Smartkarma Daily Briefs

FSS Governor Lee challenged the legality of the Robotics-Bobcat merger ratio, citing Article 176-5 of the Capital Markets Act, allowing a 10% premium or discount.
Following the FSS Governor’s statements, Doosan must likely apply a 10% premium/discount to the Robotics-Bobcat merger, creating a 30% spread based on current stock prices.
Doosan may still revise or cancel the merger, but the FSS Governor’s comments might boost Bobcat short-term. Given the uncertainty, aggressive trading is risky.

NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow

There are 19 changes a side for the NIFTY Midcap 150 Index at the September rebalance. There are many stocks with same-way flows from passive trackers of other indices.
Estimated one-way turnover is 9.8% resulting in a one-way trade of INR 8.2bn (US$98m). With US$40.1bn tracking the index actively, the impact on the stocks will be much larger.
The adds have outperformed the deletes this year, though near-term performance has been meh. There was a similar trend in March and the adds could outperform nearer to implementation.

NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines

There are 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that will be implemented at the close on 27 September. Changes are on expected lines.
Estimated one-way turnover for the Nifty Next 50 Index (NIFTYJR INDEX) is 19.6% resulting in a one-way trade of INR 63.64bn (US$759m). Many stocks have over 1x ADV to trade.
The adds have outperformed the deletes this year but there has been big underperformance over the last month as stocks expected to benefit from rural spending have rallied.

CIMC Enric (3899 HK): Things Are Getting Better

By Osbert Tang, CFA

CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.

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Aug 26

Daily Brief Industrials: Doosan Bobcat Inc, Hitachi Energy India, Bharat Heavy Electricals, CIMC Enric Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%
NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow
NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines
CIMC Enric (3899 HK): Things Are Getting Better

Korea FSS Chief Calls for 10% Premium/Discount on Doosan Merger, Boosting Swap Spread to 30%

FSS Governor Lee challenged the legality of the Robotics-Bobcat merger ratio, citing Article 176-5 of the Capital Markets Act, allowing a 10% premium or discount.
Following the FSS Governor’s statements, Doosan must likely apply a 10% premium/discount to the Robotics-Bobcat merger, creating a 30% spread based on current stock prices.
Doosan may still revise or cancel the merger, but the FSS Governor’s comments might boost Bobcat short-term. Given the uncertainty, aggressive trading is risky.

NIFTY MIDCAP150 Index Rebalance: 19 Changes a Side; Lots of Overlap with Other Index Flow

There are 19 changes a side for the NIFTY Midcap 150 Index at the September rebalance. There are many stocks with same-way flows from passive trackers of other indices.
Estimated one-way turnover is 9.8% resulting in a one-way trade of INR 8.2bn (US$98m). With US$40.1bn tracking the index actively, the impact on the stocks will be much larger.
The adds have outperformed the deletes this year, though near-term performance has been meh. There was a similar trend in March and the adds could outperform nearer to implementation.

NIFTY NEXT50 Index Rebalance: 7 Changes on Expected Lines

There are 7 changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that will be implemented at the close on 27 September. Changes are on expected lines.
Estimated one-way turnover for the Nifty Next 50 Index (NIFTYJR INDEX) is 19.6% resulting in a one-way trade of INR 63.64bn (US$759m). Many stocks have over 1x ADV to trade.
The adds have outperformed the deletes this year but there has been big underperformance over the last month as stocks expected to benefit from rural spending have rallied.

CIMC Enric (3899 HK): Things Are Getting Better

By Osbert Tang, CFA

CIMC Enric Holdings (3899 HK)‘s 1H24 result is below expectations, but the growth outlook is promising. Management also guided for a solid recovery in 2H24.
Backlog and new orders rose 42.5% and 29.4%, respectively, with chemical and environmental orders rebounded sharply QoQ. The overall margin will be better in 2H24.
Hydrogen revenue should reach Rmb1bn in FY24 (1H24: Rmb450m). New coke oven gas (COG) to hydrogen projects may generate Rmb10bn revenue by FY27, or 43% of FY23 revenue.

