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Smartkarma Daily Briefs

Feb 14
0

Daily Brief Industrials: Huitongda, Fujitec Co Ltd, ROHM Co Ltd, UBTech Robotics, China Communications Construction, Crompton Greaves, Recruit Holdings, Xinjiang Goldwind Science & Technology and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
  • Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM
  • Rohm (6963 JP): Gearing Up in the Downturn
  • UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
  • China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
  • Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023
  • Recruit (6098 JP) | A Soft-Landing?
  • Recruit: HRTech Margins Falling Back to Pre-Covid
  • Xinjiang Goldwind Science & Technology (2208 HK) – 2021/2023 Downtrend – Target LT Trend – 6.92/6.94

Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up

By Clarence Chu

  • Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
  • Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
  • Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

Fujitec (6406 JP): Oasis’ Activism Comes to a Head of the 24 February EGM

By Arun George

  • Oasis proposals to restructure the Fujitec Co Ltd (6406 JP) Board which will be voted on at the 24 February EGM have got independent proxy advisor, ISS, support.
  • An Oasis win would renew enthusiasm that Fujitec can close the performance gap with peers, resulting in a catalyst for the rerating of the shares.
  • An Oasis loss is not disastrous as Oasis could come back or Fujitec would likely offer a premium to buyout Oasis. Fujitec is also cheap on a cash-adjusted P/E basis.

Rohm (6963 JP): Gearing Up in the Downturn

By Scott Foster

  • Rohm is increasingly an automotive semiconductor maker. Its business should hold up reasonably well in the downturn and grow significantly in the long term.
  • Capital spending risks excess capacity in the coming year, but sets the stage for long term growth. Possible investment in Toshiba a positive. 
  • Weak quarters ahead. Buy on weakness for the long term. 

UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated

By Andrei Zakharov

  • UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors. 
  • UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation. 
  • Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today. 

China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

By Osbert Tang, CFA

  • There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
  • New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
  • Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.

Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023

By David Coloretti, CMT

  • At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
  • The 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
  • Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).

Recruit (6098 JP) | A Soft-Landing?

By Mark Chadwick

  • Recruit’s Q3 results are unlikely to move the market. Full year guidance slightly above consensus estimates
  • Much of the bad news on the labour market and interest rates is now discounted in current valuations
  • We remain bullish. At 23x PE the stock is trading at a deep discount to its historical 30x

Recruit: HRTech Margins Falling Back to Pre-Covid

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) reported 3QFY03/2023 results today. Revenue increased 18% YoY to JPY880.1bn (vs consensus JPY862.0bn) while operating profit for the quarter decreased 12.4% YoY to JPY96.8bn (consensus JPY107.2bn).
  • Though HR Tech top line grew 24.2% YoY, it declined sequentially while adjusted EBITDA margin of the segment also declined during the quarter.
  • Recruit’s share price has fallen 24% over the last 12-months and with further weakening of labour markets, there is more room for shares to fall.

Xinjiang Goldwind Science & Technology (2208 HK) – 2021/2023 Downtrend – Target LT Trend – 6.92/6.94

By David Coloretti, CMT

  • At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
  • The 2021/2023 downtrend is accompanied by comprehensive LT momentum confirmation. The 2012/2023 uptrend support at 6.92/6.94 remains at risk of being retested in the coming 1-2 months,
  • A monthly close below 6.92/6.94 would confirm a far more significant multi-month downtrend. For now we target 6.92/6.94 (-10%). The response to 6.92/6.94 is critical to the MT outlook.

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Feb 14
0

Daily Brief TMT/Internet: Canon Inc, Citizen Watch, Meituan, Weibo Corp, Taiwan Semiconductor (TSMC), Coinbase and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Canon ADR Cancellation – There May Be A Trade To Do
  • Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
  • [Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
  • Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
  • [Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
  • Taiwan Tech Weekly: Latest Key Results Add More Expectations for a 2H23E Turnaround
  • Bitcoin And The Tax-Loss Harvesting Rally

Canon ADR Cancellation – There May Be A Trade To Do

By Travis Lundy

  • Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
  • Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
  • No related investment opportunity but there may be a trade to do.

Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback

By Travis Lundy

  • Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
  • It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
  • The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.

[Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan

By Shawn Yang

  • We expect Meituan to report 18% YoY topline growth in C4Q22, in line with cons. Our non-IFRS net margin est. is 1.9ppt higher than cons.
  • In-Store would be impacted by Douyin’s category expansion and deepening penetration in lower-tier cities.
  • We downgrade Meituan to SELL and cut TP to HK$137 due to pressure from competition for in-store.

Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business

By Shifara Samsudeen, ACMA, CGMA

  • On Tuesday last week, short-video app Douyin announced that it plans to offer its food delivery service in more Chinese cities expanding its current trial in Beijing, Chengdu and Shanghai.
  • Following this, on Wednesday last week, Meituan announced that it plans to recruit 10,000 workers in 1Q2023 across a number of its business divisions including technology development and customer services.
  • Though we don’t expect Douyin’s entry into food delivery to have large impact, increased competitive pressure and headcount increase would drag down Meituan’s profitability in the near-term.

[Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY

By Shawn Yang

  • We estimate that Weibo’s top line/bottom line would be 1.3%/9.0% vs cons., as the continuous cost-saving measures offset the impacts of temporary disturbance caused by reopening. 
  • We remain optimistic about Weibo’s rebound in 1H23 as the macro improves, with top line/bottom line beating cons. by 2.2%/5.5% in 2023.
  • Reiterate BUY rating and raise TP to US$ 26.9, implying 11.7X PE in 2023.

Taiwan Tech Weekly: Latest Key Results Add More Expectations for a 2H23E Turnaround

By Vincent Fernando, CFA

  • This week we digest key takeaways from some of the latest key industry results that came out (ASE Technologies (TW), Novatek (TW), and Tokyo Electron (JP)).
  • ASE and Tokyo Electron exhibited their insulated positions during the current inventory corrections happening, delivering decent margins and beating expectations. Novatek also beat expectations.
  • Forward expectations are generally for a worse 1Q23E ahead followed by the beginning of a recovery in 2Q23E. Is this becoming simply the consensus view, however?

Bitcoin And The Tax-Loss Harvesting Rally

By Kevin George

  • Bitcoin sold off in December and rallied in January for a reason.
  • Big banks are coming with a digital payments option. Big banks will have a digital payment option in the coming days.
  • Bitcoin sold off last month and rallied again in January, with a rise in popularity in the wake of contagion.

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Feb 14
0

Daily Brief Financials: Rothschild & Co, Commerzbank AG, S&P 500, Bank Brisyariah, K3 Capital Group, Bakkt, Hopson Development, Binance Coin and more

By | Daily Briefs, Financials

In today’s briefing:

  • Concordia/Rothschild & Co: Back to the Origins
  • Quiddity Leaderboard for DAX Mar 23: Linde DEL Triggers US$2.7bn Reverse Funding Flows
  • EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event
  • BRIS – Dominant
  • Sun Capital Partners/​K3 Capital Group: Last Trading Day
  • Enhancing Focus on B2B2C; Sunsetting Consumer App
  • Morning Views Asia: China SCE, Hopson Development
  • The End of BUSD

Concordia/Rothschild & Co: Back to the Origins

By Jesus Rodriguez Aguilar

  • Concordia (38.9% stake) points out that none of Rothschild’s businesses require a high amount of capital thus a listing brings more troubles than advantages (the enlarged family concert owns 54.5%).
  • Lo and behold, a possible €48/share cash offer, partly financed with Rothschild’s cash holdings (via dividend and extraordinary dividend) is the solution, arguably cheap for a high-quality firm.
  • My conservative Fwd P/E-based SOTP valuation is €53.9/share. There’s some margin to improve the offer. Spread is 2.3%/5.6% (gross/annualised). I would be long the shares.

