Smartkarma Daily Briefs

This morning, Reuters is reporting that Toyo Construction (1890 JP) has asked the Japanese government to investigate alleged breaches of the Foreign Exchange and Foreign Trade Act by YFO.
Why? The Very Japanese family office of Nintendo’s founding family used Cayman entities to purchase Toyo shares and Toyo was re-labeled as having businesses in “Core Sectors” in October 2021.
Toyo has also repeated its complaint about changed “intentions” on large shareholder filings. That bit of the complaint is 10 months old. A closer look at the details within.

Golden Energy: Dian Swastatika Goes To Vote. Nothing To See Here

Dian Swastatika (DSSA IJ) shareholders will vote on the in-specie distribution of Golden Energy Mines and the exit offer of Golden Energy & Resources (GER SP) on the 2 May.
This requires a simple majority vote, and the Widjaja family-controlled PT Sinar Mas Tunggal holds 59.9% in DSSA. This is rubber-stamped.
For what it’s worth, DSSA’s “independent advisors” concluded the Offer is fair. To the Widjaja family as majority owners, it most certainly is. To the DSSA minority shareholders… 👀

Mitsui OSK(9104): Ex-Div – The Last Straw…

By Mark Chadwick

Mitsui OSK is up 460% since June 2020. Almost gravity defying. Strong Container profits have lead to high dividends. Now Shareholders hang on for one more big payoff
Container rates have just about to reverted to pre-pandemic levels. Utilization is falling; Capacity coming on; Customers using spot. All points to potential losses next year for Containers and ONE
We expect a major profit decline=>div cut; How far could share price fall ? See the share price vs Shanghai Container Index correlation below. We are bearish Mitsui OSK.

Sunpower: Extension of CB’s Puts Focus Back on GI Business Fundamentals

By Nicolas Van Broekhoven

Sunpower Group (SPWG SP) announced it agreed to a 2-year extension of its CBs with two Chinese P/E funds that have been supporting it since 2017
The extension is unexpectedly favorable to Sunpower equity holders and removes a major overhang
After two difficult years with spiking coal prices and rolling lockdowns in China, the company can finally be valued on the merits of its GI business once again

Leoch [842]: +225% EPS, 5G Play, 4x P/E, 6% Dividend, Inflection Point

By Evaluate Research

Capital Expenditure – New Investment in Mexico Plant in 2023
The company achieved a solid performance in its Recycled Lead business and Power Solutions business with a revenue growth of 18% and 13%, respectively, as compared to 2021.
The revenue for Recycled Lead business and Power Solutions business was RMB2,413 million and RMB10,433 million respectively.

AKR Corporindo (AKRA IJ) – Smelting Upwards

By Angus Mackintosh

AKR Corporindo (AKRA IJ) booked an impressive set of numbers significantly above consensus with net profit increasing +117% YoY driven by strong performance across all segments.
Trading & Distribution will be driven by both the demand for petroleum products together with chemicals, especially from the increasing number of smelters in Indonesia, both for copper and nickel.
JIIPE industrial estate booked 44.5 ha of sales, above guidance, with expectations for 70-75 hectares of land sales this year. Valuations are significantly below the historical average and consensus low.

Shenzhen Intl (152 HK): Don’t Look Back, Look Forward

By Osbert Tang, CFA

FY22 is definitely bad for Shenzhen International (152 HK) given the 64.9% profit plunge. However, negative contributors like Shenzhen Airlines and exchange losses will be removed in this year.
Earnings for Shenzhen Expressway (548 HK) will improve and 1Q23 has witnessed good traffic recovery. Logistics profit will benefit from higher occupancy, REIT issuance and new projects.
Upside will come from logistics park transformation with profit from Yicheng Qiwanli pre-sale potentially to be booked. Consensus earnings forecast of HK$4.1bn is at low-end of our estimate.