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Aug 26

Daily Brief Consumer: Zomato, S&T Motiv, Yamaha Motor, Kering, Prosus NV, Yadea Group Holdings, Alibaba Group Holding , China Resources Beer Holdings, JD.com Inc (ADR), TSE Tokyo Price Index TOPIX and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Zomato: Index Inclusions & Passive Impact (Once Added to F&O)
KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts
Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest
EURO STOXX 50: Kering Out of Fashion with $750M Deletion. DSM-Firmenich In with $1.3B Addition.
Naspers X Prosus Discount Update Post Tencent 2Q FY24 Results, Narrowing Gains Momentum
Yadea (1585): Ready for New Standard
China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.
Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence
ECM Weekly (26th Aug 2024) – Zomato, Colowide, Star Asia, Yamaha, 99Speed, Hero Fin, Bajaj Housing
Issues Related to Outside Director Compensation Are Plentiful

Zomato: Index Inclusions & Passive Impact (Once Added to F&O)

Zomato (ZOMATO IN) has a market cap of over US$27bn but is not a member of the NIFTY Index and S&P BSE SENSEX Index since it is not an F&O member.
Once SEBI’s proposed and enhanced stock inclusion thresholds are implemented, Zomato (ZOMATO IN) should be added to the F&O segment of the market.
Passive NIFTY Index and S&P BSE SENSEX Index will have to buy a lot of Zomato stock at subsequent rebalances. The impact will be higher given the lower real float.

KRX Sector Indexes’ Rebalancing Event, Often off Traders’ Radar but with Significant Price Impacts

Early position buildup has minimal price impact, and even after the announcement, only a few stocks with a larger passive impact see significant movement.
Since these KRX sector indices include many small to mid-cap stocks, the price impact of constituent changes on ETF rebalancing day was quite noticeable.
Due to potential learning effects, build positions in predictable high-impact stocks before the announcement, then monitor flows and impacts to decide on targeting the ETF rebalancing trading day.

Yamaha Motors (7272 JP) – Secondary Offering as Toyota Sells Down – Easy To Digest

By Travis Lundy

On Firday 23 August, Yamaha Motor (7272 JP) announced that three cross-holders would sell about 4.6% of the shares out in a secondary sale.
MS&AD was expected. Toyota was probably expected. Yamaha Corp is a bit of a surprise. But it also frees up Yamaha Motor to sell down cross-holdings (top 2 are Toyota/Yamaha).
Given the price/guidance/dividend yield and limited size, this should be quite easy to place.

EURO STOXX 50: Kering Out of Fashion with $750M Deletion. DSM-Firmenich In with $1.3B Addition.

By Dimitris Ioannidis

Kering (KER FP) is the main candidate for direct deletion as it is the only constituent below the exit threshold. Forecasted supply is $750m and 9.7 ADV.
DSM-Firmenich (DSFIR NA) is the main candidate for addition replacing Kering (KER FP) as it is the highest ranked non-constituent. Forecasted demand is $1.3bn and 22.5 ADV.
Nokia OYJ (NOKIA FH) and Volkswagen (Pref) (VOW3 GR) are only 2% above the exit threshold. Potential replacements are Engie SA (ENGI FP) and Argenx SE (ARGX US).

Naspers X Prosus Discount Update Post Tencent 2Q FY24 Results, Narrowing Gains Momentum

By Charlotte van Tiddens, CFA

Tencent reported a softer set of results for Q2 relative to Q1. Revenue for the quarter was up 1% QoQ and 8% YoY.
Since our last discount update mid-August, the discounts of both Naspers and Prosus have continued to narrow.
Naspers’ discount is trading well off the lows reached at the end of July (~45%).

Yadea (1585): Ready for New Standard

By Henry Soediarko

The 1H result was poor due to the inventory clearance from the new product standards, which rendered older products less desirable.
Management has proven to be able to manage costs carefully during a down cycle.
Yadea Group Holdings (1585 HK) used to trade around 35x PER; now it is only 10x PER.

China Consumption Weekly (26Aug2024): 2Q24 Rev Up By – PopMart 62%, Zeekr 58%, Tongcheng 48%, Etc.

By Ming Lu

Pop Mart’s total revenue increased by 62% YoY due to the promising overseas market.
Tongcheng’ revenue grew by 48% YoY in 2Q24, as new businesses are successful.
Alibaba’s Freshippo plans to set up frontline warehouses, which is a way back to online.

