Smartkarma Daily Briefs

Cosmo Energy Holdings (5021 JP) and noted Japanese activist Yoshiaki Murakami and affiliates/companies have been duking it out for the better part of a year.
Now Cosmo is putting a Poison Pill to an AGM vote. And it has decided to not allow Murakami-san to vote his shares. Because he is an interested party.
INVESTORS NEED TO BE AWARE. This is the second time a company has sought to deny a shareholder its voting rights without legal basis. The last time the court agreed.

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Early Targetable Names in KOSPI 200 December Rebalancing

By Sanghyun Park

Based on the average daily full market cap up until the last close, the following additions have been identified as high-probability candidates: Sam A Aluminum, Dentium, and Dongwon Industries.
Three constituents will likely leave as they rank at the bottom in descending order of full market cap among those failing the screening: Cuckoo Homesys, Zinus, and Hyundai Home Shopping.
Dongwon Industries seems to be the most attractive, but given the uncertainty surrounding its inclusion, it may be more appropriate to target Dentium.

StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim

By David Blennerhassett

A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
Preceding my comments on Japan Post 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%.

EQD | Asian Derivative YTD Range Trade Ideas

By Leon Gross

Hang Seng Index (HSI INDEX) Implieds are at Records Low, Cheap to Historic, Buy Options.
Many Asian Indices have Tight Ranges, Flat Returns YTD, Options Expensive to the Range.
HSBC Holdings (5 HK) and Citic Ltd (267 HK) are up than 23% YTD, (with the Hang Sang flat), hedge them with cheap options

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May 26

Daily Brief Equity Bottom-Up: Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan and more

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

In today’s briefing:

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
FUJIFILM (4901.T) Loving The Setup Here
Berli Jucker (BJC TB) – The Big C Factor
Meituan (3690 HK): 1Q23, Real Operating Profit Turned Positive After Nine Quarters
India Industrials | Quarterly Update – ABB, SIEM, HAVELLS, POLYCAB
[XPeng Inc. (XPEV US, BUY, TP US$10) TP Change]: BUY on Recovery Starting from 2Q23
[Vipshop (VIPS US) Earnings Review]: Demand for Apparel Rising on Increased Social Activity
[Xiaomi (1810 HK, SELL, TP HK$8.2) Earnings Review]: Good Cost Control Could Be Transitory
Frontier Management Inc. (7038 JP) – 1Q Follow-Up
[Futu Holdings (FUTU US, BUY, TP US$51) Review]: A Resilient Quarter Under Regulatory Pressure

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play

By Vincent Fernando, CFA

Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.

FUJIFILM (4901.T) Loving The Setup Here

By William Keating

Q1’23 revenues of ¥764 billion, up 15% YoY and 2.6% QoQ
FY2022, revenues grew by 13.2% to ¥2,859 while net income grew by 3.9% to ¥219.4.
Electronic Materials set to grow from ¥180 billion in ’22 to ¥500 billion by ’30

Berli Jucker (BJC TB) – The Big C Factor

By Angus Mackintosh

Berli Jucker‘s 1Q2023 results were driven by growth across its segments from modern retail to packaging to the consumer, and healthcare & Technical, with margin improvements at the same time.
The key near-term catalyst for Berli Jucker will be the IPO of Big C Retail, which will provide a separate market valuation for its retail assets.
Berli Jucker is a beneficiary of the resurgence of tourism in Thailand through both its retail and packaging businesses plus it benefits from lower commodity prices across its other divisions.

Meituan (3690 HK): 1Q23, Real Operating Profit Turned Positive After Nine Quarters

By Ming Lu

In 1Q23, total revenues grew by 27% YoY with all business lines up by more than 10% YoY.
The real operating profits turned positive after nine quarters’ losses.
We believe the stock has an upside of 35% for yearend 2023. Buy.

India Industrials | Quarterly Update – ABB, SIEM, HAVELLS, POLYCAB

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).
ABB posted a strong start, SIEM has a black dot with respect to its recent sale of subsidiary. POLYCAB continues to perform, and HAVL is back to capex mode.
Our picks remain the same, ABB instead of SIEM, POLYCAB instead of HAVL.

