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Smartkarma Daily Briefs

Nov 23
0

Daily Brief ECM: Zeekr Pre-IPO – Thoughts on Valuation and more

By | Daily Briefs, ECM

In today’s briefing:

  • Zeekr Pre-IPO – Thoughts on Valuation
  • Tata Technologies IPO- Forensic Analysis
  • DS Dansuk IPO Valuation Analysis

Zeekr Pre-IPO – Thoughts on Valuation

By Sumeet Singh

  • ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$500m in its US listing.
  • Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
  • We have looked at the company’s past performance and undertaken a peer comparison in our earlier notes. In this note, we will talk about valuations.

Tata Technologies IPO- Forensic Analysis

By Nitin Mangal

  • Tata Technologies (TATATECH IN) awaited IPO is set to launch for subscription this week.
  • The company is one of the largest ER&D player that is based in India with revenues crossing INR 44 bn in F23. 
  • Balance sheet remains strong and cash rich. There are however, doubts on revenue recognition policy, forex risk and reliance on Tata Group.

DS Dansuk IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of DS Dansuk is 113,948 won per share which is 28% higher than the high end of the IPO price range (89,000 won). 
  • We estimate bio energy to account for 64.7% of total sales, followed by battery recycle (21.5%), plastic recycle (6.7%), and others (7.1%) in 2023. 
  • DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

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Nov 23
0

Daily Brief Thematic (Sector/Industry): Aircraft Leasing 101 – Heralding the Golden Era and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Aircraft Leasing 101 – Heralding the Golden Era
  • What Oct US SEMI Equipment and Sep SIA/WSTS Global Sales Tell Us?
  • HBM’s Impact on DRAM Revenues

Aircraft Leasing 101 – Heralding the Golden Era

By Mohshin Aziz

  • This report explains the nuts and bolts of the aircraft leasing industry in a simple manner, along with its opportunities, risks, and business outlook.  
  • We are in a golden era, underpinned by strong global traffic recovery, and supply shortage due to technical and manufacturer snafus. Airlines are also increasingly struggling to access credit. 
  • AerCap Holdings NV (AER US) is our top pick on its superior business profile and attractive valuation, the second choice is BOC Aviation (2588 HK). 

What Oct US SEMI Equipment and Sep SIA/WSTS Global Sales Tell Us?

By Andrew Lu

  • SEMI reports Oct front/back end equipment billings decline of 14% and 18% y/y, respectively, which was improved from 18% and 24% y/y decline in September, implying early signs of recovery.
  • WSTS/SIA earlier reported September sales of US$44.89bn, up 1.9% m/m and down only 4% y/y (vs. 16% decline in June), suggesting semi sales y/y improvement and pass the cycle trough.
  • We are positive on SOX INDEX likely to break new high of over 4,000 in six months and expect PC/smartphone/training AI semi and DRAM semi/equipment vendors to outperform in short.

HBM’s Impact on DRAM Revenues

By Jim Handy

  • HBM DRAM, used for GPUs in AI, has enjoyed stable pricing while other DRAM prices have collapsed
  • This has attracted the attention of all DRAM makers, but SK hynix has a first-mover advantage
  • Although increased competition will reduce HBM prices, it will have little impact on GPU maker margins

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Nov 23
0

Daily Brief Credit: Morning Views Asia: Lippo Karawaci and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Lippo Karawaci

Morning Views Asia: Lippo Karawaci

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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Nov 23
0

Daily Brief Event-Driven: JSR (4185) – Time To Fight The FUD and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • JSR (4185) – Time To Fight The FUD
  • Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
  • Geely Stalls As ZEEKR Spins Off
  • S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement
  • JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware
  • Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities
  • A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
  • EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)
  • Blackstone&Permira/Adevinta: Firm Offer

JSR (4185) – Time To Fight The FUD

By Travis Lundy

  • Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come. 
  • FUD and Flows would widen the spread. And they did.
  • Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

By Sanghyun Park

  • The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
  • The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
  • The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

Geely Stalls As ZEEKR Spins Off

By David Blennerhassett

  • Geely Auto (175 HK)‘s share price has largely swatted away the pending US-listing of ZEEKR (ZK US).
  • ZEEKR was valued at US$13bn after a US$750mn fund raising in February. At that value, Geely’s 54.7% stake is worth 58% of its market cap.
  • Geely is trading around a six and half year low, and below its five average trailing/forward metrics. 

