Smartkarma Daily Briefs

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

Intage Holdings (4326 JP): NTT’s Partial Tender Offer

NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.

Budweiser APAC: Chinese Beer Makers Poised for a Breakout

By Oshadhi Kumarasiri

With shares trading near its all-time low since its listing on HKEX in 3Q19, we think it could be worthwhile taking another look at Budweiser Brewing APAC (1876 HK)’s valuation.
China’s beer industry and regional markets are expected to sustain growth momentum in Q3, driven by tourism’s impact on increased beer consumption.
We think it’s worth keeping an eye on Budweiser APAC, as we suspect that it could start to break out from the current downtrend in the near term.

NextEd Group (NXD): Whiplash! Market Reaction to Australia’s Visa Changes Highlights the Risk.

By Anik Siwach

Agile Response to Visa Changes: NextEd’s nimble approach to the end of the COVID-19 408 visa showcases adaptability in uncertain times.
Tech Sector Growth Potential: Expanding in the thriving tech field, NextEd taps into strong post-study work rights and sector support.
Regulatory Challenges: Navigating regulatory shifts, NextEd’s resilience shines amid uncertainty in the non-university education landscape.

[Luckin Coffee (LKNCY US, BUY, TP US$44) TP Change]: Moutai Latte Is Not Just a Blockbuster

By Shawn Yang

Luckin Coffee’s new blockbuster Moutai Latte achieved 5.42mn cup sold with RMB100mn GMV in first day.
We think Luckin Coffee had effectively achieved two goals through the new premium product: 1) de facto price lifting; 2) extend potential customer base and step into the monetization stage.
We raised our 2023 revenue and non-GAAP NI on Luckin by 1.6%/4.4%. We maintain the stock as BUY rating and raise TP by US$1 to US$44/ADS.

Swatch Group: Revival Of The Swiss Brand

By Alexis Dwek

Swatch Group enjoys a strong competitive position in the Swiss watch industry, with leading positions across all price segments
Swatch Group’s 17 watch brands and 2 multi-brand retail companies demonstrate an incredible creativity and savoir-faire
The stock is currently trading well below its 10-year historical P/E mean.

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Sep 07

Most Read: JFE Holdings, Boss Resources, Intage Holdings, ARM Holdings, Axiata Group, Empyrean Technology , Mirae Asset Tiger Top 10 ETF and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
NTT’s Partial Offer for Marketing Consultant Intage (4326) –
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Intage Holdings (4326 JP): NTT’s Partial Tender Offer
Arm IPO – Don’t Worry, It’ll Be Fine
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
StubWorld: Axiata Is Coming Up Cheap
CSI300 Index Rebalance Preview: 14 Potential Changes in December
Single-Day ETF Flow Event Not to Be Missed in Korea in December

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

By Brian Freitas

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

NTT’s Partial Offer for Marketing Consultant Intage (4326) –

Today, NTT (Nippon Telegraph & Telephone) (9432 JP) announced a partial offer to buy a minimum of 40.0% and a maximum of 51.0% of Intage Holdings (4326 JP).
Six crossholders holding 20.98% between them have separately agreed to tender a total of 19.9%. That means a minimum 25.4% minority participation. With success, minimum pro-ration is 51.5%.
The dynamics of this deal and where synergies lie suggests people need to think really hard about where they underwrite future illiquid ownership.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

By Clarence Chu

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Intage Holdings (4326 JP): NTT’s Partial Tender Offer

NTT (Nippon Telegraph & Telephone) (9432 JP) has announced a partial tender offer for Intage Holdings (4326 JP) to make it a consolidated subsidiary.
The offer is for a minimum of 15.4m shares (40.00% ownership ratio) and a maximum of 19.6m shares (51.00%) at JPY2,400 per share, a 26.4% premium to the undisturbed price.
Irrevocables represent a 19.90% ownership ratio. The minimum acceptance condition requires a 20% minority acceptance rate. The offer is attractive and represents an all-time high.

