Smartkarma Daily Briefs

J&T debuted with a rich valuation, but little investor enthusiasm to date
Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
…but, with few other comps, J&T’s lackluster early performance could be a drag

Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global

KEX’s EBIT margin fell to -38% in Q323, but showed Q/Q improvement vs Q223
Q/Q progress on margin most likely due to KEX initiatives, not market recovery
Ongoing weakness in Thai domestic express market marginally negative for J&T

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Nov 14

Daily Brief Event-Driven: WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines
Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth
Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.
CSI300 Index Rebalance Preview: 13 Potential Changes in December
Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders
StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings
KOSPI200 Rebalance in December 2023 Highlighted by Locals
KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years
Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000

WuXi XDC (2268 HK): Index Inclusion Possibility & Timelines

By Brian Freitas

WuXi XDC Cayman (1877628D HK) is looking to raise up to HK$4.07bn (US$521m) in its IPO by selling 197.6m shares at HK$20.6/share, valuing the company at HK$24.67bn (US$3.16bn).
WuXi XDC Cayman (1877628D HK) will not get Fast Entry to any indices but should be added to the HSCI and to Southbound Stock Connect in March.
Inclusion in other indices will take longer with the highest probability of index inclusion starting in September 2024.

Japan Best Rescue (2453) MBO at ¥1,000; High Premium, Low Multiple, No Money For Synergies or Growth

This MBO by MBK is a strong premium because of a low recent price, but it pays a low P/FCF multiple for growth, and no synergies counted.
Yet another MBO where insiders and friends take advantage of structural inferiority of minority shareholders. Something Should Be Done.
What do Minority Shareholders in Japan Say When They Meet Death? “OK, Today it is then.” (with apologies to Game Of Thrones).

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

Shidax (4837) – Mgmt Lowers F’casts So Family Can MBO Minorities Cheap. Offensive Governance.

Shidax had a Good Governance Moment last year. The stock is up 40-odd% since last year’s GGM, but now the Board, so good last year, has tripped up.
The family and main shareholder – part of last year’s GGM – have decided to bully the Board into accepting an MBO at the wrong price.
Management lowers forecasts without telling anyone. Bidders say “Synergies LaLaLa!” Board says “Ohh la la!” Nobody counts the synergies. Bidder buys at low multiple of newly lowered forecasts. Minorities Lose.

CSI300 Index Rebalance Preview: 13 Potential Changes in December

By Brian Freitas

With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

Vinda International (3331 HK): Essity’s Stake Attracts More Potential Bidders

By Arun George

Bloomberg reported Asia Pulp & Paper is the latest party to have expressed interest in acquiring Essity (ESSITYB SS)’s controlling Vinda International (3331 HK) stake at more than HK$20 per share.
Vinda has three substantial shareholders. We think the most likely structure is a bidder acquiring Essity’s stake, which would trigger a mandatory general offer.
Vinda’s recent update points to improving growth and margins. Peers and historical multiples imply a fair price range of HK$21-26 per share, a 7-32% premium to the last close.

StubWorld: Takara Trading “Rich” As Bio Cuts Forecast Earnings

By David Blennerhassett

On an implied stub and simple ratio, Takara Holdings (2531 JP) is at a decade-plus high to 60.9%-held Takara Bio Inc (4974 JP).
Preceding my comments on Takara 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%.

KOSPI200 Rebalance in December 2023 Highlighted by Locals

By Douglas Kim

This article discusses the potential inclusions and exclusions of KOSPI200 rebalance inDecember 2023 (especially those that are highlighted by the locals).
Stocks that are expected to be added to the KOSPI200 index include Posco DX, HD Hyundai Electric, Sam-A Aluminum, TCC Steel, and Dentium.
Stocks that are expected to be excluded in the KOSPI200 index Include Zinus, Handsome, Cuckoo Homesys, Taekwang Industrial, and Hyundai Home Shopping.

KT&G: A New Shareholder Return Policy Worth 2.8 Trillion Won Over Next 3 Years

By Douglas Kim

KT&G announced a new shareholder return policy worth 2.8 trillion won (including dividend payout of 1.8 trillion won and treasury shares purchase/cancellation of 1.0 trillion won) over next three years.
In addition, the company plans to cancel about 7.5% of the company’s existing treasury shares which represents about 142 billion won (1.2% of outstanding shares).
Although this 2.8 trillion won in shareholder return policy is large, the company could have announced even larger shareholder return policy, including cancellation of its entire treasury shares.

