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Smartkarma Daily Briefs

May 03
0

Daily Brief Consumer: Arclands Corporation, Taste Gourmet, Kimly Ltd, S&P 500 INDEX, JD.com Inc., Yerbae Brands , Philip Morris International, Procter & Gamble Co and more

By | Consumer, Daily Briefs

In today’s briefing:

  • JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date
  • Taste Gourmet: What to Expect From the 2023 Results
  • Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand
  • S&P 500 Testing 4165-4200, DJIA Testing 34,280, Nasdaq Composite Testing 12,300; Stay Defensive
  • JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin
  • Yerbaé Brands: 2022 Financials Beat Expectations
  • Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers
  • The Procter & Gamble Company: Pricing Power Continues To Be Its Biggest Weapon – Key Drivers

JAPAN ACTIVISM: Murakami-San Goes Substantial on Arcland SHD (3085) Ahead of Merger Vote Record Date

By Travis Lundy

  • Today, City index Eleventh, the corporate entity often used by noted activist Yoshiaki Murakami, announced (EDINET filing) they owned 1.756mm shares or 5.31% of Arcland Service (3085 JP) 
  • In mid-April, Arclands Corporation (9842 JP) announced it would merge with 55%-owned restaurant subsidiary Arclands SHD. Murakami-owned 5+% of Arclands at the time. Then it sold 9842 and bought 3085.
  • This looks like a confusing set of moves. It is not as confusing when you think about it. He is setting up something for later.

Taste Gourmet: What to Expect From the 2023 Results

By Sameer Taneja

  • Taste Gourmet (8371 HK) will report FY23 (March YE) results on June 23rd. Channel checks indicate strong momentum in Q4 Vs. Q3 FY23.
  • Based on our estimates of 72/112 mn HKD for FY23/24e, the stock trades at 8x/5x FY23e/FY24e with a 7.6%/11.9% dividend yield assuming a 60% payout ratio.
  • The company has 114 mn HKD of cash (20% of market cap), which is earmarked for restaurant expansion by 6-10 outlets and dividend payout (50-60% of earnings) in HK/China.

Kimly (KMLY SP): Ramp up in Public Housing Supply, an Opportunity to Expand

By Devi Subhakesan

  • The ramp-up in public housing supply in Singapore could be an opportunity for Kimly Ltd to fast-track expansion given its outlets, food-stalls are mostly located in public housing blocks. 
  • Bigger F&B retail players like Kimly are better positioned versus others to weather the multiple headwinds faced by Singapore F&B retail sector today. 
  • Upcoming 1H FY2023 results can trigger an up move in the stock if the company reports a meaningful margin recovery. Current undemanding valuations reflect heightened investor concerns.  

S&P 500 Testing 4165-4200, DJIA Testing 34,280, Nasdaq Composite Testing 12,300; Stay Defensive

By Joe Jasper

  • We still recommend a tactical overweight to defensives (Staples, Utilities, Healthcare, and gold miners) as the SPX tests our 4165-4200 resistance range, and also resistance from the prior 1.5-month uptrend.
  • As we await Wednesdays FOMC announcement, the DJIA and Nasdaq Composite are testing 1-year resistances at 34,280 and 12,300, the DXY appears to be inflecting higher, and breadth remains weak.
  • While we still see a reach to 4300-4325 as possible, we believe playing for more upside is akin to picking up pennies in front of a steamroller.

JD.com (9618 HK) Earnings Preview: To Continue A Strategy of Low Growth and High Margin

By Ming Lu

  • We believe JD’s growth rate will continue to slow down and its margin will continue to improve in 1Q23.
  • However, we also believe revenue growth will recover from 2Q23.
  • We set a price target of HK$256, implying an upside of 85%. Buy.

Yerbaé Brands: 2022 Financials Beat Expectations

By Atrium Research

  • Yerbaé posted full-year 2022 financial results that beat our estimates.
  • 2022 net revenue came in at $7.2M vs. our estimate of $6.8M, representing 19% YoY growth
  • Gross margin came in at 59% in 2022 vs. our estimate of 58%

Philip Morris International Inc.: IQOS & ILUMA Are Changing The Game – Key Drivers

By Baptista Research

  • Philip Morris International’s Q1 results exceeded analyst expectations on the earnings front but were below par in terms of revenues despite some decent underlying momentum from IQOS, ZYN, and its combustible business.
  • The company’s Q1 organic net revenues had solid growth.
  • This highlights the ongoing strength of IQOS as a step-up in pricing but was somewhat mitigated by anticipated HTU inventory movement.

