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Smartkarma Daily Briefs

Daily Brief Event-Driven: Midea Group (000333 CH): H-Share Listing & Index Implications and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Midea Group (000333 CH): H-Share Listing & Index Implications
  • Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know
  • Prosus/Naspers: Business As Usual As CEO Steps Down
  • Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December
  • Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb
  • Liquid Universe of European Ordinary and Preferred Shares: September‘23 Report
  • CellSource (4880) TOPIX Inclusion Coming Up
  • SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point
  • EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades


Midea Group (000333 CH): H-Share Listing & Index Implications

By Brian Freitas

  • Midea Group Co Ltd A (000333 CH) could raise between HK$35-54bn (US$4.5-6.9bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
  • The H-shares could get Fast Entry to some global indices depending on the number of shares that are allotted to cornerstone and/or strategic investors.
  • The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know

By Sanghyun Park

  • The proposal to increase NPS’s annual target investment return rate by 1%p by 2028. A rough mathematical estimate suggests the necessity of an additional investment of nearly ₩60T until 2028.
  • It augments the overall investment volume in local stocks to ₩200T. This projection implies an annual net purchase of approximately ₩12T from the forthcoming year through 2028.
  • Consequently, this matter is currently among the most captivating topics in the Korean local market, and efforts are underway to identify the sectors and stocks that stand to benefit.

Prosus/Naspers: Business As Usual As CEO Steps Down

By David Blennerhassett

  • Bob van Dijk, CEO of both Naspers (NPN SJ) and Prosus NV (PRX NA), has stepped down, effective 18 September. 
  • Van Dijk was instrumental in the 2019 listing of Prosus and the creation (and subsequent unwinding) of the highly-criticised Prosus/Naspers cross-holding structure. 
  • His departure should have minimal impact. Everything else basically stays the same. Continue to be long Prosus vs. NAV – that is, Prosus vs. Tencent (700 HK).

Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December

By Brian Freitas

  • The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
  • Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
  • We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb

By Brian Freitas

  • Tata Motors DVR (TTMT/A IN) now trades at a 32.9% discount to Tata Motors Ltd (TTMT IN) and there is another 4.4% in the trade following the scheme of arrangement.
  • Tata Motors DVR (TTMT/A IN) could be added to global indices in November and that will bring significant inflows to the stock.
  • The pre-positioning and passive buying could lead to the DVR discount narrowing further and provide trading opportunities for the next few weeks.

Liquid Universe of European Ordinary and Preferred Shares: September‘23 Report

By Jesus Rodriguez Aguilar

  • Since mid-August, spreads have not followed a clear pattern across our European liquid universe of ordinary and preferred shares (10 have tightened, 9 widened).
  • Recommended trades long preferred / short ordinary shares: Carlsberg, Media-for-Europe, Sixt, Volkswagen (probably the most interesting situation), Grifols, Atlas Copco.
  • Possible trades long ordinary / short preferred shares: Fuchs, Henkel, Schindler, SSAB Svenska Stal.

CellSource (4880) TOPIX Inclusion Coming Up

By Travis Lundy

  • Today, regenerative medicine service provider CellSource (4880 JP) announced a forecast revision lower for the year ending 31 October. It also announced a new dividend policy and dividend payout.
  • It also announced an equity offering of up to 3.542mm shares, increasing float by 60% followed by a move from the TSE Growth segment to TSE Prime. 
  • The dynamics of shareholder structure and flow mean one can wait this one out.

SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point

By Sumeet Singh

  • SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.
  • SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades

By Nico Rosti

  • The NIFTY Index closed up 3 weeks in a row, then fell on Monday, but current pattern looks bullish according to MRM models, we expect a modest correction (if any).
  • Usually (69% of the times) this pattern brings a pullback that does not last for more than 1 week, then the following week the index closes up.
  • Broadly speaking buy-the-dips support for this week is found between 20050 and 19900. If the correction becomes multi-week, it can go much lower, we will re-assess in that case.

