Smartkarma Daily Briefs

The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.

Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)

SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.

Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal

Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M.
There have been some noises about cost-cutting, which could be key to an early return to profitability.
Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.

Mincor: Did Twiggy Thwart BHP Offtake?

Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
Mincor delivers 100% of its ore to BHP. It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance.
Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.

Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes

After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.
Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale.

Hong Kong CEO & Director Dealings (30 Mar): Tian An, CSPC Pharmaceutical, Li Auto

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
Stocks mentioned include Tian An China Investment (28 HK), CSPC Pharmaceutical Group (1093 HK), and Li Auto (2015 HK).

Quiddity Leaderboard JPX-Nikkei 400: End-Mar 2023

By Janaghan Jeyakumar, CFA

JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-March 2023.

SK Inc: Shares Cancellation & Updated NAV Valuation

On 29 March, SK Inc announced that it will cancel 0.95 million in treasury shares, which represents 1.3% of the company’s outstanding shares and 5% of treasury shares.
One of the concerns about SK Inc in the past several weeks has been lower DPS of 5,000 won in 2022 versus DPS of 8,000 won in 2021.
Our base case valuation of SK Inc is NAV of 19.7 trillion won (NAV per share of 266,113 won), representing a 54% upside from current levels.

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Mar 31

Most Read: Toshiba Corp, Japan Airlines, Soulbrain, Alibaba Group, SK Innovation, Rakuten Bank, Sembcorp Marine, Mincor Resources NL, Samsung Sds and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toshiba – 3D Stake Reduction Reduces and Increases Risk
Nikkei 225 March 2023 Rebal Tomorrow
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown
Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)
Rakuten Bank IPO – Thoughts on Valuation
Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal
Mincor: Did Twiggy Thwart BHP Offtake?
Samsung SDS Placement – Well Flagged and the Last One Did Well
Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes

Toshiba – 3D Stake Reduction Reduces and Increases Risk

By Mio Kato

An EDINET filing yesterday revealed that 3D Investment Partners had reduced their stake in Toshiba from 7.2% to 4.9%.
This significantly derisks the possibility of 3D becoming a forced seller and alters the risk reward here.
Nevertheless, it is still difficult to be especially bullish here given uncertainty regarding the tender vote is now a little higher.

Nikkei 225 March 2023 Rebal Tomorrow

The Nikkei 225 March 2023 Rebalance is 31 March at the close. There is about US$1.75bn of funding to sell against US$1.85bn of 3 names to buy.
The impact on the Buy Side is middling at 3, 6.4, and 6.9 days of ADV to buy. The three DELETES are larger on average but they are all smallcaps.
One trade – long an ADD vs a Peer – is still worth doing. Indexers buy the stock, it goes into a dark closet, and never comes out.

Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea

Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

Alibaba’s Sum of the Parts Valuation: Why the Initial Excitement May Be Overblown

By Oshadhi Kumarasiri

Alibaba Group (9988 HK)‘s shares rallied after announcing the business split, with investors believing that the sum of parts could be worth more than the current valuation.
Our analysis shows that NAV is only 12% higher than the current valuation, contrary to the idea of a significantly higher sum of parts value.
Therefore, we would be looking to short Alibaba (ADR) (BABA US) yet again once this initial excitement settles.

Detailing & Assessing SK Innovation’s Exchange Offer with SK On Shares as Consideration (10% of SO)

SK Innovation will buy back its shares, worth about 10% of the total issued shares, through a tender offer and offer SK On stocks as consideration instead of cash.
Even if there is allocation risk, as only 10% of SO are targeted, expectations that pricing discrepancy can sufficiently offset this should be the factor driving up the price today.
Additional trading openings? This depends on the disparity widening between the intrinsic value of SK On and the exchange ratio.

Rakuten Bank IPO – Thoughts on Valuation

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we provide our thoughts on valuation.

Sembcorp Marine (SMM SP) JVs for S$8.6bn Multi-Year Offshore HVDC Converter Platforms Deal

Sembcorp Marine (SMM SP) is a month in to its new existence as a business more than twice as large as its old business after absorbing Keppel O&M.
There have been some noises about cost-cutting, which could be key to an early return to profitability.
Today, mid-day, we get news of the biggest ever offshore renewables contract win in a JV with General Electric – a deal worth €6bn (SGD 8.64bn). It’s big.

Mincor: Did Twiggy Thwart BHP Offtake?

