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Smartkarma Daily Briefs

Apr 26
0

Daily Brief ECM: CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry and more

By | Daily Briefs, ECM

In today’s briefing:

  • CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry
  • Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning
  • Horizon Construction Development IPO: The Bull Case
  • Pre-IPO YSB Inc (YSB.HK) – The Business Model Is Facing Challenges
  • Esco Lifesciences (1891571D SP) Pre-IPO: A Profitable Revenue Growth Saga
  • CPF Global Food Solution Pre-IPO – The Negatives – Muted Growth Prospects
  • Ross Stores Inc.: Collaboration With Adidas & Other Drivers
  • Omnicom Group Inc.: Success in Precision Marketing and Public Relations – Key Drivers
  • Analog Devices Inc.: The Next Big Thing in Mission-Critical Equipment – Key Drivers

CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry

By Ethan Aw

  • CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO. 
  • CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally. 
  • In this note, we talk about the positive aspects of the deal.

Lalatech IPO: Huge Drop in Operating Costs Prior to IPO Is Concerning

By Shifara Samsudeen, ACMA, CGMA

  • Lalatech Holdings Co Ltd (LALA HK) is a technology driven logistics transportation platform with a global footprint. The company has filed for an IPO and plans to raise about US$1bn.
  • The company’s financials have shown significant improvement over the last 2 years with the company turning profitable at the operating profit line in 2022.
  • Huge drop in selling and marketing costs have helped cut down losses which seems too realistic and the company hasn’t provided sufficient explanation on these cost cuts.

Horizon Construction Development IPO: The Bull Case

By Arun George

  • Horizon Construction Development (1887128D HK)/HCD, a subsidiary of Far East Horizon (3360 HK), is pre-marketing an HKEx IPO to raise US$200-250 million, according to press reports.
  • HCD is the largest equipment operation service provider in China in terms of revenue in 2021, according to Frost & Sullivan.
  • The key elements of the bull case rest on market share gains, an anticipated post-COVID recovery boost, high revenue visibility, stable operating margin and young equipment life.

Pre-IPO YSB Inc (YSB.HK) – The Business Model Is Facing Challenges

By Xinyao (Criss) Wang

  • The margins of pharmaceutical circulation B2B business is low. If there’s not enough incremental space of terminal customers, the simple B2B trading model is difficult to form a leapfrog growth.
  • Based on YSB’s business model, if terminal customers choose to use other platforms like JD Health/Alibaba Health, etc., YSB would face the risk of losing upstream and downstream users.
  • So far, we haven’t seen that YSB has established core competitiveness or moat to secure the terminal customers pool, casting doubts on its business model, investment logic and outlook.

Esco Lifesciences (1891571D SP) Pre-IPO: A Profitable Revenue Growth Saga

By Tina Banerjee

  • Esco Lifesciences Group (1891571D SP), a profitable lifesciences tool provider with a global presence, is looking to raise $300M in its upcoming HK IPO.  
  • The company clocked revenue of S$117M in 2019, which steadily rose to S$155M in 2020 and S$172M in 2021, representing CAGR of 21%, outpacing lifesciences equipment market growth of 10%.
  • In May 2021, Esco raised $200M through series-A fund raising with investors holding nearly 24% of the shares. This puts its valuation at around $840M.

CPF Global Food Solution Pre-IPO – The Negatives – Muted Growth Prospects

By Ethan Aw

  • CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO. 
  • CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally.
  • In this note, we talk about the not-so-positive aspects of the deal.

Ross Stores Inc.: Collaboration With Adidas & Other Drivers

By Baptista Research

  • Ross Stores delivered strong fourth-quarter sales and profitability results despite a very competitive holiday season, owing to customers’ positive response to the company’s expanded selection and value offerings.
  • The company delivered an all-around beat with earnings per share for Q4 reported at $1.31 on a net income of $447 million.
  • These figures compare to earnings per share of $1.04 on net earnings of $367 million for the 13 weeks ended January 29, 2022.

Omnicom Group Inc.: Success in Precision Marketing and Public Relations – Key Drivers

By Baptista Research

  • Omnicom Group delivered an all-around beat as its revenues increased by 1%, while non-GAAP adjusted operating income remained unchanged.
  • Net interest expense decreased as interest income exceeded the company’s expectations.
  • We give Omnicom Group a ‘Hold’ rating with a revised target price.

Analog Devices Inc.: The Next Big Thing in Mission-Critical Equipment – Key Drivers

By Baptista Research

  • Despite significant macroeconomic uncertainty in the first quarter of fiscal 2023, Analog Devices managed to deliver an all-around beat.
  • These successes were driven by the company’s unwavering commitment to customer collaboration, the rising demand for cutting-edge technologies, and effective operational management.
  • We give Analog Devices a ‘Hold’ rating with a revised target price.

