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Smartkarma Daily Briefs

May 02
0

Daily Brief Utilities: Adani Transmission and more

By | Daily Briefs, Utilities Sector

In today’s briefing:

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

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.

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May 02
0

Daily Brief Industrials: Hyundai Rotem Company, Dongfang Electric and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Contenders for MSCI Korea Inclusion in 2H 2023
  • Dongfang Electric (1072 HK): Profit Surged, Record New Orders Signed

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).

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.

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May 02
0

Daily Brief TMT/Internet: Semiconductor Manufacturing International Corp (SMIC), Shenandoah Telecommunications Company and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • [SMIC (981 HK, BUY, TP HK$24) Target Price Change]: Still Waiting for Downstream Inventory Digestion
  • SHEN: One-Time Benefits Offset Loss

[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.

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 Energy/Materials: Bumi Resources Minerals Tbk and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • LQ45 Index Rebalance Preview (July): Identifying Potential Changes

LQ45 Index Rebalance Preview (July): Identifying Potential Changes

By Brian Freitas

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May 02
0

Daily Brief Consumer: Alibaba Group, Inner Mongolia Yili Industrial Group (A), Tokyo Stock Exchange Tokyo Price Index Topix, Giant Biogene Holding and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim
  • Yili: 4Q22 and 1Q23 Results – Buy
  • Few Companies Include ROE and ROIC as KPIs in Their Mid-Term Management Plans
  • Giant Biogene IPO Lock-Up – US$1.7bn Lockup Release Will Increase Free Float by 14x

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

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.

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.

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May 02
0

Daily Brief Industrials: Hyundai Rotem Company, Dongfang Electric and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Contenders for MSCI Korea Inclusion in 2H 2023
  • Dongfang Electric (1072 HK): Profit Surged, Record New Orders Signed

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).

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.

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May 02
0

Daily Brief Health Care: Astellas Pharma, M3 Inc, Hygeia Healthcare Group and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Astellas Pharma (4503 JP): New Acquisition to Add Promising Drug Candidate in New Therapeutic Area
  • M3: Guidance Points to Further Slowdown in Growth
  • Astellas Pharma Buys Iveric Bio: Help Offset Upcoming Patent Expiry of XTANDI
  • Hygeia Healthcare (6078.HK) – Profits Fell Short of Expectations, but the Outlook Remains Positive

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).

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.

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.

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.

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May 02
0

Daily Brief Financials: Nexus Select Trust, Central China Real Estate and more

By | Daily Briefs, Financials

In today’s briefing:

  • Nexus Select Trust IPO: The Investment Case
  • Morning Views Asia: Central China Securities, Japfa Comfeed Indonesia

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.

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

Most Read: Bloomberry Resorts, Kunlun Tech, Kiwoom Securities, Adani Transmission, SBI Shinsei Bank, Daou Data Corp, Alibaba Group, Dongwon Industries, Hyundai Rotem Company, Bumi Resources Minerals Tbk and more

By | Daily Briefs, Most Read

In today’s briefing:

  • PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot
  • Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC
  • We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline
  • MSCI May 2023 QCIR Preview: Potential Changes as Review Period Ends
  • 2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan
  • Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash
  • Alibaba Cloud: Faces Nationalization Threat, IPO Prospects Remain Dim
  • End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023
  • Contenders for MSCI Korea Inclusion in 2H 2023
  • LQ45 Index Rebalance Preview (July): Identifying Potential Changes

PCOMP Index Rebalance Preview: MPI Tender Offer Opens Up an Index Spot

By Brian Freitas

Index Rebalance & ETF Flow Recap: KS200, KQ150, HSI, CSI300/500, STAR50, SSE50, ChiNext, PCOMP, HDFC

By Brian Freitas

  • Friday marked the end of the review cutoff for the MSCI, CSI300, CSI500, STAR50, SSE50, ChiNext and a bunch of other indices for the upcoming rebalances in May and June.
  • There are no major index events coming up this week as a lot of markets are shut on different days.
  • There were big inflows to mainland China ETFs during the week, while there was a big redemption from the iShares MSCI ACWI ETF (ACWI US). 

We Should Aim at Kiwoom Securities’ Potential Legal Risk-Induced Stock Price Decline

By Sanghyun Park

  • The recent matched order operation’s ringleader called in local major broadcasting companies for an interview and claimed the sell orders through SG on Monday were not from their CFD accounts.
  • The trigger is Kiwoom Securities’ Chairman Kim, who created a continuous and rapid decline in stock prices and led to a vicious cycle of endless margin calls and covering orders.
  • Rather than fishing for a bottom for the eight stocks from this point on, it seems necessary to actively design positions aimed at Kiwoom Securities’ legal risk-induced stock price decline.

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.

2023 High Conviction Update – Shinsei Revises Up Profit Forecast – Now Ahead of Plan

By Travis Lundy

  • A year ago, SBI Shinsei Bank (8303 JP)‘s new MTMP was to get from ¥35bn profit in FY22 to ¥70bn in FY24 including ¥55bn of organic profit, ¥15bn of synergies.
  • On Friday, SBI Shinsei announced FY22 would be ¥42bn instead of ¥35bn, despite higher interest rates. More aggressive lending and gains in subs were credited. 
  • The MTMP calls for ¥70bn Profit in Mar-25 – ¥341 EPS so Friday’s close x 7.1x. The big picture takeout scenario remains intact and Real World Float is still small. 

Insiders At Seoul City Gas and Daou Data Corp Sell Shares Before the Crash

By Douglas Kim

  • Key insiders at Seoul City Gas (017390 KS) and Daou Data Corp (032190 KS) sold their shares before the recent crash.
  • On 28 April, it was reported that Kim Young-Min (Seoul City Gas Chairman) sold 2% of Seoul City Gas on 20 April, resulting in net sales of 45.7 billion won.
  • These Korean companies are two of the eight stocks related to the CFD derivatives sell-down that have been crashing in the past week. 

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.

End of Mandatory Lock-Up Periods for 46 Companies in Korea in May 2023

By Douglas Kim

  • We discuss the end of the mandatory lock-up periods for 46 stocks in Korea in May 2023, among which 4 are in KOSPI and 42 are in KOSDAQ.
  • These 46 stocks on average could be subject to further selling pressures in May and could underperform relative to the market. 
  • Among these 46 stocks, the top 6 market cap stocks include KG Mobility, Dongwon Industries, Hugel, Yunsung F&C, Enchem, and Jeio. 

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

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May 01
0

Daily Brief Australia: Carly Holdings and more

By | Australia, Daily Briefs

In today’s briefing:

  • Carly Holdings Limited – The Right Operational Model

Carly Holdings Limited – The Right Operational Model

By Research as a Service (RaaS)

  • Carly Holdings Limited (ASX:CL8) operates a vehicle subscription business, which it launched in March 2019, leveraging the existing DriveMyCar operations and technology.
  • Car subscription allows business and retail customers to pay a single monthly fee to access a car for 30 days or more and is an alternative to purchasing or financing a vehicle.
  • Carly has attracted larger automotive industry businesses as shareholders, with a model that facilitates sales volumes of new vehicles and delivers a new recurring revenue stream for automotive manufacturers and dealers. 

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