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Smartkarma Daily Briefs

Daily Brief Thematic (Sector/Industry): White Castles’ Kitchen Robots – Impact on McDonald’s & Global Fast Food Franchises and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • White Castles’ Kitchen Robots – Impact on McDonald’s & Global Fast Food Franchises

White Castles’ Kitchen Robots – Impact on McDonald’s & Global Fast Food Franchises

By Douglas Kim

  • We discuss how White Castle, which has one of the most loyal customer base for franchise burger chain in the United States, has been using robots to make French fries.
  • In February 2022, White Castle started to roll out Miso Robotics’ Flippy 2 machine robots on about White Castle 100 restaurants in the United States.
  • In the next several years, there is a real chance for McDonald’s, White Castle, and Burger King to replace human workers making French fries and burgers with robots.

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Daily Brief Equity Bottom-Up: Hong Kong Stocks Priced For Liquidation and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Hong Kong Stocks Priced For Liquidation
  • Yamazaki Baking: Profitability to Double Over The Next Few Years
  • Closing the Gap Between LG Energy Solution & LG Chem Pair Trade
  • Tencent (700 HK): Game Market Weak in 3Q22 and to Be Worse in 2023
  • Delta Taiwan Vs. Thailand Monitor: Major Disconnect Post Thai Earnings, Trade Taiwan Into Earnings
  • Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail
  • Alibaba ADR: Initiation of Coverage – Business Strategy & Key Drivers
  • IRDM: Orbiting Subscriber Growth
  • IBM Corporation: Acquisition-Led Growth In The Cloud Market & Other Drivers
  • Lam Research: Major Drivers

Hong Kong Stocks Priced For Liquidation

By David Blennerhassett

  • With investors chucking in the towel and the HSI touching a thirteen-year low, it’s time for some old school perspective.
  • This insight looks at Benjamin Graham’s Net Nets, (current assets less current liabilities), then subtract any debt not included in current liabilities. More simply, current assets less total liabilities.
  • Graham would conclude these stocks are priced for liquidation. Stocks discussed include Sinopec Engineering (2386 HK), PC Partner (1263 HK), Linklogis (9959 HK), Antengene (6996 HK) and property service companies.

Yamazaki Baking: Profitability to Double Over The Next Few Years

By Oshadhi Kumarasiri

  • Yamazaki Baking (2212 JP)’s Q3 was mixed with revenue growing 5.6% YoY to surpass consensus by 3% but OP of ¥1.6bn was ¥650m below consensus.
  • However, this was mostly priced-in, as shares are currently trading at the bottom end of the upward trend channel.
  • With wheat prices down 23% from the peak, pressure from input price inflation should alleviate, resulting in margin upside in the fourth quarter.

Closing the Gap Between LG Energy Solution & LG Chem Pair Trade

By Douglas Kim

  • In this insight, we discuss a pair trade between LG Chem Ltd (051910 KS) (go long) and LG Energy Solution (373220 KS) (go short). 
  • LG Chem’s shares are trading at nearly 66% discount to its NAV which we believe to be excessive. 
  • Another major factor that could negatively impact LGES’ shares in the next several months is the end of the lock-up period for the company’s ESOA shares in about three months. 

Tencent (700 HK): Game Market Weak in 3Q22 and to Be Worse in 2023

By Ming Lu

  • In 3Q22, the game market size shrank in China and globally.
  • The limitations on time spent on games by juveniles, imposed earlier by the authorities, severely impacted the domestic market.
  • We believe the key impact for 2023 is the predictable license approval.

Delta Taiwan Vs. Thailand Monitor: Major Disconnect Post Thai Earnings, Trade Taiwan Into Earnings

By Vincent Fernando, CFA

  • Delta Electronics Thailand shares rose sharply ahead of its earnings result, where profit beat expectations. Delta Taiwan shares fell the same day, thus we see an opportunity.
  • Delta Taiwan to report on October 28th. Delta Taiwan is now smaller in market cap than its subsidiary despite earning substantially higher levels of net profit.
  • 2023E growth expectations are relatively similar for both, supporting Delta Taiwan to revert vs. Thailand. Trade opportunity into the Delta Taiwan October 28th results.

