Smartkarma Daily Briefs

We do not expect any constituent changes in June (that could change though!). The only flows are likely to be from capping the constituents at 10% of the index weight.
Capping changes will lead to a one-way turnover of 2.15% resulting in a one-way trade of A$14m. There are two stocks with over A$5m to trade.
Stockland (SGP AU) will be the most affected stock with passive trackers needing to sell over 1 day of ADV. The stock has run up and shorts are increasing.

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May 17

Daily Brief China: Alibaba (ADR), Tencent, JD Industrials, ImmuneOnco Biopharmaceuticals (Shanghai), Hua Hong Semiconductor, Zhangzhou Pientzehuang Pharmaceutical Co., Ltd. and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Alibaba (BABA US): Buy Ahead of March Quarter Results This Thursday
Tencent Holdings Ltd (700 HK) – Critical Weekly Close Awaits – 302/330 Buy Zone Achieved in May
JD Industrials Pre-IPO: Pure Platform for Third Parties and Strong Support from Related Parties
ImmuneOnco (宜明昂科) Pre-IPO: Clinical Numbers Are yet to Be Convincing
[Hua Hong (1347 HK) Earnings Review]: Capacity Ramp and High LIBOR Impact Profitability
Tencent Announced Game Pipeline in Annual Conference “Spark 2023”, and Our Estimations
Zhangzhou Pientzehuang Pharmaceutical (600436.CH) – The Significance Behind Cannot Be Ignored

Alibaba (BABA US): Buy Ahead of March Quarter Results This Thursday

By Eric Chen

We believe BABA’s upcoming 4QFY23 results will surprise the market to the upside by a wide margin in terms of recovery in bottomline, catalyzing trading opportunity for short-term investors.
We also expect that the results will usher in a period of sustained re-rating for the stock due to China’s continued yet slow consumption recovery and Alibaba’s well-executed restructuring plan.
Geo-Political risks will not go away, but have been very much reflected in current pricing in our view. Buy ahead of results on Thursday.

Tencent Holdings Ltd (700 HK) – Critical Weekly Close Awaits – 302/330 Buy Zone Achieved in May

By David Coloretti, CMT

At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
Our multi-quarter outlook for Tencent Holdings Ltd (700 HK) remains extremely bullish with a multi-quarter target towards 451.95. In April we identified the 302/330 range as a potential buy zone.
The recent low of 323.20 has preceded an impulsive bullish daily confirmation. This week we await a bullish weekly close (above 343.99) to confirm a renewed MT uptrend bias.

JD Industrials Pre-IPO: Pure Platform for Third Parties and Strong Support from Related Parties

By Ming Lu

JD Industrials is a pure trading platform for third party wholesalers.
The company avoids the competition with its clients and the risk of overdue account receivable.
JD Industrials has brand support from JD.com and logistics support form JD Logistics.

ImmuneOnco (宜明昂科) Pre-IPO: Clinical Numbers Are yet to Be Convincing

By Ke Yan, CFA, FRM

ImmuneOnco, a China-based clinical-stage biotechnology company, plans to raise up to US$ 100m via a Hong Kong listing.
In this note, we examine the company’s core product, namelyIMM01, a CD47 target fusion protein. We also look at the company’s management and pre-IPO investors.
We think its clinical data is not yet convincing and we are not so keen on the company.

[Hua Hong (1347 HK) Earnings Review]: Capacity Ramp and High LIBOR Impact Profitability

By Shawn Yang

Hua Hong reported C1Q23 top-line, IFRS EBIT, and non-IFRS net income in-line, (15.3%), and 13.3% vs. our est., and in-line, (3.4%), and 34.9% vs. cons., respectively.
Hua Hong reported 1Q23 utilization rate of 103%, higher than peers, which we believe is due to (1) large EV and new energy exposure, and (2) 8” price cuts.
Despite near-term margin deterioration, we maintain Hua Hong’s BUY and HK$ 35 TP due to auto IC exposure and localization, implying 11x FY24 PE.