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Daily Brief Australia: Whitehaven Coal and more

By | Australia, Daily Briefs

In today’s briefing:

  • Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition


Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition

By Sameer Taneja

  • The pivot in capital allocation plans of Whitehaven Coal (WHC AU) by suspending its buyback program (up to 25% of outstanding shares) is a big negative for us. 
  • We think the increase in capex spending in a frothy pricing environment and focus on M&A for spending the 2.6 bn of cash is a coin toss on capital allocation. 
  • We prefer names that keep their capital allocation plans consistent, e.g., Indo Tambangraya Megah (ITMG IJ), and would take money off the table here.

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Daily Brief South Korea: Korea Stock Exchange KOSPI 200, Doosan Robotics, ASICLAND , KakaoBank , Seoul Guarantee Insurance, SK Biopharmaceuticals and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know
  • Trading Strategy of Doosan Robotics in the First Day of Trading Post Book Building Results
  • Asicland IPO Preview: The Only Value Chain Alliance (VCA) Company of TSMC in Korea
  • KakaoBank – Term Deposits +47% | Net Int Inc/Assets -80bps | Provisions: 10% to 23% of Net Int Inc
  • Seoul Guarantee Insurance Pre-IPO – The Negatives – The Tide Could Be Turning. Overhang Looms
  • Asicland IPO Valuation Analysis
  • SK Biopharmaceuticals (326030 KS): Solid Growth in Xcopri US Sales in 2Q23; Operating Loss Narrowed


Korea NPS’s Funds Influx into Local Stock Market Starting Next Year: What to Know

By Sanghyun Park

  • The proposal to increase NPS’s annual target investment return rate by 1%p by 2028. A rough mathematical estimate suggests the necessity of an additional investment of nearly ₩60T until 2028.
  • It augments the overall investment volume in local stocks to ₩200T. This projection implies an annual net purchase of approximately ₩12T from the forthcoming year through 2028.
  • Consequently, this matter is currently among the most captivating topics in the Korean local market, and efforts are underway to identify the sectors and stocks that stand to benefit.

Trading Strategy of Doosan Robotics in the First Day of Trading Post Book Building Results

By Douglas Kim

  • Doosan Robotics (454910 KS) reported excellent IPO book building results. The IPO price has been finalized at 26,000 won (upper end of the IPO price range). 
  • A total of 1,920 institutional investors participated in the IPO demand forecast survey and the demand ratio was 272 to 1. 
  • The trading strategy on the first day of IPO is to take some profits (25%-50% of total) if the share price shoots much higher than the IPO price by 70-100%+.

Asicland IPO Preview: The Only Value Chain Alliance (VCA) Company of TSMC in Korea

By Douglas Kim

  • Asicland is one of eight companies in the world and the only TSMC VCA (Value Chain Alliance) company in Korea.
  • The IPO price range is from 19,100 won to 21,400 won. The IPO offering amount is from 50.4 billion won to 56.4 billion won. 
  • Asicland’s sales and operating profit increased at a CAGR of 71.8% and 220%, respectively from 2020 to 2022. Operating margin improved from 4.7% in 2020 to 16.5% in 2022.

KakaoBank – Term Deposits +47% | Net Int Inc/Assets -80bps | Provisions: 10% to 23% of Net Int Inc

By Daniel Tabbush

  • Major pressure on net interest income where deposits are growing much faster than loans in the past six months, especially with term deposits, is creating major NIM contraction
  • Earnings may disappoint based on weakening net interest income, weakening margins, and where the overlay is far higher credit costs; from KRW17bn to KRW59bn in 2 yrs to 2Q23
  • Operating costs are not helping to support ROA and with a new virtual bank investment in Thailand, costs can remain high; fixing operational risks can also keep costs high.

Seoul Guarantee Insurance Pre-IPO – The Negatives – The Tide Could Be Turning. Overhang Looms

By Clarence Chu

  • Seoul Guarantee Insurance (031210 KS) is looking to raise around US$270m in its Korean IPO.
  • Seoul Guarantee Insurance (SGI) is a guarantee insurance firm operating predominantly in Korea.
  • In this note, we will talk about the not so positive aspects of the deal.