Asia Gaming: Despite Continuing Covid Headwinds, Melco Remains Too Cheap to Ignore, as Dips Prevail

By Howard J Klein

  • Melco Resorts & Entertainment will report 3Q22 results by November 11th. We expect sustaining recovery for its Manila and temporary Cyprus properties.
  • Current valuations of the shares do not yet reflect some recovery expected from increased arrivals due to the re-opening of 4 China provinces and Shanghai, Sporadic closures happen.
  • Threats of delisting fron last spring have significantly diminished as MLCO moved aggressively to meet NASDAQ concerns.

Alibaba ADR: Initiation of Coverage – Business Strategy & Key Drivers

By Baptista Research

  • This is our first report on global tech giant, Alibaba.
  • The company is currently trading close to its 52-week low with its results just around the corner.
  • Tmall GMV and Taobao experienced a percentage decline in the mid-single-digit in the last quarter.

IRDM: Orbiting Subscriber Growth

By Hamed Khorsand

  • IRDM put the emphasis on its quarterly report versus commentary on smartphones and drones using satellite connectivity. The third quarter results continued to show the ongoing growth in IOT subscribers
  • IRDM’s service revenue has been trending higher with added maritime and IOT subscribers
  • During the third quarter, IRDM added 7 thousand voice subscribers and 89 thousand IOT subscribers. The rate of voice customer additions can be lumpy depending on seasonality

IBM Corporation: Acquisition-Led Growth In The Cloud Market & Other Drivers

By Baptista Research

  • IBM delivered an all-around beat with over $14 billion in revenue and tremendous growth throughout the portfolio resulting in a sharp recovery in its stock price.
  • Technology continues to be a key source of competitive advantage, and there is still a healthy market for hybrid cloud and AI solutions.
  • Consistent double-digit revenue growth at IBM Consulting, satisfying client demand for digital transformations.

Lam Research: Major Drivers

By Baptista Research

  • Like most of its semiconductor peers, Lam has witnessed a strong correction after its earlier highs.
  • It demonstrated its sustained strength in execution by surpassing the $5 billion revenue for the first time.
  • It is ramping up output levels and has increased revenue by almost 10% compared to the previous quarter.

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Daily Brief Crypto: Crypto Lending Series (#2) Clearpool – A Bright Spot Emerging from the Rubble and more

By | Crypto, Daily Briefs

In today’s briefing:

  • Crypto Lending Series (#2) Clearpool – A Bright Spot Emerging from the Rubble

Crypto Lending Series (#2) Clearpool – A Bright Spot Emerging from the Rubble

By Rose Choy

  • As the crypto lending market recovers from the shock of large defaults in the sector, the markets are now focused on institutional lending where capital efficiency and liquidity are key. 
  • Overcollateralized lending has been stagnant although holding ground, but its low utilization, low interest rates and wide bid ask are not appealing to most lenders and borrowers.
  • The market preference is switching to non-collateralized lending where a mix of Cefi and Defi characteristics may evolve to provide the winning combination.

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Daily Brief Macro: US-China: New US Chip Ban Will Have Far-Reaching Consequences Beyond Just Chips and more

By | Daily Briefs, Macro

In today’s briefing:

  • US-China: New US Chip Ban Will Have Far-Reaching Consequences Beyond Just Chips
  • Xi’s Regime Change in China Creates Dangers for Itself and the World
  • India: Opposition Congress Party Struggles To Re-Invent Itself
  • Is US tax driving Chinese stocks?
  • CX Daily: Why The Yuan Is Suddenly Gaining International Traction

US-China: New US Chip Ban Will Have Far-Reaching Consequences Beyond Just Chips

By Nigel Chiang

  • The latest American technology sanctions on China show that the two powers are engaged in a struggle in which the time of half-hearted measures is over.
  • China faces a formidable task both in maintaining its current progress in fabrication and chip design, while also reconfiguring manufacturing capacity to remove reliance on external equipment and components.
  • Non-Aligned countries such as those in Southeast Asia may find their balancing act increasingly hard to maintain. Choosing a side, however, will not be an easy task.

Xi’s Regime Change in China Creates Dangers for Itself and the World

By Manu Bhaskaran

  • President Xi has effected a substantive regime change that fundamentally alters how China is governed. 
  • It presages a shift in how China interacts with, and impacts the rest of the world.
  • These developments will increase the risk of policy errors in managing China’s economy and also spells trouble for relations with big powers such as the US.

