Smartkarma Daily Briefs

Blibli (1437710D IJ) priced its IPO at IDR450 per share to raise net proceeds of US$508 million. The shares will start trading on 8 November.
We have previously discussed the IPO in Blibli IPO: The Bull Case, Blibli IPO: The Bear Case, Blibli Vs Tokopedia Vs Bukalapak Vs Lazada Vs Shopee, Blibli IPO: Valuation Insights.
Despite peer multiple derating, the IPO price remains unattractive compared to global and Asian-focused e-commerce peers.

I-Tail Corporation IPO: The Bull Case

I-Tail (ITC TB), Thai Union Group (TU TB)’s pet care division, has started pre-marketing an up to US$600 million SET IPO, according to press reports.
I-Tail is one of the largest original equipment manufacturers (OEMs) for wet cat & dog food in Asia, according to Frost & Sullivan.
The key elements of the bull case rest on strong top-line growth, market share gains, ambitious growth plans and the highest margin profile among peers.

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Nov 07

Daily Brief Macro: Hawkish Fed Faces New Challenge as US Treasury Examines Ways to Improve Market Liquidity and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Hawkish Fed Faces New Challenge as US Treasury Examines Ways to Improve Market Liquidity
The Hidden Story of Investor Capitulation
Peering into 2023: A Bear Market Roadmap

Hawkish Fed Faces New Challenge as US Treasury Examines Ways to Improve Market Liquidity

By Said Desaque

US financial markets have been persistently wrong to entertain thoughts of an early dovish pivot to Fed policy conduct without unambiguous evidence of returning price stability.
The Fed’s pursuit of quantitative tightening will raise the federal budget deficit via higher net interest costs and lower tax revenues due to slower economic growth.
Diminishing liquidity in the US Treasury market could force a bond buyback programme that potentially complicates the Fed’s quantitative tightening programme due to its impact on bank reserves

The Hidden Story of Investor Capitulation

By Cam Hui

The good news is that retail sentiment is more washed out than generally believed.
The bad news is the stock market faces a number of short-term challenges in November.
Uncertainty over the midterm election and a possible fiscal fallout, a likely hot CPI report and bearish World Cup seasonality will create headwinds for stock prices.

Peering into 2023: A Bear Market Roadmap

By Cam Hui

The Fed has made it clear that it wants to tighten monetary conditions by engineering an equity bear market.
Assuming the economy enters recession in Q4 or Q1, history shows that it will emerge within about six months, putting the timing of a bottom at about the same time.
The S&P 500 is trading at a forward P/E of 16.1. Assuming a typical 15-20% cut to forward earnings estimates in a recession, this puts the downside potential at 2500–2850.

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Nov 07

Daily Brief Equity Bottom-Up: Astra International (ASII IJ) – Driving into Indonesia’s Growth Areas and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Astra International (ASII IJ) – Driving into Indonesia’s Growth Areas
Kunlun Energy (135 HK): Kunlun Gas 3Q22 Masked by Non-Operating Factors
Akeso Biopharma (9926.HK) – The Recent Business Progress, the Valuation and the Challenges
China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom
Deep Dive: Komatsu (6301, KMTUY)
REIT Watch – CapitaLand Reits see operational growth in Q3
Grounding Myself in this Market Cycle
King No More

Astra International (ASII IJ) – Driving into Indonesia’s Growth Areas

By Angus Mackintosh

Astra International (ASII IJ)‘s recent 9M2022 numbers confirmed its position as a well-rounded way to play Indonesia’s economic recovery through autos and commodities through its controlling stake in United Tractors.
The company has continued to deploy its war chest of funds from the Bank Permata sale, investing in commercial vehicle leasing, hydro-power, and digital banking in 3Q2022 alone.
Astra International (ASII IJ trades on 9.0x FY2023 PER and 8.5x FY2024E PER versus its 5-year average forward PER of 14x, making it attractive at current levels.

Kunlun Energy (135 HK): Kunlun Gas 3Q22 Masked by Non-Operating Factors

By Osbert Tang, CFA

3Q22 result of Kunlun Gas is weaker than expected, but this is due to lower other income and surge in non-operating expenses. Without them, profit growth is actually more encouraging.
While there is gross margin squeeze on higher input costs, Kunlun managed to reduce operating costs by 14.1%, successfully mitigated the negative impact.
Kunlun Gas contributed 62.5% of 1H22 net profit of Kunlun Energy (135 HK). Its solid 36.2% 9M22 earnings growth still points to healthy underlying momentum for its parent.

