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Smartkarma Daily Briefs

Oct 16
0

Daily Brief ESG: Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital and more

By | Daily Briefs, ESG

In today’s briefing:

  • Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital

Return Targets and Use of Cash Should Be Disclosed Together with Cost of Capital

By Aki Matsumoto

  • Cash usage and return targets should be presented to investors along with cost of capital, but few companies can successfully envision future design due to poor planning for growth investments.
  • Since there’s a significant positive correlation between ROE+DOE and TOPIX, the company should optimize its cash allocation by demonstrating enhanced shareholder returns until it can design a growth investment plan.
  • Ajinomoto, which provided cost of capital projections and ROIC targets by business segment, should be commended for its constant communication with investors seeking better disclosure in good times and bad.

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Oct 16
0

Daily Brief United States: Light & Wonder , Wells Fargo & Co and more

By | Daily Briefs, United States

In today’s briefing:

  • Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
  • WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M

Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

By Travis Lundy

WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M

By Daniel Tabbush

  • WFC is seeing net interest income growth rate decelerate sharply from 29% YoY in 2Q23 to 8% YoY in 3Q23. Its deposit costs rose from 23bps to 192bps YoY
  • CRE NCO’s rose to USD93m in 3Q23 from reversals in 3Q22. Its CRE non-accruals rose to USD3,863m in 3Q23, vs USD2,507m in 2Q23, vs USD853m in 3Q22
  • Mortgage, Auto, CRE loans are down QoQ and YoY. C&I loans, its largest loan bucket are down 0.9% QoQ. Total gross loans declined USD5.5bn QoQ, now down USD13bn from peak.

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Oct 16
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Markets Wary of Conflict; Toyota and Idemitsu Partner on Solid-State Batteries and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan | Markets Wary of Conflict; Toyota and Idemitsu Partner on Solid-State Batteries
  • What Is Holding Back China Consumers’ Potential?
  • GLP-1 Drugs – Are They Dessert or Time Bomb to Your Portfolio?
  • China Weekly Economic Wrap 10-15-2023

Ohayo Japan | Markets Wary of Conflict; Toyota and Idemitsu Partner on Solid-State Batteries

By Mark Chadwick

  • Overseas: U.S. equities declined on Friday due to escalating conflict in the Middle East, leading to higher oil prices and a flight to safety assets like bonds and gold.
  • Today: Lawson increases dividend due to strong domestic business. Daikin eyes European heat pump market. Mazda targets EV expansion in the US.
  • JapanX: Toyota and Idemitsu Partner to Revolutionize EVs with Solid-State Batteries

What Is Holding Back China Consumers’ Potential?

By Eric Chen

  • The vast majority of under-educated Chinese in less-developed regions are largely irrelevant to the China consumer market as investors and analysts know it.
  • That is why that simple benchmarking with developed markets on per capita basis almost always results in forecasts that prove too optimistic in hindsight.
  • They risk being further left behind as technology advancements and economic transformation may block the path for their income growth and hence derail consumption upgrade.

GLP-1 Drugs – Are They Dessert or Time Bomb to Your Portfolio?

By Xinyao (Criss) Wang

  • The potential/market size of GLP-1 drugs is much greater-than-expected. Indication expansion could easily generate big returns. Investment strategy for GLP-1 drugs should be long-term, which is expected to bring alpha.
  • Supply-Demand relationship of entire market would change due to popularization of GLP-1 drugs.This is not only for healthcare, but also cause a change in the investment logic of other industries.
  • It’s recommended to re-examine stock positions in portfolio. Because each indication expansion of GLP-1 drugs would mean a decrease in demand in another field, leading to potential stock price plummet.

