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Smartkarma Daily Briefs

Nov 01
0

Daily Brief Equity Bottom-Up: SK Hynix. DRAM To The Rescue and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • SK Hynix. DRAM To The Rescue
  • JD.Com: Losing Its Appeal?
  • Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results
  • APAC Luxury Industry Series: Update
  • GoTo: In Pursuit of Profits…
  • Fanuc (6954) | Not Out of the Woods Yet
  • AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum
  • Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised
  • Midea Group (000333 CH):  Not That Correlated To China Property
  • Arbuthnot Banking Group (ARBB) Trading update: taking ABG to the next level

SK Hynix. DRAM To The Rescue

By William Keating

  • SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
  • Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
  • While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

JD.Com: Losing Its Appeal?

By Steven Holden

  • After a spike higher in fund ownership in 2021, active Asia Ex-Japan funds are beginning to close out positions.
  • Funds including T.Rowe Price, LO Funds and Nikko AM have closed out exposure this year.
  • JD.com remains a very well owned stock among institutional investors, at a time when performance is anything but stellar so far this year.

Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results

By Ming Lu

  • We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
  • We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
  • We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.

APAC Luxury Industry Series: Update

By Oshadhi Kumarasiri

  • This update builds upon our initial report on the APAC Luxury Industry, in which we expressed our belief that potential opportunities lie within the small niches of the luxury sector.
  • While the share price performance hasn’t met our expectations, the broader trend we highlighted, Luxury Travel and Tourism, has shown robust growth.
  • Even though travel flows have returned to pre-pandemic levels, Shiseido has not yet regained its pre-pandemic performance, however the two hotels are already operating at levels close to 2019 levels.

GoTo: In Pursuit of Profits…

By Shifara Samsudeen, ACMA, CGMA

  • GoTo reported 3Q2023 results on Monday. Gross revenues increased 1.4% YoY to IDR5.98trn while adj. EBITDA losses further narrowed down to IDR1.84trn vs IDR3.71trn in 3Q2022.
  • GoTo Gojek Tokopedia Tbk PT (GOTO IJ) continues to see huge reduction in losses but growth rates have fallen further with cutdown on incentives and promotional spending.
  • It seems that GoTo has stopped exploring growth opportunities in pursuit of profits, however, this may not be sustainable in the long-term with falling growth rates.

Fanuc (6954) | Not Out of the Woods Yet

By Mark Chadwick

  • Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.
  • Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns
  • We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns

AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum

By Osbert Tang, CFA

  • The A-share subsidiaries of AviChina Industry & Technology (2357 HK) have mostly posted solid 3Q23 results – aggregate earnings growth has accelerated to 50.2%, from 26.8% in 1Q23.
  • Their 9M23 result reached 64% of FY23 consensus forecast earnings for AviChina, vs. just 61% a year ago. This indicates the market is too conservative and suggests room for upgrade.
  • Valuations are cheap at 8.7x and 7.0x PERs for FY23 and FY24. Its market capitalisation equals just 46% of the total attributable market capitalisation of these subsidiaries.

Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised

By Tina Banerjee

  • Alfresa Holdings (2784 JP)‘s H1FY24 revenue, operating profit, and net profit are expected to exceed the previous expectations due to greater-than-expected growth in the ethical pharmaceuticals business.  
  • Encouraged by the growth in the pharmaceutical market and better-than-expected H1FY24 performance, the company has raised FY24 revenue, operating profit, and net profit guidance by 4%, 30%, and 36%, respectively.
  • New FY24 guidance implies, H2FY24 revenue run-rate will be similar to H1F24, while H2FY24 operating profit will accelerate to ¥20.1 billion from ¥15.9 billion in H1FY24.

Midea Group (000333 CH):  Not That Correlated To China Property

By Steve Zhou, CFA

  • Midea Group Co Ltd A (000333 CH) has officially filed for Hong Kong listing last week. 
  • A common pushback against owning the stock is the perception of strong correlation to China property, which is not true in terms of business fundamentals.
  • The stock is currently trading at 10x 2024E PE compared to an average of 13x over the last 10 years. 