Consumer Tales Aug Wk#4: Beer in China, Ola’s Path to Profits, Kalyan Jewellers’ Quiet Confidence

By Devi Subhakesan

Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
With fewer young people and a growing number of older adults, the target market for alcoholic beverages is shrinking in many markets including China.
Upsides from vertical integration could give Ola Electric (OLAELEC IN) a significant cost advantage over local competitors. Strong pricing power can allow it to decide whether to prioritize growth or margins.

ECM Weekly (26th Aug 2024) – Zomato, Colowide, Star Asia, Yamaha, 99Speed, Hero Fin, Bajaj Housing

By Sumeet Singh

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, we looked at a number of upcoming listings in India.
There was a revival in placement flows during the week, after a lull over the past few weeks.

Issues Related to Outside Director Compensation Are Plentiful

By Aki Matsumoto

A few companies have stock compensation plans for outside directors, but their common features are a majority of outside directors on the board and a high percentage of foreign ownership.
8 million compensation for an outside director would be too low to devote much of his/her time to that company. Consequently, 17.5% of all outside board members serve multiple companies.
The need to raise the ratio of female board members amid the low percentage of women in managerial positions has increased the concurrent positions of female board members.

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Aug 26

Daily Brief Financials: Shin Kong Financial Holding, Huafa Property Services Group, NIFTY Index and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price
Huafa Property Services (982 HK): What’s Going on as Shares Trades Very Wide Ahead of the Vote?
EQD / NSE Vol Update / Smile & Skew Compress as Vols Trade to New Summer Lows

Shin Kong (2888.TW) And Taishin (2887.TW) Agree to Merge, But It Isn’t Clean, And It’s A Bad Price

By Travis Lundy

After rumours were rekindled a week earlier, on 22 August 2024, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) announced they would merge.
The ratio is 0.6022 shares of Taishin for every share of Shin Kong putting NEWCO assets at about the level of Taiwan #3 CTBC Financial. That’s bad.
There’s history here. LOTS of history. This would need approvals from the FSC and FTC, but CTBC is already a spoiner, and the SKFH Board Meeting was anything but clean.

Huafa Property Services (982 HK): What’s Going on as Shares Trades Very Wide Ahead of the Vote?

The Huafa Property Services Group (982 HK) vote on Huafa Industrial Co., Ltd. Zhuhai (600325 CH)’ HK$0.29 offer is on 28 August. However, shares trade wide ahead of the vote.
Several readers have enquired about the unusually high spread ahead of the vote of a seemingly clean deal. The conversations raised several concerns.
The concerns are unwarranted, and this remains a clean deal. At the last close and for the 30 September payment, the gross/annualised spread was 5.5%/68.9%.

EQD / NSE Vol Update / Smile & Skew Compress as Vols Trade to New Summer Lows

By Sankalp Singh

IVs have moved to new lows for the summer, breaking below the floor set through June & July. Nifty50 IVs now trading at 11.0% levels.
Spectacular turnaround in IVs since early-August vol-spike. In spite of this, Vol Regime remains steady in its “High & Down” vol-state.
Nifty50 Vol surface characteristics have compressed for Monthly-expiry contracts. Smile & Skew for Quarterly contracts remain unchanged.

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Aug 26

Daily Brief TMT/Internet: Shift Inc, Taiwan Semiconductor (TSMC) – ADR, Softbank Group, Uchi Technologies, Bharti Airtel and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Shift (3697): Profitability Rebound Underway
Taiwan Dual-Listings Monitor: TSMC Maintaining Strong Premium; UMC Headroom Continues to Decrease
SoftBank Group (9984 JP): A Bigger Bounty Awaits with Swiggy’s Upcoming IPO
Uchi Technologies (UCHI MK): Q2 2024 Profitability Resilient, Guidance Weak
Bharti Airtel Positioning Continues to Strengthen

Shift (3697): Profitability Rebound Underway

By Michael Allen

A massive shortage of IT professionals combined with Shift’s overwhelming dominance of the labor market should drive 20% annual revenue growth through 2030.
But Shift missed consensus profitability estimates 3 consecutive quarters, and the share price is down 67% in 12 months, compared to an 18% rise in the median peer.
In our view, a recovery in profitability is already underway, and shares are at least 45% undervalued

