Smartkarma Daily Briefs

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

By Douglas Kim

On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

Seven & I Ventures Down Under with 7-Eleven Australia Acquisition

By Oshadhi Kumarasiri

Seven & I Holdings (3382 JP) announced last week that it had agreed to buy the 7-Eleven convenience store chain in Australia for A$1.71bn ($1.1bn).
The acquisition may not immediately impact Seven & I’s stock price like Speedway did, given its smaller scale, lack of synergies, and less favorable macroeconomic conditions.
The main positive takeaway from this news is that the acquisition price for 7-Eleven Australia is not as extravagant as the amount Seven & I paid for the Speedway acquisition.

Sanyo Trading (3176 JP) – Aiming to Elevate to a Higher-Quality Business

By Astris Advisory Japan

Business investment and targeting growth – we view Sanyo Trading’s new long-term plan as a step in the right direction for the company to become a higher-quality business.
Whilst investment activities and macro headwinds may limit short-term growth prospects, the company has indicated ¥20bn to ¥30bn 5-year cumulative allocation in human capital, DX implementation, and M&A, which should drive transformation into a more diversified and resilient business.
This commitment by management demonstrates its aim to drive higher returns by leveraging its core strengths of product differentiation, strong technical staff, and maintaining high customer success in new products and activities.

LaKeel (4074 JP) – Highlighting Opportunities and Acknowledging Challenges

By Astris Advisory Japan

Results highlighting both strengths and limitations – Q1-3 FY12/2023 results were below expectations, with the company experiencing a delay and potential cancellation of a large license sale, which had a negative knock-on effect on related Consulting demand.
FY12/2023 company guidance has been revised to reflect lowered earnings visibility.
Although this highlights the need for the company to strengthen business model resilience, growth in DX-related in-house LaKeel Products remained stable with sales up 19.3% YoY.

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Dec 05

Most Read: Fast Retailing, Uber Technologies , Samsung KODEX Top5Plus Total Return ETF, Benefit One Inc, Helia Group , Cheng Shin Rubber Ind Co., Ltd., Gentrack, NTPC Ltd, Nexon, Great Wall Motor and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
S&P500 Index Rebalance: Calling an UBER
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Benefit One (2412) – Pro-Ration Expectations Update
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum
Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion
A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

S&P500 Index Rebalance: Calling an UBER

Uber Technologies (UBER US), Jabil Circuit (JBL US) and Builders Firstsource (BLDR US) will be added to the S&P 500 INDEX (SPX INDEX) at the close on 15 December.
There are a bunch of inclusions. deletions and migrations across the S&P 500 INDEX (SPX INDEX), the S&P Midcap 400 Index, and the S&P SmallCap 600 Index.
We estimate passive trackers will need to buy around US$18bn of Uber Technologies (UBER US). There has been positioning in the stock for just over a month now.

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

By Sanghyun Park

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Benefit One (2412) – Pro-Ration Expectations Update

Since the announcement of the Benefit One Inc (2412 JP) partial offer, the stock has traded 16+mm shares in the market, which is about 40% of Real World Float.
Some of that has been traded multiple times. Looking only at that data would suggest a higher pro-ration, but I expect there is other data one must take into account.
Benefit One shares are currently trading at a level suggesting either lower participation OR higher back-end despite the earnings guidance downgrade at announcement.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up

Gentrack (GTK NZ) and Turners Automotive (TRA NZ) will be added to the S&P/NZX 50 Index while Synlait Milk (SML NZ) and Pacific Edge (PEB NZ) will be deleted.
There is a lot to trade on the stocks. The impact in terms of days of ADV appears high but historically there has been volume on implementation date.
The adds have jumped recently and there will be pre-positioning on the stocks. Not so much on the deletes.

NIFTY200 Momentum30 Index Rebalance Preview: 58% Turnover & Strong Momentum

There could be 18 changes for the Nifty200 Momentum 30 Index that will be implemented at the close on 28 December.
If all changes are on expected lines, one-way turnover is estimated at 58.2% and that will result in a one-way trade of INR 20bn (US$240m).
Since July, the potential adds to the index have outperformed the index and the potential deletes by a big margin. Momentum could keep the outperformance going till implementation date.

