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Smartkarma Daily Briefs

Nov 24
0

Daily Brief Consumer: Oriental Watch, Giant Biogene Holding , Aeon Co Ltd, Watts Co Ltd, ZJLD Group , Britvic PLC and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap
  • 2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher
  • Aeon and Seven & I to Create Ecosystems Via Financial Services
  • Watts Finally Reacts to Margin Squeeze
  • 2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift
  • Britvic – Brand portfolio proving resilient

Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap

By Sameer Taneja

  • Oriental Watch (398 HK) reported an 8% YoY profit decline for H1 FY24 (Vs. our expectation of 10-15% growth) due to a higher taxation rate and lower margins in HK. 
  • Despite that, the company distributed 100% of its profits for a 28.5 cent HKD/share dividend (15% annualized) and built net cash/investments to 1.25 bn HKD (62% of market cap). 
  • Trading at 7x FY24e PE with abundant cash and real estate with a 15% yield, the stock is worth exploring with the perspective of building a high-yield portfolio.

2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher

By Sumeet Singh

  • Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the company’s past performance and future prospects.

Aeon and Seven & I to Create Ecosystems Via Financial Services

By Michael Causton

  • Aeon and Seven & I both have large financial services arms, generating a substantial share of consolidated profits.
  • With cashless payments now the norm, the old business models that relied on fees for cash dispensing are fast becoming outdated.
  • Both retailers plan major changes to create ecosystems that should deliver a lot more data to improve targeted marketing for e-commerce and retail stores.

Watts Finally Reacts to Margin Squeeze

By Michael Causton

  • The ¥100 Shop chains are facing higher COGS on one side and rising wages on the other, a problem when you run a fixed price chain at just ¥100. 
  • Most (except Seria Co Ltd (2782 JP)) have reacted by introducing new, higher priced lines led by Daiso.
  • Watts, the smallest chain, is now catching up and higher priced lines will make up a third of stock by 2027.

2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift

By Clarence Chu

  • In Apr 2023, ZJLD Group (6979 HK) raised around US$676m in its HK IPO. While it initially had a turbulent listing, the shares are now trading above its IPO price.
  • ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu. 
  • In this note, we will talk about the company’s past performance and future prospects.

Britvic – Brand portfolio proving resilient

By Edison Investment Research

Britvic reported robust FY23 results despite the weaker consumer environment, reflecting the resilience of its brand portfolio. Price/mix offset limited volume declines resulting in revenue growth of 6.6%, despite unfavourable summer weather and tougher comparators. Inflationary pressures were mitigated through pricing actions and cost discipline, as adjusted EBIT grew 6% at a margin of 12.5%. Investment in its existing brand portfolio and the recent addition of two bolt-on acquisitions in high growth categories underpins management’s confidence heading into FY24.

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Nov 24
0

Daily Brief Thailand: KCE Electronics PCL, Bumrungrad Hospital Pub Co and more

By | Daily Briefs, Thailand

In today’s briefing:

  • Quiddity Leaderboard SET50 Dec 23: Final Expectations; Only ONE Change Likely
  • Bumrungrad Hospital (BH TB): Strong 3Q23 Performance; Middle-East Tension Plays Spoilsports

Quiddity Leaderboard SET50 Dec 23: Final Expectations; Only ONE Change Likely

By Janaghan Jeyakumar, CFA

  • The SET50 index tracks the performance of the top 50 largest and most liquid names listed in the Stock Exchange of Thailand (SET).
  • In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in December 2023.
  • I currently see only one ADD and one DEL for the SET 50 index and with more than 90% of the reference period complete, these are my final expectations.

Bumrungrad Hospital (BH TB): Strong 3Q23 Performance; Middle-East Tension Plays Spoilsports

By Tina Banerjee

  • In 3Q23, Bumrungrad Hospital Pub Co (BH TB) reported 18% YoY revenue growth to THB6.8 billion, driven by 27% and 20% YoY growth in Thai and expat patients revenue, respectively.
  • Revenue from international patients grew 16% YoY, driven by Middle-east and China, which grew 31% and 21%, YoY, respectively. EBITDA, PAT, and their respective margins reached record high in 3Q23.
  • Due to heavy revenue exposure in Middle-east, the ongoing tension in the region is acting as a setback. Bumrungrad shares tumbled ~15% over the last one month.

