Smartkarma Daily Briefs

Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

Great Wall Motor Eyes Expansion in Vietnam Amid Southeast Asia Push

By Caixin Global

Great Wall Motor Co. Ltd. (601633.SH +2.50%) said on Wednesday that it will enter the Vietnamese market in August with its Haval H6 hybrid model, while a broader plan to build an assembly plant for new-energy vehicles in the country is set for 2025.
The Haval H6s will initially be exported to Vietnam from its manufacturing facility in Rayong, Thailand, the Hebei-based carmaker said earlier.
Vietnam is the fourth-largest auto market in the Association of Southeast Asian Nations (ASEAN) region after Indonesia, Thailand and Malaysia, according to 2022 passenger car sales figures released by the ASEAN Automotive Federation.

[Alibaba (BABA US, BUY, TP US$109) Company Update]: Racehorse Mechanism Benefits E-Commerce

By Shawn Yang

We recently discussed BABA’s management changes with more e-commerce practitioners, and our main conclusion is that this change will be more beneficial to BABA’s e-commerce business rather than other subsidiaries;
BABA is expected to learn from Tencent and ByteDance by shifting from a centralized authority model to a racehorse mechanism. Some subsidiaries, especially AliCloud and Cainiao, undergo a painful transformation;
This may be good news for BABA because its e-commerce is the largest of its valuation. We also remind investors to exercise caution regarding the upcoming IPOs of BABA subsidiaries.

Pre-IPO Wuhan YZY Biopharma – Both R&D and Commercialization Capabilities Have yet to Be Proven

By Xinyao (Criss) Wang

YZY is a company that is serious about drug development However, there is actually high R&D risk of its pipeline candidates. So, YZY’s R&D capability has yet to be proven.
There are still many unanswered questions in the whole direction of bispecific antibody. If YZY’s candidates fail to prove better marginal clinical benefits, they won’t have good commercialization performance.
YZY has a long way to go based on its pipeline situation. Considering Wuhan YZY Biopharma (YZY HK) has no product in commercialization stage, its valuation may not be high.

Bank of Chongqing – One Of Worst NIM Contraction, But With High Loan Growth

By Daniel Tabbush

Combination of high NIM contraction with high loan growth is not a good combination
BOC has seen its NIM down 14% in the past year but against 12% loan growth
PBOC pressure to cut rates and for banks to support ailing debtors, is a risk

SF Holdings A/H Listing – Early Look – Front Running

S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
In this note, we look at its past performance and other deal dynamics that might impact the listing.

Qiniu Pre-IPO Tearsheet

By Clarence Chu

Qiniu Limited (1045102D CH) is looking to raise about US$200m in its upcoming Hong Kong IPO.
Qiniu Limited (Qiniu) is a one-stop scenario-based intelligent audiovisual service provider.
According to iResearch, the firm is the third largest audiovisual platform as a service (PaaS) provider in China in terms of FY22 revenue, with a market share of 5.7%.

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Jul 04

Daily Brief Japan: Tryt Inc, Takara Bio Inc, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

TRYT IPO: Valuation Insights
Takara Bio (4974 JP): Corona Cliff Set to Jeopardize FY24 Financial; Formulated FY26 Management Plan
What Changes in the External Environment Are Changing the Mindset of Managers?

TRYT IPO: Valuation Insights

Tryt Inc (9164 JP), a leading professional recruiting and temporary staffing service in Japan, seeks to raise US$450 million. Pricing is on 5 July, and book-building is 6-11 July.
We previously discussed the IPO in TRYT IPO: The Bull Case and TRYT IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Tryt is unattractively valued at the IPO reference price of JPY1,620 per share. We would pass on the IPO.

Takara Bio (4974 JP): Corona Cliff Set to Jeopardize FY24 Financial; Formulated FY26 Management Plan

By Tina Banerjee

Takara Bio Inc (4974 JP) is anticipating 32% YoY decline in revenue to ¥53B in FY24. Both operating and net profits are expected to decline more than 60% YoY in FY24.
The company has formulated the medium-term management plan 2026 for the three-year period ending in FY26, with the final-year quantitative targets being operating profit of ¥15 billion and ROE 8%.
Considering Takara Bio’s FY24 operating profit guidance of ¥8B, FY26 target seems to be aggressive and difficult to achieve.

