Smartkarma Daily Briefs

Grizzly Research LLC publishes a short selling report on ZTO.
Meituan plans to shift car hailing from direct operation to a platform for third-party operators.
Dada, which was acquired by JD.com last year, posts good 4Q22 results.

Shorting Event on LX International’s Potential Rights Offer for HMM Takeover

By Sanghyun Park

The opinion rapidly spreading in the local market is that LX International is increasing its available shares by twice the amount to plan a paid-in increase for the HMM acquisition.
The size of an offering is estimated at ₩1.2T to ₩1.5T. The short-term price impact will undoubtedly be significant for LX International having a market cap of ₩1.2T.
The market has already witnessed a preemptive position buildup targeting this. However, since there is a time gap until the offering announcement, an entry point opportunity may still be available.

SK Networks: 100 Billion Won in Share Buyback + 70 Billion Won in Treasury Shares Cancellation

SK Networks announced that it will repurchase 100 billion won in common shares and also cancel nearly 70 billion won of existing treasury shares.
The combined share buyback and treasury shares cancellation will represent nearly 14% of the company’s total outstanding shares.
The combined share buyback and treasury shares cancellation which will represent nearly 14% of the company’s total outstanding shares, will likely have a positive impact on SK Network’s share price.

JD Logistics (2618 HK): 4Q22, Outside Customer Revenue Continued Surging, Buy

Total revenue increased by 41% YoY and revenue from external customers increased by 69% YoY in 4Q22.
We believe total revenue will grow by 26% in 2023 and 17% in 2024.
We also believe the stock has an upside of 58% and a price target of HK$20.

ZKH Group IPO: The Bull Case

ZKH Group (ZKH US), a leading MRO (maintenance, repair, and operations) procurement service platform in China, is pre-marketing an NYSE IPO to raise US$200-300 million.
The ZKH platform is for enterprise customers and the GBB platform is for micro businesses. Key backers include Tencent (700 HK) and Tiger Global.
The key elements of the bull case rest on large addressable markets, solid customer loyalty, improving gross margin, lower operating losses and a strong balance sheet.

MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility

In this insight, we discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement in May 2023 amid heightened market volatility.
The potential inclusions (high probability) in the MSCI Korea index in May are Hanwha Aerospace and Ecopro. Potential adds (low probability) include POSCO International, Cosmo AM&T, and SM Entertainment.
The three most likely exclusions in the MSCI Korea index in May include Lotte Shopping, SD Biosensor, and S1 Corporation.

Monotaro (3064) | Pricing in Downside Risks

By Mark Chadwick

We reassess our long-term financial model for Monotaro following 2 consecutive months of weak monthly data
Just two months into the new fiscal year, but YTD sales growth of 13% is far short of the full year target
Our DCF valuation highlights further 21% downside assuming 10y CAGR of 10.5%

Parker-Hannifin Corporation: Initiation of Coverage – The Meggitt Synergies & Other Drivers

This is our first report on Parker-Hannifin Corporation, a global leader in motion and control technologies.
Parker-Hannifin delivered strong operating performance throughout the second quarter of the current fiscal and delivered an all-around beat.
We initiate coverage on the stock of Parker-Hannifin Corporation with a ‘Hold’ rating.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 14

Daily Brief Industrials: Halcyon Agri, ZTO Express, LX International, SK Networks, JD Logistics, ZKH Group, Hanwha Aerospace, MonotaRO Co Ltd, Parker Hannifin and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Halcyon Agri’s Offer: IFA Says Fair. Independent Directors Say Accept
China Internet Weekly (13Mar2023): ZTO, Meituan, Alibaba, Trip.com, Dada, JD.com
Shorting Event on LX International’s Potential Rights Offer for HMM Takeover
SK Networks: 100 Billion Won in Share Buyback + 70 Billion Won in Treasury Shares Cancellation
JD Logistics (2618 HK): 4Q22, Outside Customer Revenue Continued Surging, Buy
ZKH Group IPO: The Bull Case
MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility
Monotaro (3064) | Pricing in Downside Risks
Parker-Hannifin Corporation: Initiation of Coverage – The Meggitt Synergies & Other Drivers