India: Opposition Congress Party Struggles To Re-Invent Itself

By Nicholas Chia

  • The opposition Congress Party made its job of returning to power harder by electing an 80-year old loyalist of the Gandhi family to head the party.
  • In a nutshell, the credibility of the Congress Party is diminished by the perceived fact that the Gandhi family is not able to truly relinquish control of the party leadership.
  • That is not to say that the Congress party will disappear from India’s political map altogether, although regional parties will be key in future general elections.

Is US tax driving Chinese stocks?

By Mark Tinker

  • In this part of the world (Hong Kong) there has definitely been a sense over the last few months that, once the CCP conference was out of the way, only then would things start to happen.
  • Rightly or wrongly, there was a belief that nobody was prepared to take any risks until the issue of Xi’s third term was resolved.
  • We ourselves commented that we believed Xi would indeed secure the third term back in August (see all eyes should be on the 20th Party Congress) in part because at the time there were some quite high profile western analysts asserting that the probability of it not happening was as high as 30%, perhaps not coincidentally leading to some subsequent dramatic social media posts appearing about Xi being under house arrest and there being a faction close to former leader Hu Xintao taking over.

CX Daily: Why The Yuan Is Suddenly Gaining International Traction

By Caixin Global

  • Cover Story: Why the yuan is suddenly gaining international traction

  • China names new top Communist Party leadership for next five-year term

  • A younger generation is now the majority in Communist Party’s elite body


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Daily Brief Industrials: Nidec Corp, Arwana Citramulia and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Nidec (6594) | Solid Traction
  • Arwana Citramulia (ARNA IJ) – Grand Master of Tiles

Nidec (6594) | Solid Traction

By Mark Chadwick

  • Positive impression of Q2 results: sales +28% YoY beat consensus, OP +16% in-line. 
  • Near term headwinds for the precision motors and appliance businesses, but FX will significantly offset downside risk
  • We remain bullish on the stock given solid progress in the e-Axle business. We see the division turning a profit next year

Arwana Citramulia (ARNA IJ) – Grand Master of Tiles

By Angus Mackintosh

  • Arwana Citramulia (ARNA IJ) booked yet another positive set of earnings in 3Q2022 driven by increased efficiency and cost reduction leading to 32% YoY growth in profits above consensus.
  • There are a number of potential positives in 4Q related to new capacity coming on stream which should help to boost sales of the company’s higher end products.
  • Consensus has caught up with the company’s projects profit growth forecast of +30% for FY2022 but this may prove conservative, with valuations looking attractive on a 9x forward PER multiple.

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Daily Brief Industrials: Nidec Corp, Arwana Citramulia and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Nidec (6594) | Solid Traction
  • Arwana Citramulia (ARNA IJ) – Grand Master of Tiles

Nidec (6594) | Solid Traction

By Mark Chadwick

  • Positive impression of Q2 results: sales +28% YoY beat consensus, OP +16% in-line. 
  • Near term headwinds for the precision motors and appliance businesses, but FX will significantly offset downside risk
  • We remain bullish on the stock given solid progress in the e-Axle business. We see the division turning a profit next year

Arwana Citramulia (ARNA IJ) – Grand Master of Tiles

By Angus Mackintosh

  • Arwana Citramulia (ARNA IJ) booked yet another positive set of earnings in 3Q2022 driven by increased efficiency and cost reduction leading to 32% YoY growth in profits above consensus.
  • There are a number of potential positives in 4Q related to new capacity coming on stream which should help to boost sales of the company’s higher end products.
  • Consensus has caught up with the company’s projects profit growth forecast of +30% for FY2022 but this may prove conservative, with valuations looking attractive on a 9x forward PER multiple.

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Daily Brief TMT/Internet: Hong Kong Hang Seng Index, Softbank Group, SK Inc, Tencent, Tokyo Electron, Vega Corp, Taiwan Semiconductor (TSMC) – ADR, GoTo and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Seasons & Quirks: The Ting Hai Effect (丁蟹效应)
  • Softbank Group – Another China Shock as Markets Fret over Macro Environment
  • SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance
  • Tencent: Added Pressure with Declining Game Industry and Challenging Macroeconomy
  • Tokyo Electron (8035) | WFE Scenarios Suggest Stock May Have Hit Bottom
  • Lowya – the Zozo of Home Decor?
  • Intel Vs. TSMC/​​​​UMC Long/​​​​Short Monitor: Intel Earnings This Week, Potential Positive Comments
  • GoTo (GOTO IJ): Lock Up Expiry & Index Implications