The Procter & Gamble Company: Pricing Power Continues To Be Its Biggest Weapon – Key Drivers

By Baptista Research

  • Procter & Gamble delivered strong results and managed an all-around beat in the recent result.
  • Pricing increased sales growth by 10 points, while mix had a marginally favorable impact on the quarter.
  • Growth remained widespread across business divisions, with organic sales increasing in the company’s ten product categories.

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May 02
0

Daily Brief Credit: Morning Views Asia: Central China Securities and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Central China Securities, Japfa Comfeed Indonesia

Morning Views Asia: Central China Securities, Japfa Comfeed Indonesia

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 02
0

Daily Brief Singapore: Mapletree Logistics Trust and more

By | Daily Briefs, Singapore

In today’s briefing:

  • REIT Watch – Hospitality S-Reits among April’s top performers, averaging 6% gains

REIT Watch – Hospitality S-Reits among April’s top performers, averaging 6% gains

By Geoff Howie

  • Hospitality S-Reits among April’s top performers, averaging 6% gains However, by sub-segments within the index, hospitality S-Reits were the best performing segment with average total returns of 6.1 per cent followed by data centre S-Reits at 1.7 per cent.
  • The top five performing trusts and their respective total returns were: CapitaLand Ascott Trust (8.5 per cent), Frasers Hospitality Trust (6.7 per cent), Mapletree Logistics Trust (5.6 per cent), Far East Hospitality Trust (5.1 per cent) and CDL Hospitality Trusts (4.2 per cent).

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May 02
0

Daily Brief Quantitative Analysis: Hong Kong Connect Flows (Apr 28th): Meituan and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Hong Kong Connect Flows (Apr 28th): Meituan, China Construction Bank
  • TWSE Short Interest Weekly (Apr 28th): Unimicron Tech, Evergreen, Taiwan Cement, Polaris, Largan
  • A-H Premium Weekly (Apr 28th): Sinopec, China Shenhua, CRRC, Tigermed, GWM
  • Downside Betas Vs Downside Correlations
  • Northbound Flows (Apr 28th): Kweichow Moutai, East Money, CATL, Gree Electric Appliances, CMB

Hong Kong Connect Flows (Apr 28th): Meituan, China Construction Bank

By Ke Yan, CFA, FRM

  • We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of April 28th.
  • The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
  • We estimate the inflows to be USD 201m and highlight flows for Meituan, China Construction Bank.

TWSE Short Interest Weekly (Apr 28th): Unimicron Tech, Evergreen, Taiwan Cement, Polaris, Largan

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of TWSE Stocks as of Apr 28th which has an aggregated short interest worth USD12.6bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Unimicron Tech, Evergreen Marine, Taiwan Cement, Polaris, Largan Precision, Micro-Star Intl, King Yuan Elec, Powertech, Hiwin Tech.

A-H Premium Weekly (Apr 28th): Sinopec, China Shenhua, CRRC, Tigermed, GWM

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 111.3% as of Apr 28th.
  • The average A-H premium changed by 0.8ppt week on week, led by consumer staples, consumer discretionary, health care and offset by information technology, energy, real estate.
  • We highlight weekly changes in A-H premium for Postal Savings, BankComm, CCB, Sinopec, China Shenhua, CRRC, Tigermed, GWM.

Downside Betas Vs Downside Correlations

By Nicolas Rabener

  • Investors typically use correlation to identify diversifying strategies, but the metric can be misleading
  • Upside and downside betas and correlations provide a better perspective
  • Common hedge fund strategies failed to provide attractive diversification benefits

Northbound Flows (Apr 28th): Kweichow Moutai, East Money, CATL, Gree Electric Appliances, CMB

By Ke Yan, CFA, FRM

  • We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of April 28th.
  • We estimate the weekly outflows to be US$844.5 million, led by financials, consumer staples, and offset by industrials, information technology.
  • We highlight flows for Kweichow Moutai, East Money Information, Contemporary Amperex Technology, Gree Electric Appliances, China Merchants Bank.

