Smartkarma Daily Briefs

By Shifara Samsudeen, ACMA, CGMA

This is always a tough subject, but every now and then I throw myself on the mercy of the ho-humming crowd and write about the Ito En Prefs (25935 JP).
No strong catalyst. Limited capacity for strongly better governance. Even less apparent corporate interest in good governance.
But we have a mini-catalyst, and it has been a while, and I think there IS a good way to think about this stock, so here’s another crack at it.

Sapporo Holdings: Activist Investor 3D Investment Partners Assumes Majority Ownership

By Oshadhi Kumarasiri

Last week, activist investor 3D Investment Partners raised its stake in Sapporo Holdings (2501 JP) by an additional 13%, cementing its position as the majority shareholder in the business.
This suggests the activist investor is optimistic about successfully advancing their proposals.
If investment properties are sold or spun off, and Alcoholic Beverages and Food & Soft Drinks undergo the suggested turnaround, we anticipate an additional 80-100% upside in the near term.

2024 High Conviction – CyberAgent: Worst Seems to Be Over

CyberAgent Inc (4751 JP) (CA) is a Japan-based media and entertainment company offering media, internet advertising, smart games and investment development businesses in Japan.
The gaming business of the company has collapsed with the slowdown of hit title UMA MUSUME while titles released after UMA MUSUME have failed to perform satisfactorily.
Profitability of Internet advertising and media are expected recover and seems that worst is over for the games business as several titles are slated for release in the near future.

(Mostly) Asia M&A, Nov 2023: Taisho Pharma, CIMC Vehicle, CMIC, Japan Best Rescue, Shidax

By David Blennerhassett

For the month of November 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$13bn.
The average premium for the new deals announced (or first discussed) in November was 41%. The average YTD is 38% (97 deals).
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Kobayashi Pharmaceutical Co (4967 JP): Q3 Shows Early Signs of Business Revival; Aims Big for US

By Tina Banerjee

Kobayashi Pharmaceutical Co (4967 JP) witnessed business revival in Q3, especially in the domestic household and the U.S. business. In Q3, revenue increased 6% YoY and 13% QoQ to ¥45.4B.
Kobayashi has reiterated FY24 guidance. The company has guided for FY24 revenue of ¥172.0B (+4% YoY), operating income of ¥25.5B (-4% YoY), and net profit of ¥20.2B (-1% YoY).
By establishing the supplement business in North America and further expanding OTC medicines, the company aims to achieve sales of ¥34B in the U.S. in 2030, including ¥16B from healthcare.

Toyota Motor Corporation: Market Dynamics in China & the Impact on Toyota’s Electric Vehicle Strategy! – Major Drivers

By Baptista Research

Toyota Motor Corporation delivered a positive result and managed an all-around beat in the last quarter.
Consolidated vehicle sales reached 114.1% of the previous fiscal year, totaling 4,744,000 units.
Toyota and Lexus brand vehicle sales amounted to 5,172,000 units, representing 109.1% of the same period last fiscal year.

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Nov 30

Most Read: GMO Payment Gateway, Denso Corp, Toyota Motor, Celltrion Healthcare , SK Square , Kurita Water Industries and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Japan – Increase in Shorts on Some Interesting*** Stocks
Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying
Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Japan – Increase in Shorts on Some Interesting*** Stocks

Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent Inc, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp have underperformed the Nikkei 225 recently.
The underperformance could lead to selling from global passive trackers and liquidity events on some of the stocks at month-end.
There has been an increase in short interest on most stocks over the last week as positioning for the liquidity event ramps up.

Denso Corp (6902 JP): Potential US$4.6bn Placement & Limited Passive Buying

There could be a US$4.6bn secondary placement in Denso Corp (6902 JP) before year-end as Toyota Motor (7203 JP), Toyota Industries (6201 JP) and Aisin Corp (7259 JP) unwind cross-holdings.
Denso Corp (6902 JP) was down 4.85% yesterday (and even more intra-day) and the stock could remain under pressure for the next few weeks.
There will be limited passive buying in conjunction with the secondary offering and active investors will need to buy a lot of stock.

Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”

Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap

15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, “It was a trap”.
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS

By David Blennerhassett

The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – 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%.

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

By Sanghyun Park

KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback

By Arun George

Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

By Douglas Kim

SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company.
SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
In addition, SK Square announced the merger of TVing and Wavve OTT services.

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
Toyota is the company’s largest shareholder and its largest customer.
We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.