S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement

By Brian Freitas

  • There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
  • Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
  • Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware

By Arun George

  • JSR Corp (4185 JP)’s pre-conditional tender offer from JIC is conditional on several regulatory approvals, notably China SAMR approval. JIC can waive the conditions precedent.
  • A takeaway from the Broadcom (AVGO US)/VMware Inc Class A (VMW US) SAMR clearance is that if JIC is willing to commit to restrictive conditions, SAMR approval can be obtained.
  • On 6 November, JSR reiterated a late December tender start. However, with time fast running out, the likely scenario is SAMR conditional approval with a delayed tender start.

Xiaomi (1810 HK): Outperformance Leads to Passive Selling & Opens Up Trading Opportunities

By Brian Freitas

A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental

By Douglas Kim

  • It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
  • Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.   
  • Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability. 

EQD | A Quick US/Global Equities Correction IS Possible Soon (…a Really OVERSOLD VIX…)

By Nico Rosti

  • The VIX INDEX has reached very OVERSOLD levels, it could bounce soon. Our models predict a short-lived bounce, probably 1-week.
  • An increased VIX could trigger panic selling also in Asia-Pacific markets, dragging down returns and increasing volatility.
  • The S&P500 is also WEEKLY OVERBOUGHT, the combination of VIX OVERSOLD and SPX OVERBOUGHT for us is a clear indication: WEEKLY pullback incoming!

Blackstone&Permira/Adevinta: Firm Offer

By Jesus Rodriguez Aguilar

  • Permira and Blackstone announced a NOK 115.0/share offer, two months after their approach was unveiled. 3-month VWAP premium is 52.6%. The offer represents 18.3x EV/NTM Fwd EBITDA (vs. 14.6x comparables)
  • The three largest shareholders (c.72.3%) communicated at the outset their support, so it’s a done deal. 90% condition can be waived. Board says price “financially fair”, but cannot recommend it.
  • I set my TP at NOK 115. The consortium could achieve an IRR of 17.8% by year 8. Spread is 3.3%/6.65% (gross/annualised, assuming settlement by 31 May). Long.

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Nov 23
0

Daily Brief Macro: 5 things we watch: IFO and more

By | Daily Briefs, Macro

In today’s briefing:

  • 5 things we watch: IFO, US rates, Earnings revisions, USD & Gasoline
  • USD’o’meter: Is King USD about to reverse?
  • 5 Things We Watch: IFO, US Rates, Earnings Revisions, USD & Gasoline
  • CX Daily: China Asks Banks to Boost Real Estate Lending
  • UK: Buying Votes With Inflationary Policy

5 things we watch: IFO, US rates, Earnings revisions, USD & Gasoline

By Andreas Steno

  • We start off this week’s 5 Things We Watch by having a look at the Ifo survey coming up this Friday in the midst of the Schwarze Null ruling.
  • This is followed by talking about US rates and Nvidia earnings and we then move on to talking about the USD while lastly finishing off with gasoline demand.
  • This week we are watching out for the following 5 topics within Global macro: IFO, US Rates, Earnings revisions, The USD, Gasoline.

USD’o’meter: Is King USD about to reverse?

By Andreas Steno

  • In this piece, we will try to assess the USD outlook in a structured way by looking at:1) Relative rates, 2) Relative inflation, 3) Relative Growth, 4) Relative energy.
  • We combine the four filters in an aggregate probability-based model and find that the USD is still likely to increase in value for the next few months.
  • Let’s have a look at the details.

5 Things We Watch: IFO, US Rates, Earnings Revisions, USD & Gasoline

By Ulrik Simmelholt

  • We start off this week’s 5 Things We Watch by having a look at the Ifo survey coming up this Friday in the midst of the Schwarze Null ruling.
  • This is followed by talking about US rates and Nvidia earnings and we then move on to talking about the USD while lastly finishing off with gasoline demand.
  • Chancellor Olaf Scholz’s government is challenged by the Constitutional Court’s ruling from last week on special fund financing outside the regular budget.