Arbuthnot Banking Group (ARBB) Trading update: taking ABG to the next level

By Hardman & Co

  • In our view, the key takeaway from the recent 3Q trading statement is how ABG is progressing strategically towards its “Future State 2” plan.
  • In particular, we note specialist SME finance divisions generating the ambitious balance sheet growth in the plan, optimising the core relationship banking franchise, which, in this period, saw 7% deposit growth ‒ given the level of base rates, this is a profitable product for a relationship bank, and continued investment, which, at times, requires a step change in cost rather than a gentle evolution.
  • To meet expected multi-year demand, ABG is increasing its central London HQ office space by 45% at an annual increase in cost of ca.£5m (with further dual running costs until October 2024 as it is refitted).

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Nov 01
0

Daily Brief Macro: BTC Bull Run Preempts Other Digital Assets and more

By | Daily Briefs, Macro

In today’s briefing:

  • BTC Bull Run Preempts Other Digital Assets
  • CX Daily: China’s Family-Run Businesses Face Succession Issues
  • EA: Doves Near Inflation’s Trough

BTC Bull Run Preempts Other Digital Assets

By Pranay Yadav

  • Bitcoin price has increased 20% over the past week anticipating the imminent approval  of a spot Bitcoin ETF. 
  • Bitcoin has outperformed other digital assets over the past year. Dominance has reached a two-year high. 
  • BTC-ETH ratio is expected to continue rising after a near-term pullback due to ETF approval and relative safety providing strong tailwinds to BTC. 

CX Daily: China’s Family-Run Businesses Face Succession Issues

By Caixin Global

  • Family / Cover Story: China’s family-run businesses face succession issues 
  • China-U.S. /: China, U.S. ‘working together’ on Biden-Xi meeting at APEC next month
  • Personnel /: Communist Party names new economic czar

EA: Doves Near Inflation’s Trough

By Phil Rush

  • EA inflation plummeted by 1.4pp to 2.9% in Oct-23, 0.2pp beyond the consensus and within 0.1pp of our forecast again. But it is close to views prevailing since February.
  • The downside news concentrated on energy prices, as we expected, while the core matched forecasts by falling 0.3pp to 4.2%. National surprises broadly skewed lower.
  • We still expect a much smaller slowing in November before temporarily jumping into yearend. Recent downside news should encourage the ECB as it resists hiking again.

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Nov 01
0

Daily Brief Australia: Emerald Resources Nl, Treasury Wine Estates, ADX Energy Ltd, Lepidico Limited and more

By | Australia, Daily Briefs

In today’s briefing:

  • S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)
  • Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds
  • Auctus on Friday – 20/10/2023
  • ADX Energy Limited (ASE: ADX): On Track to start drilling in early November
  • Lepidico – Development plan evolves

S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)

By Brian Freitas

Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds

By Sumeet Singh

  • Treasury Wine Estates (TWE AU) aims to raise up to US$525m (A$825m) via a renounceable fully underwritten entitlement offer.
  • Proceeds from the placement will be used to part fund the acquisition of DAOU Vineyards, a luxury wine brand based in California.
  • In this note, we will talk about the deal dynamics.

Auctus on Friday – 20/10/2023

By Auctus Advisors

  • ________________________________________ ADX Energy (ADX AU)C; target price of A$0.80 per share: Two high impact wells to commence drilling by YE23 – ADX is expected to start drilling the Anshof-2 appraisal well in November.
  • Anshof is also estimated to hold 5.5 mmboe net 3C contingent resources (net to ADX).
  • We have changed our target price to A$0.80 per share as we incorporate the recently announced 10 for 1 share consolidation.

ADX Energy Limited (ASE: ADX): On Track to start drilling in early November

By Auctus Advisors

  • • 3Q23 production of 324 boe/d and cash of A$5.7 mm at the end of September were near our expectations.
  • This includes 101 bbl/d gross production for Anshof that was shut-in on 19 September after reaching the regulatory limit for test production.
  • Anshof-3 production will recommence after the drilling of the Anshof-2 well and the installation of a permanent production facility in February.

Lepidico – Development plan evolves

By Edison Investment Research

On 30 October, Lepidico announced the updated economics of its 2020 definitive feasibility study (DFS) on its integrated lithium hydroxide mine and chemical plant to show a base case NPV8 of US$457m post-tax, which equates to 9.4 Australian cents per share on a pre-funding basis. In our January 2019 report Gold stars and black holes, we calculated that companies with completed DFSs typically have an EV/NPV ratio of 30.9%, which would imply a pre-funding valuation for Lepidico of 2.9c/share, to which its shares are currently trading at a significant 69.0% discount.

