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Smartkarma Daily Briefs

Oct 31
0

Daily Brief Japan: Nippon Electric Glass, Teraoka Seisakusho, Mitsubishi Motors, Panasonic Corp, TSE Tokyo Price Index TOPIX, Nihon M&A Center and more

By | Daily Briefs, Japan

In today’s briefing:

  • BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
  • Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
  • Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
  • Panasonic (6752) | Panic-Sonic
  • Meaningful If “P/B Below 1x” Is a Change of Mindset that Makes Managers Decide to Take an MBO
  • Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance

BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling

By Travis Lundy

  • Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
  • The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results. 
  • In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.

Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster

By Travis Lundy

  • A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
  • Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
  • For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.

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

By Janaghan Jeyakumar, CFA

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

Panasonic (6752) | Panic-Sonic

By Mark Chadwick

  • Panasonic’s Q2 results showed flat consolidated sales of Y2,090 billion, with a 24% YoY increase in adjusted operating profit.
  • FY3/24 outlook was revised down with sales and operating profit reductions across segments, notably in Lifestyle and Energy
  • Our concerns include the company’s complex structure, low overall profitability, uncertainties about valuing IRA credits, and challenges stemming from economic conditions, leading to pessimism about Panasonic’s stock price

Meaningful If “P/B Below 1x” Is a Change of Mindset that Makes Managers Decide to Take an MBO

By Aki Matsumoto

  • Although it’s important that the quality of companies be maintained and improved through metabolism, the number of listed companies has consistently increased due to the many IPOs and few delistings.
  • Many founders used IPOs as a tax-saving measure, and many managers were not thoughtful enough to increase shareholder profits, which is why there were many IPOs and few delistings.
  • Delisting through MBO or TOB for parent and subsidiary listed subsidiaries is much more effective than “TSE request” in reducing the number of companies with P/B below 1x.

Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance

By Shifara Samsudeen, ACMA, CGMA

  • Nihon M&A Center (2127 JP) ’s 2Q revenues decreased YoY while OP remained flat. However, both revenue and OP beat consensus estimates driven by improvement in revenue per M&A transaction.
  • There was strong improvement in revenue per transaction driven by enhanced efforts and growth in no. of large deals, however, M&A revenues declined due to drop in no. of deals.
  • Nihon has so far achieved only 36% of its OP target and it seems unlikely for the company to reach its full-year OP guidance, suggesting there is further downside.  

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Oct 31
0

Daily Brief ECM: Ecopro Materials IPO – Updated Thoughts on Valuation – Sentiment Has Gotten Worse and more

By | Daily Briefs, ECM

In today’s briefing:

  • Ecopro Materials IPO – Updated Thoughts on Valuation – Sentiment Has Gotten Worse
  • Honasa Consumer IPO – Thoughts on Valuations
  • LS Materials IPO Valuation Analysis
  • Qyuns Therapeutics (荃信生物) Pre-IPO: Mixed View on Two Core Products

Ecopro Materials IPO – Updated Thoughts on Valuation – Sentiment Has Gotten Worse

By Ethan Aw

  • EcoPro Materials (ECO123 KS) is looking to raise up to US$469m in its Korean IPO.
  • Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
  • In our previous notes, we covered the company’s performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we will share our updated thoughts on valuation.

Honasa Consumer IPO – Thoughts on Valuations

By Sumeet Singh

  • Honasa Consumer is looking to raise about US$200m in its upcoming India IPO.
  • HC’s product portfolio includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments.
  • In our previous note, we looked at the company’s past performance. In this note, we talk about the RHP updates and valuations.

LS Materials IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of LS Materials IPO is target price of 6,628 won per share, which is 21% higher than the high end of the IPO price range.
  • We estimate LS Materials to generate sales of 155.5 billion won (down 4% YoY) and 197.2 billion won (up 26.8% YoY) in 2024. 
  • LS Materials is one of the largest players globally in the large-size ultracapacitors, which stabilize power supply and are used to replace and supplement primary batteries and lithium-ion batteries.

Qyuns Therapeutics (荃信生物) Pre-IPO: Mixed View on Two Core Products

By Ke Yan, CFA, FRM

  • Qyuns Therapeutics, a China-based clinical-stage biotechnology company, plans to raise up to US$ 100m via a Hong Kong listing.
  • In this note, we examine the company’s core products, namely QX002N, an IL-17A antibody, and QX005N, an IL-4Rα antibody. We also look at the company’s management and pre-IPO investors.
  • We are of mixed views for its two core products. We also think the management and pre-IPO investors are of mediocre quality.