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Apr 26
0

Daily Brief Equity Bottom-Up: Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem. and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.
  • Shimano (7309) | The Hangover
  • [Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick
  • Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring
  • Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash
  • CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient
  • UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market
  • WuXi AppTec (2359.HK/603259.CH) 2023Q1 – The Signals Behind the Plunge in Stock Price
  • Vivendi: Leadership Position in Media, Entertainment, Culture, and Communication
  • Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice

Actionable Tactical Trade: Long China Mobile H-Share 941HK on Strong Southbound Momentum & A/H Prem.

By Jacob Cheng

  • This insight is a short note that aims to ride on short term momentum for the stock
  • Since April, southbound trade contributes to 72% of China Mobile H-share turnover.  So, southbound trade is the major share driver
  • For entire market, A-share is trading at 40% premium to H-share.  For China mobile, the A/H premium is currently at 80%. Strong upside for H-share if premium is to narrow

Shimano (7309) | The Hangover

By Mark Chadwick

  • Shimano reported Q1 results post close. Operating profit fell 26% YoY and full year guidance was cut 21%
  • We believe that sales in 2023 have simply reverted back to trend. We expect sales to grow in 2024 as underlying demand drivers remain intact
  • With the stock down 9% over the past year, we believe the market has discounted the profit revision. We see good value at 17x EV/EBIT

[Tencent (700 HK, BUY, TP HK$433) Earnings Preview]: Still a BUY, but Not Our Top Pick

By Shawn Yang

  • We estimate that Tencent 1Q23’s rev./non-IFRS net income beat cons. by 3.6%/4.5%. We forecast that VAS/ads/others will have 6.5%/15.3% /17.6% YoY growth in 1Q23. 
  • We maintain BUY rating for Tencent because of 1) video account, especially the rapid growth of Wechat Beans (微信豆); and 2) recovery of ads revenue from Ecommerce and gaming.
  • We remove Tencent from our top buy ideas because: 1) current consensus has been high; 2) lack of hit title in upcoming pipeline; and 3) launch of DNF casts shadow

Wynn Macau: We like the Bonds Now Moving to the Shares Later This Spring

By Howard J Klein

  • Wynn’s issuance of US$600m in convertible bonds for its Macau subsidiary pushes out maturities by five years, easing investor concerns about debt levels.
  • The Macau gaming market is in early stages of pent up demand recovery compared with Las Vegas which is in a mature stage of the cycle.
  • Premium mass and VIP customers key to Wynn Macau business model are returning at a faster rate than industry observers have judged. Decline of junkets not hurting VIP in 2023.

Oriental Watch: Recovery of HK Sales in Jan-Feb 2023, Trading at 15% Yield, 50% of Mkt Cap in Cash

By Sameer Taneja

  • The census and statistics department data for watches and jewelry showed a sharp rebound for HK in Jan-Feb 2023 (up 63% YoY). China sales, we estimate, continue to be resilient.
  • Over the last month, secondhand watch pricing has also shown an uptrend of 3-4%. This leads us to believe that demand is having a decent uptick in April. 
  • The stock trades at 7.2x PE FY23e, with >50% of the market capitalization in cash and a 15% dividend yield (assuming a 100% payout ratio). 

CIMC Enric (3899 HK): It’s Not My Fault, I’m Resilient

By Osbert Tang, CFA

  • We see the recent sell-down of CIMC Enric Holdings (3899 HK) unjustified. 1Q23 revenue grew a healthy 19.6%, and management indicated excellent margin expansion as well. 
  • New orders signed accelerated in Mar to 21.6%, from just 10.7% in Jan-Feb. Its order backlog reached Rmb18.9bn (+22.3%). For hydrogen business, new orders even grew 61%. 
  • Guidances are for double-digit revenue growth in FY23, and besides better gross margin, lower tax rates have benefited net margin. We estimate 1Q23 profit may have increased ~50%.

UMP Healthcare: An Undervalued Gem with a Promising Future in Hong Kong’s Healthcare Market

By Sameer Taneja

  • UMP Healthcare (“UMP”) is Hong Kong’s leading private medical service network. Its network spans 1100+ service providers, 1mm+ scheme members, 2000+ contract customers, and over 1.13mm+ annual clinic visits.
  • Despite the consistent track record, UMP trades at a 61% discount to its IPO price, 6x PE, and 8% yield with 45% of its market cap in net cash. 
  • We see ingredients in place for a multi-year re-rate, backed by HK’s new Healthcare Policy and the company’s strategic tilt towards higher margin service lines supporting future profit growth.