Halcyon Agri’s Offer: IFA Says Fair. Independent Directors Say Accept

By David Blennerhassett

Halcyon Agri (HACL SP) has issued the circular in response to China Hainan Rubber Industry (601118 CH)‘s conditional MGO.
The IFA reckons the Offer is fair and reasonable. The Independent Directors recommend that shareholders accept the Offer.
The first close is the 24 March. Hainan Rubber is under no obligation to extend the Offer beyond this date.

China Internet Weekly (13Mar2023): ZTO, Meituan, Alibaba, Trip.com, Dada, JD.com

Grizzly Research LLC publishes a short selling report on ZTO.
Meituan plans to shift car hailing from direct operation to a platform for third-party operators.
Dada, which was acquired by JD.com last year, posts good 4Q22 results.

Shorting Event on LX International’s Potential Rights Offer for HMM Takeover

By Sanghyun Park

The opinion rapidly spreading in the local market is that LX International is increasing its available shares by twice the amount to plan a paid-in increase for the HMM acquisition.
The size of an offering is estimated at ₩1.2T to ₩1.5T. The short-term price impact will undoubtedly be significant for LX International having a market cap of ₩1.2T.
The market has already witnessed a preemptive position buildup targeting this. However, since there is a time gap until the offering announcement, an entry point opportunity may still be available.

SK Networks: 100 Billion Won in Share Buyback + 70 Billion Won in Treasury Shares Cancellation

SK Networks announced that it will repurchase 100 billion won in common shares and also cancel nearly 70 billion won of existing treasury shares.
The combined share buyback and treasury shares cancellation will represent nearly 14% of the company’s total outstanding shares.
The combined share buyback and treasury shares cancellation which will represent nearly 14% of the company’s total outstanding shares, will likely have a positive impact on SK Network’s share price.

JD Logistics (2618 HK): 4Q22, Outside Customer Revenue Continued Surging, Buy

Total revenue increased by 41% YoY and revenue from external customers increased by 69% YoY in 4Q22.
We believe total revenue will grow by 26% in 2023 and 17% in 2024.
We also believe the stock has an upside of 58% and a price target of HK$20.

ZKH Group IPO: The Bull Case

ZKH Group (ZKH US), a leading MRO (maintenance, repair, and operations) procurement service platform in China, is pre-marketing an NYSE IPO to raise US$200-300 million.
The ZKH platform is for enterprise customers and the GBB platform is for micro businesses. Key backers include Tencent (700 HK) and Tiger Global.
The key elements of the bull case rest on large addressable markets, solid customer loyalty, improving gross margin, lower operating losses and a strong balance sheet.

MSCI Korea Potential Adds & Deletes in May 2023 Amid Heightened Market Volatility

In this insight, we discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement in May 2023 amid heightened market volatility.
The potential inclusions (high probability) in the MSCI Korea index in May are Hanwha Aerospace and Ecopro. Potential adds (low probability) include POSCO International, Cosmo AM&T, and SM Entertainment.
The three most likely exclusions in the MSCI Korea index in May include Lotte Shopping, SD Biosensor, and S1 Corporation.

Monotaro (3064) | Pricing in Downside Risks

By Mark Chadwick

We reassess our long-term financial model for Monotaro following 2 consecutive months of weak monthly data
Just two months into the new fiscal year, but YTD sales growth of 13% is far short of the full year target
Our DCF valuation highlights further 21% downside assuming 10y CAGR of 10.5%

Parker-Hannifin Corporation: Initiation of Coverage – The Meggitt Synergies & Other Drivers

This is our first report on Parker-Hannifin Corporation, a global leader in motion and control technologies.
Parker-Hannifin delivered strong operating performance throughout the second quarter of the current fiscal and delivered an all-around beat.
We initiate coverage on the stock of Parker-Hannifin Corporation with a ‘Hold’ rating.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 14