CX Daily: China Asks Banks to Boost Real Estate Lending

By Caixin Global

  • Property / China drafts list of developers eligible for funding, asks banks to boost real estate lending

  • Israel-Hamas /: China calls for ‘early ceasefire’ in Gaza conflict in meeting with Arab-Islamic ministers

  • Personnel /: Premier Li takes helm of China’s top financial regulator

UK: Buying Votes With Inflationary Policy

By Phil Rush

  • The UK Autumn Statement announced tax cuts that broadly spend the entire windfall from a less enormous current fiscal deficit while reinforcing inflation’s persistence.
  • Voter income is boosted ahead of a general election through surging benefits, pensions, and minimum wage rates. National insurance cuts also raise take-home pay. 
  • Fiscal headroom of £13bn is preserved, although that uses the flexibility of extending the target date. Its existence still relies on excessively bullish potential GDP forecasts.

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Nov 23
0

Daily Brief Equity Bottom-Up: 2024 High Conviction:  Anta Sports (2020 HK) and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • 2024 High Conviction:  Anta Sports (2020 HK)
  • Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges
  • Kuaishou: Strong Earnings With Further Improvement in Profitability
  • Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval
  • China Dongxiang (3818 HK): Turned Around on Sports Business
  • Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value
  • Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)
  • 2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era
  • Fast Retailing: On to the Next (Bigger) Stage
  • Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge

2024 High Conviction:  Anta Sports (2020 HK)

By Steve Zhou, CFA

  • Anta Sports Products (2020 HK) is the second largest China sportswear company at 20% market share in 2022.
  • The thesis for Anta lies in Anta’s above-industry earnings growth for the next 3 years, low market expectations on China sportswear sector, and flexible multi-brand strategy.
  • Anta trades at a forward PE of 17x based on estimated 2024 earnings, with around 15-20% expected net profit growth in 2024-2026.

Beyond Fashion: Unraveling Bangladesh’s Garment Industry Challenges

By Nimish Maheshwari

  • Bangladesh’s garment industry grapples with a 14% export dip, prompting worker unrest over wage discrepancies.
  • Efforts by a wage board fall short as workers advocate for a Tk25,000 minimum, seeking fair compensation.
  • Economic turbulence looms as 3,500 factories, constituting 85% of exports, confront closure amid widespread unrest.

Kuaishou: Strong Earnings With Further Improvement in Profitability

By Shifara Samsudeen, ACMA, CGMA

  • Kuaishou’s 3Q2023 earnings beat consensus estimates with significant improvement to the company’s profitability driven by growth across all business segments.
  • Operating losses of the overseas segment has further reduced, and new offerings such as paid mini dramas have been driving strong growth for the company.
  • Though Kuaishou’s share price has moved up during the last few months, valuation multiples are at a steep discount to historical multiples, suggesting there is further upside.

Medtronic (MDT US): Beat-And-Raise Q2; Weight Loss Drugs Not to Impact Growth; New Device Approval

By Tina Banerjee

  • Medtronic Plc (MDT US) reported Q2FY24 revenue of $8B, representing 5% organic growth, topping guidance of 4.0–4.5%. Cardiovascular, neuroscience, and medical surgical grew mid-single-digit with diabetes accelerating to high-single-digit.
  • The company now expects FY24 organic revenue growth of 4.75% versus the prior 4.5%. Medtronic raised FY24 adjusted EPS guidance to $5.13–5.19 from $5.08–5.16 earlier.
  • In November, the company has received FDA approval for innovative renal denervation device for the treatment of hypertension, which should open a multi-billion-dollar market opportunity.

China Dongxiang (3818 HK): Turned Around on Sports Business

By Osbert Tang, CFA

  • The turnaround of sports business at China Dongxiang (3818 HK) is very welcoming. We are glad that sales trend in Oct-Nov is sustained and Phenix brand is well-received.
  • Reported losses widened as poor market environment enlarged investment losses. However, net cash and investment portfolio are still valued at Rmb8.5bn, or 5.9x its market capitalisation. 
  • CNDX looks comfortably at over 6% full-year dividend yield. Together with just 0.15x P/B, there are enough protections for the downside of the stock.  

