Smartkarma Daily Briefs

JD Industrials (JDI) is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
In this note, we will undertake a peer comparison versus domestic and international peers.

Manyo Factory IPO Bookbuilding Results Analysis

By Douglas Kim

Manyo Factory IPO price has been finalized at 16,000 won. The demand ratio for this IPO among institutional investors was very high at 1,800 to 1.
Our base case valuation of Manyo Factory is target price of 29,555 won per share, which represents 85% higher than the the IPO price of 16,000 won.
We believe a premium valuation multiple to the comps is appropriate due to Manyo Factory’s higher sales growth rate, operating margins, and ROE than the comps in 2020 to 2023.

JD Industrials Pre-IPO – Peer Comparison – Some Interesting Nuggets from Peer Filings

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
We undertook a peer comparison in our previous note, in this note we talk about some additional useful information that we found interesting from peer filings.

Microport Cardiac Rhythm Management Pre-IPO Tearsheet

By Ethan Aw

MicroPort Cardiac Rhythm Management (1813053D CH) is looking to raise about US$200m in its upcoming HK IPO. The deal will be run by Goldman Sachs and CICC.
Microport Cardiac Rhythm Management (MCRM) is a R&D-driven, commercial-stage medical technology company specializing in active implantable medical devices for cardiac rhythm management (CRM).
Its operations are dedicated to the design, development and commercialization of products and solutions to treat and manage arrhythmias and heart failure.

Pre-IPO Cutia Therapeutics (CUT HK) – Outlook Is Uncertain Due to Unique Pipeline Characteristics

By Xinyao (Criss) Wang

Majority of Cutia’s products are based on license-in/distribution agreements. Cutia’s independent R&D capability has yet to be proven. Stock prices of companies that completely rely on license-in are unsatisfactory.
Cutia’s pipelines have unique characteristics. So, the requirements on team’s ability are comprehensive. Purely medical background of Cutia’s team could be a “hindrance” and may fail to commercialize them well.
There is a real need in the fields Cutia is focusing on, so the story is compelling. However, with limited commercialized products, it’s difficult to prove anything at current stage.

Horizon Construction Dev IPO Trading – Subscription Rates Still Weak, Despite Cornerstone Support

By Ethan Aw

Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In this note, we will talk about the trading dynamics and valuation.

Trimble Inc.: Acquisition Of Transporeon & Other Drivers

Trimble delivered mixed results in the first quarter, with revenues of $915 million that were below Wall Street expectations.
The quarter’s cash flow improved significantly year on year, with both cash flow from operations and free cash flow exceeding non-GAAP net income.
Revenues in the transportation business increased organically year over year during the quarter, and operating margins were higher than 15%.

FLEETCOR Technologies Inc.: Is The Double-Digit Organic Growth Enough To Make It A Buy? – Key Drivers

FLEETCOR Technologies delivered another all-around beat while managing a decent top-line growth and accretive operating leverage.
The company had $901 million in revenue, a 14% increase, and cash EPS of $3.80, a 4% increase.
We give FLEETCOR Technologies, Inc. a ‘Hold’ rating with a revised target price.

Bio-Techne Corporation: Collaboration With Lunaphore & Other Drivers

Bio-Techne had a weak quarter, with revenues below market expectations.
Its revenue growth was not up to the mark despite the key drivers being physician uptake, utilization of its ExoDx prostate test, and increased demand for its cell therapy workflow solutions.
Their Exosome Diagnostics business remained extremely strong in the quarter due to a better marketing message, a stronger commercial team, and the recently modified Medicare LCD, which generated significant test volume and revenue growth.

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May 25

Daily Brief Credit: Morning Views Asia: Lenovo and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Morning Views Asia: Lenovo, Vedanta Resources, Xiaomi Corp

Morning Views Asia: Lenovo, Vedanta Resources, Xiaomi Corp

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.

