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Smartkarma Daily Briefs

Jan 15
0

Daily Brief Singapore: Halcyon Agri and more

By | Daily Briefs, Singapore

In today’s briefing:

  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Esso Thailand, Essential Met, Norwest Energy, Halcyon Agri

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Esso Thailand, Essential Met, Norwest Energy, Halcyon Agri

By David Blennerhassett

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Jan 14
0

Daily Brief ESG: Transitional Measures Will End in 2-3 Years and more

By | Daily Briefs, ESG

In today’s briefing:

  • Transitional Measures Will End in 2-3 Years, but Will Prime Market Listing Criteria Remain the Same?

Transitional Measures Will End in 2-3 Years, but Will Prime Market Listing Criteria Remain the Same?

By Aki Matsumoto

  • TSE will probably settle on a compromise: “transitional measures will be completed as soon as possible,” while “measures to minimize negative impacts will also be adopted.
  • Of 271 companies that failed to meet prime market listing criteria and are allowed to list under transitional measures, 227 (98%) don’t have tradable market capitalization of 10 billion yen.
  • The market capitalization of companies that disclosed plans to meet listing criteria within 3 years increased, while those that stated that they would meet criteria in over 3 years decreased.

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Jan 14
0

Daily Brief Credit: Chinese Property Weekly – 13 January 2023 – Lucror Analytics and more

By | Credit, Daily Briefs

In today’s briefing:

  • Chinese Property Weekly – 13 January 2023 – Lucror Analytics
  • Weekly Wrap – 13 Jan 2023
  • Ecolab Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
  • PPG Industries Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
  • United Rentals Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Chinese Property Weekly – 13 January 2023 – Lucror Analytics

By Charles Macgregor

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

Weekly Wrap – 13 Jan 2023

By Charles Macgregor

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

  1. Lippo Karawaci
  2. China SCE
  3. China Jinmao Holdings
  4. Guangzhou R&F Properties
  5. Sunac China Holdings

and more…

Ecolab Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • Ecolab is a major provider of water, hygiene and infection prevention solutions and services.
  • The company has been benefitting from the recent price increases which has resulted in consistent double-digit organic sales growth in recent results.
  • They also invested in select breakthrough innovations to help customers save more water, energy, and cost, especially in Europe.

PPG Industries Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • PPG is a renowned manufacturer and distributor of paints, coatings and specialty materials.
  • The company’s recent financial performance has been solid and has been supported by ongoing real-time price hikes.
  • The company has consistently performed well in several of its companies, notably PPG Comex.

United Rentals Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • United Rentals is one of the largest equipment rental companies in the world, known for renting out construction, aerial and industrial equipment, general tools and light equipment.
  • The company is operating in a favorable operational climate and its fleet productivity has been increasing as per recent results, resulting in a higher rental revenue.
  • The demand for its equipment rental services is relatively high, even though some parts of the economy are slowing down.

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Jan 14
0

Daily Brief ECM: Allied Blenders and Distillers Pre-IPO – Yet to Recover from COVID-19 and more

By | Daily Briefs, ECM

In today’s briefing:

  • Allied Blenders and Distillers Pre-IPO – Yet to Recover from COVID-19
  • Oasis Corp IPO Valuation Analysis

Allied Blenders and Distillers Pre-IPO – Yet to Recover from COVID-19

By Ethan Aw

  • Allied Blenders & Distillers (ABD IN) is looking to raise about US$250m in its upcoming India IPO. I-Sec, Axis Capital, JM Financial, Kotak and Equirus Capital will be the bookrunners.
  • ABD is the largest Indian-owned Indian-made foreign liquor (IMFL) company and the third largest IMFL company in India, in terms of annual sales volumes between FY14 and FY21.
  • ABD has grown its brand over time and managed to stay profitable, despite COVID-19. However, sales volume has yet to return to pre-COVID levels, along with its profitability. 

Oasis Corp IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Oasis Corp is EV of 605 billion won, implied market cap of 788 billion won, and target price of 24,847 won per share. 
  • This is 18.5% lower than the low end of the IPO price range. Given the lack of upside, we have a Negative View of the Oasis Corp IPO.
  • The end of COVID pandemic and relaxed regulations for hypermarkets in early morning delivery services are likely to have greater negative impact on Oasis Corp. 

