Smartkarma Daily Briefs

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 – Hollysys Automation Technologies (HOLI US), Shinko Electric Industries (6967 JP), JSR Corp (4185 JP), Probiotec Ltd (PBP AU), Genetron Holdings Ltd (GTH US), Adbri (ABC AU).
Lowest spreads Pact Group Holdings (PGH AU), Tietto Minerals Ltd (TIE AU), Orecorp Ltd (ORR AU), Benesse Holdings (9783 JP), Irc Ltd (1029 HK), T&K Toka Co Ltd (4636 JP).

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Feb 05

Daily Brief India: Bharti Hexacom and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Bharti Hexacom Pre-IPO Tearsheet

Bharti Hexacom Pre-IPO Tearsheet

By Ethan Aw

Bharti Hexacom (6597372Z IN) is looking to raise up to US$1bn in its upcoming India IPO. The bookrunners are SBI Capital, Axis Capital, BOB Capital, ICICI Securities and IIFL Securities.
Bharti Hexacom (BH) is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India.
It offers its services under the brand ‘Airtel’. BH relies on a robust network infrastructure with a mix of owned and leased assets.

Before it’s here, it’s on Smartkarma

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Feb 05

Daily Brief China: Meituan, Trip.com, WuXi AppTec and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Meituan (3690 HK): Turning Cautiously Positive
Monthly Chinese Tourism Tracker | China’s 2023 Recovery in Ten Charts | (January 2024)
Latest Impact of the US Biosecure Act on WuXi AppTec/WuXi Bio/WuXi XDC – China CXO Really Game Over?

Meituan (3690 HK): Turning Cautiously Positive

By Eric Chen

Share price of Meituan has fallen by 25% since we flagged the name as high-conviction sell for 2024 last December, due in large to its weakening fundamental and earnings cut.
We believe its competitive positioning in food delivery remains rock solid and estimates Meituan will likely command over 2/3 market share in in-store business, at the expense of margin.
The company trades at 12x/8.6x 2024/25 consensus earnings. Current valuation already priced in rather bearish outlook amidst macro concerns and intensified competition in our view. We see value emerging.

Monthly Chinese Tourism Tracker | China’s 2023 Recovery in Ten Charts | (January 2024)

By Daniel Hellberg

By one metric, outbound tourism in December improved to 89% of 2019 levels
Meanwhile, domestic activity in December remained close to pre-Covid levels
In this month’s edition we track the tourism recovery in ten illustrative charts

Latest Impact of the US Biosecure Act on WuXi AppTec/WuXi Bio/WuXi XDC – China CXO Really Game Over?

By Xinyao (Criss) Wang

Based on the latest updates, it’s still uncertain to see a positive turnaround.There’ve been no effective ways to evade.Debate about restricting Chinese biopharmaceuticals has never gone away in US politics.
Nobody can say with 100% certainty whether the Bill will be passed/how much impact it will have. Until the dust settles, any rebound in share prices is difficult to sustain.
The market is preparing for the worst-case scenario, but if the final Bill is less stringent than expected, shares of WuXi AppTec and its subsidiaries would rebound.Here’re different bottom-fishing strategies.

Before it’s here, it’s on Smartkarma

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Feb 05

Daily Brief Japan: JSR Corp, BayCurrent Consulting , Aozora Bank Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

JSR (4185) – Possible Trouble in Arb Land as SUNY/CNSE Files Suit Against JSR Sub Inpria
JSR Corporation (4185 JP): An Unwelcome US Lawsuit as Tender Start Looms
Japan – Increasing Shorts on Some Interesting** Stocks
Aozora Bank (8304 JP) – Two Bets Too Far

JSR (4185) – Possible Trouble in Arb Land as SUNY/CNSE Files Suit Against JSR Sub Inpria

By Travis Lundy

JSR Corp (4185 JP) announced 2 February on its website that the Research Foundation for the State University of New York (“RF SUNY”) filed suit against JSR subsidiary Inpria 25 January.
JSR claims no wrongdoing. A court order from the US District Court for the Northern District of New York denied RF SUNY’s request for a hearing by 5 February.
This may put a short-term damper on sentiment in the name, and I expect the JICC people have been working on this for a week.

