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Smartkarma Daily Briefs

Jul 12
0

Daily Brief Quantitative Analysis: Covered Call Strategies Uncovered and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Covered Call Strategies Uncovered

Covered Call Strategies Uncovered

By Nicolas Rabener

  • Covered call strategies aim to offer index-like returns with lower volatility and higher yields
  • They have underperformed their benchmarks significantly over longer periods
  • They are tools for market timing, but that is difficult to execute successfully

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Jul 12
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan|Equities Bid Ahead of CPI Print; NUGGET:China Semi Derisking – The Winner Is…Yes and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan|Equities Bid Ahead of CPI Print; NUGGET:China Semi Derisking – The Winner Is…Yes, Japan!
  • China Beer Sector: One of The Few Consumer Sectors That Are Still Trading Up After The Pandemic
  • Global Exchanges – Pace of Revenue Diversification Differs Between DM and EM Exchanges
  • China TMT Update-BZ/XPEV/BABA/PDD/1024.HK:Taobao’s Short Videos/SME Development Index/XPEV in Israel
  • The Nasdaq’s Special Rebalance Is Not So Special

Ohayo Japan|Equities Bid Ahead of CPI Print; NUGGET:China Semi Derisking – The Winner Is…Yes, Japan!

By Mark Chadwick

  • OVERSEAS. SPX +0.7% with all sectors in the green ahead of expected soft CPI print on Wed; Oil strong with weaker USD; MSFT wins as Activision purchase progresses
  • JAPAN. NKY Futures +0.4% vs Cash; USDJPY 140.3; Markets start coalesing around BOJ policy shift; TSE kicks out 48 companies from Prime listing; Big Earnings Beat from Lawson(2651)
  • NUGGET. Building a global semi-supply chain is a central tenet of Japan’s industrial policy. We think focusing on short term cyclical semi-weakness risks missing out on the home runs

China Beer Sector: One of The Few Consumer Sectors That Are Still Trading Up After The Pandemic

By Steve Zhou, CFA

  • China’s beer sector is still trading up, despite the deflation concerns of the overall China consumer sector.
  • Visible ASP growth and margin improvement over the next few years make the sector an attractive investment opportunity.
  • Prefer China Resources Beer Holdings (291 HK) as it offers the best risk-reward within the sector.  

Global Exchanges – Pace of Revenue Diversification Differs Between DM and EM Exchanges

By Victor Galliano

  • Exchanges, especially in developed markets, continue to seek revenue streams outside of the traditional trading and transaction-based fees which has led to a mini-boom in exchange-driven M&A targeting diversification
  • We use data and IT revenues as a proxy for “stickier” potentially recurring revenues in four DM and three EM exchanges, concluding that DM exchanges are under more diversification pressure
  • We identify three buy opportunities in exchanges; we like Hong Kong Exchange, Deutsche Borse and we add Nasdaq, whilst we are negative on Coinbase which remains the exchange to avoid

China TMT Update-BZ/XPEV/BABA/PDD/1024.HK:Taobao’s Short Videos/SME Development Index/XPEV in Israel

By Shawn Yang

  • Boss Zhipin: SME Development Index rebound slightly in June, and labor subindex also marginally improved, but still far below the prosperity range
  • XPEV:  Xpeng establishes partnership with Freesbe for Israel market (+)
  • BABA/PDD/1024.HK: Taobao launched a dedicated entrance to short videos (+/-/-)

The Nasdaq’s Special Rebalance Is Not So Special

By Investment Talk

  • You might have heard the news that Nasdaq Inc announced1 a “special rebalance” for the Nasdaq 100; an index which tracks the largest technology stocks across a range of America’s sectors.
  • This reshuffle seeks to “address overconcentration in the index by redistributing the weights”; specifically the weightings of the Big 7 (Google, Microsoft, Apple, Nvidia, Amazon, Tesla, and Meta) who, together, account for ~54% of the index.
  • The rebalance will be based on the shares outstanding as of July 3rd, and changes are expected to be announced on July 14th; taking effect by July 24th2.