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Nov 24
0

Daily Brief Australia: Origin Energy, Orecorp Ltd, Amaero International Ltd, SenSen Networks and more

By | Australia, Daily Briefs

In today’s briefing:

  • Origin: Brookfield’s “Inferior” Alternative Proposal
  • Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat
  • OreCorp (ORR AU): Silvercorp Returns with a Higher Offer
  • Amaero International Ltd. – Capital Raised for Tennessee Fit-Out and Capital Equipment
  • SenSen Networks – Major contract with Heavy Vehicle Regulator

Origin: Brookfield’s “Inferior” Alternative Proposal

By David Blennerhassett

  • Origin Energy (ORG AU)‘s Scheme vote today was always going to be a tenuous affair with AusSuper’s ~17.5% blocking stake, and Perpetual also firmly in the “against” camp. 
  • The Scheme meeting has now been adjourned. Origin said that based on the proxy votes, it was unlikely the Scheme would have achieved the required 75% approval by shareholders.
  • In addition, the Brookfield-led consortium has pitched a alternative non-binding and indicative proposal which Origin views as inferior to the existing Scheme, and has significant reservations as to its complexity.

Origin Energy (ORG AU): Brookfield/EIG’s Latest Effort Falls Flat

By Arun George

  • Origin Energy (ORG AU) has postponed its scheme meeting to 4 December after it received a non-binding indicative proposal from Brookfield/EIG to amend the current scheme.
  • The Board admitted the current scheme was likely to be voted down if the meeting was held today. The alternative transaction structure will struggle to gain shareholder support.
  • If Brookfield/EIG walks, the share price will fall, at least in the short term. We think a reasonable deal break price is A$7.40, an 11% downside to the last close.

OreCorp (ORR AU): Silvercorp Returns with a Higher Offer

By Arun George

  • Orecorp Ltd (ORR AU) has disclosed a revised offer from Silvercorp Metals (SVM US) at A$0.19 cash per share and 0.0967 SVM shares per ORR share.
  • The revised offer was necessitated due to the decline in SVM shares. Since 7 August, the revised offer is, on average, 7.8% higher than the previous offer.
  • Directors and irrevocables represent around 20% of voting rights. The revised offer should help the scheme get up. At the last close, the gross spread was 8.6%.

Amaero International Ltd. – Capital Raised for Tennessee Fit-Out and Capital Equipment

By Research as a Service (RaaS)

  • Amaero International Ltd (ASX:3DA) is a global specialist in advanced materials manufacturing for the defence, aerospace, and other industrial sectors.
  • The company is developing a 1,000+-tonne-a-year critical metals alloy powder manufacturing facility in Tennessee, USA with its initial focus on producing refractory alloy powder, C103, a critical metal powder used in hypersonics weaponry.
  • The company has raised A$10m from new and existing institutional and sophisticated shareholders at $0.16/share, representing a 15.8% discount to the last traded price prior to the raise. 

SenSen Networks – Major contract with Heavy Vehicle Regulator

By Edison Investment Research

SenSen has won a major contract with Australia’s National Heavy Vehicle Regulator (NHVR), generating A$1.5m in upfront revenue and c A$500,000 in annual recurring revenue. This is a major scale-up with an existing customer, providing important validation of both SenSen’s technology and its ‘land and expand’ strategy, while retaining significant upsell potential through expanding deployments across other NHVR jurisdictions. The deal provides good support for our FY24 forecasts and strengthens the company’s prospects for delivering sustained, scalable growth.

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Nov 24
0

Daily Brief South Korea: Celltrion Healthcare , Eoflow , HDC Hyundai Development Co-Engineering & Construction, Korea Zinc, LX International and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises
  • EOFlow (Further) Tests Investor Patience
  • KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used
  • Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea
  • LX International: Positive Impact from Not Participating in Main Bidding for HMM

KOSDAQ150 Index Rebalance: 17 Changes a Side; Many Surprises

By Brian Freitas

  • There are 17 inclusions and 17 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the December rebalance to be implemented at the close on 14 December.
  • While most of the inclusions were expected, there are many differences on the deletes. Trading the strategy becomes tougher with the short sell ban in place.
  • The adds have started to outperform the deletes over the last month and there could be more movement over the next 3 weeks to implementation.