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Nov 01
0

Daily Brief South Korea: Kakao Corp, SK Hynix, Doosan Robotics, ASICLAND and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Concerns About A Major Accounting Fraud at Kakao Mobility
  • SK Hynix. DRAM To The Rescue
  • End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023
  • Asicland IPO Book Building Results Analysis

Concerns About A Major Accounting Fraud at Kakao Mobility

By Douglas Kim

  • It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud. 
  • There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing. 
  • Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp. 

SK Hynix. DRAM To The Rescue

By William Keating

  • SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
  • Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
  • While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
  • These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
  • Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis. 

Asicland IPO Book Building Results Analysis

By Douglas Kim

  • Asicland completed an excellent IPO book building results. IPO price has been determined at 25,000 won which is 17% higher than the high end of the IPO price range.
  • A total of 1,906 institutional investors participated in this IPO book building results. The IPO demand ratio was 490 to 1. Asicland IPO will start trading on 13 November. 
  • Our base case valuation of Asicland is implied market cap of 434 billion won or target price of 40,571 won per share, which is 62% higher than the IPO price.

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Nov 01
0

Daily Brief Singapore: Mandarin Oriental International and more

By | Daily Briefs, Singapore

In today’s briefing:

  • APAC Luxury Industry Series: Update

APAC Luxury Industry Series: Update

By Oshadhi Kumarasiri

  • This update builds upon our initial report on the APAC Luxury Industry, in which we expressed our belief that potential opportunities lie within the small niches of the luxury sector.
  • While the share price performance hasn’t met our expectations, the broader trend we highlighted, Luxury Travel and Tourism, has shown robust growth.
  • Even though travel flows have returned to pre-pandemic levels, Shiseido has not yet regained its pre-pandemic performance, however the two hotels are already operating at levels close to 2019 levels.

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Nov 01
0

Daily Brief United States: Russell 2000 Index, Alphabet , Cheniere Energy, At&T Inc, Avantor , Baker Hughes, American Express Co, Coca Cola Co, Copart Inc, Align Technology and more

By | Daily Briefs, United States

In today’s briefing:

  • Bullish Breadth Divergences Persist; Russell 2000 Testing 1.5-Year Support; Buys in Education Svcs
  • Alphabet Inc: Cloud Innovations – A Glimpse into the Future of Tech! – Major Drivers
  • Cheniere Energy Inc.: Initiation of Coverage – Business Strategy
  • AT&T Inc: The Convergence Of 5G & Fiber Is The Future! – Major Drivers
  • Avantor Inc.: Initiation of Coverage – Business Strategy
  • Baker Hughes Co: Initiation of Coverage – Business Strategy
  • American Express Company: Launch Of American Express Business Blueprint & Other Developments
  • The Coca-Cola Company: From North America to Asia – Dominating Every Sip! – Major Drivers
  • Copart Inc.: Initiation of Coverage – Business Strategy
  • Align Technology Inc: Initiation of Coverage – Business Strategy

Bullish Breadth Divergences Persist; Russell 2000 Testing 1.5-Year Support; Buys in Education Svcs

By Joe Jasper

  • The SPX is at 4165-4200 support, and the Nasdaq 100 (QQQ) is at $350-$355 support. No “decisive” breakdowns quite yet as supports show signs of holding.
  • Russell 2000 (IWM) is testing 1.5-year support at $162-$163, making this a logical spot for small-caps to bounce and an attractive risk/reward for buyers
  • Continue to see signs of breadth possibly bottoming-out. Both the SPX and Russell 2000 and the % of stocks above their 50-day and 20-day MAs display bullish breadth divergences.

Alphabet Inc: Cloud Innovations – A Glimpse into the Future of Tech! – Major Drivers

By Baptista Research

  • Alphabet Inc. delivered a solid result and managed an all-around beat in the quarter, with significant growth in its Search and YouTube segments, as well as momentum in Cloud services.
  • The goal is to provide more diverse information and multiple perspectives in search results while incorporating ads.
  • The company enables developers and organizations to build transformative products and services, mainly through Google Cloud, which witnessed continued growth, showcasing innovations in infrastructure, data, AI, workspace collaboration, and cybersecurity solutions.

Cheniere Energy Inc.: Initiation of Coverage – Business Strategy

By Baptista Research

  • This is our first report on energy infrastructure major, Cheniere Energy Inc.
  • The company performed decently in the previous quarter as global inventory levels reached historic highs.
  • The U.S.’s mild climate and increased production kept Henry Hub prices below $3 during the quarter, encouraging coal-to-gas switching and boosting power sector demand.

