Smartkarma Daily Briefs

Amid general disappointment over China’s post-COVID recovery, high beta names like Akeso have sold off in recent days;
Management called for an update which specified on (1) why Ivonescimab (AK112) was absent in ASCO 2023, (2) sales update of Cadonilimab (AK104), (3) NDA and data readout timelines.
We came away positive; We view management’s confirmation on progress a positive development that enhances certainty. We raise TP by HK$1 to HK$60.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 20

Most Read: Rakuten, Yuexiu Property, Dongwon Industries, Neuren Pharmaceuticals, Kum Yang, Five Star Business Finance, Skyworth Group Limited, Yunsung F&C, Sony Corp, Leeno Industrial and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
Yuexiu Rights – The Trading Pattern Fits
Checking on Dongwon Industries’ KS200 Deletion Situation After Last Friday’s Share Cancellation Plan
S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning
KOSPI200 Index Rebalance: Two Sets of Changes
Five Star IPO Lock-Up – Over US$1.3bn Lockup Release with Less than US$1m ADV
Skyworth (751 HK): Thoughts On Proration
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
Preemptive Flow Trading Opportunities with the Fastest-Growing Sector ETFs in Korea

Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters

Yesterday (15 May 2023) just before EOD, an article ran suggesting a ¥300bn capital raise by Rakuten (4755 JP). The stock fell 10% in 10mins. Rakuten hemmed/hawed but didn’t deny.
One day later, we have a deal. It is up to 546mm shares including greenshoe, which at the close was ¥333bn. 468mm shares to the public, 79mm to 3rd parties.
This increases Real World Float by 95%. In that respect this is vaguely IPO-ish. Investors have to re-underwrite. Then Passive re-shrinks the float. Details matter.

Yuexiu Rights – The Trading Pattern Fits

The Yuexiu Property (123 HK) Rights start trading today. Last day is next Monday. There is a general pattern to the flows and it behooves investors to be aware.
There is a pattern to these trades which is worth understanding.
In this case, I expect it is worth going long Yuexiu Rights vs Short peer basket equity earlier in the cycle.

Checking on Dongwon Industries’ KS200 Deletion Situation After Last Friday’s Share Cancellation Plan

By Sanghyun Park

It is highly likely that Dongwon Industries will be removed from the KOSPI 200 index in this June review.
Additionally, based on the confirmed cancellation timeline, the possibility of reinstatement during the December review seems unlikely.
As a result, it would be wise to maintain shorting position strategies that factor in this information.

S&P/ASX Index Rebalance Preview: Potential Changes, Impact, Shorts & Positioning

The review period for the June rebalance of the S&P/ASX family of indices ends tomorrow and we expect two changes for the S&P/ASX 200 (AS51 INDEX).
Impact of passive trading on the stocks varies between 4.3-11 days of ADV. Short interest on the potential adds is small while there are significant shorts on the potential deletes.
We expect there is pre-positioning on at least three of the four stocks. In some cases that is small, while it could be a lot larger in other stocks.

KOSPI200 Index Rebalance: Two Sets of Changes

There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.

Five Star IPO Lock-Up – Over US$1.3bn Lockup Release with Less than US$1m ADV

Five Star Business Finance (FIVESTAR IN) raised around US$190m in its India IPO in Nov 2022.
Five-Star Business is a non-banking financial company (NBFC-ND-SI) that provides secured business loans to micro-entrepreneurs and self-employed individuals.
In this note, we will talk about the lock-up dynamics and updates since our last note.

Skyworth (751 HK): Thoughts On Proration

By David Blennerhassett

Back on the 23 December, Skyworth Group (751 HK) announced another partial buyback – this time for 100mn shares (3.87% of shares out), at HK$3.80/share, a 20.25% premium to undisturbed.
On the 28 March, terms were bumped to $5.00/share. Independent shareholders approved the whitewash waiver on the 5 May.
The Offer closes on the 18 May. The minimum proration is 7.8%. Expect the final proration to be higher.

KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating

There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.

Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff

Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.