China Weekly Economic Wrap 10-15-2023

By Fern Wang

  • Country Garden default warning, Huijin’s Big 4 investments, Regulators reined in offshore new brokerage accounts, PBOC roles fine-tuned
  • China tightened rules on security lending to boost confidence of investors
  • September China Import/Export data continued to decline and Government bond issuance continued to support ASF growth

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Oct 16
0

Daily Brief ECM: EcoPro Materials IPO: Valuation Insights and more

By | Daily Briefs, ECM

In today’s briefing:

  • EcoPro Materials IPO: Valuation Insights
  • J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation

EcoPro Materials IPO: Valuation Insights

By Arun George

J&T Global Express Pre-IPO, Part 6 | How We Could Potentially Get Closer To US$13 Bn Valuation

By Daniel Hellberg

  • In this insight we consider what it would take to pull our valuation up closer to US$13 bn
  • Such a valuation would require solid revenue growth (+17-18% Y/Y or better), plus sustained progress on raising China and ‘Other’ EBITDA margins, which are currently negative
  • Even with these optimistic assumptions, J&T would trade at 20x EV/2025 Adj EBITDA & at historical EV/Revenue multiples far above more profitable Chinese express names

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Oct 16
0

Daily Brief Credit: Morning Views Asia: Anton Oilfield and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Anton Oilfield, China Jinmao Holdings, Pan Brothers, Tata Motors ADR

Morning Views Asia: Anton Oilfield, China Jinmao Holdings, Pan Brothers, Tata Motors ADR

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 16
0

Daily Brief Event-Driven: Japan – Increase in Shorts on Some Interesting* Stocks and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Japan – Increase in Shorts on Some Interesting* Stocks
  • EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
  • TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
  • S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)
  • Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
  • Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
  • Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR

Japan – Increase in Shorts on Some Interesting* Stocks

By Brian Freitas

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

By Arun George

  • Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
  • Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
  • Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors

By Travis Lundy

  • In April 2022, I wrote about Tsi Holdings (3608 JP) saying in the first three bullet points it could double in two years. It doubled in one. 
  • They bought back shares held by JDB in April 2022, then they launched another buyback program in January 2023, and completed it last month.
  • Now they have launched another to buy back 8.46% with a ToSTNeT-3 for half on Monday AM. The rest is expected on market through end-March 2024.

S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

By Brian Freitas

Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say

By Travis Lundy

Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading

By Sanghyun Park

  • First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading. 
  • If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free. 
  • We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.

Merger Arb Mondays (16 Oct) – NWS, Haitong Intl, Eoflow, Liontown, Origin Energy, Estia, Pact, JSR

By Arun George

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Oct 16
0

Daily Brief Equity Bottom-Up: Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth
  • WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M
  • Ramayana Lestari Sentosa (RALS IJ) -A Challenging Transformation Process
  • Sa Sa Intl (178 HK): Revival Well on Track
  • Ushio (6925 JP): Preparing for the Next Growth Cycle
  • Nanya Tech: Sharply Worse Margin Performance Than Micron & SK Hynix, But Supports Memory Recovery
  • Aeon Keeps Working After High Profit Growth

Money Forward: Weakening Top Line Growth and Huge Convertible Bond Issuance to Support Growth

By Shifara Samsudeen, ACMA, CGMA

  • Money Forward (3994 JP) reported 3QFY11/2023 results on Friday. 3Q revenue fell below consensus despite increasing 37.4% YoY while reported operating losses were slightly below consensus estimated operating losses.
  • MF also has provided more details on its ¥12bn convertible bond issuance in August to secure funds to further grow its SaaS and fintech businesses.
  • This is concerning given the huge debt in the company’s balance sheet and it seems that the company may not be able to make profits in the near-term.

WFC – Net Interest Income +8% YoY Vs +29% | CRE Non-Accruals +54% QoQ, +4.5x YoY | NIM -17bps in 6M

By Daniel Tabbush

  • WFC is seeing net interest income growth rate decelerate sharply from 29% YoY in 2Q23 to 8% YoY in 3Q23. Its deposit costs rose from 23bps to 192bps YoY
  • CRE NCO’s rose to USD93m in 3Q23 from reversals in 3Q22. Its CRE non-accruals rose to USD3,863m in 3Q23, vs USD2,507m in 2Q23, vs USD853m in 3Q22
  • Mortgage, Auto, CRE loans are down QoQ and YoY. C&I loans, its largest loan bucket are down 0.9% QoQ. Total gross loans declined USD5.5bn QoQ, now down USD13bn from peak.