Daily Brief Health Care: Shenzhen Mindray Bio-Medical Electronics, Lutronic Corp, AmerisourceBergen Corp, Centene Corp, Davita Healthcare Partners and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Shenzhen Mindray Bio-Medical Electronics (300760.CH) – Shareholders’ Stock Selling and the Outlook
Lutronic Corp (085370 KS): Record-High Performance in 2022; Litigation May Limit Upside Potential
AmerisourceBergen Corporation: Initiation of Coverage – Acquisition of PharmaLex & Key Drivers
Centene Corporation: Initiation of Coverage – Recent Restructuring & Other Drivers
DaVita Inc.: Initiation of Coverage – Strong Value Proposition & Key Drivers

Shenzhen Mindray Bio-Medical Electronics (300760.CH) – Shareholders’ Stock Selling and the Outlook

By Xinyao (Criss) Wang

Several original shareholders reduced their holdings of Mindray, which indicates that the senior executives and major shareholders aren’t optimistic about Mindray’s outlook, putting the Company’s long-term growth under scrutiny.
Mindray’s performance in overseas markets could be under pressure, which is an uncertain factor to drag down this year’s performance growth. Supply chain issue would hinder Mindray’s breakthrough in high-end fields.
Performance slowdown could continue if without breakthroughs in new growth points or internationalization. Our forecast on 2023 growth is about 15%-18%. Mindray’s valuation may fall back to 30-35 PE TTM.

Lutronic Corp (085370 KS): Record-High Performance in 2022; Litigation May Limit Upside Potential

By Tina Banerjee

Lutronic Corp (085370 KS) recorded its highest ever revenue and operating profit in 2022, driven by strong performance of overseas business, which contributed 88% of revenue and grew 62% YoY.
Overall, business has recovered with the reopening of the dermatology clinics and resumption of elective procedures globally. In addition to product sales, sales of consumables and services are steadily increasing.
Despite stellar performance in 2022, ongoing lawsuit against U.S.-based competitor remains an overhang on Lutronic’s overseas growth aspirations, especially in the U.S.

AmerisourceBergen Corporation: Initiation of Coverage – Acquisition of PharmaLex & Key Drivers

This is our first report on major pharmaceutical sourcing and distribution services provider, AmerisourceBergen.
Among major updates, AmerisourceBergen added PharmaLex to its portfolio of specialty solutions to expand its capabilities.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Centene Corporation: Initiation of Coverage – Recent Restructuring & Other Drivers

This is our first report on Centene Corporation, one of the largest health insurance players in the U.S.
Centene had a successful year in 2022 and ended it on a positive note with an all-around beat.
Total revenue grew by $3 billion, driven by strong organic growth in Medicaid, strong growth in Medicare membership, and the acquisition of Magellan.

DaVita Inc.: Initiation of Coverage – Strong Value Proposition & Key Drivers

This is our first report on major healthcare provider, DaVita.
DaVita produced an adjusted operating income of $317 million and adjusted profits per share from continuing operations of $1.11 for the fourth quarter, bringing the entire year squarely at the top of the revised target range it provided last quarter.
During the previous quarter, the international adjusted operating income fell by $15 million.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 14

Daily Brief Utilities: Adani Transmission and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

Quiddity Leaderboard for BSE/SENSEX Jun 23: NMDC Could Be a BSE 200 ADD

Quiddity Leaderboard for BSE/SENSEX Jun 23: NMDC Could Be a BSE 200 ADD

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the Potential ADDs/DELs for the BSE SENSEX, 100, 200, and 500 Indices in the June 2023 Rebalance.
The BSE AllCap March 2023 Rebalance results were announced and this changes the main universe from which SENSEX, BSE 100, and BSE 200 members are selected.
In this insight, we take a look at the recent updates to my expectations and the price and volume performance of the candidates.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

Daily Brief Australia: Harvey Norman Holdings, HomeCo Daily Needs REIT, Invocare Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