Preemptive Flow Trading Opportunities with the Fastest-Growing Sector ETFs in Korea

By Sanghyun Park

Two SOL sector ETFs are unique in that they only include companies positioned upstream. This results in a group of smaller-sized constituents, which can have a greater flow impact.
Once the universe is established, constituent selection and weight adjustment are determined exclusively using full/float market capitalization. As a result, flow trading can be highly predictable.
Although they have lower AUM, the five Semiconductor constituents could still face a significant flow impact during this one-day flow event due to their much lower DTV.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief United States: Binance Coin, Incyte Corp, Cognizant Tech Solutions A, Paycom Software, Ansys Inc, Marriott International, Uber, Clorox Company, Ecolab Inc, Howmet Aerospace and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Stablecoins: Does Trust Really Matter?
Incyte Corporation: New Approvals for Opzelura and Zynyz & Other Drivers
Cognizant Technology Solutions: Launch of Cognizant Neuro AI Platform & Other Drivers
Paycom Software Inc.: Launch of Global HCM & Other Drivers
ANSYS Inc.: Investments In AI & HPC
Marriott International Inc.: City Express & Digital Networks Driving Growth – Key Drivers
Uber Technologies Inc.: Fall In ETAs A Good Sign? – Key Drivers
The Clorox Company: Launch of Start Clean & Other Developments
Ecolab Inc.: Improved Data Visibility For Water & Other Drivers
Howmet Aerospace Inc.: Commercial Aerospace Resurgence Is Saving The Day – Key Drivers

Stablecoins: Does Trust Really Matter?

By Kaiko

The stablecoin market has been upended in 2023.
The start of the year saw BUSD given an expiry date of 2024, a banking crisis in March hit USDC and DAI hard, while Binance anointed TUSD as its stablecoin of choice by choosing it for one of the few zero-fee BTC pairs in crypto.
All of these events had huge ramifications for stablecoin market structure.

Incyte Corporation: New Approvals for Opzelura and Zynyz & Other Drivers

Incyte had a terribly disappointing first quarter and failed to meet the revenue expectations as well as earnings expectations of Wall Street.
The company’s product revenue increased 14% year over year as Jakafi was in high demand among patients across all indications.
In hematology and oncology, the ongoing launches of Pemazyre and Minjuvi ex-U.S. were the primary factors in the 17% rise year over year.

Cognizant Technology Solutions: Launch of Cognizant Neuro AI Platform & Other Drivers

It was a successful first quarter for Cognizant Technology Solutions.
The adjusted operating margin for the first quarter was 14.6%, and the company had quarterly solid bookings growth of 28% YoY.
We give Cognizant Technology Solutions Corporation a ‘Hold’ rating with a revised target price.

Paycom Software Inc.: Launch of Global HCM & Other Drivers

Paycom Software had impressive results in the first quarter and managed an all-round beat with revenues of $452 million, up 28% year over year.
Employee self-service payroll continues to create significant client acquisitions for Beti, which remains a critical difference in the industry.
We give Paycom Software a ‘Buy’ rating with a revised target price.

ANSYS Inc.: Investments In AI & HPC

Ansys managed an all-around beat in Q1 and its results exceeded expectations across all key metrics.
ANSYS invests in five technology pillars: numerics, high-performance computing (HPC), artificial intelligence (AI), 3D design, and system-level simulation.
In addition to its investment in numerics, HPC, AI, 3D design, and system-level simulation, ANSYS has been working with key partners to develop new technologies to enhance its capabilities further and bring value to its customers.

Marriott International Inc.: City Express & Digital Networks Driving Growth – Key Drivers

Marriott International delivered a solid quarterly result that was an all-around beat resulting from strong demand growth globally, with a decent performance across all geographies and hotel levels.
U.S. and Canadian RevPAR increased by 26% year over year while occupancy increased by 8% to 66%.
Global card acquisitions climbed by 35% year on year, while global card expenditure increased by 16%.

Uber Technologies Inc.: Fall In ETAs A Good Sign? – Key Drivers

Uber Technologies started 2023 on a strong note, with gross bookings up 22% yearly in constant currency.
In addition, Uber produced a 12% increased adjusted EBITDA margin and $549 million in free cash flow.
We give Uber Technologies a ‘Hold’ rating with a revised target price.