JSR Corporation (4185 JP): An Unwelcome US Lawsuit as Tender Start Looms

The Research Foundation of the State University of New York (SUNY RF) has filed a patent infringement lawsuit against JSR Corp (4185 JP) and its subsidiary, Inpria.
SUNY RF claims the “planned tender offer will irreparably harm SUNY RF absent preliminary relief” and filed a motion for a preliminary injunction to stop JSR licensing patents to JIC.
JSR has yet to file a response, making it hard to judge the lawsuit’s merits. The best case is the PI is not granted, delaying the tender by a month.

Japan – Increasing Shorts on Some Interesting** Stocks

By Brian Freitas

There are some Japanese stocks that have dropped in price even as the broader market has powered higher. That could lead to the stocks being deleted from global portfolios.
The deletion from passive portfolios will lead to a liquidity event at the end of February where passive trackers will need to sell multiple days of ADV.
BayCurrent Consulting (6532 JP) is a dark horse for inclusion in the Nikkei 225 (NKY INDEX) in March and this deletion could take the stock lower before the Nikkei 225 announcement.

Aozora Bank (8304 JP) – Two Bets Too Far

By Victor Galliano

3QFY23 results reveal losses related to Aozora’s US CRE exposure and securities portfolio; management forecasts a FY23 loss and a 50% cut in the previously forecast FY2023 dividend
US CRE exposure is 6.6% of total loans and Aozora’s US CRE deterioration propelled the NPL ratio to 2.87% up 162bps QoQ, the worst NPL ratio of the peer group
The securities portfolio hits are in US MBS and US bond ETFs; SMFG and Mizuho have large relative FX bond exposures, but they have less duration risk

Before it’s here, it’s on Smartkarma

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Feb 04

Daily Brief Industrials: SCREEN Holdings, Hyundai Motor, Outsourcing Inc, Lockheed Martin, Benefit One Inc, 3M Co, Paccar Inc, Raytheon Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Screen Holdings (7735): Share Price Straight Up, Financials Not so Simple
Samhyun IPO Preview
(Mostly) Asia-Pac Weekly Risk Arb Wrap: QV Equities, Orecorp, Benesse, Glosel, Outsourcing
Lockheed Martin: How Bad Is The Impact of Delays in Government Budget? – Major Drivers
Weekly Deals Digest (04 Feb) – Benefit One, Benesse, Outsourcing, Glosel, Hollysys, OreCorp, QVE
Last Week in Event SPACE: Benefit One, Guoco, Outsourcing, Hang Lung, Hollysys, Dalek
3M Company: How Geographic Shifts and Portfolio Magic Could Boost Growth! – Major Drivers
PACCAR Inc: Can The Newly Refreshed Product Lineup Change The Game? – Major Drivers
RTX Corporation: Can Their Investments In Differentiated Technologies Further Build Their Competitive Moat? – Major Drivers

Screen Holdings (7735): Share Price Straight Up, Financials Not so Simple

By Scott Foster

The share price was up 4.4% on Friday – and up 2.3x since the end of October – raising forward valuations to the high side of their usual range.
Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.
Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.

Samhyun IPO Preview

By Douglas Kim

Samhyun is getting ready to complete its IPO on the KOSDAQ exchange in March. The IPO total offering amount is 40 billion won to 50 billion won.
The company generated sales of 99.8 billion won (up 45.5% YoY) and operating profit of 9.8 billion won (up 250% YoY) in 2023.
Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: QV Equities, Orecorp, Benesse, Glosel, Outsourcing

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deals discussed this week on Smartkarma: The all-scrip Offer for QV Equities Ltd (QVE AU) from WAM Leaders Ltd (WLE AU).
Key updates took place on: Orecorp Ltd (ORR AU), Benesse Holdings (9783 JP), Glosel (9995 JP) and Outsourcing Inc (2427 JP).

Lockheed Martin: How Bad Is The Impact of Delays in Government Budget? – Major Drivers

Lockheed Martin Corporation held its fourth quarter and year-end earnings conference call for 2023, outlining its performance, financial results, and future expectations.
The company emphasized strong performance in 2023, driven by considerable demand for its aircraft, helicopters, satellites, radar systems, and other products and services.
Lockheed Martin reported a record backlog of $161 billion, with sales for the full year of $67.6 billion, reflecting a 2% year-on year growth.

