Smartkarma Daily Briefs

• Integral Corporation (5842 JP) has set its IPO price at JPY2,300-2,400 per share, 18%-29% lower than the IPO reference price range of JPY2,800-3,400 per share.
• We previously discussed the IPO in Integral Corporation IPO: The Bull Case, Integral Corporation IPO: The Bear Case and Integral Corporation IPO: Valuation Insights. 
• Our analysis suggests that the revised IPO price range is attractive compared to peer multiples. The re-rating of peers since the release of the prospectus also makes the offer tempting. 

• Integral Corporation (5842 JP) is looking to raise around US$123m in its Japan IPO.
• Integral is a private equity management company advising funds that invest in both listed and unlisted companies in Japan, with a focus on mid-sized companies.
• In our previous notes, we looked at the company’s past performance. In this note, we talk about valuation.

• This is not a typo: SBI Sumishin Net Bank saw loans up 21% YoY in 1Q24, operating in Japan
• The bank has achieved cost scale, with acquisition cost per account a fraction of 2 yrs ago
• Credit quality remains exceptional, amongst best in Japan, with 0.06% NPL ratio in 1Q24

China Vanke’s H1/23 results were in line with our expectations, with single-digit growth in overall revenue but ongoing margin pressure. The company realised CNY 201 bn of revenue in the period, up 2.9% y-o-y, while attributable profit fell 19.4% to CNY 9.87 bn. Booked revenue from property development was CNY 171 bn (-4.5%), owing to weakness in settlement area (-5.2%) and settlement gross margin (-1.6 ppts).

LTM adjusted debt climbed 2.3% y-o-y to CNY 347 bn at end-June, leading to weakened credit metrics. That said, the developer managed to optimise its debt structure in H1/23, with less exposure to short-term and offshore debt. The LTM cash balance declined 11% to CNY 120 bn, but covered short-term debt by 2.4x (FYE 2022: 2.0x). The company has no offshore debt due in H2/23 but will have two USD bonds coming due in 2024, with total outstanding principle of USD 1.2 bn.

We believe Vanke faces ongoing destocking and margin pressure. That said, the company appears to have smooth access to external funding, with prudent cash-flow management. We see limited near-term repayment risk. Our fundamental Credit Bias on Vanke is “Stable”. We maintain our “Buy” recommendation on the 2024 bonds, as the yields for these notes appear to be more attractive, but revise our recommendation on the rest of the curve to “Hold” from “Buy”.

• The KOSPI 200 INDEX last week started to rally, so we want to look at WEEKLY resistance levels to evaluate where the current rally could end.
• MRM Resistance Levels where the rally could stop are: 339, 348, 356.
• Based on the current MRM pattern reading we expect the index to either roll down this week, or to rally for +2 more weeks (CC=+4) and then go down.

• KE Holdings (Beike) reported 2Q23 GTV 5.6% lower than our estimate, revenue (2.6%)/0.4% vs. our estimate/consensus, and non-GAAP NI 21.8%/42.9% higher than our estimate/consensus. 
• We think 3Q23 is the trough and expect a rebound in 4Q23 as more substantial supportive policies laying out in China. 
• We maintain the stock as BUY rating and raised TP by US$2 to US$24/ADS

• The discounts to NAV of covered holdcos have not shown a clear pattern during August, some widened while others tightened. Discounts to NAV: C.F.Alba, 46.6% (vs. 47.5%); GBL, 36.2% (vs. 39.1%); 
• Heineken Holding, 17.9% (vs.16.4%);  Industrivärden C, 7.8% (vs. 6.6%); Investor B, 16.6% (vs. 15%); Porsche Automobile Holding, 41.5% (vs. 43.8%). The spread of Rio Tinto DLC tightened to 17.8% (vs. 19%).
• What seems interesting: holding trades, Investor B vs. listed assets, Porsche SE/vs. listed assets and the Rio DLC, long RIO LN/short RIO AU.