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Smartkarma Daily Briefs

Dec 22
0

Daily Brief ESG: A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow

A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow

By Aki Matsumoto

  • Since the ROE has been hovering around the 9% ceiling, the challenge is that few companies could present future outlook convincing enough to raise expectations of sustainable ROE growth.
  • Since stable BPS has higher correlation with TOPIX than EPS, investors trust a company that accumulates cash flow in shareholders’ equity to sustainably increase profits than to temporarily increase profits.
  • Since it’s been confirmed that Tobin’s Q of companies with more cash on hand is higher, the stock valuations of companies with higher cash flow margins tend to be higher.

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Dec 22
0

Daily Brief Japan: Benefit One Inc, Pasona Group, TSE Tokyo Price Index TOPIX, Japan System Techniques Co, Carta Holdings, Inc. and more

By | Daily Briefs, Japan

In today’s briefing:

  • Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share
  • Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123
  • Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price
  • A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow
  • 2Q Follow-Up – Japan System Techniques (4323 JP)
  • 3Q FOLLOW-UP – Carta Holdings (3688 JP)

Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share

By Travis Lundy

  • Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
  • The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
  • Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123

By Arun George

  • Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY2,123 per share, a 32.7% premium to M3 Inc (2413 JP)’s offer.
  • The other terms are unchanged. The pre-conditions relate to board recommendation, Pasona Group (2168 JP) support, and the M3 offer not being completed. The tender offer starts in mid-January 2024.
  • While M3 has extended its offer period to 17 January 2024, it will unlikely engage in a bidding war. Expect the Board and Pasona to support the Dai-ichi Life proposal.

Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price

By David Blennerhassett

  • Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
  • Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
  • That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

A Market with a Low Average ROE Favors Valuations for Companies with More Reliable Cash Flow

By Aki Matsumoto

  • Since the ROE has been hovering around the 9% ceiling, the challenge is that few companies could present future outlook convincing enough to raise expectations of sustainable ROE growth.
  • Since stable BPS has higher correlation with TOPIX than EPS, investors trust a company that accumulates cash flow in shareholders’ equity to sustainably increase profits than to temporarily increase profits.
  • Since it’s been confirmed that Tobin’s Q of companies with more cash on hand is higher, the stock valuations of companies with higher cash flow margins tend to be higher.

2Q Follow-Up – Japan System Techniques (4323 JP)

By Sessa Investment Research

  • Fully independent DX provider: Japan System Techniques (JAST) is an independent system integrator that develops and sells software and systems, which celebrated its 50th anniversary.
  • The company develops systems for customers in a variety of industries and sectors, including finance, manufacturing, distribution, services, public services, telecommunications, transportation, and science and technology.
  • Furthermore, as a developer, the company has three main JAST-branded software offerings for its customers, namely GAKUEN for the education industry, BankNeo for the financial industry, and JMICS (JAST Medical Insurance Checking System) for the medical industry and the profitability of these own-brand businesses is very high.

3Q FOLLOW-UP – Carta Holdings (3688 JP)

By Sessa Investment Research

  • In 2023, the first year of CARTA Holdings’ new medium-term management plan, the company made a solid push to reform its business and organizational structure with the aim of executing a sharp recovery in business performance.
  • It moved forward with narrowing its focus, integrating four direct sales subsidiaries in the digital marketing business, and withdrawing from the low-profit game and hometown tax payment business in the internet-related services business.
  • In addition, the company announced and implemented additional measures to reduce fixed costs to the tune of ¥1 bn, including by calling for voluntary retirement during FY23/12, as its earnings may fall further than initially expected before bottoming out, mainly for reservation-based ads. 

