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Smartkarma Daily Briefs

Jan 09
0

Daily Brief ECM: Youlife International Pre-IPO Tearsheet and more

By | Daily Briefs, ECM

In today’s briefing:

  • Youlife International Pre-IPO Tearsheet

Youlife International Pre-IPO Tearsheet

By Ethan Aw

  • Youlife International Holdings (1759732D CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by Macquarie and CCB International. 
  • Youlife International is a blue-collar lifetime service platform in China. It assists blue-collar talent with upskilling and lifetime career development. 
  • According to CIC, Youlife ranked first among all blue-collar lifetime service platforms in China in terms of revenue generated from blue-collar lifetime services in 2021. 

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Jan 09
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Daily Brief Event-Driven: Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited. and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
  • PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix
  • Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
  • Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston
  • Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages
  • Essential Metals (ESS AU): Scheme With Tianqi/IGO

Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.

By Travis Lundy

  • Yamada Denki (9831 JP) has bought back nearly 16% of shares out ex-Treasury in the 7.5 months since last fiscal year earnings were announced. It went limit up on Day1.
  • Then it stopped – despite the buyback being 15% of expected volume every day for a year and a HUGE piece of Real World Float.
  • There is 8% left to buy at current prices – 16-18% of volume the next 4.5mos. And it is still a dirt cheap capital structure and somewhat sticky shareholder structure.

PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix

By Travis Lundy

  • On Friday after the close, S&P DJI Indices announced that PEXA Group (PXA AU) would replace Pendal Group (PDL AU) in the S&P ASX 200 on 12 January at close.
  • This is unsurprising. Pendal was scheduled to exit in January due to takeover. PEXA was already an interim S&P ASX 200 member after the distribution by Link Administration (LNK AU).
  • The timing is conveniently in the timeframe for the LNK distribution of PXA shares to its shareholders implemented on the 10th. 

Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event

By Travis Lundy

  • In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
  • This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
  • This is therefore a TOPIX inclusion event at end-January 2023.

Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

By Arun George

Dissecting KRX Annual ETF Market Report & Noteworthy Trends for ETF Arbitrages

By Sanghyun Park

  • Korea’s ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.
  • Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.
  • Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.

Essential Metals (ESS AU): Scheme With Tianqi/IGO

By David Blennerhassett

  • Small lithium player Essential Metals (ESS AU) has entered into a Scheme with the Tianqi Lithium JV, comprising Tianqi Lithium (9696 HK) (51%) and IGO Ltd (IGO AU) (49%). 
  • The Scheme Consideration of A$0.50/share is a 45% premium to last close, and a 36.3% premium to the 30-day VWAP. 
  • Standard Scheme conditions apply. FIRB required. The Scheme Booklet is due out in March, with a shareholder meeting expected in April 2023. Possible implementation in May 2023.

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Jan 09
0

Daily Brief Technical Analysis: Asia Long Bets and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • Asia Long Bets

Asia Long Bets

By Thomas Schroeder

  • Our biggest shift in Asia stems from reversing from short to long Japan and Taiwan. We have held a positive view in Australia and Thailand.
  • SPX bounce call from 3,800 to 3,950, is lacking needed energy. Flat pattern wants to press lower post bounce and represents pullback risk in Asia as does an oversold USD.
  • Asia longs are tactical in nature but have the ability to run into late January within the context of a larger degree Q1 equity bear cycle.

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Jan 09
0

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

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Sands China, SJM Holdings, Yanlord Land

Morning Views Asia: Sands China, SJM Holdings, Yanlord Land

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Jan 09
0

Daily Brief Thematic (Sector/Industry): Our Three Worst Calls in 2022: Signs of Reversal in 2023 and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Our Three Worst Calls in 2022: Signs of Reversal in 2023
  • Smartkarma Webinar | China Healthcare: Outlook and Opportunities in 2023
  • The Innovations Portfolios – Week Seven

Our Three Worst Calls in 2022: Signs of Reversal in 2023

By Osbert Tang, CFA

  • Xinjiang Goldwind Science & Technology (2208 HK) performed badly in 2022 and with sustained pressure on WTG price, earnings will stay under pressure. We will only pick up post-FY22 result.
  • Removal of “zero COVID” policy and consumption recovery should revive sportswear business of China Dongxiang Group (3818 HK). Improvement in equity market will boost its investment portfolio value.   
  • Valuation retreat for China Longyuan Power (916 HK) has made it more attractive. Rebound in electricity demand, continued green energy push and potential asset injection are drivers. 