Lenovo
Vedanta Resources
Xiaomi Corp

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May 25

Daily Brief Technical Analysis: SPX Sequence into Early June and more

By Smartkarma Daily Briefs | Daily Briefs, Technical Analysis

In today’s briefing:

SPX Sequence into Early June

SPX Sequence into Early June

By Thomas Schroeder

SPX has once again slipped from the 4,200 high zone. Bounce support lies at 4,120/100.
Our preferred sequence touted a pullback from 4,200-20 which holds 4,100 and rockets back to 4,200+ on the back of a debt deal with overshoot risk to 4,250.
Any new June high will be unsustainable and fall prey to macro undercurrents. USD getting a bid on yield and risk aversion.

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May 25

Daily Brief Event-Driven: Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
StubWorld: Japan Post Holdings Coming Up “Cheap”
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
Quiddity Leaderboard SET50 Jun 23: Final Expectations
Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow
Quiddity Leaderboard ES50 Sep 23: Ferrari RACEs into the Lead; US$1.2bn Potential Inflow

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

StubWorld: Japan Post Holdings Coming Up “Cheap”

By David Blennerhassett

At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
Preceding my comments on Japan Post 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%.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

Quiddity Leaderboard SET50 Jun 23: Final Expectations

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.

Rakuten Bank & SBI Sumishin Net Bank: Upcoming Passive Flow

By Brian Freitas

SBI Sumishin Net Bank (7163 JP) and Rakuten Bank (5838 JP) listed over the last couple of months and the stocks will be added to various indices over the year.
First up, Rakuten Bank (5838 JP) will be added to the Tokyo Stock Exchange Tokyo Price Index Topix (TPX INDEX) at the close on 30 May.
Then both stocks will be added to other global indices between August and December bringing in passive flows and helping support the stock.

Quiddity Leaderboard ES50 Sep 23: Ferrari RACEs into the Lead; US$1.2bn Potential Inflow

By Janaghan Jeyakumar, CFA

The ES50 Index is one of the most highly-tracked indices in mainland Europe and the annual index review takes place in September.
Historically, these Rebalance events have had significant volume and ADV impact and they generally involve large cap names.
In this insight, we take a look the names leading the race to become ADDs/DELs for the upcoming index review in September 2023.

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May 25

Most Read: Rakuten Bank , Rakuten, Youlchon Chemical, Japan Post Holdings, Dongkuk Steel Mill, JD Industrials, Toyo Construction, Dickson Concepts Intl, Thai Life Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Bank – Big TOPIX Inclusion Next Week
Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand
Rakuten (4755 JP): The Current Playbook
KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill
StubWorld: Japan Post Holdings Coming Up “Cheap”
KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline
JD Industrials Pre-IPO – Peer Comparison
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
Quiddity Leaderboard SET50 Jun 23: Final Expectations

Rakuten Bank – Big TOPIX Inclusion Next Week

Rakuten Bank priced its IPO low and then immediately bounced. Earnings came in as forecast, and the forecast next year did too. Highish PBR, high ROE, not-so-high-PER on low ROA.
The stock fell on 16 May after Rakuten Bank announced its capital raising. That was probably a knee-jerk reaction, and had no reason.
Next week sees the TOPIX inclusion. And the Real World Float has gotten smaller since the offering. And some of those people aren’t going to sell near-term.

Rakuten (4755 JP) – A Tricky Offering But Lots of Non-Fundamental Long Demand

The Rakuten (4755 JP) offering is producing interesting analysis. My read on the telecom side is that things are better (or less bad) than they were.
Longer-Term, I see the idea. Shorter-term, there will still be questions until there are not. However, there could be a lot of non-fundamental “I want this” demand in the offering.
Questions to ask yourself are: 1) how much will get placed with investors who want it 20+% lower than 15 May highs? 2) how many shorts will cover?