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Dec 22
0

Daily Brief Thematic (Sector/Industry): Overview of My Winners and Losers in 2023…and 5 High Conviction Ideas Going Into 2024 and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Overview of My Winners and Losers in 2023…and 5 High Conviction Ideas Going Into 2024
  • Ohayo Japan | Micron Fuels Rally; Paris Miki in Luxottica’s Vision
  • Show Me The (Dividend) Money – Play on the U.S. High Dividend Yielding Stocks
  • China Property Developers In Distress – Weekly News & Announcements Tracker | Dec 15-21, 2023
  • Sox Index Broke New High; Nov US SEMI Equipment and Oct SIA Sales Showed Y/Y Improvement
  • Dear Santa, Here Are Airline CEOs Christmas Wishes
  • Asian Autos: Increasing Exposure Reflects Rising Market Confidence

Overview of My Winners and Losers in 2023…and 5 High Conviction Ideas Going Into 2024

By Nicolas Van Broekhoven

  • The 2023 vintage of “5 High Conviction Ideas” was commodity heavy with 4 of our 5 picks coming from this sector. Three out of five declined between 15-25%. 
  • Our best performer was unloved Mongolian Mining (975 HK) which returned 234% even beating NVIDIA Corp (NVDA US) YTD performance.  Miracles happen: Coal mining beats AI.
  • Our 2024 vintage of top ideas for the year will hopefully have a higher hit ratio. See below for more details which are our five high conviction ideas for 2024.

Ohayo Japan | Micron Fuels Rally; Paris Miki in Luxottica’s Vision

By Mark Chadwick

  • Overseas: SPX +1%, Micron +8% after the chipmaker revealed a bte Q2 revenue forecast and higher prices in 2024
  • Today: Japan’s domestic M&A spending has surged to an 18-year high in 2023
  • Japan: Luxottica continues to build a stake in Paris Miki. It could be interesting if the family want out.

Show Me The (Dividend) Money – Play on the U.S. High Dividend Yielding Stocks

By Mohshin Aziz

  • There are many high dividend-yielding U.S. stocks. However, taxes on dividends are complex, qualified dividends max at 20%, non-qualified max at 37%, and foreigners max at 30%   
  • These high-yielding stocks appear unloved and didn’t move much in tandem with the U.S. indexes, suggesting a potential laggard investment opportunity 
  • If you have made your bounty from the market surge and looking for safe shelter among the laggards and dividend payers, the U.S. might just be the place for you 

China Property Developers In Distress – Weekly News & Announcements Tracker | Dec 15-21, 2023

By Robert Ciemniak

  • A weekly curated selection of Chinese news articles and company announcements focused on developers in distress
  • We look for their deals, updates, specific project progress news (‘local signals’), as well as relevant local research commentaries about the market
  • We do not verify the underlying data or provide any opinion, we only select and summarize the information; See direct links to sources

Sox Index Broke New High; Nov US SEMI Equipment and Oct SIA Sales Showed Y/Y Improvement

By Andrew Lu

  • As expected, SOX index broke a new high, in line with Nov US semi equipment billings and Oct SIA/WSTS global sales y/y improvement.
  • SEMI reports Nov front/back end equipment billings decline of 9% and 11% y/y, respectively, which was improved from 14% and 17% y/y decline in Oct, implying recovery intact.
  • WSTS/SIA earlier reported Oct sales of US$46.6bn, up 3.8% m/m and down only 1% y/y (vs. 16% decline in June), suggesting semi sales y/y improvement and clearly pass the trough.

Dear Santa, Here Are Airline CEOs Christmas Wishes

By Mohshin Aziz

  • 2023 was great for the airlines, strong passenger demand provided high load factors and yields, coupled with lower fuel price trend in 2H23 is a virtuous combination for strong profits
  • However, there were plenty of challenges, some remain unsolved such as aircraft shortage, aircraft reliability issues, and airspace closure due to geopolitics   
  • The outlook for 1H24 remains solid, demand is strong and so are yields. Operationally, things are slowly getting more efficient. For 2H24, it is too early to say 

Asian Autos: Increasing Exposure Reflects Rising Market Confidence

By Steven Holden

  • Improved sentiment in Asia Ex-Japan Autos sector as sustained increases in positioning continue through 2023.
  • BYD Company most widely held but stabilizing; Li Auto sees increased buying. Sector 7th most owned, underweight by -0.85%.
  • Rising Allocations, Low Historical Positioning and Net Underweight Suggest Potential Continued Demand for Auto Stocks