Asicland IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of Asicland is target price of 40,571 won per share, which is 90% higher than the high end of the IPO price range (21,400 won). 
  • Our target price of 40,571 won is based on 43x P/E using our estimated net profit of 10.1 billion won in 2024. 
  • Asicland is one of eight companies in the world and the only TSMC VCA (Value Chain Alliance) company in Korea.

SK Biopharmaceuticals (326030 KS): Solid Growth in Xcopri US Sales in 2Q23; Operating Loss Narrowed

By Tina Banerjee

  • In 2Q23, Xcopri U.S. sales increased 57% YoY and 18% QoQ to KRW63.4B, marking the 13th consecutive quarter of growth since the company launched Xcopri in the U.S. in May’20.
  • Operating loss narrowed for the second consecutive quarters to KRW18.9B from KRW22.7B in 1Q23 and KRW40.1B in 2Q22. The company is on track to swing back to black in 4Q23.
  • SK Biopharmaceuticals (326030 KS) entered licensing agreement with Hikma Pharmaceuticals (HIK LN) to commercialize Xcopri in 16 countries in MENA, including Saudi Arabia, Egypt, and Algeria – three biggest epilepsy markets.

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Daily Brief Singapore: Lanzhou Zhuangyuan Pasture Co and more

By | Daily Briefs, Singapore

In today’s briefing:

  • 10 in 10 with Pasture Holdings Meeting demands of global healthcare system


10 in 10 with Pasture Holdings Meeting demands of global healthcare system

By Geoff Howie

10 in 10 with Pasture Holdings Meeting demands of global healthcare system

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Daily Brief India: Tata Motors DVR, R R Kabel, NIFTY Index and more

By | Daily Briefs, India

In today’s briefing:

  • Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb
  • R R Kabel IPO Trading – Average Subscription Rates but Strong Insti Demand
  • EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades


Tata Motors (TTMT/A IN) – Index Inclusion & The DVR Arb

By Brian Freitas

  • Tata Motors DVR (TTMT/A IN) now trades at a 32.9% discount to Tata Motors Ltd (TTMT IN) and there is another 4.4% in the trade following the scheme of arrangement.
  • Tata Motors DVR (TTMT/A IN) could be added to global indices in November and that will bring significant inflows to the stock.
  • The pre-positioning and passive buying could lead to the DVR discount narrowing further and provide trading opportunities for the next few weeks.

R R Kabel IPO Trading – Average Subscription Rates but Strong Insti Demand

By Ethan Aw

  • R R Kabel (2333180Z IN) raised around US$238m in its India IPO, after the deal was priced at INR1,035/share. It will begin trading tomorrow on 20th Sep 2023.
  • R R Kabel is an Indian consumer electrical company, which primarily sells wires, cables and fast moving electrical goods (FMEG).
  • We have looked at various aspects of the deal in our previous notes. In this note, we talk about demand and trading dynamics.

EQD | NIFTY Index New WEEKLY Supports Analysis for LONG Trades

By Nico Rosti

  • The NIFTY Index closed up 3 weeks in a row, then fell on Monday, but current pattern looks bullish according to MRM models, we expect a modest correction (if any).
  • Usually (69% of the times) this pattern brings a pullback that does not last for more than 1 week, then the following week the index closes up.
  • Broadly speaking buy-the-dips support for this week is found between 20050 and 19900. If the correction becomes multi-week, it can go much lower, we will re-assess in that case.

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Daily Brief United States: Wheat, Gilead Sciences, Amazon.com Inc, Viacom Inc Class B, Cloudflare , United Parcel Service Cl B, Apple , Arthur J Gallagher & Co, Eli Lilly & Co, Lyondellbasell Indu Cl A and more

By | Daily Briefs, United States

In today’s briefing:

  • Double Crosshairs Haunt Wheat; Geopolitics and El Niño Impacts Global Staple
  • Gilead Sciences Inc.: The Unstoppable Growth Machine in Virology and Oncology! – Major Drivers
  • Amazon.com Inc.: How Is The Revenue Diversification Beyond AWS & E-Commerce Catalyzing Growth? – Major Drivers
  • Paramount Global: The Streaming Surge – How Did Paramount+ Gain Such Traction? – Major Drivers
  • Cloudflare Inc.: Beyond AI – Is Their Cloud Reigning Supreme? – Major Drivers
  • United Parcel Service Inc.: The Digital Power Play Boosting Revenues in 2023! – Major Drivers
  • Apple Inc.: A Hot Product Lineup For 2024 & Beyond! – Major Drivers
  • Arthur J Gallagher & Co.: Strategic Acquisitions Pave the Way for Global Expansion! – Initiation of Coverage – Financial Forecasts
  • Eli Lilly and Company: Will The Acquisition Of DICE Therapeutics Become A Growth Catalyst? – Major Drivers
  • LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers


Double Crosshairs Haunt Wheat; Geopolitics and El Niño Impacts Global Staple

By Pranay Yadav

  • Global wheat trade is imbalanced with few exporters and many importers. This means a few nations’ trade policies affect supply during shortages as they restrict exports to prioritize domestic needs.
  • El Niño generally causes wheat production to decline among key exporters as well as most importers. This increases the likelihood of shortages in the wheat export market.
  • Currently diminished global wheat inventories increase the likelihood of supply shocks and price surges in global wheat markets.

Gilead Sciences Inc.: The Unstoppable Growth Machine in Virology and Oncology! – Major Drivers

By Baptista Research

  • Gilead Sciences Inc. delivered mixed results for the previous quarter, with revenues above the analyst consensus.
  • Total product sales, excluding Veklury, displayed significant growth, extending the company’s streak of seven consecutive quarters with year-over-year growth in its base business.
  • Despite an anticipated decrease in Veklury sales due to reduced hospitalizations, the total product sales, including Veklury, also showed a substantial year-over-year increase.

Amazon.com Inc.: How Is The Revenue Diversification Beyond AWS & E-Commerce Catalyzing Growth? – Major Drivers

By Baptista Research

  • Amazon.com, Inc. delivered positive results and managed an all-around beat last quarter.
  • The company has reported revenue of $134.4 billion and operating income of $7.7 billion.
  • These are significant contributing causes to AWS’s recent growth and the over twofold increase in revenue over other service providers.

Paramount Global: The Streaming Surge – How Did Paramount+ Gain Such Traction? – Major Drivers

By Baptista Research

  • Paramount Global managed to exceed analyst expectations in terms of revenue and earnings, demonstrating sustained focus on corporate spending containment and good momentum in its D2C sector.
  • Affiliate and subscription revenue increased by a healthy 12% in Q2 and again showed how the combination of traditional and streaming led to net growth for the business.
  • Paramount’s 47% increase in D2C subscription revenue was mostly attributable to Paramount+, where the company saw subscriber growth, increased ARPU, and lower churn rates.

Cloudflare Inc.: Beyond AI – Is Their Cloud Reigning Supreme? – Major Drivers

By Baptista Research

  • Cloudflare, Inc. delivered an all-around beat in the previous quarter.
  • The second quarter’s total revenue reached 32% year over year to $308.5 million.
  • In the quarter, Cloudflare received 10 million active worker applications, a 250% increase since December and a 490% increase year over year.

United Parcel Service Inc.: The Digital Power Play Boosting Revenues in 2023! – Major Drivers

By Baptista Research

  • United Parcel Service, Inc. delivered a mixed result in the recent quarter, with revenues below market expectations but managed to surpass the analyst consensus regarding earnings.
  • Consolidated revenue for the quarter was $22.1 billion, a 10.9% decrease from the prior year.
  • All three segments showed flexibility in the quarter, reducing total expenses by $2.1 billion compared to the same period last year.

Apple Inc.: A Hot Product Lineup For 2024 & Beyond! – Major Drivers

By Baptista Research

  • Apple Inc. managed to surpass the revenue and earnings expectations of analysts.
  • Apple has reported sales of $81.8 billion, which is higher than the company had anticipated.
  • With robust iPhone sales setting new quarterly total revenue highs in countries including India, Indonesia, Mexico, the Philippines, Poland, Saudi Arabia, Turkey, and the United Arab Emirates, Apple saw strong results in emerging markets continue.