WuXi AppTec (2359.HK/603259.CH) 2023Q1 – The Signals Behind the Plunge in Stock Price

By Xinyao (Criss) Wang

  • Excluding COVID-19 projects, some of WuXi AppTec’s conventional CXO business growth rate has declined significantly. So, the fading of COVID-19 dividend period is not the only reason for the performance decline.
  • The supply-side reform of innovative drugs is further deepened, and the effect of industry clearing is obvious. So, the “winner-takes-all” logic will be gradually deduced in the future.
  • WuXi AppTec’s controlling shareholders seem to “have foreseen something”- They could continue to reduce holdings on rallies in the future. Together with longer-than-expected industry winter, valuation center could further decline.

Vivendi: Leadership Position in Media, Entertainment, Culture, and Communication

By Alexis Dwek

  • For 2022, Vivendi reported a solid set of results as both revenues and EBITA grew strongly despite the challenging market environment
  • For 2023, positive momentum is expected to be sustained, as management stays confident in the growth prospects.
  • Underlying market growing close 4.6% CAGR to 2026. Solid growth prospects for the Company

Ricegrowers Limited (SunRice) – Global Market Forecasts Positive for SunRice

By Research as a Service (RaaS)

  • The latest release of the USDA Rice Crop Outlook Report (April 13) provides useful data on the global and US rice markets, which has implications for the rice-related businesses within Ricegrowers Limited, trading as SunRice (ASX:SGLLV).
  • The global rice market is forecast to see the second consecutive year of demand exceeding supply (due mainly to supply issues), with global-ending rice stocks expected to be the lowest since 2017/2018 and equal to just four months’ demand.
  • Prices for most grades, as a result, remain at record highs (US-medium-grain, which is a proxy for Australian grades) or trending higher in recent months (including Thailand +4%-5% and Vietnam +7%). 

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Apr 26
0

Daily Brief Macro: Japan Watch #2: Ueda Is Under Increasing Pressure to Act and more

By | Daily Briefs, Macro

In today’s briefing:

  • Japan Watch #2: Ueda Is Under Increasing Pressure to Act
  • Operating Leverage in Reverse: The Impact on Equity Markets
  • Resilience in World Economy Is Only of Modest Help to Asia
  • Avoiding Recession Raises All Rates
  • China’s Recovery Progresses but Elements of Fragility Remain
  • CX Daily: Hubris And Heartache: Behind The Tragedy Of Beijing’s Deadly Hospital Fire

Japan Watch #2: Ueda Is Under Increasing Pressure to Act

By Andreas Steno

  • Japanese inflation is getting increasingly embedded – >80% of basket components increase YoY.
  • Expectations ahead of the Ueda-led BoJ policy statement are low
  • In general, a move higher in the Japanese Core CPI speaks in favor of a defensive equity allocation

Operating Leverage in Reverse: The Impact on Equity Markets

By Jeroen Blokland

  • Operating leverage works both ways. With the gap between earnings growth and sales growth now negative, stock markets have entered a phase of ‘reverse operating leverage.’
  • To determine the impact of reverse operating leverage on future equity market returns, we looked at all instances when sales growth topped earnings growth since 2000.
  • As it turns out, a recession determines whether ‘reverse operating leverage’ hits equities or not. And since we expect a recession…

Resilience in World Economy Is Only of Modest Help to Asia

By Manu Bhaskaran

  • The world economy has been more resilient than thought but the demand for Asian manufactured goods has been hurt by cyclical headwinds and lower commodity prices.
  • Global services activity, in contrast, has done better but this provides fewer benefits for Asian exporters. Still, a fuller tourism recovery should provide a boost to Asia.
  • However, capital expenditures in developed economies are proving resilient, while positive dynamics such as infrastructure spending and investment inflows provide support for growth.

Avoiding Recession Raises All Rates

By Phil Rush

  • Global activity has remained remarkably resilient to recessionary forces. A prolonged path of stagnation may spare the acute pains of recession but carries other costs.
  • Persistent excess demand sustains inflationary pressures, including through second-round effects that are particularly pronounced in the UK.
  • Policy needs to stay tighter for longer, increasing the hysteresis potential as rates need to defer demand ever further into the future, opposite to the 2010s’ regime.

China’s Recovery Progresses but Elements of Fragility Remain

By Manu Bhaskaran

  • Economic data in March showed that the recovery is underway, but the pace is uneven and shows signs of slowing in areas like retail sales, fixed investment, and real estate. 
  • Forward-Looking indicators such as corporate confidence, loan demand, and housing market sentiment are improving, but a “wait-and-see” attitude is prevalent.
  • We upgrade our views on Chinese growth given that the recovery remains on track, but this is subject to a considerable margin of error given our reservations.

