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Smartkarma Daily Briefs

May 09
0

Daily Brief Consumer: Ferrari N.V., Nissin Foods Holdings, Aeon Co Ltd, Coupang, Chipotle Mexican Grill, Tesla Motors and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Ferrari: Classic Fisher Company, Almost Perfect Score on The Fisher 15 Framework
  • Nissin Foods’ FQ4 Earnings: A Possible 59% Operating Profit Surprise?
  • Aeon Will Own Japan’s Two Largest Supermarket Groups with Inageya Purchase
  • [Coupang Inc. (CPNG US) Earnings Preview]: Market Share Solid Given Limited Competitive Threat
  • Chipotle Mexican Grill Inc.: Improved Digital Capabilities & A 6
  • Tesla Inc.: Price Cuts Along With Capacity Expansion Have Really Changed The Game – Key Drivers

Ferrari: Classic Fisher Company, Almost Perfect Score on The Fisher 15 Framework

By Sameer Taneja

  • Ferrari NV (RACE IM) has been a steady compounder of earnings growing operating profits at 14% CAGR and sales volumes at 6% CAGR over the last 20 years. 
  • The company has expanded EBITDA margins from 25% in 2014 to 35% in 2022 and is expected to increase by another 300 bps in FY23 to 38%, as per guidance. 
  • At 41x/35x FY23e/FY24e, we conceded it is a tad expensive, but we would look at investing in this company over the long term.

Nissin Foods’ FQ4 Earnings: A Possible 59% Operating Profit Surprise?

By Oshadhi Kumarasiri

  • Nissin Foods Holdings (2897 JP) to report FQ4 results on May 10th with ¥158.5bn revenue and ¥8.1bn operating profit expected according to revised Feb 2023 guidance.
  • Consensus predicts Nissin Foods’ operating profit to be ¥6.6bn from a revenue of ¥167.8bn, which is lower than the company’s latest annual guidance.
  • Meanwhile, a higher FQ4 operating profit of ¥10.5bn is expected based on our analysis, exceeding consensus by 59%.

Aeon Will Own Japan’s Two Largest Supermarket Groups with Inageya Purchase

By Michael Causton

  • Last year saw the consolidation of several supermarket chains in Shikoku and Chugoku by Aeon, creating Japan’s largest supermarket group. 
  • Now, Aeon has now announced that it will expand its existing stake in Inageya, rolling the company into USMH and creating another, even larger food operation and Japan’s biggest yet.
  • Aeon is looking for dominance in Tokyo and may seek more acquisitions but rivals are unlikely to give it a free hand nor say no to acquisitions of their own.

[Coupang Inc. (CPNG US) Earnings Preview]: Market Share Solid Given Limited Competitive Threat

By Shawn Yang

  • We expect CPNG to report C1Q23 top-line and non-GAAP net income 2.0% and 4.8% vs. consensus, respectively. 
  • AliExpress became S. Korea’s most downloaded app after increasing spending, but product overlap with Coupang is limited, while other S. Korean competitors recorded declining MAU, in our understanding.
  • South Korean economic indicators, including CPI and retail data, point towards a recovery. We maintain our BUY rating and US$19 TP.

Chipotle Mexican Grill Inc.: Improved Digital Capabilities & A 6

By Baptista Research

  • It was a successful quarter for Chipotle Mexican Grill, reporting an all-around beat.
  • The company’s quarterly sales were $2.4 billion and it retained about 80% of digital sales and has recovered almost 80% of in-restaurant sales.
  • We give Chipotle Mexican Grill a ‘Hold’ rating with a revised target price.

Tesla Inc.: Price Cuts Along With Capacity Expansion Have Really Changed The Game – Key Drivers

By Baptista Research

  • Tesla had a mixed quarter and failed to meet the high revenue expectations of Wall Street.
  • Although automotive operating margin and gross margin both fell sequentially, the company delivered an earnings beat.
  • In terms of the Cybertruck, Tesla continues to construct Alpha models of the Cybertruck on its pilot line for testing.

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May 08
0

Daily Brief United States: M & T Bank Corp, Grid Dynamics Holdings Inc and more

By | Daily Briefs, United States

In today’s briefing:

  • US Banks – Is System Deposit Flight Being Contained?
  • Navigating The Grid

US Banks – Is System Deposit Flight Being Contained?

