Smartkarma Daily Briefs

In early February, Link REIT (823 HK) announced it would do a 1 for 5 rights offering, with the Exercise Price well below TERP.
The REIT units dropped in price as the already unlevered REIT was not seen to be needing further deleverage and early debt repayment in a rising rate environment.
Units went ex-Rights on 24 February. The rights start trading tomorrow. That means flows. Of multiple kinds. Worth thinking about.

Meituan (3690 HK): Tencent’s In-Specie Div Settles in Two Weeks

By Brian Freitas

From the time of Tencent (700 HK) announcement of the in-specie dividend, Meituan (3690 HK) has underperformed Tencent (700 HK) and Alibaba Group (9988 HK) by around 35%.
Surprisingly, short interest on Meituan (3690 HK) has dropped in the last few months as the stock has continued to drop.
As with JD.com Inc. (9618 HK), Prosus (PRX NA) could sell Meituan (3690 HK) in the months following settlement. Or they could remove the overhang by placing a block.

The March BOJ Meeting, April Handover, the Japan Post Bank (7182) Offering, and Follow-On

Tomorrow is BOJ Governor Kuroda’s last Monetary Policy Meeting, capping a ten year run as one of the most dynamic central bankers in the world.
Tomorrow is also the day BEFORE the first day on which the Japan Post Bank (7182 JP) mega offering could price and the last day of bookbuild indications.
I am not saying this is not coincidence, but it is worth thinking about the interplay.

Japan Post Bank (7182 JP): The Current Playbook

By Arun George

Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have risen by 4.4%. On 1 March, JPB completed the ToSTNeT-3 buyback by acquiring 59.5 million shares for JPY70 billion.
To understand JPB’s trading pattern, it is instructive to look at Japan Post Insurance (7181 JP)/JPI’s 2019 offering and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
JPB’s shares should follow the trading pattern playbook of JPI’s 2019 and JPH’s 2021 offerings and start trading below the pre-offer last trading price during the subscription period.

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs

Elliott Management was noted several weeks ago to have bought near 5% of Dai Nippon Printing (7912 JP). The stock popped when people found out.
Then the stock popped when the company said they’d announce the outline for their new Mid-Term Management Plan on 9 March, and that would include more capital allocation measures.
Today we got the Outline. There are more capital allocation measures. The numbers look big. Nuance is required to understand the impacts over time.

Meritz Merger Approved: Let’s Now Discuss Key Dates & Entry Points For LONG DGB Financial

K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.
From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.
We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.

Sosei Group (4565 JP) TSE Prime Promotion and TOPIX Inclusion… Finally

Sosei Group (4565 JP) is a Tokyo-based biopharma group which started small, got big and exciting, and hasn’t grown in market cap in years, while it has grown in ambition.
It has strategic relationships with AbbVie, Biohaven, Genentech, GSK, Takeda, Pfizer, AstraZeneca, and Takeda and a market cap near ¥200bn.
It has always had impressive shareholder support. Now after nearly 20 years on TSE Mothers/Growth (the limit was supposed to be 10yrs), it moves to TSE Prime and TOPIX.

MSCI Korea May Review: Two New Names Are Emerging for Inclusion

By Shifara Samsudeen, ACMA, CGMA

Two new names have emerged as likely candidates for inclusion in Korea: SM Entertainment and Cosmo Advanced Materials, whose YTD returns are approximately 104% and 83%, respectively.
For SM Entertainment, the float rate may be adjusted downward depending on the tender offer results. Still, even if modified to 50%, it will surpass the float market cap hurdle.
Cosmo still has a significant gap in the full market cap. However, we should note that the recent insane rally in Korea’s EV battery sector shows no signs of ending.

HSCEI Dividend Futures: Fair Value Estimates as Result Season Looms

By Brian Freitas

The HSCEI 2023 dividend futures have moved up over the last few months though there was a sharp move lower in the last couple of weeks.
With results and dividends scheduled to be announced in the next few weeks, we take a look at the fair value estimate for the 2023 dividend futures.
We also list out the things to watch for over the next few weeks and months that could impact the 2023 dividend futures and the 2023/24 dividend steepener.

Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True

Following Jehoshaphat’s allegations that profits are inflated dramatically over a decade with manipulative accounting, Techtronic Industries (669 HK) has issued a rebuttal clarifying that the accusations are without any merit.
TTI’s beyond comparison performance is due to world class brands such as Milwaukee, Ryobi and Hoover which have helped top line grow at 13% CAGR over the past 13 years.
Nevertheless, we have assessed some of the company’s clarifications here which seemed too good to be true.

