Smartkarma Daily Briefs

PACCAR managed to surpass the revenue and earnings expectations of Wall Street, with net income surging by 60% year-over-year to a historic $1.23 billion, accompanied by a 23% increase in revenues.
PACCAR Parts also played a pivotal role in the company’s success, with third-quarter revenues reaching $1.58 billion and Parts pretax profits increasing by 10% to $412 million.
PACCAR Financial achieved an impressive pretax income of $134 million in the financial sector in the third quarter.

Waste Management: Recycling Tech Transforms Business! Inside their Next-Gen Sustainability Approach! – Major Drivers

Waste Management delivered a mixed result in the recent quarter, with revenues below market expectations but surpassed the analyst consensus regarding earnings.
The solid waste business was the driving force behind this achievement, with organic revenue growth in collection and disposal aligning well with expectations.
The resilience of solid waste volumes, with positive trends in commercial volumes and special waste growth, stood out.

General Electric Company: A Lucrative Strategy Of Future-Proof Investments Revealed! – Major Drivers

General Electric Company delivered an all-around beat in the previous quarter.
Orders increased by double digits, with services up by 15% and equipment up by 22%, driven primarily by the commercial aerospace sector.
The aerospace segment, in particular, experienced substantial growth, with commercial engines and services leading the way.

Illinois Tool Works Inc.: Surge in China’s Automotive Segment – Unveiling Recent Big Winners! – Major Drivers

Illinois Tool Works delivered a mixed set of results in its most recent results, with revenues falling short of Wall Street expectations but above-par earnings.
The company had relatively stable organic growth in the quarter, with a 2% increase on an equal-day basis.
Operating margin for the third quarter reached 26.5%, marking a 200-basis point increase compared to the previous year.

3M Company: How They’re Dominating the Market! – Major Drivers

3M Company delivered an all-around beat in the most recent quarterly result.
This success has positioned the company for a promising conclusion to the year 2023.
The company also addresses potential risk and uncertainty by resolving significant litigation matters, such as Combat Arms and PFAS litigation.

Marsh & McLennan Companies: String Of Recent Acquisitions Driving Growth? – Major Drivers

Marsh & McLennan Companies, Inc. managed to exceed the revenue and earnings expectations of Wall Street.
The company achieved an unprecedented quarterly underlying revenue growth over two decades and reported substantial growth in adjusted EPS.
Marsh McLennan Agency acquired Graham Company, a top-100 US insurance and benefits broker and risk management consultancy, bolstering the company’s Mid-Atlantic presence.

The Sherwin-Williams Company: Acquisition Game-Changer! How Oskar Nolte & Klumpp Coatings Set the Stage for Future Wins! – Major Drivers

The Sherwin-Williams Company delivered a solid result and managed an all-around beat in the last quarter.
In the third quarter, Sherwin-Williams’ Paint Stores Group exhibited commendable resilience, with a 3.6% increase in sales, despite a demanding 21.5% comparison.
Within the Paint Stores Group, the Protective & Marine sector emerged as the fastest-growing, achieving double-digit percentage sales growth against a mid-teens comparison.

Southern Copper Corporation: Can It Defy The Odds? – Major Drivers

Southern Copper Corporation delivered a strong result and managed an all-around beat in the last quarter, demonstrating resilience and adaptability.
Copper, constituting a significant 75% of their sales, faced a marginal 9% decline in production, primarily due to diminished ore grades in the Cuajone mine.
Amidst these challenges, Southern Copper remained proactive, predicting a 6% increase in copper production for the year 2023, aiming for 917,000 tons.

