Smartkarma Daily Briefs

The review period for the MSCI May QCIR starts on Monday. The most ~~changes~~ inclusions by far are expected to be in China.
There will be an ad hoc change for the S&P/ASX 100 Index, S&P/ASX 200 (AS51 INDEX) and KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 18 April.
After a period of sustained outflows, there were some inflows to the IShares Core MSCI Asia Ex Japan ETF (3010 HK) during the week.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Liann Beng, Newcrest, OZ Minerals, Glory Star New Media

By David Blennerhassett

There are 42 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this past week: Singaporean construction firm Lian Beng (LBG SP) announced a voluntary unconditional cash Offer from the controlling Ong family,
Key updates took place for Newcrest Mining (NCM AU) and OZ Minerals Ltd (OZL AU), and Glory Star New Media Group Holdings (GSMG US).

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Apr 16

Daily Brief Equity Bottom-Up: Market Share Loss for Tesla Korea Accelerating in 1Q 2023 and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Market Share Loss for Tesla Korea Accelerating in 1Q 2023
Money Forward (3994) | Costs Under Control
China Healthcare Weekly (Apr.14)- Surgical Robot VBP, Only 5 Biotech to Stand Out, Jafron Biomedical
Okada Casino Momentum Signals an Entry Point Despite Legal Woes with Its Spac Hedge Fund Deal
Calnex: De-Facto Standards for High-Speed Network Infrastructure Worldwide

Market Share Loss for Tesla Korea Accelerating in 1Q 2023

The fact that Tesla Korea is losing its market share significantly in Korea portends increased challenges for Tesla Motors on a global basis.
The number of new Tesla vehicles registered in Korea was 1,303 units in 1Q 2023, down 52% YoY.
In this insight, we provide three major reasons for Tesla’s market share losses in Korea. We also provide Tesla Korea’s 2022 results analysis.

Money Forward (3994) | Costs Under Control

By Mark Chadwick

Money Forward’s Q1 sales grew 43% YoY to 6.8 billion yen, which beat the top end of guidance (Y6.2-6.6b).
EBITDA came in at minus 704 million yen, far ahead of guidance for -Y1.2-1.7b. Money Forward drastically curtailed hiring in the quarter.
Money Forward’s stock has turned in a 26% performance so far this year. We believe the stock can continue to rally on focused cost control.

China Healthcare Weekly (Apr.14)- Surgical Robot VBP, Only 5 Biotech to Stand Out, Jafron Biomedical

By Xinyao (Criss) Wang

Anhui Province publicly solicits pre-bid data for the provincial centralized procurement of Class B large medical equipment, surgical robots included, which is worth investors’ attention.
No more than five biotech would truly stand out in the future. We suggest investors focus on those biotech in the first echelon, rather than betting on riskier smaller ones.
For Jafron, we analyzed some key points of the company. Due to the concerns, the temporary rebound in performance in 2023 is not enough to completely reverse the investment logic.

Okada Casino Momentum Signals an Entry Point Despite Legal Woes with Its Spac Hedge Fund Deal

By Howard J Klein

26 Capital, a US hedge fund that has crafted an innovative spac deal to bring the leading Manila casino property into an IPO by this fall has stalled.
The overall tone of recovery in Philippine gaming in this early post-covid era is speeding up and expected to meet or surpass baseline 1919 growth easily.
We see an attractive entry point for Okada’s owner, Tokyo traded Universal Entertainment, based both on its strong performance and the ultimate success of the IPO.

Calnex: De-Facto Standards for High-Speed Network Infrastructure Worldwide

By Steven Chen

Despite a micro-cap status, Calnex is the key player behind the evolution of high-speed network infrastructure on a truly global basis;
The company has a market-dominant position at several critical points across the global telecoms ecosystem;
The recent plunge in share price demonstrates Mr. Market’s short-termism and presents a good opportunity for incoming shareholders, in our opinion.

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Apr 16

Daily Brief Macro: Major Global Liquidity Warning – Don’t Fight the Feds and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Major Global Liquidity Warning – Don’t Fight the Feds
Sentiment Strengthens, While Fundamentals Fade

Major Global Liquidity Warning – Don’t Fight the Feds

By Michael J. Howell

A major bull market in Global Liquidity has started. Be prepared the cycle is rising and looks set to expand towards a new top sometime around 2026.
A sharp uptick in the pace of liquidity injections into World financial markets occurred around October of last year in the wake of the British gilt crisis
China’s PBoC also began a major easing policy coinciding with the end of COVID-lockdowns. China matters hugely to the World economy because of her whopping size.

Sentiment Strengthens, While Fundamentals Fade

By Jeroen Blokland

We have to go back to 1980 to find a month when small US businesses thought it was an even worse time to expand.
Volatility is falling off a cliff as investors embrace a new kind of goldilocks.
A common denominator drives Bitcoin and Gold higher: their perceived value as insurance against adverse market circumstances.