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Dec 22
0

Daily Brief ECM: 2024 IPOs Pipeline Worldwide (Top 100 Companies) and more

By | Daily Briefs, ECM

In today’s briefing:

  • 2024 IPOs Pipeline Worldwide (Top 100 Companies)
  • Midea (000333 CH):  Positive Read-Through From Gree’s Profit Alert
  • UBTech Robotics IPO – Quick Thoughts on Valuation – Too Hefty a Premium for Slowing Growth
  • Emcure Pharmaceuticals Pre-IPO: IPO Size Trimmed; Domestic Revenue Growth Decelerated

2024 IPOs Pipeline Worldwide (Top 100 Companies)

By Douglas Kim

  • This is our 5th annual edition of the IPOs Pipeline Worldwide (Top 100 Companies) report.
  • After weak global IPO markets in 2022 and 2023, the near term trend for global IPOs continues to remain lackluster.
  • For those investors that closely monitor the global IPO opportunities, this is a good reference insight to check out the largest potential IPOs that could get completed next year.

Midea (000333 CH):  Positive Read-Through From Gree’s Profit Alert

By Steve Zhou, CFA

  • Gree Electric Appliances (000651 CH) announced a profit alert for FY22 yesterday.  Net profit is expected to increase 10.2% – 19.6% yoy for the whole year.
  • The resilient result of Gree should alleviate concerns of the market that Midea is too correlated with China’s new home sales. 
  • The stock is trading at 10x 2024E earnings compared to an average of 13x over the last 10 years, with earnings likely growing at a high-single-digit pace.

UBTech Robotics IPO – Quick Thoughts on Valuation – Too Hefty a Premium for Slowing Growth

By Ethan Aw

  • UBTech Robotics (9880 HK) is looking to raise about US$168m in its upcoming HK IPO, after downsizing from an earlier reported float of up to US$700m.
  • UBTech Robotics is engaged in artificial intelligence (AI)-empowered robotics in China, dedicated to the innovation of humanoid robots and development and sales of smart service robotic solutions.
  • In our previous note, we looked at the company’s performance and its PHIP updates. In this note, we share our quick thoughts on valuation.

Emcure Pharmaceuticals Pre-IPO: IPO Size Trimmed; Domestic Revenue Growth Decelerated

By Tina Banerjee

  • Emcure Pharmaceuticals has re-submitted DRHP to the SEBI for the second time. The IPO consists of a fresh issue of INR8 billion and an offer-for-sale of up to ~14M shares.
  • In the re-submitted DRHP, the company has trimmed the sizes of both the fresh issue and OFS. Emcure originally planned to launch IPO its in 2022.
  • Emcure has added latest financial performances in re-filed DRHP.  During H1FY24, revenue from India increased only 3% YoY to INR16.4M, due to lower sales of anti-viral HIV products.

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Dec 22
0

Daily Brief Event-Driven: Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2 and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share
  • Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123
  • StubWorld: Hanwha Corp Is “Cheap”
  • KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX
  • Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price
  • HLB: Approves to Switch Listing from KOSDAQ to KOSPI in an Extraordinary General Meeting
  • SEPI/Telefonica: Acquisition of a 10% Stake

Dai-Ichi Life “Decides” Tender Offer Price and Buyback Price at ¥2,123 and ¥1,491/Share

By Travis Lundy

  • Today, Dai Ichi Life Insurance (8750 JP) came out with a cover letter and an amended Announcement of Intention to Commence a Tender Offer on Benefit One Inc (2412 JP). 
  • The cover letter says they have obtained information from Pasona Group (2168 JP) and Benefit One allowing them to calculate a Tender Offer of ¥2,123/share for minorities, and buyback at ¥1,491/share. 
  • Now we wait. Again. Dai-Ichi Life “intends” to start a tender in mid-Jan 2024 (19 Jan likely earliest start possible) but it is not clear timing will come that early.

