Smartkarma Daily Briefs

Generac Holdings is a major energy technology player with a reasonable amount of debt on its balance sheet and showing ongoing growth in its commercial and industrial product categories.
Its weaker residential product sales have been a point of concern for the management.
Sales of C&I products have climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.

Vulcan Materials Company: Detailed Credit Analysis & Financial Strength Evaluation Report

Vulcan Materials Company is a well-known producer, distributor, and seller of construction materials.
The company did continue its reliable cash generation and careful capital deployment and its free cash flow conversion has been above 90% on average over the last four years.
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.

Warner Bros. Discovery Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

Discovery is a major global media company that is going through a turbulent phase.
In terms of direct-to-consumer, they are successfully moving towards their objective of realizing profitability in streaming, a significant and potent part of their business.
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.

Generac Holdings Inc.: Initiation of Coverage – Acquisition-Led Growth & Innovation

This is our first report on a renowned energy technology player, Generac Holdings.
Sales of C&I products climbed significantly, with strong core sales growth across all domestic channels and all overseas areas.
We initiate coverage on the stock of Generac Holdings Inc. with a ‘Hold’ rating.

FMC Corporation: Detailed Credit Analysis & Financial Strength Evaluation Report

FMC Corporation is a major agricultural sciences player in the U.S.
The company has been witnessing high volume growth and its aggressive pricing has helped build a strong financial position.
Agricultural markets remain strong with high commodity prices, expanding cropland, and optimistic grower sentiment.

O’Reilly Automotive Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

O’Reilly Automotive, Inc is one of the largest retailers of automobile aftermarket parts in the U.S.
The company has consistently reported strong sales volumes and the management claims that the core fundamental demand drivers are still strong, which supports the health of the automotive aftermarket.
DIY and professional businesses have showed strength across 2022 and their high average ticket increase contributed to the improved performance in their DIY division, which accelerated on a 1, 2, and 3-year comparable store sales growth basis.

O’Reilly Automotive Inc.: Initiation of Coverage – Business Strategy

This is our first report on O’Reilly Automotive, Inc., one of the largest retailers of automobile aftermarket parts in the U.S.
O’Reilly Automotive had a great last quarter and ended 2022 with an all-around beat.
The company reported strong sales volumes and the management claims that the core fundamental demand drivers are still strong, which supports the health of the automotive aftermarket.

Parker-Hannifin Corporation: Detailed Credit Analysis & Financial Strength Evaluation Report

Parker-Hannifin Corporation is among the market leader in motion and control technologies across the globe.
Parker-Hannifin has also benefited from a positive net impact of the aircraft Wheel and Brake sale and the Meggitt acquisition.
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.

Rockwell Automation Inc.: Detailed Credit Analysis & Financial Strength Evaluation Report

By Shifara Samsudeen, ACMA, CGMA

Rockwell Automation is a major provider of digital transformation and industrial automation solutions across the world.
Its backlog orders continue to increased sequentially with order cancellation rates staying in the low single digits as per recent results.
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 22

Daily Brief Indonesia: GoTo, PT Trimegah Bangun Persada Tbk (Harita Nickel) and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

GoTo: Ambitious Profit Target to Further Stall Growth
Harita Nickel IPO: Valuation Insights

GoTo: Ambitious Profit Target to Further Stall Growth

GoTo (GOTO IJ) reported 4Q2022 and full-year 2022 results yesterday. Gross revenue increased 18.0% YoY to IDR6.3trn while adjusted EBITDA losses declined to IDR3.1trn vs IDR6.5trn in 4Q2021.
However, adjusted EBITDA as % of net revenues has increased considerably compared to 3Q2022 due to increase in variable costs.
GoTo’s ambitious profitability target would prevent the company from fully exploiting growth opportunities which will lead to further decline in growth rates.

Harita Nickel IPO: Valuation Insights

By Arun George

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ), an Indonesian nickel play, has launched an IDX IPO to raise US$1 billion. Book building ends on 24 March.
We previously discussed the IPO in Harita Nickel IPO: The Bull Case and Harita Nickel IPO: The Bear Case.
In this note, we discuss valuation. Our analysis suggests that Harita is fairly valued at the IPO IPO price range of IDR1,220-1,250 per share. We would participate in the IPO.