Akeso Biopharma (9926.HK) – The Recent Business Progress, the Valuation and the Challenges

By Xinyao (Criss) Wang

Akeso has made some business progress. We analyzed the commercialization outlook/concerns on its late stage products. Akeso still stays at the level of biotech, a long way from becoming biopharma.
The core challenge is whether bispecific antibody can bring better marginal clinical benefits than the combination of two mab, and why patients are willing to pay higher price for them?
The sales forecast of Akeso’s late stage products could be RMB2 billion to RMB3 billion. The market value by the end of Nov 4 was just reasonable but not undervalued.

China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom

By Ming Lu

Tencent and Alibaba are rumored to be acquired by state-owned companies.
Tencent charges for originally free function and JD.com re-organized to cut cost.
Autohome’s revenue stopped declining in 3Q22 and it is time to accumulate.

Deep Dive: Komatsu (6301, KMTUY)

By Value Punks

Industrials have been quite resilient this year. Their stocks prices have run up as sector earnings fared better-than-expected, and as investors have looked for safety under the cover of ‘real economy’ stocks during a year in which tech is down big.
You may think that the train has left the station already with blue chip industrials like Caterpillar and Deere.
They’re certainly trading near all time highs! But hold on. There is one train which hasn’t left yet, and that is Komatsu.

REIT Watch – CapitaLand Reits see operational growth in Q3

By Geoff Howie

REIT Watch – CapitaLand Reits see operational growth in Q3 CLI’s funds business comprises five real estate investment trusts (Reits) and business trusts listed on the Singapore Exchange (SGX).
Ascendas Reit is now known as CapitaLand Ascendas Reit; Ascott Residence Trust is now known as CapitaLand Ascott Trust; while Ascendas India Trust is changed to CapitaLand India Trust.

Grounding Myself in this Market Cycle

By BluSuit

At the moment of writing this, it’s 2:30 pm on a Sunday and I am in a ground blind. Every year at about this time of the year I take a few days off of work to unplug, have a few drinks with other family members and run off to the middle of the woods.
I get some of my best thinking done out here while I wait for a White Tail Buck to come by. It’s blissful.
Regardless of where I am or what I am doing, I am and always have been committed to maintaining my transparency, my thoughts and my investing story/process to all of you.

King No More

By subSPAC

Fantasy Sportbook Operator DraftKings saw its shares drop by 28% at the close on Friday, recording the worst in its trading history even as its management and CEO remained upbeat about the company’s future.
What was surprising about the steep decline was the fact that the company beat analyst expectations both on the revenue and EPS front in its most recent quarter while also raising its full-year guidance.
The market remains skeptical about the company’s business model and its decision to prioritize growth over profitability, a stark comparison to its peers who have cut costs in recent months.

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Nov 07

Daily Brief Thematic (Sector/Industry): Good Morning Japan (November 7 and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Good Morning Japan (November 7, 2022)
Weekly Stock Bullfinder – Week of 11/7

Good Morning Japan (November 7, 2022)

By Mark Chadwick

Good Morning Japan: A detailed look at the overnight news and market moves that will impact the trading day in Japan
US rally overnight on mixed employment and hopes of easing of China Covid-19 restrictions. China officials pour cold water these hopes – look for reversal
Daikin Nikkei Preview – looks weak; Defense stocks likely gets support; SMBC takes that axe to SMBC Nikko CEO – harsh.

Weekly Stock Bullfinder – Week of 11/7

By Weekly Stock Bull Finder

Michael Kantro (@MichaelKantro), Chief Investment Strategist at Piper Sandler, put together the “HOPE” roadmap to illustrate the chronology of how and where the Federal Reserve’s interest rate hikes ripple through and impact the economy.
The order of the HOPE roadmap dictates that the housing market is the first to slow, followed by new orders, then S&P 500 profits, and last is the employment market.
The Federal Reserve’s latest increase, the fourth consecutive increase of 75 points, brings the federal funds rate – which acts as a benchmark for everything including business loans, credit card and mortgage rates – to between 3.75% and 4%, the highest level since January 2008.

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Nov 07

Daily Brief Event-Driven: MSCI Korea November SAIR: Potential Changes and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
MSCI SEA EM Nov SAIR: High Impact Deletions Expected
Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli
Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro
Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
Elliot Tenders Its Stake

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning

We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling

Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

MSCI SEA EM Nov SAIR: High Impact Deletions Expected

There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.

Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Blibli (1437710D IJ) priced at IDR450, Giant Biogene Holding (2367 HK) solid trading debut.
Event-Driven developments – Nitro Software Ltd (NTO AU), Perpetual Ltd (PPT AU), ReadyTech Holdings Ltd (RDY AU), China VAST, Singapore Medical (SMG SP), 21Vianet Group (VNET US).

Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), 111 Inc (YI US), Pendal Group (PDL AU), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Tassal (TGR AU), OZ Minerals Ltd (OZL AU), China Vast Industrial Urban Development (6166 HK), PTB.

Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago

There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago.
That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

MSCI India November SAIR: Potential Changes & Higher Foreign Holding

Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

Elliot Tenders Its Stake

By Jesus Rodriguez Aguilar

4 November was the deadline to tender. PMI threatened to walk away if it didn’t reach 90%. Some funds that opposed the deal trimmed their stakes, likely bought by arbs.
The FT has reported that Elliot (10.5% stake) has tendered and that by 4 November over 80% acceptances were recorded. PMI is very likely to reach now over 90% acceptances.
Results will be announced on 7 November, with settlement on 11 November. The squeeze-out procedure is likely be initialed as soon as possible after settlement. Gross spread is 0.87%.

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Nov 07

Most Read: Kawasaki Kisen Kaisha, Toshiba Corp, Yang Ming Marine Transport, Sk Chemicals Co Ltd/New, Mitsui & Co Ltd, Metro Pacific Investments Co, KT Corp, Tencent, Blibli, I-Tail and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

KLine (Kawasaki Kisen 9107) Announced Q2 Earnings and Possibly Game-Able Buyback (And Index Impact)
Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp
Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI
MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
MSCI SEA EM Nov SAIR: High Impact Deletions Expected
KOSPI 200 Index Review: Names Subject to Float Rate Adjustment
ECM Weekly (6th Nov 2022) – Giant Biogene, Blibli, Betagro, Bionote, Fusion, Medanta, Bikaji, Axis
Blibli IPO: Trading Debut
I-Tail Corporation IPO: The Bull Case

KLine (Kawasaki Kisen 9107) Announced Q2 Earnings and Possibly Game-Able Buyback (And Index Impact)

Strong but slightly disappointing Q2 earnings from Kawasaki Kisen Kaisha (9107 JP), and full-year forecasts are higher, but not as high as consensus.
The company has announced a buyback, to be executed on ToSTNeT-3. Effissimo and Mizuho Bank will participate. Other crossholders could too.
Strategy depends on whether you think they will. If they do not, post-buyback float drops sharply.

Last Week in Event SPACE: Toshiba, Perpetual/Pendal, News Corp/Fox Corp

By David Blennerhassett

There is potentially a premium of about 20-25% being assessed for the possibility of a deal for Toshiba Corp (6502 JP), but there is also fundamental risk beyond this.
Perpetual Ltd (PPT AU) rejects EQT/BPEA/Regal’s Offer, a proposal that is contingent on PPT ceasing its Scheme with Pendal Group (PDL AU)
News Corp (NWS AU) is trading rich. The net EV/EBITDA for the stub ops trades closely matches to Fox (FOXA US). And Fox is preferable over NWS’ print media business.

Index Rebalance & ETF Flow Recap: TW Div+, CSI500, ChiNext, SSE180, KS200, KQ150, FTSE CH50, AMFI

MSCI announces the changes at the November SAIR pre-market open (Asia time) on 11 November. That day is also the market cap cutoff for the FTSE December QIR.
There are some pretty big changes to the flows for the FTSE TWSE Taiwan Div+ Index following changes to forward dividend estimates and stock prices.
Quiet week for ETF flows with large inflows to Huatai-PB CSI 300 ETF (510300 CH) and Tracker Fund of Hong Kong Ltd (2800 HK).

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning

We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling

Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

MSCI SEA EM Nov SAIR: High Impact Deletions Expected

There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.

KOSPI 200 Index Review: Names Subject to Float Rate Adjustment

By Sanghyun Park

We have seven constituents of KOSPI 200, which are subject to a float rate adjustment due to major shareholder stake sales and lockup release in the upcoming rebalancing in December
In terms of passive impact x ADTV, LG Energy Solution, KT Corp, and Shinhan Financial are expected to receive the most attention from flow traders.
The preemptive setups of flow traders will likely be more inclined toward these float rate changes since this December rebalance will have the lowest number of constituent changes ever.

ECM Weekly (6th Nov 2022) – Giant Biogene, Blibli, Betagro, Bionote, Fusion, Medanta, Bikaji, Axis

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, a number of companies in India have launched thier IPOs recently, even as HK and rest of Asia remains dormant.
The only notable placement this week was the selldown in Axis Bank Ltd (AXSB IN) by Bain Capital.

Blibli IPO: Trading Debut

Blibli (1437710D IJ) priced its IPO at IDR450 per share to raise net proceeds of US$508 million. The shares will start trading on 8 November.
We have previously discussed the IPO in Blibli IPO: The Bull Case, Blibli IPO: The Bear Case, Blibli Vs Tokopedia Vs Bukalapak Vs Lazada Vs Shopee, Blibli IPO: Valuation Insights.
Despite peer multiple derating, the IPO price remains unattractive compared to global and Asian-focused e-commerce peers.

I-Tail Corporation IPO: The Bull Case