Earlier today (30 March), Mincor Resources NL (MCR AU) said BHP Group (BHP AU) would not agree to amend off-take agreement specifications, and will no longer accept lower-quality ore.
Mincor delivers 100% of its ore to BHP. It will continue to deliver on-specification ore to BHP, but has withdrawn its forward guidance.
Shares rolled over 5.7% to close at A$1.42/share, above Wyloo’s unconditional A$1.40/share. Offer.

Samsung SDS Placement – Well Flagged and the Last One Did Well

By Clarence Chu

Lee Seo-Hyun, via KEB Hana Bank, is looking to sell her entire stake in Samsung Sds (018260 KS) to raise US$132m.
While a relatively large one to digest, the deal is very flagged.
In this note, we will run the deal through our ECM framework and talk about the recent updates.

Another Block Deal Sale of Samsung SDS by the Lee Family to Pay for Inheritance Taxes

After the market close today, Samsung Sds announced a block deal of 1.51 million shares at a discount range of 3.5% to 4.5% to the closing price of 117,900 won.
Lee Seo-Hyun, the daughter of the late Samsung Chairman Lee Kun-Hee, is selling her 1.51 million shares of Samsung SDS (1.95% of oustanding shares) in a block deal.
The company faces continued overhang on additional stake sale due to the inheritance tax issue in the next 2-3 years. As a result, we would avoid the block deal sale.

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Mar 30

Most Read: Nitori Holdings, Meituan, KT Corp, Aag Energy Holdings, Rakuten Bank, DGB Financial Group, Hang Seng China Enterprises Index, Soulbrain, Alibaba (ADR) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know
KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion
AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not
Rakuten Bank IPO – Peer Comparison – SBI Sumishin or Kakaobank?
Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision
HSCEI Dividend Futures: Nearing the Pointy End of Results Season
AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge
Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea
Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure

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.

Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know

Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday.
That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim.
The data tells us some things. It does not tell us much else. Be careful of the details.

KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion

KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

AAG Energy (2686 HK): Scheme Doc Out. IFA Says Fair. It Is Not

That was a quick turnaround. Two days after the pre-conditions were satisfied, the Scheme Document for Xinjiang Xintai (603393 CH)‘s privatisation of AAG Energy (2686 HK) has been dispatched.
The EGM and Court Meeting will take place on the 27 April, with payment, assuming all resolutions get up, on (or before) the 1 June.
The Independent Financial Adviser, Somerley, considers the terms of the Scheme “fair and reasonable.” However, their analysis clearly shows this is not the case.

Rakuten Bank IPO – Peer Comparison – SBI Sumishin or Kakaobank?

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

Clarifying Market’s Inaccurate Constituent Change Forecast in K200 Rebalancing with GICS Revision

DGB Financial Group’s market cap makes it virtually impossible to get deleted even with Kakao Pay’s GICS change in this June rebalancing.
It’s unclear whether this has damaged the price impact of K200 inclusion. Nevertheless, the intensity of the pre-rebalancing flow wasn’t aggressive, possibly due to the combination of factors, including this.
This suggests the possibility of an intense price impact resulting from a more concentrated flow right before the effective date, so we should prepare a setup that considers this.

HSCEI Dividend Futures: Nearing the Pointy End of Results Season

The HSCEI 2023 dividend futures have dropped over the last week as results have trickled in and some of the larger dividend payers have cut their final dividends.
Over 50% of the DIPS are confirmed now and that number will increase significantly over the next couple of days as the remaining companies announce their final dividends.
From our estimates, just over 80% of the DIPS will be confirmed by tomorrow though over 66% of the total DIPS will have CNYHKD risk attached to it.

AAG Energy (2686 HK): Rushed Scheme Document Points to a Vote on a Knife Edge

By Arun George

Aag Energy Holdings (2686 HK) scheme document is out with the court meeting scheduled for 27 April. The IFA considers the HK$1.85 offer to be fair and reasonable.
The IFA’s conclusion is dubious as the contents of the report could easily have come to the opposite conclusion. The quick despatch of the scheme document is worrying.
The weak IFA report will further annoy minorities and push more towards the NO camp. The vote is on a knife edge which is reflected in the current 13.5% spread.