Benefit One (2412 JP): Dai-Ichi Life’s Tender Offer at JPY2,123

By Arun George

  • Dai Ichi Life Insurance (8750 JP)‘s pre-conditional tender offer for Benefit One Inc (2412 JP) is JPY2,123 per share, a 32.7% premium to M3 Inc (2413 JP)’s offer.
  • The other terms are unchanged. The pre-conditions relate to board recommendation, Pasona Group (2168 JP) support, and the M3 offer not being completed. The tender offer starts in mid-January 2024.
  • While M3 has extended its offer period to 17 January 2024, it will unlikely engage in a bidding war. Expect the Board and Pasona to support the Dai-ichi Life proposal.

StubWorld: Hanwha Corp Is “Cheap”

By David Blennerhassett

  • A double dose of StubWorld this week as Hanwha Corporation (000880 KS) comes up “cheap” on my monitor.
  • Preceding my comments on Hanwha are the current setup/unwind tables for Asia-Pacific Holdcos.
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX

By Brian Freitas

Buy Pasona As Dai-Ichi Life Amends Benefit One’s Tender Offer & Buyback Price

By David Blennerhassett

  • Earlier this month, Dai Ichi Life (8750 JP) countered M3 with an unsolicited ¥1,800/share Offer of Equity Value TOB; followed by a Benefit One buyback to mop up Pasona‘s stake.
  • Dai-Ichi has now amended the TOB Price for minorities in Benefit One to ¥2,123/share, and the tax-equivalent price of ¥1,800/share for Pasona would be ¥1,491 on the Buyback Tender, post-squeezeout.
  • That price appears a bit higher for Pasona than expected, and therefore a bit lower for Benefit One minorities. Terms can still be bumped.

HLB: Approves to Switch Listing from KOSDAQ to KOSPI in an Extraordinary General Meeting

By Douglas Kim

  • HLB Inc (028300 KS) announced that it has decided to transfer listing from KOSDAQ exchange to KOSPI exchange.
  • HLB currently has a market cap of 6.5 trillion won and HLB is likely to be included in KOSPI 200 in 2024. 
  • One of the key reasons why the company has a large market cap is due to its Rivoceranib liver cancer drug which is being reviewed by the U.S. FDA. 

SEPI/Telefonica: Acquisition of a 10% Stake

By Jesus Rodriguez Aguilar

  • The Spanish Cabinet has agreed on the acquisition of up to 10% of the share capital of Telefonica SA (TEF SM) (c.€2.2 billion), higher than the 5% initially mentioned.
  • This should move the market as it represents 48 trading days. This also means that the Government will likely authorise the purchase of up to 9.9% by STC.
  • The Kingdom of Spain 10-y benchmark bond yield is 2.9%, while the 24e dividend yield of Telefonica is 8% (source: IBES), therefore the operation makes financial sense.

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Dec 22
0

Daily Brief Credit: Weekly Wrap – 21 Dec 2023 and more

By | Credit, Daily Briefs

In today’s briefing:

  • Weekly Wrap – 21 Dec 2023

Weekly Wrap – 21 Dec 2023

By Charles Macgregor

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

In this Insight:

  1. Meituan
  2. Lippo Malls Indonesia Retail Trust
  3. SK Hynix
  4. China Jinmao Holdings
  5. Geely Auto

and more…

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Dec 22
0

Daily Brief Equity Bottom-Up: Alibaba’s Eddie Wu and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Alibaba’s Eddie Wu, Strategic Leader or Ma’s Partner?
  • Plover Bay (1523 HK): Interesting Net Cash /8% Dividend Yield Play/ With ROEs Above 50%
  • Sumber Alfaria Trijaya (AMRT IJ) – Rationalising the Lawson Buildout
  • Intel’s AI Everywhere In New York
  • Edelweiss: Hitting All the Right Notes to Scale Up Businesses and Unlock Value
  • COSCO Shipping Energy (1138 HK): Time for Another Look
  • AOT Vs MAHB: Part Deux
  • 2Q Follow-Up – Japan System Techniques (4323 JP)
  • Carnival Corp’s Per Passenger Revenue
  • MillerKnoll, Inc. – 2QFY24 Results Deliver Strong Margins; Orders Challenged

Alibaba’s Eddie Wu, Strategic Leader or Ma’s Partner?