Japan Best Rescue System (2453 JP): MBK Partners Backed MBO Tender Offer at JPY1,000

By Arun George

Japan Best Rescue System Co (2453 JP)/JBR has recommended an MBK Partners-backed MBO tender offer of JPY1,000 per share, a 53.8% premium to the undisturbed price (13 November).
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 66.67% ownership ratio.
Irrevocables to accept the offer represent a 53.62% ownership ratio. The minimum acceptance condition requires a 28.1% minority acceptance rate, which is helped by the significant premium.

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Nov 14

Daily Brief Credit: Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics
Morning Views Asia: China Jinmao Holdings

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics

By Leonard Law, CFA

Adani Ports and Special Economic Zone’s (APSEZ) H1/23-24 results came in slightly above expectations, with revenue growth of 26% y-o-y exceeding management’s full-year guidance for a 15-20% increase. EBITDA (excluding FX losses) rose by 17%, at the higher end of the 13-17% guidance. Net adjusted leverage improved to 3.4x (FY 2022-23: 4.0x). We expect the company’s leverage to continue improving in FY 2023-24, in line with management’s guidance.

In our view, there remains a small degree of regulatory overhang and negative headline risk facing the broader Adani Group, which may affect group entities’ financing access in the offshore bond market (particularly on an unsecured basis). That said, the group’s access to onshore and bank financing remains intact.

Separately, we note that the Supreme Court hearing regarding the Securities and Exchange Board of India’s (SEBI) investigation on Adani Group has been repeatedly deferred. The Supreme Court requested on November 6th that all parties file final submissions regarding the case by November 8th. We believe the regulatory overhang may only be resolved by the eventual outcome of SEBI’s investigation and the Supreme Court’s judgement.

Morning Views Asia: China Jinmao Holdings

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.

China Jinmao Holdings

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Nov 14

Daily Brief Equity Bottom-Up: Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback and more

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

In today’s briefing:

Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback
Appier (4180) | Key Drivers Behind Strong Q3 Performance
Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring
Sea Ltd: Potential for a Short Squeeze
China Feihe (6186 HK): Year-Of-The-Dragon Trade
Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
Indian Banks Screener: Stick with Bank of Baroda and HDFC Bank
Life Insurance of India (LICI IN) 2Q24 Review: Poor Performance; No Signs of Turnaround. Sell.
Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E

Ajinomoto (2802) Secondary Offering (Cross-Holder Unwind) Matched Against Large Buyback

Today after the close, Ajinomoto Co (2802 JP) announced a large secondary offering of 14.3mm shares (2.75% of shs out). At last price that is ¥82bn.
At the same time, they announced a 10mm share (1.92%) ¥40bn buyback to be conducted from the delivery date of the Offering through 31 March 2024.
Over time, there would be some index upweight as float increases. On a net basis, this is a small deal on a low vol stock with a semiconductor story lurking.

Appier (4180) | Key Drivers Behind Strong Q3 Performance

By Mark Chadwick

Appier’s Q3 demonstrated a 39% YoY revenue increase, reaching a record JPY7.1B. This was driven by substantial growth in the US/EMEA markets (117% YoY), customer expansion, and Digital Content growth.
Appier’s gross margin expanded from 51.3% to 52.6% and the operating margin reached a historical high of 4.4%. Despite ongoing investments, EBITDA margins hit12.1%, showcasing strong operating leverage.
Appier’s revised full-year outlook, with increased revenue target (JPY 26.2B), operating income (JPY0.70B), and EBITDA (JPY2.6B), exceeds consensus expectations by 1%, 11%, and 8%, respectively.

Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring

TSMC’s ADR premium is 10.4%, this is a decent level to short it based on the historical trading range.
UMC’s ADR premium is near a good level to short the spread but one should wait for it to rise above 1.5% in our view.
UMC ADR short interest continues to trend higher; TSMC ADR short interest continues to fall.