Smartkarma Webinar | China Healthcare: Outlook and Opportunities in 2023

By Smartkarma Research

What does 2023 have in store for the Chinese healthcare industry? In the next webinar, we speak with Insight Provider Xinyao (Criss) Wang on just that, as she shares with us the landscape of the Chinese healthcare industry in 2023. From its outlook in 2023, to the opportunities present, Criss will share with us her thoughts and insights in this next episode of our Webinar Wednesdays. Have any burning questions about the Chinese healthcare industry for 2023? Get them answered in the live Q&A that will conclude the session. 

The webinar will be hosted on Wednesday, 11 January 2023, 17:00 SGT/HKT.

A Hong Kong/China Healthcare Analyst, Criss has over 13 years’ worth of experience in both finance and healthcare. She covers clinic operations, investment and equity research in both the Chinese and overseas markets.

The Innovations Portfolios – Week Seven

By Pyari Menon

  • We again write about one stock each from the large, mid and small cap portfolios, briefly giving the reasons for their inclusion.
  • The three companies we write about this week are Abbvie Inc (ABBV US), Becton Dickinson and Co (BDX US) and Ciena Corp (CIEN US) 
  • For the seven weeks since inception ended 6 Jan the combined innovation portfolio was +1.6%, versus DJIA -0.3%, S&P500 -1.8%, Nasdaq -5.2% & MSCI-ACWI-ETF +0.1%, all in US$ terms

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Jan 09
0

Daily Brief Equity Bottom-Up: Taiwan Dual-Listings: TSMC Premium Hitting High Territory and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%
  • Nidec (6594 JP): New Valuation Benchmark
  • Keyence (6861) | Better Risk/Reward at Peers
  • Meta Platforms: A Value Opportunity In The Tech Environment
  • China Internet Weekly (9Jan2023): Ant Group, Alibaba, Tencent, ByteDance, China Literature
  • Ant Group Completed Equity Structure Adjustment
  • Perfectly Imperfect
  • Shanghai Junshi Bioscience (1877.HK/688180.CH)- Junshi Has Changed Its Story from Tumor to COVID-19?

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%

By Vincent Fernando, CFA

  • TSMC’s ADR premium is entering the higher end of its range since early 2022. Earnings coming this week.
  • UMC’s ADR has flipped from a discount to a moderate premium. Earnings are ahead as well.
  • ASE Technology’s ADR premium has reached 6.1%, high even for this usually higher-premium trading pair.

Nidec (6594 JP): New Valuation Benchmark

By Scott Foster

  • Nidec has become an auto parts and factory automation company and should be valued as such. At 24x EPS guidance for FY Mar-23, the shares do not look particularly cheap.
  • 1H results were good, but heavy up-front investment in e-axle traction motor systems for electric vehicles points to deferred gratification for shareholders. 
  • Recession is starting to bite, the Yen is up and Japanese interest rates have only started to rise. Be careful when buying for long-term growth.