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Mar 10

Daily Brief Industrials: Dai Nippon Printing, Fangda Carbon New Material Co, Ltd., Doosan Robotics, Hosokawa Micron, SITC International and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs
Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months
Doosan Robotics (Number One Player in Collaborative Robots in Korea) & NAV Analysis of Doosan Corp
Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback
SITC International (1308 HK): Still Not Easy to Find the Bright Spot

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs

Elliott Management was noted several weeks ago to have bought near 5% of Dai Nippon Printing (7912 JP). The stock popped when people found out.
Then the stock popped when the company said they’d announce the outline for their new Mid-Term Management Plan on 9 March, and that would include more capital allocation measures.
Today we got the Outline. There are more capital allocation measures. The numbers look big. Nuance is required to understand the impacts over time.

Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months

Fangda Carbon New Material Co, Ltd. (600516 CH) is looking to raise around US$124m in its Swiss GDR listing. Huatai is the sole bookrunner in the deal.
The firm is offering 13.91m GDRs (1 GDR to 10 A-shares) for sale at US$8.63-8.9/GDR, or at a 8.3-11.1% discount to last close on the A-share leg.
As per the firm, it plans to use the net proceeds from the offering to support its business expansion, repay debt, supplement working capital and for general corporate purposes.

Doosan Robotics (Number One Player in Collaborative Robots in Korea) & NAV Analysis of Doosan Corp

The Doosan Group is aiming to complete the IPO of Doosan Robotics in 2H 2023. Doosan Robotics is expected to be one of the largest IPOs in Korea in 2023.
The local media have mentioned that Doosan Robotics could receive at least 1 trillion won (US$0.8 billion) in market cap valuation.
Established in 2015, Doosan Corp owns a 90.9% stake in Doosan Robotics, which is the largest collaborative robot manufacturer in Korea.

Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback

Today after the close, Hosokawa Micron (6277 JP) – a company which is all about powders and particles – announced a ToSTNeT-3 buyback of 1.35mm shares (8.26% TSO) tomorrow AM.
Nisshin Seifun Group (2002 JP) and subsidiary Nisshin Engineering said they would offer some shares in. The HM announcement said financial institutions might sell.
Hosokawa Micron is cheap, and this is accretive. Worth a closer look.

SITC International (1308 HK): Still Not Easy to Find the Bright Spot

By Osbert Tang, CFA

We stay bearish on SITC International (1308 HK) despite record net profit in FY22. The collapse in spot freight rate will take a toll on FY23 earnings.
Management is also conservative on outlook, citing both demand and supply issues. It expects gross margin to return to pre-pandemic levels (17-20%) in the future, vs. 41.8% in 2H22.
Market consensus is just too optimistic, projecting just 37% YoY decline in earnings for FY23. We believe actual earnings may be at least 18-27% lower than current street forecasts.

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Mar 10

Daily Brief TMT/Internet: Cosmo AM&T, JF Wealth Holdings, Lasertec Corp, Beisen Holdings, Harvest Technology Group Ltd, Centralnic, Adobe Systems and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

MSCI Korea May Review: Two New Names Are Emerging for Inclusion
JF Wealth IPO Trading – Tepid Subscription Here Probably Won’t Buck Recent HK IPO Trends
Lasertec Corp (6920 JP) – Bullish ST Momentum Failures – 4 Month Correction May Be Done
Beisen IPO Preview and Valuation Analysis
Harvest Technology Group Limited – Approaching Cash Breakeven?
CentralNic Group – Clarifying the narrative
Adobe Is A High Quality Business With Capital Allocation Problems

MSCI Korea May Review: Two New Names Are Emerging for Inclusion

Two new names have emerged as likely candidates for inclusion in Korea: SM Entertainment and Cosmo Advanced Materials, whose YTD returns are approximately 104% and 83%, respectively.
For SM Entertainment, the float rate may be adjusted downward depending on the tender offer results. Still, even if modified to 50%, it will surpass the float market cap hurdle.
Cosmo still has a significant gap in the full market cap. However, we should note that the recent insane rally in Korea’s EV battery sector shows no signs of ending.

JF Wealth IPO Trading – Tepid Subscription Here Probably Won’t Buck Recent HK IPO Trends

JF Wealth Holdings (9636 HK) raised around US$129m in its Hong Kong IPO.
JF Wealth (JFW) is an online investment decision-making solution provider in China, focusing on the online investor content services market.
We have covered various aspects of the deal in our previous notes. In this note we will talk about the demand and trading dynamics.