Rakuten (4755 JP): The Current Playbook

By Arun George

Since the announcement of the placement, Rakuten (4755 JP)’s shares are down -15.7% from the undisturbed price of JPY707 per share (12 May prior to press reports of the placement).
To understand how the shares will trade as the offer is launched, we think it is instructive to look at recent large Japanese placements. Pricing date is likely 24 May.
So far, Rakuten’s shares have mostly followed the pattern of previous large placements. Investors participating in previous large Japanese placements tend to secure positive returns.

KOSPI200 Ad Hoc Index Rebalance: Youlchon Chem to Replace Dongkuk Steel Mill

By Brian Freitas

Following the spin-off, Dongkuk Steel Mill (001230 KS) will be deleted from the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) and replaced with Youlchon Chemical (008730 KS).
Youlchon Chemical (008730 KS) just missed being added to the index at the June rebalance but will be added a couple of weeks after the regular rebalance.
Shorts on Dongkuk Steel Mill (001230 KS) have increased over the last month but overall short interest is way below historical levels.

StubWorld: Japan Post Holdings Coming Up “Cheap”

By David Blennerhassett

At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
Preceding my comments on Japan Post 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%.

KOSPI 200 Ad-Hoc Changes for Dongkuk Steel Spinoff: Discussing Flow Trading Timeline

By Sanghyun Park

Applying the T+3 relisting date as the effective date will again lead to noteworthy changes to the timeline of rebalancing flow trading.
It seems unnecessary to concentrate shorting on the trading halt day for Dongkuk Steel. We should aim for price corrections driven by passive flows on the T+2 period before effective.
Despite the Dongkuk Steel shareholders’ approval on the 12th, Youlchon Chemical’s price experienced a significant decline. The ongoing risk of major shareholder stake sales appears to have overshadowed this event.

JD Industrials Pre-IPO – Peer Comparison

JD Industrials (JDI) is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
In this note, we will undertake a peer comparison versus domestic and international peers.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

By Shifara Samsudeen, ACMA, CGMA

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV

By Sameer Taneja

Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value).
The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

Quiddity Leaderboard SET50 Jun 23: Final Expectations

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential ADDs/DELs for Thailand’s SET50 index rebalance in June 2023.
There are only few more days left for the base date and we believe there could be two ADDs/DELs for the SET 50 index.
The LONG Thai Life Insurance (TLI TB) – SHORT Bangkok Life Assurance (BLA TB) trade had a good spell of performance but now it might be time to rethink.

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May 25

Daily Brief Thematic (Sector/Industry): Ohayo Japan | US Stocks/Bond Sell Off (Again) On Debt Impass;NUGGET: Sapporo HD-Using AI to Get Edge and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Ohayo Japan | US Stocks/Bond Sell Off (Again) On Debt Impass;NUGGET: Sapporo HD-Using AI to Get Edge
Where Are We in the Semiconductor Cycle?
SPAC Talk : Terminal Value

Ohayo Japan | US Stocks/Bond Sell Off (Again) On Debt Impass;NUGGET: Sapporo HD-Using AI to Get Edge

By Mark Chadwick

OVERSEAS. SPX -0.7%, down again on inability to get a debt deal; Yellen’s warnings keep coming; Fed Minutes – Officials mixed on hikes/pause; NVIDIA-BLOW OUT AI DRIVEN GUIDANCE
JAPAN. NKY Futs -0.3% Discount to Cash; US debt limit weighs on Japans; Fujitsu MTP – to return ¥600bn to shareholders over 3 yrs; Watch Advantest today on NVIDIA’s guidance
NUGGET. Next Gen drinks development takes off as Sapporo Holdings(2501 JP) seeks competitive edge in drinks development by using AI

Where Are We in the Semiconductor Cycle?