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Jan 14
0

Daily Brief Equity Bottom-Up: Seven & I’s Valuation Nears Breaking Point and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Seven & I’s Valuation Nears Breaking Point
  • PPG Industries Inc.: Initiation of Coverage – Business Model & Key Drivers
  • Ecolab Inc.: Initiation of Coverage – Business Model & Key Drivers
  • BlackRock’s Q4 Earnings Beat Conveys An Inflection Point
  • Progressive Corp: Initiation of Coverage – Technological Superiority & Other Drivers
  • DoorDash Inc.: Initiation of Coverage – Recent Collaborations & Other Drivers
  • United Rentals Inc.: Initiation of Coverage – Acquisition-Led Growth & Other Drivers

Seven & I’s Valuation Nears Breaking Point

By Oshadhi Kumarasiri

  • Seven & I Holdings (3382 JP)‘s Q3 OP of ¥160.1bn was a significant surprise to the upside with consensus OP at ¥130.2bn and us expecting around ¥125-130bn.
  • This was mostly driven by an unexpected upside to the retail fuel margin while gasoline prices have come down by more than 34%.
  • Nevertheless, we would expect this temporary misalignment in retail fuel margin to correct over the next few quarters, resulting in around 35-40% downside to the company’s valuation multiples.

PPG Industries Inc.: Initiation of Coverage – Business Model & Key Drivers

By Baptista Research

  • This is our first report on PPG, a well-known manufacturer of paints, coatings and specialty materials.
  • The company performed well in several of its companies, notably PPG Comex.
  • They also began collaborating with the HD Supply team to find new paint clients, particularly in the commercial maintenance sector.

Ecolab Inc.: Initiation of Coverage – Business Model & Key Drivers

By Baptista Research

  • This is our first report on Ecolab, a major provider of water, hygiene and infection prevention solutions and services.
  • The company delivered a below-par result with revenues just about meeting Wall Street expectations on account of the price increases.
  • The company saw overall pricing increasing from 9% to 12% and consistent double-digit organic sales growth of 13%.

BlackRock’s Q4 Earnings Beat Conveys An Inflection Point

By Pearl Gray Equity and Research

  • BlackRock’s Q4 earnings report suggests an inflection point might be near.
  • The company managed to mitigate systemic risks during its latest quarter, preserving its base rate rate-centric business model.
  • In addition, aggressive investment in technology prompted a rise in product launch costs, according to the report.

Progressive Corp: Initiation of Coverage – Technological Superiority & Other Drivers

By Baptista Research

  • This is our first report on auto insurance major, Progressive Corp.
  • The company had a disappointing quarter and failed to meet Wall Street expectations in terms of revenues as well as earnings.
  • This quarter, the company increased personal auto rates in 20 states at an average of around 5% each day for an overall countrywide premium impact of +2%.

DoorDash Inc.: Initiation of Coverage – Recent Collaborations & Other Drivers

By Baptista Research

  • This is our first report on DoorDash, the largest online food aggregator in the U.S.
  • The company is a market leader in its domain and has demonstrated incredible resilience.
  • Even in the last quarter, its market revenues have increased significantly despite the oil crisis, relatively persistent inflation, and the European war.

United Rentals Inc.: Initiation of Coverage – Acquisition-Led Growth & Other Drivers

By Baptista Research

  • This is our first report on United Rentals, one of the largest equipment rental companies in the world, known for renting out construction, aerial and industrial equipment, general tools and light equipment.
  • The company’s fleet productivity increased by roughly 9%, while rental revenue increased by 20% year over year in the last quarter.
  • The demand for its equipment rental services is relatively high, even though some parts of the economy are slowing down.

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Jan 14
0

Daily Brief Thematic (Sector/Industry): Japan Weekly | Tokyo Electron and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Japan Weekly | Tokyo Electron, 7&I, Fast Retail

Japan Weekly | Tokyo Electron, 7&I, Fast Retail

By Mark Chadwick

  • The Nikkei traded up half a percentage point this week, while the JPY strengthened 3% to Y127/$
  • US stocks (and hence global) rallied after data showed that inflation cooled in December, easing pressure on the Fed. 
  • Lower inflation, interest rates, and China’s reopening are providing a decent backdrop for Japanese equities

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Jan 14
0

Daily Brief Event-Driven: Melco Trading “Cheap” As Macau Opens Up and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Melco Trading “Cheap” As Macau Opens Up
  • IFM Increases Its Stake in Naturgy

Melco Trading “Cheap” As Macau Opens Up

By David Blennerhassett

  • After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
  • Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%. 
  • Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.