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Nov 02

Daily Brief China: ZJLD Group , WuXi XDC Cayman Inc, Shenzhen International, China Minsheng Banking H, WuXi AppTec, ZTO Express Cayman , Midea Group Co Ltd A, Health And Happiness (H&H) and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

ZJLD Group (6979 HK): Direct Beneficiary Of Moutai Raising Ex-Factory Price
WuXi XDC IPO: The Bear Case
Shenzhen Intl (152 HK): A Big Step Forward
China Minsheng Bank’s NII Decline Has Slowed for 3Q23, Asset Quality Stabilized For Now
WuXi AppTec (2359.HK/603259.CH) 23Q3 – Will the TIDES Business Turn the Tide?
The Four Listed Chinese Express Companies Suffered Significant Margin Erosion in Q323
Past A/H Listings Performance – Have Been a Mixed Bag
Morning Views Asia:

ZJLD Group (6979 HK): Direct Beneficiary Of Moutai Raising Ex-Factory Price

By Steve Zhou, CFA

Late last night (near mid-night), Kweichow Moutai (600519 CH) shocked the market by announcing a direct price hike on its main Feitian 53 degree product by an average of 20%.
The market had no expectation of such price hike as it was widely perceived that Moutai could not directly increase the ex-factory price due to regulatory pressures.
Moutai’s Feitian ex-factory price is the key price leader for pretty much all other major Baijiu brand, directly benefiting ZJLD Group (6979 HK).

WuXi XDC IPO: The Bear Case

By Arun George

WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
In WuXi XDC IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
The bear case rests on margins on a downward trend, large customer concentration, high related party transactions and volatile FCF generation.

Shenzhen Intl (152 HK): A Big Step Forward

By Osbert Tang, CFA

Shenzhen International (152 HK) has reached agreement with the government on the South China Logistics Park Phase I transformation and it will receive Rmb1.058bn compensation.
The sum equals a significant 9% of SZI’s market capitalisation. The agreement also kick-started the project’s long-term contribution, which may provide an income stream lasting 3-5 years.
The deal showcased SZI’s ability to realise the underlying value of its assets. The stock should not be valued on its earnings, and its 0.3x P/B is deeply undervalued.

China Minsheng Bank’s NII Decline Has Slowed for 3Q23, Asset Quality Stabilized For Now

By Fern Wang

NII decline has slowed but the overall profitability is lacklustre
Asset quality stabilized for now, real estate exposure remains a concern
We believe the turnaround of the bank is still pretty far off.

WuXi AppTec (2359.HK/603259.CH) 23Q3 – Will the TIDES Business Turn the Tide?

By Xinyao (Criss) Wang

23Q3 results has sounded an alarm for investors. Obviously, the deterioration of financing situations both domestically and internationally has forced WuXi AppTec to readjust projected revenue growth.
Almost all of the important logic at the moment is negative for CXOs.Revenue growth in TIDES business alone is hard to offset the decline in WuXi AppTec’s other businesses/industry trend.
After a pullback, investors can bet on the next rebound, but we still recommend taking profits in time, because without persuasive fundamentals, rebound driven by sentiment is difficult to sustain.

The Four Listed Chinese Express Companies Suffered Significant Margin Erosion in Q323

By Daniel Hellberg

Given declining prices and slowing volume growth, we anticipated lower Q3 express margins
The four China-listed express firms saw Op Inc margin fall from 5.3% in Q2 to 3.9% in Q3
SF fared better than ‘sort & transport’ names, but its freight forwarding segment still a drag

Past A/H Listings Performance – Have Been a Mixed Bag

By Sumeet Singh

Two of the biggest deals in the Hong Kong pipeline are A/H listings for S.F. Holding (002352 CH) and Midea Group (000333 CH), both looking to raise around US$3bn.
Prior to the deals going live, we had a quick look at the A/H premium, subscription and past performance of some of the earlier A/H listings.
Overall, most of the recent A/H listings haven’t done much in the near term.