Keyence (6861) | Better Risk/Reward at Peers

By Mark Chadwick

  • Keyence is a structural growth stock that has fallen by 31% over the past year reflecting near term risks to growth
  • Although Keyence is a major beneficiary of continued investment in industrial automation, the company would need to grow significantly quicker than the industry to justify the current valuation
  • We analyse Keyence’s core value drivers – revenue, margins, risk and reinvestment – but see better risk/reward in other growth stocks

Meta Platforms: A Value Opportunity In The Tech Environment

By Moat Investing

  • META’s sustainable earnings come up with at least 30% to 35% upside potential.
  • There is a huge margin of safety at the current price, and multiple should expand from now forward.
  • Meta Platforms, Inc. (NASDAQ:META) is one of the most beaten-up stories among the FAANG, the storytelling around the Metaverse has failed to be understood by the market, and a great deal of pessimism

China Internet Weekly (9Jan2023): Ant Group, Alibaba, Tencent, ByteDance, China Literature

By Ming Lu

  • A state-owned company invested in Ant Group, which boosted Alibaba’s stock price.
  • Tencent obtained five new game licenses in December, three of which are imported games.
  • China Literature’s daily active users increased by 80% in 2022 and reached the historical high.

Ant Group Completed Equity Structure Adjustment

By Xin Yu, CFA

  • CBIRC approved the capital replenishment plan of RMB10.5bn of Ant CFC on Dec 30, 2022
  • Under the regulatory guidance, Ant Group needs to complete a multifaceted rectification plan
  • After the fund raising, Ant Group’s next step is to obtain FHC license and credit bureau license

Perfectly Imperfect

By subSPAC

  • Artificial Intelligence (AI) and Deep Learning Applications are all the rage, primarily thanks to the likes of OpenAI’s ChatGPT being used for text and Dall-E being used to generate digital images.
  • ChatGPT’s popularity has soared, reaching a user base of 1 million users in 5 days, and OpenAI itself is benefiting from the surge in users, now valued at $29 Billion.
  • Investors are already looking for the next wave of AI products that can make a big splash and potentially disrupt legacy industries. 

Shanghai Junshi Bioscience (1877.HK/688180.CH)- Junshi Has Changed Its Story from Tumor to COVID-19?

By Xinyao (Criss) Wang

  • Junshi once generated sales and profits in scale, but lost money again. Its story suddenly changed from cancer drugs to COVID-19. We have lost sight of its development direction.
  • Junshi’s commercialization history has lost its reference value for confirming the outlook. The calculation of peak sales doesn’t make much sense, because they cannot help Junshi turn losses into profits.
  • The current market value still has too much “bubble”, and COVID-19 drug is a major “interference” to the valuation. We analyzed our thoughts on future valuation by excluding COVID-19 projects.  

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Jan 09
0

Daily Brief Macro: Is QT Already Dead? Can The Fed Really ‘Ease’ Liquidity And Still ‘Tighten’? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Is QT Already Dead? Can The Fed Really ‘Ease’ Liquidity And Still ‘Tighten’?
  • New Year, New Fears
  • The Legacies of Repeated Stimulus: Entitled Investors Face Their Reality Check
  • Three Questions Investors Need to Ask in 2023
  • The Week That Was in ASEAN@Smartkarma – Minor Is Major, Krung Thai Card’s Creep, and Halcyon Agri
  • January Market Thinking

Is QT Already Dead? Can The Fed Really ‘Ease’ Liquidity And Still ‘Tighten’?

By Michael J. Howell

  • US QT will soon melt away into a ‘stealth QE’ under pressure from illiquidity in key financial markets. QT is effectively already dead
  • Recent experiences by the UK (September) and Japanese (December) Monetary Authorities evidence poor sovereign debt market liquidity
  • Lesson is that QE and QT are not symmetric policies: QE is easier to engage than to disengage via QT. This likely puts a floor under Global Liquidity in 2023

New Year, New Fears

By Cam Hui

  • The U.S. stock market continues to face headwinds in the form of a deteriorating earnings outlook and a hawkish Fed.
  • However, market internals are supportive of a short-term bounce before the downtrend resumes.
  • Traders shouldn’t try to overstay their welcome. Investors should take advantage of any strength to lighten up equity positions.