By Jim Handy

The steep part of the chip collapse has run its course, and prices are now following cost
Revenues will rise once demand growth fully offsets price decreases, probably in the fourth quarter
The market will regain profitability only after a new shortage develops, which may be the middle of 2024

SPAC Talk : Terminal Value

By Water Tower Research

At the risk of sounding monotonous, while the SPAC IPO market remains pretty much comatose, there continues to be solid flow of liquidations.
The number of SPACs electing to liquidate their trust funds has risen to 19 for May and scheduled for June thus far.
YTD, 107 SPACs have thrown in the towel and elected to liquidate.

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May 25

Daily Brief Equity Bottom-Up: Dickson Concepts 113 HK: Straight From The Ben Graham Stable and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV
Meituan’s Recent Expansion in Hong Kong: A Review
CRISPR Therapeutics AG (CRSP US): First Genome Editing Based Drug Candidate Seeking FDA Approval
Suzuki (7269) | EV Strategy – A Dead End?
Alibaba Health: Healthy 2H but Margins Have Very Little Room for Improvement (Quantamental)
Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)
Buy Signals on Sand China Ltd. Getting Stronger as Macau Recovery Gains Steam
Itochu and Donki Tie on Retail Media to Create Major New Revenue Stream
Pinduoduo(PDD US): The Worst Is yet to Come
Xinhua Winshare (811 HK): We Love the Boredom

Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV

By Sameer Taneja

Dickson Concepts Intl (113 HK), an HK distributor of luxury goods, is a classic example of a Graham net-net with a >40% discount to NCAV (Net Current Asset Value).
The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.

Meituan’s Recent Expansion in Hong Kong: A Review

By Shawn Yang

On May 22nd, Meituan launched its food delivery platform called KeeTa in Hong Kong SAR.
KeeTa’s expansion stratgies include Collaboration with branded chain merchants,lower ASP, subsidy campaign, and launching “On-time Guarantee”.
Sofar the initial results after launch seems to be in-line with expecation, while there will still be a lot of challenges, like small market size and stabilized competition landscape.

CRISPR Therapeutics AG (CRSP US): First Genome Editing Based Drug Candidate Seeking FDA Approval

By Tina Banerjee

CRISPR Therapeutics AG (CRSP US) completed regulatory submissions for exa-cel in the U.S., EU, and UK, positioning exa-cel to potentially become the first approved CRISPR-based therapy in the world.
According to Evaluate Pharma, if approved, exa-cel’s revenue is expected to be $1B+ in 2028, with expected market share of 20% in sickle cell and 36% in beta thalassemia.
As of March 31, 2023, CRISPR has cash, cash equivalents, and marketable securities of $1,889.5M, which is sufficient to fund its operating expenses for ~3 years.

Suzuki (7269) | EV Strategy – A Dead End?

By Mark Chadwick

After reviewing Suzuki’s EV Strategy we turn Bearish on the outlook and see downside for the share price.
We believe that Street has missed the rising costs associated with the electrification strategy. We see a period of weaker margins.
Suzuki only targets 20% of sales to come from EVs in India, its largest market. It could be viewed as a laggard.

Alibaba Health: Healthy 2H but Margins Have Very Little Room for Improvement (Quantamental)

Alibaba Health Information Technology (241 HK) ’s 2HFY03/2023 revenues beat consensus by 1.4% while adjusted operating losses of RMB1.74m (0.01% of revenue) is significantly lower compared to 2HFY03/2022 and consensus.
Improvement in profitability was driven by improved GPM coupled with decrease in SG&A costs which helped offset increase in fulfilment costs as a result of the Covid-19 outbreak.
Our quantamental analysis suggests that Ali Health’s margins have very little room for improvement unless the company cuts down SG&A significantly while improving revenue % from non-direct pharmaceutical businesses.

Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)

By Daniel Hellberg

Industry and company reports show ASP declines gained momentum in April
April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
Our thesis: pricing is getting weaker, and this trend will soon impact margins

Buy Signals on Sand China Ltd. Getting Stronger as Macau Recovery Gains Steam

By Howard J Klein

Since the January 6th end of zero covid, all macro developments impacting the Asia casino sector are proving bullish despite a lingering concern about long term recovery.
SCL’s strengths play to the rapidly growing mass segment player base.
SCL’s dominant room capacity is a de facto moat when peers are not even a close second in terms of percentage of available rooms.