MVIS Australia Equal Weight Index Rebalance: One Deletion & Other Changes
MVIS Australia A-REITs Index Rebalance: Float/Capping Changes
Merger Arb Mondays (13 Mar) – InvoCare, Origin, Tyro, Toyo, Oishi, AAG Energy, Yashili, Halcyon

MVIS Australia Equal Weight Index Rebalance: One Deletion & Other Changes

By Brian Freitas

Harvey Norman Holdings (HVN AU) will be deleted from the MVIS Australia Equal Weight Index at the close of trading on 17 March.
One way turnover is 3.9% resulting in a one-way trade of A$68m. Only Harvey Norman Holdings (HVN AU) has more than 1 day of ADV to sell from passive trackers.
Harvey Norman Holdings (HVN AU) has underperformed Myer Holdings (MYR AU) significantly over the recent past and the index deletion could provide an entry point into a trade.

MVIS Australia A-REITs Index Rebalance: Float/Capping Changes

By Brian Freitas

The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 17 March. There are no constituent changes, but there are float and capping changes.
Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of A$11.1m. There is limited impact on the index constituents.
The largest inflows are on Stockland, HomeCo Daily Needs REIT, Gpt Group and Charter Hall, while the largest outflows are on Goodman Group, Vicinity Centres, Dexus Property and Scentre Group.

Merger Arb Mondays (13 Mar) – InvoCare, Origin, Tyro, Toyo, Oishi, AAG Energy, Yashili, Halcyon

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads 21Vianet Group (VNET US), 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Oishi Group PCL (OISHI TB), Toyo Construction (1890 JP), Aag Energy Holdings (2686 HK), Jiangnan.
Lowest spreads – Norwest Energy NL (NWE AU), Genesis Minerals (GMD AU), GK Goh Holdings (GKG SP), Nitro Software Ltd (NTO AU), Boustead Projects (BOCJ SP), Nissin Electric (6641 JP).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

Daily Brief China: Jiangsu Cnano Technology Co Ltd-A, Alibaba (ADR), Country Garden Holdings Co, China Jinmao Holdings and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

STAR50 Index Rebalance Preview: Two Changes in June (Possibly)
[Alibaba (BABA US) Target Price Change]: No Growth in March Promotion, Cut TP to US$100
China Real Estate
Morning Views Asia: China Jinmao Holdings, Road King Infrastructure, Sunny Optical, Vedanta Resources

STAR50 Index Rebalance Preview: Two Changes in June (Possibly)

By Brian Freitas

The review period for the June rebalance ends 30 April. We expect the changes to be announced 26 May with the implementation taking place after the close on 9 June.
We expect the index committee to continue using a 6-month minimum listing history resulting in two changes to the index.
One way turnover is estimated at 1.6% resulting in a one-way trade of CNY 1,442m. The impact on the deletions will be larger than that on the inclusions.

[Alibaba (BABA US) Target Price Change]: No Growth in March Promotion, Cut TP to US$100

By Shawn Yang

Based on our recent checks, we expect that Tmall sales in the march promo were weaker-than-expected, especially in apparel and beauty make-up.
Meanwhile, we maintain our prior forecast for Douyin’s overall eCommerce growth, and we expect that Douyin Mall’s share of Douyin eCommerce GMV is now higher than we previously estimated.
We cut the GMV growth of Taobao and Tmall from 4.4% YoY to 1.4% YoY in FY24, and cut BABA’s TP to US$ 100, implying 12.6x FY23 PE.

China Real Estate

By Untying The Gordian Knot

As a background, can I refer the reader to Substack Note No One Cares 有中国特色 Real Estate Liquidity Spiral to Solvency Challenge 31st October 2022 ?
It bottoms ticked recovery in the highly leveraged Real estate Index Hang Seng Mainland Property Index (HSPMI) and rallied 103% from trough to peak 27th January 2023.
The mainland listed Index CSI 300 Real estate (CSI300RE) trough (1^st November) to peak (27^th November) was 43.5%.