Korean Government Launches a Tender Offer to Sell a 29.3% Stake in NXC Corp for US$3.6 Billion

By Douglas Kim

On 4 December, the South Korean government announced that it will launch a tender offer to sell a 29.3% stake in NXC Corp for about US$3.6 billion.
The two daughters of ex-Chairman Kim Jung-Ju handed over a 29.3% stake in NXC Corp to the Korean government as payment-in-kind in May 2023 to pay for inheritance taxes.
The tender offer sale of the Korean government’s 29.3% stake in NXC Corp (worth nearly 4.7 trillion won) is a positive catalyst for Nexon (3659 JP).

A/H Premium Tracker (To 1 Dec 23): H Down Vs A, SOUTHBOUND Selling Continues, Tech Still Sold

The New and Better (17 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
Hs with H/A pairs under-perform their As on average by 220+bp. Liquid HK H/A Pairs saw H/As -244bp. H/A Pair intracorrelation is up and A premia continue to trend better.
SOUTHBOUND and NORTHBOUND were net buys overall but Hs had a VERY BAD WEEK vs their A-Shares where pairs were concerned.

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Dec 04

Daily Brief Quantitative Analysis: Northbound Flows (Dec 1st): Hygon Information and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Northbound Flows (Dec 1st): Hygon Information, Shanghai United Imaging Healthcare, BYD
A-H Premium Weekly (Dec 1st): CMB, Ping An Insurance, Beigene, Ganfeng Lithium
Hong Kong Connect Flows (Dec 1st): Meituan, Tencent
TWSE Foreign Holding Weekly (Dec 1st): TSMC, Mediatek, Umc
HK Short Interest Weekly: Xpeng, Xiaomi, Link Reit
Hong Kong Connect Flows (November): Five Months of Inflows Despite New Low

Northbound Flows (Dec 1st): Hygon Information, Shanghai United Imaging Healthcare, BYD

We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of December 1st.
We estimate the weekly inflows to be US$359.9 million, led by information technology, health care, utilities sectors, and offset by financials, materials.
We highlight flows for Hygon Information Technology, Shanghai United Imaging Healthcare, BYD, CMB, Wuliangye, Midea, CATL.

A-H Premium Weekly (Dec 1st): CMB, Ping An Insurance, Beigene, Ganfeng Lithium

We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 127.1% as of Dec 1st.
The average A-H premium changed by 4.7ppt week on week, led by consumer staples, utilities, communication services.
We highlight weekly changes in A-H premium for CMB, Ping An Insurance, Beigene, Ganfeng Lithium.

Hong Kong Connect Flows (Dec 1st): Meituan, Tencent

We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of December 1st.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight weekly Hongkong connect flows for Meituan and Tencent.

TWSE Foreign Holding Weekly (Dec 1st): TSMC, Mediatek, Umc

We analyzed the changes in foreign holdings of TWSE Stocks as of Dec 1st which has an aggregated holding worth USD684.7bn.
We tabulate league table for top changes by value for 1 week, one 4 weeks, 1 year and top stocks held by foreign instutions by dollar value.
We estimate that foreign flows to be inflows of USD1,077mln and highlight foreign changes in TSMC, Mediatek, Umc.

HK Short Interest Weekly: Xpeng, Xiaomi, Link Reit

We analyzed the latest HK SFC report for aggregate short position as of Nov 24th.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short changes in Xpeng, Xiaomi and Link Reit.

Hong Kong Connect Flows (November): Five Months of Inflows Despite New Low

We analyze the monthly Hong Kong Connect flows with our data engine.
We tabulate the top stocks by inflows, outflows, and holding by mainland investors.
We highlight inflows into TraHK, Xpeng, SMIC, CSOP Hang Seng ETF, Ping An Insurance.

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Dec 04

Daily Brief ESG: Need to Reactivate the Stakeholders’ Relationship Committee in the Wake of the IndusInd Bank Fiasco and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Need to Reactivate the Stakeholders’ Relationship Committee in the Wake of the IndusInd Bank Fiasco
MBOs Would Open the Door to Investment for Companies that Weren’t Invested for Fear Of “Value Trap”

Need to Reactivate the Stakeholders’ Relationship Committee in the Wake of the IndusInd Bank Fiasco

By Hemindra Hazari

The rejection by shareholders of an independent director’s re-appointment reveals the growing influence of proxy advisory firms on institutional investors
Indian corporate boards appear ill-prepared to engage with stakeholders to provide valuable feedback
Stakeholders Relationship Committee of the Board needs to reactivated and re-oriented to engage with stakeholders to improve governance

MBOs Would Open the Door to Investment for Companies that Weren’t Invested for Fear Of “Value Trap”

By Aki Matsumoto

The fact that many IPO companies either don’t need to raise capital or don’t share the same goal of going public is the crux of the problem.
It would be conducive to improving quality of TSE as a whole if companies that cannot share the objectives of a listed company with shareholders are delisted through an MBO.
An MBO by the founding family would open the door to investment for companies that have been unable to invest for fear of falling into the “value trap.”