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Jul 12
0

Daily Brief Event-Driven: LG Energy – Quick Thoughts on US$2bn EB Offering by Parent and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
  • LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
  • LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
  • Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
  • Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
  • Chindata: Bain’s Move Spurs China Merchants Into Action
  • Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40
  • POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent

By Sumeet Singh

  • LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
  • LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
  • In this note, we have a quick look at the deal and provide our thoughts on the structure.

LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

By Douglas Kim

  • On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
  • Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
  • We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

By Sanghyun Park

  • The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
  • The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
  • We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

By Travis Lundy

  • Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
  • The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
  • It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.  

Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes

By Brian Freitas

  • Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
  • There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
  • There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

Chindata: Bain’s Move Spurs China Merchants Into Action

By David Blennerhassett

  • My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
  • Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
  • This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 

Shougang Fushan Resources (639 HK): Partial Offer at HK$2.40

By Arun George

  • Shougang Fushan Resources (639 HK) has launched a partial offer to acquire a maximum of 125.0m shares (2.47% of outstanding) at HK$2.40 per share, a 17.6% premium to the undisturbed price.
  • The partial offer is conditional on approval by more than 50% of disinterested shares and the shareholder approval of the whitewash waiver. There is no minimum acceptance condition.
  • The 2020 partial offer, which was at a 9.3% premium to the undisturbed price and -17% below the current offer, was overwhelmingly approved. Therefore, the current offer should be approved.  

POSCO DX Could Switch Its Listing from KOSDAQ to KOSPI by End of 2023

By Douglas Kim

  • On 10 July, it was reported in the Hankyung Business Daily that Posco DX (022100 KS) could switch its listing from KOSDAQ to KOSPI by the end of 2023.
  • One of the key reasons for the change in the listing venue from KOSDAQ to KOSPI is that POSCO Group believes this could lead to improved valuations for the company.
  • We believe the valuations of Posco DX have become too high. Therefore, we have a Negative View of Posco DX at current prices. 

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Jul 12
0

Daily Brief ECM: Nusantara Sejahtera Raya (Cinema XXI) IPO – The Positive – High Market Share and more

By | Daily Briefs, ECM

In today’s briefing:

  • Nusantara Sejahtera Raya (Cinema XXI) IPO – The Positive – High Market Share, Steady Recovery
  • Utkarsh Small Finance Bank IPO- Forensic Analysis
  • Fadu Pre-IPO – Peer Comparison – Hardly Comparable in Scale to Its Peers
  • J&T Global Express Pre-IPO, Part 3: ‘New Markets’ & X-Border | Our Initial EV Estimate Is US$8.6 Bn
  • Nusantara Sejahtera Raya (Cinema XXI) IPO – The Negatives – Private Placement, Not a Primary Raising
  • Syngenta Pre-IPO – The Negatives – Margins Remain Razor Thin and Parent on Sanction List

Nusantara Sejahtera Raya (Cinema XXI) IPO – The Positive – High Market Share, Steady Recovery

By Sumeet Singh

  • Nusantara Sejahtera Raya (Cinema XXI) aims to raise up to US$160m in its Indonesia IPO.
  • Cinema XXI is a premium theatrical exhibition, F&B and experience company. It is the largest cinema chain operator in Indonesia.
  • In this note, we talk about the positive aspects of the deal.

Utkarsh Small Finance Bank IPO- Forensic Analysis

By Nitin Mangal

  • Utkarsh Small Finance Bank (1639303D IN) IPO opens for subscription this week.
  • The company currently is fifth largest SFB in India and has demonstrated robust growth in loan portfolio, deposits and improved productivity in the last two years.
  • However, one must be cautious of the write offs worth INR 6 bn done in the last two years which benefitted the NPAs

Fadu Pre-IPO – Peer Comparison – Hardly Comparable in Scale to Its Peers

By Ethan Aw

  • Fadu (440110 KS) is looking to raise up to US$147m in its Korean IPO.
  • Fadu is a South Korean fabless semiconductor maker mainly engaged in flash storage technology innovation. Its core products are Enterprise Solid State Drive (SSD) and Enterprise SSDs.
  • In our previous notes, we looked at the company’s past performance. In this note, we talk about peer comparison.