Quiddity Leaderboard for DAX Mar 23: Linde DEL Triggers US$2.7bn Reverse Funding Flows

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
  • In the March 2023 review, I do not see any changes for the DAX index although a couple names are close to the border.
  • As it stands, I currently expect two more changes between MDAX and SDAX and one more ADD/DEL for the SDAX index based on the latest available data.

EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event

By Simon Harris

  • January CPI is due on Tuesday 14th and the market is expecting the biggest rise since October
  • The SPX has rallied over 7% since December but the Yield Curve has been moving higher and the equity rhetoric is turning negative
  • We look at a short-term trading opportunity in the options market to play the print

BRIS – Dominant

By Daniel Tabbush

  • Relatively newly formed, increased free float, dominant Shariah market share
  • All 9 peer Shariah banks combined have less branches than BRIS
  • 57% market share of Shariah lending, where growth is highest

Sun Capital Partners/​K3 Capital Group: Last Trading Day

By Jesus Rodriguez Aguilar

  • On 10 February, the High Court made an order sanctioning the scheme of arrangement (effective on 14 February). 13 February will be the last day of dealings in the shares.
  • The listing will be cancelled on 15 February. Although a cheap offer, the need of capital for growth will benefit both K3 and the main shareholders who will remain onboard.
  • Considering the short timetable, from a risk arb point of view, this has been a good trade nevertheless.

Enhancing Focus on B2B2C; Sunsetting Consumer App

By Water Tower Research

  • Bakkt is enhancing its focus onto scalable B2B2C products and sunsetting its consumer app.
  • Bakkt will continue its core focus of providing businesses with crypto and loyalty experiences for their customers through SaaS and API solutions on a secure and compliant platform.
  • President & CEO Gavin Michael commented that as the company continues to “gain traction with our B2B2C strategy, we are laser focused on providing our partners and clients with seamless solutions that best serve their needs.

Morning Views Asia: China SCE, Hopson Development

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.

The End of BUSD

By Kaiko

  • Price Movements: cbETH, Coinbase’s liquid staking derivative, started trading at a discount after news broke that the SEC had fined Kraken $30mn. 
  • Market Liquidity: LocalBitcoins shut down after 10 years of service after competition and a prolonged bear market sapped trade volume. 
  • Derivatives: ETH options markets look bullish but more volatile than BTC. 

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Feb 14
0

Daily Brief Energy/Materials: Berger Paints India and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Berger Paints (BRGR IN) / Pidilite Industries (PIDI IN) | Fundamental Factors Back the Signal

Berger Paints (BRGR IN) / Pidilite Industries (PIDI IN) | Fundamental Factors Back the Signal

By Pranav Bhavsar

  • Berger Paints India (BRGR IN) / Pidilite Industries (PIDI IN) are exposed to similar customers but different demand dynamics offering an opportunity to build an L/S trade.
  • The valuation premium commanded by PIDI over BRGR is not justified in spite of having a similar customer base, similar growth and capital allocation profile.
  • The Price ratio of the pair BRGR/PIDI has been trading in a tight range since September 2022 and is now showing signs of breaking out of the sideway trend.

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Feb 14
0

Daily Brief Health Care: Osstem Implant, Thomson Medical Group Limited, Shanghai Pharmaceuticals Holding and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares
  • Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery
  • Shanghai Pharmaceuticals (2607 HK/601607 CH): Portfolio Expansion & China Reopening to Drive Growth

Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares

By Douglas Kim

  • Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
  • Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
  • We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024). 

Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery

By Tina Banerjee

  • For H1FY23 Thomson Medical Group Limited (TMG SP)‘s revenue increased 27% to S$184M. The growth was mainly attributed to the increase in overall patient loads and higher average bill sizes.  
  • Despite increase in operating expenses, Thomson Medical reported a 46% YoY increase in operating profit to S$45.2M, leading to 340 basis point improvement in operating profit margin to 24.6%.
  • Thomson Medical expects its existing and new business lines to grow and is therefore cautiously optimistic of its business prospects in the current financial year.  