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Oct 31
0

Daily Brief China: New Oriental Education & Techn, Great Wall Motor, Country Garden Holdings Co, Travelsky Technology Ltd H, Trip.com, Shenzhen Mindray Bio-Medical Electronics, Qyuns Therapeutics and more

By | China, Daily Briefs

In today’s briefing:

  • New Oriental Education & Technology: Back From the Dead
  • Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!
  • Country Garden : Not a Nickel Play
  • Travelsky (696): Cheaper Now
  • Monthly Chinese Tourism Tracker | Tourism Recovery Derailed By Normal Seasonality | (October 2023)
  • Shenzhen Mindray Bio-Medical Electronics (300760.CH) 23Q3- Future Performance Slowdown Is Inevitable
  • Qyuns Therapeutics (荃信生物) Pre-IPO: Mixed View on Two Core Products

New Oriental Education & Technology: Back From the Dead

By Steven Holden

  • MSCI China Funds are starting to engage with New Oriental Education & Technology after a big exodus in 2021 following China’s Tech Crackdown.
  • Since the lows of 2022, New Oriental Education has been one of the key beneficiaries of active fund rotation.
  • Previous holders such as HSBC, Mirae and BlackRock have bought back in after closing out in 2021, but there is still a long way to go to reach previous highs.

Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!

By Travis Lundy

  • The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • Last week the portfolio bounced back, erasing the previous week’s losses. Southbound continues to see net inflows and this week all H/A Pair sectors saw Hs outperform except Energy.
  • High-Div SOEs continue to be weak. Banks, Pharma, Industrials, and Utilities spreads continue to be Very Volatile. Quiddity Favourite Great Wall Motor (2333 HK) up 7% after Q3 results Friday.

Country Garden : Not a Nickel Play

By Warut Promboon

  • Country Garden should not be a surprise. The bond price at 5 cents is based on much uncertainty.
  • We list a few caveats why the bonds at 5 cents are not investible.
  • The potential wind-up order by the Hong Kong court will be a big test of the rule of law in China.

Travelsky (696): Cheaper Now

By Henry Soediarko

  • Travelsky Technology Ltd H (696 HK) share price was unjustly sold off due to flows rather than operational performance.
  • The key business is processing flights for domestic tourism, with a lesser correlation to geopolitical issues.
  • Due to the strong earnings growth, PER is adjusted from 60x to 25x. 

Monthly Chinese Tourism Tracker | Tourism Recovery Derailed By Normal Seasonality | (October 2023)

By Daniel Hellberg

  • September outbound tourism metrics plummeted, in some cases to levels seen in Q223
  • Domestic air travel demand also fell vs August; normal seasonal patterns are dominating
  • As recovery fizzles, travel shares languish, and we see few reasons for optimism, near-term

Shenzhen Mindray Bio-Medical Electronics (300760.CH) 23Q3- Future Performance Slowdown Is Inevitable

By Xinyao (Criss) Wang

  • Mindray’s Q3 revenue growth slowed significantly, dragging down the overall revenue growth. This was related to China’s anti-corruption campaign, the impact of which is expected to linger for some time.
  • Our 2023 forecast is revenue up 15-18% YoY. Anti-corruption campaign would lead to declining demand and growth ceiling of domestic medical equipment market, thus negatively affecting Mindray’s future performance growth.
  • Investors may need to prepare in advance for Mindray’s future revenue growth to fall to 15%.Based on this, PE TTM of around 30 is reasonable valuation for Mindray, not undervalued.

Qyuns Therapeutics (荃信生物) Pre-IPO: Mixed View on Two Core Products

By Ke Yan, CFA, FRM

  • Qyuns Therapeutics, a China-based clinical-stage biotechnology company, plans to raise up to US$ 100m via a Hong Kong listing.
  • In this note, we examine the company’s core products, namely QX002N, an IL-17A antibody, and QX005N, an IL-4Rα antibody. We also look at the company’s management and pre-IPO investors.
  • We are of mixed views for its two core products. We also think the management and pre-IPO investors are of mediocre quality.