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Nov 30

Daily Brief ESG: Headline Is Eye Catching and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies

Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies

By Aki Matsumoto

The “minimum majority of outside directors” is an eye catcher, but it does’t affect most companies because the 1/3 outside director ratio applies if a nominating committee is in place.
Since companies with majority of independent directors are 12.1% in prime market, the objective becomes to achieve the minimum requirement (1/3 INEDs), and few companies engage in further improving practices.
Companies with over 50% independent director have extremely superior market values in capitalization, ROE, ROA, and Tobin’s Q. Therefore, the acceleration of increasing independent director ratios should be seriously implemented.

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Nov 30

Daily Brief Thematic (Sector/Industry): Ohayo Japan | GM Higher on $10bn Buyback; Honda Boosts Bet on Electric Bikes and more

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

In today’s briefing:

Ohayo Japan | GM Higher on $10bn Buyback; Honda Boosts Bet on Electric Bikes
[Blue Lotus Daily – TMT Update] PDD: PDD Begins Hiring Staff to Train LLM for Temu Customer Service
Japan’s Convenience Stores Still Growing, Still Innovating

Ohayo Japan | GM Higher on $10bn Buyback; Honda Boosts Bet on Electric Bikes

By Mark Chadwick

Overseas: SPX -0.1%, Nasdaq -0.1%; Mixed signals from the Fed; CrowdStrike +10%, GM +9%
Today: NKY Futs -0.1% v cash. JPY/$ 147.3; Toyota to sell shares in Denso; Japan announces extra budget to offset inflation
JapanX: Honda Charges Ahead with its investment in electric motorcycles

[Blue Lotus Daily – TMT Update] PDD: PDD Begins Hiring Staff to Train LLM for Temu Customer Service

By Ying Pan

On November 22nd, 2023 local Chinese media reported that Pinduoduo began hiring researchers/engineers for its large language model (LLM) on its recruitment website and other staffing channels.
According to reports, PDD is in the process of hiring researchers to build its new LLM tool to make AI functionality available for customer service on Temu.
Reminder that Temu is responsible for handling post sales services under a “fully managed” business model, which is currently out-sourced to a customer service center.

Japan’s Convenience Stores Still Growing, Still Innovating

By Michael Causton

Convenience stores remain Japan’s largest sector. 2020 was the first and, so far, only year in the format’s 50-year history when sales declined, but performance has since bounced back.
Still dominated by three of the largest retail chains in the country, it remains one of the most dynamic and forward thinking retailing and marketing sectors
The latest initiatives look set to deliver more growth in sales as well as potentially delivering a huge new revenue stream in the form of retail media.

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Nov 30

Daily Brief ECM: Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!” and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”
Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap
Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback
Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected
Dekon Food and Agriculture Group IPO – Ebbs and Flows of Cycle Have Hurt Profitability
Tata Technologies IPO: Trading Debut
Tata Technologies IPO Trading – Will Be a Good Listing Owing to over Enthusiasm
Fedbank Financial IPO Trading – Subscription Rates Hint at a Snoozy Debut
Leader Energy Holdings Pre-IPO – Still Too Early for an ESG Angle
Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues

Huge Denso (6902) Secondary Sale by Toyota Group – Admiral Ackbar Says “It’s A Trap!”

Yesterday, Reuters reported that multiple Toyota Group companies would sell ~10% of Denso Corp (6902 JP) worth ¥700bn in a secondary share sale by year-end.
The sellers would be Toyota, selling down to just over 20%, Toyota Industries (6201) (selling down a bit more than half, and Aisin Seiki (7259 JP) selling its 2% stake.
Denso would buy back shares. This whole thing is both interesting and complicated so I discuss the interesting complications below. It looks bigger than it probably is.

Denso Offering, Buyback, and New Cross-Holding Reduction Policy – It WAS a Trap

15 minutes after I published what I thought was a considered analysis, Denso dumps the details. I thought it might be a trap. It looks like a trap.
A holistic view of the three different documents here suggests, indeed, “It was a trap”.
This giant offering is not bearish overhang but likely tilts bullish with greenshoe support, a large buyback, a new cross-holding reduction policy, and the follow-on effects from that.