The Clorox Company: Launch of Start Clean & Other Developments

Despite a difficult operational and cost environment, Clorox produced solid results in the third quarter, managing an all-around beat, with organic sales growth in each of its 4 businesses, an increase in gross margin, and double-digit adjusted EPS growth.
Clorox made excellent strides throughout the quarter by increasing margin while sustaining top-line growth.
Clorox also experienced an increase in gross margin, helped by cost-justified pricing and cost reductions that reached a decade-high level.

Ecolab Inc.: Improved Data Visibility For Water & Other Drivers

Ecolab performed well in the third quarter and managed an all-around beat.
In the quarter, margins expanded significantly.
Organic sales had a solid improvement across all segments, increasing from 12% in the fourth quarter to 13% in the first.

Howmet Aerospace Inc.: Commercial Aerospace Resurgence Is Saving The Day – Key Drivers

Howmet Aerospace had a strong first quarter with revenues of $1.6 billion, up 6% sequentially and 21% over the previous year.
Commercial aerospace sales increased 29% year on year, led by Engine Products, Engineered Structures, and Fastening Systems.
Defence Aerospace increased 11% year on year, led by the F-35 program and increases in legacy spares.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Australia: AUB Group Limited, Incannex Healthcare and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

AUB Group Placement – Came as a Surprise but Strong Track Record Makes up for It
Incannex Healthcare – On the road to psychotherapy clinics

AUB Group Placement – Came as a Surprise but Strong Track Record Makes up for It

By Ethan Aw

AUB Group Limited (AUB AU) is looking to raise up to AUD150m (US$100m) in its primary placement. The proceeds will be used to strengthen its balance sheet.
The deal would be a large one to digest at 24 days of three month ADV and dilution of 6.2%.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

Incannex Healthcare – On the road to psychotherapy clinics

Incannex has announced that it has entered into a lease for its first ‘psychedelic clinic’ in Melbourne, following the announcement of plans for commercializing its psychedelic-assisted psychotherapy business in March 2023. In collaboration with Australian psychedelic clinical experts, Incannex will set up these clinics through its subsidiary, Clarion Clinics Group, using psilocybin for treatment-resistant depression (TRD) and MDMA for post-traumatic stress disorder (PTSD). The first ‘model’ clinic is expected to open and take patients from September 2023. If sound operations are observed, Incannex intends rapidly to expand to larger clinics across Australia. While we recognize that this has the potential to provide a future stream of revenue for the company, we await further details before updating our valuation.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief China: Alibaba Group, Sing Tao News Corp, Tencent, ZTO Express, iQIYI Inc, Cainiao Smart Logistics, Dmall Inc and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Alibaba Potential IPOs – Part 3 – An Early Look at Cloud, Easy US$10bn+
Alibaba (9988 HK): 4Q23, Physical Store Revenue Decreased for First Time, Downgrade to Hold
Sing Tao (1105 HK) Makes Its Own News
Alibaba 4QFY23: Concerns Surrounding Taobao and Tmall, Disappointing IPO-Bound Cloud & Cainiao
[Tencent (700 HK, BUY, TP HK$433) Earnings Review]: Ads Growth Will Accelerate, Maintain BUY
Tencent: Domestic Gaming Returns to Growth
[ZTO Express (ZTO US, BUY, TP US$38) TP Change]: Margin Improves While Capex Intensity Nears Peak
[iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After
Full-Year Results for Alibaba’s CaiNiao: Reduced Losses, Slower Growth, and A (Likely) 2024 IPO
Dmall Pre-IPO – The Negatives – Path to Profitability Remains Murky and Related Party Sales an Issue

Alibaba Potential IPOs – Part 3 – An Early Look at Cloud, Easy US$10bn+

On 28th Mar 2023, Alibaba Group (9988 HK) announced that it would adopt a new organizational and governance structure, splitting into six major business groups and other investments.
Alibaba also stated that each of the business groups would be set up as an independent entity with its own board and the groups will eventually seek to list.
In our previous note, we highlighted which division could list. In this note, we will look at the Cloud segement.

Alibaba (9988 HK): 4Q23, Physical Store Revenue Decreased for First Time, Downgrade to Hold

By Ming Lu

Alibaba’s revenue from physical stores decreased year over year for the first time.
The operating margin declined despite that Alibaba cut losses in minor businesses.
We conclude an upside of 15% and a price target at HK$101. Downgrade to Hold.