What Changes in the External Environment Are Changing the Mindset of Managers?

By Aki Matsumoto

Given the history of changes in the external environment that have changed managers’ mindsets all at once, inflation and rising foreign shareholdings are likely to be the catalysts for change.
Given that some companies still do not show capital efficiency as a KPI, it is dangerous to expect much from individual companies’ efforts to improve capital efficiency.
Whether or not to engage in management improvement is a matter for managers, but the catalyst is often an increase in foreign shareholdings. Changes are taking place in some companies.

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Jul 04

Daily Brief TMT/Internet: Fadu , Black Sesame Technologies, Eoptolink Technology Inc Ltd, Alibaba (ADR), Nano Dimension , Qiniu Limited and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Fadu IPO Preview
Black Sesame Pre-IPO Tearsheet
CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes
China Designer of AI-Based Self-Driving Chips Files for Hong Kong IPO
[Alibaba (BABA US, BUY, TP US$109) Company Update]: Racehorse Mechanism Benefits E-Commerce
Nano Dimension – Record quarter for revenue
Qiniu Pre-IPO Tearsheet

Fadu IPO Preview

By Douglas Kim

Fadu is getting ready to complete its IPO in Korea in August. Fadu is one of the most highly anticipated IPOs in Korea in 2023.
The expected market cap at the top end of the IPO price range is 1.6 trillion won. The IPO price range is from 26,000 won to 31,000 won.
Fadu is a system semiconductor fabless company specializing in data centers.

Black Sesame Pre-IPO Tearsheet

Black Sesame International Holdings (BSIH) is looking to raise around US$300m in its upcoming Hong Kong IPO. The deal will be run by CICC and Huatai.
BSIH is an automotive-grade computing SoC and SoC-based intelligent vehicle solution provider.
In terms of shipment of automotive-grade high-computing power SoCs in 2022, it was the third largest provider globally, according to Frost & Sullivan.

CSI500 Index Rebalance Preview: Potential Adds Outperforming Potential Deletes

Two thirds of the way through the review period for the June rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.1% at the December rebalance resulting in a one-way trade of CNY 6.75bn.
The potential adds have outperformed the potential deletes and the CSI500 Index over the last six weeks. There could be more outperformance till nearer the end of the review period.

China Designer of AI-Based Self-Driving Chips Files for Hong Kong IPO

By Caixin Global

Black Sesame International Holding Ltd., a Xiaomi-backed designer of artificial intelligence-based self-driving computing chips, has filed for a Hong Kong IPO
Black Sesame, which also counts Tencent Holdings Ltd. and SAIC Motor Corp. Ltd. among its major investors, plans to use the IPO proceeds mainly to develop system-on-a-chip (SoC) designs and software for intelligent vehicles in the next three years.
Bloomberg in January reported that the company expects to raise $200 million through the share sale, citing people familiar with the matter.

[Alibaba (BABA US, BUY, TP US$109) Company Update]: Racehorse Mechanism Benefits E-Commerce

By Shawn Yang

We recently discussed BABA’s management changes with more e-commerce practitioners, and our main conclusion is that this change will be more beneficial to BABA’s e-commerce business rather than other subsidiaries;
BABA is expected to learn from Tencent and ByteDance by shifting from a centralized authority model to a racehorse mechanism. Some subsidiaries, especially AliCloud and Cainiao, undergo a painful transformation;
This may be good news for BABA because its e-commerce is the largest of its valuation. We also remind investors to exercise caution regarding the upcoming IPOs of BABA subsidiaries.

Nano Dimension – Record quarter for revenue

By Edison Investment Research

For Q123, Nano Dimension reported good progress in revenue, up 43.5% y o-y and 23.6% q-o-q to $15.0m. Continued investment in R&D resulted in an adjusted EBITDA loss of $23.7m. Revaluation of the company’s stake in Stratasys and interest income earned on cash resulted in net income of $22.2m for the quarter. With net cash of $974m at quarter end, the company is well-funded to pursue its acquisition strategy.