J&T Global Express Pre-IPO, Part 3: ‘New Markets’ & X-Border | Our Initial EV Estimate Is US$8.6 Bn

By Daniel Hellberg

  • After analyzing J&T’s Chinese and SE Asian operations in previous insights, in this note we turn to the company’s ‘Others’ segment, made up of New Markets and X-Border logistics
  • Compared to China and SE Asia, J&T’s New Markets and X-Border logistics business lines are small (just 11% of 2022 Revenue) but could offer attractive growth in the medium-term
  • We conclude this insight with a preliminary sum-of-parts valuation of J&T as a whole. Based on available information, our initial estimate of J&T’s EV is US$8.6 bn (pre-IPO)

Nusantara Sejahtera Raya (Cinema XXI) IPO – The Negatives – Private Placement, Not a Primary Raising

By Sumeet Singh

  • Cinema XXI (CINEMA IJ) aims to raise up to US$160m in its Indonesia IPO.
  • Cinema XXI is a premium theatrical exhibition, F&B and experience company. It is the largest cinema chain operator in Indonesia.
  • In this note, we talk about the not-so-positive aspects of the deal.

Syngenta Pre-IPO – The Negatives – Margins Remain Razor Thin and Parent on Sanction List

By Clarence Chu

  • Syngenta Group (1844795D CH) is looking to raise around US$9.2bn in its upcoming China A-share IPO.
  • Syngenta Group (Syngenta) is one of the largest agricultural firms globally, developing, producing and commercializing a portfolio of crop protection, seeds, crop nutrition products.
  • In this note, we will talk about the not so positive aspects of the deal.

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Jul 12
0

Daily Brief Credit: Vista Land & Lifescapes – Tear Sheet – Lucror Analytics and more

By | Credit, Daily Briefs

In today’s briefing:

  • Vista Land & Lifescapes – Tear Sheet – Lucror Analytics
  • Morning Views Asia: Agung Podomoro Land, Shui On Land

Vista Land & Lifescapes – Tear Sheet – Lucror Analytics

By Leonard Law, CFA

We view Vista Land & Lifescapes (VLL) as “High Risk” on the LARA scale. This is mainly in consideration of the company’s weak financial profile, with high leverage and inadequate Cash/Short-term Debt coverage. Moreover, there are large ongoing related-party transactions. Positively, the company enjoys high margins. It also has a sizeable portfolio of investment properties and long-term securities investments, which supports the balance sheet and provides recurring income.

Our fundamental Credit Bias is “Negative”, considering the company’s track record of negative FCF generation and inadequate liquidity. Moreover, the challenging macroeconomic conditions (with rising costs and interest rates) may impact its margins and financing costs. That said, we believe VLL has good access to funding, which mitigates its debt repayment risk. In addition, we believe the controlling shareholders have a strong incentive to support VLL if needed.

We initiate coverage with a “Hold” recommendation on the VLLPM notes. We deem the yield unattractive. That said, market technicals appear robust, possibly supported by demand from private banks and local investors.

Morning Views Asia: Agung Podomoro Land, Shui On Land

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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Jul 12
0

Daily Brief Equity Bottom-Up: Playmates Toys: Movie and Toy Reviews TMNT Mutant Mayhem Suggest Big Upside Ahead and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Playmates Toys: Movie and Toy Reviews TMNT Mutant Mayhem Suggest Big Upside Ahead
  • Ant Group Proposes Share Buyback at Roughly 30% of IPO Valuation
  • Seven & I: 7-Eleven US Poses Challenges for FY24 Guidance
  • Rorze (6323) | Q1 Miss, Buying Opp
  • Initiation – OHBA (9765 JP)
  • Dr Lal PathLabs (DLPL IN): Strong Trajectory in Non-COVID Business; Positive Industry Outlook
  • 5 in 5 with Sri Trang Gloves Thailand – Touch Of Life
  • BeiGene (6160.HK/​BGNE.US) – Novatis Chose to Escape Before Tragedy of TIGIT Truly Comes
  • Chariot Limited (AIM: CHAR): Adding portfolio depth and near term newsflow
  • Moderna Inc (MRNA US) – What Would Happen After Moderna Enters China?