Shanghai Pharmaceuticals (2607 HK/601607 CH): Portfolio Expansion & China Reopening to Drive Growth

By Tina Banerjee

  • Shanghai Pharmaceuticals Holding (2607 HK) received approval to produce anticoagulant bivalirudin injection, which is mainly used in PTCA and for patients undergoing PCI.
  • In December 2022, SPH received approval for salbutamol sulphate, indicated for the treatment of respiratory diseases including chronic bronchospasm and severe acute asthma attacks unresponsive to traditional treatment.
  • SPH signed an exclusive license agreement with Shionogi for import and distribution of Ensitrelvir Fumaric Acid, an anti-viral drug for COVID-19, in mainland China.

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Feb 14
0

Daily Brief Consumer: Yashili International Holdings, Taste Gourmet, Koolearn, Shiseido Company, Li Auto, Abc Mart Inc, Manchester United, Harley Davidson, Tokyo Stock Exchange Tokyo Price Index Topix, Coca Cola Co and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?
  • Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
  • Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental
  • Shiseido: Conservative Guidance Is Not a Cause for Concern as Shiseido Almost Always Overdelivers
  • [Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023
  • ABC Mart Rebounds in Weakened Sector but Watch Out for Workman
  • Manchester United: Further Upside Potential On This Arbitrage Trade
  • The Electric Dream
  • Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand
  • How Attractive Is Coca-Cola’s Dividend As The Company Reports Full Year Results?

Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?

By Arun George

  • Yashili International Holdings (1230 HK) latest monthly update notes that Dumex Key Condition 2 is satisfied paving the way towards completing the Dumex China Disposal. 
  • The completion of the remaining pre-condition, the 25% Yashili acquisition, depends on the completion of the Dumex China Disposal, which now looks imminent.
  • We think the pre-condition will be satisfied by the end of February and the scheme document will be despatched by early April. At the last close, the spread is 6.2%.

Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.

By Sameer Taneja

  • Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November. 
  • The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn. 
  • Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play. 

Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental

By David Blennerhassett

Shiseido: Conservative Guidance Is Not a Cause for Concern as Shiseido Almost Always Overdelivers

By Oshadhi Kumarasiri

  • Shiseido Company (4911 JP)’s share price is down more than 4% today following a mixed 4Q22 with revenue missing consensus by 2.1% but OP beating by 31.7%.
  • A lot of optimism was baked in the medium-term plan, but 2023 OP guidance (¥60.0bn) was ¥17.5bn below consensus expectations.
  • Nevertheless, we think this shouldn’t worry investors too much as Shiseido has outperformed initial guidance by an average of ¥17.0bn over the past 3 years.

[Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023

By Shawn Yang

  • We expect Li Auto to report 4Q22 top line of RMB 17.5bn, in line with consensus, and recovered GPM of 21.8%, vs 12.7% in Q3.
  • We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7);
  • 2) margin upside in 2023 driven by improved product mix, sharing of auto parts among its product line up, and expanded scale economy; 3) less impacted by Tesla’s price war.

ABC Mart Rebounds in Weakened Sector but Watch Out for Workman

By Michael Causton

  • Footwear sales plummeted during Covid, except for sports and hiking shoes, with a deleterious impact on all the big three retailers. 
  • While ABC Mart has recovered, Chiyoda and G-Foot continue to struggle, leaving the market wide open. 
  • Disruption is coming in the form of Workman but others might also see the opportunity.

Manchester United: Further Upside Potential On This Arbitrage Trade

By Kevin George

  • Manchester United saw takeover rumors and options activity. The bids have started arriving for this soccer club.
  • The club has an easy 80%, but where is the top for bids? Click here for all the latest Manchester United transfer news.
  • Click here to read Manchester United’s transfer news for the latest transfer news.