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 02

Daily Brief Japan: Hokuhoku Financial Group, Resona Holdings, Daiichi Sankyo and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still
Japanese Banks – Nearing the Yield Curve Control End-Game
Daiichi Sankyo (4568 JP): Landmark ADC Deal Pushes FY24 Revenue Guidance Higher

Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still

40% of Banks outside the Top 7 (none of which offered H1 guidance) in the TOPIX Banks Index have now changed H1 guidance or reported H1. 2 reported both up.
92% of the others have revised up H1 net income guidance a weighted average of 47%. Net Interest Income, Corporate fees/comms are up, expenses and credit costs are down.
Big tables with data, reasons for guidance changes, and buyback history of each presented below.

Japanese Banks – Nearing the Yield Curve Control End-Game

By Victor Galliano

The latest BoJ adjustment to its yield curve control lifts the hard yield ceiling of 1% on 10 year JGBs, making it “a reference” and allowing yields to exceed it
10 year JGB yields are close to 1%, with Japanese bond yields steepening further which is positive for Japanese banks, especially those with a high share of floating-rate credit exposures
We stick with our positive views on Resona, Mizuho, SMFG and Hachijuni; we add Concordia to our buy list for its high share of floating rate credit exposure

Daiichi Sankyo (4568 JP): Landmark ADC Deal Pushes FY24 Revenue Guidance Higher

By Tina Banerjee

Daiichi Sankyo (4568 JP) reported strong H1FY24 results, with double-digit growth in revenue, core operating profit, and net profit, mainly driven by its global mainstay product Enhertu.
Daiichi Sankyo and Merck entered into a global development and commercialization agreement for three of Daiichi Sankyo’s drug candidates, for a total potential consideration of up to $22 billion.
Daiichi Sankyo has raised FY24 revenue, core operating profit, and net profit forecast by 7%, 11%, and 17%, respectively. FY24 revenue is expected to grow 21% YoY to ¥1,550 billion.

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Nov 01

Most Read: Socionext, Emerald Resources Nl, KCE Electronics PCL, Treasury Wine Estates, SK Hynix, Kakao Corp, WuXi XDC Cayman Inc, TOPIX-Banks Index, Doosan Robotics and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)
SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds
SK Hynix. DRAM To The Rescue
Concerns About A Major Accounting Fraud at Kakao Mobility
WuXi XDC IPO: The Bull Case
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023
WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)

Shareholders have approved Invocare Ltd (IVC AU)‘s acquisition by TPG and IVC is expected to stop trading after the close on 3 November.
Invocare Ltd (IVC AU) will be replaced by Emerald Resources Nl (EMR AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 3 November.
Boss Resources (BOE AU) misses out this time but should be added to the index late November or at the regular rebalance in December.

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

Two thirds of the way through the review period, we see one change for the SET 50 Index in December with KCE Electronics (KCE TB) replacing Ngern Tid Lor (TIDLOR TB).
There is one close change where I-TAIL (ITC TB) could replace Srisawad Power 1979 (SAWAD TB) in the index.
Delta Electronics Thailand (DELTA TB) is unlikely to be deleted while Berli Jucker (BJC TB) fails liquidity and is unlikely to be added.

Treasury Wine Entitlement Offer – Not as Straightforward as It Sounds

By Sumeet Singh

Treasury Wine Estates (TWE AU) aims to raise up to US$525m (A$825m) via a renounceable fully underwritten entitlement offer.
Proceeds from the placement will be used to part fund the acquisition of DAOU Vineyards, a luxury wine brand based in California.
In this note, we will talk about the deal dynamics.

SK Hynix. DRAM To The Rescue

By William Keating

SK Hynix reported Q323 revenues of 9.066 trillion won, up 24% QoQ but still down 17% YoY
Net income was -2.185 trillion won, a 27% improvement on the losses in the prior quarter.
While DRAM has turned profitable, NAND remains stubbornly loss making and is likely to remain so for the foreseeable future

Concerns About A Major Accounting Fraud at Kakao Mobility

It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud.
There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing.
Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp.