CX Daily: Hubris And Heartache: Behind The Tragedy Of Beijing’s Deadly Hospital Fire

By Caixin Global

  • Hubris and Heartache: Behind the tragedy of Beijing’s deadly hospital fire

  • China lodges complaint about South Korean president’s ‘erroneous’ remarks on Taiwan

  • China loses more of its share of U.S. imports to ‘low-cost’ Asian rivals

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Apr 26
0

Daily Brief Event-Driven: Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
  • AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
  • Mankind Pharma: IPO Details & Index Inclusion
  • KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
  • Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion
  • CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

By Sanghyun Park

  • The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
  • Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
  • The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote

By David Blennerhassett

  • We’re down to the pointy end of AAG Energy Holdings (2686 HK)‘s Scheme. And at a gross/annualised spread of 15.6%/318%, all is not well.
  • The uncertainty is not without substance. A derisory Offer, one that is rejected by a proxy advisor; together with a silent, large shareholder no one seems to know.
  • Shareholders go to the vote this Thursday, the 27th April. Currently trading 5% below the undisturbed price.

Mankind Pharma: IPO Details & Index Inclusion

By Brian Freitas

  • Mankind Pharma (6596876Z IN) is looking to raise up to US$526m in its IPO by selling 40.06m shares at a price range of INR 1026 to INR 1080 per share.
  • The company has allocated 12.02m shares to anchor investors at INR 1080/share. That list includes marquee names and the lock-up reduces near-term float.
  • The IPO opens on 25 April and will close on 27 April. Shares are expected to start trading on 9 May and there are no near-term index inclusions expected.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

By Brian Freitas

  • With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX). 
  • There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
  • Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

Quiddity Leaderboard Singapore’s STI Sep 23: KDCREIT Facing Risk of Deletion

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for Singapore’s ST index (“STI”) between now and the September 2023 index review.
  • With roughly 4 more months left for the base date, Sembcorp Marine (SMM SP) seems to be an ADD but it is close to the border.
  • Since the ranking system used for this index in based on prices as at a single point in time, the rankings could change significantly and our expectations could change too.

CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

By Brian Freitas

  • With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
  • There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
  • The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.

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Apr 26
0

Most Read: Mntech Co Ltd, Youlchon Chemical, Zhejiang Huafeng Spandex A, JD Industrials, Aag Energy Holdings, Mankind Pharma, Lutronic Corp, CPF Global Food Solution, Zhejiang Century Huatong A and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively
  • KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
  • CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
  • AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
  • JD Industrials Pre-IPO – The Positives – Growing Fast and a Leader in Its Space
  • AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote
  • Mankind Pharma: IPO Details & Index Inclusion
  • KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)
  • CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry
  • CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

Matched Order Fraud in Korea: Reason Behind Eight Stocks Hit Massively

By Sanghyun Park

  • The local ghost hedge fund began to excessively invest in credit, which leveraged 2.5 to 3 times when the eight manipulated stocks started to increase rapidly in price.
  • Then, the Financial Supervisory Service deemed this excessively-leveraged trading behavior as unusual, and news of an investigation into their activities broke out and triggered them to dump the shares.
  • The key now is identifying in advance the stocks that will experience similar selling patterns. To do so, we need to prioritize selecting stocks with high-margin balances in recent times.

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

By Brian Freitas

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

By Brian Freitas

  • With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
  • With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

By Arun George

  • Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%. 
  • The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp. 
  • At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).  

JD Industrials Pre-IPO – The Positives – Growing Fast and a Leader in Its Space

By Sumeet Singh

  • JD Industrials is looking to raise about US$1bn in its upcoming HK IPO. 
  • JD Industrials (JDI) is a leading industrial supply chain technology and service provider in China in terms of GMV in each year during the Track Record Period, according to CIC. 
  • In this note, we talk about the positive aspects of the deal.

AAG (2686 HK): Pros & Cons Ahead Of Scheme Vote

By David Blennerhassett

  • We’re down to the pointy end of AAG Energy Holdings (2686 HK)‘s Scheme. And at a gross/annualised spread of 15.6%/318%, all is not well.
  • The uncertainty is not without substance. A derisory Offer, one that is rejected by a proxy advisor; together with a silent, large shareholder no one seems to know.
  • Shareholders go to the vote this Thursday, the 27th April. Currently trading 5% below the undisturbed price.