Tencent Announced Game Pipeline in Annual Conference “Spark 2023”, and Our Estimations

By Shawn Yang

On May 15th, Tencent holds its annual game conference “Spark 2023” and releases its latest game pipeline, including updates of 15 launched games and 20 new games.
Considering Tencent’s large size, only a game that has the potential to exceed RMB 10 bn in annual gross billing could be considered as a positive sign.
Yet, we don’t find any game title that could reach over RMB 10bn annualized gross billing in the game pipeline.

Zhangzhou Pientzehuang Pharmaceutical (600436.CH) – The Significance Behind Cannot Be Ignored

By Xinyao (Criss) Wang

Different from other TCM companies, Pientzehuang is based on the investment logic of consumer goods, which breaks away from the price constraints of drug market. Meanwhile, Pientzehuang has formed a “monopoly”.
As a well-known trademark/time-honored brand in China, and representing the quintessence of Chinese culture, Pientzehuang would be supported by national policies,and is consistent with China’s efforts to expand domestic demand/consumption.
Although Pientzehuang’s performance was disappointing last year, its strategic height and significance are obviously different from other TCM. We think that this is crucial to the investment value of Pientzehuang.

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May 17

Daily Brief Japan: Rakuten, GLP J-REIT, Aeon Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality
Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In
Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon
GLP J-Reit (3281 JP): Cheaper than Peers, Offering Could Be a Catalyst
Aeon to Launch Ground-Breaking Online Food Business

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.

Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality

Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
The deal was undoubtedly accelerated by Reuters breaking the news of a possible equity raising on 15th May 2023.
We have covered most aspects of the deal in our previous note, in this note we talk about the deal dynamics and run the deal through our ECM framework.

Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In

Rakuten (4755 JP) is looking to raise around US$2.4bn by selling shares via a Japanese Public Offering and an International Offering as well as through a third-party allotment.
The stock has already dropped 13.7% in the last couple of days on large volumes as the rumours of the offering started to swirl.
The offering prices late next week and passive trackers will be buying stock once the stock settles and this will provide support in the near-term.

Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon

By Oshadhi Kumarasiri

Rakuten (4755 JP) announced a public offering of 468.1m new shares and third-party allotment of 78.8m shares to secure ¥333bn.
Enhanced network coverage via KDDI network sharing to attract new users and overcome previous barriers for Rakuten Mobile.
Mobile breakeven could drive Rakuten’s operating profit to ¥150-200bn, potentially boosting the share price to around ¥2,000.

GLP J-Reit (3281 JP): Cheaper than Peers, Offering Could Be a Catalyst

By Janaghan Jeyakumar, CFA

On 15th May 2023, large-cap logistics JREIT GLP J-REIT (3281 JP) (“GLP”) announced a follow-on equity offering to fund part of their recently-announced property acquisition.
The primary offer quantity is 209,991 units. In addition, there will also be an over-allotment quantity of 3,200 units. The total size of this offering could be roughly ¥30.6bn (~US$225mn).
In this insight, we take a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

Aeon to Launch Ground-Breaking Online Food Business

By Michael Causton

It has taken three years to build and set up but Aeon will finally open its first automated warehouse for online food sales in Chiba this summer.
The warehouse will run on technology from Ocado and act as the backend for a completely new online supermarket called Green Beans.
A second warehouse is due to come online in 2026, expanding sales to all of Tokyo and into Kanagawa. This is the most advanced food e-commerce operation in Japan.