Denso (6902 JP): US$4.0 Billion Secondary Offering and US$1.4 Billion Buyback

By Arun George

Denso Corp (6902 JP) announced a secondary offering of up to 294.8 billion shares (including overallotment) and a buyback (maximum shares of 125 million or maximum value of JPY200 billion).
Denso also announced a cross-holding reduction policy. In an unspecified timeframe, it will sell part of its holdings in Toyota Industries (6201 JP) and Aisin (7259 JP).
Looking at recent large Japanese placements is instructive to understand the potential offer price. The pricing date will fall between 13 and 18 December (likely 13 December).

Denso Corp Placement – Toyota to Raise US$4.4bn, as Expected

Following yesterday’s news release by Reuters that Toyota Motor (7203 JP) could sell up to 10% of Denso Corp (6902 JP), the deal was officially launched today.
Toyota is the company’s largest shareholder and its largest customer.
We have covered the deal background in our earlier note, Denso Corp Placement – Possible Placement by Toyota to Raise US$4.7bn. In this note, we talk about the final terms.

Dekon Food and Agriculture Group IPO – Ebbs and Flows of Cycle Have Hurt Profitability

By Clarence Chu

Dekon Food and Agriculture Group (DFAG CH) is looking to raise up to US$128m in its Hong Kong IPO.
Dekon Food and Agriculture Group (DFAG) is a vertically integrated livestock farming enterprise in China.
In this note, we will look at past performance, and share our thoughts on valuation.

Tata Technologies IPO: Trading Debut

By Arun George

Tata Technologies (TATATECH IN) priced its IPO at Rs500 per share to raise gross proceeds of US$365 million. The shares will start trading tomorrow.
We previously discussed the IPO in Tata Technologies IPO: The Investment Case and Tata Technologies IPO: Valuation Insights.
The market sentiment on the sector has improved. In 2023, Indian IPOs with a >US$100 million raise had an average first-day gain of 28.3%. The IPO price is attractive.

Tata Technologies IPO Trading – Will Be a Good Listing Owing to over Enthusiasm

Tata Technologies (TATATECH IN) (TT) raised around US$370m in its India IPO.
Tata Technologies is a global engineering services company offering product development and digital solutions, including turnkey solutions, to global original equipment manufacturers (OEMs) and their tier 1 suppliers.
In our previous note, we looked at the company’s past performance and valuation. In this note, we talk about the demand and trading dynamics.

Fedbank Financial IPO Trading – Subscription Rates Hint at a Snoozy Debut

By Clarence Chu

Fedbank Financial Services (0702066D IN) raised around US$130m in its India IPO.
Fedbank Financial Services (Fedbank) is a retail-focused non-banking finance company (NBFC) promoted by The Federal Bank Limited.
In our previous note, we looked at the company’s past performance and valuation. In this note, we talk about the demand and trading dynamics.

Leader Energy Holdings Pre-IPO – Still Too Early for an ESG Angle

By Ethan Aw

Leader Energy Holdings (1814173D MK) is looking to raise up to US$215m in its upcoming Malaysia IPO.
Leader Energy Holdings (LE) is an independent power producer (IPP) primarily engaged in the development, ownership, O&M of power assets and projects.
LE’s revenue has grown on the back of higher power generation as well as coal price increases over the track record period, which drove profitability up.

Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues

By Shifara Samsudeen, ACMA, CGMA

Sino-Synergy Hydrogen Energy Technology (9663 HK) (SHET) is looking to raise around US$200m in its Hong Kong IPO.
SHET is a hydrogen fuel cell company in the PRC focusing on research, development, production and sales of hydrogen fuel cell stacks and hydrogen fuel cell systems.
In this note, we will look at the company’s background and talk about valuations.

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Nov 30

Daily Brief Equity Bottom-Up: L’Occitane (973 HK): FY1H24 Earnings Hurt By Massive Increase In Marketing and more

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

In today’s briefing:

L’Occitane (973 HK): FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected
Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment
YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024
Meituan: Earnings to Weaken Further
Korean Air (003490 KS): Cheap, but a Value Trap
[Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore
India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped
UMC (2303.TT; UMC.US): There Is a Greater Chance for a Rebound in 2Q24F.

L’Occitane (973 HK): FY1H24 Earnings Hurt By Massive Increase In Marketing, As Expected

By Steve Zhou, CFA

L’Occitane (973 HK) reported FY1H24 (fiscal year ending March 31) results yesterday after market, with net profit down 45% yoy.
The sharp drop in earnings is mainly due to a 48% yoy increase in marketing costs, as well as increased finance costs.
The company maintained the FY24 outlook of 17% topline growth and an operating profit margin of 12% (FY1H24: 7.2%).