3QFY23 Adjusted EPS Beats but Revenues Miss; 4QFY23 Guidance Disappoints

By Water Tower Research

After market close Wednesday, March 22, MillerKnoll reported 3QFY23 adjusted EPS of $0.54, $0.12 higher than our estimate and consensus.
GAAP EPS of $0.01 missed by $0.31, caused primarily by a $37.2 million charge for closing Fully, a Knoll brand.
3QFY23 revenues of $985 million missed our estimate by ~$20 million.

Roper Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Roper Technologies is a diversified software and tech investment player.
The company makes pertinent investments in technology companies with a high base of cash and negative working capital with the objective of maximizing the returns on the capital employed.
Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

Roper Technologies Inc.: Initiation of Coverage – Acquisition-Led Growth Strategy & Key Drivers

This is our first report on Roper Technologies, a diversified software and tech investment company.
The company ended 2022 on a positive note with revenue of over $1.4 billion, up 14% higher than the prior year.
We initiate coverage on the stock of Roper Technologies, Inc. with a ‘Hold’ rating.

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Mar 29

Daily Brief Industrials: Toyo Construction, Golden Energy & Resources, Mitsui O.S.K. Lines, Sunpower Group, Leoch International Technology, AKR Corporindo, Shenzhen International, MillerKnoll, Roper Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Toyo Construction (1890) Tries a Different Tactic – FEFTA!
Golden Energy: Dian Swastatika Goes To Vote. Nothing To See Here
Mitsui OSK(9104): Ex-Div – The Last Straw…
Sunpower: Extension of CB’s Puts Focus Back on GI Business Fundamentals
Leoch [842]: +225% EPS, 5G Play, 4x P/E, 6% Dividend, Inflection Point
AKR Corporindo (AKRA IJ) – Smelting Upwards
Shenzhen Intl (152 HK): Don’t Look Back, Look Forward
3QFY23 Adjusted EPS Beats but Revenues Miss; 4QFY23 Guidance Disappoints
Roper Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
Roper Technologies Inc.: Initiation of Coverage – Acquisition-Led Growth Strategy & Key Drivers

Toyo Construction (1890) Tries a Different Tactic – FEFTA!

This morning, Reuters is reporting that Toyo Construction (1890 JP) has asked the Japanese government to investigate alleged breaches of the Foreign Exchange and Foreign Trade Act by YFO.
Why? The Very Japanese family office of Nintendo’s founding family used Cayman entities to purchase Toyo shares and Toyo was re-labeled as having businesses in “Core Sectors” in October 2021.
Toyo has also repeated its complaint about changed “intentions” on large shareholder filings. That bit of the complaint is 10 months old. A closer look at the details within.

Golden Energy: Dian Swastatika Goes To Vote. Nothing To See Here

Dian Swastatika (DSSA IJ) shareholders will vote on the in-specie distribution of Golden Energy Mines and the exit offer of Golden Energy & Resources (GER SP) on the 2 May.
This requires a simple majority vote, and the Widjaja family-controlled PT Sinar Mas Tunggal holds 59.9% in DSSA. This is rubber-stamped.
For what it’s worth, DSSA’s “independent advisors” concluded the Offer is fair. To the Widjaja family as majority owners, it most certainly is. To the DSSA minority shareholders… 👀

Mitsui OSK(9104): Ex-Div – The Last Straw…

By Mark Chadwick

Mitsui OSK is up 460% since June 2020. Almost gravity defying. Strong Container profits have lead to high dividends. Now Shareholders hang on for one more big payoff
Container rates have just about to reverted to pre-pandemic levels. Utilization is falling; Capacity coming on; Customers using spot. All points to potential losses next year for Containers and ONE
We expect a major profit decline=>div cut; How far could share price fall ? See the share price vs Shanghai Container Index correlation below. We are bearish Mitsui OSK.