Qiniu Pre-IPO Tearsheet

By Clarence Chu

Qiniu Limited (1045102D CH) is looking to raise about US$200m in its upcoming Hong Kong IPO.
Qiniu Limited (Qiniu) is a one-stop scenario-based intelligent audiovisual service provider.
According to iResearch, the firm is the third largest audiovisual platform as a service (PaaS) provider in China in terms of FY22 revenue, with a market share of 5.7%.

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Jul 04

Daily Brief Energy/Materials: Musgrave Minerals, Siemens Energy AG, Amman Mineral Internasional and more

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

In today’s briefing:

Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer
Siemens Energy: Profit Warning Offers Buying Opportunity
Amman Mineral International IPO Trading – Looks Attractive with Ample Upside

Musgrave Minerals (MGV AU): Ramelius’ Offer Edges past Westgold’s Offer

Musgrave Minerals (MGV AU) has recommended a cash and scrip off-market takeover offer from Ramelius Resources (RMS AU) at 1 RMS share for every 4.21 MGV shares + A$0.04 cash.
RMS’ offer is attractive compared to adjusted exchange ratios and peer multiples. The offer, which has a 50.1% minimum acceptance condition, has secured commitments from shareholders representing 12.13% of shares.
At the last close, RMS’ offer is 14.9% higher than Westgold Resources (WGX AU)’s rival scrip off-market takeover offer of 1 WGX share for every 5.37 MGV shares.

Siemens Energy: Profit Warning Offers Buying Opportunity

By Alexis Dwek

Since its spin-off from Siemens Group’s former Gas and Power division three years ago, momentum for the new formed Company has been picking up
Siemens Energy is experiencing a rise in demand for green transition technologies as governments worldwide move away from fossil fuels.
Siemens Gamesa has recently announced a profit warning. We feel that the market over-reacted as the shares plunged over 37% on the day, erasing €7bn in Siemens Energy’s market value.

Amman Mineral International IPO Trading – Looks Attractive with Ample Upside

By Ethan Aw

Amman Mineral Internasional (1416286D IJ) raised around US$714m in its Indonesian IPO.
Amman Mineral International (AMI) carries out exploration, development, mining, processing. The company operates an open pit copper and gold mine known as the Batu Hijau mine in Indonesia.
In this note, we will talk about the trading dynamics and valuation.

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Jul 04

Daily Brief Consumer: Perfect Medical Health, Alibaba Group Holding , United Malt Group Ltd, Senco Gold , Great Wall Motor, Faurecia, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety
Alibaba (9988 HK): Buy JD Logistics as the Business Model Alibaba Begins to Follow
United Malt/Malteries Soufflet: I’ll Drink To That!
Senco Gold Ltd IPO- Forensic Analysis
Great Wall Motor Eyes Expansion in Vietnam Amid Southeast Asia Push
Faurecia – ESG Report – Lucror Analytics
What Changes in the External Environment Are Changing the Mindset of Managers?

Shortlist Of High Conviction Ideas: Income, Value, and Margin of Safety

By Sameer Taneja

We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
Post the interim results, we provide short updates on each company and links to our latest work on them.
Our top picks are Perfect Medical Health (1830 HK), Water Oasis (1161 HK), Taste Gourmet (8371 HK), Uchi Technologies (UCHI MK), and The Keepers Holdings (KEEPR PM).

Alibaba (9988 HK): Buy JD Logistics as the Business Model Alibaba Begins to Follow

By Ming Lu

Alibaba’s new chairman decides to provide logistics service to outside customers.
We believe Alibaba is following JD Logistics, as both companies have large retailer bases.
We suggest buying JD Logistics the role model instead of Alibaba the follower.

United Malt/Malteries Soufflet: I’ll Drink To That!

By David Blennerhassett

Back on the 28 March, United Malt Group Ltd (UMG AU) entered into a NBIO with Malteries Soufflet at an Offer Price of $5.00/share, a 45.3% premium to undisturbed.
After a lengthy due diligence process, the two companies have now entered into a binding agreement of A$5.00/share, by way of a Scheme. UMG’s board has unanimously recommended the bid.
The Offer is subject to FIRB and other regulatory approvals. Malteries Soufflet and UMG are the second and fourth-largest maltsters in the world.