Itochu and Donki Tie on Retail Media to Create Major New Revenue Stream

By Michael Causton

Itochu, Familymart, PPI (Don Quijote) and their data analytics partners have come together in the first case of cross-retailer ad platform development.
Itochu provides the central relationship that ties these companies together, and other deals are likely given the significant potential for retail media.
The opportunity for brands to market to these retailers’ customers through highly targeted ads will become ever more compelling, delivering new revenue streams for Donki and Familymart.

Pinduoduo(PDD US): The Worst Is yet to Come

By Eric Chen

The odds are high for PDD to miss consensus for 1Q results this Friday due to high base and deflating domestic growth drivers, despite TEMU’s momentum.
Among major China tech companies, PDD is likely to be the only one to register stagnant or even negative earnings growth for FY23, which has not been in the price.
A down cycle for PDD’s earnings growth leads us to assign 12x P/E to an estimated non-GAAP net profit of RMB39 billion for FY23, implying 15% downside.

Xinhua Winshare (811 HK): We Love the Boredom

By Osbert Tang, CFA

Despite solid outperformance, share price of Xinhua Winshare (811 HK) is more than 100% covered by net cash of Rmb7.6bn. DPS has also risen uninterruptedly in the last 3 years.
1Q23 result demonstrated operating resilience as recurring profit soared 48.5%. Its franchise in textbook publication and distribution stayed well protected, securing profitability outlook.
We like XW’s boring businesses in the current depressed market. It trades on 4.5x PER with secured 6.6% dividend yield. The HA discount has widened to 10pp deeper than average.

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May 25

Daily Brief Macro: Euro Watch: A Conflict of Interest Emerging Between ECB and Italy and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Euro Watch: A Conflict of Interest Emerging Between ECB and Italy
Global Earnings on the Edge: A Concise Analysis of Key EPS Indicators
UK: The Exceptional Inflation Nation
US Default Unlikely, but This Is Just Round1 of Prolonged Debt-Reducing Negotiations
Germany 2 and 10-year Yields Show Signs of Breakout

Euro Watch: A Conflict of Interest Emerging Between ECB and Italy

By Andreas Steno

A conflict of interest is emerging between Italy and ECB, as Italy needs funding in the middle of a hiking cycle
Italy needs to refinance roughly 650 bn. EUR within the next year
Will the central bank scoop up the debt, or will banks and households have to step in?

Global Earnings on the Edge: A Concise Analysis of Key EPS Indicators

By Jeroen Blokland

Our aggregate bellwether earnings indicator point to a 20% decline in global earnings-per-share.
This contrasts sharply with market expectations, which continue to project earnings growth in all major regions.
Combining our earnings estimate with current global equity market valuation also results in significant downside.

UK: The Exceptional Inflation Nation

By Phil Rush

Inflation slowed by much less than expected again in Apr-23 to 8.7% on the CPI (RPI 11.4%). That 0.4pp CPI surprise extends a worrying trend in the UK.
Broad strength across core goods and services means underlying inflation increased again while other countries slowly converged toward their targets.
State-Sponsored second-round effects are creating painful inflationary exceptionalism in the UK. We now expect a 25bp rate hike in August beyond our existing June call.

US Default Unlikely, but This Is Just Round1 of Prolonged Debt-Reducing Negotiations

By Prasenjit K. Basu

The Gramm-Rudman-Hollings process was initiated in 1987 when US public debt was just 50% of GDP. It is now 123% of GDP. Serious, protracted deficit-reduction negotiations are therefore imperative.
Biden and McCarthy know the chaos that any hint of default will sow. They will take these talks to the brink, but the debt-ceiling will be lifted by mid-June.
Medium-Term spending cuts should bring annual deficits down to 3% of GDP by FY2024 (30Sep’24). Despite near-term messy uncertainty, lower deficits will reduce bond yields and be positive for markets.