Mankind Pharma: IPO Details & Index Inclusion

By Brian Freitas

  • Mankind Pharma (6596876Z IN) is looking to raise up to US$526m in its IPO by selling 40.06m shares at a price range of INR 1026 to INR 1080 per share.
  • The company has allocated 12.02m shares to anchor investors at INR 1080/share. That list includes marquee names and the lock-up reduces near-term float.
  • The IPO opens on 25 April and will close on 27 April. Shares are expected to start trading on 9 May and there are no near-term index inclusions expected.

KOSDAQ150 Index Rebalance Preview: Adds Starting to Crack (After Huge Outperformance)

By Brian Freitas

  • With 3 trading days left in the review period for the June rebalance, we see 8 potential changes and 2 close adds for the KOSDAQ 150 Index (KOSDQ150 INDEX). 
  • There are two potential transfers from the KOSDAQ Market to KOSPI Market that could lead to more changes in May and/or June.
  • Nearly all potential deletions are trading near their lows and short interest has been increasing on some of the stocks. That will be covered closer to implementation of the rebalance.

CPF Global Food Solution Pre-IPO – The Positives – One of the Largest Players in the Industry

By Ethan Aw

  • CPF Global Food Solution (2247162D TB) is looking to raise around US$1bn in its upcoming Thailand IPO. 
  • CPF Global Food Solution (CPFGS) is a subsidiary of CP Foods Group, offering food products and services to food operators and consumers locally and internationally. 
  • In this note, we talk about the positive aspects of the deal.

CSI500 Index Rebalance Preview: Potential Changes as Review Period Nears Completion

By Brian Freitas

  • With three trading days left in the review period for the CSI 500 Index (SH000905 INDEX) June rebalance, we forecast 50 changes at the close on 9 June.
  • There is a big sector skew in the potential changes. We estimate a one-way turnover of 10.77% at the June rebalance resulting in a one-way trade of CNY 6.28bn.
  • The potential adds have outperformed the potential deletes but there has been a big selloff in the last couple of weeks as the market has headed lower.

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Apr 25
0

Daily Brief China: Tencent, Meituan, Aag Energy Holdings, Zhejiang Huafeng Spandex A, Kujiale, Prudential PLC, Pico Technology, Hangzhou Tigermed Consulting (H), JD.com Inc., Xiaomi Corp and more

By | China, Daily Briefs

In today’s briefing:

  • Tencent Second Rejection – 305 Buy Zone
  • Meituan (3690 HK): Delivery Workers on Strike
  • AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote
  • CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete
  • Kujiale: 3D Design Platform for Home Décor
  • APAC Insurers Series (#2): AIA or Prudential?
  • PICO: Leader in Chinese XR Market
  • Hangzhou Tigermed Consulting (3347HK)-Turning Point Emerge, Followed by Sharp Decline in Performance
  • JD.com Inc: Proposed Acquisition of Deppon Logistics Co & Other Drivers
  • [Xiaomi (1810 HK, SELL, TP HK$8.2) Company Update]: EV Expense Acceleration at the Starting Line

Tencent Second Rejection – 305 Buy Zone

By Thomas Schroeder

  • Tencent’s rally back to the 285 resistance saw a second rejection confirming a b-wave top and our base case call for a C wave slide to the 305 buy support.
  • Corrective structure to align with RSI low just under 30 as the buy zone. Sell volumes are on the backfoot.
  • Macro long zone remains at 305/280 to challenge the 385 bull/bear divide. Near resistance at 370.

Meituan (3690 HK): Delivery Workers on Strike

By Ming Lu

  • Meituan’s delivery workers started a strike in Shanwei City of Guangdong Province.
  • Meituan called many of its delivery workers from other cities nearby as substitutes.
  • We believe the hard job market pushes Meituan to the very font line of industrial relation.

AAG Energy (2686 HK): Nervousness Ahead of the 27 April Vote

By Arun George

  • Ahead of Aag Energy Holdings (2686 HK)’s vote on 27 April, the gross spread to Xinjiang Xintai Natural Gas (603393 CH)’s HK$1.85 offer sits uncomfortably high at 13.5%. 
  • The key risk remains that minorities vote down the scheme. Retail forums are active with mixed views on the offer. Peers have also modestly re-rated, which helps the NO camp. 
  • At the last close, the risk-reward profile is unfavourable as the downside to a scheme fail (-16.0%) is greater than the upside to a scheme pass (+13.5%).  

CSI300 Index Rebalance Preview: Potential Changes as Review Period Nearly Complete

By Brian Freitas

  • With 4 trading days to go the review period, we see 13 potential index changes at the June rebalance that will be implemented at the close on 9 June.
  • We estimate a one-way turnover of 1.94% at the June rebalance leading to a one-way trade of CNY 5.05bn.
  • With the review period nearly complete, the gap between the potential adds and deletes could narrow ahead of the announcement of the changes as pre-positions are built.