Taiwan Dual-Listings Monitor: TSMC Maintaining Strong Premium; UMC Headroom Continues to Decrease

By Vincent Fernando, CFA

TSMC: +15.4% Premium; Wait for Closer to 20% Before Opening Fresh Short
UMC: +1.2% Premium; Can Consider Shorting at 1.5% or Higher; Headroom Continues to Decrease
ASE: +5.2% Premium; Wait for More Extreme Levels Before New Trade

SoftBank Group (9984 JP): A Bigger Bounty Awaits with Swiggy’s Upcoming IPO

By Devi Subhakesan

Softbank Group (9984 JP) could see its USD450 million investment in India food delivery player, Swiggy , triple in value with the upcoming IPO, reportedly valuing it at USD15 bn.
SoftBank Group, generated a total return, net of investments, of USD1.4 billion with the listing of Ola Electric (OLAELEC IN) , Unicommerce (UNIECOM IN), and BrainBees Solutions, this month.
If Swiggy’s IPO reaches valuations closer to Zomato’s, SoftBank could reap even greater rewards than from its recent portfolio company listings.

Uchi Technologies (UCHI MK): Q2 2024 Profitability Resilient, Guidance Weak

By Sameer Taneja

Uchi Technologies (UCHI MK) reported Q2 2024 revenue/profit up 2.2%/13.4% YoY. In USD terms, revenue declined 3% YoY.
Aided by the strengthening of the USD/MYR in Q2 (which has reversed slightly), EBITDA margins improved by 250 bps to 65.7% and net margins by 540 bps to 54.5%.
The company maintained guidance of a high single-digit revenue decline (in USD). The stock trades at 13x PE with a 7.8% dividend yield.

Bharti Airtel Positioning Continues to Strengthen

By Steven Holden

The bull market in Bharti Airtel positioning shows no signs of slowing down, with average fund weights and the percentage of funds invested in Bharti Airtel reaching 15-year highs
Over the past six months, ownership increases have been the highest among Indian peers, propelling Bharti Airtel to the 7th most widely owned stock in India.
In the last six months, 27 funds have initiated new positions, with no closures, and notable new investors include Fidelity, GQG, and Morgan Stanley.

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Aug 26

Daily Brief Health Care: Divi’s Laboratories, Shanghai Henlius Biotech , China Traditional Chinese Medicine, Hogy Medical and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Quiddity NIFTY Sep 24 Rebal: US$647mn One-Way Capping for NIFTY Next 50; All Changes Were Predicted
Henlius (2696 HK): Was There Any Doubt?
Merger Arb Mondays (26 Aug) – China TCM, Henlius, Canvest, GA Pack, Huafa, Tohokushinsha
Hogy Medical (3593) | New Strategy Sparks Investor Confidence
Shanghai Henlius Biotech (2696.HK) – Privatization Has Taken a Positive Step Forward

Quiddity NIFTY Sep 24 Rebal: US$647mn One-Way Capping for NIFTY Next 50; All Changes Were Predicted

By Janaghan Jeyakumar, CFA

The September 2024 Rebalance results for the NIFTY broad market Indices were announced after the close on Friday 23rd August 2024.
There will be two changes for NIFTY 50 and five changes for NIFTY 100 during the September 2024 index rebal event. All of these changes were as predicted.
All NIFTY 50 and NIFTY 100 changes will also be reflected in the NIFTY Next 50 index which could see US$647mn one-way capping flows.

Henlius (2696 HK): Was There Any Doubt?

By David Blennerhassett

Roughly six weeks ago, Shanghai Henlius Biotech (2696 HK) announced the scrip option condition was met. Just that Shanghai Fosun Pharmaceutical (2196 HK) (the Offeror) was weighing its options
This situation mirrored L’Occitane (973 HK)‘s (eventual) scrip option. And in place of Pleasant Lake in that transaction; Henlius has Loyal Valley Capital (5.8309% shareholder) behind the scenes.
Late Friday, Henlius updated the terms of Fosun’s Offer to now include the scrip option alternative. We expected nothing less. 1H24 results will also be out later today.