Sunpower: Extension of CB’s Puts Focus Back on GI Business Fundamentals

By Nicolas Van Broekhoven

Sunpower Group (SPWG SP) announced it agreed to a 2-year extension of its CBs with two Chinese P/E funds that have been supporting it since 2017
The extension is unexpectedly favorable to Sunpower equity holders and removes a major overhang
After two difficult years with spiking coal prices and rolling lockdowns in China, the company can finally be valued on the merits of its GI business once again

Leoch [842]: +225% EPS, 5G Play, 4x P/E, 6% Dividend, Inflection Point

By Evaluate Research

Capital Expenditure – New Investment in Mexico Plant in 2023
The company achieved a solid performance in its Recycled Lead business and Power Solutions business with a revenue growth of 18% and 13%, respectively, as compared to 2021.
The revenue for Recycled Lead business and Power Solutions business was RMB2,413 million and RMB10,433 million respectively.

AKR Corporindo (AKRA IJ) – Smelting Upwards

By Angus Mackintosh

AKR Corporindo (AKRA IJ) booked an impressive set of numbers significantly above consensus with net profit increasing +117% YoY driven by strong performance across all segments.
Trading & Distribution will be driven by both the demand for petroleum products together with chemicals, especially from the increasing number of smelters in Indonesia, both for copper and nickel.
JIIPE industrial estate booked 44.5 ha of sales, above guidance, with expectations for 70-75 hectares of land sales this year. Valuations are significantly below the historical average and consensus low.

Shenzhen Intl (152 HK): Don’t Look Back, Look Forward

By Osbert Tang, CFA

FY22 is definitely bad for Shenzhen International (152 HK) given the 64.9% profit plunge. However, negative contributors like Shenzhen Airlines and exchange losses will be removed in this year.
Earnings for Shenzhen Expressway (548 HK) will improve and 1Q23 has witnessed good traffic recovery. Logistics profit will benefit from higher occupancy, REIT issuance and new projects.
Upside will come from logistics park transformation with profit from Yicheng Qiwanli pre-sale potentially to be booked. Consensus earnings forecast of HK$4.1bn is at low-end of our estimate.

3QFY23 Adjusted EPS Beats but Revenues Miss; 4QFY23 Guidance Disappoints

By Water Tower Research

After market close Wednesday, March 22, MillerKnoll reported 3QFY23 adjusted EPS of $0.54, $0.12 higher than our estimate and consensus.
GAAP EPS of $0.01 missed by $0.31, caused primarily by a $37.2 million charge for closing Fully, a Knoll brand.
3QFY23 revenues of $985 million missed our estimate by ~$20 million.

Roper Technologies Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Roper Technologies is a diversified software and tech investment player.
The company makes pertinent investments in technology companies with a high base of cash and negative working capital with the objective of maximizing the returns on the capital employed.
Baptista Research looks to evaluate the different credit strengths and credit risks of the company as well as a line-by-line analysis of the financial statements of the company for the past four years.

Roper Technologies Inc.: Initiation of Coverage – Acquisition-Led Growth Strategy & Key Drivers

This is our first report on Roper Technologies, a diversified software and tech investment company.
The company ended 2022 on a positive note with revenue of over $1.4 billion, up 14% higher than the prior year.
We initiate coverage on the stock of Roper Technologies, Inc. with a ‘Hold’ rating.

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Mar 29

Daily Brief Health Care: Hugel Inc, Terumo Corp, Iqvia Holdings, CanSino Biologics Inc, Sipai Health Technology, Aft Pharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Korea FSC Officially Eases a Major Hurdle for a Tender Offer: Names to Watch
Terumo Corp (4543 JP): Sequential Decline Expected in Q4; Stronger Yen to Weigh on Performance
IQVIA Holdings Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
CanSino Biologics (6185.HK) 2022 Results – It Is Time to Reassess CanSino and Its Future Prospects
IQVIA Holdings Inc.: Initiation of Coverage – Recent Acquisitions & Key Drivers
Sipai Health Technology (314.HK) – Unjustified Valuation and Problematic Business Model
AFT Pharmaceuticals – Maxigesic international momentum continues