IFM Increases Its Stake in Naturgy

By Jesus Rodriguez Aguilar

  • Australian institutional investor IFM has informed the Spanish National Securities Market Commission (CNMV) that it has increased its stake in Naturgy Energy Group SA (NTGY SM) to just over 14%.
  • Corporate politics: IFM is still far from the 17% threshold that would grant two sits on the Board of Naturgy (and the initial minimum acceptance condition in the partial offer).
  • Speculative buy (TP €27.42, DCF-based). IFM’s intention of increasing its stake may continue to drive up the share price.

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Jan 14
0

Daily Brief Macro: Global Liquidity Has Bottomed … and more

By | Daily Briefs, Macro

In today’s briefing:

  • Global Liquidity Has Bottomed …
  • UK: Resilient GDP Raises Work for BoE
  • US Inflation Watch – a Consensus Print, but Decently Dovish Beneath the Surface
  • Putting (some) chips back on the table

Global Liquidity Has Bottomed …

By Michael J. Howell

  • Global Liquidity Index (GLI) moves higher to 17.5 (normal range 0-100). Most national liquidity indexes bottomed around October 2022
  • Global Liquidity will reverse its recent fall and rebound to US$174 trillion. Rising Central Bank Liquidity is a common theme. Financial dominance driving a return to Central Bank QE.
  • More liquidity is consistent with future stabilisation and moderate gains in World asset markets. Rebound investment phase. Emerging Markets and Cyclicals favoured. Gold, commodities and crypto also could be winners

UK: Resilient GDP Raises Work for BoE

By Phil Rush

  • UK GDP was surprisingly resilient in Nov-22 as it grew by 0.1% m-o-m, about 0.3pp above forecasts. The World Cup helped, but services trends are broadly less bleak.
  • Further downward revisions from the national accounts don’t negate existing evidence of excess demand. Delaying GDP falls means inflationary pressures persist for longer.
  • The BoE will need to squeeze demand more if inflation doesn’t achieve that itself amid second-round effects. More rate hikes and a recession are still coming in 2023.

US Inflation Watch – a Consensus Print, but Decently Dovish Beneath the Surface

By Andreas Steno

  • Inflation printed right on consensus despite another jump in shelter costs.
  • Several goods categories cooled quicker than anticipated by many. .
  • This is net/net a dovish report after all. USD remains a sell.

Putting (some) chips back on the table

By Mark Tinker

  • After a blow out year in 2022, the CTA macro funds are being careful how they place their chips for 2023 and while some are trying to push equities and bonds lower, continuing last year’s winning trades, more focus is currently on their more traditional ‘noise markets’ of FX and Commodities, where if anything most of the trades being put on are now the opposite of last year!
  • However, this is evidently harder work than last year, when it was ‘easy’ to create forced buyers and distressed sellers.
  • Thus, after being long energy in 2022, with early commentary emphasis on a big slowdown in GDP, the traders tried to flip and push Oil lower from the top of its trading band (around $85 on Brent).

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Jan 14
0

Daily Brief Energy/Materials: Ecolab Inc, Ppg Industries and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Ecolab Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
  • PPG Industries Inc.: Initiation of Coverage – Business Model & Key Drivers
  • Ecolab Inc.: Initiation of Coverage – Business Model & Key Drivers
  • PPG Industries Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Ecolab Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • Ecolab is a major provider of water, hygiene and infection prevention solutions and services.
  • The company has been benefitting from the recent price increases which has resulted in consistent double-digit organic sales growth in recent results.
  • They also invested in select breakthrough innovations to help customers save more water, energy, and cost, especially in Europe.

PPG Industries Inc.: Initiation of Coverage – Business Model & Key Drivers

By Baptista Research

  • This is our first report on PPG, a well-known manufacturer of paints, coatings and specialty materials.
  • The company performed well in several of its companies, notably PPG Comex.
  • They also began collaborating with the HD Supply team to find new paint clients, particularly in the commercial maintenance sector.

Ecolab Inc.: Initiation of Coverage – Business Model & Key Drivers

By Baptista Research

  • This is our first report on Ecolab, a major provider of water, hygiene and infection prevention solutions and services.
  • The company delivered a below-par result with revenues just about meeting Wall Street expectations on account of the price increases.
  • The company saw overall pricing increasing from 9% to 12% and consistent double-digit organic sales growth of 13%.