Sing Tao (1105 HK) Makes Its Own News

By David Blennerhassett

Sing Tao News Corp (1105 HK), which owns Hong Kong’s oldest and third-largest Chinese language newspaper, is suspended pursuant to the Hong Kong Code on Takeovers and Mergers.
A takeover of Sing Tao was mooted in 2019-2021 when Charles Ho, the former chairman, sought to exit his 48.98% stake; but that transaction fizzled out.
At a market cap of just US$50mn, this (likely) Offer hardly rates a mention. Yet a takeover of a Hong Kong newspaper is still newsworthy.

Alibaba 4QFY23: Concerns Surrounding Taobao and Tmall, Disappointing IPO-Bound Cloud & Cainiao

By Oshadhi Kumarasiri

Alibaba (ADR) (BABA US)‘s 4QFY23 OP beat consensus by around RMB 2.5bn (20% beat) through cost cutting, but YoY revenue growth remained sluggish at 2.0%.
Consensus expectations of Alibaba achieving an OP of RMB 150bn by FY25 may be overly optimistic due to declining dominance of Taobao and Tmall, and lack of profitable alternative businesses.
Alibaba Group (9988 HK) would need to excel to reach RMB100bn OP, resulting in a high FY+2 EV/OP of 14.0x. This seems steep for a company with minimal earnings growth.

[Tencent (700 HK, BUY, TP HK$433) Earnings Review]: Ads Growth Will Accelerate, Maintain BUY

By Shifara Samsudeen, ACMA, CGMA

Tencent’s latest financial results are in line with expectations, with revenue and non-IFRS profit of 2.5%/(2.1%) vs cons. While we anticipate weak growth in the gaming sector,
We suggest that advertising presents several catalysts for Tencent, including the recovery of Ecommerce and gaming, WeChat Video Account’s growth, and inter-connections with Baba and Mihoyo.
We maintain a BUY rating with an unchanged target price of HK$433, implying 34X PE in 2023.

Tencent: Domestic Gaming Returns to Growth

Tencent (700 HK) reported 1Q2023 results. Revenue grew 10.7% YoY and beat consensus estimate by 2.3% while reported operating profit was 2.25 below consensus estimates.
Key highlight was the YoY growth in domestic game revenue (+6%) which was mainly driven by strong performance of newly launched titles.
There has been strong recovery across all business segments during the quarter and current valuations are still at a discount to historical trading multiples and offer a good entry point.

[ZTO Express (ZTO US, BUY, TP US$38) TP Change]: Margin Improves While Capex Intensity Nears Peak

ZTO reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income (3.1%), 30%, and 30% vs. our est. ZTO raised volume est. to 20-24% YoY;
Margin beat as parcel cost was (8%) vs. our est., but we suggest also due to (1) parcel mix improvements, (2) output-based pay, and (3) lower % of KA customers;
Maintain BUY and raise TP to US$ 38 due improving gross profit per parcel and an end in-sight for CAPEX spending. Our TP implies 24x P/2023E.

[iQIYI, Lnc. (IQ US, SELL, TP US$5) Target Price Change]: Content Pipeline Weakens After

IQIYI’s 1Q23 top line beat our est. by 8.5%, while its non-GAAP net income beat our est./cons by 95%/82%, largely due to its blockbuster <Knockout>.
However, we expect its content pipeline is weaker compared with other key competitors in Q2.
Our top and bottom lines in 2Q23 are (3.4%)/(7.4%) vs cons, due to the fierce competition. Maintain SELL and cut TP to US$ 5.0, implying 16.7X PE in 2023.