Merger Arb Mondays (26 Aug) – China TCM, Henlius, Canvest, GA Pack, Huafa, Tohokushinsha

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Capitol Health (CAJ AU).
Lowest spreads: Tohokushinsha Film (2329 JP), Fuji Soft Inc (9749 JP), Descente Ltd (8114 JP), Second Chance Properties (SCE SP), Fancl Corp (4921 JP), C.I. TAKIRON Corporation (4215 JP).

Hogy Medical (3593) | New Strategy Sparks Investor Confidence

By Mark Chadwick

Dalton & Co. increased their stake in Hogy Medical to 19.15%, signaling confidence in the new Medium-Term Business Plan.
Hogy Medical’s new plan aims to boost ROE above 6%, drive revenue to ¥46 billion, and enhance shareholder returns.
Potential M&A activity in Japan’s med-tech sector and the new plan could unlock significant shareholder value, with a possible 50% upside in share price.

Shanghai Henlius Biotech (2696.HK) – Privatization Has Taken a Positive Step Forward

By Xinyao (Criss) Wang

The Share Alternative is necessary to improve success rate of privatization. Our guess is Henlius Biopharmaceuticals/Lin Lijun would vote for this privatization, but we’re not sure about Qatar Investment’s decision.
Due to its “flaws”, undervaluation of Henlius is difficult to fundamentally change. So, those conservative and cautious investors would choose the Cash Alternative considering the risks behind the Share Alternative.
Even if there’re plans of re-listing, it may be based on a new entity formed after integrating Henlius and other assets within Fosun Pharma. So, the value of Rollover Entities/Securities remains uncertain.

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Aug 25

Daily Brief Thematic (Sector/Industry): GEMWeekly (23 Aug 2024): China Property Price War; Thailand and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

GEMWeekly (23 Aug 2024): China Property Price War; Thailand, SK Macro; SEC, Tencent, JD, Reliance
Japan Weekly | The Market Waits; 7&I, GMO Payment, Disco

GEMWeekly (23 Aug 2024): China Property Price War; Thailand, SK Macro; SEC, Tencent, JD, Reliance

By Wium Malan, CFA

The Global Emerging Markets Weekly summarises the key news and related developments impacting the largest countries and constituents of the Global Emerging Markets equity indices.
Macro data points: Thailand GDP growth, South Korea interest rates and GDP growth expectations.
Companies mentioned:Samsung Electronics (005930 KS), Tencent (700 HK), JD.com (9618 HK), Reliance Industries (RIL IN)

Japan Weekly | The Market Waits; 7&I, GMO Payment, Disco

By Mark Chadwick

This week, markets remained relatively flat, as investors awaited guidance from monetary policymakers, particularly Fed Chair Jerome Powell’s much-anticipated speech on Friday
With inflation trending downward—core CPI has fallen for four consecutive months to 3.2%—the Fed seems poised to ease monetary policy
Topix rose +0.2%; 13 stocks reached 52-week highs, with only one stock, Colowide, hitting a new yearly low

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Aug 25

Daily Brief ECM: Narrative and Numbers | Housing Finance – PSUs | FY24 and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Narrative and Numbers | Housing Finance – PSUs | FY24
Yamaha Motors Placement – A Relatively Small Cross-Shareholding Unwind

Narrative and Numbers | Housing Finance – PSUs | FY24

By Pranav Bhavsar

This Insight focuses on PSU owned Housing Finance companies – PNB Housing Finance Ltd (PNBHOUSI IN) , LIC Housing Finance (LICHF IN) and Can Fin Homes (CANF IN).
PNB Housing aims to focus on affordable housing, LIC Housing Finance is possibly struggling due to its size and a conservative risk appetite.
Can Fin Homes exhibits some serious questions regarding its internal controls and underwriting policies.