Seasons & Quirks: The Ting Hai Effect (丁蟹效应)

By Travis Lundy

In 1992, a TV series aired in Hong Kong on TVB called The Greed of Man. The series told the three-plus-decade story of Ting Hai, an “uneducated and pathologically self-righteous brute” (played by Canto pop singer and actor Adam Cheng (born 1947)) and Fong Chun-sun, “an honest, cultured and refined leader of the Asian Stock Exchange” (played by Damian Lau) who were childhood friends, split, and saw Ting kill Fong over a girl.

Ting Hai fled to Taiwan, was brutish again, spent a decade-plus in prison there. One of Ting Hai’s sons pursues a Fong daughter, is rebuffed, the son turns violent. Eventually the three Fong daughters are killed, and Fong’s only son (played by Sean Lau) flees to Taiwan and makes it rich through indirect gambling on stocks. In Hong Kong, the Tings have made it rich by being short in the 1987 crash. Ting has come back to Hong Kong, is charged with murder, then buys himself out of a sentence. Fong comes back to Hong Kong, and they duke it out in the stock market in true good guys vs bad guys epic knock-down drag-out drama. Ting and his sons are backed by the triads. Fong is backed by a few HK tycoons. Eventually, Ting is wiped out.

He responds by throwing his four sons off the top of the stock exchange building and following himself. Only Ting survives, now billions in debt, and spends the rest of his life in prison. 

The first episode of the show actually started with that final scene of Ting hurling his sons off the building. TVB got so many calls from disturbed viewers they altered the show, and moved its time slot. Apparently, the re-issues and re-airings of the show all show edited versions. The edited version was re-released on TV in 2015 and was well-received in HK by a younger generation. 

Most importantly to this insight however, is that when the series started in 1992, the Hang Seng Index fell 1200 points in one month – that was almost 20% at the time. It started falling part way through the series, then the index fell 1,000 points (16+%) in four days after the gruesome ending.

There were so many complaints about the ending that TVB revised the video release and subsequent re-releases.

The sharp fall in the market after Ting Hai went off the building became known as the Ting Hai Effect or the Adam Cheng Effect. Since then, the story goes, whenever a series or movie starring Adam Cheng is aired, the Hang Seng falls sharply. 

Two years later, another TVB drama series starring Adam Cheng called ‘Instinct‘ was aired starting in November 1994. The index started falling a day or two before, after what had been an ugly year-to-date, and fell 20% in 7 weeks while the series aired.

1996 saw two series starring Adam Cheng air on TVB.

Cold Blood Warm Heart – a romantic crime thriller series of 65 episodes aired its first episode on 5 February and ended its run on 3 May. The market fell 700+ points or 6% in the period. 

In early September 1996, Adam Cheng starred in another TVB series called Once Upon A Time In Shanghai (a remake of a 1980s series called The Bund), which ran from 2 September through 25 October 1996. The Hang Seng Index fell sharply the next day, and this was blamed on the Ting Hai Effect, but the market did pretty well in the 7-week-long series.

In late 1997 he starred in a historical drama called Legend of Yung Ching for a Taiwanese production company, covering a period in the mid 18th century of the Kangxi Emperor, the Yongzheng Emperor (Adam Cheng’s role), and the Qianlong Emperor in the Qing Dynasty. Apparently, the market dropped the day it aired. 

In June 1999, he starred in a four-part series called Lord of Imprisonment (may have been a Taiwanese series) which started apparently late in the month. That apparently started a fall of 6+% in the Hang Seng Index.

In 2000, a series called Divine Retribution aired on ATV. It was a sequel to Greed of Man, and was originally called Greed of Man 2000 and actually took place in the near future, not the recent past as had been the case for the original series. It ran from 11 September through 3 November 2000. The Hang Seng Index fell 10% in 6 weeks before rallying in the last two days of the series.

In March 2004 – from 8 March through 24 April 2004 – a historical drama of 37 episodes (more for the international version) starring Adam Cheng called Blade Heart aired on TVB. The opening theme song was performed by Adam Cheng.

You guessed it. The Hang Seng was down more than 10% in 7 weeks.