Ramayana Lestari Sentosa (RALS IJ) -A Challenging Transformation Process

By Angus Mackintosh

  • Iconic Indonesian mass-market department store retailer Ramayana Lestari Sentosa (RALS IJ) has struggled with sluggish growth this year, especially over Lebaran but management remains confident in some recovery in 2H2023.
  • The company embarked on transformation pre-pandemic but COVID put a brake on this change and forced a number of stores to close and resurrection has begun again but slowly.
  • Ramayana is taking a conservative approach this year, opting not to expand its store network as anticipates weakened purchasing power but pre-election spending could provide a boost. Valuations are attractive.

Sa Sa Intl (178 HK): Revival Well on Track

By Osbert Tang, CFA

  • Market expectation for FY23/24 earnings of Sa Sa International Hldgs (178 HK) is overly conservative. It achieved HK$110-125m of profit in 1H, and 2H is the normal peak season.
  • Offline sales in 2Q23/24 recovered to 47.2% of the 2019 level and the rebound in mainland tourist arrivals should boost sales over the next 12 months. 
  • Lower rent costs should allow for higher operating leverage as revenue revives. Its gross margin for 1H23/24 has further expanded and we think this trend can be sustained. 

Ushio (6925 JP): Preparing for the Next Growth Cycle

By Scott Foster

  • Ushio is making substantial investments in it core light source technologies, sacrificing short term profit for long-term growth potential.
  • Geared to rising demand for EUV mask and IC package lithography, bio-medical equipment, and solid-state light sources. Digital cinema business rebounding from COVID.
  • Selling at 21x current EPS guidance, 12x management’s FY Mar-26 EPS target and 0.9x book value. Upside potential to book value while waiting for confirmation of forecast recovery.

Nanya Tech: Sharply Worse Margin Performance Than Micron & SK Hynix, But Supports Memory Recovery

By Vincent Fernando, CFA

  • Nanya Technology’s results missed expectations last week, showing a sharp decline in margin, underperforming the recent results performance of Micron & SK Hynix.
  • The company was more conservative on a pricing recovery outlook for its memory ASPs than Micron & SK, due to lacking DDR5 DRAM products and lacking High Bandwith Memory DRAM.
  • Nevertheless the company is cautiously reporting an improving environment and improved customer inventory levels, hence we believe the result still implies an improving memory industry pricing environment into year end.

Aeon Keeps Working After High Profit Growth

By Michael Causton

  • As outlined in previous reports, Aeon has been working hard to streamline its vast retail empire but also rethinking the fundamentals of retailing for each major format it operates.
  • The results are now coming through with a big increase in operating profits in 1H2023, up 23% on last year.
  • There is real momentum now, and the new online supermarket business is central to its ambitions to create the first true national FMCG business.

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Oct 16
0

Daily Brief Macro: Indonesian Strategy – Election Race Hots Up Amidst Profits Recovery and more

By | Daily Briefs, Macro

In today’s briefing:

  • Indonesian Strategy – Election Race Hots Up Amidst Profits Recovery
  • 3 Reasons Why Stocks Should Rally Into Year-End
  • The Term Premium Red Herring
  • US Financial Markets Face Headwinds Due to Rising Term Premium in US Treasuries
  • Portfolio Watch: The Art of Resisting Panic
  • Probing the Evolving Inflation Debate
  • Rates Watch: Are we all still chasing that cutting cycle too early?

Indonesian Strategy – Election Race Hots Up Amidst Profits Recovery

By Angus Mackintosh

  • Indonesia’s election race is about to begin with the Presidential candidates announcing running mates on 26th October and with campaigns that could boost consumer demand. 
  • The Indonesian economy should see GDP growth above 5% in 2023 and 2024, with inflation already under control at 2.28% in September. FDI remains positive although may slow before elections. 
  • We explore the prospects for different sectors with a positive view on banks, retail, consumer staples, property, and Astra International as a market proxy, with some opportunities in tech.

3 Reasons Why Stocks Should Rally Into Year-End

By Cam Hui

  • The financial markets are recovering from a very oversold condition and extreme positioning. The recovery has already sparked a minor risk-on rebound.
  • The rally should continue owing to supportive market structure, positive risk appetite, and supportive sentiment.
  • Bullish momentum should continue to spark a FOMO stampede for risk into year-end.