Sunpower: Resilient Growth Story; Direct Competitor IPO’s in China and Highlights Sunpower Value

By Nicolas Van Broekhoven

  • Sunpower reported 9M23 results which showed the company performing strongly as a 100% GI business.
  • Revenues +15% and EBITDA +46% YoY. Earlier this month a competitor listed in China at a massive premium to Sunpower’s valuation.
  • The uncertainty over the CB due in April 2025 will be an overhang but management believes there are multiple ways to resolve this in FY2024.

Monthly Container Shipping Tracker | Maersk, Evergreen, ZIM Report Disparate Results (November 2023)

By Daniel Hellberg

  • Price momentum in October was negative, but decline moderated somewhat
  • Disparate Q3 profitability trends reported by Maersk, Evergreen, and ZIM 
  • As sentiment weakens (again), we also see signs of a cyclical bottom

2024 High Conviction – China Healthcare: It’s Time to Embrace a New Era

By Xinyao (Criss) Wang

  • After COVID-19, China healthcare has been under pressure for a long time. High interest rate environment is unfriendly to companies, but the current situation is not entirely devoid of opportunities.
  • GLP-1s has reignited investors’ interest in this industry, which will be long-term opportunity and bring alpha. With rich domestic/overseas catalysts ahead, related share price performance is worth looking forward to.
  • Among the domestic GLP-1s companies, Innovent is our top pick. The “concept validation” of Innovent’s business model has been completed. A qualitative change in the Company is coming soon.  

Fast Retailing: On to the Next (Bigger) Stage

By Michael Causton

  • We once called Uniqlo the Toyota of clothing. And this remains apposite. Its consistent, reliable quality, focus on supply chain efficiency, and increasingly global renown make it a solid bet.
  • The majority of the growth last year came from overseas markets, including even the US and Europe and the appointment of Daisuke Tsukagoshi as president will boost overseas performance further.
  • Fast Retailing is talking up the potential of GU, which should make up for lower domestic growth from Uniqlo but also now thinks it can make it a global brand.

Nvidia Still Cheap: Enterprise AI Next Driver to Kick-In; Adjusting Our Taiwan AI Plays Short Hedge

By Vincent Fernando, CFA

  • Nvidia’s street-beating results indicate strong growth to continue; Generative AI demand will next expand from startups, consumer internet, and cloud service providers increasingly to enterprise AI-linked demand.
  • Nvidia is not expensive despite recent market concerns. We believe Nvidia can meet or even beat its current calendar year 2024 earnings expectations and forward PE is cheap.
  • Short a basket of Taiwan AI concept stocks vs. a core Nvidia long position rather than take profits in Nvidia. We have swapped one Taiwan stock in our short basket.

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Nov 23
0

Daily Brief Indonesia: Lippo Karawaci and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Morning Views Asia: Lippo Karawaci

Morning Views Asia: Lippo Karawaci

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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Nov 23
0

Daily Brief Australia: Helia Group , Lakes Blue Energy, WRKR and more

By | Australia, Daily Briefs

In today’s briefing:

  • S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement
  • Lakes Blue Energy NL – A Partner for the Enterprise North Dance
  • Wrkr Limited – FY24 Revenue Guidance a Continuation of Q1 FY24

S&P/​​​​​​​​​ASX Index Rebalance Preview: Big Impact; A Week From Announcement

By Brian Freitas

  • There could be 3 changes for the S&P/ASX 200 (AS51 INDEX) in December. There are unlikely to be any changes for indices higher up the hierarchy.
  • Passive trackers will need to buy between 7-11 days of ADV in the inclusions while the impact on the deletions will be larger at between 11-23 days of ADV.
  • Short interest has decreased on the potential inclusions and increased on the potential deletions. There is significant pre-positioning on some of the stocks.

Lakes Blue Energy NL – A Partner for the Enterprise North Dance

By Research as a Service (RaaS)

  • Lakes Blue Energy NL (ASX:LKO) is a junior energy explorer with assets across southern and eastern Australia (and PNG).
  • Having secured a farm-in deal, the company is set to return to exploration with the high-graded Enterprise North prospect set for drilling in H2 2024 subject to securing the requisite regulatory approvals.
  • The success case of Enterprise North can also add material look-through upside to other Victorian opportunities. 