Weekly Deals Digest (04 Feb) – Benefit One, Benesse, Outsourcing, Glosel, Hollysys, OreCorp, QVE

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 – Amer Sports (AS US) is up 15% since listing. Ola Electric (1700674D IN) and FirstCry (0172540D IN) IPOs.
Event-Driven developments – Benefit One Inc (2412 JP), Benesse Holdings (9783 JP), Glosel (9995 JP), Outsourcing Inc (2427 JP), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU).

Last Week in Event SPACE: Benefit One, Guoco, Outsourcing, Hang Lung, Hollysys, Dalek

As totally expected, Dai Ichi Life Insurance (8750 JP) extended its expected start date for the Tender Offer on Benefit One Inc (2412 JP).
The possibility of a fourth Offer attempt by the Queks is raised as Elliott surprisingly exits its position in Guoco Group Ltd (53 HK).
Outsourcing Inc (2427 JP) is eminently bumpable, But unless investors force the issue, don’t expect a bump.

3M Company: How Geographic Shifts and Portfolio Magic Could Boost Growth! – Major Drivers

3M has shown solid operational improvements in its fourth-quarter results, which could translate into an exciting year ahead for the company, despite the ongoing pandemic-related challenges.
The company reported strong adjusted EPS growth of 11% and operating margin expansion of 180 basis points, with significant contributions from its restructuring program aimed at streamlining operations, reducing costs and improving productivity.
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.

PACCAR Inc: Can The Newly Refreshed Product Lineup Change The Game? – Major Drivers

PACCAR, a leading American truck manufacturing company, showcased impressive performance in their fourth quarter 2023 earnings conference call.
The company reported record annual revenues of $35.1 billion and a net income of $4.6 billion, marking an impressive after-tax return on revenue of 13.1%.
This positive trend was primarily driven by record deliveries of the company’s DAF, Kenworth and Peterbilt trucks, strong results in its parts division and consistent financial services performance.

RTX Corporation: Can Their Investments In Differentiated Technologies Further Build Their Competitive Moat? – Major Drivers

RTX Corporation held its Q4 2023 earnings conference call with senior executives such as Chairman and CEO Greg Hayes, incoming CEO Chris Calio and Chief Financial Officer Neil Mitchill.
The call highlighted a leadership change with the transition of current CEO, Greg Hayes, to Executive Chairman, and Chris Calio assuming the role of CEO.
The company reported strong full-year results with $74.3 billion in adjusted sales, a growth of 11% organically, and adjusted EPS of $5.06, a growth of 6% year-over-year.

Before it’s here, it’s on Smartkarma

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Feb 04

Daily Brief TMT/Internet: DISCO Corp, Bluesheets , Alphabet , China Mobile, Texas Instruments, Verizon Communications and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Index Rebalance & ETF Flow Recap: N225, ASX, STAR50, NIFTY50, KRX New Deal, UOL SP, Korea Passive
Bluesheets Raises US$6.5M in Series A Led by Illuminate Financial
Alphabet Inc.: Is It Losing The AI Race? Or Can It Still Catch Up? – What Investors Need to Know! – Major Drivers
HK Connect SOUTHBOUND Flows (To 2 Feb 2024); Net Selling (Much Tech), Net SOE Buying, Still
Texas Instruments: A Tale of Strong Cash Generation and Capital Management! – Major Drivers
Verizon Communications – Increasing Contribution from Fixed Wireless Access & Other Major Drivers

Index Rebalance & ETF Flow Recap: N225, ASX, STAR50, NIFTY50, KRX New Deal, UOL SP, Korea Passive

By Brian Freitas

The review period for a global index and a bunch of local indices ended last week. The announcement of the changes will be made in 1 week to 4 weeks.
Strike Energy (STX AU) will replace Costa Group Holdings (CGC AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 8 February.
The inflows to mainland China ETFs continue for another week. There were big inflows to iShares India ETF (INDA US) and Ishares India Small-Cap (SMIN US).

Bluesheets Raises US$6.5M in Series A Led by Illuminate Financial

By e27

Singapore-based AI automation software company Bluesheets today announced that it has secured US$6.5 million in a Series A funding round led by Illuminate Financial, a UK-based financial-services-focused VC fund that is backed by BNY Mellon, J.P Morgan, Citi, SGX, Barclays, Euroclear, S&P Global, Jefferies and Deutsche Börse Group.
The company’s early investors, such as 1982 Ventures and Insignia Ventures Partners, and new investor Antler Elevate Fund also participated in the round.
In a press statement, Bluesheets said that the funding will play a crucial role in advancing its exclusive AI capabilities, enabling them to assist a broader range of clients in digitalising and automating their processes, ensuring competitiveness in the AI-driven era.