Arm IPO – Don’t Worry, It’ll Be Fine

By Mio Kato

So the terms are out for Softbank’s attempt to list Arm.
In typical sparkling form, Masayoshi Son has clocked a ~19% drawdown within weeks.
Good thing all the bankers will easily get their $8bn loan paid back in full and aren’t subject to conflicting interests…?

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

By Sumeet Singh

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

StubWorld: Axiata Is Coming Up Cheap

By David Blennerhassett

Axiata Group (AXIATA MK)‘s NAV discount and implied stub are around their lows since the CelcomDigi (CDB MK) / Digi.com merger last November.
Preceding my comments on Axiata 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%.

CSI300 Index Rebalance Preview: 14 Potential Changes in December

By Brian Freitas

Over 85% of the way through the review period, we see 14 potential index changes at the December rebalance that will be implemented at the close on 8 December.
We estimate a one-way turnover of 1.93% at the December rebalance leading to a one-way trade of CNY 6.93bn.
The huge inflow to passive trackers has led to the gap between the potential adds and deletes narrowing. That should reverse as passive will need to sell the deletes.

Single-Day ETF Flow Event Not to Be Missed in Korea in December

By Sanghyun Park

Ecopro Co will replace Celltrion Inc. Their float market cap difference is nearly 5 trillion won, so it doesn’t seem likely that this will reverse by the end of November.
Ecopro may not have a very significant passive impact x ADTV, given its still high trading volume. On the other hand, Celltrion seems likely to be the target of traders.
From a trading perspective, it’s important to focus on the potential price impact of this flow event on Celltrion, which could be amplified depending on the possibility of merger cancellation.

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Sep 06

Daily Brief Utilities: China Longyuan Power and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

China Longyuan (916 HK): Value Has Definitely Emerged

China Longyuan (916 HK): Value Has Definitely Emerged

By Osbert Tang, CFA

China Longyuan Power (916 HK) is now attractively priced at 5.9x and 5.2x PERs for FY23 and FY24, respectively. The 2Q23 result clearly showed that business is gathering momentum.
Margins have demonstrated good improvement despite weaker tariffs and coal sale business. With a very low base in last year, its 2H23 earnings growth will be impressive.
There is positive progress on new project sign-up which has secured its pipeline. Asset injection from parent will stay as a major theme in the next two years.

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Sep 06

Daily Brief TMT/Internet: ARM Holdings, GLOBALFOUNDRIES , VNG (VinaGame), Shinsung ST, Intel Corp, Kinatico, Lenovo and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

ARM Holdings IPO: Unattractive Price Range
ARM Holdings Pre-IPO – Thoughts on Valuations
Globalfoundries Not Amused By TSMC’s European JV
VNG IPO: The Bull Case
Shinsung ST IPO Preview
Intel Does A Surprising Side Deal With Tower Semi
Shinsung ST IPO Valuation Analysis
ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding
Kinatico Ltd – The Power of SaaS Drives H2 and FY23 Profit
Morning Views Asia: China Vanke , Lenovo, Vedanta Resources, Yuexiu Property

ARM Holdings IPO: Unattractive Price Range

ARM Holdings (1822695D US) has launched a roadshow for its IPO. Softbank Group (9984 JP) offers 95.5 million ADSs (over-allotment option of 7.0 million ADS) at US$47.00-51.00 per ADS.
We previously discussed the IPO in ARM Holdings IPO: The Bull Case, ARM Holdings IPO: The Bear Case and ARM Holdings IPO: Valuation Insights.
The IPO price range values ARM at a premium to peers’ multiples. DCF sensitivity analysis suggests a need for ambitious forecasts to justify the price range.

ARM Holdings Pre-IPO – Thoughts on Valuations

By Sumeet Singh

Softbank Group (9984 JP) aims to raise around US$8-10bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our earlier note, we looked at Arm’s past performance and undertook a peer comparison. In this note, we talk about valuations.

Globalfoundries Not Amused By TSMC’s European JV

By William Keating

Globalfoundries may be considering filing a complaint regarding TSMC’s recently announced European JV with three of their customers, Bosch, Infineon and NXP
Yet they just inked their own deal for a JV with ST Micro in France. What gives?
In conjunction with their recent CFO hiring fiasco, one wonders if all is well with the GF leadership team.