By Oshadhi Kumarasiri

  • In the latest wave of management changes, Eddie Wu, Jack Ma’s trusted associate has staged a comeback, securing pivotal roles.
  • We believe this is not a mere coincidence. Jack Ma seems to be orchestrating moves from behind the scenes, with Eddie Wu strategically positioned to represent his influence.
  • The Chinese government’s reaction to Jack Ma’s increased involvement may impact Alibaba Group Holding (9988 HK)‘s price performance in the short term.

Plover Bay (1523 HK): Interesting Net Cash /8% Dividend Yield Play/ With ROEs Above 50%

By Sameer Taneja

  • Plover Bay Technologies (1523 HK) is another exciting play from the stable of net cash (12% of market cap) and high dividend yield (8% FY22) companies.  
  • The company develops networking technologies that enable supercharged connectivity. Users can build always-on networks anywhere by combining fixed, mobile, and satellite connectivity. Its major brands are Peplink and Pepwave.
  • Plover Bay is a high net margin (25%) and high ROE (>50%) business that has 9-10% CAGR revenue growth (trading at 11x PE) with catalysts up ahead. 

Sumber Alfaria Trijaya (AMRT IJ) – Rationalising the Lawson Buildout

By Angus Mackintosh

  • Sumber Alfaria Trijaya has decided to pare back the velocity of the expansion of Lawson convenience stores as it consolidates its leading position and maximises efficiencies.
  • 4Q2023 saw slower growth in November but December should be stronger, whilst its store expansion for 2023 reached 1,700 new stores, with plans for around 1,300 new stores in 2024.
  • Sumber Alfaria Trijaya remains the best way to play the minimarket space in Indonesia. 4Q 2023 numbers should provide a positive catalyst given it is the seasonally high quarter. 

Intel’s AI Everywhere In New York

By William Keating

  • Intel’s “AI Everywhere” event turned out to be little more than last minute launches client and server products promised for 2023
  • While these products have little new in the way of ground-breaking AI hardware, the entire event was infused with AI marketing to the highest degree
  • Ostensibly Intel’s great hope in AI hardware acceleration, Gaudi, featured solely as a last minute gimmick announcing that Gaudi3 was “out of the fab and into the lab”. Yawn!

Edelweiss: Hitting All the Right Notes to Scale Up Businesses and Unlock Value

By Ankit Agrawal, CFA

  • Edelweiss reported a decent Q2FY24 with ex-Insurance PAT of INR 153cr vs INR 133cr YoY. All the businesses – ARC, Asset Management and Credit – performed well.
  • Edelweiss is making decent progress in the Credit business aided by the co-lending business model. 80% of disbursals in NBFC and 30% in Housing Finance in Q2FY24 were through co-lending.
  • Edelweiss is in process of selling a minority stake in its Alternative Asset Management business for value unlocking. It plans to sell 10-20% equity stake for INR 1500-2000cr.

COSCO Shipping Energy (1138 HK): Time for Another Look

By Osbert Tang, CFA

  • The 20% retreat in the share price of Cosco Shipping Energy Transportation (1138 HK) from the peak has well reflected the plunge in 3Q23 VLCC rates and 10% earnings downgrade.
  • 4Q23 VLCC rates have rebounded 78.4% QoQ. Re-routing due to recent Houthi attacks on commercial ships at the Red Sea has reduced effective supply and is positive to rates.
  • Heightened energy security needs will drive demand. The medium-term supply pressure is mild as the VLCC orderbook equals just 2% of the existing fleet, fueling ROE for FY23-25F. 