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May 02
0

Daily Brief ESG: Few Companies Include ROE and ROIC as KPIs in Their Mid-Term Management Plans and more

By | Daily Briefs, ESG

In today’s briefing:

  • Few Companies Include ROE and ROIC as KPIs in Their Mid-Term Management Plans

Few Companies Include ROE and ROIC as KPIs in Their Mid-Term Management Plans

By Aki Matsumoto

  • Although many companies now disclose numerical targets in their mid-term management plans, only a few still use ROE or ROIC as numerical targets(15% 1,801 companies of Metrical Universe, March 2023).
  • The fact that many companies that don’t include ROE or ROIC as KPIs indicates that the management wasn’t aware of the return  from the shareholders’ perspective or cost of capital.
  • The 3-year mid-term business plan is built on the foundation of the actual project in progress and should be outlined to reflect its cash allocations and cash flow returns.

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May 02
0

Daily Brief Equity Bottom-Up: Alibaba Cloud: Faces Nationalization Threat and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim
  • Yili: 4Q22 and 1Q23 Results – Buy
  • M3: Guidance Points to Further Slowdown in Growth
  • Dongfang Electric (1072 HK): Profit Surged, Record New Orders Signed
  • Hygeia Healthcare (6078.HK) – Profits Fell Short of Expectations, but the Outlook Remains Positive
  • [SMIC (981 HK, BUY, TP HK$24) Target Price Change]: Still Waiting for Downstream Inventory Digestion
  • REIT Watch – Hospitality S-Reits among April’s top performers, averaging 6% gains
  • SHEN: One-Time Benefits Offset Loss

Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim

By Oshadhi Kumarasiri

  • Alibaba (ADR) (BABA US) Cloud will cut prices for its elastic computing services using Arm and Intel-based chips by 15-20% and Nvidia’s V100 and T4 graphics processing units by 41-47%.
  • It seems like the company is trying to combat increasing competition in the only way it knows how, by further subsidizing its already-subsidized cloud services.
  • Price may not be the main reason for companies to avoid using Alibaba Group (9988 HK)‘s Cloud services. Government initiatives to nationalize the cloud-computing market could be a bigger factor.

Yili: 4Q22 and 1Q23 Results – Buy

By Xin Yu, CFA

  • 4Q22 result beat and 1Q23 result was roughly in line
  • Revenue growth to accelerate and margin to improve in 2023
  • Long-Term targets remain unchanged and the valuation becomes attractive now

M3: Guidance Points to Further Slowdown in Growth

By Shifara Samsudeen, ACMA, CGMA

  • M3 Inc (2413 JP)  reported 4QFY03/2023 results on Friday. Both revenue and OP increased 3.1% and 52.0% YoY to ¥55.7bn (vs consensus ¥60.8bn) and ¥16.0bn (vs consensus ¥17.8bn) respectively.
  • We previously raised concerns over slowdown in medical platform earnings, and it seems that m3 has not been able to generate meaningful growth from its overseas businesses.
  • The company expects FY03/2024E revenue growth to further drop to about 8.3% marking the slowest annual increase in revenue over the last two decades.

Dongfang Electric (1072 HK): Profit Surged, Record New Orders Signed

By Osbert Tang, CFA

  • The market should be happy with the 43.9% YoY growth in recurring earnings at Dongfang Electric (1072 HK) in 1Q23. Gross margin of 18.7% is the highest since 2Q21.
  • New orders surged 26.1% YoY and 92.4% QoQ to a record Rmb22.6bn in 1Q23. We estimate backlog equals to 1.42x FY23F consensus revenue, meaning a very secured pipeline.
  • While EPS dilution is a concern, this has already been reflected in share price. The acquisitions of subsidiaries will enhance FY23 earnings. Its 8x PER and 0.8x P/B are inexpensive.