[XPeng Inc. (XPEV US, BUY, TP US$10) TP Change]: BUY on Recovery Starting from 2Q23

XPeng reported soft 1Q23 results, with topline of RMB 4.03bn, missing cons by (4.4%); GPM of 1.7% missing cons. and our est. by (4.5ppt)/(4.8ppt.
The 2Q23 guidance implies a QoQ recovery of 15.2%-20.7%, thanks to increasing order intake of the all-new P7i and recent channel transformation.
We maintain BUY. We cut TP to US$ 10 due to pressure amid intensified competition.

[Vipshop (VIPS US) Earnings Review]: Demand for Apparel Rising on Increased Social Activity

VIPS reported C1Q23 top-line, GAAP operating profit, and non-GAAP net income 6.6%, 27%, and 31% vs. our est., and 5.6%, 20%, and 36% vs. cons.;
We expect VIPS profitability to remain steady given its relative immunity to competitor price competition, mainly due to its high apparel exposure, high member loyalty, and differentiated product sourcing strategy;
Given improving apparel demand and EPADS on share buy-backs, we maintain BUY and US$ 16.3 TP, implying 8.1x 2023 non-GAAP P/E.

[Xiaomi (1810 HK, SELL, TP HK$8.2) Earnings Review]: Good Cost Control Could Be Transitory

Xiaomi reported C1Q23 top-line and non-IFRS net income (6.9%) and 20.7% vs. our est., and in-line and 39.9% vs. consensus;
We suggest that higher margins are transitory, as (1) key IC component prices may have bottomed, (2) EV spend is likely to ramp up further.
We maintain SELL and HK$ 8.2 TP, implying 26x FY23 PE.

Frontier Management Inc. (7038 JP) – 1Q Follow-Up

By Sessa Investment Research

1Q operating profit rose 18%, on a 19% rise in sales. Net profit rose 10%.
According to the company’s data, the pace of increase in orders has been increasing since around the last week of 1Q, indicating a potential for stronger results in this FY.
Management Consulting business sales rose 14%.

[Futu Holdings (FUTU US, BUY, TP US$51) Review]: A Resilient Quarter Under Regulatory Pressure

Futu reported 1Q23 revenue 12.7%/14.8% higher than our est./cons., non-GAAP NI 21.2%/19.5% higher than our est./cons., mainly due to strong margin financing and security lending activities during volatile market;
Futu’s operation and client trading behaviours remain steady in 1Q23 after the implement of rectification measures from regulators.
On the other side, overseas expansion in Japan and Malaysia may start to kick-off in 2H23; We maintain BUY rating on FUTU and maintain TP at US$51.

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May 26

Daily Brief Macro: Industrial Metal Prices Melt as Global Recession Fears Heat Up and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Industrial Metal Prices Melt as Global Recession Fears Heat Up
EU Watch: At the End of the Day It Is All About Domestic Politics…
European Deposits: US Turmoil on Tour?
CX Daily: Five Things to Know About Chinese Trust Firms’ Scramble to Offload Risky Assets
US Long-End Yields Pause not Reversal

Industrial Metal Prices Melt as Global Recession Fears Heat Up

By Jeroen Blokland

The Bloomberg Industrial Metals Index has plunged by 14% during the last month, casting an ominous cloud over the much-anticipated soft landing that investors have been hoping for.
The ongoing decline in commodity prices, down 26% from their peak, now suggests an implied US recession probability of 68%.
And in our updated US Recession Scoreboard, the recent dip in copper mirrors a somewhat elevated, yet increasing, chance of a US recession.

EU Watch: At the End of the Day It Is All About Domestic Politics…

By Andreas Steno

Watch out for political fragmentation in the EZ as the economy looks weaker and weaker
Germany must make the hard choice of lending a helping hand to the peripheral EZ countries or to Herr Müller in Lower Saxony
Policy measures such as friend shoring and green transition are all welcomed by most as long as the above-mentioned Herr Müller does not get poorer.

European Deposits: US Turmoil on Tour?