Arthur J Gallagher & Co.: Strategic Acquisitions Pave the Way for Global Expansion! – Initiation of Coverage – Financial Forecasts

By Baptista Research

  • This is our first report on insurance and reinsurance brokerage player, Arthur J Gallagher & Co.
  • The company surpassed Wall Street’s revenue and earnings expectations in its latest quarterly result.
  • The company posted revenue and organic growth for its risk management and combined brokerage segments.

Eli Lilly and Company: Will The Acquisition Of DICE Therapeutics Become A Growth Catalyst? – Major Drivers

By Baptista Research

  • Eli Lilly and Company managed to surpass the revenue and earnings expectations of Wall Street.
  • Eli Lilly made progress on its ambitious manufacturing plan, advanced its R&D pipeline, and produced positive financial results.
  • Furthermore, Eli Lilly announced that commercial production in its Research Triangle Park facility in North Carolina has started supporting its incretin portfolio.

LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers

By Baptista Research

  • LyondellBasell Industries delivered mixed results for the previous quarter, with revenues below the analyst consensus.
  • O&P Americas EBITDA climbed by $138 million to $679 million during the second quarter.
  • Their team anticipates that fluctuating feedstock costs and the emergence of new capacity will cause margins to contract in the third quarter.

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Daily Brief China: Midea Group Co Ltd A, Prosus NV, Samsonite, The United Laboratories International Holdings Limited, Health And Happiness (H&H), 4Paradigm, ENN Natural Gas, ZTO Express Cayman , Shulan Health Management and more

By | China, Daily Briefs

In today’s briefing:

  • Midea Group (000333 CH): H-Share Listing & Index Implications
  • Prosus/Naspers: Business As Usual As CEO Steps Down
  • Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December
  • United Laboratories International Holdings Placement (3933.HK) – Valuation Pullback Seems Inevitable
  • H&H International – Tear Sheet – Lucror Analytics
  • 4Paradigm IPO: Valuation Insights
  • Morning Views Asia: ENN Natural Gas
  • ZTO Express (2057 HK/​​ZTO US): Rock Solid Competitive Position
  • Pre-IPO Shulan Health Management – Hard to Bring Investors Expected Returns Due to Poor Profit Model


Midea Group (000333 CH): H-Share Listing & Index Implications

By Brian Freitas

  • Midea Group Co Ltd A (000333 CH) could raise between HK$35-54bn (US$4.5-6.9bn) in its H-share listing depending on the H-shares discount and exercise of the overallotment option.
  • The H-shares could get Fast Entry to some global indices depending on the number of shares that are allotted to cornerstone and/or strategic investors.
  • The H-shares will be added to Southbound Stock Connect following the end of the price stabilisation period. Inclusion in the Hang Seng Composite Index will come later.

Prosus/Naspers: Business As Usual As CEO Steps Down

By David Blennerhassett

  • Bob van Dijk, CEO of both Naspers (NPN SJ) and Prosus NV (PRX NA), has stepped down, effective 18 September. 
  • Van Dijk was instrumental in the 2019 listing of Prosus and the creation (and subsequent unwinding) of the highly-criticised Prosus/Naspers cross-holding structure. 
  • His departure should have minimal impact. Everything else basically stays the same. Continue to be long Prosus vs. NAV – that is, Prosus vs. Tencent (700 HK).

Hang Seng Index Rebalance Preview: Foreign Companies Eligible from December

By Brian Freitas

  • The move from 80 index constituents to 100 could take most of next year (and possibly even the year after that) to manage turnover and add profitable companies.
  • Foreign companies will be eligible for inclusion in the index from the December rebalance. That makes Samsonite (1910 HK) a high probability inclusion candidate.
  • We highlight 8 potential inclusions to the index with passive trading impact varying from 1.6-4.3 days of ADV. There are large shorts on some of the stocks.

United Laboratories International Holdings Placement (3933.HK) – Valuation Pullback Seems Inevitable

By Xinyao (Criss) Wang

  • Last year, United Lab mainly relied on antibiotics to make money. However, after the pandemic is under control, antibiotic sales may decline. United Lab’s performance could be under pressure.
  • As a late comer, sales of United Lab’s weight management products could be lower than expected in the future under increasing competition. The veterinary drugs business requires time to cultivate.
  • RMB12 billion market value of United Lab has priced in all positive factors.There could be a pullback in valuation. RMB6 billion market value is a safe place to go long.