Hygeia Healthcare (6078.HK) – Profits Fell Short of Expectations, but the Outlook Remains Positive

By Xinyao (Criss) Wang

  • In 2022, Hygeia maintained stable revenue growth but with lower-than-expected profit performance. We think Hygeia’s profitability would improve gradually in the future as more and more new hospitals become break-even.
  • Different from Aier/Topchoice, Hygeia’s acquired hospitals would be directly incorporated into the listed company, which means all aspects of consideration would be prudent. This is clearly more beneficial for investors/shareholders.
  • Hygeia’s business model has proven to be replicable.The implementation of DRG policy has no significant impact on profitability. Hygeia is expected to have higher valuation than Aier/Topchoice in the future.

[SMIC (981 HK, BUY, TP HK$24) Target Price Change]: Still Waiting for Downstream Inventory Digestion

By Shawn Yang

  • We expect SMIC to report C1Q23 top-line, IFRS operating income, and non-IFRS net income (2.6%), (31%), and (29%) vs. consensus, respectively.
  • Our sample of 1Q23 earnings for A-listed fabless firms found that (1) inventory days grew 18% QoQ to 191 days, and (2) revenues declined 9% QoQ. 
  • Despite potential earnings miss, SMIC’s BUY case is strengthened positive externalities. We maintain BUY and raise TP to HK$24.

REIT Watch – Hospitality S-Reits among April’s top performers, averaging 6% gains

By Geoff Howie

  • Hospitality S-Reits among April’s top performers, averaging 6% gains However, by sub-segments within the index, hospitality S-Reits were the best performing segment with average total returns of 6.1 per cent followed by data centre S-Reits at 1.7 per cent.
  • The top five performing trusts and their respective total returns were: CapitaLand Ascott Trust (8.5 per cent), Frasers Hospitality Trust (6.7 per cent), Mapletree Logistics Trust (5.6 per cent), Far East Hospitality Trust (5.1 per cent) and CDL Hospitality Trusts (4.2 per cent).

SHEN: One-Time Benefits Offset Loss

By Hamed Khorsand

  • SHEN reported first quarter results benefiting from non-recurring termination revenue and tax refunds. SHEN’s revenue and profitability were aided in the quarter with $1.7 million in termination fee
  • Net income benefited from a one-time refund on sales tax and interest earned on tax refunds more than offsetting SHEN’s interest expense
  • SHEN ended the first quarter with 28,793 Glo Fiber subscribers, up 4,507 from the fourth quarter 2022

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May 02
0

Daily Brief Thematic (Sector/Industry): KLAC Q1’23 Earnings Report. So Far and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • KLAC Q1’23 Earnings Report. So Far, So Good
  • China A-Share Consumer Staples: Depressed Share Price Cannot Reflect Decent Earnings
  • Global Semiconductor Sales Increased 0.33% MoM In March 2023

KLAC Q1’23 Earnings Report. So Far, So Good

By William Keating

  • Q1’23 revenues of $2.43 billion, marginally above the guided midpoint $2.35 billion, down 17.5% sequentially and up 6.4% YoY.
  • For Q2’23, the company expects revenues of $2.25 billion at the midpoint, down 4% sequentially.
  • KLAC historically outperforms its peers during semi down cycles. This time will be no different.

China A-Share Consumer Staples: Depressed Share Price Cannot Reflect Decent Earnings

By Osbert Tang, CFA

Global Semiconductor Sales Increased 0.33% MoM In March 2023

By William Keating

  • Global semiconductor sales for the month of March amounted to $39.83 billion, representing a 0.33% increase sequentially, the first such increase in twelve months.
  • Q1 2023 sales amounted to $119.5 billion, a decrease of 8.7% compared to the fourth quarter of 2022 and 21.3% less than the first quarter of 2022.
  • While small, the March MoM increase is still hugely significant.

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May 02
0

Daily Brief ECM: Nexus Select Trust IPO: The Investment Case and more

By | Daily Briefs, ECM

In today’s briefing:

  • Nexus Select Trust IPO: The Investment Case

Nexus Select Trust IPO: The Investment Case

By Arun George

  • Nexus Select Trust (NST IN), a consumption centre REIT, is seeking to raise up to Rs32 billion (US$391 million). The offer opens from 9-11 May. 
  • NST, sponsored by Blackstone Group (BX US), owns India’s most extensive portfolio of consumption centres and will be the first publicly listed consumption centre REIT in India.
  • The key elements of the investment case rest on strong portfolio performance, high occupancy rates, favourable lease contracts, rental reversion potential and low tenant concentration risk.