Alphabet Inc.: Is It Losing The AI Race? Or Can It Still Catch Up? – What Investors Need to Know! – Major Drivers

Alphabet Inc.’s fourth quarter results for 2023 reflect signs of solid growth and sustained technological innovation as the company maintains a strong trajectory for 2023.
An investor would focus on Alphabet’s robust earnings performance, demonstrated by substantial revenues of $307 billion, an increase of 9% from 2022.
Take the case of Alphabet’s primary business.

HK Connect SOUTHBOUND Flows (To 2 Feb 2024); Net Selling (Much Tech), Net SOE Buying, Still

By Travis Lundy

A bad week for HK and Chinese shares. National Team buying seems lighter into the waning days of the Year of the Rabbit.
Net SOUTHBOUND selling was HK$9.4bn on the week, with net selling every day as the market fell hard – both in HK and the mainland.
Remarkable this past week was the tendency to net sell names which were down hard, and net buy names which have been performing well.

Texas Instruments: A Tale of Strong Cash Generation and Capital Management! – Major Drivers

Texas Instruments, an American multinational company, has shared their Q4 2023 earnings release.
The financial results indicated a downturn in revenue, decreased by 10% sequentially and 13% year-on-year to $4.1 billion.
This decrease was largely due to declining sales in the Analog segment (12% YoY), the Embedded Processing segment (10% YoY), and the Other segment (25% YoY).

Verizon Communications – Increasing Contribution from Fixed Wireless Access & Other Major Drivers

Verizon released its most recent results which were fairly good though we can develop a more balanced investment thesis for this telecommunications giant consists of highlighting several positives and negatives from the results of the fourth quarter of 2023.
Of the uplifting notes, Verizon saw a 3.2% YoY growth in wireless service revenue, hitting $76.7 billion in 2023.
The fourth quarter saw a strong finish with significant increases in customers embracing the offerings.

Before it’s here, it’s on Smartkarma

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Feb 04

Daily Brief Energy/Materials: Baker Hughes, Halliburton Co and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Baker Hughes Company: Improving Consumer Demand For Integrated Solutions! – Major Drivers
Halliburton Company: Will The Recent Technology Advancements Become Their Biggest Growth Catalyst? – Major Drivers

Baker Hughes Company: Improving Consumer Demand For Integrated Solutions! – Major Drivers

Baker Hughes Company’s Q4 2023 financial performance reveals an overall strong growth and a positive outlook for 2024.
The company made substantial progress and saw records broken for all primary financial metrics like orders, revenue, EBITDA, EPS, and free cash flow.
This growth trend shows a successful financial strategy and beneficial operational improvements.

Halliburton Company: Will The Recent Technology Advancements Become Their Biggest Growth Catalyst? – Major Drivers

Halliburton Company in its fourth quarter 2023 earnings call reported a strong year with both its divisions, completion and production, and drilling and evaluation achieving their highest operating margins in over a decade.
The company generated full-year total company revenue of $23 billion, a 13% increase year-over-year, and operating income of $4.1 billion, an increase of 33% compared to 2022 adjusted operating income.
International business grew robustly with revenue up 17% year on-year despite the company’s exit from Russia in August of 2022.

Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Feb 04

Daily Brief Industrials: SCREEN Holdings, Hyundai Motor, Outsourcing Inc, Lockheed Martin, Benefit One Inc, 3M Co, Paccar Inc, Raytheon Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Screen Holdings (7735): Share Price Straight Up, Financials Not so Simple
Samhyun IPO Preview
(Mostly) Asia-Pac Weekly Risk Arb Wrap: QV Equities, Orecorp, Benesse, Glosel, Outsourcing
Lockheed Martin: How Bad Is The Impact of Delays in Government Budget? – Major Drivers
Weekly Deals Digest (04 Feb) – Benefit One, Benesse, Outsourcing, Glosel, Hollysys, OreCorp, QVE
Last Week in Event SPACE: Benefit One, Guoco, Outsourcing, Hang Lung, Hollysys, Dalek
3M Company: How Geographic Shifts and Portfolio Magic Could Boost Growth! – Major Drivers
PACCAR Inc: Can The Newly Refreshed Product Lineup Change The Game? – Major Drivers
RTX Corporation: Can Their Investments In Differentiated Technologies Further Build Their Competitive Moat? – Major Drivers