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Oct 31
0

Daily Brief Event-Driven: StubWorld’s: Amorepacific’s Multi-Year Lows and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • StubWorld’s: Amorepacific’s Multi-Year Lows
  • BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling
  • Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
  • SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
  • Quiddity JPX-Nikkei 400 Rebal 2024: End-Oct 2023
  • Tietto (TIE AU): Zhaojin Makes An Offer
  • Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!
  • Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won
  • Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer
  • Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release

StubWorld’s: Amorepacific’s Multi-Year Lows

By David Blennerhassett

  • Both the implied stub for Amorepacific Group (002790 KS) and the simple ratio (Group/Amorepacific Corp (090430 KS)) are around lifetime low levels. 
  • Preceding my comments on Amorepacific 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%.

BIG Nippon Electric Glass (5214) Buyback, Possibly Offset by Cross-Holder Selling

By Travis Lundy

  • Nippon Electric Glass (5214 JP) is going through a rebuilding year. Lots of restructuring expenses and I expect there will be more.
  • The company today announced the outline of its next Mid-Term Management Plan for the 5 years to 2028. It will announce details in early Feb 2024 with results. 
  • In that, there is ¥50bn of buybacks through Dec2026, of which ¥20bn will be made in the next 4mos. That is about 11-14% of ADV assuming the price jumps.

Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster

By Travis Lundy

  • A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
  • Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
  • For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

By Brian Freitas

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

By Janaghan Jeyakumar, CFA

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

Tietto (TIE AU): Zhaojin Makes An Offer

By David Blennerhassett

  • SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
  • The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
  • Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition. 

Quiddity A/H Premium Tracker (To Oct27): Volatility Off, Spreads Still Volatile. GreatWall Q3!

By Travis Lundy

  • The New and Better (10 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
  • Last week the portfolio bounced back, erasing the previous week’s losses. Southbound continues to see net inflows and this week all H/A Pair sectors saw Hs outperform except Energy.
  • High-Div SOEs continue to be weak. Banks, Pharma, Industrials, and Utilities spreads continue to be Very Volatile. Quiddity Favourite Great Wall Motor (2333 HK) up 7% after Q3 results Friday.

Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won

By Douglas Kim

  • On 30 October, Kum Yang announced that it has submitted an agenda to expand the issuance limit of CB and BW to 10 trillion won.
  • This increase in the limit of CB and BW issuance to 10 trillion won would mean potential capital raise through these methods that are nearly 2x its entire market cap.
  • Kum Yang may be trying to raise large amount of capital (several trillion won) which could result in significant dilution risk for the existing shareholders. 

Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer

By Arun George

  • Tietto Minerals Ltd (TIE AU) has disclosed a conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.58 per share, a 36.5% premium to the undisturbed price of A$0.425.
  • The offer is conditional on China and Cote d’Ivoire regulatory approvals (should be forthcoming) and a 50.1% minimum acceptance condition (which can be waived).
  • The offer is light compared to peer resource multiples and recent share prices. The presence of large Chinese shareholders is a stumbling block for a rival offer. 

Mankind Pharma Lock-Up – A US$1.1bn+ Lockup Release

By Sumeet Singh

  • A group of shareholders raised around US$530m in Mankind Pharma(MP) IPO in May 2023. The pre-IPO shareholders will be released from their lockup soon.
  • MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
  • In this note, we will talk about the lock-up dynamics and recent updates.

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Oct 31
0

Daily Brief Credit: Country Garden : Not a Nickel Play and more

By | Credit, Daily Briefs

In today’s briefing:

  • Country Garden : Not a Nickel Play
  • Morning Views Asia: Pertamina Geothermal Energy PT

Country Garden : Not a Nickel Play

By Warut Promboon

  • Country Garden should not be a surprise. The bond price at 5 cents is based on much uncertainty.
  • We list a few caveats why the bonds at 5 cents are not investible.
  • The potential wind-up order by the Hong Kong court will be a big test of the rule of law in China.

Morning Views Asia: Pertamina Geothermal Energy PT

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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  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
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Oct 31
0

Daily Brief Equity Bottom-Up: New Oriental Education & Technology: Back From the Dead and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • New Oriental Education & Technology: Back From the Dead
  • Panasonic (6752) | Panic-Sonic
  • PC Monitor: Inventories Healthy & Intel Expects Over 100 Million AI PCs In Two Years
  • BOM Cost and CoWoS Demand Analysis on Nvidia AI GPU HGX for 2023-2025, Room to Raise Estimates
  • Taiwan Tech Weekly: Wave of Key Taiwan Results; Heavyweights Samsung, AMD, Qualcomm Internationally
  • [Week 9] Namaste India 🙏 | Earnings Edition – Part II
  • Bukalapak (BUKA IJ) – Taking the Track Towards Profitability
  • Travelsky (696): Cheaper Now
  • Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance
  • Dr. Reddy’s Laboratories (DRRD IN): Highest Ever Sales and Profit in Q2; Good Show in Key Markets

New Oriental Education & Technology: Back From the Dead

By Steven Holden

  • MSCI China Funds are starting to engage with New Oriental Education & Technology after a big exodus in 2021 following China’s Tech Crackdown.
  • Since the lows of 2022, New Oriental Education has been one of the key beneficiaries of active fund rotation.
  • Previous holders such as HSBC, Mirae and BlackRock have bought back in after closing out in 2021, but there is still a long way to go to reach previous highs.