Perfect Medical H1 FY24: Rebound of Growth in H2 FY24, 9% Div Yield, New High ROIC Investment

By Sameer Taneja

Perfect Medical Health (1830 HK) results showed 7% revenue growth and 10% YoY profit (27% YoY adjusted profit for subsidies) growth in H1 FY24.
The company declared a 14.2 cent/share interim dividend. H2 dividends usually are higher, so we expect a 32-35 cent dividend for FY24.
This is another dividend-yielding gem, trading at 12.0x PE FY24e, a 9% dividend yield, and 15% of the market cap in cash and investments with a >50% ROE.

YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity

By Xinyao (Criss) Wang

YSB would be added to KraneShares CSI China Internet ETF.Cornerstone investors could opt to cash out directly,taking advantage of improved liquidity, which means even they’re not optimistic about YSB’s prospects.
YSB’s profit margin is disappointing. It would be hard for YSB to deliver decent profits in the end. This business does not make money. YSB is also short of money.
Since going public, YSB’s share price has been on a rollercoaster, which has deviated from the fundamentals, but it should be pointed out eventually stock prices will return to fundamentals.

ELS Losses for HSCEI Index Could Result in Lowering Dividend Expectations for Korean Banks in 2024

By Douglas Kim

The equity linked securities (ELS) losses related to Hang Seng China Enterprises Index (HSCEI INDEX) could lower dividend expectations for Korean banks in 2024.
On average, if H-Index declines below 5,699, then the majority of the investors on these H-Index could start to incur major losses starting 1Q 2024.
Amid challenges of lower interest rates expectations and higher losses from ELS products, major Korean banks could be more hesitant on share buybacks and increasing their dividends in 1H 2024.

Meituan: Earnings to Weaken Further

Meituan (3690 HK) ‘s 3Q2023 revenues beat estimates while OP for the quarter was well below consensus estimates.
There were clear signs of slowdown in earnings growth due to macroeconomic challenges and weaker demand. 4Q earnings are expected to decline further.
Meituan’s share price went down by about 11% following its earnings announcement as slowdown in core local commerce and weakening earnings have concerned investors.

Korean Air (003490 KS): Cheap, but a Value Trap

By Mohshin Aziz

Korean Air Lines (003490 KS) is cheap, against peers and its own history. The impending merger with Asiana Airline is a major overhang
Business is good, with steady passenger loads and yields, and cargo showing decent signs of recovery. Lower fuel prices could surprise on the upside
Target Price KRW23,868 based on FY24 P/BV of 0.81x (1SD below mean). Too little upside for the level of uncertainty. PASS

[Miniso Group (MNSO US, BUY, TP US$31) Company Update]:Opportunity for a Reposition Has Come to Fore

By Eric Wen

MNSO reported C3Q23 revenue in line with our estimate/consensus, and non-GAAP operating income in line with our estimate.
However, stock fell 14% over two days, mainly on concern of slowdowns in overseas distributors;
Based on our channel checks, overseas distributor inventory has always been a problem, more so when heightened US interest rate pricking the consumption bubble in developing markets.

India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells

By Pranav Bhavsar

In this Insight, we review the recent performance of ABB India Ltd (ABB IN) , Siemens Ltd (SIEM IN) , Polycab India (POLYCAB IN) and Havells India (HAVL IN).
Most companies have performed in line with our expectations, we expect sectorial dynamics to remain in play.
We continue to favour ABB over Siemens (ABB/SIEM), Polycab over Havells (POLYCAB/HAVL).

Taiwan Tech Post-Earnings Takeaways: Semis Margins Underestimated? Hardware 2024E Forecasts Ramped

By Vincent Fernando, CFA

Taiwan Tech companies beat analyst expectations by a high rate in the latest quarter
Semiconductors: Consensus could be underestimating a margin rebound for 2024E
Hardware aggregate forecast earnings growth increased significantly for 2024E as compared to just three months ago

UMC (2303.TT; UMC.US): There Is a Greater Chance for a Rebound in 2Q24F.

By Patrick Liao

Although it is still early to determine the extent of the utilization rate that could be reached in UMC for 2Q24F, there is a greater chance for a rebound.
UMC’s high-end technology, specifically 28nm, has a utilization rate of over 80% in 4Q23F.
MediaTek is UMC’s largest client, dominating in WiFi, TV SoC, Bluetooth, and other areas.