The Legacies of Repeated Stimulus: Entitled Investors Face Their Reality Check

By Said Desaque

  • In contrast to previous monetary stimulus since the global financial crisis, the velocity of circulation of money rose very early during the present expansion, thereby helping to produce inflationary pressures.
  • Premature policy easing by the Fed remains the biggest market risk, particularly if China’s re-opening sparks resurgence in commodity price inflation that undermines US inflation returning to its 2% target.
  • Fiscal and monetary stimulus in the US has created liquidity strains in the US Treasury market. Heavy borrowing by the Treasury in 2023 Q1 could complicate the Fed’s policy plans.

Three Questions Investors Need to Ask in 2023

By Cam Hui

  • The equity outlooks for the three major regions are diverging. Europe stocks are the leadership, but investors need to recognize that the leadership is sensitive to weather and energy prices.
  • China may be undergoing a re-opening rally, but a sustained advance is in doubt and a successful re-opening would have significant disruptive effects on commodities and the global inflation outlook.
  • The U.S. stock market faces valuation headwinds, a deteriorating earnings outlook and a Federal Reserve that’s determined to suppress asset prices as a way to fight inflation.

The Week That Was in ASEAN@Smartkarma – Minor Is Major, Krung Thai Card’s Creep, and Halcyon Agri

By Angus Mackintosh

  • The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia. 
  • The first week of 2023 saw insights on Minor International, which continues to be a global Tourism recovery play, and Krungthai Card, as it sees credit costs creeping up.
  • We also saw a macro piece looking at the stalling of the convergence of Malaysia’s per-capita income with developed economies and whether its decline can be thwarted. 

January Market Thinking

By Mark Tinker

  • The consensus forecast for the Global Economy in 2023 is pretty clear, a peak in inflation and a sharp slowdown in GDP that will be ‘short but not painless’.
  • The associated view for markets, however, is more diverse and largely depends on the extent to which this economic slowdown is regarded as being ‘already in the price’.
  • Most analysis at least implicitly acknowledges that bear markets tend to have two phases; the first is the de-rating phase associated with higher interest rates and a tightening of monetary policy (arguably what we have just seen in 2022), while the second phase is the credit cycle, where the economic impacts of the tightening of policy feed through into lower earnings and thus a second round of weakness.

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Jan 09
0

Most Read: Li Auto, PEXA Group, SBI Shinsei Bank, Yamada Denki, Alibaba (ADR), Taiwan Semiconductor (TSMC) – ADR, Sun*, Halcyon Agri, Ant Financial Services Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi
  • ASX200 Index Rebalance: PEXA to Replace Pendal
  • Last Week In SPACE: Shinsei Bank, Warrego Energy, Korean Bank Activism, Japfa
  • Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.
  • ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert
  • PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix
  • Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%
  • Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event
  • Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston
  • Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise

Index Rebalance & ETF Flow Recap: HSCEI, HSTECH, HSI, HSCI, KS200, KQ150, CSI300, SENSEX, LQ45, PSEi

By Brian Freitas

ASX200 Index Rebalance: PEXA to Replace Pendal

By Brian Freitas

Last Week In SPACE: Shinsei Bank, Warrego Energy, Korean Bank Activism, Japfa

By David Blennerhassett

  • SBI Holdings (8473 JP) is still expected to buy out SBI Shinsei Bank (8303 JP) minorities sooner rather than later
  • Not one to rest on its laurels, Hancock immediately bumped its Offer for Warrego Energy (WGO AU) to A$0.36/share, up from A$0.28/share, provided it gets to 40%. We need more popcorn.
  • APCM reckons Korean banks can pay out more than 50% of net income to their shareholders annually.   

Yamada Denki (9831) – GINORMOUS Buyback 2/3 Done. Stock Price Reaction Limited.

By Travis Lundy

  • Yamada Denki (9831 JP) has bought back nearly 16% of shares out ex-Treasury in the 7.5 months since last fiscal year earnings were announced. It went limit up on Day1.
  • Then it stopped – despite the buyback being 15% of expected volume every day for a year and a HUGE piece of Real World Float.
  • There is 8% left to buy at current prices – 16-18% of volume the next 4.5mos. And it is still a dirt cheap capital structure and somewhat sticky shareholder structure.

