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Smartkarma Daily Briefs

May 08
0

Daily Brief Industrials: Toshiba Corp, IHI Corp, China Energy Engineering, Amaero International Ltd, AP Moeller – Maersk A/S and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
  • Ihi (7013) | Multiple Engines for Growth
  • Energy China (3996 HK): Tempting Risk-Return Payoff
  • Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
  • Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

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

By Arun George

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

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.

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.

Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

By Daniel Hellberg

  • Maersk’s Q1 earnings were solid, despite plummeting container rates and volumes. Annualizing Q1 Net Income would give RoE of about 17%, which is a healthy level, in our view. 
  • Q1 EBITDA of US$4 bn is equivalent to 36% to 50% of full-year guidance, which remains unchanged. Maersk indicated Q1 will likely be its most profitable quarter in 2023.
  • Maersk’s result reinforces our view that container rates are bottoming. A related takeaway is that a slowing goods inflation rate could lose a tailwind it’s enjoyed since last October.

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May 08
0

Daily Brief Consumer: Super Hi International Holding, Makalot Industrial, Alibaba Group, Skyworth Group Limited and more

By | Consumer, Daily Briefs

In today’s briefing:

  • HSCI Index Rebalance Preview and Stock Connect: Potential Changes in June & September
  • Yuanta/​​P-Shares Taiwan Dividend+ ETF Preview: Two Weeks to Cutoff
  • Alibaba (9988 HK): Chinese Authorities Turning Opposite to Encourage Non-State-Owned Companies
  • Skyworth (751 HK): Thoughts On Proration

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.

Yuanta/​​P-Shares Taiwan Dividend+ ETF Preview: Two Weeks to Cutoff

By Brian Freitas

  • With two weeks left to the cutoff, there could be 5 changes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in June.
  • Apart from the adds/deletes, there will also be capping and funding flows that will lead to an estimated one-way turnover of 13.5% and a one-way trade of US$886m.
  • There are 9 stocks with at least 5 days ADV to trade from passive trackers and another 12 stocks that have at least 1 day ADV to trade.

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.

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. 

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May 08
0

Daily Brief Energy/Materials: Japan Petroleum Exploration, Aag Energy Holdings, Kum Yang and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • JAPAN GOVERNANCE CHANGES II – Who Could Surprise on Buybacks? Quant Rankings
  • AAG Energy (2686 HK): New Scheme Vote Date, Different Result?
  • Kum Yang: Shorting Entry Timing on the Inevitable Block Deals
  • AAG Energy (2686) Favors Buying Weakness

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.

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).

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.

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 Industrials: Toshiba Corp, IHI Corp, China Energy Engineering, Amaero International Ltd, AP Moeller – Maersk A/S and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Merger Arb Mondays (08 May) – Toshiba, AAG, Lian Beng, Penguin, Golden Energy, Estia
  • Ihi (7013) | Multiple Engines for Growth
  • Energy China (3996 HK): Tempting Risk-Return Payoff
  • Amaero International Ltd – Frost & Sullivan Report Points to a Compelling Business Case
  • Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

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

By Arun George

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

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.

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.

Maersk Q1: Earnings Fine | Guidance Intact | Takeaways for Container Shipping (And Inflation)

By Daniel Hellberg

  • Maersk’s Q1 earnings were solid, despite plummeting container rates and volumes. Annualizing Q1 Net Income would give RoE of about 17%, which is a healthy level, in our view. 
  • Q1 EBITDA of US$4 bn is equivalent to 36% to 50% of full-year guidance, which remains unchanged. Maersk indicated Q1 will likely be its most profitable quarter in 2023.
  • Maersk’s result reinforces our view that container rates are bottoming. A related takeaway is that a slowing goods inflation rate could lose a tailwind it’s enjoyed since last October.

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May 08
0

Daily Brief Health Care: Mankind Pharma, BeiGene Ltd, Shanghai Tofflon Science A and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Weekly Deals Digest (07 May) – Mankind, Nexus, Tata Tech, AAG, Golden Energy, Lian Beng, Penguin
  • BeiGene (6160.HK/BGNE.US) 23Q1 – Qualitative Changes Are Taking Place
  • Shanghai Tofflon Science (300171.CH) 2022/23Q1 – It’s Better Not to Go Against the Trend

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

By Arun George

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.

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.

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May 07
0

Daily Brief Australia: Liontown Resources, Clinuvel Pharmaceuticals and more

By | Australia, Daily Briefs

In today’s briefing:

  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Liontown, AAG Energy, Penguin, Lian Beng, Golden Energy
  • Clinuvel Pharmaceuticals (CUV AU): Portfolio Expansion Ensures Continued Profitable Growth

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liontown, AAG Energy, Penguin, Lian Beng, Golden Energy

By David Blennerhassett

Clinuvel Pharmaceuticals (CUV AU): Portfolio Expansion Ensures Continued Profitable Growth

By Tina Banerjee

  • Clinuvel Pharmaceuticals (CUV AU) recorded 19% YoY revenue growth in H1FY23, driven by the growth of network of prescriber, treatment demand, and number of prescriptions of Scenesse.  
  • In March, Clinuvel announced the test launch of the first dermatocosmetic product Cyacêlle, a polychromatic screen, formulated to protect skin against ultraviolet A & B and high-energy visible lights.
  • Clinuvel has published encouraging initial readouts of the DNA repair programs. In March 2023, the company has initiated Prénumbra Instant trial in acute ischemic stroke patients.