Korea FSC Officially Eases a Major Hurdle for a Tender Offer: Names to Watch

By Sanghyun Park

Korea FSC will accept financial institutions’ LOC and LPs’ investment performance agreements as certifying documents for securing funds. This revision will be effective right from April 1 this year.
The impact from a preemptive trading perspective is likely to be significant. Additional stake purchases through tender offers will increase more aggressively, particularly when purchasing shares from the majority shareholder.
We should first pay attention to companies where private equity (PE) is the largest shareholder whose stake is relatively low (less than 50%): Hugel, Hana Tour Service, & Hanssem

Terumo Corp (4543 JP): Sequential Decline Expected in Q4; Stronger Yen to Weigh on Performance

By Tina Banerjee

Terumo Corp (4543 JP) raised FY23 revenue guidance due to greater than expected depreciation of Yen. However, excluding Fx, revenue growth expectation has been lowered to 5% from 6% earlier.
New guidance implies Q4FY23 revenue of ¥197B (-8% QoQ) and operating profit of ¥28.5B (-24% QoQ). Terumo assumed exchange rate of ¥130/USD for Q4FY23, similar level realized in Q1FY23.
Terumo has reduced FY23 operating and net profit guidance by ¥10B and ¥8.5B, respectively due to higher-than-expected inflation. Excluding Fx, operating profit is expected to decline 2% in FY23.

IQVIA Holdings Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

IQVIA Holdings is an global healthcare-tech major providing services to the clinical research and health information technology sectors.
In partnership with Tasso, they have launched the first self-collection safety lab panel for clinical trial participants in the United States, enhancing their decentralized clinical trial capabilities.
Our focus is on analyzing the financial strength and the debt servicing capability of the company and the analysis does not differentiate among debt instruments.

CanSino Biologics (6185.HK) 2022 Results – It Is Time to Reassess CanSino and Its Future Prospects

By Xinyao (Criss) Wang

The investment logic of vaccine companies is different that of biotech. Generally speaking, vaccine companies cannot develop to large scale without successfully betting on big vaccine varieties.
The most fatal problem of CanSino is that there’re no other blockbuster varieties except COVID-19 vaccine. So, either CanSino develops a big variety,or it would gradually enter a vicious circle.
CanSino’s current valuation is at a low level. Even with many negative factors, that doesn’t mean CanSino’s stock price won’t rebound.

IQVIA Holdings Inc.: Initiation of Coverage – Recent Acquisitions & Key Drivers

This is our first report on an IQVIA Holdings, an international player providing services to the clinical research and health information technology sectors.
IQVIA expanded access to clinical research.
We initiate coverage on the stock of IQVIA Holdings Inc. with a ‘Buy’ rating.

Sipai Health Technology (314.HK) – Unjustified Valuation and Problematic Business Model

By Xinyao (Criss) Wang

The sustainability/stability of Sipai’s performance and growth potential are worrying. Sipai doesn’t have a business with core competitiveness as its foundation, thus leading to potential problems in its business model.
It is useless to have fast revenue growth because Sipai’s profitability is very weak, which is actually closely related to its business characteristics. Sipai is far from being breakeven.
Sipai is overvalued. Such high valuation is not reasonable based on our analysis. We are conservative about Sipai’s outlook and we think there are much better investment opportunities.

AFT Pharmaceuticals – Maxigesic international momentum continues

By Edison Investment Research

AFT Pharmaceuticals (AFT) has announced that it has signed three additional licensing agreements for Maxigesic IV – with Labatec in Switzerland and Pharma Bavaria in Argentina and Paraguay. The product franchise continues its international expansion, with the deals following the recent launches of Maxigesic IV in five European countries. To date (FY23, ending 31 March) AFT’s flagship product, Maxigesic, is available in 61 countries (across all dose forms), up 15 from the prior year. This is marginally lower than the target of 63 countries for FY23, but the company also announced achieving its first product registration in China with Crystawash Extend, its long-lasting sanitiser. China launches are generally highly sought after, and this announcement should provide access to the larger offline retail and hospitals segments (c 75% of the over-the-counter (OTC) market in China). Currently AFT only has an online retail presence in China (under the Cross Border E-Commerce OTC scheme).