Yamaha Motors Placement – A Relatively Small Cross-Shareholding Unwind

By Sumeet Singh

A group of shareholders aims to raise around US$330m via selling around 3.6% of Yamaha Motor (7272 JP).
This will be another cross-shareholding unwind and hence, won’t be a huge surprise, although the stock hasn’t been doing particularly well lately.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

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Aug 25

Daily Brief Equity Bottom-Up: Lowe’s Companies: A Dive Into Its Brand Strength & Market Position! – Major Drivers and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Lowe’s Companies: A Dive Into Its Brand Strength & Market Position! – Major Drivers
Oddity Tech: ~34% Downside Risk As Growth Will Slow Down
Clarity Pharmaceuticals Ltd (CU6 AU): An Attractive Bet on Red Hot Radiopharmaceutical Field
Cardinal Health Inc.: How Are They Achieving Specialty Business Growth Despite Nonrenewal Challenges! – Major Drivers
Coherent Corp.: How Is The Management Executing Portfolio Optimization and Operational Execution Improvements! – Major Drivers
Deere & Company: These Are The 4 Biggest Challenges In Its Path! – Major Drivers
Estée Lauder Companies: A Tale Strategic Pricing & Precision Marketing! – Major Drivers
Fabrinet (FN): A Bear’s Perspective! – Major Drivers
JD.com Inc.: Enhancing Platform Ecosystem For Third-Party Sellers As A Key Growth Catalyst! – Major Drivers
Lumentum Holdings Inc.: Expansion in High-Speed Optical Transceivers & Other Major Drivers

Lowe’s Companies: A Dive Into Its Brand Strength & Market Position! – Major Drivers

Lowe’s Companies’ second quarter 2024 earnings outlined a mixed performance amid challenging market conditions, reflecting both the strengths and weaknesses of its current business strategy.
The company reported Q2 sales of $23.6 billion, with comparable sales down by 5.1%.
This decline was attributed to a decrease in demand for Do-It-Yourself (DIY) projects, partially mitigated by solid performance in the Professional (Pro) segment and a growth in online sales.

Oddity Tech: ~34% Downside Risk As Growth Will Slow Down

By Andrei Zakharov

Oddity Tech, owner of famous global brands IL MAKIAGE and SpoiledChild, is growing slower than in 2022 and 2023. The overall growth will slow down to ~20% y/y in 2025.
According to my estimates and SEC filings, private equity firm L Catterton, the largest shareholder, reduced its stake in Oddity Tech to 18.4%, down from ~42% prior to an IPO.
I see ~34% downside risk in Oddity Tech stock as growth will slow down and the company will launch new brands only in the second half of 2025.

Clarity Pharmaceuticals Ltd (CU6 AU): An Attractive Bet on Red Hot Radiopharmaceutical Field

By Tina Banerjee

Clarity Pharmaceuticals Ltd (CU6 AU) received FDA fast track designation for its lead candidate 64Cu-SAR-bisPSMA for PET imaging of prostate cancer lesions. Currently, 64Cu-SAR-bisPSMA is in phase 3 trial.
If approved, 64Cu-SAR-bisPSMA has the potential the best-in-class diagnostic as the product has improved lesion detection capability compared to existing prostate cancer diagnostics.
Clarity’s copper platform, strong prostate pipeline and therapeutic and diagnostic efficacy data represents an attractive opportunity to grow a significant radiopharmaceutical franchise in oncology and other indications.

Cardinal Health Inc.: How Are They Achieving Specialty Business Growth Despite Nonrenewal Challenges! – Major Drivers

Cardinal Health Incorporated has shown a remarkable year with strong operational performance, achieving a considerable improvement in key financial metrics as highlighted in their Fourth Quarter FY 2024 Earnings.
During the fiscal year 2024, Cardinal Health reported striking growth in earnings per share (EPS), marking a 29% increase in both the fourth quarter and for the entire year.
The substantial growth in EPS throughout FY 2024 to $7.53 indicates a positive trajectory exceeding the company’s initial guidance significantly.