Full-Year Results for Alibaba’s CaiNiao: Reduced Losses, Slower Growth, and A (Likely) 2024 IPO

By Daniel Hellberg

Cainiao Smart Logistics (1437124D HK) ‘s March 2023 quarterly and full-year results can be found within Alibaba’s full-year earnings report, which was released on Thursday May 18
In both the March quarter and its fiscal year, CaiNiao showed improved Adjusted EBITDA results, though in both periods the tech-centric logistics network still reported losses
Revenue growth slowed to 18% Y/Y in the March quarter, and parent Alibaba (ADR) (BABA US) indicated CaiNiao will target an IPO in 2024, a bit later than some expected

Dmall Pre-IPO – The Negatives – Path to Profitability Remains Murky and Related Party Sales an Issue

By Clarence Chu

Dmall Inc (1751691D CH) is looking to raise around US$200m in its upcoming Hong Kong IPO.
Dmall provides cloud-based, end-to-end SaaS platform purpose-built for the Chinese retail industry.
In this note, we will talk about the not so positive aspects of the deal.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief India: Vedant Fashions, Nexus Select Trust, Vedanta Resources and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Vedant Fashion OFS – Well Flagged and Recent Earnings Momentum Has Been Decent
Nexus Select Trust IPO Trading – Decent but Mostly Domestic Demand
Morning Views Asia: Vedanta Resources

Vedant Fashion OFS – Well Flagged and Recent Earnings Momentum Has Been Decent

By Clarence Chu

Vedant Fashions (MANYAVAR IN)‘ Promoter is looking to raise US$239m via trimming a 7% stake in the firm.
The selldown here is to meet the minimum public shareholding requirement of 25% set by SEBI.
The deal would be a large one to process with the base deal alone representing 187 days of the firm’s three month ADV.

Nexus Select Trust IPO Trading – Decent but Mostly Domestic Demand

Nexus Select Trust (NST IN) raised around US$391m in its India IPO. The market value of its assets stood at INR234bn (US$2.9bn), of which INR211bn (US$2.6bn) was from its retail assets.
NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
We have looked at various aspects of the deal in our previous note, in this note, we talk about the demand and trading dynamics.

Morning Views Asia: 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.

Vedanta Resources

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief South Korea: Kum Yang, Yunsung F&C, L&F Co Ltd, Cosmochemical, PhilEnergy and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

KOSPI200 Index Rebalance: Two Sets of Changes
KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating
How Should We Time the L&F Shorting Event for Another Share Dilution Risk?
Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150
PhilEnergy IPO Preview

KOSPI200 Index Rebalance: Two Sets of Changes

There will be 2 additions and 2 deletions for the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) at the June rebalance that will be implemented on 8 June.
Kum Yang (001570 KS) and Cosmochemical (005420 KS), both high probability names, are inclusions while Hwaseung Enterprise (241590 KS) and Dongwon Industries (006040 KS) are deletions.
Not surpisingly, there is almost no short interest on the adds. Short interest on the deletes is higher and rising. Expect short covering on the deletes prior to implementation.

KOSDAQ150 Index Rebalance: 8 Changes with Some Surprises; Performance Deteriorating

There are 8 inclusions and 8 exclusions for the KOSDAQ 150 Index (KOSDQ150 INDEX) at the June rebalance to be implemented at the close on 8 June.
There is one surprise on the deletions and there are a few surprise non-deletions. Smaller surprise on some non-inclusions.
Short interest is non-existent on the adds and is a lot larger on the deletes. Shorts on the deletes will be covered in the next few weeks.

How Should We Time the L&F Shorting Event for Another Share Dilution Risk?

By Sanghyun Park

The main challenge is the construction of new production facilities in the US. The investment amount is estimated to be around ₩1T, achieving an annual production capacity of 100,000 tons.
The government’s approval is the most significant factor to monitor. It will likely be granted between late June or early July, which is when we should start building positions.
Due to the local market’s expectation of L&F’s upcoming fundraising event, some traders may start building their positions early on. It’s important to consider this possibility and act preemptively.

Trading Strategy Post KRX Rebalance Announcement of KOSPI 200 and KOSDAQ 150

By Douglas Kim

Korea Exchange announced the KOSPI 200 and KOSDAQ 150 indices constituents changes today.
Kum Yang (001570 KS) and Cosmochemical (005420 KS) were included in the KOSPI 200. Dongwon Industries (006040 KS) and Hwaseung Enterprise (241590 KS) were excluded in KOSPI 200 index.
We expect continued underperformance of Kumyang and Cosmo Chemical as many investors will now start to sell these stocks based on “buy on rumor, sell on news” strategy.