Later that year, he was in The Conqueror’s Story from 25 October through 4 December – also on TVB. The market fell nearly 200 points the day the series started. 

Adam Cheng also starred in a period costume drama called The Prince’s Shadow from 14 March through 18 April 2005. The market fell on the first day, regained most of its loss, but that was the high price of the series. The market fell over the period of the series.

In 2007, Adam Cheng played a real estate CEO in a TV drama set in contemporary China. The series, named Return Home ran for 33 episodes starting 15 July 2007.

In 2009 he did a TVB series on Hong Kong TV, titled The King of Snooker. It was 20 episodes airing on TVB from 30 March 2009 through 24 April 2009. On the first day, the market fell 600+ points or 4.7% on the day. He had also filmed a series in 2008 called The Book and The Sword – a 40-episode period drama aired in China starting 20 March 2009. The HK market fell 2.3% that day.

On 21 May 2012, a 30-episode psychological thriller titled Master of Play starred Adam Cheng. It ran on TVB for 30 episodes through 29 June 2012. The market fell 10% in the 10 days running up to the launch of the new series.

A year later, the period drama movie Saving General Yang was released in Beijing on 4 April 2013 and the next day, the Hang Seng was down 610 points (-2.7%).

In April 2015, the original 1992 drama The Greed of Man which made the Ting Hai Effect was rerun. The first day of the re-run (20 April) the market fell 2% or 558 points. 

He was interviewed in the South China Morning Post 9 days later and the next morning the article came out (30 April). He said he wasn’t to blame for the stock market’s falls when his shows aired. 

The market fell five days straight. 

In classic fashion, there was a new series out in 2018 called Ever Night. It saw advertising the two weeks before and the Hang Seng fell about 1,000 points in the two weeks before the release. People joked days before that the market fall was due to the new show.

The show was popular in China, so the 60-episode Season 1 started in October 2018 was followed by a 43-episode Season 2 staring 13 January 2020 and running for 3 months and a week. The market fell 25% from the start of Season 2 before rebounding. 

Which brings us to the present day…

Earlier this month, the sequel to The Greed Of Man was released for streaming on Disney+. The market, which had rebounded that day, fell for the next 6 days. 

And today, 25 October, TVB starts re-runs of the 1988 series Behind Silk Curtains starring Adam Cheng, where he plays the role of the chairman of a bank, and drives a businessman’s company to bankruptcy so he can take it over.

Notes:

  • This is a fun thing. But it appears to be taken somewhat seriously. It ALWAYS comes up. 
  • Not EVERY movie or tv series appearance causes bad results. Bar Bender aired starting on 3 April 2006 on TVB Jade, and the market was up that day, fell back a little in the following days, but not seriously, and then rose 8% by 26 April. 
  • However, enough do that it retains its name decades later. 

Sources:

  • CLSA put out a Hong Kong Market Outlook piece in April 2004 about The Adam Cheng Effect. That is probably the first I heard of it. 
  • The Ting Hai Effect wikipedia page is a place to start. 
  • There was an article in Chinese on www.chinanews.com (original source: http://big5.chinanews.com.cn:89/gate/big5/www.chinanews.com/yl/ypkb/news/2009/04-02/1629867.shtml) in April 2009 just after the King of Snooker series started which talked about the Tin Hai Effect. It is likely the source of some of the later articles in English because one of the dates is wrong and most later English sources copy that date.
  • Wikipedia has a list of most of the TVB series by year of production. 
  • IMDB has a list of most of his appearances. Wikipedia does too.

Softbank Group – Another China Shock as Markets Fret over Macro Environment

By Kirk Boodry

  • HK markets fell to 13-year lows as President Xi solidified his hold on power, raising concerns for private businesses that have already struggled with harsher regulation
  • Softbank looks smart for its early settlement of Alibaba-linked derivative contracts in August as political worries have shares testing new lows
  • But exposure remains with Alibaba’s 12% decline equal to $3.3bn (¥485bn) in lost value. Shares have rallied throughout October but China news appears to have stalled the move

SK Inc: Solid Dividends, Ongoing Buyback, and Emphasis on Value Should Lead to Outperformance

By Douglas Kim

  • Our base case target price of 276,567 won suggests a 37% upside from current levels for SK Inc. Our base case valuation assumes a 30% holdco discount.
  • At DPS of 8,000 won, this would represent dividend yield of 4% at current price of 202,000 won.
  • The three largest holdcos/quasi holdcos in Korea which include Samsung C&T, SK Inc, and LG Corp have strongly outperformed KOSPI this year. 