AOT Vs MAHB: Part Deux

By Henry Soediarko

  • Airports of Thailand (AOT TB) 6m24 revenue growth rates are healthy, supported by the growth in departure passenger service charges and the coming back of concession revenues.
  • AOT labor expenses have expanded at an unprecedented level, even higher than pre-COVID levels, while Malaysia Airports Holdings (MAHB MK) kept them under control.
  • Book profit on half of the exposure and wait for the next quarter to see if AOT labor expenses will stay high.

2Q Follow-Up – Japan System Techniques (4323 JP)

By Sessa Investment Research

  • Fully independent DX provider: Japan System Techniques (JAST) is an independent system integrator that develops and sells software and systems, which celebrated its 50th anniversary.
  • The company develops systems for customers in a variety of industries and sectors, including finance, manufacturing, distribution, services, public services, telecommunications, transportation, and science and technology.
  • Furthermore, as a developer, the company has three main JAST-branded software offerings for its customers, namely GAKUEN for the education industry, BankNeo for the financial industry, and JMICS (JAST Medical Insurance Checking System) for the medical industry and the profitability of these own-brand businesses is very high.

Carnival Corp’s Per Passenger Revenue

By Calcbench

  • Lots of financial analysts and other Calcbench users might be wishing they could sail away on a tropical cruise as we enter the holiday slow season, so perhaps it’s a good time to visit Carnival Corp. ($CCL) and the company’s latest financial performance. 
  • Carnival filed its latest quarterly (and fiscal year-end) earnings release on Thursday, and top-line numbers looked pretty good for a company still recovering from the pandemic’s apocalyptic effects four years ago.
  • Quarterly revenue jumped 40.6 percent from the year-ago period, to $5.4 billion; annual revenue soared 77.5 percent to $21.6 billion. 

MillerKnoll, Inc. – 2QFY24 Results Deliver Strong Margins; Orders Challenged

By Water Tower Research

  • After market close on December 20, MillerKnoll reported 2QFY24 adjusted EPS of $0.59, ahead of our estimate of $0.55 and the consensus mean of $0.54.
  • Margins were better than expected, while revenue of $949.5 million came in at the low end of guidance.
  • Sales in the Americas segment disappointed relative to our expectations.

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Dec 22
0

Daily Brief Macro: Mint Macro Roundup: BoJ Maintains Loose Policy Yet Yen Remains Strong and more

By | Daily Briefs, Macro

In today’s briefing:

  • Mint Macro Roundup: BoJ Maintains Loose Policy Yet Yen Remains Strong
  • Sentiment Nugget: Central Bank Divergence Into Year-End
  • The Weekly Market Monitor – Bye-Bye OPEC, Hello Liquidity, and Welcome Back Earnings!
  • EIA Watch: Is OPEC falling apart? 2024 outlook

Mint Macro Roundup: BoJ Maintains Loose Policy Yet Yen Remains Strong

By Pranay Yadav

  • BoJ stuck to its ultra-loose monetary policy at its policy meeting on 19/Dec. It continues to maintain an extremely dovish stance to encourage economic growth.
  • Governor Ueda stated that the prospects of inflation declining sustainably to target and wages rising and propping up demand remain high.
  • Yen initially weakened following continued easing however it has recovered losses and stands 1.7% stronger than its level before Fed’s dovish stance on 13/Dec.

Sentiment Nugget: Central Bank Divergence Into Year-End

By Andreas Steno

  • Into year-end we have noted a number of key shifts in what Central Bank language is actually telling us from a quantitative point of view.
  • We regularly track and update our measure of positivity/negativity of Bank language contained in statements, outlooks and speeches on a scale of -1 to +1 in our DataHub for premium subscribers.
  • There you can access full histories and dig deeper into the underlying drivers.

The Weekly Market Monitor – Bye-Bye OPEC, Hello Liquidity, and Welcome Back Earnings!