Senco Gold Ltd IPO- Forensic Analysis

By Nitin Mangal

Senco Gold (0655443D IN) ‘s long awaited IPO is scheduled to open this week.
The company is the largest organized retail jewellery player in the East and has a pan India presence.
A look at its IPO filing and current financials reveal several key takeaways, including ongoing litigations, inability to generate cash and register key trademarks, etc.

Great Wall Motor Eyes Expansion in Vietnam Amid Southeast Asia Push

By Caixin Global

Great Wall Motor Co. Ltd. (601633.SH +2.50%) said on Wednesday that it will enter the Vietnamese market in August with its Haval H6 hybrid model, while a broader plan to build an assembly plant for new-energy vehicles in the country is set for 2025.
The Haval H6s will initially be exported to Vietnam from its manufacturing facility in Rayong, Thailand, the Hebei-based carmaker said earlier.
Vietnam is the fourth-largest auto market in the Association of Southeast Asian Nations (ASEAN) region after Indonesia, Thailand and Malaysia, according to 2022 passenger car sales figures released by the ASEAN Automotive Federation.

Faurecia – ESG Report – Lucror Analytics

By Charles Macgregor

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Faurecia’s ESG as “Strong”, in line with the Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

What Changes in the External Environment Are Changing the Mindset of Managers?

By Aki Matsumoto

Given the history of changes in the external environment that have changed managers’ mindsets all at once, inflation and rising foreign shareholdings are likely to be the catalysts for change.
Given that some companies still do not show capital efficiency as a KPI, it is dangerous to expect much from individual companies’ efforts to improve capital efficiency.
Whether or not to engage in management improvement is a matter for managers, but the catalyst is often an increase in foreign shareholdings. Changes are taking place in some companies.

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Jul 04

Daily Brief Financials: S&P 500 INDEX, HDFC Bank, Bank of Chongqing Co Ltd H, Sino-Ocean Group and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models
HDFC – Amalgamated, We List Its Own Key Synergies, Which Appear Tremendous
Bank of Chongqing – One Of Worst NIM Contraction, But With High Loan Growth
Morning Views Asia: MGM China Holdings, Sino-Ocean Service, Vedanta Resources

EQD | Introducing the Market Reversal Matrix (MRM): Predict Trend Reversal with Bayesian Models

By Nico Rosti

A market-timing device that classifies historical trend patterns/reversals in “buckets”, to generate a “matrix” showing the market’s average trend reversal “behavior” at the end of each trend “type”.
A purely statistical approach: using Bayesian Models to determine the probability of DAILY or WEEKLY trend reversal at precise LONG/SHORT support prices at fixed points in time.
The analogy with the game of Blackjack: knowing the probability of a trend reversal can be 30% or 90% (not always =50%) can be a significant edge for the investor.

HDFC – Amalgamated, We List Its Own Key Synergies, Which Appear Tremendous

By Daniel Tabbush

News out this morning that HDFC Bank and HDFC merger became effective 1 July
This occurred after the Boards approved the merger scheme on 30 June
Funding cost benefits, operating cost synergies, product cross-sale: major benefits

Bank of Chongqing – One Of Worst NIM Contraction, But With High Loan Growth

By Daniel Tabbush

Combination of high NIM contraction with high loan growth is not a good combination
BOC has seen its NIM down 14% in the past year but against 12% loan growth
PBOC pressure to cut rates and for banks to support ailing debtors, is a risk

Morning Views Asia: MGM China Holdings, Sino-Ocean Service, Vedanta Resources

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.

MGM China Holdings
Sino-Ocean Service
Vedanta Resources

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Jul 04

Daily Brief Quantitative Analysis: Hong Kong Connect Flows Monthly: $366m Outflows in June and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Hong Kong Connect Flows Monthly: $366m Outflows in June
Screening for GEMs: July 2023
Northbound Flows Monthly (June): Midea, Foxconn, CATL, Wuxi Apptec, Sany Heavy

Hong Kong Connect Flows Monthly: $366m Outflows in June

By Ke Yan, CFA, FRM

We analyze the monthly Hong Kong Connect flows with our data engine.
We tabulate the top stocks by inflows, outlfows, and holding by mainland investors.
We highlight flows for PetroChina, China Mobile, Xpeng, Bilibili, Kuaishou, CCB, ICBC, BYD, HSBC.