Playmates Toys: Movie and Toy Reviews TMNT Mutant Mayhem Suggest Big Upside Ahead

By Nicolas Van Broekhoven

  • Three weeks ahead of the global launch of TMNT Mutant Mayhem momentum is building
  • Google Trends searches reveal rising interest in both movies and toys
  • Risk/Reward is still highly attractive, last time a TMNT movie was a success stock hit 4 HKD

Ant Group Proposes Share Buyback at Roughly 30% of IPO Valuation

By Caixin Global

  • Ant Group Co. Ltd. has offered to buy back some shares at a whopping 70% discount to the unrealized valuation for its ill-fated IPO, shortly after regulators hit the fintech giant with an almost $1 billion fine.
  • Ant Group announced Saturday that it had proposed to repurchase as much as 7.6% at a price that values the company at approximately 567 billion yuan ($78 billion).
  • The offer represents a roughly 40% discount to the approximate 960 billion yuan figure achieved in Ant Group’s last fundraising round in 2018, and is around 70% cheaper than the 2.1 trillion yuan valuation touted in its planned 2020 IPO.

Seven & I: 7-Eleven US Poses Challenges for FY24 Guidance

By Oshadhi Kumarasiri

  • Gasoline retail prices have caught up with declining wholesale prices, and it should lead to around 16-20% QoQ decrease in retail fuel margin to ¥35-37 cents per gallon.
  • US gas station merchandise sales exhibited weak performance this year, experiencing YoY growth rates of 5%, -2%, -15%, -17%, and -22% during the first five months.
  • We anticipate around 25% downside for Seven & I Holdings (3382 JP) after earnings, as it may face challenges in achieving its FY24 guidance.

Rorze (6323) | Q1 Miss, Buying Opp

By Mark Chadwick

  • Rorze’s stock price has risen 35% since we became bullish on the stock in August
  • Q1 sales and operating profits big miss versus analyst consensus due to slowing semicon capex cycle
  • We would be buying into any stock weakness with an eye on recovery in 2H23 into 2024

Initiation – OHBA (9765 JP)

By Sessa Investment Research

  • OHBA is a general construction consulting firm boasting a leading market share in the field of urban development, with potential to reap the benefits of the long- term shift to compact and smart cities in rural areas.
  • Since its establishment in 1922, the company has been involved in various stages of public works projects preceding the construction phase, such as urban planning, land readjustment, surveying, and land development, in Japan, where the separation of design and construction is mandatory
  • This commenced with the development of Togoshi New Town (1932), which OHBA undertook in partnership with Mitsui Gomei and Mitsui Trust.

Dr Lal PathLabs (DLPL IN): Strong Trajectory in Non-COVID Business; Positive Industry Outlook

By Tina Banerjee

  • Dr Lal PathLabs Ltd (DLPL IN) reported 14% and 16%, YoY, revenue growth from its non-COVID business in 4QFY23 and FY23, respectively.
  • The company’s base business is now back to pre-COVID trajectory. Margins are also nearing pre-COVID level. Going ahead, the company has couple of margin levers.
  • Due to lesser competitive threat and uncertainty over COVID, FY24 is lesser challenging than the previous year. The company expects higher revenue growth in FY24 than FY23.