PhilEnergy IPO Preview

By Douglas Kim

PhilEnergy is offering 2.8 million shares in the IPO and expected market cap range of the IPO is from 279 billion won to 318 billion won.
The IPO price range is from 26,300 won to 30,000 won and the total offering amount is 74 billion to 84.4 billion won.
The company’s core products include stacking and laser notching equipment used in the rechargeable batteries manufacturing process.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Singapore: Sea , Golden Energy & Resources and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Sea (SE US) – Into the Looking Glass
Golden Energy: IFA Says Fair & Reasonable. It Is Neither
Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable

Sea (SE US) – Into the Looking Glass

By Angus Mackintosh

Sea Ltd’s 1Q2023 results showed its ability to sustain profitable growth with a vibrant performance from e-commerce and fintech, offset by slower digital entertainment but with visible stabilisation.
E-Commerce showed strong performance in Asia, with Brazil making significant progress towards profitability, whilst digital financial services were boosted by a sizable loan book and more diversified funding costs.
Sea Ltd continues to demonstrate its cost leadership and ability to expand its total addressable market while sustaining profitability through better infrastructure and user experience rather than pure promotional spending.

Golden Energy: IFA Says Fair & Reasonable. It Is Neither

By David Blennerhassett

Responding to SIAS and the SGX, the Widjaja Family revised terms such that Golden Energy (GER SP) shareholders opting for an all-cash payout would receive S$0.973/share, up from S$0.846/share.
The Offer remains low-balled. The Offer should include a similar in-specie of the Stanmore Coal (SMR AU) stake together with a cash-out option. This is the most transparent approach.
The Circular is out and the IFA reckons the Offer is fair & reasonable – despite a fair value of S$0.574/share for Stanmore versus the Exit Offer of A$0.181/share.

Golden Energy (GER SP): Art of the Lie as the IFA Says Offer Is Fair and Reasonable

By Arun George

The IFA has concluded that the Widjaja family’s offer for Golden Energy & Resources (GER SP) is fair and reasonable. The EGM will be held on 9 June.
The IFA has justified its conclusion based on a convoluted methodology that has serious flaws. A fairer SOTP valuation is 37% higher than the IFA’s SOTP valuation range.
Notably, Dian Swastatika Sentosa (DSSA IJ) will abstain from voting on both resolutions. While the prospect of a bump is diminishing, the offeror is yet to declare the offer final.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Japan: Sony Corp, Suruga Bank Ltd, Medipal Holdings, Dentsu Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff
Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
Medipal Holdings (7459 JP): Better-Than-Expected FY23 Result; Accelerated Growth Expected in FY24
Dentsu Group – FY23 ambitions weighted to second half

Sony (6758 JP) – Big-But-Meh Buyback, and Bigger Potential Sony Financial Spinoff

Sony Corp (6758 JP) reported earnings on 28 April, which saw profit-taking the next day after a brief two-day run-up, as revenues, OP, and NP were guided down.
There previous ¥200bn buyback ended about two weeks later. Yesterday they launched a new ¥200bn buyback, and the stock reacted well this AM. And then BIG new news this morning.
Sony announced an assessment of a partial spin-off of Sony Financial. Assessment this FY, spinoff “within next 2-3yrs” (if possible). This garnered more excitement. Brief analysis of both follows.

Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.

Suruga Bank Ltd (8358 JP) today signed an MOU (with board resolution) to form a business and capital alliance with Credit Saison (8253 JP).
Suruga will sell (post-dilution) 15+% of voting rights to Credit Saison, and buy 4.44% of CreditSaison. Then Suruga will try to buy back the shares it sold to Credit Saison.
A look at the history is instructive, as is a look at the shareholder structure and the change in business model post-2019. Not as easy as it looks.

Medipal Holdings (7459 JP): Better-Than-Expected FY23 Result; Accelerated Growth Expected in FY24

By Tina Banerjee

Medipal Holdings (7459 JP) announced strong FY23 result, with year-over-year improvement in sales and profit. While sales were just 1% ahead of forecast, net profit exceeded the guidance by 16%.
Outperformance was mainly driven by PALTAC business. Revenue from PALTAC increased 6% YoY to ¥1,104B, 2% ahead of forecast of ¥1,080B, fueled by 14% growth in OTC pharmaceutical products.
Medipal has guided for accelerated revenue growth of 3% YoY for its pharmaceutical wholesale business in FY24. In FY23, the business recorded revenue growth of 0.6% YoY.