Sea Ltd: Potential for a Short Squeeze

By Oshadhi Kumarasiri

We suspect that the recent strength in Sea (SE US)‘s price performance is likely due to short covering, with shorts incentivized to cover after a nearly 38% gain.
As earnings approach, short positions have been increasing since late October, likely anticipating another earnings disappointment from Sea Ltd’s Q3 report on November 14, 2023.
Consensus estimates for Sea Ltd are at their lowest since its inception. A modest outperformance could lead to a squeeze in short interest.

China Feihe (6186 HK): Year-Of-The-Dragon Trade

By Steve Zhou, CFA

China Feihe (6186 HK) saw major derating (from around 20x PE to the current high-single-digit PE) coupled with sizable earnings drop (-28% yoy in 2022/-25% yoy in 1H23) since 2022.
The investment thesis or trade thesis here is a play on the rise of new born babies in 2024, the year of the dragon in China.
The margin of safety here is also high given a 7% forward dividend yield (Feihe has pledged to increase dividend payout ratio going forward).

Sanyo Trading (3176 JP) – Transitioning onto the Next Stage

Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.

Indian Banks Screener: Stick with Bank of Baroda and HDFC Bank

By Victor Galliano

We retain Bank of Baroda as the deep value Indian bank from our peer group, for its modest valuations, healthy ROE and further improvements in pre- and post-provision returns
The market seems unconvinced by HDFC Bank but we retain it as our quality bank pick, with its potential for savings from the HDFC merger and its strong balance sheet
Axis bank stays on our watchlist, but its premium valuations are the challenge; we remain negative on State Bank of India for its delinquency risks and limited progress on returns

Life Insurance of India (LICI IN) 2Q24 Review: Poor Performance; No Signs of Turnaround. Sell.

By Raj Saya, CA, CFA

Life Insurance of India (LICI IN) reported its 1H24 earnings which are a continuation of the poor performance of the largest life insurer in India.
Total sales were down -10% (individual sales – flat y-o-y); VNB margins falling; outlook not positive. Not positive shifts in product mix or distribution trends.
We value LIC at 0.5x FY25e P/EV, implying a -15% downside from the current price, reflecting poor sales growth, loss of market-share and its failure to turn-around the business model.

Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel

Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.

Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E

Both Himax and Novatek reported their results last week; both delivered gross margins at the high-end or above their previous guidance.
Both companies showed a continued decline in inventory levels. Himax is trading at one of the cheapest levels relative to Novatek in history.
Novatek sees industry inventory levels as normalized and expects 2024E to be an industry growth year. We rate both stocks as Structural Longs.

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Nov 14

Daily Brief Macro: The Week That Was in ASEAN@Smartkarma – Cisarua Mountain Dairy and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

The Week That Was in ASEAN@Smartkarma – Cisarua Mountain Dairy, Sumber Alfaria Trijaya, and DBS Bank
Energy Watch: Time to Buy Oil Again?
USD CPI Watch: The tricky path to 2% despite a soft report
EUROPOLITICS WATCH: Opposition Victory in Poland Opens Door for Ukraine in the EU?
Energy Cable #46: Scholz to the rescue!
Singapore Economics: Cost Pressures Warrant a Review of the Old Playbook
China Economics: Troubles Not Easily Solved by Beijing’s Support Measures
[TW2] The Week That Was in Markets in 11 Charts (W/E 11th Nov 2023)

The Week That Was in ASEAN@Smartkarma – Cisarua Mountain Dairy, Sumber Alfaria Trijaya, and DBS Bank

By Angus Mackintosh

The past week saw insights on Cisarua Mountain Dairy (CMRY IJ), Sumber Alfaria Trijaya (AMRT IJ), Ace Hardware Indonesia (ACES IJ), Boustead Holdings (BOUS MK), and Multi Bintang Indonesia.
There was also a macro insight on Thailand as the new government settles in and equity bottom-up insights on OCBC (OCBC SP) and DBS (DBS SP) from Daniel Tabbush.
The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across Southeast Asia.

Energy Watch: Time to Buy Oil Again?

By Ulrik Simmelholt

Conclusions up front: – We agree with OPEC that the demand side seems to be doing decent; paper markets are net short oil again.
Our model is approaching the buy zone despite the recent weakness seen in Oil.
The big risk to our model is a supply increase from an exhausted Saudi Arabian one-man-army.