The Electric Dream

By subSPAC

  • Over a dozen companies focused on building out Electric Vehicles have gone public through a SPAC merger in the past two years, albeit with mixed results.
  • Legendary Motorcycle Maker Harley Davidson shocked the public markets in 2021 when it announced that it was spinning off its EV segment LiveWire through a $1.8 billion SPAC merger.
  • The move came as the legacy bike maker has faced a period of slowing sales, losing market share to competitors, and failing to reach younger first-time riders.

Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

By Aki Matsumoto

  • Regarding the three most in-demand documents, only 30-50% of companies with over 30% foreign ownership disclose them in English. The mismatch between overseas investors’ demand and companies’ disclosure continues.
  • If TSE requires faster timing of disclosure in English, companies may limit the materials they disclose in English due to increased burden. Disclosing necessary materials is more important than timing.
  • In order to encourage companies to disclose in English in their annual securities reports, the Corporate Governance Code should clearly state the disclosure in English in the annual securities report.

How Attractive Is Coca-Cola’s Dividend As The Company Reports Full Year Results?

By Vladimir Dimitrov, CFA

  • Coca-Cola delivered nearly 36% total return in a matter of only two and a half years.
  • There are a number of positive signs leading to a high probability of a dividend increase during 2023, according to the company’s full-year 2022 results.
  • Coca-Cola (NYSE:KO) has been one of the best-performing large-cap consumer staple companies in recent years.

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Feb 14
0

Most Read: Link REIT, Canon Inc, Ebos Group Ltd, Dai Nippon Printing, Kakao Pay, Citizen Watch, S.M.Entertainment Co, Tencent, Huitongda, Osstem Implant and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Big Link REIT (823 HK) Rights Offering
  • Canon ADR Cancellation – There May Be A Trade To Do
  • Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
  • Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated
  • Kakao Pay (377300 KS): MSCI Inclusion (Finally!)
  • Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback
  • HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap
  • ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault
  • Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
  • Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares

Big Link REIT (823 HK) Rights Offering

By Travis Lundy

  • After being halted this morning before the start of trade, post-close, Link REIT (823 HK) announced a fully-underwritten Rights Offering. 
  • The Rights Offering intends to raise HK$18.8bn issuing 1 Right for every 5 Shares held, at a subscription price of HK$44.20, a 26% discount to TERP. 
  • This will take an already under-levered REIT and add more capital to it. And there is going to be selling pressure at some point.

Canon ADR Cancellation – There May Be A Trade To Do

By Travis Lundy

  • Last week (on 10 February), Canon Inc (7751 JP) announced it intended to delist its ADRs from the NYSE.
  • Canon is the third Japanese company to do so in two months, after Eisai Co Ltd (4523 JP) announced in December and Olympus Corp (7733 JP) in January.
  • No related investment opportunity but there may be a trade to do.

Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs

By Brian Freitas

  • MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
  • FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
  • Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

Dai Nippon Printing (7912) – Activism Results Going Forward Are Complicated

By Travis Lundy

  • A little over two weeks ago, western media outlets reported “sources familiar with the matter” said Elliott Management had built a “significant” stake in Dai Nippon Printing (7912 JP). 
  • DNP has been a “value name” for years. And years. Lots of cash, lots of real estate, and lots of cross-holdings. DNP had a plan to sell crossholdings, slowly.
  • DNP had planned a March 9 presentation of its new MTMP. Elliott, reportedly with a little less than 5%, wanted faster. A few weeks later, DNP has responded with faster. 

Kakao Pay (377300 KS): MSCI Inclusion (Finally!)

By Brian Freitas

  • MSCI will add Kakao Pay (377300 KS) to the MSCI Korea Index at the February QCIR. There are 7 trading days to implementation on 28 February.
  • Local institutions and foreign investors have been sellers in the last couple of weeks and retail investors have been buying to mop up the selling.
  • Cumulative excess volume indicates a fair amount of pre-positioning and we’d look to sell ahead of the passive MSCI buying.