5 in 5 with Sri Trang Gloves Thailand – Touch Of Life

By Geoff Howie

5 in 5 with Sri Trang Gloves Thailand – Touch Of Life

BeiGene (6160.HK/​BGNE.US) – Novatis Chose to Escape Before Tragedy of TIGIT Truly Comes

By Xinyao (Criss) Wang

  • BeiGene and Novartis mutually terminate the Option Agreement on ociperlimab. Our interpretation is Novartis may think its clinical data wouldn’t meet expectations, and is therefore unwilling to take the risk.
  • Theoretically, BeiGene still has the possibility of creating miracles to turn things around, but based on the current situation, the risk of TIGIT project failure is already very high.
  • We suggest that investors can reduce the position of BeiGene in advance or even consider offload entirely (In case its stock price falls due to unsatisfactory clinical data in 23H2).

Chariot Limited (AIM: CHAR): Adding portfolio depth and near term newsflow

By Auctus Advisors

  • Chariot has raised US mm of new equity priced at £0.14 per share.
  • The company is also looking to raise up to an additional US$3 mm through an open offer. 
  • The proceeds of the raise will be used to drill four new low cost/low risk exploration wells onshore Morocco in a licence expected to be awarded imminently.

Moderna Inc (MRNA US) – What Would Happen After Moderna Enters China?

By Xinyao (Criss) Wang

  • Moderna’s move into China helps ease its current performance difficulties. But China has its own regulations/policies on vaccines. Whether Moderna can successfully adapt/stand out in China remains to be seen.
  • The entire vaccine industry in China is expected to undergo significant changes. We listed the companies in this industrial chain that would benefit from the successful signing with Moderna.
  • An important signal behind this deal is that while significant differences remain at the top, mutually beneficial business cooperation between China and US will continue, providing investors with additional options/confidence.

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Jul 12
0

Daily Brief Macro: Malaysia’s State Polls an Acid Test for Anwar’s Government and more

By | Daily Briefs, Macro

In today’s briefing:

  • Malaysia’s State Polls an Acid Test for Anwar’s Government
  • Philippines’ Marcos Has Surprised on the Upside
  • Markets Better Not Focus on Valuation
  • The Energy Cable #28 Is There Life in Energy After All? – Watch Series
  • EM by EM #12 – Is the surging Peso a prelude for a longer Mexico bull case ? – Steno Signals
  • The Great Game – Erdogan’s Historic Flip-Flop – The Great Game
  • CX Daily: China Looks to Saudi Arabia Amid Shifting Sands in U.S. Economic Ties
  • UK: Slackening Too Slowly for the BoE
  • Oh, Canada!
  • CX Daily: Xiaomi to Stay the Course on Chip Design After Rival Bails

Malaysia’s State Polls an Acid Test for Anwar’s Government

By Manu Bhaskaran

  • The forthcoming state legislative assembly elections in six states will be the first major electoral test for premier Anwar Ibrahim and his coalition government.
  • Baseline expectations are modest for both Anwar and his opponents in the Perikatan Nasional bloc. Trends among Malay voters will be key in determining the results. 
  • Structural factors point to the headline status quo being maintained but watch for socio-religious issues and the parties’ ability to appeal to younger first-time voters.   

Philippines’ Marcos Has Surprised on the Upside

By Manu Bhaskaran

  • The Macros Jr. Administration is in good standing after its first year: its economic agenda of fiscal consolidation, infrastructure spending, and liberalization strikes us as sound.  
  • Some positive political signs are also emerging: investigations into previous extrajudicial killings and a relaxation of restrictions on the media are encouraging.
  • The foreign policy shift is significant: Marcos has abandoned the Sinophilia of his predecessor Duterte, taking a more hawkish stance on maritime disputes vis-à-vis China.

Markets Better Not Focus on Valuation

By Jeroen Blokland

  • The risk premium of equity asset classes has further declined. The risk premium on US Equities is now just 3.1%, which is very unattractive.
  • The risk premium of equity asset classes has further declined. The risk premium on US Equities is now just 3.1%, which is very unattractive.
  • Our ‘Bellwether EPS indicator’ points to a year-on-year earnings-per-share decline of nearly 22%, leaving little room for earnings growth to remain positive.

