Smartkarma Daily Briefs

Applied Materials has recorded robust financial results for its third quarter of fiscal year 2024, maintaining momentum with record revenues and solid earnings near the upper end of the guidance range.
The company is aptly positioned amid extensive secular growth trends reshaping technology, primarily due to increasing demands across key sectors like AI, IoT, and clean energy, which require foundational advancements in semiconductor technology.
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.

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.

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.

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.

Paycor HCM Inc.: Their Expanded Enterprise and Embedded Partnerships Is Driving Our Optimism! – Major Drivers

Paycor’s fourth quarter and full year 2024 earnings call, which ended on June 30, 2024, reflects a company strategically navigating its growth amidst an evolving market landscape.
With an 18% revenue growth for the quarter and a 19% increase for the fiscal year, Paycor appears to have successfully executed its strategic initiatives.
The company managed to increase the average number of employees on its platform by 9% and expanded the amount earned per employee per month by 6%, signaling efficient scaling and value addition.

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Aug 25

Most Read: JD.com , Westgold Resources, Techwing Inc, Huaneng Lancang River Hydropow, China Traditional Chinese Medicine, ESR Group , Shanghai Henlius Biotech , Vector, Canara Bank, CMES AI Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JD.com (9618 HK): Index Implications of Walmart Placement
S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes
FnGuide Semiconductor Top10 Index Rebalance Preview: Two Changes Likely in October
China A50 ETFs Rebalance Preview: Two High Probability Changes in Sep
(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
CMES AI Robotics IPO Preview

JD.com (9618 HK): Index Implications of Walmart Placement

Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.

S&P/ASX Index Rebalance Preview: Review Period Nearly Done; Big Impact Changes

With 2 trading days left in the review period, there could be 30 adds/deletes across the S&P/ASX family of indices in September.
Passive trackers will need to trade a lot of stock in the forecast changes, with the impact being especially large for the changes to the S&P/ASX 200 and S&P/ASX 300.
The forecast adds have hugely outperformed the forecast deletes. Borrow recall on the deletes and increased borrow availability on the adds could result in underperformance following announcement of the changes.

FnGuide Semiconductor Top10 Index Rebalance Preview: Two Changes Likely in October

With the start of the review period around the corner, there could be two changes for the FnGuide Semiconductor Top10 Index at the October rebalance.
Wonik Ips (240810 KS) and Techwing Inc (089030 KS) are potential adds while ISC Co Ltd (095340 KS) and Dongjin Semichem (005290 KS) are potential deletes.
Passives will need to trade more than 2x ADV on two potential changes and more than 1x ADV on another potential change.

China A50 ETFs Rebalance Preview: Two High Probability Changes in Sep

With the review cutoff done, there should be two changes for the CSOP FTSE China A50 (HKD) (2822 HK) / iShares FTSE/Xinhua A50 China (2823 HK) ETFs in September.
Huaneng Lancang River Hydropow (600025 CH) and China National Nuclear Power (601985 CH) should replace China Tourism Group Duty Free Corp (601888 CH) and Yihai Kerry Arawana (300999 CH).
China Tourism Group Duty Free (1880 HK) will be deleted from a global index later this month and there could be some opportunities to trade the A/H arb.

(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).

CMES AI Robotics IPO Preview

By Douglas Kim

CMES AI Robotics is getting ready to complete its IPO on KOSDAQ in October. The expected IPO price is 20,000 won to 24,000 won.
CMES provides intelligent robot solutions that combine artificial intelligence (AI) and three-dimensional (3D) vision technology. CMES’s core technologies include 3D vision sensors and image processing algorithms.
Robotics related IPOs have generated enormous interest in Korea. Although CMES is a small cap name, this robotics related IPO is also likely to garner high interest as well.

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Aug 25

Daily Brief Health Care: China Traditional Chinese Medicine, Shanghai Henlius Biotech , Clarity Pharmaceuticals Ltd, Cardinal Health, Medtronic Plc and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

(Mostly) Asia-Pac M&A: APM Human Services, TCM, Alps Logistics, Fancl, Jeisys Medical, PropertyGuru
Henlius (2696 HK): Share Alternative Facilitates the Vote
China Healthcare Weekly (Aug.25)- China TCM 24H1 Profit Warning, Financing Activities, Giant Biogene
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
Medtronic plc: Are Its Investments in Robotics with Hugo Robotic-Assisted Surgery System Yielding Results? – Major Drivers

(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).

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%.

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.

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.

Medtronic plc: Are Its Investments in Robotics with Hugo Robotic-Assisted Surgery System Yielding Results? – Major Drivers

Medtronic PLC reported its fiscal 2025 first-quarter results, reflecting a sustained performance trajectory with key financial metrics meeting or exceeding expectations.
Highlights from the earnings call emphasize continued growth across several of Medtronic’s business segments, along with strategic advancements in product innovations and global market expansions.
Revenue growth was reported at 5.3%, surpassing the midpoint of guidance, with significant contributions from the Cardiovascular, Neuroscience, and Diabetes segments.