Absolutely GINORMOUS Citizen Watch (7762 JP) Buyback

By Travis Lundy

  • Today, Citizen Watch (7762 JP) reported Q3 earnings, and a BIG buyback.
  • It is a VERY BIG BUYBACK at up to 75mm shares (25.61% of shares out), with an allocation of up to ¥40bn (which is ~22.1% at last price).
  • The buyback is to be executed over the next year. Buyback structure (undisclosed) matters and shareholder structure matters too. There is a big short. This could get really interesting.

HYBE’s Tender Offer of SM Entertainment: Closing the Price Gap

By Douglas Kim

  • We believe that there is a very high probability of a successful tender offer of 25% stake in SM Entertainment by HYBE. 
  • There is a 4.6% gap between the tender offer price and current price. There is a strong probability of this gap being closed in the next several weeks. 
  • There could also be an on-going interest by Kakao to try to take over the controlling interest in SM Entertainment but HYBE is not likely to give up control easily.

ECM Weekly (12th Feb 2023) – Hesai, Oasis, Mankind, Greatpower, Ruipeng, CATL, Nissan/Renault

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • On the IPO front, Hesai Group (HSAI US) provided the first Asia linked listing for the year.
  • Things were quiet on the placement front owing to the annual earnings reporting season.

Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up

By Clarence Chu

  • Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
  • Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
  • Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

Osstem Implant: Founder Choi Changes CB Sale Terms to MBK-Unison & KCGI Agrees to Sell Its Shares

By Douglas Kim

  • Due to the enormous controversy regarding Chairman Choi Gyu-Ok’s children exchange CB call options for BWs, the Choi family has decided to change and simplify this transaction structure.
  • Previously, MBK-Unison decided to acquire the call option on CB that Chairman Choi gave to his children. Under revised contract, MBK-Unison agreed to acquire the convertible bond itself.
  • We believe MBK-Unison consortium is getting a relative bargain in this deal and the valuation of Osstem Implant remain attractive (EV/EBITDA of 6.4x and P/E of 11.7x in 2024). 

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Feb 13
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Daily Brief Quantitative Analysis: Northbound Flows (Feb 10th): Ping An Insurance and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Northbound Flows (Feb 10th): Ping An Insurance, CATL, Moutai, Luzhou Lao Jiao, Hundsun
  • HK Short Interest Weekly: Short Covers for Tencent, Baba, Anta, Wuxi Biologics
  • Hong Kong Connect Flows (Feb 10th): Meituan, HKEx, ICBC, CCB, Kuaishou, Tencent, Li Ning
  • A-H Premium Weekly (Feb 10th): Premium Compressed for Utilities
  • TWSE Short Interest Weekly (Feb 10th): Evergreen Marine, Unimicron Tech, Novatek

Northbound Flows (Feb 10th): Ping An Insurance, CATL, Moutai, Luzhou Lao Jiao, Hundsun

By Ke Yan, CFA, FRM

  • We analyze the weekly Shanghai/Shenzhen northbound Connect flows with our data engine for holding position as of February 10th.
  • We estimate the weekly inflows to be US$456.0 million, led by financials, information technology, utilities sectors, and offset by materials, consumer discretionary.
  • We highlight flows for Ping An Insurance, Contemporary Amperex Technology, Kweichow Moutai, Luzhou Lao Jiao, Hundsun Technologies, Byd, Midea, Tongwei, Trina Solar

HK Short Interest Weekly: Short Covers for Tencent, Baba, Anta, Wuxi Biologics

By Ke Yan, CFA, FRM

  • We analyzed the latest HK SFC report for aggregate short position as of Feb 3rd.
  • Top short increases and decreases were tabulated for one week and four week period. 
  • We highlight short changes in Bidu, Manulife, Mengniu Dairy, CDF, Tencent, Baba, Anta Sports, Wuxi Bio.