USD CPI Watch: The tricky path to 2% despite a soft report

By Andreas Steno

Another CPI report, another preparation piece, where we as always share our thoughts on the coming report, what to expect next, and how far the Fed is from their all-important mandate of 2% inflation.
Main conclusions/notes upfront: 1) The path to 2% is tricky or almost impossible for the next 6 months.
CPI needs to average 0% MoM, which does not seem feasible.

EUROPOLITICS WATCH: Opposition Victory in Poland Opens Door for Ukraine in the EU?

By Anne Sandager

On Wednesday, the European Commission made a formal recommendation to start EU membership negotiations with Ukraine and Moldova.
Ukraine is thereby catching up to countries such as Montenegro, Serbia, and North Macedonia whose accession processes have been underway since the 00s.
Accepting Ukraine with a population of 43,79 million into the EU will be the end to the Union as we know it.

Energy Cable #46: Scholz to the rescue!

By Andreas Steno

After moaning like it’s the beginning of the 00’s German industry has once again been lent a helping hand from the government and this could have a huge potential impact on global energy markets.
So let’s see what is up and down on the surface of the proposal.
First in order to help the very energy-intensive German industry the government has decided to decrease the taxes on electricity by a whopping 190% from almost 2 cents to 0.05 cents running into 2025.

Singapore Economics: Cost Pressures Warrant a Review of the Old Playbook

By Manu Bhaskaran

The fall in real wages despite apparent tightness in the labour market may be a symptom of the economy’s reliance on low-cost foreign labour to supplement its workforce.
Survey evidence points to renewed cost pressures for businesses seeking to retain and expand their workforce, while cost-of-living challenges continue to plague consumers.
These phenomena are the latest in a long-running trend of Singapore being increasingly costly for businesses and individuals. The policy playbook needs to be relooked at.

China Economics: Troubles Not Easily Solved by Beijing’s Support Measures

By Manu Bhaskaran

Beyond the cyclical downsides for trade, Chinese goods are also facing an increasingly hostile environment due to trade restrictions imposed by skeptical recipient markets.
Anaemic price growth suggests that demand has yet to mount a sustained recovery. Belt-tightening by consumers continues despite seasonal sales and aggressive discounting.
Beijing has expanded support for the property sector, but long-run inefficiencies may be deepened. Watch for the next party Plenum for further hints on Beijing’s policy agenda.

[TW2] The Week That Was in Markets in 11 Charts (W/E 11th Nov 2023)

By Srinidhi Raghavendra

US equities were on a tear last week. Asian equities were buoyant but less muted.
Commodity majors were on a retreat. Gold, Silver, Oil, and Copper retreated on geopolitical conflicts that appears to be contained.
SLOOS reported tighter standards and weaker demand for commercial and industrial loans to firms of all sizes over the third quarter.

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Nov 14

Daily Brief Industrials: Zhejiang Expressway Co H, Sanyo Trading, Adani Ports & Special Economic Zone, Japan Elevator Service Holding, Cainiao Smart Logistics Network, J&T Global Express , Carr’s Group PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics
Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation
Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global
Carr’s Group – A new team to take the group forward

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

Sanyo Trading (3176 JP) – Transitioning onto the Next Stage

Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics

By Leonard Law, CFA

Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel

Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.

CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation

J&T debuted with a rich valuation, but little investor enthusiasm to date
Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
…but, with few other comps, J&T’s lackluster early performance could be a drag

Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global

KEX’s EBIT margin fell to -38% in Q323, but showed Q/Q improvement vs Q223
Q/Q progress on margin most likely due to KEX initiatives, not market recovery
Ongoing weakness in Thai domestic express market marginally negative for J&T

Carr’s Group – A new team to take the group forward

Carr’s Group has announced a fully refreshed executive team, none having been in-situ at the start of 2023. This will enable the executives to have an uninhibited view of the operations, enabling the development and implementation of a strategy reflecting the different opportunities and challenges facing the Engineering and Speciality Agriculture divisions.