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Dec 04

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Five Weeks of Gains; Komatsu Acquires IVolve and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Ohayo Japan | Five Weeks of Gains; Komatsu Acquires IVolve
WSTS Forecasts Semi Revenue Increase of 13.1% In 2024. Seriously?

Ohayo Japan | Five Weeks of Gains; Komatsu Acquires IVolve

By Mark Chadwick

Overseas: SPX +0.6%, Nasdaq +0.3%; Illumina +7%, Microsoft -1%, Intel -2%
Today: NKY Futs +0.1% v cash. JPY/$146; Kewpie and Ezaki Glico raising prices; Appier helping Nexon
JapanX: Komatsu Expands Construction Software Arsenal with iVolve Acquisition for Fleet Management Services

WSTS Forecasts Semi Revenue Increase of 13.1% In 2024. Seriously?

By William Keating

9.4% semi revenue decline in 2023 seems about right to us
Forecast of13.1% semi revenue increase in 2024, seems on the high side
Forecast assumes a ~45% YoY increase in memory revenue. Sanjay will be delighted to hear the good news!

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Dec 04

Daily Brief Credit: Morning Views Asia: and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Morning Views Asia:

Morning Views Asia:

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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Dec 04

Daily Brief Equity Bottom-Up: Pair Trade: Want Want (151 HK) And Mengniu (2319 HK) and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Pair Trade: Want Want (151 HK) And Mengniu (2319 HK)
Fu Shou Yuan (1448.HK) – Magic Is About to Disappear, but Is Still Undervalued
H World Group (1179 HK): Uniquely Well-Placed for Lower-Tier Markets
Elastic: 2Q’FY24 Earnings Review – Elastic Cloud Is a Bright Spot, PT Raised To $121
IHH Healthcare (IHH MK): Double-Digit Growth Across Key Metrics for Q3; Bed Expansion to Continue

Pair Trade: Want Want (151 HK) And Mengniu (2319 HK)

By Steve Zhou, CFA

Want Want (151 HK) and China Mengniu Dairy Co (2319 HK) are both fairly liquid names in the China consumer staples sector.
Both companies trade at virtually the same forward PE of 14x. However, I expect Want Want’s near term sales growth to be lower than market expectations.
The upside risk for Want Want could be its overseas expansion efforts, as overseas sales now account for mid to high-single-digit of sales and grew high-teens yoy in FY1H24.

Fu Shou Yuan (1448.HK) – Magic Is About to Disappear, but Is Still Undervalued

By Xinyao (Criss) Wang

The high growth in 23H1 is unsustainable. 23H2 YoY revenue growth would be single-digit. Due to 23H1’s high base, we cannot rule out the possibility of negative growth in 24H1.
In the case of lower-than-expected external M&A activities, Fu Shou Yuan has accumulated a large amount of cash, which would drag down ROE. So, current dividend policy still needs improvement.
Fu Shou Yuan’s expansion would be relatively moderate. Double-digit revenue growth can still be expected in the long term. The market value of above RMB15 billion is more reasonable.

H World Group (1179 HK): Uniquely Well-Placed for Lower-Tier Markets

By Osbert Tang, CFA

H World Group (1179 HK) has been over-penalised by market weakness as its share price was off 16.8% YTD. It turned around in 3Q23 and guidance for 4Q23 is solid.
Surge in operating and adjusted EBITDA margins indicated high operating leverage. Occupancy has not returned to 2019 level, but there will be more margin expansion when this happens.
55% of rooms in China are of economy type, and 82% are in tier-2 and below cities. Such characteristics allow it to benefit from the prevailing consumption downgrade.

Elastic: 2Q’FY24 Earnings Review – Elastic Cloud Is a Bright Spot, PT Raised To $121

By Andrei Zakharov

Elastic NV (ESTC US) reported a solid quarter, reflecting strong cloud revenue growth, ~13% non-GAAP operating margin and rapid adoption of ESRE.
Elastic NV (ESTC US) shares rallied 35%+ during regular trading session and closed up ~37% on Friday at $110.20. I raised PT to $121 from $112.
However, I downgrade Elastic NV (ESTC US) to Equal-weight from Overweight on valuation and expect the stock to trade in-line with peers.