ECM Weekly (8th Jan 2022) – Sinohytec, Beauty Farm, Sula, Kfin, Bionote, Meidong, CIFI, Jinxin Fert

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs
  • On the IPO front,  only the smaller issuers were active with most following through on year end listing plans.
  • On placements front, HK market got going in a jiffy, riding on the coattails of China reopening.

PEXA (PXA) Replaces Pendal (PDL) In the S&P ASX 200, Getting into the Distro Mix

By Travis Lundy

  • On Friday after the close, S&P DJI Indices announced that PEXA Group (PXA AU) would replace Pendal Group (PDL AU) in the S&P ASX 200 on 12 January at close.
  • This is unsurprising. Pendal was scheduled to exit in January due to takeover. PEXA was already an interim S&P ASX 200 member after the distribution by Link Administration (LNK AU).
  • The timing is conveniently in the timeframe for the LNK distribution of PXA shares to its shareholders implemented on the 10th. 

Taiwan Dual-Listings: TSMC Premium Hitting High Territory, ASE Shoots to 6.1%

By Vincent Fernando, CFA

  • TSMC’s ADR premium is entering the higher end of its range since early 2022. Earnings coming this week.
  • UMC’s ADR has flipped from a discount to a moderate premium. Earnings are ahead as well.
  • ASE Technology’s ADR premium has reached 6.1%, high even for this usually higher-premium trading pair.

Sun* (Sun Asterisk – 4053 JP) TOPIX Inclusion Event

By Travis Lundy

  • In mid-December, digital UX creation agency (90% of revenues) and “talent agency” (10%) announced it would move from TSE Growth to TSE Prime mid-December 2022.
  • This was in Janaghan’s “Not Ready” list in TOPIX Inclusions: Who Is Ready (Dec 2022) because it did not meet two of the requirements. But it turns out it did.
  • This is therefore a TOPIX inclusion event at end-January 2023.

Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

By Arun George

Ant Group: Shareholder Restructuring Announced and the Lack of IPO Plan Are Negatives Surprise

By Victor Galliano

  • The announced restructuring of Ant Group holding companies will block founder Jack Ma from achieving majority voting on the board following the implementation of the holdcos adjustment
  • The majority of board directors will be “independent” post the holdco restructuring and they are likely to drive a more social policy focused agenda, as the 2021 sustainability report suggests
  • We see these developments, and especially the lack of IPO plan, to be negative for non-government aligned Ant Group shareholders, such as the international private equity groups and especially Alibaba

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Jan 09
0

Daily Brief Industrials: Nidec Corp, Halcyon Agri and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Nidec (6594 JP): New Valuation Benchmark
  • Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

Nidec (6594 JP): New Valuation Benchmark

By Scott Foster

  • Nidec has become an auto parts and factory automation company and should be valued as such. At 24x EPS guidance for FY Mar-23, the shares do not look particularly cheap.
  • 1H results were good, but heavy up-front investment in e-axle traction motor systems for electric vehicles points to deferred gratification for shareholders. 
  • Recession is starting to bite, the Yen is up and Japanese interest rates have only started to rise. Be careful when buying for long-term growth.

Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

By Arun George

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Jan 09
0

Daily Brief Industrials: Nidec Corp, Halcyon Agri and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Nidec (6594 JP): New Valuation Benchmark
  • Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

Nidec (6594 JP): New Valuation Benchmark

By Scott Foster

  • Nidec has become an auto parts and factory automation company and should be valued as such. At 24x EPS guidance for FY Mar-23, the shares do not look particularly cheap.
  • 1H results were good, but heavy up-front investment in e-axle traction motor systems for electric vehicles points to deferred gratification for shareholders. 
  • Recession is starting to bite, the Yen is up and Japanese interest rates have only started to rise. Be careful when buying for long-term growth.

Merger Arb Mondays (09 Jan) – Origin Energy, Warrego, Nitro, Norwest, Halcyon, Kingston

By Arun George

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