Panasonic (6752) | Panic-Sonic

By Mark Chadwick

  • Panasonic’s Q2 results showed flat consolidated sales of Y2,090 billion, with a 24% YoY increase in adjusted operating profit.
  • FY3/24 outlook was revised down with sales and operating profit reductions across segments, notably in Lifestyle and Energy
  • Our concerns include the company’s complex structure, low overall profitability, uncertainties about valuing IRA credits, and challenges stemming from economic conditions, leading to pessimism about Panasonic’s stock price

PC Monitor: Inventories Healthy & Intel Expects Over 100 Million AI PCs In Two Years

By Vincent Fernando, CFA

  • Intel’s results last week beat expectations by a wide margin, with margins recovering better than expected by the Street and guided to keep improving through 4Q23E.
  • New Meteor Lake chips for PCs, branded as ‘Intel Core Ultra’ will officially launch December 14th and are expected to drive demand for new AI-optimized PCs in 2024E.
  • Intel said that the PC industry completed its inventory digestion in 1H23, drove sequential demand growth in 3Q23, and this is expected to continue into 4Q23E.

BOM Cost and CoWoS Demand Analysis on Nvidia AI GPU HGX for 2023-2025, Room to Raise Estimates

By Andrew Lu

  • TSMC’s manufacturing value only accounts for 1/4 of H100 HGX bill of materials but HBM3 accounts for more than half;
  • ABF substrate, SXM5 module, UBB and CCL vendors should be benefited, especially for Ibiden Co Ltd (4062 JP) on ABF substrate/OAM and Elite Material (2383 TT) on OAM/UBB CCL;
  • Nvidia AI GPU likely doubling each year in next two years; Our estimates on Nvidia 2025 AI GPU EPS contribution are exceeding Bloomberg consensus earnings estimates, suggesting room to raise.

Taiwan Tech Weekly: Wave of Key Taiwan Results; Heavyweights Samsung, AMD, Qualcomm Internationally

By Vincent Fernando, CFA

  • Key Results This Week: Delta, Elan, ChipMOS, Nuvoton, AU Optronics in Taiwan… Plus Samsung, AMD, and Qualcomm.
  • Positive signs for the PC & mobile space have come from recent Intel, UMC, Mediatek results.
  • Top Losers: Macronix Slumps on Weak Results and Outlook, Hon Hai Slumps on China Tax & Land Probe

[Week 9] Namaste India 🙏 | Earnings Edition – Part II

By Pranav Bhavsar

  • Our earnings coverage continues for the second edition and is expected to continue for one more week.
  • At the bottom, we provide a consolidated view of all earnings tracked so far (Bullish / Bearish) and would be happy to engage on any of them.
  • We also highlight the earnings of some of the global companies that have significant operations or growth in India.

Bukalapak (BUKA IJ) – Taking the Track Towards Profitability

By Angus Mackintosh

  • Bukalapak (BUKA IJ) 3Q2023 results confirmed that it is on track to achieving EBITDA breakeven in 4Q2023, with strong revenue growth and a significant improvement in its contribution margin.
  • The was a slight slowdown in marketplace revenue QoQ due to a high Lebaran base, mainly due to slower gaming. 4Q2023 should see a strong recovery and higher take rates. 
  • Bukalapak looks to be pressing all the right buttons but more granularity on what is driving higher take rates would be well-received . Valuations look attractive relative to peers.

Travelsky (696): Cheaper Now

By Henry Soediarko

  • Travelsky Technology Ltd H (696 HK) share price was unjustly sold off due to flows rather than operational performance.
  • The key business is processing flights for domestic tourism, with a lesser correlation to geopolitical issues.
  • Due to the strong earnings growth, PER is adjusted from 60x to 25x. 

Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance

By Shifara Samsudeen, ACMA, CGMA

  • Nihon M&A Center (2127 JP) ’s 2Q revenues decreased YoY while OP remained flat. However, both revenue and OP beat consensus estimates driven by improvement in revenue per M&A transaction.
  • There was strong improvement in revenue per transaction driven by enhanced efforts and growth in no. of large deals, however, M&A revenues declined due to drop in no. of deals.
  • Nihon has so far achieved only 36% of its OP target and it seems unlikely for the company to reach its full-year OP guidance, suggesting there is further downside.  

Dr. Reddy’s Laboratories (DRRD IN): Highest Ever Sales and Profit in Q2; Good Show in Key Markets

By Tina Banerjee

  • Global generics revenue increased 9% YoY to INR61 billion, mainly driven by double-digit growth in North America and Europe generic businesses, partly offset by muted growth in domestic market.
  • Revenue from North America generics increased 13% y/y to INR31.7 billion, driven by growing momentum in core portfolio, Mayne integration, and favorable Fx. Pricing environment remains stable.
  • Despite increase in SG&A and R&D expenses, EBITDA grew 13% YoY to INR 21.8 billion. Net profit increased 33% YoY to INR14.8 billion. Both EBITDA and net profit topped estimates.

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Oct 31
0

Daily Brief Macro: Japan Watch: Markets Are Unprepared for BoJ Action and more

By | Daily Briefs, Macro

In today’s briefing:

  • Japan Watch: Markets Are Unprepared for BoJ Action
  • The Week That Was in ASEAN@Smartkarma – Siloam International Intl Hospitals, Bank Rakyat, and MrDIY
  • Positioning Watch: Who Blinks First?
  • Energy Cable #44 – Energy as a Diversifier + JPY Focus

Japan Watch: Markets Are Unprepared for BoJ Action

By Andreas Steno

  • It is time for one of the most important Bank of Japan meetings in decades.
  • Markets remain unprepared for a move, despite the pre-warning of a higher inflation forecast. Here is our preview!
  • It is a no-brainer for the BoJ to increase the inflation forecast given how firm inflation has been relative to forecasts, but the big question is whether it matters for the policy decision? The short answer is yes. 

The Week That Was in ASEAN@Smartkarma – Siloam International Intl Hospitals, Bank Rakyat, and MrDIY

By Angus Mackintosh

Positioning Watch: Who Blinks First?

By Emil Moller

  • Hello, everyone, and welcome to our weekly Positioning Watch! I’m certain that our dedicated readers have noticed the absence of last weekend’s edition, but fear not, we’re back with a vengeance today! Typically, we release Positioning Watch every Saturday.
  • However, we’ve observed that many of our readers actually prefer to peruse it on Mondays so why not add everything that may occur in a weekend?
  • Therefore, we’ve decided to shift our release schedule to every Monday.

Energy Cable #44 – Energy as a Diversifier + JPY Focus

By Ulrik Simmelholt

  • Take aways: Correlation in the electricity and natural gas markets in Europe is increasing. Could energy stocks and commodities be the new diversifier?
  • JPY should be even weaker considering Nat Gas flows. This week an interesting development in the correlation between electricity prices and natural prices caught our attention as seen in the below chart.
  • Over the last 3 years we have seen the correlation between the two move higher and higher to a point where electricity prices are almost a mirrored reflection of what is going on in the gas markets.

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Oct 31
0

Daily Brief Utilities: Pertamina Geothermal Energy PT and more

By | Daily Briefs, Utilities Sector

In today’s briefing:

  • Morning Views Asia: Pertamina Geothermal Energy PT

Morning Views Asia: Pertamina Geothermal Energy PT

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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Oct 31
0

Daily Brief Energy/Materials: EcoPro Materials, Tietto Minerals Ltd, Kum Yang, Bharat Petroleum Corp and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Ecopro Materials IPO – Updated Thoughts on Valuation – Sentiment Has Gotten Worse
  • Tietto (TIE AU): Zhaojin Makes An Offer
  • Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won
  • Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer
  • Bharat Petroleum – ESG Report – Lucror Analytics

Ecopro Materials IPO – Updated Thoughts on Valuation – Sentiment Has Gotten Worse

By Ethan Aw

  • EcoPro Materials (ECO123 KS) is looking to raise up to US$469m in its Korean IPO.
  • Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
  • In our previous notes, we covered the company’s performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we will share our updated thoughts on valuation.