AT&T Inc: The Convergence Of 5G & Fiber Is The Future! – Major Drivers

By Baptista Research

  • AT&T Inc. delivered a positive result and managed an all-around beat in the last quarter, prioritizing investments in 5G and fiber technologies to expand their customer base while ensuring profitability.
  • In the wireless sector, its consistent go-to-market strategy continues to attract high-value subscribers, exemplifying the resonance of its customer-centric approach.
  • Besides these positive results, the company launched AT&T Internet Air to deliver uninterrupted and dependable internet connectivity to small company proprietors.

Avantor Inc.: Initiation of Coverage – Business Strategy

By Baptista Research

  • This is our first report on Avantor, Inc, a well-known provider of mission-critical products to the healthcare industry as well as other domains.
  • The company delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
  • Market trends weakened sequentially, particularly in biopharma, where larger pharmaceutical customers moderated their spending, and small biotech companies faced ongoing funding constraints.

Baker Hughes Co: Initiation of Coverage – Business Strategy

By Baptista Research

  • This is our first report on energy equipments and services provider, Baker Hughes.
  • Despite global economic uncertainty and fluctuating commodity prices, Baker Hughes remains optimistic about the outlook for the year, emphasizing a durable upstream spending cycle driven by international and offshore markets.
  • Baker Hughes continues to optimize its corporate structure with a cost-reduction strategy and a focus on achieving higher margins and returns.

American Express Company: Launch Of American Express Business Blueprint & Other Developments

By Baptista Research

  • American Express Company delivered a solid result and managed an all-around beat in the last quarter, continuing the impressive trajectory of its financial performance.
  • The company reported its 7th consecutive quarter of tangible results, with significant revenues reaching $15.4 billion, showcasing a 13% year-over-year increase.
  • The company further introduced product improvements and analytics advancements to its digital cash flow management hub, American Express Business Blueprint.

The Coca-Cola Company: From North America to Asia – Dominating Every Sip! – Major Drivers

By Baptista Research

  • The Coca-Cola Company managed to surpass the revenue and earnings expectations of Wall Street.
  • The company had strong organic revenue growth, improved operating margins, and earnings per share growth.
  • With 11% organic revenue growth driven by higher volume, pricing actions, and carryover pricing, Coca-Cola maintained its industry’s vibrancy.

Copart Inc.: Initiation of Coverage – Business Strategy

By Baptista Research

  • This is our first report on Copart Inc, a well-known online auctions and vehicle remarketing services provider.
  • With global revenue increasing by nearly 13%, including a favorable currency impact, the company demonstrated its ability to drive solid financial results.
  • With solid profits and cost efficiency, Copart is set to weather market changes and maintain global service excellence.

Align Technology Inc: Initiation of Coverage – Business Strategy

By Baptista Research

  • This is our first report on health-tech player, Align Technology Inc. exceeded analyst expectations in terms of revenue as well as earnings.
  • Notably, 195,000 teens and kids commenced Invisalign clear aligner treatment in Q2, marking a 7% sequential increase and a significant 10% year-over-year growth.
  • Total Clear Aligner revenues for Q2 amounted to $832.7 million, reflecting a 5.4% sequential and 4.3% year-over-year increase.

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Nov 01
0

Daily Brief Indonesia: GoTo Gojek Tokopedia Tbk PT, Lippo Karawaci and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • GoTo: In Pursuit of Profits…
  • Morning Views Asia: Lippo Karawaci

GoTo: In Pursuit of Profits…

By Shifara Samsudeen, ACMA, CGMA

  • GoTo reported 3Q2023 results on Monday. Gross revenues increased 1.4% YoY to IDR5.98trn while adj. EBITDA losses further narrowed down to IDR1.84trn vs IDR3.71trn in 3Q2022.
  • GoTo Gojek Tokopedia Tbk PT (GOTO IJ) continues to see huge reduction in losses but growth rates have fallen further with cutdown on incentives and promotional spending.
  • It seems that GoTo has stopped exploring growth opportunities in pursuit of profits, however, this may not be sustainable in the long-term with falling growth rates.