Screening for GEMs: July 2023

By Wium Malan, CFA

An overview (and output) of our machine learning-driven GEM screening model, which seeks to find the best medium-term long ideas within the top 100 stocks in the MSCI GEM Index.
The model is based on 1) a quantitative multifactor screening model, enhanced by two AI Technology-based approaches; 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model.
Developed over roughly 4 years and implemented in its current state for over 3 years, the model has a solid real-world alpha-generating performance track record, discussed in detail below.

Northbound Flows Monthly (June): Midea, Foxconn, CATL, Wuxi Apptec, Sany Heavy

By Ke Yan, CFA, FRM

We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.
Industrials, Consumer Discretionary, Information Technology led the inflows while Consumer Staples, Financials led the outflows.
We highlight flows for Midea, Foxconn, CATL, Wuxi Apptec, Sany Heavy, China Tourism, Longi Green, Ping An, Zijin Mining, Haitian Flavoring.

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Jul 04

Daily Brief Industrials: Tryt Inc, S.F. Holding and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

TRYT IPO: Valuation Insights
SF Holdings A/H Listing – Early Look – Front Running

TRYT IPO: Valuation Insights

Tryt Inc (9164 JP), a leading professional recruiting and temporary staffing service in Japan, seeks to raise US$450 million. Pricing is on 5 July, and book-building is 6-11 July.
We previously discussed the IPO in TRYT IPO: The Bull Case and TRYT IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Tryt is unattractively valued at the IPO reference price of JPY1,620 per share. We would pass on the IPO.

SF Holdings A/H Listing – Early Look – Front Running

S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
In this note, we look at its past performance and other deal dynamics that might impact the listing.

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Jul 04

Daily Brief Industrials: Tryt Inc, S.F. Holding and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

TRYT IPO: Valuation Insights
SF Holdings A/H Listing – Early Look – Front Running

TRYT IPO: Valuation Insights

Tryt Inc (9164 JP), a leading professional recruiting and temporary staffing service in Japan, seeks to raise US$450 million. Pricing is on 5 July, and book-building is 6-11 July.
We previously discussed the IPO in TRYT IPO: The Bull Case and TRYT IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Tryt is unattractively valued at the IPO reference price of JPY1,620 per share. We would pass on the IPO.

SF Holdings A/H Listing – Early Look – Front Running

S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, aims to raise around US$2-3bn in its H-share listing in Hong Kong.
SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017
In this note, we look at its past performance and other deal dynamics that might impact the listing.

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Jul 04

Daily Brief Health Care: BeiGene Ltd, Lutronic Corp, Healthway Medical Corp, Takara Bio Inc, Wuhan YZY Biopharma and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds
(Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata
Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer
Takara Bio (4974 JP): Corona Cliff Set to Jeopardize FY24 Financial; Formulated FY26 Management Plan
Pre-IPO Wuhan YZY Biopharma – Both R&D and Commercialization Capabilities Have yet to Be Proven

HSCEI Index Rebalance Preview: Deletions Fairly Certain; Uncertainty Among the Adds

Country Garden Services Holdings (6098 HK) and Zhongsheng Group (881 HK) are high probability deletions in September, while Trip.com (9961 HK) is a high probability inclusion.
The second add could be BeiGene Ltd (6160 HK) if it passes the velocity test. If not, Chow Tai Fook Jewellery (1929 HK) will be added.
With the exception of Zhongsheng Group (881 HK), short interest has been rising on all the other stocks and could affect how the stocks trade close to implementation date.

(Mostly) Asia M&A, June 2023: DDH1, Dali Foods, NWS Holdings, JSR Corp, Lutronic, Chindata

By David Blennerhassett

For the month of June, 13 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$9bn.
The average premium for the new deals announced (or first discussed) in June was 42%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Healthway Medical (HMED SP): OUE Healthcare’s Delisting Offer