Germany 2 and 10-year Yields Show Signs of Breakout

By Untying The Gordian Knot

Yesterday, the yields closed almost unchanged despite two consecutive higher highs.
However, if the breakout with the Ichimoku baseline as a stop is sustained, the main part of the uptrend is yet to begin.
Yesterday, the yields remained almost the same at closing despite two consecutive higher highs.

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May 25

Daily Brief Energy/Materials: Rent.com.au Ltd, Vale SA, Flotek Industries, Pan American Silver, Seadrill and more

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

In today’s briefing:

Rent.com.au Ltd – RentPay Hits Milestone of $100m Paid on the Platform
Vale S.A.: Energy Transition Metals Business Could Save The Day? – Key Drivers
Flotek Industries, Inc. – Cost Efficiencies Starting to Flow Through Gross Profit
Pan American Silver – Bigger scale, stronger profitability
SDRL: Early Arrival of Free Cash Flow

Rent.com.au Ltd – RentPay Hits Milestone of $100m Paid on the Platform

By Research as a Service (RaaS)

Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through their technology platform and a growing number of aligned transactional services.
The company has announced that RentPay has reached the milestone of $100m paid through the platform since its relaunch.
The pace of growth is accelerating, with the $75m mark reached in February and the $50m milestone passed in October 2022.

Vale S.A.: Energy Transition Metals Business Could Save The Day? – Key Drivers

Vale had a bad quarter with revenues and earnings well below expectations.
The company saw a decent performance in iron ore production, particularly at S11D.
Although there was a gap between production and sales, Vale’s management expects to offset the impact in the second half of the year.

Flotek Industries, Inc. – Cost Efficiencies Starting to Flow Through Gross Profit

By Water Tower Research

Flotek is repositioning the company’s field operations to serve customers in both the Chemistry Technologies and Data Analytics business segments.
Improved cost control contributed to $1.9 million of adjusted gross profit in 1Q23, compared with ($2.1) million in 4Q22 and ($0.5) million in 1Q22.
The 1Q23 adjusted gross profit margin was 5.5% in 1Q23.

Pan American Silver – Bigger scale, stronger profitability

By Edison Investment Research

Pan American Silver (PAAS) completed the Yamana transaction at the end of March, continuing its track record of timely and value-accretive acquisitions that add scale and improve profitability. With the full annualised contribution from the Yamana assets, we estimate PAAS will produce c 25Moz of silver and 1.1Moz of gold in FY24. The anticipated launch of Escobal (FY25e) could further increase silver production to above 40Moz, bringing PAAS closer to the industry leader, Fresnillo. In this note we reinstate our estimates and update our valuation to reflect the Yamana acquisition. Our sum-of-the-parts valuation is now US$22.5/share.

SDRL: Early Arrival of Free Cash Flow

By Hamed Khorsand

SDRL reported Q1 results affirming the positive attributes of the business after repositioning assets in the fourth quarter. The first quarter included economic utilization of 95% resulting in cost absorption
Day rates continue to trend higher putting SDRL in an advantageous spot as a portion of its fleet becomes available late in 2023 and early 2024
Subsequent to the first quarter, SDRL closed the acquisition of Aquadrill and has now provided full year guidance incorporating the business

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May 25

Daily Brief Industrials: Japan Post Holdings, JD Industrials, Toyo Construction, ZTO Express, Kyoto Fusioneering, Horizon Construction Development, Greenland Technologies Holdi, Caterpillar Inc, Honeywell International and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