EOFlow (Further) Tests Investor Patience

By David Blennerhassett

  • Back on the 25 May, when Medtronic Plc (MDT US) enter into a SPA with EOFlow (294090 KS)‘s CEO, with a follow-on Tender Offer, the whole construct looked pretty clean.
  • Then in August Insulet Corp (PODD US) launched its lawsuit, which in hindsight, should have been expected. Then earlier this month, news surfaced concerning a stock-backed loan to the CEO.
  • Now the CEO is selling, presumably to repay his collateralized loan. Shares are down 38% since the resumption of trading, and are now at a whopping 122% spread to terms. 

KOSPI200 Index Rebalance: Mostly Expected Though Some Discretion Used

By Brian Freitas

Understanding & Assessing Yearend Dividend Arbitrage Structure Using Futures in Korea

By Sanghyun Park

  • As the ex-dividend date in Korea has been before the dividend is determined, SSFs trade at a discount based on the anticipated dividend rather than adjusting dividend settlement proceeds explicitly.
  • The current dividend arbitrage yield for the financial companies can be seen as reflecting the postponement of the ex-dividend date to the next year.
  • We should pay attention to those with a significant dividend arbitrage yield but that did not amend their articles of incorporation earlier this year.

LX International: Positive Impact from Not Participating in Main Bidding for HMM

By Douglas Kim

  • LX International announced today that it will not participate in the main bidding to acquire HMM Co.
  • This is likely to have a positive impact on LX International’s share price as many investors are relieved that company will not raise excessive amounts of capital to acquire HMM.
  • In addition, by not acquiring HMM, LX International has enough financial resources to continue to pay high dividends. 

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Nov 24
0

Daily Brief China: Oriental Watch, Giant Biogene Holding , Xiaomi Corp, ZJLD Group , BOC Aviation and more

By | China, Daily Briefs

In today’s briefing:

  • Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap
  • 2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher
  • [Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds
  • 2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift
  • BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

Oriental Watch (398 HK): H1 FY24 Lower than Expectation But A 15% Div Yield, Cash >60% of Mkt Cap

By Sameer Taneja

  • Oriental Watch (398 HK) reported an 8% YoY profit decline for H1 FY24 (Vs. our expectation of 10-15% growth) due to a higher taxation rate and lower margins in HK. 
  • Despite that, the company distributed 100% of its profits for a 28.5 cent HKD/share dividend (15% annualized) and built net cash/investments to 1.25 bn HKD (62% of market cap). 
  • Trading at 7x FY24e PE with abundant cash and real estate with a 15% yield, the stock is worth exploring with the perspective of building a high-yield portfolio.

2024 High Conviction – Giant Biogene – Growth Rate Keeps Moving Higher

By Sumeet Singh

  • Giant Biogene was listed in Hong Kong IPO in 2022. It has done well since and is now trading 45% above its IPO price, but its still cheap.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the company’s past performance and future prospects.

[Xiaomi Inc.(1810HK,SELL,TP HK$12.6) Earnings Review]: Mi14 Success Does Not Alter Overall Headwinds

By Eric Wen

  • Xiaomi reported C3Q23 top-line, non-GAAP EBIT, and GAAP net profit (2%), 7% and in-line vs. our est., and in-line, 4%, and 13%, vs. consensus respectively.
  • Xiaomi’s recent run could be short lived, as (1) Huawei will soon launch mid-range 5G handsets, (2) the Mi 14 will soon face new high-end Android competition;
  • And (3) its underinvested EV project could disappoint. We maintain our SELL rating and HK$ 12.6 TP, implying 28x CY24 P/E.

2024 High Conviction – ZJLD – Buoyed by a Premiumisation Shift

By Clarence Chu

  • In Apr 2023, ZJLD Group (6979 HK) raised around US$676m in its HK IPO. While it initially had a turbulent listing, the shares are now trading above its IPO price.
  • ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu. 
  • In this note, we will talk about the company’s past performance and future prospects.