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Apr 16

Most Read: Lasertec Corp, JD Health, Bellevue Gold, Sun Kwang, Citizen Watch, Ecopro BM Co Ltd, Tesla Motors, Tencent, Samsung SDI and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200
Major Global Liquidity Warning – Don’t Fight the Feds
KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)
Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways
Ecopro BM: Considering on a CB Issuance of 500 Billion Won
Market Share Loss for Tesla Korea Accelerating in 1Q 2023
Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen
Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

Major Global Liquidity Warning – Don’t Fight the Feds

By Michael J. Howell

A major bull market in Global Liquidity has started. Be prepared the cycle is rising and looks set to expand towards a new top sometime around 2026.
A sharp uptick in the pace of liquidity injections into World financial markets occurred around October of last year in the wake of the British gilt crisis
China’s PBoC also began a major easing policy coinciding with the end of COVID-lockdowns. China matters hugely to the World economy because of her whopping size.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Citizen Watch (7762) : Super-Aggressive Buyback Likely Ending Soon – Beware of Risks Both Ways

By Travis Lundy

In mid-February 2023, Citizen Watch (7762 JP) announced another buyback. It had averaged nearly two small buybacks a year for the past four years for a total of ¥10bn.
This new one was ¥40bn, which assuming a 20% share price jump was 12% of ADV for a year. Bigly! We got the 20% jump, then not much more.
But Citizen has been buying fiercely. In the first 25 days of trading they averaged 25.8% of volume and bought back 11.5% of shares out. There’s a story here.

Ecopro BM: Considering on a CB Issuance of 500 Billion Won

According to Hankyung Business Daily, Ecopro BM Co Ltd (247540 KS) is considering on issuing a CB worth 500 billion won to various private equity and asset managment companies.
We would be negative on the potential CB issuance of nearly 500 billion won by Ecopro BM.
The potential issuance of this CB is a signal from the management that it is trying to capitalize on the recent sharp increases in share price to raise more capital.

Market Share Loss for Tesla Korea Accelerating in 1Q 2023

The fact that Tesla Korea is losing its market share significantly in Korea portends increased challenges for Tesla Motors on a global basis.
The number of new Tesla vehicles registered in Korea was 1,303 units in 1Q 2023, down 52% YoY.
In this insight, we provide three major reasons for Tesla’s market share losses in Korea. We also provide Tesla Korea’s 2022 results analysis.

Last Week in Event SPACE: Tencent, Ecopro, Japan’s Governance, Jardines, Citizen

By David Blennerhassett

Prosus (PRX NA) moved 96mn shares of Tencent (700 HK) into CCASS. Tencent shares fell hard. If the share price fell because of a block offering, that would be unwarranted.
Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Japan’s Finance Minister said that companies need to improve their PBRs, and that “increasing corporate value of listed companies would allow for Japan to realise sustainable growth.”

Price/Flow Impact on Four Constituent Changes in KODEX Top 5 Plus ETF Rebalancing in June

By Sanghyun Park

Samsung SDI and LG Chem are expected to be newly included in the index, while Hana Financial and KT&G Corporation are predicted to be excluded.
The correlation between the price movement and the flow direction on the rebalancing trading day of constituent changes from the past reviews was quite high.
We can set the price impact expectation for the upcoming review even more aggressively, given that the size of the flow x DTV is more significant than in previous cases.

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Apr 15

Daily Brief Australia: Genesis Minerals, EML Payments Limited, Vedanta Resources and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Genesis Minerals (GMD AU): Alternate Transaction and Placement to Buy St Barbara’s Key Assets
EML Payments – Considering its options
Weekly Wrap – 14 Apr 2023

Genesis Minerals (GMD AU): Alternate Transaction and Placement to Buy St Barbara’s Key Assets

By Arun George

Genesis Minerals (GMD AU) and St Barbara Ltd (SBM AU) have dropped their merger plans. Instead, GMD will acquire SBM’s Leonora gold assets for a total consideration of A$600 million.
The transaction is favourable for GMD shareholders. GMD is getting the assets at an attractive price. GMD will fund the acquisition through a A$450 million placement at A$1.15 per share.
The transaction provides a way out for long-suffering SBM shareholders as they retain exposure to gold assets and have option value on the sale of SBM’s remaining assets.

EML Payments – Considering its options

By Edison Investment Research

EML Payments’ H123 results reflected the changing mix of revenue (lower establishment fees and breakage, higher interest income), the effect of the ongoing remediation of regulatory issues in the European and UK PFS businesses and the restructuring of the group. With the Irish regulator raising additional concerns post results and applying a more stringent growth cap to EML’s Irish subsidiary, PFS Card Services Ireland Limited (PCSIL), the board has initiated a strategic review of the business.