Tietto (TIE AU): Zhaojin Makes An Offer

By David Blennerhassett

  • SOE-Backed Zhaojin Mining Industry H (1818 HK), China’s fourth largest integrated gold producer, has tabled a non-binding Offer for Aussie-listed West African gold miner Tietto Minerals Ltd (TIE AU).
  • The A$0.58/share cash Offer is a 36% premium to undisturbed. Zhaojin is seeking 50.1% of shares out, with 7.02% already held.
  • Conditions include a raft of PRC and Côte d’Ivoire regulatory approvals. None of these should face opposition. 

Kum Yang – Submits An Agenda to Expand Issuance Limit of CB and BW to 10 Trillion Won

By Douglas Kim

  • On 30 October, Kum Yang announced that it has submitted an agenda to expand the issuance limit of CB and BW to 10 trillion won.
  • This increase in the limit of CB and BW issuance to 10 trillion won would mean potential capital raise through these methods that are nearly 2x its entire market cap.
  • Kum Yang may be trying to raise large amount of capital (several trillion won) which could result in significant dilution risk for the existing shareholders. 

Tietto Minerals (TIE AU): Zhaojin’s Conditional Off-Market Takeover Offer

By Arun George

  • Tietto Minerals Ltd (TIE AU) has disclosed a conditional proposal from Zhaojin Mining Industry H (1818 HK) at A$0.58 per share, a 36.5% premium to the undisturbed price of A$0.425.
  • The offer is conditional on China and Cote d’Ivoire regulatory approvals (should be forthcoming) and a 50.1% minimum acceptance condition (which can be waived).
  • The offer is light compared to peer resource multiples and recent share prices. The presence of large Chinese shareholders is a stumbling block for a rival offer. 

Bharat Petroleum – ESG Report – Lucror Analytics

By Trung Nguyen

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Bharat Petroleum’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Material”, but Disclosure is “Adequate”.

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Oct 31
0

Daily Brief Industrials: Teraoka Seisakusho, Nihon M&A Center, Trimas Corp, Uponor OYJ and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster
  • Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance
  • TRS: Scaled for Free Cash Flow
  • Aliaxis Condedes Defeat

Offensively Low-Priced MBO for Teraoka Seisakusho (4987) – Yet Another SmallCap Governance Disaster

By Travis Lundy

  • A small specialty adhesives maker – Teraoka Seisakusho (4987 JP) has had an MBO proposed and approved. At 0.54x book. NetCash+securities+2.5mos of net A/R+inventory = 99% of Takeover Market Cap.
  • Borrow 2x EBITDA, pay out the cash and securities, and this is being done at <0.3x remaining book. The takeover is 100+% bank funded. It’s ridiculous.
  • For this to get stopped, however, someone has to go activist on a smallcap where retail owns the entire float and friends and family own 55% to start.

Nihon M&A: Earnings Show Some Recovery; but Could Miss Full-Year OP Guidance

By Shifara Samsudeen, ACMA, CGMA

  • Nihon M&A Center (2127 JP) ’s 2Q revenues decreased YoY while OP remained flat. However, both revenue and OP beat consensus estimates driven by improvement in revenue per M&A transaction.
  • There was strong improvement in revenue per transaction driven by enhanced efforts and growth in no. of large deals, however, M&A revenues declined due to drop in no. of deals.
  • Nihon has so far achieved only 36% of its OP target and it seems unlikely for the company to reach its full-year OP guidance, suggesting there is further downside.  

TRS: Scaled for Free Cash Flow

By Hamed Khorsand

  • TRS reported third quarter results where the packaging business continues to stabilize from inventory destocking while the aerospace segment continues to grow as fast as possible
  • The packaging business has gone through restructuring that should lead to higher profit margin as customers begin to increase their order activity
  • Improved supply chains are aiding the sales growth in aerospace. The growth in aerospace should help push cash flow higher and offset the softness in packaging

Aliaxis Condedes Defeat

By Jesus Rodriguez Aguilar

  • The offer period for white-knight Georg Fischer AG (FI/N SW)‘s acquisition of Uponor OYJ (UNR1V FH) will end, unless extended, on 31 October. Aliaxis, which put Uponor in play, concedes defeat.
  • The waiting game has ended. Aliaxis will tender its 20% stake with €90 million capital gains (pre-tax) as consolation. GF will obtain at least 53.9% acceptances, possibly a lot more.
  • The spread has been positive for most days since mid-July, on expectations of an offer sweetening. That won’t happen now. Gross spread is +0.14%. Recommendation is tender.

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