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Mar 22

Daily Brief Australia: Bellevue Gold, Mincor Resources NL, Neuren Pharmaceuticals and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

S&P/ASX Index Rebalance Preview: Changes from Now to June
Mincor Resources (MCR AU): Wyloo’s A$1.40 Unconditional Takeover Offer
Quiddity Leaderboard-ASX Jun 23: OZ Minerals Replacements and Other Changes
Mincor: Twiggy’s On-Market Takeover
Neuren Pharmaceuticals (NEU AU): It’s Not Too Late to Join the Bandwagon; More Stream Is Still Left

S&P/ASX Index Rebalance Preview: Changes from Now to June

There could be an addition to the S&P/ASX 100 Index and S&P/ASX 200 (AS51 INDEX) in April following OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU).
Then there could be another change for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in June.
Passive trackers will need to trade between 4.5-18 days of ADV on the potential adds/ deletes. Short interest has started to increase on a couple of stocks.

Mincor Resources (MCR AU): Wyloo’s A$1.40 Unconditional Takeover Offer

By Arun George

Wyloo has launched an unconditional off-market takeover bid for Mincor Resources NL (MCR AU) at A$1.40 per share, a 34.6% premium to the undisturbed price. The offer opens 5 April.
In certain aspects the offer is attractive. The offer values Mincor at a premium to peer and precedent transaction EV/Resource and EV/Reserve multiples.
However, the offer is at a discount to recent share prices and price targets. Rival bidders (BHP Group Ltd (BHP AU) or IGO Ltd (IGO AU)) could also emerge.

Quiddity Leaderboard-ASX Jun 23: OZ Minerals Replacements and Other Changes

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for ASX 200, 100, 50, and 20 in the run up to the June 2023 Rebalance.
OZ Minerals Ltd (OZL AU) upcoming deletion in April 2023 could cause a couple of intra-review replacements.
Separately, there could be one more change in the ASX 200 index in the June 2023 review.

Mincor: Twiggy’s On-Market Takeover

Nickel explorer Mincor Resources NL (MCR AU)‘s board urges shareholders to take no action in response to the on-market takeover from Andrew Forrest’s backed Wyloo Metals.
Wyloo is offering A$1.40/share. The offer period commences on the 5 April and runs until the 8 May – unless extended. However, Wyloo’s broker is already standing in the market.
Wyloo, together with associates, control 19.87% of the voting power in Mincor. Currently trading 5.7% through terms

Neuren Pharmaceuticals (NEU AU): It’s Not Too Late to Join the Bandwagon; More Stream Is Still Left

By Tina Banerjee

Neuren Pharmaceuticals (NEU AU)‘s lead product Daybue (trofinetide) has obtained FDA approval for the treatment of Rett syndrome in adult and pediatric patients two years of age and older.
Daybue is expected to be available in the US in April, 2023. Neuren is eligible to receive royalties on net sales of trofinetide in North America, plus milestone payments.
Geography expansion of trofinetide (mainly European approval and launch), label expansion possibility of trofinetide, and Neuren’s pipeline progress can act as potential upside catalysts for the stock.

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Mar 22

Daily Brief South Korea: S.M.Entertainment Co, Korea Kolmar and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

S.M. Entertainment: Proration Musings
Korea Kolmar: When Will People in Korea Stop Wearing Masks?

S.M. Entertainment: Proration Musings

After HYBE (352820 KS) conceded to Kakao Corp (035720 KS) earlier this month, S.M.Entertainment Co (041510 KS)‘s shares have declined 23%.
Kakao’s Partial Offer of ₩150,000/share closes on the 26 March.
Unadjusted proration is 36.8%, conservatively rising to 48.5%. It may settle at 61% if HYBE maintains its position – but that is probably a tad optimistic.

Korea Kolmar: When Will People in Korea Stop Wearing Masks?

By Douglas Kim

The Korean government removed mask mandates for public transportation in Korea as of Monday, 20 March including in buses, taxis, and subways.
There are four major reasons why it will take much longer time for most people in Korea to stop wearing masks.
As millions of people stop wearing masks in the coming year, there will be clear, visible higher demand for cosmetics, which should benefit companies such as Korea Kolmar.

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Mar 22

Daily Brief India: Indus Towers, Vedanta Resources and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

India: AMFI Stock Reclassification Preview (June 2023)
Morning Views Asia: Sino-Ocean Service, Vedanta Resources

India: AMFI Stock Reclassification Preview (June 2023)

Nearly halfway through the review period, we see 10 stocks moving from MidCap to LargeCap and vice versa, and 9 stocks moving from SmallCap to MidCap and vice versa.
Financials are poised to be the biggest gainers in the reshuffle with 6 stocks moving from MidCap to LargeCap and 5 stocks moving from SmallCap to MidCap.
Over the last 6 months, stocks expected to migrate upward have outperformed stocks that are expected to migrate downward., though there has been a downward drift this year.