By Jeroen Blokland

  • After the latest data, our earnings bellwether is back to zero, suggesting company earnings may be off the hook for big declines. That would be different this time.
  • Our Fair Value estimate of the 10-year US Treasury is dropping like a stone, yet the gap with the actual yield remains strikingly large. ‘term premium aficionados’ are likely wrong.
  • We look at a bunch of US housing and consumer data and must conclude that the odds of an imminent recession are shrinking.

EIA Watch: Is OPEC falling apart? 2024 outlook

By Ulrik Simmelholt

  • Welcome to this year’s final EIA watch with a 2024 outlook plus your weekly updates from our EIA models.
  • Before we start, we have some breaking news coming out of OPEC.
  • Jornal de Angola reports that Angola will exit OPEC and we see this as the first cracks starting to show within the cartel.

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Dec 21
0

Daily Brief TMT/Internet: LG Display, Whispir Ltd, SiteMinder, Nexchip Semiconductor , Tencent, Viva Republica, Micron Technology and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering
  • Whispir (WSP AU): Soprano & Pendula Jostle for Control
  • Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More
  • STAR50 Index Rebalance Preview: Four High Impact Changes in March
  • [Blue Lotus Sector Update]: Latest Developments in Short Video Point to Possibilities
  • Key Beneficiaries of a Potential Viva Republica IPO in 2024
  • The First Semi Micron to Guide 1Q24; Conservative Now but Likely Raise Later

Arb Trading with Stock Rights in Korea: A Basic Guide Featuring LG Display Offering

By Sanghyun Park

  • Unlike typical Korean stock rights arbitrage, LG Display’s significant equity offering and active stock futures trading anticipate a spread opening, akin to the recent Hanwha Ocean scenario.
  • In contrast to Hanwha Ocean, the absence of major sellers, like KDB, sets this event apart. LG Electronics, the major shareholder with a 37.9% stake, intends to participate.
  • Despite differences from Hanwha Ocean, LG Display’s high retail shareholder presence implies a substantial likelihood of stock rights overhang, even without players like KDB.

Whispir (WSP AU): Soprano & Pendula Jostle for Control

By David Blennerhassett

  • On the 6 November, cloud communication outfit Whispir (WSP AU)  announced a A$0.46/share unconditional Offer, in cash, from mobile messaging software play Soprano Design.
  • The Offer price was a 92% premium to Whispir’s recent private placement, and a 60% premium to the undisturbed price. Whispir rejected the Offer.
  • Pendula subsequently emerged with a A$0.57/share NBIO. Soprano “countered” with A$0.52/share. Pendula upped its indicative Offer to A$0.60/share. An independent expert’s fair value is between A$0.486/share-A$0.565/share.

Quiddity Leaderboard ASX Mar 24: Allkem, Newmont, Costa, and Many More

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for ASX 300, 200, 100, 50, and 20 in the run-up to the March 2024 index review.
  • I expect one change for ASX 20, one change for ASX 100, and four changes for ASX 200 during the March 2024 index rebal event.
  • Separately, there could also be one intra-review change for ASX 200 in February 2024.

STAR50 Index Rebalance Preview: Four High Impact Changes in March

By Brian Freitas

  • The review period for the March rebalance ends 31 January. We expect the changes to be announced 23 February with the implementation taking place after the close on 8 March.
  • We expect the index committee to continue using a 6-month minimum listing history resulting in four changes to the index.
  • One way turnover is estimated at 3.3% resulting in a one-way trade of CNY 4,717m. The impact on the deletions will be much larger than that on the inclusions.

[Blue Lotus Sector Update]: Latest Developments in Short Video Point to Possibilities

By Ying Pan

  • We view both Weixin Video Account (WVA) and Douyin China as secondary assets to their respective parents, which in our view, may lead to them forming…(TBC)
  • However, rising competition in the short-play (短剧) market may put the two businesses in more direct confrontation, which may delay or diminish the chance for two to work together;
  • We view Tencent as the likely winner in the continuing evolution of short video as it considers various options to maximize the value of WVA traffic.