Morning Views Asia: China Jinmao Holdings, Road King Infrastructure, Sunny Optical, 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.

China Jinmao Holdings
Road King Infrastructure
Sunny Optical
Vedanta Resources
Yanlord Land

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

Daily Brief Thailand: Oishi Group PCL and more

By Smartkarma Daily Briefs | Daily Briefs, Thailand

In today’s briefing:

ThaiBev To Take Oishi Group Private

ThaiBev To Take Oishi Group Private

By David Blennerhassett

Thai Beverage (THBEV SP) is proposing to take 79.66%-held Oishi Group PCL (OISHI TB) private by a voluntary Delisting Offer.
The Offer price is THB 59/share, a 26.9% premium to last close.
This Delisting Offer requires a shareholder vote. Payment may occur sometime in August.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

Daily Brief Singapore: Halcyon Agri, China Jinmao Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Halcyon Agri (HACL SP): Board Recommends Conditional MGO
Morning Views Asia: China Jinmao Holdings, Road King Infrastructure, Sunny Optical, Vedanta Resources

Halcyon Agri (HACL SP): Board Recommends Conditional MGO

The IFA opines that China Hainan Rubber Industry (601118 CH)‘s MGO at S$0.413 per share is fair and reasonable. The Halcyon Agri (HACL SP) Board recommends accepting the offer.
Since the offer opened on 24 February, there have been no acceptances. Perhaps minorities held off until the full-year results and the IFA report. Board recommendation should drive acceptance.
The 50%+ minimum acceptance condition requires around 40% of minorities acceptance rate (47% excluding the Gondobintoro Family). This remains achievable. At the last close, the gross spread is 2.0%.

Morning Views Asia: China Jinmao Holdings, Road King Infrastructure, Sunny Optical, Vedanta Resources

By Charles Macgregor

China Jinmao Holdings
Road King Infrastructure
Sunny Optical
Vedanta Resources
Yanlord Land

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

Daily Brief Japan: Japan Post Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Japan Post Bank – Estimating Foreign Ownership and Deal Flowback
Japan Post Bank Placement – Still Misbehaving – Post-Pricing Performance of Some More Deals
Weekly Deals Digest (12 Mar) – Japan Post Bank, SBI Sumishin, ASMPT, Oishi, InvoCare, Olam

Japan Post Bank – Estimating Foreign Ownership and Deal Flowback

By Travis Lundy

The word floating around late Friday as books closed was that foreigners had bid strongly. More than the entire Japan Post Bank (7182 JP) offering size in fact.
The offering is an interesting problem, as discussed before. Different people are going to buy it for different reasons.
This insight looks at the breakdown of ratios and the resultant foreign ownership, along with post-offer supply/demand balance.

Japan Post Bank Placement – Still Misbehaving – Post-Pricing Performance of Some More Deals

By Sumeet Singh

Japan Post Holdings (6178 JP) aims to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
We have looked at the deal in our previous notes, Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback and Japan Post Bank Placement – Misbehaving.
In this note, we talk about the updates since our last note and have a look at the post pricing performance of a few more deals.

Weekly Deals Digest (12 Mar) – Japan Post Bank, SBI Sumishin, ASMPT, Oishi, InvoCare, Olam

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Japan Post Holdings (6178 JP)‘s large offering of Japan Post Bank (7182 JP)‘s shares, SBI Sumishin Net Bank (7163 JP) aims to raise up to US$440 million.
Event-Driven developments – ASM Pacific Technology (522 HK), Yashili International Holdings (1230 HK), Invocare Ltd (IVC AU), Oishi Group PCL (OISHI TB), Olam Group (OLG SP), Halcyon Agri (HACL SP).

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Mar 13

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

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer
Bukwang Pharmaceutical (003000 KS): High R&D Cost Put Pressure on Profit; Pain to Continue in Future

HYBE Gives Up the M&A Fight for SM Entertainment: Impact on Kakao’s Tender Offer