Coherent Corp.: How Is The Management Executing Portfolio Optimization and Operational Execution Improvements! – Major Drivers

Coherent Corp. concluded its fiscal year 2024 with financial results reflecting a positive trajectory, showing a 9% sequential and year-over-year revenue growth primarily driven by robust demand in datacom transceivers for AI data-centric deployments.
This was further accentuated by Non-GAAP gross margin expansion of 145 basis points compared to the previous quarter, underpinned by resolution of prior transitory issues and a substantial growth in Non-GAAP EPS by 16% sequentially and almost 50% year-over-year.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Deere & Company: These Are The 4 Biggest Challenges In Its Path! – Major Drivers

Deere & Company reported its third-quarter earnings, revealing a mixed financial performance amid varied market conditions across its segments.
Despite a tough macroeconomic environment, the company maintained a disciplined approach, particularly in managing inventory and costs, which was evident from an equipment operations margin of 18.5%.
However, the reduced demand in both agricultural and construction sectors, coupled with price competition, led to a decline in net sales and revenues by 20% and 17% respectively, totaling $11.387 billion and $13.152 billion.

Estée Lauder Companies: A Tale Strategic Pricing & Precision Marketing! – Major Drivers

Estée Lauder Companies’ fiscal 2024 results reflect a challenging environment particularly impacted by market conditions in China and the Asia-Pacific region.
The fiscal year witnessed a 2% contraction in organic sales, with a modest gross margin expansion and a decline in adjusted operating margin by 120 basis points to 10.2%.
The company’s performance in various regions displayed disparity, with noted declines in Mainland China contrasted by growth in EMEA (Europe, the Middle East, and Africa) primarily due to a recovery in Asia travel retail.

Fabrinet (FN): A Bear’s Perspective! – Major Drivers

Fabrinet concluded the fiscal year 2024 on a strong note with record revenue and earnings per share, reflecting robust execution across its business segments.
For the fourth quarter, the company posted revenue of $753 million, exceeding its guidance and marking a 15% year-over-year increase and a 3% increase sequentially.
Non GAAP earnings per share for the quarter came in at $2.41, also surpassing the projected range.

JD.com Inc.: Enhancing Platform Ecosystem For Third-Party Sellers As A Key Growth Catalyst! – Major Drivers

JD.com reported its second quarter and interim 2024 earnings, presenting a mixed performance amid challenging market conditions.
The company achieved record non-GAAP net profit for a single quarter, indicating strong profitability and effective cost management.
However, revenue growth was modest, reflecting the competitive and dynamic nature of the market JD.com operates in.

Lumentum Holdings Inc.: Expansion in High-Speed Optical Transceivers & Other Major Drivers

Lumentum Holdings, a provider of optical and photonic solutions, reported mixed performance in its fourth quarter fiscal year 2024 results.
The company experienced a decrease in both the Cloud & Networking and Industrial Tech segments but made significant progress in expanding its customer base and advancing its technology for future growth, particularly in high-speed optical transceivers and datacom components.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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Aug 25

Daily Brief Event-Driven: (Mostly) Asia-Pac M&A: APM Human Services and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

(Mostly) Asia-Pac M&A: APM Human Services, TCM, Alps Logistics, Fancl, Jeisys Medical, PropertyGuru
ESR Group (1821 HK): A Rumoured Offer Price Surfaces
Henlius (2696 HK): Share Alternative Facilitates the Vote
Japan Tobacco/Vector Group: Possible Bump-Up?
NIFTY Bank Index Rebalance: Canara Bank IN; Bandhan Bank OUT
China Healthcare Weekly (Aug.25)- China TCM 24H1 Profit Warning, Financing Activities, Giant Biogene
Weekly Deals Digest (25 Aug) – Seven & I, Iriso, Fancl, Alps Logistics, China TCM, Henlius, GA Pack
Trading Situation for Hyundai Motor’s 5% Stake in Korea Zinc, Set to Be Unlocked in October
NIFTY50 Index Rebalance: Trent, BEL to Replace Divi’s Lab, LTIMindtree
Last Week in Event SPACE: Seven & I Holdings, Webjet, Hanwha Group, Swire Pac/Props, EOFlow

(Mostly) Asia-Pac M&A: APM Human Services, TCM, Alps Logistics, Fancl, Jeisys Medical, PropertyGuru

By David Blennerhassett

I tally 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal
Two new deals were discussed this week: Alimentation Couche-Tard (ATD CN)‘s non-binding proposal for Seven & I Holdings (3382 JP).; and EQT’s Offer for PropertyGuru (PGRU US).
Key updates took place on APM Human Services (APM AU), TCM (570 HK), GaPack (468 HK), Alps Logistics (9055 JP), Fancl Corp (4921 JP), and Jeisys Medical (287410 KS).