Dentsu Group – FY23 ambitions weighted to second half

Dentsu Group had demanding Q123 on Q122 comparisons and, with the acquisition contributions, we are not too concerned about the read-across for the rest of FY23, with performance skewed to H2. Progress in Customer Transformation and Technology (CT&T), up 6.7% in Q123 and now 35% of group net revenue, should buoy medium-term growth. Tag, the acquisition announced in March and expected to complete in early Q323 (subject to regulatory clearances), is another step towards the 50% CT&T target. We anticipate a return to margin expansion in FY24 as one-off factors retreat, the transition progresses and cost benefits from the ‘One dentsu’ initiative start to flow. The valuation remains at a marked discount to global peers.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Financials: Suruga Bank Ltd, Nexus Select Trust, HSBC Holdings, AUB Group Limited, Binance Coin, BlackRock Latin American Inves, AGBA Group Holding and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.
Nexus Select Trust IPO Trading – Decent but Mostly Domestic Demand
HSBC Holdings: Conviction Returns
AUB Group Placement – Came as a Surprise but Strong Track Record Makes up for It
Stablecoins: Does Trust Really Matter?
BlackRock Latin American Inv. Trust – High degree of confidence in the current portfolio
AGBA – Taking health and wealth to the GBA

Suruga Bank (8358) To Sell, Then Buy Back 17% of the Bank, but HOW Is Key.

Suruga Bank Ltd (8358 JP) today signed an MOU (with board resolution) to form a business and capital alliance with Credit Saison (8253 JP).
Suruga will sell (post-dilution) 15+% of voting rights to Credit Saison, and buy 4.44% of CreditSaison. Then Suruga will try to buy back the shares it sold to Credit Saison.
A look at the history is instructive, as is a look at the shareholder structure and the change in business model post-2019. Not as easy as it looks.

Nexus Select Trust IPO Trading – Decent but Mostly Domestic Demand

Nexus Select Trust (NST IN) raised around US$391m in its India IPO. The market value of its assets stood at INR234bn (US$2.9bn), of which INR211bn (US$2.6bn) was from its retail assets.
NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
We have looked at various aspects of the deal in our previous note, in this note, we talk about the demand and trading dynamics.

HSBC Holdings: Conviction Returns

By Steven Holden

After a multi-year drop in ownership, UK fund exposure in HSBC Holdings is on the rise.
Over the last 6-months, average fund weights have increased by +0.33% as new positions outnumbered closing positions by a factor of 2.
With increasing active fund ownership and rising benchmark weights, UK Equity funds need higher conviction to omit HSBC from their portfolio.

AUB Group Placement – Came as a Surprise but Strong Track Record Makes up for It

By Ethan Aw

AUB Group Limited (AUB AU) is looking to raise up to AUD150m (US$100m) in its primary placement. The proceeds will be used to strengthen its balance sheet.
The deal would be a large one to digest at 24 days of three month ADV and dilution of 6.2%.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

Stablecoins: Does Trust Really Matter?

By Kaiko

The stablecoin market has been upended in 2023.
The start of the year saw BUSD given an expiry date of 2024, a banking crisis in March hit USDC and DAI hard, while Binance anointed TUSD as its stablecoin of choice by choosing it for one of the few zero-fee BTC pairs in crypto.
All of these events had huge ramifications for stablecoin market structure.

BlackRock Latin American Inv. Trust – High degree of confidence in the current portfolio

BlackRock Latin American Investment Trust’s (BRLA’s) lead manager Sam Vecht and deputy manager Christoph Brinkmann have a high degree of confidence in the positive prospects for the trust’s portfolio. It has an overweight exposure to Brazil versus its benchmark, the MSCI Emerging Markets Latin America Index. Vecht highlights high real interest rates in the country, providing scope for a lower base rate. Brazil now has a more stable political situation, and the manager anticipates that the economy should turn around in H223, which he believes would be positive for equity performance. Vecht and Brinkmann consider that BRLA’s portfolio has real potential to deliver better absolute and relative performance.

AGBA – Taking health and wealth to the GBA