PPG Industries Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • PPG is a renowned manufacturer and distributor of paints, coatings and specialty materials.
  • The company’s recent financial performance has been solid and has been supported by ongoing real-time price hikes.
  • The company has consistently performed well in several of its companies, notably PPG Comex.

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Jan 14
0

Most Read: Brilliance China Automotive, MatsukiyoCocokara, Li Auto, Shinko Electric Industries, Cosmo Energy Holdings, Jb Financial Group, Japan Excellent, Melco International Development, China Education Group, Seven & I Holdings and more

By | Daily Briefs, Most Read

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: A Lot of Change
  • MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
  • Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
  • Fujitsu (6702) Subsidiary Selldowns To Come
  • Cosmo Energy (5021) Vs Murakami – It’s On!
  • K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27
  • Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.
  • Melco Trading “Cheap” As Macau Opens Up
  • China Education Group (839 HK): Solidifying Investment Thesis After Placement
  • Seven & I’s Valuation Nears Breaking Point

HSCI Index Rebalance Preview and Stock Connect: A Lot of Change

By Brian Freitas

  • We see 44 potential adds (including plenty of new listings) and 19 potential deletes (on market cap, liquidity and suspension) for the Hang Seng Composite Index in March.
  • We expect 37 stocks to be added to Southbound Stock Connect following the rebalance while 37 stocks could be deleted from the trading link and become Sell-only. 
  • There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period

By Brian Freitas

  • We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
  • As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
  • On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

By Brian Freitas

Fujitsu (6702) Subsidiary Selldowns To Come

By Travis Lundy

Cosmo Energy (5021) Vs Murakami – It’s On!

By Travis Lundy

  • In March 2022, longtime Cosmo Energy Holdings (5021 JP) holder Mubadala sold the last 15.7% of Cosmo Energy in a block sale after having sold 5% 8 months earlier.
  • A month later it was revealed noted Japanese activist Murakami-san had bought 5.1%. A week later it was 8.3%. Then he bought more. Cosmo announced a buyback in May 2022.
  • By November Murakami-san had 19.8%. But behind the scenes there had been discussions and those are now coming to light. Cosmo has announced possible defence measures.

K200 ETFs’ Swap Trading on Meritz & Fresh Buy-In JB Financial on Jan 27

By Sanghyun Park

  • KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
  • We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
  • As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.

Japan Excellent (8987). It WAS Most Excellent. That’s Now Done.

By Travis Lundy

  • 4.5 months ago I wrote about a possible “Sustained Flow Event” on Japan Excellent (8987 JP). Since then, the stock has outperformed every other Office REIT. It’s up since then.
  • Outperformance within Office REITs has been a minimum of 3.5%, and a maximum of ~20.8% vs the biggest peer, with an average and median outperformance of 11.7% and 13.4% respectively.
  • This idiosyncratic story has come to an end. It may be a temporary end, but I don’t see the next catalyst.

Melco Trading “Cheap” As Macau Opens Up

By David Blennerhassett

  • After Macau’s government renewed the concession periods for the city’s six incumbent gambling concessionaires for another 10 years, the key players are up 86% on average
  • Both Melco International Development (200 HK) and Melco Resorts & Entertainment (MLCO US) have gained a little over 100%. 
  • Melco’s NAV discount is back out to 36%. The simple ratio – Melco/MCLO – is around the lowest level since Melco began consolidating MCLO in early 2017.

China Education Group (839 HK): Solidifying Investment Thesis After Placement

By Osbert Tang, CFA

  • Positive response of China Education Group (839 HK)‘s placement indicated a good return of investor appetite to the sector. Its premium multiples stay well justified even after recent rally. 
  • The HK$1.6bn proceeds will reduce gearing to 29.2% (including contract liabilities) from 41.7% with minimal dilution. Narrowing in valuation gap against asking price of targets means more M&A potential. 
  • More funding for expansion of existing campuses, increase in accommodation and the set up of COVID-19 related curriculum will allow CEG to realise higher revenue per student.

Seven & I’s Valuation Nears Breaking Point

By Oshadhi Kumarasiri

  • Seven & I Holdings (3382 JP)‘s Q3 OP of ¥160.1bn was a significant surprise to the upside with consensus OP at ¥130.2bn and us expecting around ¥125-130bn.
  • This was mostly driven by an unexpected upside to the retail fuel margin while gasoline prices have come down by more than 34%.
  • Nevertheless, we would expect this temporary misalignment in retail fuel margin to correct over the next few quarters, resulting in around 35-40% downside to the company’s valuation multiples.

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