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Nov 14

Daily Brief Health Care: e-Therapeutics PLC, Lonza Group , TSE Tokyo Price Index TOPIX and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

e-therapeutics – More to come in RNAi therapy discovery
Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance
The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

e-therapeutics – More to come in RNAi therapy discovery

e-therapeutics reported H1 FY24 results (to end-July 2023), reaffirming its commitment to integrating its computational and hepatocyte biology expertise to develop short interfering RNA (siRNA) therapies. The key half-year development was the proof-of-concept (PoC) data for two preclinical assets for the treatment of cardiometabolic disease and haemophilia, with further updates forthcoming. We view these pipeline updates, especially in segments with increased interest, as positive. Management continues to strengthen its intellectual property (IP) position and has filed new patent applications to protect 11 inventions relating to its novel targets and siRNA constructs. In our view, the company’s cost-effective and flexible approach is a key differentiator, especially in light of the challenging funding environment for drug discovery. In H1 FY24, R&D spend was £5.3m, and the company expects an increase in H2 FY24 with further development of its AI capabilities and progression of its in-house preclinical pipeline. At end-July 2023, e therapeutics had a net cash position of £24.8m.

Lonza Group (LONN SW): Customer Driven Events Are Impacting Near-Term Performance

By Tina Banerjee

In 1H23, biologics division of Lonza Group (LONN SW) reported revenue decline of 1% YoY to CHF1.6B, due to low mRNA sales dragged by lower demand for the COVID-19 vaccines.
Reflecting slower-than-expected growth in early-stage services and continued weak demand for nutraceutical capsules, Lonza has reduced 2023 sales growth expectation and cut core EBITDA margin guidance to 28–29%.
Growth in 2024 will be impacted by high base, the subsequent mRNA revenue loss, and trial setback faced by small biotech client. Lonza anticipates 2024 margin in the high twenties.

The ％ of Female Board Members Exceeding 30% Shows Whether the Company Is Truly Pursuing Diversity

By Aki Matsumoto

30% female board member set by TSE isn’t surprising, as it’s level within reach, but the fact that TSE set explicit target that companies can’t excuses is a first step.
To ensure that a female board member isn’t isolated from other board members, multiple female board members should be elected. In this sense, 30% female board members goal makes sense.
In fact, the most interesting question is how many more companies will approach 50% after achieving a 30% of female board members.

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Nov 14

Daily Brief Industrials: Zhejiang Expressway Co H, Sanyo Trading, Adani Ports & Special Economic Zone, Japan Elevator Service Holding, Cainiao Smart Logistics Network, J&T Global Express , Carr’s Group PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting
Sanyo Trading (3176 JP) – Transitioning onto the Next Stage
Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics
Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel
CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation
Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global
Carr’s Group – A new team to take the group forward

Zhejiang Expressway (576 HK) Rights Offering – The Dynamics May Be Interesting

Last week, Zhejiang Expressway Co H (576 HK) announced its rights offering on both its H-Shares and its A-Shares, previously mooted on 23 May, and the Circular on 26 June.
The company applied, got CSRC approval on 5 Nov, announced the issuance on 6 Nov, and shares went ex- on 10 November. It’s probably unneeded, but it’s there.
The stock is cheap. The company will boost its payout ratio. And it isn’t that “heavy” a deal. The Rights Trading Dynamics may be interesting.

Sanyo Trading (3176 JP) – Transitioning onto the Next Stage

Impressive progress to date – Q1-4 FY9/2023 results were at record highs for the company, demonstrating a sustained track record of above-average profitability and disciplined capital allocation via M&A.
Business diversification to life sciences has led to sales mix improvement and a more resilient business in our view.
Company guidance for FY9/2024 indicates a decrease in earnings YoY, attributed to the accumulation of strategic upfront investments for business development.

Adani Ports – Earnings Flash – H1 FY 2023-24 Results – Lucror Analytics

By Leonard Law, CFA

Japan Elevator Service Holdings (6544 JP) – Game-Changer Continuing to Excel

Success of disruptive innovation – we believe Q1-2 FY3/2024 results were ahead of the run-rate for FY guidance, driven by 1) sustained growth in maintenance and repair service contracts, and
2) stronger than expected demand for modernization services, resulting in gross margin improvement QoQ in Q2 FY3/2024 via amplified proposal effectiveness and increases in pricing.
We expect to see JES continue to successfully disrupt the market via innovation, driven by secular growth as building owners convert to reputable independent providers for cost management and structural demand from aging elevators requiring modernization.