Morning Views Asia: Lippo Karawaci

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Nov 01
0

Daily Brief China: WuXi XDC Cayman Inc, JD.com , Kuaishou Technology, Haitong International Securities Group, AviChina Industry & Technology H, Midea Group Co Ltd A, Cainiao Smart Logistics and more

By | China, Daily Briefs

In today’s briefing:

  • WuXi XDC IPO: The Bull Case
  • WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong
  • JD.Com: Losing Its Appeal?
  • Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results
  • (Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power
  • AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum
  • Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention
  • Midea Group (000333 CH):  Not That Correlated To China Property
  • Midea A/H Listing – Filing Updates – Growth and Margins Pick Up
  • Introducing Monthly Tracking of Chinese X-Border Express Parcel Data | YTD Volume up +55%, ASPs -25%

WuXi XDC IPO: The Bull Case

By Arun George

  • WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.   
  • WuXi XDC ranked No. 2 globally and No. 1 in China among CRDMO for antibody-drug conjugates and other bioconjugates in terms of revenue in 2022, according to Frost & Sullivan.
  • The bull case rests on large addressable markets, market share gains, fast-paced revenue growth, strong revenue visibility, a solid balance sheet and ambitious capacity expansion plans.

WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong

By Clarence Chu

  • WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
  • WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
  • In our previous notes we looked at the company’s past performance, peer comparison, and shared our thoughts on valuations. In this note, we discuss WXDC’s PHIP updates.

JD.Com: Losing Its Appeal?

By Steven Holden

  • After a spike higher in fund ownership in 2021, active Asia Ex-Japan funds are beginning to close out positions.
  • Funds including T.Rowe Price, LO Funds and Nikko AM have closed out exposure this year.
  • JD.com remains a very well owned stock among institutional investors, at a time when performance is anything but stellar so far this year.

Kuaishou/KS (1024 HK) Earnings Preview: Unnecessary Concerns About Chairman Change and 3Q23 Results

By Ming Lu

  • We believe Mr. Su’s resignation as chairman is not a concern, because Mr. Cheng, the CEO, has been operating the company for two years.
  • We believe the 3Q23 YoY growth will be lower, as 2Q23 had a lower comparison base.
  • We believe the operating margin can be negative in 3Q23 as Q3 is always a weak season, but operating profit will break even for 2023.

(Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power

By David Blennerhassett

  • For the month of October 2023, 7 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$4bn.
  • The average premium for the new deals announced (or first discussed) in October was 65%. The average YTD is 37% (85 deals).
  • This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

AviChina Industry (2357 HK): No Way Its Parts Are Greater than the Sum

By Osbert Tang, CFA

  • The A-share subsidiaries of AviChina Industry & Technology (2357 HK) have mostly posted solid 3Q23 results – aggregate earnings growth has accelerated to 50.2%, from 26.8% in 1Q23.
  • Their 9M23 result reached 64% of FY23 consensus forecast earnings for AviChina, vs. just 61% a year ago. This indicates the market is too conservative and suggests room for upgrade.
  • Valuations are cheap at 8.7x and 7.0x PERs for FY23 and FY24. Its market capitalisation equals just 46% of the total attributable market capitalisation of these subsidiaries.

Pre-IPO WuXi XDC (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

  • We’ve seen increasing global cooperation for ADC pipelines. However, licensing deals alone cannot be used as the only basis for judgment. We still need to wait for solid clinical evidence.
  • ADCs are far less “general and popularized” than PD-1. If compare ADC with GLP-1s, the difference is more obvious.How big the real market is for ADC is a question mark.
  • WuXi XDC’s share price could perform well after IPO due to positive sentiments towards ADC, but whether its long-term valuation would be higher than peers remains to be seen.  

Midea Group (000333 CH):  Not That Correlated To China Property

By Steve Zhou, CFA

  • Midea Group Co Ltd A (000333 CH) has officially filed for Hong Kong listing last week. 
  • A common pushback against owning the stock is the perception of strong correlation to China property, which is not true in terms of business fundamentals.
  • The stock is currently trading at 10x 2024E PE compared to an average of 13x over the last 10 years. 

Midea A/H Listing – Filing Updates – Growth and Margins Pick Up

By Sumeet Singh

  • Midea Group Co Ltd A (000333 CH), one of the world’s largest home appliance producers, aims to raise up to US$3bn in its H-share listing.
  • Midea Group is one of the world’s largest home appliance manufacturing companies with a presence in over 200 countries. Its A-shares have been listed since 2013.
  • We have covered the company and deal background in our previous note. In this note, we talk about the updates from the recent filing.