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Nov 30

Daily Brief Event-Driven: StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve
Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023
Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways
Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec
Taking off from Heathrow

StubWorld: Toyota Group To Sell 10% of Denso; Adelson Selling LVS

By David Blennerhassett

The Toyota Group of companies are proposing to reduce their holdings in Denso (6902 JP) by selling about 10% by year-end, in a share sale worth ~$4.7bn.
Preceding my comments on Toyota Industries (6201 JP) / Toyota Motor (7203 JP) – and Las Vegas Sands (LVS US) – 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%.

Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger

By Sanghyun Park

KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.

SK Square: Drag Along Rights To Be Exercised to Sell 11 Street + Merger of TVing and Wavve

By Douglas Kim

SK Square announced it will not exercise the call option to repurchase minority stake in 11 Street. This is likely to have a positive impact on the company.
SK Square does not need to pay 500 billion won plus 3.5% annualized interest to the financial investors of 11 Street. This will also accelerate sale of 11 Street.
In addition, SK Square announced the merger of TVing and Wavve OTT services.

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Quiddity JPX-Nikkei 400 Rebal 2024: End-Nov 2023

By Janaghan Jeyakumar, CFA

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the rankings of the potential ADDs/DELs every month.
Below is a look at potential ADDs/DELs for the JPX-Nikkei 400 Index Rebal to come in August 2024 based on trading data as of end-November 2023.

Naspers (NPN SJ), Prosus (PRX NA) H1 FY24 Results, Key Takeaways

By Charlotte van Tiddens, CFA

Improved transparency from management is an important positive. Additional disclosures were included on entity IRR in the results presentation (attached, not previously disclosed).
Profitability target for the consolidated ecommerce businesses moved forward to H2 FY24 from H1 FY25. Significant narrowing of trading losses in H1 FY24 to $36m from $256m in H1 FY23.
As management ‘commit to highlight value where and when possible’, we think an IPO could very well be on the horizon.

Tata Consultancy Services Buyback: Tender Offer Period Opens on 1st Dec

By Janaghan Jeyakumar, CFA

Tata Consultancy Svcs (TCS IN) launched an INR170bn (US$2bn) Buyback in mid-November 2023 which is one of the largest Buybacks in India in recent years.
The company has published the Letter of Offer confirming the final details and the expected timeline for this Buyback.
Below is a closer look at these details and their implications for shareholders.

Taking off from Heathrow

By Jesus Rodriguez Aguilar

Ferrovial Sa (FER SM) announces the sale of its 25% stake in Heathrow Airport Holdings for £2,368 million (valued at zero in its books), far exceeding my valuation of €1,617 million.
With the operation, Ferrovial will be able to invest in more lucrative new infrastructure projects than Heathrow (a mature asset). Ferrovial is focused on growth in North American greenfield projects.
The divestment should have a positive impact of 4.7% on Ferrovial’s consensus target price, which increases to €34.55/share vs. €33/share previously, which implies a revaluation potential of 9.5%.

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Nov 30

Daily Brief Credit: Morning Views Asia: Medco Energi and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Morning Views Asia: Medco Energi, Yankuang Energy Group

Morning Views Asia: Medco Energi, Yankuang Energy Group

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.

Medco Energi
Yankuang Energy Group

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Nov 30

Daily Brief Macro: The US Fed May Find It Hard NOT to Cut Rates in 2024 and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

The US Fed May Find It Hard NOT to Cut Rates in 2024
5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics
CX Daily: Zhongzhi Vice President Xie Among Those Probed Over Group’s Collapse
EM by EM #32: Keep Calm & Carry Lira?
Euroflation Nugget: Deep deflation tomorrow?
UK Trend Inflation Problem

The US Fed May Find It Hard NOT to Cut Rates in 2024

By Michael J. Howell

Risk asset markets are driven by rising Global Liquidity and falling inflation. Low inflation in 2024 will be sufficient to justify a significant change in direction by the US Fed
Cyclical analysis points to a further sizeable improvement in Global Liquidity conditions over the next 12-18 months
Investment regime is heading towards its next phase of Calmwhich favors equities and sees steeper yield curves ahead

5 Things We Watch: CBs, Eurflation, OPEC, Ifo, Dutch Politics

By Ulrik Simmelholt

We start off this week’s 5 Things We Watch by having a look at the reactions of CBs.
This is followed by talking about EURflation and the upcoming OPEC meeting and we then move on to talking about the Ifo numbers released last week while lastly finishing off with Dutch politics.
The Fed is the most plausible “pauser”.