Introducing Another Long Short Basket Trading Event with Semicon ETF Rebalancing in Korea

Mirae Asset TIGER Fn Semiconductor TOP 10 ETF saw a rapid increase in AUM in a short period. Currently, AUM has reached 126 billion won.
Compared to the flow size, the price movement magnitude was substantial. What is particularly important is that the correlation between weight change direction and price impact was quite significant.
Considering Long Short basket trading based on the weight change direction on a day trading window seems worthwhile.

Alibaba: Business Unit Split Receives Positive Response, Overshadowing Lingering Regulatory Pressure

By Oshadhi Kumarasiri

Yesterday, Alibaba (ADR) (BABA US) announced its intention to divide its business into six distinct units, each with its own CEO and independent board of directors.
Tying this with Jack Ma’s rare public appearance in China since the beginning of the tech crackdown, people are speculating that the tech crackdown is over.
However, if you look at this news more objectively, this split indicates nothing but the tightening of the regulatory framework.

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Mar 29

Daily Brief United States: Yum China Holdings, Inc, Intuit Inc, Iqvia Holdings, First Citizens Bcshs Cl A, MillerKnoll, Roper Technologies, Martin Marietta Materials and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Yum China: Looking Delicious with Record Profits Expected in 1Q23 and Potential for Further Growth
Intuit – Strong Pricing Power Is Keeping It Together
IQVIA Holdings Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report
First Citizens: Additional Credit Risk Might Force Its Stock Price Back Down
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
Martin Marietta Materials Inc.: Initiation of Coverage – Business Strategy & Recent Developments
IQVIA Holdings Inc.: Initiation of Coverage – Recent Acquisitions & Key Drivers
Martin Marietta Materials Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Yum China: Looking Delicious with Record Profits Expected in 1Q23 and Potential for Further Growth

By Oshadhi Kumarasiri

Chinese restaurant sector could see 15% YoY revenue growth in Q1 2023, as Total Retail Sales of Meals in China rose 16.4% YoY during Jan-Feb 2023.
Yum China Holdings Inc (9987 HK)‘s 1Q23 OP may reach a record high of $350m, and annual profitability is expected to double as restaurant footfall recovers.
We suggest buying Yum China for potential multiple expansion due to rapid profitability growth.

Intuit – Strong Pricing Power Is Keeping It Together

By Vladimir Dimitrov, CFA

Intuit Inc.’s share price is now trailing the tech sector.
Intuit investors relying on Non-GAAP figures should be careful as there are significant risks involved, according to the company’s share price.
The company’s legacy brands are the key driver behind revenue growth and profitability, says Intuit.

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

By Pearl Gray Equity and Research

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.

First Citizens: Additional Credit Risk Might Force Its Stock Price Back Down

First Citizens BancShares, Inc.’s acquisition of SVB Financial Group’s debt portfolio might be lucrative in the long run due to various synergetic and financial reasons.
First Citizens’ stock was relatively undervalued prior to its latest stock surge.
The bank’s stock is overvalued on a technical basis.

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.

Martin Marietta Materials Inc.: Initiation of Coverage – Business Strategy & Recent Developments

This is our first report on Martin Marietta Materials, a major global manufacturer of heavy construction materials and aggregates.
The company delivered a mixed performance in the quarter and surpassed the revenue expectations with decent growth.
As pricing growth dramatically accelerated, bad weather and a number of large Martin Marietta geographies had a negative impact on product delivery.

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.

Martin Marietta Materials Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

This is our first report on Martin Marietta Materials, a major global manufacturer of heavy construction materials and aggregates.
As pricing growth dramatically accelerated, bad weather and a number of large Martin Marietta geographies had a negative impact on product delivery.
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.

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Mar 29

Daily Brief India: Pokarna Ltd, Vedanta Resources and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Pokarna Ltd- Forensic Analysis
Morning Views Asia: ENN Natural Gas, Japfa Comfeed Indonesia, Vedanta Resources

Pokarna Ltd- Forensic Analysis

By Nitin Mangal

Pokarna Ltd (POKR IN) is principally engaged in the business of quarrying, manufacturing & processing and selling of Granite & manufacturing and selling of Apparel under the brand name ‘Stanza’.
One of the key audit matters related to IT systems risk, and these are reflected by some of the accounting misclassifications.
Other forensic concerns include high cost of debt on and ICDs and director loans, added WC burden, inventory valuation, etc.