By Victor Galliano

  • Deposit outflows for 1Q23 in the most affected of the mid-sized US banks were in low double digits, much less severe than the deposit collapse suffered by First Republic
  • In fact, since the end of 1Q23, some smaller banks have reported slightly positive deposit flows, and the recent usage of Fed and FHLB funding lines is not alarming
  • We review a select group of mid-sized US banks focusing in on a number of key metrics; despite the challenging times, we like M&T Bank and Western Alliance

Navigating The Grid

By subSPAC

  • As the current digital landscape continues to evolve, companies are racing to adapt to the new normal.
  • Grid Dynamics has successfully capitalized on this demand, delivering services across Cloud, Data, AI, and Digital Experiences.
  • As a result, the company has enjoyed impressive growth and significantly expanded its clientele over the last few years.

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May 08
0

Daily Brief China: Super Hi International Holding, Aag Energy Holdings, Alibaba Group, Hang Lung Properties, Skyworth Group Limited, China Energy Engineering, BeiGene Ltd, Agricultural Bank Of China, Shanghai Tofflon Science A and more

By | China, Daily Briefs

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
  • AAG Energy (2686 HK): New Scheme Vote Date, Different Result?
  • Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies
  • HK RE: Retail to Benefit from Tourism Recovery.  Buy HLP 101 HK & NWD 17 HK on Attractive Valuation
  • Skyworth (751 HK): Thoughts On Proration
  • Energy China (3996 HK): Tempting Risk-Return Payoff
  • BeiGene (6160.HK/BGNE.US) 23Q1 – Qualitative Changes Are Taking Place
  • Agricultural Bank of China Ltd (1288 HK) – Target 13%-24% Uptrend in 2-3 Quarters.
  • Shanghai Tofflon Science (300171.CH) 2022/23Q1 – It’s Better Not to Go Against the Trend
  • AAG Energy (2686) Favors Buying Weakness

HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September

By Brian Freitas

  • There is only one new listing as a potential inclusion to the HSCI in June. If added to the HSCI, it will also be added to Southbound Stock Connect.
  • There are 18 potential inclusions and 19 potential deletions for the HSCI in September. There are a few close adds and there could be another 5 deletions on Prolonged Suspension.
  • A lot of the potential deletions have large Southbound holdings. With all the stocks becoming sell-only, there could be unwinding of some positions over the next couple of months.

AAG Energy (2686 HK): New Scheme Vote Date, Different Result?

By Arun George

  • Aag Energy Holdings (2686 HK)’s disclosed a revised timetable to vote on Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer. The new scheme meeting is set for 2 June. 
  • Our analysis suggests that in the best case, Xinjiang Xintai would need to further swing NO votes representing 6.52%-8.34% of outstanding shares to YES to get the scheme approved. 
  • AAG’s case is unprecedented. The risk-reward remains unattractive as the upside to a scheme pass (13.5% upside) is equal to the downside to a scheme fail (average 13.5% downside).

Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies

By Ming Lu

  • Chinese authorities have begun to ban public opinion against non-state-owned companies.
  • These actions were the opposite to what the authorities did in past years.
  • We believe the authorities need non-state-owned companies to bail the unemployed young people out of the weak job market.

HK RE: Retail to Benefit from Tourism Recovery.  Buy HLP 101 HK & NWD 17 HK on Attractive Valuation

By Jacob Cheng

  • Hong Kong retail sales strongly rebounded 41% yoy in March
  • During May Day Holiday (Apr 29 – May 3), there was 625k mainland visitors to Hong Kong, around 63% of pre-COVID level
  • Among all RE sub-sectors, retail and residential will be the first to recover (already seeing recovery), office will be lagging and the last. 

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. 

Energy China (3996 HK): Tempting Risk-Return Payoff

By Osbert Tang, CFA

  • China Energy Engineering (3996 HK) is a laggard in this round of “China style valuation” rally. With strong earnings and project backlog, there is good room to catch up.
  • Its 1Q23 earnings growth is ahead of the infrastructure trio, and so as the new contracts signed. Moreover, it has a faster growth in overseas market. 
  • The 3-year EPS CAGR is projected at 16.3%, yet it just trades on 5x PER. Its ROE of 9.4% makes it attractively priced at only 0.4x P/B for FY23.