H&H International – Tear Sheet – Lucror Analytics

By Charles Macgregor

We view H&H International as “Medium Risk” on the LARA scale. The company has a sound business profile, with stable branded products in the Baby Nutrition & Care (BNC) and Adult Nutrition & Care (ANC) markets. The acquisition of Zesty Paws in 2021 allowed H&H to expand into the Pet Nutrition & Care (PNC) market. The company’s strong distribution channels support cross-border and e-commerce sales strategies. That said, the positive factors are balanced by risks associated with penetration into new markets and products, along with the fragmented and competitive Chinese market.

We view positively H&H’s solid business fundamentals and strong market positions. We highlight the company’s sound liquidity profile and stable CFO. Negatively, the Zesty Paws acquisition affected H&H’s financial profile, weakening the leverage metrics. That said, PNC is part of the company’s sustainable growth plan. We expect H&H to work on deleveraging in the near term, in order to maintain a healthy credit profile.

Bondholders of the 2026 USD notes suffer from small degree of structural subordination, as the company’s PRC subsidiaries do not guarantee the notes, but certain PRC subsidiaries are likely to be guarantors for the term loan.

Our Credit Bias on H&H is “Stable”, given the company’s solid business fundamentals, strong market positions and moderate financial profile. ANC and PNC are expected to deliver better numbers going forward, while BNC should remain challenging. As a result, ANC and PNC will likely be H&H’s key growth segments, offsetting high competition in the BNC business. The company aims to expand into other business segments and markets outside China, in order to compensate for muted growth in the country.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.


4Paradigm IPO: Valuation Insights

By Arun George

  • 4Paradigm (1764934D HK), a leader in enterprise artificial intelligence (AI) in China, has launched an HKEx IPO to raise up to US$144 million.
  • We previously discussed the IPO in 4Paradigm IPO: The Bull Case and 4Paradigm IPO: The Bear Case
  • In this note, we discuss forecasts and valuation. Our analysis suggests that the IPO price range of HK$55.60-61.16 per share is unattractive. We would give the IPO a pass.

Morning Views Asia: ENN Natural Gas

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.


ZTO Express (2057 HK/​​ZTO US): Rock Solid Competitive Position

By Osbert Tang, CFA

  • ZTO Express Cayman (2057 HK)‘s impressive 1H23 and 2Q23 results are only reflections of its competitive strengths. We believe the company is poised to generate even better profitability. 
  • Its market share expansion, excellent cost management, positive volume growth, new business initiatives and solid net cash position are all strengths that drive long-term outlook.
  • While trading on premium vs. peers, ZTO’s PER valuations are well justified by its leadership position, healthy financial position, and high EPS CAGR for FY23-FY25F.

Pre-IPO Shulan Health Management – Hard to Bring Investors Expected Returns Due to Poor Profit Model

By Xinyao (Criss) Wang

  • Private general hospitals are the core business of Shulan, but the business model for general hospitals is not good – heavy assets, challenging operations, low profits, difficult to expand nationwide. 
  • Even with the endorsement of renowned academician Dr. Li Lanjuan, whether Shulan’s hospitals can attract constantly sufficient patient flow remains a question. Most patients still prioritize public hospitals for treatment.
  • Due to the lack of solid profit model and expansion model, we’re not optimistic about Shulan’s profitability and future financial performance. Shulan may be in a state of long-term loss.

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Daily Brief Japan: CellSource , SBI Sumishin Net Bank and more

By | Daily Briefs, Japan

In today’s briefing:

  • CellSource (4880) TOPIX Inclusion Coming Up
  • SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point


CellSource (4880) TOPIX Inclusion Coming Up

By Travis Lundy

  • Today, regenerative medicine service provider CellSource (4880 JP) announced a forecast revision lower for the year ending 31 October. It also announced a new dividend policy and dividend payout.
  • It also announced an equity offering of up to 3.542mm shares, increasing float by 60% followed by a move from the TSE Growth segment to TSE Prime. 
  • The dynamics of shareholder structure and flow mean one can wait this one out.