Morning Views Asia: ENN Natural Gas, Japfa Comfeed Indonesia, Vedanta Resources

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

ENN Natural Gas
Japfa Comfeed Indonesia
Vedanta Resources

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Mar 29

Daily Brief China: Meituan, Aag Energy Holdings, Sunpower Group, Kunlun Energy, Leoch International Technology, Shenzhen International, West China Cement, Guangzhou Automobile Group, Growatt Technology, CK Asset Holdings and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know
AAG Energy (2686 HK): Pre-Cons Done. Still A Rubbish Offer
Sunpower: Extension of CB’s Puts Focus Back on GI Business Fundamentals
Kunlun Energy (135 HK): Rock Solid as Usual
Leoch [842]: +225% EPS, 5G Play, 4x P/E, 6% Dividend, Inflection Point
Shenzhen Intl (152 HK): Don’t Look Back, Look Forward
West China Cement – Earnings Flash – FY 2022 Results – Lucror Analytics
Guangzhou Automobile Group: Adjusting for Bonus Shares
Growatt Technology: High-Profile IPO Preview and Valuation Analysis
CK Asset Holdings: Active Capital Management Deserves Re-Rating

Meituan (3690 HK) Distro – Prosus Shares Hit CCASS. What We Know And What We Don’t Know

Meituan (3690 HK) shares hit accounts on Friday, they showed up in the CCASS data. All but about 2.3mm shares worth. Another 248.8mm shares showed up on Monday.
That was the Prosus stake, which was expected as of November 2022 (evidently, they did not convert more Tencent shares in the interim.
The data tells us some things. It does not tell us much else. Be careful of the details.

AAG Energy (2686 HK): Pre-Cons Done. Still A Rubbish Offer

Back on the 17 February, AAG Energy Holdings (2686 HK) announced an underwhelming Offer of HK$1.85/share (declared final) by way of a Scheme from major shareholder Xinjiang Xintai (603393 CH).
Yesterday, Xinjiang Xintai shareholders approved the proposal. This was expected – it’s a total bargain.
AAG shareholders will likely get to vote on the Scheme in early May. They should vote it down.

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

Kunlun Energy (135 HK): Rock Solid as Usual

By Osbert Tang, CFA

Core earnings of Kunlun Energy (135 HK) rose 25.2% in FY22, providing solid evidence for its strength against peers. We are delighted to see dollar margin even expanded 4.1%.
Pace of new project addition has not weakened as it secured 25 new projects in FY22. Collectively, they will increase sales volume by 3.2bn cu.m., 7% of FY22 volume.
Net cash of Rmb13.6bn equals 28% of share price, making 8.9% ROE look decent. Market earnings forecast is too low; and even so, it trades on just 7.2x FY23 PER.

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.

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.

West China Cement – Earnings Flash – FY 2022 Results – Lucror Analytics

By Leonard Law, CFA

West China Cement’s (WCC) FY 2022 results were overall acceptable. The company reported slightly weaker earnings for its core business in Mainland China, as lower sales volumes (amid COVID-19-related disruptions and the subdued real estate sector) and increased raw material costs more than offset surprisingly positive ASP growth.

Importantly, WCC’s expansion in Africa is taking shape, as its plant in Mozambique has ramped up quickly and achieved high capacity utilisation in the first two years of operations. The company’s plants in Africa enjoy substantially higher ASP than those in China, which should support the overall gross margin.

We expect WCC’s FCF to remain deeply negative in FY 2023, which will lead to a further weakening of its net leverage (2.6x at FYE 2022). We believe FCF may turn positive in FY 2024, when the bulk of the company’s new projects in Africa are due to complete and commence operations.

Guangzhou Automobile Group: Adjusting for Bonus Shares

By BOS Research

The company declared bonus shares of 40% during the annual results announcement in Mar, with shareholders issued 4 shares for every 10 shares by way of conversion of capital reserve.
The stock went ex-dividend on 1 June 2018.
Primarily as a result, we have adjusted our target price for the stock to HKD11.3 (from HKD16.3).

Growatt Technology: High-Profile IPO Preview and Valuation Analysis

By Andrei Zakharov

Growatt Technology (1833969D CH) , one of the largest providers of PV and storage inverters globally, plans to go public and may seek $500M+ through Hong Kong IPO.
I view Growatt Technology (1833969D CH) as a high-quality growth company with best-in-class products and solutions, and see significant opportunity in international markets.
The company is well-positioned to benefit from fast-growing PV inverter and energy storage markets. I am bullish on Growatt Technology IPO and like long-term energy storage story.