Screen Holdings (7735): Share Price Straight Up, Financials Not so Simple

By Scott Foster

The share price was up 4.4% on Friday – and up 2.3x since the end of October – raising forward valuations to the high side of their usual range.
Management raised FY Mar-24 operating profit guidance slightly after 3Q results that were strong YoY but flat QoQ. 4Q should be better as finished goods inventory is shipped.
Operating efficiency has improved and a new semiconductor up-cycle has begun, but the numbers suggest caution. Take profits and reassess.

Samhyun IPO Preview

By Douglas Kim

Samhyun is getting ready to complete its IPO on the KOSDAQ exchange in March. The IPO total offering amount is 40 billion won to 50 billion won.
The company generated sales of 99.8 billion won (up 45.5% YoY) and operating profit of 9.8 billion won (up 250% YoY) in 2023.
Samhyun developed one of the world’s first CVVD (Continuously Variable Valve Duration) technology for automobile engines, which improves fuel efficiency by controlling the engine’s valve opening time.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: QV Equities, Orecorp, Benesse, Glosel, Outsourcing

I tally 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deals discussed this week on Smartkarma: The all-scrip Offer for QV Equities Ltd (QVE AU) from WAM Leaders Ltd (WLE AU).
Key updates took place on: Orecorp Ltd (ORR AU), Benesse Holdings (9783 JP), Glosel (9995 JP) and Outsourcing Inc (2427 JP).

Lockheed Martin: How Bad Is The Impact of Delays in Government Budget? – Major Drivers

Lockheed Martin Corporation held its fourth quarter and year-end earnings conference call for 2023, outlining its performance, financial results, and future expectations.
The company emphasized strong performance in 2023, driven by considerable demand for its aircraft, helicopters, satellites, radar systems, and other products and services.
Lockheed Martin reported a record backlog of $161 billion, with sales for the full year of $67.6 billion, reflecting a 2% year-on year growth.

Weekly Deals Digest (04 Feb) – Benefit One, Benesse, Outsourcing, Glosel, Hollysys, OreCorp, QVE

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 – Amer Sports (AS US) is up 15% since listing. Ola Electric (1700674D IN) and FirstCry (0172540D IN) IPOs.
Event-Driven developments – Benefit One Inc (2412 JP), Benesse Holdings (9783 JP), Glosel (9995 JP), Outsourcing Inc (2427 JP), Hollysys Automation Technologies (HOLI US), QV Equities Ltd (QVE AU).

Last Week in Event SPACE: Benefit One, Guoco, Outsourcing, Hang Lung, Hollysys, Dalek

As totally expected, Dai Ichi Life Insurance (8750 JP) extended its expected start date for the Tender Offer on Benefit One Inc (2412 JP).
The possibility of a fourth Offer attempt by the Queks is raised as Elliott surprisingly exits its position in Guoco Group Ltd (53 HK).
Outsourcing Inc (2427 JP) is eminently bumpable, But unless investors force the issue, don’t expect a bump.

3M Company: How Geographic Shifts and Portfolio Magic Could Boost Growth! – Major Drivers

3M has shown solid operational improvements in its fourth-quarter results, which could translate into an exciting year ahead for the company, despite the ongoing pandemic-related challenges.
The company reported strong adjusted EPS growth of 11% and operating margin expansion of 180 basis points, with significant contributions from its restructuring program aimed at streamlining operations, reducing costs and improving productivity.
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.

PACCAR Inc: Can The Newly Refreshed Product Lineup Change The Game? – Major Drivers

PACCAR, a leading American truck manufacturing company, showcased impressive performance in their fourth quarter 2023 earnings conference call.
The company reported record annual revenues of $35.1 billion and a net income of $4.6 billion, marking an impressive after-tax return on revenue of 13.1%.
This positive trend was primarily driven by record deliveries of the company’s DAF, Kenworth and Peterbilt trucks, strong results in its parts division and consistent financial services performance.

RTX Corporation: Can Their Investments In Differentiated Technologies Further Build Their Competitive Moat? – Major Drivers