Tencent: Added Pressure with Declining Game Industry and Challenging Macroeconomy

By Shifara Samsudeen, ACMA, CGMA

  • Tencent (700 HK) shares dropped 11.43% during yesterday’s trade over concerns on the country’s political environment with Chinese president Xi Jinping securing an unprecedented third term.
  • Gamma Data reported that mobile game sales in China dropped 25% YoY during third-quarter 2022 despite 3Q being a peak period for gaming due to 2-month long school holidays.
  • Tencent’s shares dropped With renewed geopolitical challenges and further weakening of Tencent’s earnings, we expect share price to drop further.

Tokyo Electron (8035) | WFE Scenarios Suggest Stock May Have Hit Bottom

By Mark Chadwick

  • We expect strong Q2 results from TEL but full year earnings guidance is a risk
  • WFE demand is deteriorating rapidly. Will TEL provide any thoughts on the 2023 outlook?
  • We provide a scenario analysis for different WFE scenarios…the stock may have bottomed

Lowya – the Zozo of Home Decor?

By Michael Causton

  • Lowya is an online furniture brand run by Vega Corp that hit the headlines with 42% growth in 2020 while most other lifestyle retailers were reeling from the pandemic. 
  • Sales fell last year post-Covid and won’t grow much this year either but Lowya wants to become a ¥60 billion business and looks a good bet for the long-term.
  • Lowya will shift to a mall model similar to Zozo which should allow it to grow faster, while tie-ups with major retailers like Aeon should raise brand awareness fast.

Intel Vs. TSMC/​​​​UMC Long/​​​​Short Monitor: Intel Earnings This Week, Potential Positive Comments

By Vincent Fernando, CFA

  • Intel’s earnings this week is a key potential catalyst for the INTC & TSMC pair.  Look for comments related to U.S. chip restrictions for China.
  • Intel going ex-div early November. We note Intel’s dividend yield is much higher than TSMC’s and Intel’s dividend level appears well covered by even falling earnings.
  • Key upcoming events: Likely to be mostly related to Intel for the next two weeks.

GoTo (GOTO IJ): Lock Up Expiry & Index Implications

By Brian Freitas

  • GoTo (GOTO IJ) listed on 11 April and closed at its lowest point since listing yesterday. The lock-up on pre-IPO shareholders expires on 30 November.
  • GoTo (GOTO IJ) has confirmed that it is working with pre-IPO shareholders to explore a coordinated secondary offering.
  • The lock-up expiry will result in a lot of shares hitting the market in December. The increased float could result in MSCI/FTSE inclusion early next year.

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Daily Brief Energy/Materials: LG Chem Ltd, SICC, Ecopro BM Co Ltd, JSW Steel Ltd, Copper and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Solactive Lithium Review Results Out: Key Takeaways
  • STAR50 Index Rebalance Preview: Stable Long/Short Performance in a Volatile Market
  • Alpha Generation Through Share Buybacks in Korea: October 2022
  • JSW Steel – Earnings Flash – Q2 FY 2022-23 Results – Lucror Analytics
  • The Commodity Report #74

Solactive Lithium Review Results Out: Key Takeaways

By Sanghyun Park

  • Despite the WATCH list’s confusion, LG Energy Solution replaced LG Chem. In addition, Solactive excluded Iljin Materials, evidently due to its float-adjusted market cap size.
  • There are some somewhat elusive additions. The most prominent example is Japan Steel Works, which replaced LG Chem in the updated WATCH list at the last minute.
  • There was confusion about LG Chem’s deletion until the last minute, so, likely, the market has not sufficiently reflected this rebalancing factor in LG Energy/LG Chem’s LONG/SHORT.

STAR50 Index Rebalance Preview: Stable Long/Short Performance in a Volatile Market

By Brian Freitas

  • With the review period nearly complete, there could be 4 changes using a 12-month minimum listing history, and 5 changes using a 6-month minimum listing history.
  • The market cap of potential adds using a 6-month minimum listing history is higher and there is a higher probability of a 6-month minimum listing history being used.
  • The potential adds have outperformed the potential deletes and the index. Similar to the last few rebalances, we could see the adds outperform post the end of the review period.