CK Asset Holdings: Active Capital Management Deserves Re-Rating

By BOS Research

Core profits +13% y/y due to contribution from newly acquired infrastructure & utility business
Recurring income +38%, growing ahead of management target and supporting dividend growth
Strong balance sheet support further share buyback and acquisition.

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Mar 29

Daily Brief Singapore: Golden Energy & Resources and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

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

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… 👀

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Mar 29

Daily Brief Australia: Liontown Resources, United Malt Group Ltd, Aft Pharmaceuticals and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Liontown (LTR AU) Rejects Albemarle’s Advances
Liontown Resources (LTR AU): A Bump to Albermale’s A$2.50 Offer Is Justifiable
United Malt: Malteries Soufflet’s Non-Binding Proposal
AFT Pharmaceuticals – Maxigesic international momentum continues

Liontown (LTR AU) Rejects Albemarle’s Advances

Lithium play Liontown Resources (LTR AU) has now thrice rejected Albemarle Corp (ALB US)‘s proposals.
Liontown has labeled Albermarle’s third bid of A$2.50/share as opportunistic.
Albemarle has picked up 2.2% in Liontown. But that is dwarfed by Tim Goyder’s (chairman)’s 15% stake, who is not engaged at the current bid price.

Liontown Resources (LTR AU): A Bump to Albermale’s A$2.50 Offer Is Justifiable

By Arun George

Liontown Resources (LTR AU) has rejected an unsolicited non-binding privatisation proposal from Albemarle Corp (ALB US) at A$2.50 per share, which is a 63.9% premium to the undisturbed price (27 March).
The offer is attractive in comparison to peer multiples and historical share prices. Liontown suggests that the offer does not appropriately value the Kathleen Valley Lithium Project.
A bump to the Board’s desired A$3.00 offer is justifiable based on the Kathleen Valley NPV sensitivity analysis related to spodumene prices. Albemarle remains willing to engage.

United Malt: Malteries Soufflet’s Non-Binding Proposal

United Malt Group Ltd (UMG AU) has granted privately-held Fench rival Malteries Soufflet due diligence on an exclusive basis after receiving an indicative Offer by way of a Scheme.
Malteries Soufflet’s non-binding proposal for the Graincorp Ltd A (GNC AU)-spin-off of $5.00/share is a 45.3% premium to undisturbed.
The Offer will be subject to FIRB approval. Malteries Soufflet and United Malt are the second and fourth-largest maltsters in the world.

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 29

Daily Brief Thailand: Thai Life Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Thailand

In today’s briefing:

Quiddity Leaderboard for SET50 Jun 23 Review: TLI ADD & JMART DEL Likely; BJC Is a Question Mark

Quiddity Leaderboard for SET50 Jun 23 Review: TLI ADD & JMART DEL Likely; BJC Is a Question Mark

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential ADDs/DELs for the SET50 index rebalance in June 2023.
Based on the latest available data, I expect 2 ADDs/DELs but there are couple of names close to the border and final rankings could change with changes in share prices.
The three-month reference period used for the June 2023 rebalance will end on 31st May 2022.

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Mar 29

Daily Brief South Korea: Hugel Inc, KT Corp, Cosmochemical, CUBox and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea FSC Officially Eases a Major Hurdle for a Tender Offer: Names to Watch
KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion
Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023
CUBox IPO Preview

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

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

KT Corp (030200 KS): Foreign Room Increase Could Mean MSCI Inclusion

KT Corp (030200 KS) missed out on inclusion to the MSCI Korea Index at the May 2022 SAIR following a drop in foreign room below 15%.
Bottoming out at 6.5%, foreign room has started to increase again. The last data point shows foreign room at 14.43%, just shy of the 15% threshold for inclusion eligibility.
If foreign room increases above 15% in the next three weeks, KT Corp (030200 KS) will be added to the MSCI Korea Index at the May QCIR.

Additional Potential Inclusions in KOSPI 200 Rebalance in May 2023

In this insight, we discuss the potential new inclusions in KOSPI 200 rebalance in May 2023.
The five stocks that are potential inclusions in KOSPI 200 rebalance in May 2023 include Kumyang, Cosmo Chemical, Dentium, Jeju Air, and Youlchon Chemical.
Kumyang and Cosmo Chemical are up on average 177% YTD. We would not chase these two stocks as their share prices have already risen considerably.

CUBox IPO Preview