Weekly Wrap – 14 Apr 2023

By Charles Macgregor

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

and more…

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Apr 15

Daily Brief United States: Amazon.com Inc, Prudential Financial, International Business Machines, Old Dominion Freight Line, Schwab (Charles), West Pharmaceutical Services Inc, Dover Corp, EURO/US DOLLAR and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Amazon: Having A Long-Term View Doesn’t Mean You Should Disregard Immediate Risks
Prudential PLC: Initiation of Coverage – Expansion In Emerging Markets & Other Drivers
IBM: Don’t Be Fooled By Recent Share Price Performance
Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Charles Schwab Q1 Earnings Preview: Volatility En Route
West Pharmaceutical Services Inc.: Initiation of Coverage – Business Strategy & Key Drivers
Dover Corporation: Initiation of Coverage – Business Strategy & Key Developments
EURO-USD Cross Rate

Amazon: Having A Long-Term View Doesn’t Mean You Should Disregard Immediate Risks

By Vladimir Dimitrov, CFA

After losing nearly a third of its value, Amazon looks more attractive than a year ago.
Investors should be mindful of recency bias when evaluating Amazon’s share price attractiveness.
The unique business model also poses some risks that should be considered regardless of one’s investment horizon.

Prudential PLC: Initiation of Coverage – Expansion In Emerging Markets & Other Drivers

This is our first report on Prudential, a major provider of life and health insurance.
Prudential had a very strong quarter with 19% sales growth.
Despite slower revenue recognition in the life insurance market, the company has been witnessing strong cash flows and returned over $800 million to shareholders in the latest quarter.

IBM: Don’t Be Fooled By Recent Share Price Performance

By Vladimir Dimitrov, CFA

IBM has delivered a positive return of nearly 20% over the past two years, but that has little to do with actual business performance.
In addition to sluggish growth, IBM’s declining profitability remains a problem.Issues related to the company’s high debt load, low dividend coverage and an addiction to acquisitions have not gone away.
Being an IBM (NYSE:IBM) shareholder hasn’t been easy over the years as the market continues to make new highs, while IBM still trades at levels from 2010.

Old Dominion Freight Line Inc.: Initiation of Coverage – Business Strategy & Key Drivers

By Pearl Gray Equity and Research

This is our first report on a major LTL shipping company, Old Dominion Freight Line.
As a result, the company delivered double-digit growth in earnings per diluted share in the fourth quarter.
Besides that, the productive labor expenses as a percentage of revenue decreased by 170 basis points within their direct operating costs, while their purchase transportation costs decreased by 200 basis points.

Charles Schwab Q1 Earnings Preview: Volatility En Route

Charles Schwab is due to release its first-quarter 2023 earnings report on Monday.
The firm’s sell-side trading activities remain in decline.
The company’s elevated price-to-book multiple is a severe concern as slowing growth, a goodwill build-up, and recent impairment losses provide structural problems.

West Pharmaceutical Services Inc.: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on West Pharmaceutical Services, a major manufacturer of injectable medication delivery and packaging systems.
West Pharmaceutical reported an all-around beat in its last result and generated about 8% growth in organic sales overall.
With COVID-19 excluded, West anticipates that its base organic sales growth was in the low double digits, with proprietary product growth in the mid-teens.

Dover Corporation: Initiation of Coverage – Business Strategy & Key Developments

This is our first report on Dover Corporation, a multifaceted international manufacturer offering cutting-edge machinery and parts, consumables, aftermarket components, software and digital solutions, and support services.
The company’s last result was an all-around beat resulting from a good execution by the management and better price dynamics.
Demand for services, consumables, and pricing decisions helped the quarter be profitable.

EURO-USD Cross Rate

By Untying The Gordian Knot

While the market has aggressively moved the US rates and the rate expectations lower, the European rates are pricing in higher for longer, with a rate hike possibility still on the cards.
In the current market environment, the Dollar crosses are driven by rate differential and sentiment rather than growth differential and geopolitical risk of the Ukraine war.
The Cross rate and the 13-day RSI are overlaid with two standard deviations Bollinger Bands to plot the mean reversion boundaries.

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Apr 15

Daily Brief South Korea: WCP, Ecopro BM Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June
Ecopro BM: Considering on a CB Issuance of 500 Billion Won

A High Conviction Long Short Trade in KODEX Battery ETF Rebalancing in June

By Sanghyun Park

WCP will likely be included in the rebalancing of Samsung KODEX Secondary Battery Industry ETF in June. And we should consider the possibility of this happening to be quite high.
We can expect a daily passive inflow of around 0.3x compared to WCP’s typical DTV. The practical correlation with the price should be higher than the theoretical level.
We should consider using SKIET, which engages in the same business in the same sector, as a hedge. WCP/SKIET Long Short achieved considerable performance within the past week’s window.

Ecopro BM: Considering on a CB Issuance of 500 Billion Won