Morning Views Asia: Sino-Ocean Service, 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.

Sino-Ocean Service
Vedanta Resources

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Mar 22

Daily Brief Japan: Tokyo Stock Exchange Tokyo Price Index Topix, Mitsubishi Motors and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

The BIG March 2023 “Wednesday Thursday Trade”
Mitsubishi Motors (7211) | Modelling the Mid Term Plan
Who Is More Culpable, “Independent” Directors or or Domestic Institutions that Bias To the Company?

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

Mitsubishi Motors (7211) | Modelling the Mid Term Plan

By Mark Chadwick

The stock is down sharply over the past few weeks as investors price in higher interest rates and weaker spending on durables
Mitsubishi recently unveiled its mid-term plan and further details on its electrification strategy
If management can hit its targets, the stock would have significant upside. We have our doubts

Who Is More Culpable, “Independent” Directors or or Domestic Institutions that Bias To the Company?

By Aki Matsumoto

Surprisingly, about half of shareholders did not vote in favor of the shareholder proposal to remove outside directors who implemented practices that were problematic in terms of corporate governance.
Domestic institutional investors are still unwilling to oppose the company even when, as in this case, there is a clear corporate governance problem with the company.
It’s extremely difficult for these outside directors to fully fulfill their responsibilities as independent directors on a board composed of “independent directors” who are friends brought in by top management.

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Mar 22

Most Read: Meituan, Tokyo Stock Exchange Tokyo Price Index Topix, Hanwha Aerospace, Seoul Broadcasting System, China Telecom, S.M.Entertainment Co, Bellevue Gold, Ace Technologies, PT Trimegah Bangun Persada Tbk (Harita Nickel) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week
The BIG March 2023 “Wednesday Thursday Trade”
MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest
Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch
SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month
S.M. Entertainment: Proration Musings
S&P/ASX Index Rebalance Preview: Changes from Now to June
Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023
Harita Nickel IPO Valuation – Capacity Ramp Ups Will Pay Dividends in the Long Run
Good Morning Japan |SPX Reclaims 4000! NUGGET: Asahi Kasei-M&A Gone Bad, Writedown, Struggles Remain

Meituan (3690 HK) – US$16bn of Shares To Be Delivered This Week

In early 2022, Tencent (700 HK) made clear it was on a divestment path – disposing of investments able to support themselves – possibly “obliged” after 2021’s China internet mess.
In August, Reuters suggested Meituan (3690 HK) was next. Tencent denied it, but in November with Q3 earnings, announced a January 2023 distribution with March 2023 settlement.
US$16bn of Meituan shares get delivered on 24 March 2023 – this Friday. That’s a lot. But this time is different than last time.

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

MSCI Korea May QCIR: Potential Changes, Impact, Positioning & Short Interest

We currently forecast 2 potential inclusions and 3 potential deletions for the MSCI Korea Index at the May QCIR. That will change over the next few weeks till cutoff date.
Passive trackers are estimated to buy between 0.6-3.3 days of ADV on the potential inclusions while selling between 6.9-14.2 days of ADV on the potential deletions.
Short interest on the potential deletions has moved significantly higher in the last few weeks and there will be pre-positioning on the stocks.

Korean Government’s Official Statement on Foreign Ownership Limits & The Names Still to Watch

By Sanghyun Park

Hankyung exclusively reported that the Korean regulators were considering abolishing the foreign ownership limit. This morning, the Ministry of Economy and Finance released a statement that this report is untrue.
Nevertheless, circumstantially, given the current government’s all-out effort to make it to MSCI Developed Market status, there is a high possibility that it will resurface not too far from now.
Four out of the 33 foreign ownership-restricted stocks will likely be immediately affected: SKT, KT, and Korea Gas (MSCI inclusion) and SBS (flow improvement).

SSE50 Index Rebalance Preview: BIG Outperformance Over the Last Month

Nearly 90% through the review period, we see 6 potential adds and 5 potential deletes in June. However, there can be a maximum of 5 changes at a rebalance.
We estimate a one-way turnover of 5.07% at the June rebalance leading to a one-way trade of CNY 3.97bn. Index arb activity could add to the impact on the stocks.
The potential adds have outperformed the potential deletes by 17% over the last month and by 21% over the last two months.

S.M. Entertainment: Proration Musings

After HYBE (352820 KS) conceded to Kakao Corp (035720 KS) earlier this month, S.M.Entertainment Co (041510 KS)‘s shares have declined 23%.
Kakao’s Partial Offer of ₩150,000/share closes on the 26 March.
Unadjusted proration is 36.8%, conservatively rising to 48.5%. It may settle at 61% if HYBE maintains its position – but that is probably a tad optimistic.