ESR Group (1821 HK): A Rumoured Offer Price Surfaces

A media outlet that Reports on Deals reported that the consortium will offer HK$14.50 per share, a 22.1% and 61.8% premium to the last close (HK$11.88) and undisturbed price (HK$8.96).
While not a knockout offer, the consortium’s impending binding proposal suggests confidence that the offer price and structure would gain the support of the substantial shareholders.
The downside to a deal break is low as ESR’s valuation is undemanding. Its forward EV/EBITDA multiple is at a 30% discount to the median peers’ multiple.

Henlius (2696 HK): Share Alternative Facilitates the Vote

Shanghai Fosun Pharmaceutical (Group) (2196 HK) announced the Shanghai Henlius Biotech (2696 HK) share alternative offer, subject to proration due to a cap of 8% of outstanding shares.
The share alternative offer was necessary to facilitate the vote as the HK$24.60 offer is half the HK$49.60 IPO price.
The co-founders, HenLink and LVC, will likely tender some or all their shares for scrip. At the last close and for the December-end payment, the gross/annualised spread is 7.4%/17.9%.

Japan Tobacco/Vector Group: Possible Bump-Up?

By Jesus Rodriguez Aguilar

JT plans to acquire 100% of Vector Group at $15.00/share, a 29.9% premium. The offer requires over 50% acceptance, with Board support and completion expected by late 2024, pending approvals.
The shares go ex-dividend on August 30, with payment on September 12. Adjusted for the dividend, shares trade at a -0.4% gross spread. My fair value estimated is $15.92/share.
Consensus sets a target price of $16/share. JT may consider raising its offer to this level (6.67%), especially if they see Vector as a strong long-term investment.

NIFTY Bank Index Rebalance: Canara Bank IN; Bandhan Bank OUT

In line with our forecast, Canara Bank (CBK IN) will replace Bandhan Bank Ltd (BANDHAN IN) in the NSE Nifty Bank Index (NSEBANK INDEX) at the close on 27 September.
Bandhan Bank Ltd (BANDHAN IN) will be deleted from a global index at the close on 31 August, so real float will increase a lot over the next month.
Passive trackers will need to buy over 2 days of ADV in Canara Bank (CBK IN) and sell 1 day of ADV in Bandhan Bank Ltd (BANDHAN IN).

China Healthcare Weekly (Aug.25)- China TCM 24H1 Profit Warning, Financing Activities, Giant Biogene

By Xinyao (Criss) Wang

China Traditional Chinese Medicine (570 HK)‘s profit warning suggests weaker-than-expected 2024H1 results, but the interim report is needed for clarity. This is unlikely to negatively affect the company’s privatization plans.
In 24H1, healthcare investment and financing activities have slowed, and it will take time for investors’ confidence in the sector to recover.
Giant Biogene (2367 HK)‘s 24H1 results exceeded expectations, leading management to raise its 2024 guidance. However, the profit margin declined, and we remain cautious about long-term growth prospects.

Weekly Deals Digest (25 Aug) – Seven & I, Iriso, Fancl, Alps Logistics, China TCM, Henlius, GA Pack

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: WeRide (WRD US) delayed its Nasdaw IPO, 99 Speed Mart Retail Holdings (99SPD MK) launched a US$530 million IPO.
Event-Driven developments: Seven & I Holdings (3382 JP), Iriso Electronics (6908 JP), Fancl Corp (4921 JP), China Traditional Chinese Medicine (570 HK), Shanghai Henlius Biotech (2696 HK), GA Pack.

Trading Situation for Hyundai Motor’s 5% Stake in Korea Zinc, Set to Be Unlocked in October

The market is watching closely for when Hyundai Motor might sell its 5% stake in Korea Zinc, with the lockup ending on October 7th.
Hyundai might mediate to end the lawsuit and lift the injunction, potentially agreeing to sell the stake to a third party or on the market.
The uncertainty around Hyundai’s Korea Zinc stake sale makes trading challenging, but its actions in Q4 could significantly affect Korea Zinc’s stock price and create trading opportunities.

NIFTY50 Index Rebalance: Trent, BEL to Replace Divi’s Lab, LTIMindtree