Key Beneficiaries of a Potential Viva Republica IPO in 2024

By Douglas Kim

  • It was reported in numerous local media that Viva Republica has sent several RFPs to several large domestic securities companies to be underwriters of a potential IPO in 2024. 
  • Viva Republica is one of the largest Korean fintech companies. Market value of Viva Republica is estimated at more than 9 trillion won.
  • E World, Hanwha Securities, Hana Financial, and Korea Electronic Certification Co are major public companies that should benefit from the listing of Viva Republica. 

The First Semi Micron to Guide 1Q24; Conservative Now but Likely Raise Later

By Andrew Lu

  • Driven by stronger PC/networking DRAM sales, Micron reports 5% stronger 4Q23 sales, 10-13ppts q/q margin improvement and 34% y/y decline in MOI to 5.2 months;
  • Micron guides 1Q24 sales growth 8-16% q/q and 38-49% y/y and gross margin of 12%, beating Bloomberg consensus estimates by 6ppts;
  • Rooms to raise: 1. 1Q24 sales of 18% q/q likely; 2. Turning profits sooner than expected; 3. +Free cash flow in 2024; 4. HBM3E for GH200/H200 to improve mix, margin. 

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Dec 21
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Daily Brief Energy/Materials: Livent, United States Steel, Vedanta Resources, Pan American Silver and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Allkem+Livent=Arcadium : Expected Index Flows
  • Nippon Steel/United States Steel Corp: Knock-Out Offer
  • Vedanta Resources – Event Flash – Liability Management Exercise – Lucror Analytics
  • Pan American Silver – Skarn PEA confirms its early potential

Allkem+Livent=Arcadium : Expected Index Flows

By Travis Lundy

  • Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
  • NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
  • But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

Nippon Steel/United States Steel Corp: Knock-Out Offer

By Jesus Rodriguez Aguilar

  • Nippon Steel Corporation (5401 JP) and United States Steel (X US) have agreed an all-cash $55.00/share offer, 142% premium to where X traded before Cliff’s approach, a very generous 7x EV/24e EBITDA.
  • A determined buyer seeks market share in the lucrative US market, with no meaningful synergies expected and willingness to keep all US Steel jobs and (greener) growth projects.
  • Although unions and some lawmakers are voicing concerns, CFIUS shouldn’t pose a big hurdle. Spread is 12.04%/17.93% (gross/annualised, assuming late settlement by end of Q3 2024). Long.

Vedanta Resources – Event Flash – Liability Management Exercise – Lucror Analytics

By Trung Nguyen

Vedanta Resources (VRL) has launched a consent solicitation for an extensive liability management exercise. The company is seeking consent from noteholders of its four bonds to extend the maturities of three of the bonds (the January 2024, August 2024 and 2025 notes) to 2027-2028. There will be no haircut on the principal, and the coupon for the August 2024 notes and 2025 notes will be increased to match that of the January 2024 notes.

In our opinion, the terms of the proposal are mixed and the timeline is very tight. Failure to receive the requisite consent may lead to the company defaulting on the January 2024 notes. The new financing cannot be used to repay the January 2024 notes if the liability management exercise does not go through. In this case, there would be no time for VRL to come up with a revised proposal before the maturity of the January 2024 notes.

We acknowledge the company’s efforts in terms of the improved security packages and higher coupons. We recommend that noteholders accept the proposal and provide consent.

Pan American Silver – Skarn PEA confirms its early potential

By Edison Investment Research

Pan American Silver (PAAS) released a preliminary economic assessment (PEA) of the La Colorada Skarn project, confirming its potential to become a large-scale operation producing an average 17.2Moz of silver per annum over the first 10 years of its 17-year mine life. At a base case throughput rate of 50ktpd, the company estimates the project’s post-tax NPV8 at US$1.1bn, with an IRR of 14% and a payback period of 4.3 years. We intend to update our valuation shortly to incorporate the PEA and the prevailing stronger than expected gold and silver prices.

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