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May 07
0

Daily Brief China: Hong Kong Hang Seng Index, Estun Automation, Lifetech Scientific, Tencent and more

By | China, Daily Briefs

In today’s briefing:

  • EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Peak Rates?
  • Estun Is on Track of Achieving Its Sales Target
  • China Healthcare Weekly (May.5)- 2nd Wave of COVID, Valuation Logic of China’s Core Assets, Lifetech
  • ECM Weekly (7th May 2023) – Mankind, Nexus REIT, Pertamina Hulu, Growatt, DXN, Giant Biogene, Ventia

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Peak Rates?

By Simon Harris

  • Weekly summary of vol changes and moves across Global Markets
  • Analysing ATM volatility and skew changes over the last 5 days
  • We suggest a few trades to take advantage of the implied vol surfaces

Estun Is on Track of Achieving Its Sales Target

By Xin Yu, CFA

  • MIR forecasts China’s industrial robot market growth to accelerate to ~12% y/y in 2023 and will sustain at double digit y/y for the next several years.
  • Management sees order growth back to normal in Mar and Apr. 
  • Industrial robot sales volume is expected to increase to ~25K in 2023, growing by ~45% y/y. 

China Healthcare Weekly (May.5)- 2nd Wave of COVID, Valuation Logic of China’s Core Assets, Lifetech

By Xinyao (Criss) Wang

  • Many people have begun to pay attention to whether there would be a second wave of COVID-19 in China. We think it is necessary to share our views.
  • The overvaluation or undervaluation of China’s core assets cannot be explained solely by classic valuation models such as PE/PB/DCF, but rather by considering the deep meaning represented by the companies.
  • Lifetech’s future growth space depend more on the performance of pacemakers and IBS, but they are facing different challenges. Therefore, we recommend short-term trade rather than long term hold.

ECM Weekly (7th May 2023) – Mankind, Nexus REIT, Pertamina Hulu, Growatt, DXN, Giant Biogene, Ventia

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.
  • Nexus Select Trust will open books for India’s first Retail REIT, just as the first major India IPO for the year, Mankind Pharma seeks to list.
  • There was only Ventia (VNT AU) placement during the week, along with Giant Biogene Holding (2367 HK) lockup expiry.

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May 07
0

Daily Brief United States: ACM Research and more

By | Daily Briefs, United States

In today’s briefing:

  • [ACM Research (ACMR US)]: Preferred Local Tool Supplier Beginning Global Ascent

[ACM Research (ACMR US)]: Preferred Local Tool Supplier Beginning Global Ascent

By Shawn Yang

  • ACMR reported C1Q23 top-line, GAAP EBIT and non-IFRS net profit (2.8%), 42% and 35% vs. our est., and in-line, and positive vs. negative, respectively. 
  • We estimate ACMR’s China wafer clean/ECD share was 11%/45%~ in 1Q23, +4/28ppts YoY, while guidance implies 45%/50%~ in 4Q23, respectively; 
  • We maintain BUY and US$ 30 TP, implying 2.0x FY24 EV/Sales

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May 07
0

Daily Brief South Korea: Tokai Carbon Korea and more

By | Daily Briefs, South Korea

In today’s briefing:

  • A Long Short Trading Event Likely to Have a High Hit Rate: HPSP & TCK

A Long Short Trading Event Likely to Have a High Hit Rate: HPSP & TCK

By Sanghyun Park

  • The Korean local sector ETF with the fastest growing AUM is TIGER Fn Semiconductor Top 10 ETF, whose AUM has increased more than twice over the past two months.
  • HPSP (403870 KS) will replace Tokai Carbon Korea (064760 KS) by a comfortable margin in the upcoming review in October.
  • From a day trading perspective, this presents a significant Long-Short opportunity. Considering the relatively sizeable passive impact size, setting an entry point more aggressively may not be a bad idea.

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May 07
0

Daily Brief India: Tata Technologies and more

By | Daily Briefs, India

In today’s briefing:

  • Tata Technologies IPO: The Bear Case

Tata Technologies IPO: The Bear Case

By Arun George

  • Tata Technologies (TATATECH IN), the largest India-based ER&D (engineering research and development) service provider, is seeking to raise up to US$600 million, according to press reports.
  • In Tata Technologies IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
  • The key elements of the bear case rest on below-peer revenue growth, high contract assets, growth reliant on VinFast, mid-tier profitability, and high attrition rates.   

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