VNG IPO: The Bull Case

VNG (VinaGame) (VNG US) is Vietnam’s leading, homegrown digital ecosystem. VNG has filed for a Nasdaq listing to raise US$300 million.
VNG is the number one mobile games publisher in Vietnam. VNG’s Zalo, Zing MP3 and Bao Moi applications are Vietnam’s leading messaging, music streaming and online news applications.
The bull case rests on the core games business’ improving KPIs, return to growth, good revenue visibility, and reducing dependence on critical partners combined with VNG’s improving margin.

Shinsung ST IPO Preview

The IPO price range of Shinsung ST is from 22,000 won to 25,000 won and the expected IPO offering amount is from 44 billion won to 50 billion won.
Shinsung ST produces busbars that connect currents of electric components in secondary battery batteries for EVs and ESSs, and module cases that protect battery cells from external shocks.
The total order backlog of the company’s products reached 1.5 trillion won at the end of 2022. Order backlog ratio is 14x, which is very high.

Intel Does A Surprising Side Deal With Tower Semi

By William Keating

Tower Semi will pay Intel $300 million to acquire and own equipment and other fixed assets to be installed in the New Mexico facility
Intel’s termination fee on the failure of the proposed Tower Semi acquisition was $353 million
It’s quite the clever move and doesn’t require China’s approval…

Shinsung ST IPO Valuation Analysis

By Research as a Service (RaaS)

Our base case valuation is implied price per share of 51,050 won, which is 104% higher than the high end of the IPO price range of 25,000 won.
We estimate Shinsung ST to generate sales of 133.9 billion won (up 25.7% YoY) and operating profit of 15.4 billion won (up 94.6% YoY) in 2023.
Our valuation sensitivity analysis suggests an IPO price range of 41,351 won to 61,771 won per share.

ARM Holdings IPO – Thoughts on Valuation – Still Very Demanding

By Sumeet Singh

Softbank Group (9984 JP) aims to raisebetween US$4.5-4.9bn via selling some of its stake in ARM Holdings‘ US IPO.
ARM develops and licences high-performance, low-cost, and energy-efficient CPU products and related technology, which is used by semiconductor companies and OEMs to develop their own products.
In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

Kinatico Ltd – The Power of SaaS Drives H2 and FY23 Profit

Kinatico Ltd (ASX:KYP) is a ‘Know Your People” regtech company providing workforce compliance monitoring and management technology and services.
KYP has reported FY23 NPAT of $0.237m, an increase of 116% on the previous corresponding period (pcp), the company’s best-ever result.
On an adjusted basis (for non-cash items), NPAT was $0.75m, a turnaround of $1.5m on the prior period while the gross margin and EBITDA margin hit record levels of 65.7% and 11.2% respectively.

Morning Views Asia: China Vanke , Lenovo, Vedanta Resources, Yuexiu Property

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 Vanke
Lenovo
Vedanta Resources
Yuexiu Property

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Sep 06

Daily Brief Energy/Materials: JFE Holdings, Boss Resources, Orora Ltd, Endurance Gold and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

JFE Holdings (5411) Stock+CB Offering
Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions
JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction
Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive
EDG: Eagle Zone Extended a Further 125m

JFE Holdings (5411) Stock+CB Offering

Today JFE Holdings (5411 JP) announced it would raise ~JPY 121bn in an equity offering of 55mm treasury shares and JPY 90bn in a Convertible Bond offering.
¥125bn will be spent on capex for expansion, ¥75bn for capex, investments, and R&D related to decarbonisation, as well as repayment of debt to 2028.
This is a heavier than a “normal” equity offering. And recent large-ish equity offerings seem to have more volatility in outcome (post-offer overhang, or squeeze) than previous years.

Mergers, Acquisitions and Potential S&P/ASX Index Ad Hoc Inclusions

By Brian Freitas

There are a bunch of stocks that are constituents of the S&P/ASX family of indices and could go private or merge prior to the next scheduled rebalance in December.
That will lead to ad hoc inclusions for the S&P/ASX 200 (AS51 INDEX) and could also lead to ad hoc inclusions for the S&P/ASX 50 and S&P/ASX 100 indices.
There is a fair amount of short interest on some of the potential inclusions and short covering due to index inclusion could take the stocks higher.