StubWorld: Japan Post Holdings Coming Up “Cheap”
JD Industrials Pre-IPO – Peer Comparison
Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals
Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)
Japan-Based Nuclear Fusion Firm Powers up with $79m Raise
JD Industrials Pre-IPO – Peer Comparison – Some Interesting Nuggets from Peer Filings
Horizon Construction Dev IPO Trading – Subscription Rates Still Weak, Despite Cornerstone Support
Greenland Technologies Holding Corp. – Pen Market Purchase by CEO Shows Confidence in Outlook
Caterpillar Inc.: Collaboration With Nouveau Monde Graphite & Other Drivers
Honeywell International Inc.: Acquisition of Compressor Controls & Other Drivers

StubWorld: Japan Post Holdings Coming Up “Cheap”

By David Blennerhassett

At 0.3x, Japan Post Holdings (6178 JP) is top of the heap in terms of dollar “UpValue” to move to PBR 1.0x under Japan’s governance changes.
Preceding my comments on Japan Post 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%.

JD Industrials Pre-IPO – Peer Comparison

JD Industrials (JDI) is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
In this note, we will undertake a peer comparison versus domestic and international peers.

Stuck With Each Other: Toyo “Special Committee” Against Toyo Tender, Toyo Against YFO Proposals

Today, Toyo Construction (1890 JP) announced it was against YFO’s AGM shareholder proposals. And that the Special Committee was unanimously against YFO’s tender proposal.
The content is mixed. Some is probably correct (YFO hasn’t done a great job it appears). Some is clearly taking management’s statements at face value where it shouldn’t.
And some is just the passage of time. Last year, ¥1,000 was “too high.” This year it is “not enough.” Now Toyo and YFO are stuck with each other.

Monthly Express Tracker | Prices Continue to Slide | Volume Pops | (May 2023)

By Daniel Hellberg

Industry and company reports show ASP declines gained momentum in April
April volume jumped 36% Y/Y on a weak comp from 2022 (Covid-19 lockdowns)
Our thesis: pricing is getting weaker, and this trend will soon impact margins

Japan-Based Nuclear Fusion Firm Powers up with $79m Raise

By Tech in Asia

Kyoto Fusioneering, a Japan-based energy company, has raised US$79 million in an oversubscribed round.
The firm develops equipment that harnesses fusion energy, which involves merging two or more hydrogen atoms – the same process that powers the sun.
According to the company, its method of energy generation produces no greenhouse emissions, no long-lived radioactive waste, and no risk of nuclear reaction-triggered meltdowns.

JD Industrials Pre-IPO – Peer Comparison – Some Interesting Nuggets from Peer Filings

JD Industrials is looking to raise about US$1bn in its upcoming HK IPO.
JDI is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC.
We undertook a peer comparison in our previous note, in this note we talk about some additional useful information that we found interesting from peer filings.

Horizon Construction Dev IPO Trading – Subscription Rates Still Weak, Despite Cornerstone Support

By Ethan Aw

Horizon Construction Development (1887128D HK) raised around US$210m in its Hong Kong IPO.
HCD is an equipment operation service provider in China. It provides services covering the full cycle of projects.
In this note, we will talk about the trading dynamics and valuation.

Greenland Technologies Holding Corp. – Pen Market Purchase by CEO Shows Confidence in Outlook

By Water Tower Research

GTEC CEO Raymond Wang has purchased 66,500 shares in the open market at a cost of $1.50 per share, with the Form 4 filing made after the close on May 23.
The shares acquired represent slightly more than one half a percent of the total shares outstanding and have increased the CEO’s ownership by more than 55%.
We note that these shares are not part of an incentive program or corporate grant.

Caterpillar Inc.: Collaboration With Nouveau Monde Graphite & Other Drivers

Caterpillar had a strong start to 2023 with an all-around beat.
The company’s result was marked by double-digit top-line growth across all segments, higher operating profit margins, and significant adjusted profit per share.
Caterpillar experienced healthy customer demand across most end markets for its products and services, reflecting the successful execution of its long-term growth strategy.

Honeywell International Inc.: Acquisition of Compressor Controls & Other Drivers