Hong Kong Connect Flows (Feb 10th): Meituan, HKEx, ICBC, CCB, Kuaishou, Tencent, Li Ning

By Ke Yan, CFA, FRM

  • We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of February 10th.
  • The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
  • We highlight flows for Meituan, Hong Kong Exchanges And Clearing, Industrial And Commercial Bank Of China, China Construction Bank, Kuaishou Technology, Tencent, Li Ning.

A-H Premium Weekly (Feb 10th): Premium Compressed for Utilities

By Ke Yan, CFA, FRM

  • We analyse the changes of A-H premium on 143 stocks over the last week. The average A-H premium was 111.9% as of Feb 10th.
  • The average A-H premium changed by 3.6ppt week on week, led by health care, consumer discretionary, information technology and offset by real estate.
  • We highlight weekly changes in A-H premium for Great Wall Motor, Huadian, Huaneng, Datang Intl.

TWSE Short Interest Weekly (Feb 10th): Evergreen Marine, Unimicron Tech, Novatek

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of TWSE Stocks as of Feb 10th which has an aggregated short interest worth USD11.5bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Evergreen Marine, Unimicron Tech, Novatek.

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Feb 13
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Daily Brief Credit: Morning Views Asia: Adani Green Energy and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Adani Green Energy, Adani Ports & Special Economic Zone, Adani Transmission

Morning Views Asia: Adani Green Energy, Adani Ports & Special Economic Zone, Adani Transmission

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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Feb 13
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Daily Brief Equity Bottom-Up: Standard Chartered: FAB’s StanChart Bid Could Draw Plenty of Regulatory Scrutiny and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Standard Chartered: FAB’s StanChart Bid Could Draw Plenty of Regulatory Scrutiny
  • Koolearn (1797 HK): Don’t Overpay for Growth
  • Sa Sa Intl (178 HK): On-Ground Observations and Outlook
  • South Korean Banks Screener; Highlighting Industrial Bank of Korea (024110 KS)

Standard Chartered: FAB’s StanChart Bid Could Draw Plenty of Regulatory Scrutiny

By Fern Wang

  • FAB’s bid will be the fastest and easiest way to increase its global and product reach.
  • The deal is likely to face plenty of scrutiny due to StandChart’s complexity.
  • With ample capital, liquidity and on path for profit recovery, StandChart is not in need of a deal.

Koolearn (1797 HK): Don’t Overpay for Growth

By Eric Chen

  • Koolearn’s successful transformation into a live-streaming e-commerce business showcased outstanding entrepreneurship and leadership of its founder Michael Yu, whom we highly respect.
  • That said, we expect its growth to decelerate materially after hitting RMB18 billion GMV by 2024. We value Koolearn at RMB36 billion (20% downside), drawing reference to VIPShop growth trajectory.
  • While high-frequency data on live-streaming business will drive near-term stock price (and potentially to the upside), its current valuation doesn’t pay off for long -term investors in our view.

Sa Sa Intl (178 HK): On-Ground Observations and Outlook

By Osbert Tang, CFA

  • We observed that businesses at Sa Sa International Hldgs (178 HK) have picked up during the Chinese New Year, but a significant overall significant recovery is still lacked.
  • The full relaxation of mainland-HK border control has brought about a 110% surge in mainland arrival between 6 Feb and 11 Feb. This suggests that momentum is clearly building up. 
  • Sa Sa has embarked on strategies like re-opening important stores, selectively increase store counts and re-adjusting staff arrangement and opening hours to capture the opportunities.

South Korean Banks Screener; Highlighting Industrial Bank of Korea (024110 KS)

By Victor Galliano

  • In our latest South Korean banks screener; we add Industrial Bank of Korea to the buy list alongside Hana Financial; we cut KB Financial to a neutral rating
  • Industrial Bank of Korea has very attractive multiples and PEG ratio and the best pre-provision and post-provision returns of the peer group, it also has sound broad credit quality metrics
  • We introduce a broader credit quality metric to the screens and also EPS revisions over the last week and last month to give a sense of earnings momentum changes

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