JFE Holdings Placement – Well Flagged, but Would Probably Need a Wider Correction

By Clarence Chu

JFE Holdings (5411 JP) is looking to raise around US$870m to fund its capacity expansion plans. Together with the offering, it will undertake a US$610m CB issuance.
The deal appears to be well flagged with the firm disclosing its JV and other related CapEx plans in its earlier earnings announcement.
Overall, the new shares would result in a 8.2% dilution and represent 12 days of three month ADV.

Orora Limited Placement – Large Deal to Digest, Although Seems Well Flagged and Accretive

By Clarence Chu

Orora Ltd (ORA AU) is looking to raise A$1,345m (~US$870m) via a primary placement and an entitlement offer to partially fund its acquisition of Saverglass.
While the exact size/target of an acquisition wasn’t explicitly mentioned earlier, the firm had discussed its potential use of M&A to grow its North American/Europe regions.
Including the entitlement offer, the deal would represent 212 days of three month ADV and add 58.9% to the firm’s total shares outstanding.

EDG: Eagle Zone Extended a Further 125m

By Atrium Research

EDG reported assay results for three drill holes, two at the Eagle Zone and one at the previously undrilled Crown target.
This morning, Endurance Gold Corporation (EDG:TSXV) announced assay results for three drill holes, two at the Eagle Zone and the first drill hole completed at the Crown target.
Hole-071 is the first drill hole completed in the Crown area and intersected the northwest extension of the Eagle Zone with 3.81 g/t Au over 3.4m.

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Sep 06

Daily Brief Industrials: Komatsu Ltd, Doosan Robotics, Srg Takamiya and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Komatsu (6301) | A Winning Bet on Onshoring and Electrification
Changes to a Points Based System for IPO Subscriptions in Korea
1Q Follow-Up – Takamiya (2445 JP)

Komatsu (6301) | A Winning Bet on Onshoring and Electrification

By Mark Chadwick

We turned bullish on Komatsu a year ago and the stock has since returned over 50%.
Komatsu is trading at 10x EV/EBIT versus an historical average of 11x, with a target price of ¥5,100/share.
Komatsu represents a cheaper way to play the theme of onshoring and long-term mining demand from electrification.

Changes to a Points Based System for IPO Subscriptions in Korea

In order to reduce fake subscriptions for IPOs in Korea, the financial regulators have changed the IPO subscription system to extend the number of subscription days from two to five.
Plus, points based system is implemented so that investors will be given higher points for subscribing on the first day as opposed to the fifth day.
Doosan Robotics will be a key company to look out for in terms of how this book building changes could impact its IPO as most upcoming IPOs are small caps.

1Q Follow-Up – Takamiya (2445 JP)

By Sessa Investment Research

Takamiya announced its 1Q results for FY24/3 on August 4, after the close of trading.
Key figures on a consolidated basis were sales of ¥9,896 mn (+9.7% YoY), operating profit rose 125.5% YoY, to ¥409 mn, ordinary profit rose 41.0%YoY, to ¥615 mn, and quartery net profit rose 33.0%YoY, to ¥417 mn.
An overview by business segment is as follows

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Sep 06

Daily Brief Industrials: Komatsu Ltd, Doosan Robotics, Srg Takamiya and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Komatsu (6301) | A Winning Bet on Onshoring and Electrification
Changes to a Points Based System for IPO Subscriptions in Korea
1Q Follow-Up – Takamiya (2445 JP)

Komatsu (6301) | A Winning Bet on Onshoring and Electrification

By Mark Chadwick

We turned bullish on Komatsu a year ago and the stock has since returned over 50%.
Komatsu is trading at 10x EV/EBIT versus an historical average of 11x, with a target price of ¥5,100/share.
Komatsu represents a cheaper way to play the theme of onshoring and long-term mining demand from electrification.

Changes to a Points Based System for IPO Subscriptions in Korea