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Aug 25

Daily Brief Consumer: Vector, Seven & I Holdings, Trent Ltd, Lowe’s Companies Inc, Tapestry Inc, Tencent Music, Walmart, Alibaba Group Holding , Yamaha Motor and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Japan Tobacco/Vector Group: Possible Bump-Up?
Weekly Deals Digest (25 Aug) – Seven & I, Iriso, Fancl, Alps Logistics, China TCM, Henlius, GA Pack
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
Lowe’s Companies: A Dive Into Its Brand Strength & Market Position! – Major Drivers
Tapestry Inc.: A Story Of Enhanced Brand Building & Consumer Engagement! – Major Drivers
Tencent Music Entertainment Group: Innovation In Subscription & User Experience & Other Major Drivers
Walmart Inc.: How Are They Dealing The Challenges of Sustaining e-Commerce Profitability Amid AI Integration! – Major Drivers
Alibaba Group: A Blend of Growth
Yamaha Motors Placement – A Relatively Small Cross-Shareholding Unwind

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.

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.

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

Trent (TRENT IN) and Bharat Electronics (BHE IN) will replace LTIMindtree (LTIM IN) and Divi’s Laboratories (DIVI IN) in the NIFTY Index (NIFTY INDEX) at the close on 27 September.
Passive trackers will need to trade at least 5 days of ADV and over 11 days of delivery volume in the stocks.
All the index changes are also changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) and there will be opposing flows (though much smaller in size) for the stocks.

Last Week in Event SPACE: Seven & I Holdings, Webjet, Hanwha Group, Swire Pac/Props, EOFlow

By David Blennerhassett

Alimentation Couche-Tard has returned to the well with a NBIO for 7&I (3382 JP). This’ll be anathema to politicians who view 7&i as a local champion AND a lifeline entity.
Global travel outfit Webjet Ltd (WEB AU) has announced the separation of its two key divisions. The sum of the part is greater than the whole? I’ll take that bet.
The Kim family turn their focus to Hanwha Galleria (452260 KS) in the latest Partial Offer within the Hanwha Group complex.

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.

Tapestry Inc.: A Story Of Enhanced Brand Building & Consumer Engagement! – Major Drivers

Tapestry, Inc. reported its fourth quarter earnings where it demonstrated notable strengths internationally with a 6% growth led by significant contributions from various regions including Europe, Other Asia, and Japan.
However, modest revenue declines in North America, coupled with more challenging conditions in Greater China, posed challenges in otherwise robust financial outcomes.
Revenue in Greater China grew by 3% overall for the year but showcased declines in the latter half.

Tencent Music Entertainment Group: Innovation In Subscription & User Experience & Other Major Drivers

Tencent Music Entertainment (TME) demonstrated a strong performance in the second quarter of 2024, anchored by significant growth in its online music services and a robust increase in adjusted net profit.
The company reported a 28% year-over-year growth in online music services and a 26% increase in adjusted net profit, signaling robust operational health and profitability.
The addition of over 10 million music subscribers in the first half of 2024, combined with an increase in average revenue per paying user (ARPPU), underscores the company’s effective market penetration and pricing strategy.

Walmart Inc.: How Are They Dealing The Challenges of Sustaining e-Commerce Profitability Amid AI Integration! – Major Drivers

Walmart Inc. reported a solid financial performance in its fiscal year 2025 second quarter earnings, displaying robust sales growth and even stronger profit growth which surpassed expectations.
The company’s leadership highlighted their dual focus on achieving short-term results and driving significant transformative changes aimed at positioning Walmart for future success.
During the quarter, Walmart experienced broad-based strength across multiple divisions.

Alibaba Group: A Blend of Growth

Alibaba Group’s June Quarter 2024 financial report showcases a blend of growth, challenges, and strategic advancements.
The group reported steady growth in its core e-commerce businesses, Taobao and Tmall Group, with an increase in Gross Merchandise Volume (GMV) and order volumes.
Particularly, the company’s focus on enhancing user experience and AI-driven strategies appears to be bearing fruit, assuring an upward trajectory in retaining and attracting customers, which is crucial in a competitive e-commerce landscape.

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 Financials: ESR Group , Canara Bank, Can Fin Homes, StoneCo and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

ESR Group (1821 HK): A Rumoured Offer Price Surfaces
NIFTY Bank Index Rebalance: Canara Bank IN; Bandhan Bank OUT
Narrative and Numbers | Housing Finance – PSUs | FY24
StoneCo Ltd.: These Are The 4 Pivotal Factors Driving Its Performance In 2024 & 2025! – Major Drivers

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.

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).

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.

StoneCo Ltd.: These Are The 4 Pivotal Factors Driving Its Performance In 2024 & 2025! – Major Drivers