CaiNiao Smart Logistics Pre-IPO Part 5 | For Better or Worse, J&T IPO Will Impact CaiNiao Valuation

J&T debuted with a rich valuation, but little investor enthusiasm to date
Focusing on J&T’s valuation alone could be a boon to CaiNiao’s valuation…
…but, with few other comps, J&T’s lackluster early performance could be a drag

Q323 Another Tough Quarter for Kerry Express Thailand (KEX) | Negative Read-Through for J&T Global

KEX’s EBIT margin fell to -38% in Q323, but showed Q/Q improvement vs Q223
Q/Q progress on margin most likely due to KEX initiatives, not market recovery
Ongoing weakness in Thai domestic express market marginally negative for J&T

Carr’s Group – A new team to take the group forward

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Nov 14

Daily Brief TMT/Internet: Hygon Information Technology C, Taiwan Semiconductor (TSMC) – ADR, Sea , Appier Group, Himax Technologies Inc Adr, EQS Group AG, Centralnic and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

CSI300 Index Rebalance Preview: 13 Potential Changes in December
Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring
Sea Ltd: Potential for a Short Squeeze
Appier (4180) | Key Drivers Behind Strong Q3 Performance
Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E
EQS Group – New customer numbers ramp up
Team Internet Group – Diversity delivering resilience

CSI300 Index Rebalance Preview: 13 Potential Changes in December

By Brian Freitas

With the review period for the December rebalance of the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX) complete, there could be 13 changes for the index.
We estimate one-way turnover of 1.94% at the December rebalance leading to a one-way trade of CNY 6.98bn. There are a lot of stocks with over 1x ADV to trade.
Over the last 6 months, the potential adds and potential deletes have tracked each other and underperformed the index. Positioning has led to outperformance in the last week.

Taiwan Dual Listings Monitor: TSMC ADR Spread at Decent Short Level; UMC ADR Short Interest Soaring

TSMC’s ADR premium is 10.4%, this is a decent level to short it based on the historical trading range.
UMC’s ADR premium is near a good level to short the spread but one should wait for it to rise above 1.5% in our view.
UMC ADR short interest continues to trend higher; TSMC ADR short interest continues to fall.

Sea Ltd: Potential for a Short Squeeze

By Oshadhi Kumarasiri

We suspect that the recent strength in Sea (SE US)‘s price performance is likely due to short covering, with shorts incentivized to cover after a nearly 38% gain.
As earnings approach, short positions have been increasing since late October, likely anticipating another earnings disappointment from Sea Ltd’s Q3 report on November 14, 2023.
Consensus estimates for Sea Ltd are at their lowest since its inception. A modest outperformance could lead to a squeeze in short interest.

Appier (4180) | Key Drivers Behind Strong Q3 Performance

By Mark Chadwick

Appier’s Q3 demonstrated a 39% YoY revenue increase, reaching a record JPY7.1B. This was driven by substantial growth in the US/EMEA markets (117% YoY), customer expansion, and Digital Content growth.
Appier’s gross margin expanded from 51.3% to 52.6% and the operating margin reached a historical high of 4.4%. Despite ongoing investments, EBITDA margins hit12.1%, showcasing strong operating leverage.
Appier’s revised full-year outlook, with increased revenue target (JPY 26.2B), operating income (JPY0.70B), and EBITDA (JPY2.6B), exceeds consensus expectations by 1%, 11%, and 8%, respectively.

Himax Vs. Novatek Long/Short: Display Industry Inventory Normalized, Growth Expected for 2024E

Both Himax and Novatek reported their results last week; both delivered gross margins at the high-end or above their previous guidance.
Both companies showed a continued decline in inventory levels. Himax is trading at one of the cheapest levels relative to Novatek in history.
Novatek sees industry inventory levels as normalized and expects 2024E to be an industry growth year. We rate both stocks as Structural Longs.

EQS Group – New customer numbers ramp up

As anticipated, now that the German whistleblower protection laws are in place, EQS is recruiting substantial numbers of new customers and is set for a strong fourth quarter, with good momentum into FY24. Once these new customers convert, they become a pipeline of warm leads for other EQS products and services, including more recent additions such as those for ESG monitoring and reporting. Q323 revenues were up 14% on the prior year and newly won annual recurring revenue (ARR), which precedes reported revenue, was up 50%. The rating remains well below that of peers and the value indicated by a discounted cash flow (DCF).

Team Internet Group – Diversity delivering resilience