SBI Sumishin Net Bank IPO Lock-Up – A US$1bn Lockup Release, Will Sell a Little at Some Point

By Sumeet Singh

  • SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.
  • SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

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Daily Brief Energy/Materials: Whitehaven Coal, Frontera Energy, Lyondellbasell Indu Cl A, Chevron Corp, Rayonier Advanced Materials, Vulcan Materials Co and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition
  • Frontera Energy – ESG Report – Lucror Analytics
  • LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers
  • Chevron Corporation: Is The Strategic Acquisition Of PDC Energy A Major Enhancement Of The US Portfolio? – Key Drivers
  • Rayonier Advanced Materials, Inc. – Mature Business Growing New Shoots
  • Vulcan Materials Company: Solidifying Its Base with Surging Gross Margins! – Major Drivers


Whitehaven Coal Suspension of Buyback: A Negative Despite Rising Coal Price/ Potential Acquisition

By Sameer Taneja

  • The pivot in capital allocation plans of Whitehaven Coal (WHC AU) by suspending its buyback program (up to 25% of outstanding shares) is a big negative for us. 
  • We think the increase in capex spending in a frothy pricing environment and focus on M&A for spending the 2.6 bn of cash is a coin toss on capital allocation. 
  • We prefer names that keep their capital allocation plans consistent, e.g., Indo Tambangraya Megah (ITMG IJ), and would take money off the table here.

Frontera Energy – ESG Report – Lucror Analytics

By Charles Macgregor

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Frontera Energy’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.


LyondellBasell Industries N.V.: Can The Acquisition Of Stiphout Be A Game Changer? – Major Drivers

By Baptista Research

  • LyondellBasell Industries delivered mixed results for the previous quarter, with revenues below the analyst consensus.
  • O&P Americas EBITDA climbed by $138 million to $679 million during the second quarter.
  • Their team anticipates that fluctuating feedstock costs and the emergence of new capacity will cause margins to contract in the third quarter.

Chevron Corporation: Is The Strategic Acquisition Of PDC Energy A Major Enhancement Of The US Portfolio? – Key Drivers

By Baptista Research

  • Chevron Corporation delivered an all-around beat in the previous quarter.
  • While the company faced challenges, with adjusted earnings down $5.6 billion compared to the same quarter the previous year, it also achieved notable successes.
  • Lower refining margins impacted adjusted downstream earnings, and there was a decrease in upstream earnings primarily due to lower realizations.

Rayonier Advanced Materials, Inc. – Mature Business Growing New Shoots

By Water Tower Research

  • We are initiating coverage of Rayonier Advanced Materials, Inc. (RYAM), a leading supplier of wood- derived products and specialty materials, such as specialty cellulosics, paperboard, and high-yield pulp, to the industrial and consumer markets.

  • The company is currently focused on deleveraging the balance sheet and investing in the growth of higher-value biomaterial products, while improving operations and profitability of cash generative, but slower-growing, legacy operations.

  • FCF generation in a weak operating environment. With 2Q23 seeing downward pressure on commodity prices, as they retreat from the post-pandemic spike, and volumes, affected by customer destocking, management raised its free cash flow (FCF) generation goal to $55-70 million from $40-65 million in 2023 in order to accelerate debt paydown, toward the 2.5x net debt to EBITDA target level.


Vulcan Materials Company: Solidifying Its Base with Surging Gross Margins! – Major Drivers

By Baptista Research

  • Vulcan Materials Company delivered a positive result and managed an all-around beat in the quarter.
  • Vulcan has increased its gross margin and strictly managed SAG costs to increase its adjusted EBITDA margin by 350 basis points year-to-date.
  • With excellent price growth and restrained cost increases over the previous year, cash gross profit per ton increased.

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Daily Brief Utilities: ENN Natural Gas and more

By | Daily Briefs, Utilities Sector

In today’s briefing:

  • Morning Views Asia: ENN Natural Gas


Morning Views Asia: ENN Natural Gas

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.


💡 Before it’s here, it’s on Smartkarma

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  • ✓ Company Data and News
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