The Term Premium Red Herring

By Cam Hui

  • The turnaround from the recent bond market tantrum was mainly attributable to excessive bearishness rather than to fundamental factors.
  • Bearish sentiment was also evident in the equity market. S&P 500 breadth, as measured by the percentage of stocks above their 50 dma, fell below 10% in the recent sell-off.
  • Recent episodes of similar breadth wipeouts saw the stocks rally until this indicator reached at least 80%, indicating further upside in the coming weeks

US Financial Markets Face Headwinds Due to Rising Term Premium in US Treasuries

By Said Desaque

  • Strong US labour demand suggests Fed tightening has been insufficient to restore price stability. Uncertainty about the US economic policy outlook has produced a rising term premium for US Treasuries.
  • The falling term premium on US Treasuries after the global financial crisis boosted liquidity in the riskier segments of the capital structure, while any reversion will have adverse implications. 
  • Fears of profligate fiscal policy conduct can boost the term premium, a fear which has arguably raised longer-term Treasury yields in recent weeks along with Fed policy conduct fears.

Portfolio Watch: The Art of Resisting Panic

By Emil Moller

  • The world has seen significant changes since the last release of Portfolio Watch, marked by the tragic events in the Middle East.
  • To add some context, it is perhaps helpful to refresh the six key takeaways before the Hamas incursion into Israel on Saturday.
  • 1) We are on the sideline on Bonds but it is starting to look juicy 2) Yield curve steepener is good risk reward 3) We’re bearish on equities 4) We don’t wanna bet against the USD 5) Credit spreads are bound to widen  6) We think banks are starting to look detached from fundamentals

Probing the Evolving Inflation Debate

By Thomas Lam

  • The debate will become increasingly more complicated as actual inflation continues to exceed the Fed’s goal
  • Hence, it is useful to go beyond the routine analysis of the raw data to extract additional inflation markers and indicators   
  • My longer-term inflation outlook will be informed by my ongoing scrutiny of the incoming data via the lens of the unique markers and indicators    

Rates Watch: Are we all still chasing that cutting cycle too early?

By Andreas Steno

  • In light of the firmer than expected CPI report from the US, we have re-visited our curve views across major currencies.
  • We find the following to be decent risk/rewards:USD-EUR spreads can widen further due to diverging inflation outlooks.
  • We see value in March-2024 spreads.

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Oct 16
0

Daily Brief Australia: Boss Resources and more

By | Australia, Daily Briefs

In today’s briefing:

  • S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

S&P/ASX200 Index Ad Hoc Rebalance Preview: Replacement for Invocare (IVC)

By Brian Freitas

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Oct 16
0

Daily Brief South Korea: Eoflow , Hanwha Ocean, EcoPro Materials and more

By | Daily Briefs, South Korea

In today’s briefing:

  • EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings
  • Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading
  • EcoPro Materials IPO: Valuation Insights

EOFLOW/Medtronic Tender: Pretrial Timetable and Latest Court Filings

By Arun George

  • Latest filings on Insulet Corp (PODD US)’s voluntary dismissal without prejudice only to Flex (FLEX US), Eoflow (294090 KS)’s motion to restart Korean sales, dismiss a count and a timetable.
  • Examining the court filings suggests Medtronic Plc (MDT US)’s access to court unredacted documents is restricted. Medtronic’s limited access makes evaluating the transaction’s potential litigation risk challenging.
  • Eoflow’s defence in the court documents is based on reverse engineering and procedural arguments. The KRX will rule on Eoflow’s share trading suspension by 1 November.

Trading Angles Using Severely Backwardated Hanwha Ocean’s SSFs Ahead of the Rights Trading

By Sanghyun Park

  • First, we can take on some risk and build up a short position using SSFs from now, aiming for an aggressively low price (likely Day 1) during the rights trading. 
  • If this approach seems somewhat risky, the second is to wait until the rights trading and, although accepting some sacrifice in the spread, build positions relatively risk-free. 
  • We can also actively build up a long position in the significantly backwardated SSFs from now and, instead, set up an aggressive short on the underlying shares.

EcoPro Materials IPO: Valuation Insights

By Arun George

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