S&P/ASX Index Rebalance Preview: Changes from Now to June

There could be an addition to the S&P/ASX 100 Index and S&P/ASX 200 (AS51 INDEX) in April following OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU).
Then there could be another change for the S&P/ASX 200 (AS51 INDEX) at the regular rebalance in June.
Passive trackers will need to trade between 4.5-18 days of ADV on the potential adds/ deletes. Short interest has started to increase on a couple of stocks.

Potential Inclusions & Exclusions in KOSDAQ 150 Rebalance in May 2023

By Douglas Kim

In this insight, we discuss the potential inclusions and exclusions of the upcoming KOSDAQ 150 rebalance in May 2023.
The next round of KOSDAQ 150 rebalance will be announced in May and it will be effective as of end of May 2023.
Typically, the potential inclusions and exclusions to KOSDAQ 150 make their biggest moves in the one to three months prior to the rebalance announcements.

Harita Nickel IPO Valuation – Capacity Ramp Ups Will Pay Dividends in the Long Run

By Clarence Chu

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) is looking to raise about US$650m in its Indonesian IPO.
PT Trimegah Bangun Persada Tbk (Harita Nickel, HN) is a vertically integrated pure-play nickel company operating on Obi Island, Indonesia.
In this note, we will look at our earnings assumptions, and share our thoughts on valuation.

Good Morning Japan |SPX Reclaims 4000! NUGGET: Asahi Kasei-M&A Gone Bad, Writedown, Struggles Remain

By Mark Chadwick

OVERSEAS. SPX reclaims 4000 level with 2nd day of gains; 8/11 SPX sectors up as VIX collapses; Fed Decision Day on Wed-Expect No surprises; INTEL headwinds on China curbs
JAPAN. NKY Futs +0.6% vs Cash; USDJPY 132. 4; Japan set to rally after the Spring transition break;US accepts Japan’s EV subsidy appeal=+ve auto parts; More inflation support from govt.
NUGGET. Asahi Kasai – M&A Gone Bad, Writedown, Struggles Remain. Future profitability of the LiB Separator business in question.

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Mar 22

Daily Brief Financials: Onewo and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Onewo Space-Tech IPO Lock-Up – Company, Parent and Cornerstones Could Eventually Sell

Onewo Space-Tech IPO Lock-Up – Company, Parent and Cornerstones Could Eventually Sell

By Sumeet Singh

Onewo (2602 HK) (OST) had raised around US$730m in its Hong Kong IPO in Sep 2022. Its six-month lockup is set to expire soon.
OST is a property management service provider in China, primarily owned by China Vanke (H) (2202 HK).
In this note, we will talk about the lock-up dynamics and updates since our last note.

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Mar 22

Daily Brief Consumer: Tokyo Stock Exchange Tokyo Price Index Topix, S.M.Entertainment Co, International Housewares Retail, Del Monte Pacific, Mitsubishi Motors, Korea Kolmar, Pinduoduo, Taste Gourmet, iShares Russell 2000 ETF, Fu Shou Yuan and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

The BIG March 2023 “Wednesday Thursday Trade”
S.M. Entertainment: Proration Musings
1373 HK: Value Play 8x PE, Dividend Yield ~10%, 20% of Mkt Cap in Cash
Del Monte Pacific (DELM SP): Deep in Debt, Slipping Margins, Rising Rates – Perfect Storm?
Mitsubishi Motors (7211) | Modelling the Mid Term Plan
Korea Kolmar: When Will People in Korea Stop Wearing Masks?
Pinduoduo: Cost Cutting Wearing Out, Margins Heading Towards Our Steady State Target of 6-7%
Shortlist of High Conviction Ideas – Income, Value, Margin of Safety
Russell 2000 (IWM) Testing $170; Downgrading Energy; 10-Yr Treasury Yield Testing 3.4% Support
Fu Shou Yuan (1448.HK) – 2022 Results Missed Expectations, but the Outlook Remains Positive

The BIG March 2023 “Wednesday Thursday Trade”

Every year it’s the same trade. But it isn’t really. But it kinda is. This year it is Wednesday and Thursday. There are risks to the analysis – notably allocation.
But, ceteris paribus, it is still possibly a ¥1,580,876,450,407 buying spree to take place on one day into the close later this month. Or something close to it.
And for a two-day period, over the last ten years, the average return is 1.60% on these two days with a 9:1 win ratio. Lots of angles here.

S.M. Entertainment: Proration Musings