BOC Aviation (2588 HK, BUY, TP:HKD70): High Quality Safe Bet

By Mohshin Aziz

  • BOC Aviation (2588 HK) (BOCA) is the highest-quality aircraft leasing company, with a young asset portfolio, quality clientele, cheapest credit facility, and superb risk management.      
  • Outlook is attractive, strong demand and scarce supply ensures high lease rates and profits. Asset disposals have all recorded a healthy surplus, a potential earnings surprise. 
  • Our TP of HKD70/share implies 0.94x FY24 (22% UPSIDE) potential 

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Nov 24
0

Daily Brief United States: NVIDIA Corp, Hollysys Automation Technologies, Intel Corp, Crude Oil, Cirrus Aircraft and more

By | Daily Briefs, United States

In today’s briefing:

  • NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?
  • Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December
  • A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?
  • EIA and OPEC Watch: Depending on Nigeria and Iran
  • Cirrus Aircraft Pre-IPO – PHIP Updates – Increased Customer Demand Continues to Drive Growth

NVIDIA. Another Beat & Raise, Yet Shares Slide. But Why?

By William Keating

  • Q3FY24 revenues of 18.1 billion, up 34% QoQ and up a staggering 206% from the year ago period. It was also ~$2 billion higher than the guided number
  • NVIDIA’s current quarter forecast was for a further revenue raise of almost $2 billion with gross margins staying roughly flat at 74.5%
  • Share price reaction was negative, closing down 2.5% the following day. But why?

Hollysys (HOLI US): Progress as a Binding Proposal Targeted for Mid-December

By Arun George

  • The Hollysys Automation Technologies (HOLI US) Board has finally succumbed to shareholder pressure by targeting a special meeting of shareholders in the week commencing 22 January 2024.
  • The special meeting is a side event as the Board targets a binding proposal by mid-December, with some bidders proceeding to the confirmatory due diligence stage.
  • The BVI takeover structure and Hollysys’ undemanding valuation facilitate a competitive bidding process. A 10% uplift to the current highest offer (Recco’s US$26.50 offer) is possible.

A Turnaround Story for Intel by Accelerating 3nm Outsourcing to TSMC?

By Andrew Lu

  • By offering 15k and 30k/m 3nm capacity by 4Q24/4Q25 to Intel, TSMC will see Intel becoming one of its top 3 customers by accounting for 12% of TSMC 2025 sales
  • By leveraging 3nm outsourcing, Intel will have incremental sales/capacity growth of 19-20% per year by accounting for 28%/44% of sales in 2024/2025, beating consensus’ 14%/9% y/y sales growth for 2024/2025.
  • We estimate 30-35% 5 years EPS CAGR for Intel, driven by TSMC’s 2/3nm foundry support, lower cost and process R&D, lower capex and depreciation cost, and AI PC CPU launch.

EIA and OPEC Watch: Depending on Nigeria and Iran

By Andreas Steno

  • Welcome to our weekly EIA watch paired with a few remarks on the postponed OPEC meeting.
  • We have had a look at OPEC production and export numbers, and it seems like production is much more price bullish than actual net exports (meaning a draw on local OPEC inventories)
  • Interestingly, the US, Nigeria, Iran, UAE (among others) have managed to fill a lot of the production gap left open by left open by Saudi Arabia.

Cirrus Aircraft Pre-IPO – PHIP Updates – Increased Customer Demand Continues to Drive Growth

By Ethan Aw

  • Cirrus Aircraft (0153126D US) is looking to raise up to US$200m in its upcoming HK IPO.
  • Cirrus Aircraft designs, develops, manufactures, and sells premium aircrafts. Its two aircraft product lines, the SR2X Series and the Vision Jet, are currently certified and validated in over 60 countries.
  • We had covered the company’s performance in our earlier notes. In this note, we talk about its PHIP updates.

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Nov 24
0

Daily Brief Indonesia: Adani Ports & Special Economic Zone, Erajaya Swasembada and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land
  • Erajaya Swasembada (ERAA IJ) – Coming Out a Squall

Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land

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.