The Energy Cable #28 Is There Life in Energy After All? – Watch Series

By Andreas Steno

  • Rates are moving on the back of strong numbers in the labor market, but energy is not finding a bid… yet? This week we wonder if there is life in energy after all.
  • Below are some of the important curves in the energy space with their current price and price 1 month ago. Notice something? All have shifted upwards and we thus wonder if there is life in energy space after all?
  • If you are looking for arguments for strength in the curves below we find the Fed’s failure to tighten monetary conditions properly obvious, but that same reason might be why investors should tread lightly. Maybe that’s why energy stocks haven’t outperformed the market over the last month.     

EM by EM #12 – Is the surging Peso a prelude for a longer Mexico bull case ? – Steno Signals

By Emil Moller

  • Many have profited from MXN carry in the first half of 2023.
  • But is there more left to squeeze out or is it running on fumes?
  • We give our take here and assess the structural patterns at play in Mexico in relation to recent performance and the geopolitical climate.

The Great Game – Erdogan’s Historic Flip-Flop – The Great Game

By Andreas Steno

  • 3 main takeaways from the historic summit in Lithuania
  • The recent NATO summit held in Lithuania had an array of impactful moments that are set to shape the course of global politics in the coming years.
  • The event will be dissected from a multitude of perspectives, but there are a few major developments that stand out, demonstrating the complex tapestry of global alliances, negotiations, and unexpected twists.

CX Daily: China Looks to Saudi Arabia Amid Shifting Sands in U.S. Economic Ties

By Caixin Global

  • Saudi Arabia /Cover Story: China looks to Saudi Arabia amid shifting sands in U.S. economic ties
  • China-U.S. /: In talks with Yellen, China demands removal of U.S. economic sanctions
  • Funds /: New rules for China’s $3 trillion private fund industry have more teeth, experts say

UK: Slackening Too Slowly for the BoE

By Phil Rush

  • The UK unemployment rate surprisingly jumped by 0.2pp to 3.98%, its highest level since Dec-21. This time the rise looks genuine rather than being a sampling issue.
  • Wage growth was surprisingly strong owing to revisions again, while the monthly impulse matched our view. It will probably peak in the next month’s release.
  • The BoE may await slower wages and CPI inflation’s step down before reverting to 25bp increments as the Governor didn’t resist pricing. We now expect 50bps in August.

Oh, Canada!

By Untying The Gordian Knot

  • The yield patterns for the 2-year and 10-year in Canada differ significantly from those in the US.
  • In particular, the 2-year Canadian yield charts are better-defined patterns than the US yields and provide more clarity.
  • In the short term, the Canadian 10-year yields are expected to increase more quickly than the US as it catches up.

CX Daily: Xiaomi to Stay the Course on Chip Design After Rival Bails

By Caixin Global

  • Xiaomi /In Depth: Xiaomi to stay the course on chip design after rival bails
  • Personnel /: China’s new office for Hong Kong and Macao affairs has its first head
  • Property /: China extends policy to take pressure off ailing property market

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Jul 12
0

Most Read: JSR Corp, Socionext, LG Energy Solution, Liontown Resources, Plus Alpha Consulting, Cameco Corp, Chindata Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang
  • JSR (4185 JP) Takeover – Why So Wide? FUD and Flows
  • Socionext (6526 JP): The Current Playbook
  • LG Energy – Quick Thoughts on US$2bn EB Offering by Parent
  • S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September
  • LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion
  • LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations
  • Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion
  • Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes
  • Chindata: Bain’s Move Spurs China Merchants Into Action

LG Chem: Considering a Block Deal Sale of About 2 Trillion Won of LG Energy Solution: A Big Overhang

By Douglas Kim

  • After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.
  • This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.
  • Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.

JSR (4185 JP) Takeover – Why So Wide? FUD and Flows

By Travis Lundy

  • In the last week of June, Japanese government-affiliated Japan Investment Corp (“JIC”) announced it would take over JSR Corp (4185 JP). A “surprise” but perhaps not totally. 
  • It traded tight, then it traded back out. Then worse. Then worse again. There were good reasons for this. There were perhaps less good reasons too. 
  • FUD and Flows mean that it is likely to continue to trade wide for the near future.