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May 17

Most Read: Rakuten, AMP Ltd, Alfresa Holdings, Yuexiu Property, CapitaLand Ascendas REIT, Alibaba Group and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad
Rakuten (4755 JP) – A Big Deal With Very Interesting Characteristics – Index Matters
MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes
JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big
Yuexiu Rights – The Trading Pattern Fits
Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality
Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In
Capitaland Ascendas REIT Placement – Good Track Record and Most Deals Have Performed Well
Alibaba Potential IPOs – Part 1 – Six Mini-Alibabas – Some Are More Ready than Others to List
Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon

Rakuten Possible US$2.2bn Placement – Will Be a Huge Deal to Digest, but It’s Not All Bad

Rakuten (4755 JP) is considering raising around US$2.2bn (JPY300bn), as per Reuters reports. The company hasn’t confirmed or denied the same in its press release.
The company has been listing some of its subsidiaries and monetising investments to raise cash and has recently hinted at a possible equity issuance.
While there is no guarantee that the deal will ever materialize, in this note, we take an early look at the possible deal dynamics.

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.

MVIS Australia Equal Weight Index Rebalance: Potential Deletes & Capping Changes

There are unlikely to be any inclusions to the index in June while there are three stocks that are close to the deletion threshold.
Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of over 4% and a one-way trade of A$78m.
Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.

JAPAN BUYBACKS – Alfresa (2784) Cheap Stock, Uncheapening, Goes Big

Born of a merger between two not-very-well-known businesses 20 years ago, Alfresa Holdings (2784 JP) is still not very well known. It is in a boring, low-margin business.
The highest EBIT margin in the past two decades was…. 1.8%. ROE was in the 8-10% range for 2016-2020 but has since fallen below, as PBR has fallen below 1.0x.
Today, we got an amended Mid-Term Management Plan, a new dividend policy, and buyback of 10% of shares out based on last price. It’s worth looking in the details.

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.

Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality

Rakuten (4755 JP) aims to raise up to US$2.4bn (JPY323bn) via a global offering.
The deal was undoubtedly accelerated by Reuters breaking the news of a possible equity raising on 15th May 2023.
We have covered most aspects of the deal in our previous note, in this note we talk about the deal dynamics and run the deal through our ECM framework.

Rakuten (4755 JP) Offering: Could Drop Some More Before Passive Buying Kicks In

Rakuten (4755 JP) is looking to raise around US$2.4bn by selling shares via a Japanese Public Offering and an International Offering as well as through a third-party allotment.
The stock has already dropped 13.7% in the last couple of days on large volumes as the rumours of the offering started to swirl.
The offering prices late next week and passive trackers will be buying stock once the stock settles and this will provide support in the near-term.

Capitaland Ascendas REIT Placement – Good Track Record and Most Deals Have Performed Well

By Ethan Aw

CapitaLand Ascendas REIT (CLAR SP) is looking to raise up to S$459m (US$344m) in its primary placement. The proceeds will be used for acquisition, redevelopment and debt repayment purposes.
The deal will be a large one to digest at 15.8 days of three month ADV and 3.9% dilution.
In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

Alibaba Potential IPOs – Part 1 – Six Mini-Alibabas – Some Are More Ready than Others to List

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.
Having looked at the past performance of its division, some appear more worthy than others of undertaking a listing in the next year or two.

Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon

By Oshadhi Kumarasiri

Rakuten (4755 JP) announced a public offering of 468.1m new shares and third-party allotment of 78.8m shares to secure ¥333bn.
Enhanced network coverage via KDDI network sharing to attract new users and overcome previous barriers for Rakuten Mobile.
Mobile breakeven could drive Rakuten’s operating profit to ¥150-200bn, potentially boosting the share price to around ¥2,000.

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✓ Company Data and News
✓ Events & Webinars

May 17

Daily Brief ECM: Rakuten US$2.4bn Placement – Larger than Rumored and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality
Capitaland Ascendas REIT Placement – Good Track Record and Most Deals Have Performed Well
Rakuten: ¥333bn Offering Confirmed, Cheap Valuation and Mobile Turnaround on the Horizon
JD Industrials Pre-IPO: Pure Platform for Third Parties and Strong Support from Related Parties
Pavilion REIT Placement – Very Well Flagged, Has Been Expected for Some Time
ImmuneOnco (宜明昂科) Pre-IPO: Clinical Numbers Are yet to Be Convincing

Rakuten US$2.4bn Placement – Larger than Rumored, Some Indications of Finality