Erajaya Swasembada (ERAA IJ) – Coming Out a Squall

By Angus Mackintosh

  • Erajaya Swasembada (ERAA IJ) had a tempestuous 3Q2023, with one-off write-downs of inventory in both Indonesia and Malaysia, despite booking strong sales and gross profit growth overall. 
  • The company has also expanded its store network more aggressively in 9M2023, which meant higher opex and financing to build the new inventory, whilst stores take time to ramp up. 
  • Erajaya should see a recovery in 4Q2023, given plans to limit store expansion plus a lack of write-offs. Trading on 5x FY2024E PER with forecast +25% EPS growth is attractive.

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Nov 24
0

Daily Brief India: Juniper Hotels, Adani Ports & Special Economic Zone, Fedbank Financial Services and more

By | Daily Briefs, India

In today’s briefing:

  • Juniper Hotels Pre-IPO – Has Been Recovering Well
  • Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land
  • Fedbank Financial IPO – Strong Sector Momentum, but This One Doesn’t Seem Particularly Compelling

Juniper Hotels Pre-IPO – Has Been Recovering Well

By Sumeet Singh

  • Juniper Hotels (JH) is looking to raise up to US$217m in its upcoming India IPO.
  • Juniper Hotels is the largest owner by no. of keys of Hyatt affiliated hotels in India as of 2Q23 (30th Jun 23), according to Horwath.
  • The company is jointly held by Saraf Hotels and its affiliate, Juniper Investments and Two Seas Holdings (an indirect subsidiary of Hyatt Hotels Corporation).

Morning Views Asia: Adani Ports & Special Economic Zone, Agung Podomoro Land

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.

Fedbank Financial IPO – Strong Sector Momentum, but This One Doesn’t Seem Particularly Compelling

By Clarence Chu

  • Fedbank Financial Services (0702066D IN) is looking to raise about 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 this note, we will look at past performance, and share our thoughts on valuation.

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Nov 24
0

Daily Brief Japan: Carenet Inc, Aeon Co Ltd, Watts Co Ltd, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • CareNet (2150) – Watch the TOPIX Birdy (Smallcap)
  • Aeon and Seven & I to Create Ecosystems Via Financial Services
  • Watts Finally Reacts to Margin Squeeze
  • Women’s Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

CareNet (2150) – Watch the TOPIX Birdy (Smallcap)

By Travis Lundy

  • Carenet Inc (2150 JP) is a “medical contents” provider. It acts as a distributor of information to doctors and medical practitioners over the internet, and also consults with pharmaceutical companies.
  • On Wednesday, they announced that they were going to move from TSE Growth to TSE Prime as of 29 November.
  • At ¥31bn market capand this may turn people off, but it may be a treat for some. There is a reason why there are some big holders.

Aeon and Seven & I to Create Ecosystems Via Financial Services

By Michael Causton

  • Aeon and Seven & I both have large financial services arms, generating a substantial share of consolidated profits.
  • With cashless payments now the norm, the old business models that relied on fees for cash dispensing are fast becoming outdated.
  • Both retailers plan major changes to create ecosystems that should deliver a lot more data to improve targeted marketing for e-commerce and retail stores.

Watts Finally Reacts to Margin Squeeze

By Michael Causton

  • The ¥100 Shop chains are facing higher COGS on one side and rising wages on the other, a problem when you run a fixed price chain at just ¥100. 
  • Most (except Seria Co Ltd (2782 JP)) have reacted by introducing new, higher priced lines led by Daiso.
  • Watts, the smallest chain, is now catching up and higher priced lines will make up a third of stock by 2027.

Women’s Many Part-Time Jobs, Few Managerial Positions, and Short Tenure Are the Same Rooted Problems

By Aki Matsumoto

  • The same problem underlies the fact that women are more likely to be part-time/ non-regular workers, as well as the lower percentage of management positions and shorter length of service.
  • Setting targets and implementing measures for % of female managerial positions is important, since the higher ratio will narrow the gender wage gap, but this alone is not sufficient.
  • It’s necessary to ensure that women have the same position in workplace even if they leave the workforce, and to change social systems and people’s mindset to support child care.

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Nov 23
0

Daily Brief Quantitative Analysis: KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion, Celltrion Health, Amorepacific

KRX Short Interest Weekly (Nov 17th): Short Covers for Celltrion, Celltrion Health, Amorepacific

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of KRX Stocks as of Nov 17th which has an aggregated short interest worth USD11.9bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Celltrion, Celltrion Health, Amorepacific.

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