By Andreas Steno

Most analysts seem to conclude that the US banking stress will not spill-over to Europe
In this analysis we pull back the curtains on movements in both corporate and household deposits in Europe
And we find worrying trends in European banks which could intensify issues in coming months

CX Daily: Five Things to Know About Chinese Trust Firms’ Scramble to Offload Risky Assets

By Caixin Global

Trust /: Five things to know about Chinese trust firms’ scramble to offload risky assets
Personnel /: China appoints vice foreign minister as ambassador to U.S.
Corruption /: Jilin Province Trust’s former chairman sentenced to 14 years in prison

US Long-End Yields Pause not Reversal

By Untying The Gordian Knot

The long-end bond price rallied on Tuesday and early Wednesday, indicating a potential fall pause at the critical support.
Additionally, AUSDUD followed NZDUSD’s decline, was impulsive, and the AUDUSD broke the H&S neckline.
It’s uncommon for higher US long-end yields and lower AUDUSD to go in different directions unless it’s due to pure short-end yield differential, which is unlikely.

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May 26

Most Read: Rakuten, Cosmo Energy Holdings, Rakuten Bank , Toyo Construction, LTIMindtree, NVIDIA Corp, Sam A Aluminum, Swire Pacific (A), FUJIFILM Holdings, Mapletree Industrial Trust and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
Early Targetable Names in KOSPI 200 December Rebalancing
StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim
FUJIFILM (4901.T) Loving The Setup Here
Mapletree Industrial Trust Placement – Data Centre Exposure Still on the Rise

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote

Cosmo Energy Holdings (5021 JP) and noted Japanese activist Yoshiaki Murakami and affiliates/companies have been duking it out for the better part of a year.
Now Cosmo is putting a Poison Pill to an AGM vote. And it has decided to not allow Murakami-san to vote his shares. Because he is an interested party.
INVESTORS NEED TO BE AWARE. This is the second time a company has sought to deny a shareholder its voting rights without legal basis. The last time the court agreed.

Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow

SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play

By Vincent Fernando, CFA

Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.

Early Targetable Names in KOSPI 200 December Rebalancing

By Sanghyun Park

Based on the average daily full market cap up until the last close, the following additions have been identified as high-probability candidates: Sam A Aluminum, Dentium, and Dongwon Industries.
Three constituents will likely leave as they rank at the bottom in descending order of full market cap among those failing the screening: Cuckoo Homesys, Zinus, and Hyundai Home Shopping.
Dongwon Industries seems to be the most attractive, but given the uncertainty surrounding its inclusion, it may be more appropriate to target Dentium.

StubWorld: Swire Drifts Lower As Cathay Faces Discrimination Claim

By David Blennerhassett

A double dose of StubWorld this week. Swire Pacific (A) (19 HK)‘s P/B is back down to 0.31x as Cathay Pacific (293 HK) tackles alleged language bias by flight attendants.
Preceding my comments on Japan Post 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%.

FUJIFILM (4901.T) Loving The Setup Here

By William Keating

Q1’23 revenues of ¥764 billion, up 15% YoY and 2.6% QoQ
FY2022, revenues grew by 13.2% to ¥2,859 while net income grew by 3.9% to ¥219.4.
Electronic Materials set to grow from ¥180 billion in ’22 to ¥500 billion by ’30

Mapletree Industrial Trust Placement – Data Centre Exposure Still on the Rise

By Ethan Aw

Mapletree Industrial Trust (MINT SP) is looking to raise at least S$202m (US$150m) in its primary placement.
The proceeds will be used to partially fund its acquisition of a data centre asset in downtown Osaka, Japan, while the remainder will be funded by debt.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

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May 26

Daily Brief Utilities: China Water Affairs and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

China Water Affairs – ESG Report – Lucror Analytics

China Water Affairs – ESG Report – Lucror Analytics

By Leonard Law, CFA

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

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May 26

Daily Brief Health Care: Aspira Women’s Health and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Aspira Women’s Health, Inc. – OvaWatch Is Here; Watch Out!

Aspira Women’s Health, Inc. – OvaWatch Is Here; Watch Out!

By Water Tower Research

Aspira Women’s Health (AWH) hosted an Investor Day on May 23, which focused on its OvaWatchSM and EndoCheckTM diagnostic tools.
Two clinicians, Dr. Kevin Elias of Harvard Medical School, and Dr. Tamika Sea of Piedmont Henry Hospital in Atlanta, spoke to investors about their experience with AWH’s diagnostic technology.
OvaWatch, currently on the market, is a very important tool in monitoring and determining suspicious adnexal masses (indeterminate masses that show up on pelvic ultrasound scans).