Alpha Generation Through Share Buybacks in Korea: October 2022

By Douglas Kim

  • The sharp decline in the Korean stock market this year has led to more Korean companies conducting share buybacks. 
  • As of 23 October, the number of companies in Korea seeking share buybacks in Korea increased by 41% YoY with 308 companies announcing share buyback programs.
  • In the past month, some of the larger market cap companies including Ecopro BM and SKC that have announced share buybacks have significantly outperformed the market.

JSW Steel – Earnings Flash – Q2 FY 2022-23 Results – Lucror Analytics

By Trung Nguyen

JSW’s Q2/22-23 results continued to disappoint in our view, with very weak profitability due to a plunge in steel prices. Raw material prices remain high. At this pace, Gross Debt/EBITDA may reach 5x at FYE 2022-23. Liquidity is sound, with a large cash position. We revised our FY 2022-23 margin forecast downwards to reflect the weaker than expected operating environment.

We are concerned about JSW’s large capacity expansion programme and capex plan, which may not be appropriate given the deteriorating market conditions. Peer Tata Steel appears more shielded from adverse raw material costs (thanks to its deeper vertical integration), and is also more conservative in terms of debt management (it has reduced debt by USD 1 bn p.a.) as well as capacity expansion.

We do not expect rating pressure in the near term, but remain cautious in the medium term.


The Commodity Report #74

By The Commodity Report

  • Inventories of copper in warehouses run by exchanges such as the LME do not provide a complete picture of copper stocks in the supply chain since many industrial users will hold their own reserves of the metal.
  • But visible stocks can have a significant influence on sentiment in the market.
  • It’s just striking how negative the financial markets are about this industry, yet the physical market is so tight.

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Daily Brief Financials: Jinke Smart Services, Sunshine Insurance, Bitcoin Pro and more

By | Daily Briefs, Financials

In today’s briefing:

  • Jinke Smart’s VGO from Boyu Capital: Open with First Close of 14 November
  • Sunshine Insurance Group Pre-IPO – The Positives – Steady Headline Growth
  • BTC Market Share Hits 2-Year High

Jinke Smart’s VGO from Boyu Capital: Open with First Close of 14 November

By Arun George

  • Jinke Smart Services (9666 HK)’s VGO from Boyu Capital is now open at HK$12.00 per share. The first closing date is 14 November. The IFA says it’s fair and reasonable. 
  • The offer is conditional on 7.71% valid acceptances and anti-trust approval. The conditions can be waived. The offeror has not received irrevocables.
  • The offer is unattractive, but the low threshold and peer multiple derating suggest a high probability of success. At the current price, the spread to the offer is 3.4%. 

Sunshine Insurance Group Pre-IPO – The Positives – Steady Headline Growth

By Sumeet Singh

  • Sunshine Insurance Group (SIG), a life, health and P&C insurance company, aims to raise up to US$1bn in its HK IPO.
  • SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China.
  • In this note, we talk about the positive aspects of the deal.

BTC Market Share Hits 2-Year High

By Kaiko

  • Price Movements: In 7 out of the last 10 years, BTC has closed October in-the-green. As of this weekend, it is up slightly for the month with one week to go. 
  • Market Liquidity: BTC’s market share of volume vs. all other altcoin trading pairs has climbed to its highest level in two years. 
  • Derivatives: OI for Tether perpetual futures dropped and funding rates flipped positive since the stablecoin issuer removed commercial paper from its reserves. 

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Daily Brief Health Care: Innovent Biologics Inc and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Innovent Biologics Inc (1801.HK) – The Concerns and the Outlook

Innovent Biologics Inc (1801.HK) – The Concerns and the Outlook

By Xinyao (Criss) Wang

  • Innovent Biologics Inc (1801 HK)’s share price had some rebounds last week, which could be related to some positive progress on business and the picking-up market sentiment in healthcare sector. 
  • We increased overall sales forecast for Innovent by including the two new products from Sanofi. But it’s still far from the management’s target of RMB20 billion sales in 5 years.
  • Innovent’s current commercialization capability is like a “semi-finished product”, and has long way to go. It lacks the second big product except PD-1 to “pave the way” for next-stage development.

💡 Before it’s here, it’s on Smartkarma

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The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

  • ✓ Unlimited Research Summaries
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  • ✓ Company Data and News
  • ✓ Events & Webinars