BeiGene (6160.HK/BGNE.US) 23Q1 – Qualitative Changes Are Taking Place

By Xinyao (Criss) Wang

  • A significant change in 23Q1 was not just a narrowing of net loss, but a sudden turnaround in sales profit under the rapid revenue growth, which was an important leap.
  • BeiGene’s commercialization capabilities largely rely on high expense level that significantly deviating from the industry average, making eventual commercialization success more difficult. BeiGene is an “outlier” even among global peers.
  • How to control expenses while ensuring sustained sales growth and long-term competitiveness is an important issue for BeiGene. If no new blockbuster product emerges ultimately, high valuation would not last.

Agricultural Bank of China Ltd (1288 HK) – Target 13%-24% Uptrend in 2-3 Quarters.

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.
  • The LT downtrend structure in 1288 HK was simply defined by its 2018/2022 sequence of lower highs and lower lows. This structure was broken last week.  
  • LT momentum indicators (monthly RSI / MACD) have recently confirmed this bullish LT trend change. The current uptrend appears set to extend towards 3.60/3.90 (+13%-24%) in the coming 2-3 quarters.

Shanghai Tofflon Science (300171.CH) 2022/23Q1 – It’s Better Not to Go Against the Trend

By Xinyao (Criss) Wang

  • Tofflon needs to go through a considerable period of adjustment after experiencing the high point of performance. Its “periodicity” is obvious, which means the performance high growth is not sustainable.
  • The decline in growth rate of contract liabilities suggests that the future prospects is highly uncertain. Overall margins could continue to drop due to reduction in high margin overseas orders.
  • Unless there’s a major catalyst, it’s difficult to see significant valuation boost in short term. Given the current downward trend in performance, valuation may continue to decline in the future.

AAG Energy (2686) Favors Buying Weakness

By Thomas Schroeder

  • AAG Energy (2686) exhibits a clear wedge range to trade with an intermediate positive outcome as long as lower wedge support stands up near outlined 1.50 support.
  • The intermediate cycle favors a bullish outcome as long as lower pattern support holds true. Wedge still needs time to mature.
  • 1.70 is the level to clear for bull traction. Risk to 1.40 region if we fail to hold lower wedge support at 1.48.

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May 08
0

Daily Brief Australia: Amaero International Ltd and more

By | Australia, Daily Briefs

In today’s briefing:

  • Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case

Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case

By Research as a Service (RaaS)

  • Amaero International Ltd (ASX:3DA) is a global specialist in metal additive manufacturing for the defence, aerospace, and other industrial sectors.
  • The company has provided to shareholders an executive summary from the Frost & Sullivan Feasibility Study for its titanium powder project in Abu Dhabi which concludes that the project is feasible across technical, financial and market parameters, and supports the Chairman’s prior guidance to shareholders.
  • Amaero is progressing an 827-tonne a year titanium powder facility in the United Arab Emirates which it expects to greenlight before the end of this financial year.

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May 08
0

Daily Brief Singapore: Yanlord Land and more

By | Daily Briefs, Singapore

In today’s briefing:

  • Morning Views Asia: Greentown China, Vedanta Resources, Yanlord Land

Morning Views Asia: Greentown China, Vedanta Resources, 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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May 08
0

Daily Brief South Korea: Kum Yang and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Kum Yang: Shorting Entry Timing on the Inevitable Block Deals

Kum Yang: Shorting Entry Timing on the Inevitable Block Deals

By Sanghyun Park

  • Kum Yang IR director Park once mentioned that the block deals to sell the 2M treasury shares would likely occur in late May or early June.
  • There has been speculation in the market that the timing of the block deal may be postponed until after its inclusion in the KOSPI 200, allowing for short selling.
  • Considering the immediate funding needs faced by the company, setting an aggressive approach to shorting from shortly after its inclusion in the KOSPI 200 would be reasonable regarding entry timing.

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May 08
0

Daily Brief Japan: Japan Petroleum Exploration, Toshiba Corp, Tokyo Stock Exchange Tokyo Price Index Topix, IHI Corp, Canon Inc and more

By | Daily Briefs, Japan

In today’s briefing:

  • JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
  • Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
  • JAPAN FLOW: Foreign Investor Inflows May Increase
  • Ihi (7013) | Multiple Engines for Growth
  • A Case Study of How Nothing Will Change Unless Management Changes

JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings

By Travis Lundy

  • Japanese companies are buying back more stock than ever before, and recent moves by the TSE and METI are effectively pushing for more.
  • The new goal is to lift PBR and ROE. The easiest way to lift ROE is reduce E. Low-PBR Cos with excess assets and cross-holdings (outbound and inbound) are targets.
  • In this insight I look at several possible rankings for potential large buyback targets.

Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia

By Arun George

JAPAN FLOW: Foreign Investor Inflows May Increase

By Travis Lundy

  • For years I have tracked investor category flows in Japanese stocks because I find them quite informative. I write about them every so often in an insight series JAPAN FLOW.
  • The series, which I have written about for years, suggests foreign investors invest in Japan pro-cyclically and that correlates well to one relatively simple indicator. 
  • The policy backdrop points to greater corporate buying, greater foreign flow, greater selling by individuals and trust banks. The current timing probably matches. 

Ihi (7013) | Multiple Engines for Growth

By Mark Chadwick

  • We look for the new MTP to present a growth outlook in the Aerospace division driven by a recovery in the civilian aircraft market
  • IHI is a key beneficiary of structural growth themes of higher defense spending and energy transition
  • We believe that the market has been overly concerned about a growth plateau. At 9x TEV / NTM EBIT, the stock is a bargain versus global peers

A Case Study of How Nothing Will Change Unless Management Changes

By Aki Matsumoto

  • Underlying Canon’s long-standing underperformance, which had frustrated shareholders, was the lack of diversity on the board, which gave domestic institutional investors an excuse to vote against re-election of inside directors.
  • Canon’s voluntary Nominating Committee also has challenges: with Mr. Mitarai, CEO since 1995, chairing the NC, it’s hard to imagine that discussions and decisions are conducted with objectivity and independence.
  • Although a female independent director might be hired at next AGM in response to the low approval rate for Mitarai’s reappointment, it’s not expected to make any significant changes immediately.

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May 08
0

Daily Brief India: Mankind Pharma and more

By | Daily Briefs, India

In today’s briefing:

  • Weekly Deals Digest (07 May) – Mankind, Nexus, Tata Tech, AAG, Golden Energy, Lian Beng, Penguin

Weekly Deals Digest (07 May) – Mankind, Nexus, Tata Tech, AAG, Golden Energy, Lian Beng, Penguin

By Arun George

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May 08
0

Daily Brief ESG: A Case Study of How Nothing Will Change Unless Management Changes and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Case Study of How Nothing Will Change Unless Management Changes

A Case Study of How Nothing Will Change Unless Management Changes

By Aki Matsumoto

  • Underlying Canon’s long-standing underperformance, which had frustrated shareholders, was the lack of diversity on the board, which gave domestic institutional investors an excuse to vote against re-election of inside directors.
  • Canon’s voluntary Nominating Committee also has challenges: with Mr. Mitarai, CEO since 1995, chairing the NC, it’s hard to imagine that discussions and decisions are conducted with objectivity and independence.
  • Although a female independent director might be hired at next AGM in response to the low approval rate for Mitarai’s reappointment, it’s not expected to make any significant changes immediately.

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May 08
0

Daily Brief Quantitative Analysis: A-H Premium Weekly (May 5th): CCB and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • A-H Premium Weekly (May 5th): CCB, BOC, Sinopec, China Shenhua, CMOC, CRRC, China Southern Airlines
  • Northbound Flows (May 5th): Kweichow Moutai, Foxconn Industrial Internet, Gree Electric Appliances

A-H Premium Weekly (May 5th): CCB, BOC, Sinopec, China Shenhua, CMOC, CRRC, China Southern Airlines

By Ke Yan, CFA, FRM

  • We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 111.2% as of May 5th.
  • The average A-H premium changed by -0.3ppt week on week, led by consumer staples, communication services, health care and offset by real estate, energy, information technology.
  • We highlight weekly changes in A-H premium for CCB, BOC, Sinopec, China Shenhua, CMOC, CRRC, China Southern Airlines, CSC Financials.

Northbound Flows (May 5th): Kweichow Moutai, Foxconn Industrial Internet, Gree Electric Appliances

By Ke Yan, CFA, FRM

  • We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of May 5th.
  • We estimate the weekly outflows to be US$75.1 million, led by information technology, materials, and offset by financials, consumer staples, health care.
  • We highlight flows for Kweichow Moutai, Foxconn Industrial Internet, Gree Electric Appliances.

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