Smartkarma Daily Briefs

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Liontown Warms To Albemarle’s Bump

By David Blennerhassett

Back on the 28 March, Liontown Resources (LTR AU) rejected the third proposal of $2.50/share from Albemarle (ALB US), the world’s largest lithium producer, citing terms were opportunistic.
Then everything went quiet. There appeared to be an interested party building a stake ~$2.75/share, but nothing concrete emerged.
Now Albemarle has returned with a revised indicative proposal of $3.00/share – best and final. Due diligence has been granted. The board is supportive if terms are firmed.

Allkem/Livent (AKE AU | LTHM US) Merger Update: MUCH More Than Meets The Eye

The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/Livent: Enlarged Charging Unit is on track.
As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, TOPIX FFW, SSE50, AS51, ChiNext, Kenedix, Liontown

An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU).
The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

Last Week In Event SPACE: EOFlow, Fast Retailing, JMDC, Origin Energy

By David Blennerhassett

Should the nominated directors, to be voted on by EOFlow (294090 KS)‘s shareholders at the November EGM, include Medtronic Plc (MDT US) executives, then game on.
Fast Retailing (9983 JP) STILL has a Nikkei 225 problem, which means it probably has to underperform Nikkei 225 slightly between now and the Base Date (31 July 2024).
JMDC (4483 JP) has been one of the more annoying partial tenders out there. Even post-facto, it is tough to know what the disposition was. This is extraordinarily vexing.

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

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)

Light & Wonder (LNW AU) will replace United Malt Group Ltd (UMG AU) in the S&P/ASX 200 (AS51 INDEX) at the close on 17 October.
Invocare Ltd (IVC AU) is expected to stop trading after the close on 3 November and Boss Resources (BOE AU) is best placed to be the replacement.
There are stocks that are close on the heels of Boss Resources (BOE AU) and will compete for a place. Two of those could be added at the December rebalance.

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

Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
This is a possibly deceptive index add. I’d be quite careful.

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Oct 16

Daily Brief Consumer: CyberAgent Inc, Tsi Holdings, Light & Wonder , Ramayana Lestari Sentosa, Sa Sa International Hldgs, Aeon Co Ltd and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Japan – Increase in Shorts on Some Interesting* Stocks
TSI Holdings (3608) – Yet Another Big Buyback; Still Good, Still Cheap, Now W/ Engagement Investors
Light & Wonder CDIs Replace United Malts in ASX200 – Be Careful Is All I Can Say
Ramayana Lestari Sentosa (RALS IJ) -A Challenging Transformation Process
Sa Sa Intl (178 HK): Revival Well on Track
Aeon Keeps Working After High Profit Growth

Japan – Increase in Shorts on Some Interesting* Stocks

CyberAgent, Lixil Group, Hakuhodo Dy Holdings, Kobayashi Pharmaceutical, Welcia Holdings, Persol Holdings, GMO Payment Gateway, Kurita Water Industries and Open House have all underperformed the Nikkei 225 over the recent past.
The underperformance could lead to adjustments in global passive portfolios and liquidity events on some of the stocks.
Short interest has increased on some stocks and there could be more pre-positioning to come over the next few weeks.

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

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.

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

Post-Close Friday it was announced that Light & Wonder (LNW AU) Chess Depositary Interests would replace United Malt Group Ltd (UMG AU) at the close on 17 October.
This was announced before US markets opened. Light & Wonder (LNW US) shares popped 5.65%, closing 5.8% through the Aussie line.
This is a possibly deceptive index add. I’d be quite careful.

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.

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

Daily Brief Quantitative Analysis: Northbound Flows (Oct 13th): Longi Green and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Northbound Flows (Oct 13th): Longi Green, China Tourism, Iflytek, Ping An Insurance
A-H Premium Weekly (Oct 13th): Wuapptec, Tsingtao Brew, China Telecom, China Southern
TWSE Foreign Holding Weekly (Oct 13th): TSMC, Mediatek, Quanta Computer, Wistron
HK Short Interest Weekly: Wuxi Bio, Xpeng, Mnso, Bidu, Meituan, China Mobile, Baba
Hong Kong Connect Flows (Oct 13th): Meituan, Tencent

Northbound Flows (Oct 13th): Longi Green, China Tourism, Iflytek, Ping An Insurance

We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of October 13th.
We estimate the weekly outflows to be US$1,898.6 million, led by industrials, information technology, and offset by consumer discretionary, health care.
We highlight flows for Longi Green, China Tourism, Iflytek, Ping An Insurance.

A-H Premium Weekly (Oct 13th): Wuapptec, Tsingtao Brew, China Telecom, China Southern

We analyse the changes of A-H premium on 146 stocks over the last week. The average A-H premium was 118.6% as of Oct 13th.
The average A-H premium changed by -6.8ppt week on week, led by energy, health care, materials and offset by consumer staples.
We highlight weekly changes in A-H premium for Wuapptec, Tsingtao Brew, China Telecom and China Southern.

TWSE Foreign Holding Weekly (Oct 13th): TSMC, Mediatek, Quanta Computer, Wistron

We analyzed the changes in foreign holdings of TWSE Stocks as of Oct 13th which has an aggregated holding worth USD638.7bn.
We tabulate league table for top changes by value for 1 week, one 4 weeks, 1 year and top stocks held by foreign instutions by dollar value.
We estimate that foreign flows to be inflows of USD1,177mln and highlight foreign changes in TSMC, Mediatek, Quanta Computer, Wistron.

HK Short Interest Weekly: Wuxi Bio, Xpeng, Mnso, Bidu, Meituan, China Mobile, Baba

We analyzed the latest HK SFC report for aggregate short position as of Sep 29th.
Top short increases and decreases were tabulated for one week and four week period.
We highlight short changes in Wuxi Bio, Xpeng, Mnso, Bidu, Meituan, China Mobile, Baba.

Hong Kong Connect Flows (Oct 13th): Meituan, Tencent

We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of October 13th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight weekly Hong Kong Connect flows for Meituan and Tencent.

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Oct 16

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

By Smartkarma Daily Briefs | 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

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

By Smartkarma Daily Briefs | 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