Socionext (6526 JP): The Current Playbook

By Arun George

  • Since the announcement of the US$1.9 billion secondary placement, Socionext (6526 JP)’s shares are down -25.0% from the undisturbed price of JPY21,950 per share (5 July).
  • So far, Socionext’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.
  • The offering will likely be priced on 11 July. Due to the steep share price decline, Socionext is trading at an undemanding multiple compared to global SoC peers.  

LG Energy – Quick Thoughts on US$2bn EB Offering by Parent

By Sumeet Singh

  • LG Chem Ltd (051910 KS) aims to raise around US$2bn via offering 2028 and 2030 puttable USD exchangeable bonds for LG Energy Solution (373220 KS) shares.
  • LG Chem (LGC) had been rumoured to sell down some of its stake in LG Energy Solutions (LGES), hence, this deal will remove the overhang on LGES.
  • In this note, we have a quick look at the deal and provide our thoughts on the structure.

S&P/​​​​​​​​ASX Index Rebalance Preview: Potential Changes in September

By Brian Freitas

  • We forecast 22 changes across the ASX50 Index, ASX100 Index, S&P/ASX 200 (AS51 INDEX) and ASX300 Index at the September rebalance.
  • Some of the changes are high probability while others are close to cutoffs. The impact of passive trading will be pretty large on a lot of stocks.
  • Short interest on the potential deletes indicates some pre-positioning but there should still be a fair bit more to do.

LG Chem: To Issue Exchangeable Bonds Worth US$2 Billion

By Douglas Kim

  • On 11 July, LG Chem announced that it would issue foreign currency exchangeable bonds worth US$2 billion to raise funs to expansion into its rechargeable battery materials. 
  • Investors in LG Energy Solution will likely have a more positive view of this EB issue rather than a block sale of common shares, because of lack of price discount.
  • We believe LG Chem is not done in selling its shares of LGES as we think LG Chem is likely to sell additional 5-10% stake in LGES in 3-5 years. 

LG Chem Official ₩2.6T EB Issuance (1.6% of LG Energy SO): Details & Trading Considerations

By Sanghyun Park

  • The exchange prices are ₩687,500 and ₩715,000 at a premium of 25-30% to the closing price of LG Energy Solution today.
  • The commencement date for both the 5-year and 7-year bonds’ exchange is August 28th.
  • We should design a strategic setup that targets a band play within the current price range and the low ₩700,000 range.

Plus Alpha Consulting (4071 JP) – ¥30bn Offer Leads to ¥5bn TOPIX Inclusion

By Travis Lundy

  • Plus Alpha Consulting (4071 JP) listed on TSE Growth at end-June 2021 at ¥2300/share, which was 90x the trailing fiscal year’s earnings. but only about 65x then-current year earnings.
  • The stock popped 20+% on Day 1 to close ¥2803. Last Friday, two years and 13% higher at ¥3185/share, the company announced a Secondary Offering and move to TSE Prime.
  • It’s a big offering. It’s a smaller TOPIX inclusion event. Next spring we’ll see more upweights.  

Solactive Global Uranium & Nuclear Components Index Rebalance Preview: Potential Changes

By Brian Freitas

  • Based on prices and turnover from 10 July, there could be one deletion from the index in July. Plus there will be capping and float changes.
  • There are four stocks that meet the inclusion criteria but all are non-pure play companies and the index is already at the limit of 15 non-pure play companies.
  • There will be a large impact on a lot of stocks but the flows are not very large due to the limited assets tracking the index.

Chindata: Bain’s Move Spurs China Merchants Into Action

By David Blennerhassett

  • My read of Bain’s Offer last month, was a tactic to flesh out a competing Offer.  It seemed unlikely Bain would get the regulatory approval to take Chindata (CD US) private. 
  • Now state-backed China Merchants Capital Holdings International Ltd. has made a non-binding offer of $9.20/ADS, compared to $8/ADS from Bain.
  • This Offer is indicative. But an SOE taking over data centres makes a lot of sense. 