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Mar 28

Most Read: Toshiba Corp, Japan Airlines, Meituan, S.M.Entertainment Co, Toyo Construction, Rakuten Bank, Sun Kwang, Nitori Holdings, Cosmo Energy Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!
Toshiba – Thoughts On The Tender Opinion
Nikkei 225 Index Rebalance: Passives Trade on Friday
Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
SM Entertainment: Tender Offer Allocation Ratios Announced
Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout
Rakuten Bank Vs SBI Sumishin Net Bank
Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Cosmo Energy (5021) – It’s Even More On

Tencent Meituan Dividend – The US$17bn Overhang Is Here – Not All Shares in CCASS, Here We Go Again!

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares. Its value has since declined to US$17bn
We have covered the background of the event in our previous notes. In this note, we talk about the recent updates.

Toshiba – Thoughts On The Tender Opinion

By Mio Kato

Toshiba released documents on the tender and a notice that the FY end dividend would be cancelled shortly after our last report was published.
They are interesting in that the Special Committee’s opinions are relatively frank but details on the valuation process are almost non-existent.
In addition, the information regarding other bids and alternatives was a little surprising to us.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling

Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

SM Entertainment: Tender Offer Allocation Ratios Announced

By Douglas Kim

Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%.
At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view.

Toyo Construction (1890) Plays Offence – A New Mid-Term Mgmt Plan with High Shareholder Payout

YFO continues its fight on Board governance. Toyo Construction has shifted so the Board and a Special Committee will now examine the input Toyo says YFO has not provided.
Toyo also objected because it said YFO’s bid could not be sustained based on Toyo’s economics. Toyo’s fight should have been offence. With a new Medium-Term Management Plan, it is.
Toyo now promises strong revenue and double digit OP growth, and a ¥50/share (5.3%) dividend. Toyo is trying to pay off shareholders to support it against YFO. That’s fair/good.

Rakuten Bank Vs SBI Sumishin Net Bank

Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about $870 million. The pricing is on 5 April and the listing is on 21 April.
In Rakuten Bank IPO: The Investment Case, we highlighted the key elements of the investment case.
SBI Sumishin Net Bank (7163 JP), the key peer, will list on 29 March. In this note, we compare Rakuten Bank and SBI Sumishin across several key metrics.

Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event

By Sanghyun Park

NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

Cosmo Energy (5021) – It’s Even More On

In mid-January, things between activist Yoshiaki Murakami and Cosmo Energy Holdings (5021 JP) came to a head. Cosmo announced a large buyback and possible takeover defence measures.
The buyback was a beefy chunk of the float because of the expected profit payout. On 9 February, Cosmo lowered its NP guidance by 40%. FY22 div stays at ¥150/share.
Last Thursday, Cosmo presented its NEW Mid-Term Management Plan. ROE targets similar. Profit targets up. Minimum div goes up; payout ratio goes up. More comes if financial health targets met.

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Mar 28

Daily Brief India: Patanjali Foods, Home First Finance, Zydus Lifesciences Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Patanjali Foods Early FPO Look – Lifting the Overhang with a Well Flagged Deal. Re-Listing Went Well
Home First Finance (HOMEFIRS IN) | The Bounce Mystery & Way Forward
Zydus Lifesciences (ZYDUSLIF IN): Strong India and US Momentum to Improve Margin and Drive Growth

Patanjali Foods Early FPO Look – Lifting the Overhang with a Well Flagged Deal. Re-Listing Went Well

By Clarence Chu

The promoters of Patanjali Foods (PATANJAL IN) are looking to increase the firm’s public shareholding to the minimum required 25% imposed by SEBI.
We had discussed about this in their effective re-listing FPO last year, and the deal has been well covered by media sources as well, thus it is very well flagged.
While it would be a large one to digest, representing at least 62.1 days of the firm’s three month ADV, the deal will lift the remaining overhang on the stock.

Home First Finance (HOMEFIRS IN) | The Bounce Mystery & Way Forward

By Pranav Bhavsar

Home First Finance (HOMEFIRS IN) lends to a customer segment exposed to high income volatility.
Soft bounces are used by customers to manage their cash flow, with bounce charge collection done on a best-effort basis, management attitude towards financial discipline warrants attention.
While there may not be any immediate asset quality issues, caution is warranted.