Introducing Monthly Tracking of Chinese X-Border Express Parcel Data | YTD Volume up +55%, ASPs -25%

By Daniel Hellberg

  • For certain companies now seeking IPOs, X-border volumes may serve as demand proxy
  • In 2023, Chinese X-border volume growth has accelerated, up +55% Y/Y through September
  • In developing X-border express market, lower ASPs are actually a good thing, in our view

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Nov 01
0

Daily Brief India: Polycab India , UPL Ltd and more

By | Daily Briefs, India

In today’s briefing:

  • NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
  • UPL Limited – Earnings Flash – Q2 FY 2023-24 Results – Lucror Analytics

NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover

By Brian Freitas

  • Halfway through the review period, we see 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
  • Estimated one-way turnover is 15.26% and that will result in a one-way trade of INR 24bn. There will be more than 2x ADV to sell on nearly all deletes.
  • There is a possibility of an index methodology change, but no news for the last 4 months could indicate pushback from users or more stocks added to the F&O market.

UPL Limited – Earnings Flash – Q2 FY 2023-24 Results – Lucror Analytics

By Trung Nguyen

UPL’s Q2/23-24 results were very weak, with revenues and earnings declining significantly and a deterioration in working capital. Our scepticism of the company has continued to deepen with the results. We are concerned about the lack of discussion on the huge debt reduction and unusual earnings call set-up in Q4/22-23, as well as the subsequent rebound in debt in Q1/23-24. We note that the pressure to reduce net debt to USD 2 bn in Q4/22-23 was to meet management’s aggressive guidance and rating agencies’ expectations. Management had released the Q4 results in early May 2023, almost halfway through Q1/23-24. Yet, there were few indications of very weak Q1 or H1 numbers.

In addition, we are sceptical of management’s guidance, even after it has been revised downwards. The new guidance implies c. 18% y-o-y revenue growth and a c. 28-30% increase in EBITDA in H2/23-24. That said, management does not expect y-o-y improvement in Q3. Hence, for UPL to meet the guidance, all the growth would have to be registered in Q4. We do not believe that the company will be able to meet the full-year guidance.

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Nov 01
0

Daily Brief Japan: Socionext, TOPIX-Banks Index, Fanuc Corp, Alfresa Holdings, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
  • Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
  • Fanuc (6954) | Not Out of the Woods Yet
  • Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised
  • Fewer TOPIX Remaining Companies Show the Difficulty of Producing Convincing Disclosures

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

By Travis Lundy

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

By Travis Lundy

  • In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
  • This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
  • The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

Fanuc (6954) | Not Out of the Woods Yet

By Mark Chadwick

  • Q2 2023 results for FANUC Group showed a 3.7% decrease in consolidated net sales, a 24.5% drop in consolidated operating income, and mixed performance in its divisions.
  • Some positives: operating profit exceeding analyst expectations and an operating margin increase to 17.2%. However, declining robot orders, challenges in the US region, and high inventory remain concerns
  • We believe that the stock is currently trading around fair value (20x EV/EBIT). However, we still see risks to the downside given macro concerns

Alfresa Holdings (2784 JP): Better-Than-Expected H1FY24 Performance; FY24 Guidance Raised

By Tina Banerjee

  • Alfresa Holdings (2784 JP)‘s H1FY24 revenue, operating profit, and net profit are expected to exceed the previous expectations due to greater-than-expected growth in the ethical pharmaceuticals business.  
  • Encouraged by the growth in the pharmaceutical market and better-than-expected H1FY24 performance, the company has raised FY24 revenue, operating profit, and net profit guidance by 4%, 30%, and 36%, respectively.
  • New FY24 guidance implies, H2FY24 revenue run-rate will be similar to H1F24, while H2FY24 operating profit will accelerate to ¥20.1 billion from ¥15.9 billion in H1FY24.

Fewer TOPIX Remaining Companies Show the Difficulty of Producing Convincing Disclosures

By Aki Matsumoto

  • 439 companies that will be excluded from TOPIX aren’t expected to face further selling pressure, but 43 companies that remain in TOPIX may have a positive impact in the future.
  • Only 43 companies (8.9%) succeeded in exceeding 10 billion yen in tradable market capitalization; compared to 22.3% rise in TOPIX, the stock performance of the TOPIX exclusion candidates were lackluster.
  • These companies with small market capitalizations represent a challenge that has made it difficult for them to attract investor attention and to come up with convincing disclosures.

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