Wrkr Limited – FY24 Revenue Guidance a Continuation of Q1 FY24

By Research as a Service (RaaS)

  • Wrkr Ltd (ASX:WRK) offers compliance solutions for Australian superannuation contributions and payroll including member onboarding, super payments, messaging and employee validation.
  • New AGM commentary is guiding FY24 revenue to $9m-$10m (RaaS $10.2m), which includes forecast SMSF Hub revenue in-line with RaaS at ~$800k and higher interest income, boosted by the recent RBA rate increase.
  • While the onboarding of a ‘significant fund’ client of Link is expected ‘within weeks’ we have little in the way of transactional revenue in FY24, just implementation revenue. 

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Nov 23
0

Daily Brief Energy/Materials: JSR Corp, Lakes Blue Energy and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • JSR (4185) – Time To Fight The FUD
  • JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware
  • Lakes Blue Energy NL – A Partner for the Enterprise North Dance

JSR (4185) – Time To Fight The FUD

By Travis Lundy

  • Many months ago I suggested the JIC Tender Offer JSR Corp (4185 JP) was not overwhelmingly high-priced, but that it would be “heavy” for months to come. 
  • FUD and Flows would widen the spread. And they did.
  • Now the time decay to expected approvals and tender offer start are getting steep. Time to Fight The FUD.

JSR Corporation (4185 JP): Risk/Reward as SAMR Approves Broadcom/VMware

By Arun George

  • JSR Corp (4185 JP)’s pre-conditional tender offer from JIC is conditional on several regulatory approvals, notably China SAMR approval. JIC can waive the conditions precedent.
  • A takeaway from the Broadcom (AVGO US)/VMware Inc Class A (VMW US) SAMR clearance is that if JIC is willing to commit to restrictive conditions, SAMR approval can be obtained.
  • On 6 November, JSR reiterated a late December tender start. However, with time fast running out, the likely scenario is SAMR conditional approval with a delayed tender start.

Lakes Blue Energy NL – A Partner for the Enterprise North Dance

By Research as a Service (RaaS)

  • Lakes Blue Energy NL (ASX:LKO) is a junior energy explorer with assets across southern and eastern Australia (and PNG).
  • Having secured a farm-in deal, the company is set to return to exploration with the high-graded Enterprise North prospect set for drilling in H2 2024 subject to securing the requisite regulatory approvals.
  • The success case of Enterprise North can also add material look-through upside to other Victorian opportunities. 

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Nov 23
0

Daily Brief South Korea: K Car , SOCAR, DS Dansuk and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent
  • A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental
  • DS Dansuk IPO Valuation Analysis

Ecopro Materials KOSPI 200 Fast Entry Assessment: With K Car as the Outgoing Constituent

By Sanghyun Park

  • The fast entry screening spans from November 17th to December 7th. Given its current market cap, we should anticipate the potential success of fast entry.
  • The implementation date will coincide with the effective day of the December rebalancing, which is December 15th. There are precedents of successfully achieving fast entry with such a tight schedule.
  • The setup will be challenging due to the short selling ban. Nevertheless, with an existing position, there may be value in a market timing approach.

A Potential Fight for Management Rights of Socar Between Lee Jae-Woong and Lotte Rental

By Douglas Kim

  • It was announced that founder of Socar Lee Jae-Woong purchased 336,000 additional shares of Socar. This signals a potential M&A fight for Socar between Lee Jae-Woong/related parties and Lotte Rental.
  • Founder Lee Jae-Woong and related parties currently own 37.8% stake in Socar versus Lotte Rental which has 32.9% stake.   
  • Socar is currently trading at more attractive valuations and we like the company’s aggressive strategy to raise profitability. 

DS Dansuk IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of DS Dansuk is 113,948 won per share which is 28% higher than the high end of the IPO price range (89,000 won). 
  • We estimate bio energy to account for 64.7% of total sales, followed by battery recycle (21.5%), plastic recycle (6.7%), and others (7.1%) in 2023. 
  • DS Dansuk is an eco-friendly company with three core businesses including bio energy, battery recycling, and plastic recycling.

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