Zydus Lifesciences (ZYDUSLIF IN): Strong India and US Momentum to Improve Margin and Drive Growth

By Tina Banerjee

Zydus Lifesciences Ltd (ZYDUSLIF IN) reported total revenue of INR43.6B, up by 20% YoY and 6% QoQ, in Q3FY23. Key markets, India and the U.S. continued to deliver robust performance.
U.S. business is on track to register QoQ growth in near-term, with the launches of new products. Zydus plans to launch 2–3 transdermal products in U.S. in FY24.
For its India business, the company aims to outperform the industry growth sustainably in the medium to long term. Lipaglyn is expected to be among top 25 products of India.

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Mar 28

Daily Brief China: Meituan, DPC Dash, Aag Energy Holdings, CK Hutchison Holdings, Yuzhou Group, Parkson Retail, Ping An Insurance (H), Tencent and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling
DPC Dash IPO Trading – Tepid Demand Even as Capital Group Tops Up
AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In
Tencent Meituan Dividend – All Shares in CCASS – More Pressure Now but Will Have a Shorter Overhang
[Meituan (3690 HK) Target Price Change]: Bracing for Douyin Impact with Limited War Chest
CK Hutchison Holdings: Is a Retail IPO Coming?
Yuzhou: Strong FY Results and Robust Liquidity Profile
Parkson Retail: Positive 4Q SSS Growth, Overall SSS Growth Still Negative
Ping An: Reassuring New Business Pickup
Tencent Holdings Ltd (700 HK) – Bullish Multi-Month Outlook – Target 450+ (+20-25%)

Meituan (3690 HK): All Stock in CCASS Now; Tracking the Selling

Following the settlement of Meituan (3690 HK) shares from Tencent (700 HK)‘s in-specie dividend, nearly all the shares are now in CCASS.
Meituan (3690 HK) has underperformed Tencent (700 HK) by nearly 50% and Alibaba Group (9988 HK) by 27% since the announcement of the in-specie dividend.
Short interest is higher over the last couple of months but is far lower than the selling that could come through, especially on the Prosus (PRX NA) holding.

DPC Dash IPO Trading – Tepid Demand Even as Capital Group Tops Up

DPC Dash (1405 HK) raised around US$75m, after pricing its IPO at the bottom-end.
The company is the exclusive master franchisee for Domino’s Pizza in China, HK and Macau. DPC operated 604 stores across 17 cities, as of Feb 2023.
In this note, we talk about the subscription levels and trading dynamics.

AAG Energy (2686 HK): Pre-Condition Satisfied as Doubts Sets In

Aag Energy Holdings (2686 HK) noted that the pre-condition for Xinjiang Xintai Natural Gas (603393 CH) privatisation offer at HK$1.85 per share has been satisfied (which was expected).
The gross spread has widened to 16.4% due to concerns that the recent solid FY22 results, lack of dividends and the skinny premium would nudge minorities to vote NO.
It remains unclear if the dissatisfied retail minorities have enough votes to block the scheme. The downside remains low as the shares are trading 5% below the undisturbed price.

Tencent Meituan Dividend – All Shares in CCASS – More Pressure Now but Will Have a Shorter Overhang

On 16th Nov 22, post-market close, along with its 3Q22 results Tencent declared an interim dividend by way of distribution in specie of Class B Ordinary shares of Meituan.
At the time of declaration, the dividend amounted to US$20bn or 15.5% of Meituan’s outstanding shares.
We have spoken about the background of the deal in our earlier notes. In this note, we talk about the overnight updates.

[Meituan (3690 HK) Target Price Change]: Bracing for Douyin Impact with Limited War Chest

By Shawn Yang

Meituan reported C4Q22 total revenue 4% higher than cons. Non-IFRS net margin beat cons. by 0.4ppt due to strong cost control during lockdowns.
Meituan has limited options against Douyin’s fast expansion of new service categories and customized offerings. The competition against Douyin will continue to pressure the in-store business in the long run.
Maintain SELL and cut TP to HK$125. Our TP implies 3x PS, 10x PE and 1x PS for on-demand delivery, in-store, and new initiatives, respectively.