WuXi XDC IPO: The Bull Case

By Arun George

WuXi XDC Cayman Inc (1877628D HK), a leading contract research, development and manufacturing organization (CRDMO), is pre-marketing an HKEx IPO to raise US$500 million, according to press reports.
WuXi XDC ranked No. 2 globally and No. 1 in China among CRDMO for antibody-drug conjugates and other bioconjugates in terms of revenue in 2022, according to Frost & Sullivan.
The bull case rests on large addressable markets, market share gains, fast-paced revenue growth, strong revenue visibility, a solid balance sheet and ambitious capacity expansion plans.

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023

We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis.

WuXi XDC Cayman Pre-IPO – PHIP Updates – Margins Remain Depressed Although Growth Still Strong

By Clarence Chu

WuXi XDC Cayman Inc (1877628D HK) is looking to raise around US$500m in its upcoming Hong Kong IPO.
WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
In our previous notes we looked at the company’s past performance, peer comparison, and shared our thoughts on valuations. In this note, we discuss WXDC’s PHIP updates.

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Nov 01

Daily Brief Event-Driven: March 2024 Nikkei 225 Rebal – Socionext and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD
S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)
Concerns About A Major Accounting Fraud at Kakao Mobility
Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”
End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023
NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover
(Mostly) Asia M&A, Oct 2023: Haitong, Azure, Hollysys, Aeon, Teraoka, Tietto, Lithium Power
Back in Telefonica

March 2024 Nikkei 225 Rebal – Socionext, Disco and a Consumer Goods Stock (Ryohin Keikaku?) To ADD

In March 2024 Nikkei 225 Rebal – Look for Zozo, Ryohin Keikaku, and Maybe a Socionext Split I suggested Socionext (6526 JP) needed a stock split to get in.
Today after the close, Socionext reported H1, guided up full-year earnings (still too conservative), raised its div, and announced a 5:1 stock split for Jan1 2024.
DISCO Corp (6146 JP) is now likely to be a top 75, which leaves the question of which Consumer Goods stock would likely be added.

S&P/ASX 200 Index Adhoc Rebalance: Emerald Resources (EMR) To Replace Invocare (IVC)

Shareholders have approved Invocare Ltd (IVC AU)‘s acquisition by TPG and IVC is expected to stop trading after the close on 3 November.
Invocare Ltd (IVC AU) will be replaced by Emerald Resources Nl (EMR AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 3 November.
Boss Resources (BOE AU) misses out this time but should be added to the index late November or at the regular rebalance in December.

Concerns About A Major Accounting Fraud at Kakao Mobility

It was reported in numerous local media in Korea that FSS is investigating Kakao Mobility for a potential accounting fraud.
There are suspicions that Kakao Mobility may have artificially inflated its sales from 2020 to 2023 to enhance the value of the company prior to its IPO listing.
Given that the regulators are unlikely to make a final decision on this matter until next year, this is likely to be negative on both Kakao Mobility and Kakao Corp.

Ueda’s BOJ Looking Like Ueda’s Pre-BOJ Opinions, but Normalisation Is “A Work in Progress.”

In July the BOJ lifted the YCC range to allow flexibility at 0.5% and a red line at 1.0%. Today it moved the “reference” to 1.0% with no red line.
This allows 10yr yields to move higher, but the Board’s insistence on negative rates and YCC staying in place tells you steeper for longer makes shorting long JGBs tough.
The move today helps encourage the market mechanism to take control of dampening volatility, the same way it did when the BOJ stepped away from ETF buying in 2021.

End of Mandatory Lock-Up Periods for 48 Companies in Korea in November 2023

We discuss the end of the mandatory lock-up periods for 48 stocks in Korea in November 2023, among which 6 are in KOSPI and 42 are in KOSDAQ.
These 48 stocks on average could be subject to further selling pressures in November and could underperform relative to the market.
Among these 48 stocks, top five market cap stocks include Doosan Robotics, Fadu, CanariaBio, Enchem, and Gigavis.

NIFTY NEXT50 Index Rebalance Preview: 6 Changes & Big Turnover