CX Daily: Zhongzhi Vice President Xie Among Those Probed Over Group’s Collapse

By Caixin Global

Zhongzhi / Exclusive: Zhongzhi vice president Xie among those probed over group’s collapse
Meeting /: Politburo weighs new rules to tighten party control over foreign affairs
GDP /: China to hit 5% GDP growth target for 2023, PBOC chief says

EM by EM #32: Keep Calm & Carry Lira?

By Emil Moller

Main points upfront: Erdogan’s foreign policy decisions, including tighter economic integration with the UAE and other Arab states, are causing him to distance himself from the West.
This could lead to ongoing security concerns within the NATO alliance, and he may seek concessions in exchange for compliance.
Mehmet Simsek’s “Mission Normalization” is progressing slowly in a challenging environment.

Euroflation Nugget: Deep deflation tomorrow?

By Andreas Steno

Hello everyone, and welcome to a shorter piece on today’s regional CPI numbers, and what to expect for tomorrow’s print.
Main conclusions up-front: HUUGE dovish surprises in German and Spanish inflation numbers today, smack dab at our forecast from yesterday, where we wrote about the potential of Black Friday sales shining through in this week’s inflation numbers.
Germany and Spain combined amount to around 50% of the total EZ CPI basket, so a dovish surprise tomorrow is likely.

UK Trend Inflation Problem

By Phil Rush

The BoE’s medium-term inflation forecasts have been grinding higher amid evidence of persistence from wages. Historical errors clustered in regimes lasting several years.
Inflation proved more predictable in 2023, with spot surprises no longer skewed so heavily. Still, the trend exceeded other expectations, and we expect a 2024-25 repeat.
Wage settlements are too high and reinforced by myopic government policy before the election. Second-round effects still delay rate cuts to 2025, in our view.

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Nov 30

Daily Brief Industrials: Kurita Water Industries, Korean Air Lines, Polycab India , Ferrovial Sa, Sino-Synergy Hydrogen Energy Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning
Korean Air (003490 KS): Cheap, but a Value Trap
India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells
Taking off from Heathrow
Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues

Japan – A Last Look at Shorts on Some Interesting Stocks & Positioning

There should be liquidity events on Persol Holdings, Hakuhodo Dy Holdings, Welcia Holdings, GMO Payment Gateway, CyberAgent, Kobayashi Pharmaceutical, NGK Insulators, Lixil Group, Kurita Water Industries and Keio Corp tomorrow.
On average, the stocks have underperformed the Nikkei 225 Index over the last 2-3 months but there has been near-term outperformance.
There has been a big increase in shorts on the stocks over the last couple of months and positioning varies across stocks.

Korean Air (003490 KS): Cheap, but a Value Trap

By Mohshin Aziz

Korean Air Lines (003490 KS) is cheap, against peers and its own history. The impending merger with Asiana Airline is a major overhang
Business is good, with steady passenger loads and yields, and cargo showing decent signs of recovery. Lower fuel prices could surprise on the upside
Target Price KRW23,868 based on FY24 P/BV of 0.81x (1SD below mean). Too little upside for the level of uncertainty. PASS

India Industrials | Quarterly Update – ABB India, Siemens, Polycab and Havells

By Pranav Bhavsar

In this Insight, we review the recent performance of ABB India Ltd (ABB IN) , Siemens Ltd (SIEM IN) , Polycab India (POLYCAB IN) and Havells India (HAVL IN).
Most companies have performed in line with our expectations, we expect sectorial dynamics to remain in play.
We continue to favour ABB over Siemens (ABB/SIEM), Polycab over Havells (POLYCAB/HAVL).

Taking off from Heathrow

By Jesus Rodriguez Aguilar

Ferrovial Sa (FER SM) announces the sale of its 25% stake in Heathrow Airport Holdings for £2,368 million (valued at zero in its books), far exceeding my valuation of €1,617 million.
With the operation, Ferrovial will be able to invest in more lucrative new infrastructure projects than Heathrow (a mature asset). Ferrovial is focused on growth in North American greenfield projects.
The divestment should have a positive impact of 4.7% on Ferrovial’s consensus target price, which increases to €34.55/share vs. €33/share previously, which implies a revaluation potential of 9.5%.

Sino-Synergy Hydrogen IPO – High Potential but Comes with Ample Issues