CK Hutchison Holdings: Is a Retail IPO Coming?

In-depth presentation of retail digitalization raises expectation of retail spin-off. Asset disposals and increased DPS potential 2H catalysts
Limited impact from trade tensions; oil tailwind
Following 2 years of single-digit earnings growth, growth is likely to accelerate to double digit as headwinds from strong euro/GBP and weak oil prices eases and global economy continues to rebound.

Yuzhou: Strong FY Results and Robust Liquidity Profile

Yuzhou Properties Company Limited (Yuzhou) is a property developer that focuses on residential housing in West Strait Economic Zone and Yangtze River Delta.
The company has moved its headquarters to Shanghai from Xiamen.
The company has been listed on the Hong Kong Stock Exchange since November 2009. As of 31 Mar 2017, market capitalization of Yuzhou stands at HKD12.4b (USD1.6b).

Parkson Retail: Positive 4Q SSS Growth, Overall SSS Growth Still Negative

Parkson Retail Group Ltd (Parkson) is a department store operator with 19 years of operating history in China.
With an extensive network of 50 stores in 36 cities in China under the “Parkson” brand, the Group is one of the largest store operators.
It targets the middle- and mid-upper-end of the Chinese retail market, with most of its revenues derived from concessionaire sales (90% of total revenues), while direct sales account for the rest.

Ping An: Reassuring New Business Pickup

Interim results beat with strong results across most business lines
Life insurance new business value growth reversed to positive growth in 2Q and should accelerate
Fair value trimmed to HKD98 but headwinds abating in 2H

Tencent Holdings Ltd (700 HK) – Bullish Multi-Month Outlook – Target 450+ (+20-25%)

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.
Last week complemented November 2022’s bullish LT confirmation with a bullish MT confirmation, re-instating the MT uptrend after a period of correction in Feb/Mar.
Tencent Holdings Ltd (700 HK) has likely entered the 2nd leg of a material MT uptrend. Q2 2023 target towards 451.95 (+25%).

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Mar 28

Daily Brief South Korea: S.M.Entertainment Co, Sun Kwang, WCP and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

SM Entertainment: Tender Offer Allocation Ratios Announced
Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event
W-Scope IPO Lock-Up – US$300m Worth of Shares to Come Free

SM Entertainment: Tender Offer Allocation Ratios Announced

By Douglas Kim

Korea Investment & Securities announced the final competition rate for the tender offer of SM Entertainment by Kakao Group (8,333,641 shares of SM Entertainment at 150,000 won per share).
The competition ratio of the tender offer was 2.2655436 to 1. Accordingly, the allocation ratio was set at 44.1395170%.
At the current price of 95,100 won, SM Entertainment’s shares are undervalued by about 25% to 45% over the next 6-12 months, in our view.

Target & Timing for Flow Trading Position Setup in NICE I&S KOSPI Transfer Event

By Sanghyun Park

NICE I&S will likely complete the transfer schedule in early May, meaning that an ad-hoc change may occur before the regular rebalancing of the KOSDAQ 150 in June.
If this gets completed before SK Oceanplant’s transfer listing schedule, the top reserved issue in NICE’s GICS sector (INDUSTRIALS) will be included. It is Sun Kwang (003100 KS).
As evidenced in the case of LX Semicon, we should set up a preemptive position for potential ADDITION at the time of the T or T-1 KRX corporate action announcement.

W-Scope IPO Lock-Up – US$300m Worth of Shares to Come Free

WCP (393890 KS) raised around US$314m via in its Korean IPO. The stock was listed on 30th Sep 2022, its six-month lockup will expire soon.
WCP designs, manufactures, and sells separators, which are one of the four core materials for secondary Lithium-ion batteries.
In this note, we will talk about the lock-up dynamics and updates since our last note.