Kujiale: 3D Design Platform for Home Décor

By Shifara Samsudeen, ACMA, CGMA

  • Founded in 2011, Kujiale (1716974D CH)  is a Chinese technology company that provides a 3D design and visualization platform for home decoration and furniture.
  • The company’s AR/VR tech platform allows users to generate design sketches to decorate and furnish their homes, as well as providing information and networking services on home design.
  • The company’s parent Manycore is the largest residential interior DDC cloud-based software provider (Kujiale is the flagship product offered by Manycore) with a market share of 56.5% in 2020.

APAC Insurers Series (#2): AIA or Prudential?

By Alec Tseung

  • Given Pru’s demerger in 2021, it now offers investors a good alternative to AIA to tap into the development and the growth potential of the life insurance sector in Pan-Asia.
  • AIA has a more balanced business across so many markets in APAC, while Pru skews toward Southeast Asia.
  • Pru’s P/BV is currently at a 30% discount to AIA’s and is trading at the same level as the year-end when China just announced the re-opening of its borders.

PICO: Leader in Chinese XR Market

By Shifara Samsudeen, ACMA, CGMA

  • Pico Technology (1870309D CH)  is a Virtual Reality (VR) / Extended reality (XR) technology company that develops and sells VR glasses and comprehensive XR solutions.
  • The company is the market leader in the XR market in China and has a global presence. It was acquired by ByteDance in 2021.
  • PICO is a company to watch for in the VR/XR segment given it operates in a growing market and has already established itself as a prominent player in this space.

Hangzhou Tigermed Consulting (3347HK)-Turning Point Emerge, Followed by Sharp Decline in Performance

By Xinyao (Criss) Wang

  • Tigermed’s revenue growth in 2021/2022 would have been pessimistic if it were not for the large COVID-19 orders, which makes us worried about the Company’s future growth in post-COVID era.
  • Profit margin could further decline due to increasing labor cost. Highly volatile financial profit would lead to more ugly profit performance. Higher domestic revenue proportion would limit future growth space.
  • The year 2022 marked a turning point in Tigermed’s performance. Its subsequent growth shows a downward trend.We think its valuation should be lower than WuXi AppTec, with more downside ahead. 

JD.com Inc: Proposed Acquisition of Deppon Logistics Co & Other Drivers

By Baptista Research

  • JD.com had a successful year in 2022, achieving high-quality growth and surpassing 1 trillion RMB in full-year revenues for the first time.
  • Despite external challenges, the company was able to maintain high-quality operations and record the highest-ever profitability for the year.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

[Xiaomi (1810 HK, SELL, TP HK$8.2) Company Update]: EV Expense Acceleration at the Starting Line

By Shawn Yang

  • Per Tmall tracking data, in 1Q23 we expect Xiaomi’s (1) phone unit sales fell 18% YoY to 31.7mn (2) phone ASP rose 2% YoY,  (3) IoT revenue fell 10% YoY
  • We estimate 1Q23/FY23 operating profit is (16%)/(13%) vs. the street. We expect Xiaomi to spend more on OPEX to support its EV investment; 
  • We maintain SELL and HK$8.2 TP given rising costs despite lack of growth.

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Apr 25
0

Daily Brief United States: Shockwave Medical Inc, Tether, Gold, Kroger Co, Marvell Technology , Mettler Toledo International Inc, Morgan Stanley, Sabre Corp, Box Inc Class A, Visa and more

By | Daily Briefs, United States

In today’s briefing:

  • Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing
  • Coinbase Targets Offshore Amid Falling Volumes
  • Don’t Get Fooled by the Tight Inventory Narrative – Economic Situation Continues to Worsen
  • Kroger Co: A ‘Fresh’ & Friendly Strategy For Growth – Key Drivers
  • Marvell Technologies Inc: 5G & ASICs Saving The Day – Key Growth Drivers
  • Mettler-Toledo International Inc.: Continued Lab Growth
  • Morgan Stanley: Initiation Of Coverage – A Series Of Synergistic Acquisitions & Other Drivers
  • Sabre Corp: Leveraging The Global Travel Recovery? – Key Drivers
  • Box Inc: Benefitting From The Hybrid Work Era With Phenomenal Retention – Key Drivers
  • Visa: Don’t Follow Narratives And Focus On What Matters In Upcoming Earnings

Shockwave Medical Inc (SWAV US): Initial Thought on Takeover Talk and Probable Pricing

By Tina Banerjee

  • Shockwave Medical Inc (SWAV US) is reportedly drawing takeover interest from Boston Scientific. Shockwave can potentially be one of Boston Scientific’s largest ever acquisitions. Probable pricing still offers upside potential.
  • Shockwave has an addressable market opportunity of $8.5 billion. The company has guided for 2023 revenue of $660–680 million, which represents 35–39% YoY growth.
  • Addition of Shockwave will bolster Boston Scientific’s cardiovascular portfolio. No official announcement has been made by any of the companies. There is no certainty they will lead to a deal.