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Jul 11
0

Daily Brief Credit: Morning Views Asia: China SCE and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: China SCE, Hopson Development, Reliance Industries, Sino-Ocean Service

Morning Views Asia: China SCE, Hopson Development, Reliance Industries, Sino-Ocean Service

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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Jul 11
0

Daily Brief Thematic (Sector/Industry): New Developments in Postage Fraud Case and US Congress Could Create Big Obstacles for Temu and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • New Developments in Postage Fraud Case and US Congress Could Create Big Obstacles for Temu, SHEIN
  • Ohayo Japan| Fed Rate Hike End in Sight; NUGGET: More Women on Boards = Higher Valuations?
  • [Blue Lotus Macro]: A Job-Creating Stimulus that Also Saves the Real Estate
  • Industry Report – Cannabis
  • Weekly Sustainable Investing Surveyor Week Ended July 7, 2023

New Developments in Postage Fraud Case and US Congress Could Create Big Obstacles for Temu, SHEIN

By Daniel Hellberg

  • Update on the US postage fraud case we reported on earlier: it’s far more expansive than previously reported, and last week the judge ordered that the trial begin in August
  • A new report from the US Congress attacks Temu, SHEIN on two fronts: Xinjiang-made goods and de minimus imports; tighter enforcement or new legislation could soon follow
  • It’s unclear how the postage fraud case and growing Congressional concerns will play out; worst-case, both could dramatically undermine the direct-to-US consumer business model

Ohayo Japan| Fed Rate Hike End in Sight; NUGGET: More Women on Boards = Higher Valuations?

By Mark Chadwick

  • OVERSEAS. SPX rises as investors see end of Fed rate hike cycle; Investors continue to doubt the US bull market; China steps in again to support Real Estate market
  • JAPAN. NKY Futs +0.4% vs Cash; USJPY 141.3; “New” NISA eligible funds expand;  JP investors buy record foreign bonds in H1;  ON THE STREET:Mit Motors to BUY; Toyota to Neutral
  • NUGGET. Push for more women on boards continue in Japan – still lagging, but trend is up. Will it play out in valuations? Global Evidence Supportive.

[Blue Lotus Macro]: A Job-Creating Stimulus that Also Saves the Real Estate

By Shawn Yang

  • Forty to sixty percent of the world’s carbon emission takes place in buildings. Energy efficiency job is the single largest component that balances the job loss
  • In traditional energy and job gain in renewable energy. China is materially behind the US in energy efficiency; We believe inclusion of energy efficiency in the upcoming stimulus package 
  • Will be a sound choice to boost employment and GDP, and our listed companies in the new energy sector shall benefit from the trend.

Industry Report – Cannabis

By Water Tower Research

  • After a strong 1H23, global equities were down this week. The MSCI World Index fell 1.42%, while the S&P 500 dropped 1.06%.
  • The decline was driven by strongerthan-expected labor market data and concerns that this may make the Fed less accommodating.
  • The Russell 2000 finished the week down 1.32%, while the NASDAQ declined 0.92%.

Weekly Sustainable Investing Surveyor Week Ended July 7, 2023

By Water Tower Research

  • WTR Sustainable Index: During the week ended July 7, 2023, the WTR Sustainable Index outperformed the broader market, rising 3.3% W/W versus the S&P 500 Index (down 1.2%), the Russell 2000 Index (down 1.3%), and the Nasdaq Composite Index (down 0.9%).

  • Advanced Transportation Solutions (75.2% of the index) contributed to the index’s outperformance, rising 4.7%, while Energy Technology (6.5% of the index) was up 0.4% and Industrial Climate and Ag Technology was down 0.8%.

  • Valuation: Based on forward 12-month consensus estimates, the current P/E ratio of the WTR Sustainable index is 25.3x versus 20.5x for the S&P 500.

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