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Mar 28

Daily Brief Singapore: Golden Energy & Resources, Sembcorp Marine, Yanlord Land and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair
Quiddity Leaderboard Singapore’s STI Sep 23: Sembcorp Marine Addition Could Finally Happen
Morning Views Asia: Anton Oilfield, Yankuang Energy Group, Yanlord Land

Golden Energy (GER SP): DSS Vote on 2 May; Appraiser Unconvincingly States that Offer Is Fair

The Dian Swastatika Sentosa (DSSA IJ)/DSS EGM to gain shareholder approval will be held on 2 May. The DSS appraiser (unsurprisingly) opines that the Widjaja family offer is fair.
The appraiser valued Golden Energy & Resources (GER SP) at S$0.980. However, the valuation approach is sorely lacking, particularly for the value excluding the Golden Energy Mines (GEMS IJ) stake.
Our SoTP valuation is S$1.29 per share, 32% above the revised offer. We continue to think another bump is required to get this deal done.

Quiddity Leaderboard Singapore’s STI Sep 23: Sembcorp Marine Addition Could Finally Happen

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.
In my previous insight (link), I mentioned Sembcorp Marine (SMM SP) could miss out on being added to the STI in March 2023 and that happened to be true.
However, based on the current data, Sembcorp Marine (SMM SP) could finally be added to the STI in September 2023.

Morning Views Asia: Anton Oilfield, Yankuang Energy Group, Yanlord Land

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.

Anton Oilfield
Yankuang Energy Group
Yanlord Land

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Mar 28

Daily Brief Australia: Origin Energy, Estia Health, Liontown Resources, United Malt Group Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk
Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed
Estia Health: Bain’s Non-Binding Proposal
Liontown Resources (LTR AU) Turns Down Albemarle’s A$2.5/Share Offer
United Malt (UMG AU): Malteries Soufflet’s Indicative A$5.00 Offer

Origin Energy (ORG AU): Brookfield/EIG Binding Offer; ACCC Approval the Key Risk

Origin Energy (ORG AU) has entered into a binding proposal with Brookfield/EIG. The offer terms are changed to A$5.78 and US$2.19 per share. The offer is worth A$8.912 excluding dividends.
Since the announcement of the first indicative offer on 10 November 2022, the average implied value of the revised offer is A$8.97 per share vs A$9.00 for the previous offer.
ACCC approval will be the key overhang and is expected to take around six months. At the last close, the gross spread to the offer is 9.1%.

Origin Energy And Brookfield/MidOcean Enter Into Scheme Deed

In the wake of the Aussie government’s gas price intervention, the Brookfield/MidOcean consortium reduced its Offer for Origin Energy (ORG AU) to ~A$8.90/share, down from A$9.00/share, on the 22 Feb.
At the time, Origin appeared supportive. Origin and Brookfield/MidOcean have now entered into a Scheme Implementation Deed.
Some subtle – and more favourable to all investors – changes have been made to terms. Pricing is attractive. ACCC is the big question mark.

Estia Health: Bain’s Non-Binding Proposal

Aged care provider Estia Health (EHE AU) has appointed UBS to advise on Bain Capital’s $3.00/share non-binding proposal.
The indicative Offer arrives a little over two months after Kerry Stokes-backed Seven Group Holdings (SVW AU) off-loaded its 10% stake at ~ $2.00/share.
Separately, Regal Fund announced it has taken a 7% stake.

Liontown Resources (LTR AU) Turns Down Albemarle’s A$2.5/Share Offer

Liontown Resources (LTR AU) has turned down an unsolicited, conditional and non-binding offer from Albemarle Corp (ALB US) to acquire all outstanding shares at A$2.50/share.
There is huge short interest on Liontown Resources (LTR AU) and the short covering could take the stock close to the A$2.50/share mark.
Liontown Resources (LTR AU) is up nearly 50% today and if the price stays around this level, the stock could be added to the S&P/ASX 100 Index in September.

United Malt (UMG AU): Malteries Soufflet’s Indicative A$5.00 Offer