Coinbase Targets Offshore Amid Falling Volumes

By Kaiko

  • Last week, Coinbase received approval to operate an offshore derivatives exchange, based in Bermuda.
  • This move makes a lot of sense, particularly when looking at Coinbase’s share of total spot volumes.
  • Since the start of 2022, Coinbase’s share of volumes has almost halved, falling from 10% to 5% while Binance gained as much as 30% market share over the same time period, before losing some in the last couple of weeks with their reintroduction of fees.

Don’t Get Fooled by the Tight Inventory Narrative – Economic Situation Continues to Worsen

By The Commodity Report

  • Don’t get fooled by the tight inventory narrative While many copper bulls continue to write about the low copper inventories I would like to inform you once again that there is simply no correlation between copper inventories and the price of the industrial metal.
  • If you want to be precise – you could even make the case that excessive lows in the LME copper inventory data actually mark cyclical highs in the price of the brownish metal.
  • US Leading Economic Index’s recession signal deepens in March, Conference Board reports: “The US LEI fell to its lowest level since November of 2020, consistent with worsening economic conditions ahead,” says CB’s senior manager for business cycle indicators.

Kroger Co: A ‘Fresh’ & Friendly Strategy For Growth – Key Drivers

By Baptista Research

  • Kroger had a mixed Q4 and failed to meet the revenue expectations of Wall Street given the shifting customer preferences due to inflation and macroeconomic uncertainty.
  • The company observed total household growth and improved customer loyalty, with higher-income households growing by 1.1 million.
  • The company’s end-to-end fresh initiative led to noticeable growth in both fresh and total store sales, and Kroger will continue innovating to enhance the fresh experience and drive customer satisfaction.

Marvell Technologies Inc: 5G & ASICs Saving The Day – Key Growth Drivers

By Baptista Research

  • Marvell Technologies had a challenging Q4 but it did manage to surpass the revenue expectations of Wall Street.
  • However, the company expects strong growth in revenue from 5G and custom ASICs in Q1, although with gross margins lower than Marvell’s average.
  • In terms of the end markets, data center revenue declined 13% YoY and 21% sequentially, while the rest of the end markets held up relatively well.

Mettler-Toledo International Inc.: Continued Lab Growth

By Baptista Research

  • Mettler-Toledo experienced robust growth in most product lines and regions during Q3, particularly in the Lab business, resulting in a successful quarter which happened to be an all-around beat.
  • While Product Inspection witnessed a 13% increase in sales during the quarter, Food Retail sales decreased by 19%.
  • To capture growth and market share in its Lab business, Mettler has accelerated their digital transformation in sales and marketing and sharpened their focus on the most attractive market segments.

Morgan Stanley: Initiation Of Coverage – A Series Of Synergistic Acquisitions & Other Drivers

By Baptista Research

  • Despite a more difficult environment, Morgan Stanley had a strong quarter and managed an all-around beat.
  • The merging of Eaton Vance and E-Trade increased the company’s potential to gain new clients, increase assets, and support its stability.
  • We initiate coverage on Morgan Stanley with a ‘Hold’ rating with a revised target price.

Sabre Corp: Leveraging The Global Travel Recovery? – Key Drivers

By Baptista Research

  • Sabre had a challenging Q3 and failed to meet the revenue expectations of Wall Street while delivering wider-than-expected losses.
  • Sabre generated total revenue of $441 million in the quarter, a substantial improvement compared to $278 million in Q3 2020.
  • The distribution revenue of Sabre increased by $140 million year-on-year, and the IT Solutions revenue increased to $145 million in Q3.

Box Inc: Benefitting From The Hybrid Work Era With Phenomenal Retention – Key Drivers

By Baptista Research

  • Box had a successful third quarter and delivered an all-around beat with accelerating revenue growth, an operating margin of 21%, and RPO growth of 25%.
  • Box’s net retention rate was 109%, with 97 deals over $100,000 and a 63% attach rate of Suites over $100,000 in the quarter.
  • Box is seeing early success in customer adoption and use of Box Sign, with leading organizations replacing their incumbent signature solutions with Box Sign.