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May 26

Daily Brief TMT/Internet: LTIMindtree, NVIDIA Corp, FUJIFILM Holdings, Meituan, Xiaomi Corp, Kanzhun and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications
Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play
FUJIFILM (4901.T) Loving The Setup Here
Meituan (3690 HK): 1Q23, Real Operating Profit Turned Positive After Nine Quarters
[Xiaomi (1810 HK, SELL, TP HK$8.2) Earnings Review]: Good Cost Control Could Be Transitory
[Kanzhun Ltd. (BZ US, SELL) Earnings Review]: Weak Labour Market Adds Uncertainty to Recovery

HDFC/HDFC Bank Mega Merger Expected to Complete in a Few Weeks: Index Implications

Media reports indicate that the HDFC Bank (HDFCB IN) merger with HDFC Limited (HDFC IN) is expected to complete in 4-5 weeks.
There will be inclusions to the NIFTY Index, Nifty Next 50 Index and S&P BSE SENSEX Index and capping changes to the Nifty Bank Index apart from changes to global indices.
While the impact on the merging entities is not big, there will be fairly large flows on some stocks that are index inclusions or affected by capping changes.

Nvidia Results Blow-Out: Multi-Year Growth Ahead; Wiwynn in Taiwan, Plus a Smallcap Wildcard AI Play

By Vincent Fernando, CFA

Nvidia’s results and guidance sparked a massive rally in the shares, marking one of the largest single-day increases in market cap in U.S. stock market history.
The company sees a multi-year growth cycle of data center upgrades ahead. Key supply chain partners TSMC and ASML are rising as well.
Wiwynn in Taiwan should be a key winner. We also highlight a potential wildcard smallcap AI play that we will investigate further.

FUJIFILM (4901.T) Loving The Setup Here

By William Keating

Q1’23 revenues of ¥764 billion, up 15% YoY and 2.6% QoQ
FY2022, revenues grew by 13.2% to ¥2,859 while net income grew by 3.9% to ¥219.4.
Electronic Materials set to grow from ¥180 billion in ’22 to ¥500 billion by ’30

Meituan (3690 HK): 1Q23, Real Operating Profit Turned Positive After Nine Quarters

By Ming Lu

In 1Q23, total revenues grew by 27% YoY with all business lines up by more than 10% YoY.
The real operating profits turned positive after nine quarters’ losses.
We believe the stock has an upside of 35% for yearend 2023. Buy.

[Xiaomi (1810 HK, SELL, TP HK$8.2) Earnings Review]: Good Cost Control Could Be Transitory

Xiaomi reported C1Q23 top-line and non-IFRS net income (6.9%) and 20.7% vs. our est., and in-line and 39.9% vs. consensus;
We suggest that higher margins are transitory, as (1) key IC component prices may have bottomed, (2) EV spend is likely to ramp up further.
We maintain SELL and HK$ 8.2 TP, implying 26x FY23 PE.

[Kanzhun Ltd. (BZ US, SELL) Earnings Review]: Weak Labour Market Adds Uncertainty to Recovery

BZ reported 1Q23 cash billing 2.9% higher than our est.; revenue in-line with our estimate and consensus; and non-GAAP NI 36.3%/35.3% higher than our est. and cons.
As BZ approaching the proxy of China’s labour market, its primary hurdle is the slow recovery of labour demand and mismatch of supply and demand.
We maintain SELL rating and TP at US$13.5., as we are still waiting for signal for the overturn of job seeking market in China.

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May 26

Daily Brief Energy/Materials: Cosmo Energy Holdings, Sam A Aluminum, Growatt Technology, ABM Investama, Sibanye Stillwater and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote
Early Targetable Names in KOSPI 200 December Rebalancing
Growatt Technology IPO: Valuation Updated Look
Asia HY Trade Book – May 2023 – Lucror Analytics
Downgrading Sibanye Stillwater To A Hold Amid Rising Risk Premiums

Cosmo Energy (5021) In a Display of Stunningly Bad Governance; If You Disagree, You Can’t Vote