IHH Healthcare (IHH MK): Double-Digit Growth Across Key Metrics for Q3; Bed Expansion to Continue

By Tina Banerjee

IHH Healthcare (IHH MK) reported stellar performance in 3Q23 exceeding expectations, with double-digit revenue and EBITDA growth, while PAT more than doubles on higher patient volumes and improved case mix.
To deliver profitable growth, IHH will continue its organic expansion, including adding close to 4,000 beds in the next five years to its existing 12,000 operational beds.
Notwithstanding the strong underlying demand for quality healthcare services driving operational and financial growth, IHH expects cost pressures from elevated inflation, and rising interest rates.

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Dec 04

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade
Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump
S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough
Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover
FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M
Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea
Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys
S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up
Selected European HoldCos and DLC: November’23 Report

March 2024 Nikkei 225 Rebal – Socionext, Disco, and a Consumer Goods Stock to ADD and ¥1trn To Trade

Minimal changes in the rankings since last time. Socionext (6526), Disco (6146), and a Consumer Goods stock (Zozo (3092) top-ranked, Ryohin Keikaku (7453) a better choice) are ADDs.
The DELETEs are still Takara Holdings (2531), Pacific Metals (5541), Sumitomo Osaka Cement (5232) with a dark horse candidate in Hitachi Zosen (7004) to replace Takara.
There is the upweight to Nitori (9843) AND funkiness with Fast Retailing (9983) to consider. We are right on the threshold. The question is whether it gets “help” in January.

Taisho Pharmaceutical (4581 JP): Japan Catalyst Pushes for a Bump

By Arun George

Japan Catalyst’s press release supports the idea of a Taisho Pharmaceutical Holdin (4581 JP) MBO but not the proposed offer price as it implies a P/B less than 1.0x.
The press release is a discovery exercise encouraging other like-minded shareholders to show their hand. The shares are trading marginally above the JPY8,620 offer.
While justifiable, a bump is unlikely due to the lack of a substantial activist shareholder, irrevocables, no competing bid and the offer’s 55.5% premium to the undisturbed price.

S&P/ASX 200 Index Rebalance (Dec 2023): There Is Positioning but Probably Not Enough

There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

Yuanta/P-Shares Taiwan Div+ ETF Rebalance: Changes Lead to Huge Turnover

There are 5 adds and 4 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in December with implementation taking place from 15-21 December.
The constituent changes and capping changes result in an estimated one-way turnover of 16.1% resulting in a one-way trade of US$1.26bn.
There will be positioning in a lot of the adds/deletes and the real action could be in the other stocks with capping and/or funding flows.

FnGuide Top10 Equal Weight Index Rebalance Preview: Kia Corp Could Replace Posco Future M

The Samsung KODEX Fn Top10 Equal Weight ETF (395170 KS) tracks the FnGuide Top 10 Index and has an AUM of US$264m.
We expect Kia Corp (000270 KS) to replace Posco Future M (003670 KS) in the index at the December rebalance.
There will be 0.4x ADV to buy in Kia Corp (000270 KS) while passives will need to sell 0.1x ADV of Posco Future M (003670 KS).

Investigating Arbitrage Trading Potential to Exploit ETF Tracking Error Widening in Korea

By Sanghyun Park

Korea’s financial authorities prompted LPs to refrain from providing liquidity to ETFs through short-selling. This has resulted in a significant increase in both the frequency and magnitude of tracking errors.
Therefore, it’s time to actively explore this from an arbitrage trading standpoint. ETF arbitrage involves straightforward steps: purchasing and redeeming ETFs, followed by selling the underlying shares in the market.
The focus should be particularly directed towards sector ETFs that include a select few large-cap stocks carrying single-stock futures.

Merger Arb Mondays (4 Dec) – Origin, OreCorp, Healius, CIMC Vehicles, T&K Toka, Eoflow, Hollysys

By Arun George

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Eoflow (294090 KS), 111 Inc (YI US), Irc Ltd (1029 HK), Orecorp Ltd (ORR AU), Healius (HLS AU), Hollysys Automation Technologies (HOLI US), Origin Energy (ORG AU).
Lowest spreads – Azure Minerals (AZS AU), Tietto Minerals Ltd (TIE AU), Toyo Construction (1890 JP), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Taisho.

S&P/NZX 50 Index Rebalance: Two High Impact Changes Coming Up