Visa: Don’t Follow Narratives And Focus On What Matters In Upcoming Earnings

By Vladimir Dimitrov, CFA

  • Visa has become one of the best-performing stocks within its peer group.
  • The risk of a recession is still casting a shadow over Visa, but implications from the inflationary environment should not be ignored.
  • The business continues to perform better than expected, and investors should keep a close eye on the upcoming earnings report.

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Apr 25
0

Daily Brief India: Tata Steel Ltd, Hopson Development and more

By | Daily Briefs, India

In today’s briefing:

  • Tata Steel – ESG Report – Lucror Analytics
  • Morning Views Asia: Adani Ports & Special Economic Zone, Hopson Development, Vedanta Resources

Tata Steel – ESG Report – Lucror Analytics

By Trung Nguyen

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Tata Steel’s ESG as “Adequate”, in line with the “Adequate” Social and Governance pillars. The company has a “Strong” Environmental score. Controversies are “Immaterial” and Disclosure is “Adequate”.

Morning Views Asia: Adani Ports & Special Economic Zone, Hopson Development, Vedanta Resources

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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Apr 25
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Daily Brief South Korea: Youlchon Chemical, Kcc Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks
  • KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

KOSPI200 Index Rebalance Preview: Materials to Replace Consumer Stocks

By Brian Freitas

KCC: Plans to IPO Its Subsidiary Momentive Performance Materials in the US as Early as 2023

By Douglas Kim

  • On 24 April, KCC Corp announced that it plans to IPO its subsidiary Momentive Performance Materials Inc. in the US stock market as early as 2023.
  • In 2021, KCC raised its stake in MOM Holding from 50% + 1 share to 60%. Momentive EBITDA increased from $300 million in 2018 to $450 million in 2022.
  • Our valuation of KCC Corp suggests an NAV of 3.1 trillion won (post 50% discount) or NAV per share of 347,633 won per share, representing 49% higher than current price.

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Apr 25
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Daily Brief Japan: Keisei Electric Railway Co, Rakuten Bank , Nidec Corp, Oriental Land and more

By | Daily Briefs, Japan

In today’s briefing:

  • Keisei (9009): Connecting Narita and Tokyo
  • Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations
  • Nidec (6594) | Remain Cautious Despite Bullish Guidance
  • Oriental Land: The 33.5x FY27 Consensus OP Bubble
  • Rakuten Bank – In Japan With 65% Loan Growth

Keisei (9009): Connecting Narita and Tokyo

By Henry Soediarko

  • Japan’s tourism scene is back in action albeit still missing a contribution from China.
  • On-The-Ground research in Japan has confirmed the above point and the crowded Narita airport.
  • Keisei Electric Railway Co (9009 JP)operates Skyliner which connects Narita Airport to downtown Tokyo. 

Rakuten Bank (5838 JP): Premium Growth Neobank Still Trading at Attractive Valuations

By Victor Galliano

  • The sharp run-up in the share price since its IPO does not, in our view, mean that Rakuten Bank’s rally is done; there is further fundamental justification for a re-rating
  • Rakuten Bank trades on a LTM PE multiple of 14.4x, LTM PBV ratio of 1.6x and an ROE of 13.2%, which is the best return of our neobank peers
  • Relative to its peer group, Rakuten Bank has premium long-run growth prospects; conservatively estimating Rakuten Bank’s growth (8% pa), implies a PEG ratio in the range of 1.2x to 1.3x

Nidec (6594) | Remain Cautious Despite Bullish Guidance

By Mark Chadwick

  • NIdec’s full year FY3/23 operating profit declined 41% to Y100b, far short of analyst estimates
  • However, FY3/24 corporate guidance for Y220b in operating profit is very bullish and assumes a V-shaped recovery in margins
  • Given the macro outlook and lack of clarity on the restructuring charges, we prefer to remain cautious. 

Oriental Land: The 33.5x FY27 Consensus OP Bubble

By Oshadhi Kumarasiri

  • Oriental Land (4661 JP)’s revenue in 4QFY23 could miss consensus by around 12%, but its profitability could exceed consensus expectations by around 20%.
  • The shares did not react to beating consensus and revising up its guidance in the last quarter. This suggests limited upside risk for the company’s shares following 4QFY23 earnings.
  • Despite consensus medium-term OP estimates, Oriental Land appears to be significantly overpriced, with shares trading at a consensus FY27 EV/OP multiple of 33.4x.

Rakuten Bank – In Japan With 65% Loan Growth

By Daniel Tabbush

  • There are few, if any banks, in Japan that compare with Rakuten’s 65% loan growth
  • The newly listed interbank stands out with exceptional ROE, not from leverage
  • Credit metrics remain strong, with NPL cover especially high vs peers

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