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May 02
0

Daily Brief South Korea: Hyundai Rotem Company and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Contenders for MSCI Korea Inclusion in 2H 2023

Contenders for MSCI Korea Inclusion in 2H 2023

By Douglas Kim

  • We have provided a list of 10 stocks that could be included in the MSCI Korea index in 2H 2023.
  • Among these 10 companies, the top five companies with the highest free float based market cap have greater probabilities of becoming included in the index, in our view.
  • The five companies include Jyp Entertainment (035900 KS), Hyundai Rotem Company (064350 KS), DB Hitek Co., Ltd. (000990 KS), Cs Wind Corp (112610 KS), and LS Corp (006260 KS).

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May 02
0

Daily Brief Event-Driven: MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends
  • Contenders for MSCI Korea Inclusion in 2H 2023
  • LQ45 Index Rebalance Preview (July): Identifying Potential Changes
  • Astellas Pharma (4503 JP): New Acquisition to Add Promising Drug Candidate in New Therapeutic Area
  • Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x
  • Astellas Pharma Buys Iveric Bio: Help Offset Upcoming Patent Expiry of XTANDI

MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends

By Brian Freitas

  • The review period for the price cutoff for the MSCI May Quarterly Comprehensive Index Review (QCIR) ended 28 April. MSCI should select a day from week one.
  • The most changes are expected in China and there are a couple of stocks that could trigger the Extreme Price Increase thresholds.
  • Some stocks appear on the list of potential changes on certain days during the review period and their addition/deletion will depend on the day that MSCI chooses for computation.

Contenders for MSCI Korea Inclusion in 2H 2023

By Douglas Kim

  • We have provided a list of 10 stocks that could be included in the MSCI Korea index in 2H 2023.
  • Among these 10 companies, the top five companies with the highest free float based market cap have greater probabilities of becoming included in the index, in our view.
  • The five companies include Jyp Entertainment (035900 KS), Hyundai Rotem Company (064350 KS), DB Hitek Co., Ltd. (000990 KS), Cs Wind Corp (112610 KS), and LS Corp (006260 KS).

LQ45 Index Rebalance Preview (July): Identifying Potential Changes

By Brian Freitas

Astellas Pharma (4503 JP): New Acquisition to Add Promising Drug Candidate in New Therapeutic Area

By Tina Banerjee

  • Astellas Pharma (4503 JP) is acquiring the U.S.-based clinical stage biopharmaceutical company IVERIC bio (ISEE US) for ~$5.9B. Iveric Bio focuses on the discovery and development of novel ophthalmology treatments.
  • Iveric’s lead drug candidate Avacincaptad Pegol for the potential treatment of Geographic Atrophy is under FDA review with PDUFA action date of August 19, 2023.
  • The acquisition will be funded by a combination of bank loan, issuance of commercial paper totaling ~¥800B, and internal cash. The acquisition is expected to complete by 3Q23 (July–September).

Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x

By Sumeet Singh

  • Giant Biogene raised around US$70m in its Hong Kong IPO, after having downsized the deal and priced it at the low-end. Its six-month lockup will expire soon.
  • GB is a leader in the bioactive ingredient-based professional skin treatment product industry in China.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

Astellas Pharma Buys Iveric Bio: Help Offset Upcoming Patent Expiry of XTANDI

By Shifara Samsudeen, ACMA, CGMA

  • Japanese drug maker Astellas Pharma announced on Monday that it has entered into a definitive agreement to acquire 100% of opthalmalogy player Iveric Bio for a total consideration of U$5.9bn.
  • Astellas Pharma (4503 JP) will pay US$40 per share of IVERIC bio (ISEE US) , 64% premium to the unaffected closing price of US$24.33 per share as of 31st March 2023.
  • As Astellas’ blockbuster drug XTANDI’s exclusivity is nearing expiry, we think Iveric’s key drug asset ACP should offer some protection over loss of XTANDI’s revenues in the future.

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