Lasertec Corp (6920 JP) – Bullish ST Momentum Failures – 4 Month Correction May Be Done

By David Coloretti, CMT

At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
The structure of the November / March decline is typical of a counter-trend correction with multiple crossovers and a lack of impulsive price action.
The past 3 weeks have seen declines quickly reversed as bullish ST momentum failures plague these attempted declines. A weekly close above 22299 will confirm a likely MT uptrend renewal.

Beisen IPO Preview and Valuation Analysis

By Andrei Zakharov

China-Based HCM technology unicorn Beisen Holdings (1667838D CH) filed for an IPO in Hong Kong. Morgan Stanley and CICC are leading the upcoming offering.
Beisen Holdings (1667838D CH) is the leading provider of integrated HR SaaS and talent management platform with ~12% market share of the overall cloud-based HCM industry in China.
We believe the company’s expected IPO valuation may reach $1B, making it one of the largest providers of cloud-native HCM solutions in China scheduled to go public this year.

Harvest Technology Group Limited – Approaching Cash Breakeven?

Harvest Technology Group Limited (ASX:HTG) licenses its proprietary video compression and encryption technology for low-bandwidth, high-latency applications needing secure real-time streaming video communication.
The company delivers solutions for data transfer from anywhere via satellite or congested networks.
Harvest offers a solution which enables real-time monitoring of remote locations, real-time feedback for field technicians, and secure video conferencing.

CentralNic Group – Clarifying the narrative

By Edison Investment Research

CentralNic is a UK software company, operating globally through its two businesses, Online Presence and Online Marketing. Through a series of acquisitions, Online Marketing has become the group’s primary driver, delivering high double-digit revenue and profit growth year-on-year since the group’s first foray in 2019. Now at critical mass, the business is positioned for sustained organic growth, allowing management to prioritise capital allocation and shareholder returns, while maintaining high margins and strong cash conversion.

Adobe Is A High Quality Business With Capital Allocation Problems

By Vladimir Dimitrov, CFA

Following the massive drop in Adobe’s share price, more investors are looking favourably at the business.
In my view, capital allocation decisions within the company raise some red flags that are hard to overlook.
As a long-term shareholder, I still have a hard time rating Adobe as a buy.

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Mar 10

Daily Brief Energy/Materials: Piedmont Lithium, Shougang Fushan Resources, Empire Energy, Australis Oil & Gas and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Piedmont Lithium: General Mosquito & “Textbook Corruption”
Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends
Empire Energy Group Ltd – Another Step Closer on Carpentaria-2H Test Data
Australis Oil & Gas Limited – Holding the Next Big Thing

Piedmont Lithium: General Mosquito & “Textbook Corruption”

By David Blennerhassett

Short seller Blue Orca is alleging Atlantic Lithium (ALL LN) is seeking to obtain a Ghanaian lithium mining licence via “textbook corruption”.
Piedmont Lithium (PLL AU) is a substantial shareholder of Atlantic, together with a co-development agreement for the Ghanaian project, in which the mining license has yet to be ratified.
Orca reckons the license ratification will fail the corruption sniff test, which in turn will jeopardise the Tennessee lithium offtake facility, currently awaiting a DOE grant.

Fushan Energy: 50% of Mkt Cap in Cash / ~18% Dividend Yield / Great Returns Just in Dividends

By Sameer Taneja

Shougang Fushan Resources (639 HK) trades at 4.5x/5.1x FY22e/23e with 50% of the market cap in cash and a 17.8%/15.8% FY23e/24e dividend yield (based on an 80% payout ratio).
Since our call in FY21, close to 64 cents of the share price (25% of the current share price value) has been returned as dividends making it a dividend machine.
We forecast at least another 70 cents of dividend for H2 FY22 and FY23, bringing the dividend in 3.5 years to more than half the current share price.

Empire Energy Group Ltd – Another Step Closer on Carpentaria-2H Test Data

Empire Energy Group Limited (ASX:EEG) is an oil and gas producer/developer, with onshore Northern Territory (NT) and US oil/gas production assets.
EEG has the largest tenement position in the highly prospective Greater McArthur Basin, which includes the Beetaloo Sub-basin.
The NT energy basins are fast developing as strategic high-calorific gas bolsters for east coast Australia’s future domestic requirements, growing Gladstone LNG ullage and potential supply for Darwin’s expanding LNG export terminals, amid funding support from Territory and Federal governments.

Australis Oil & Gas Limited – Holding the Next Big Thing

Australis Oil & Gas (ASX:ATS) is an oil and gas producer/developer, with a strategic and controlling position in the emerging Tuscaloosa Marine Shale (TMS) oil play, onshore US.
The TMS is an Eagle Ford-equivalent but early-stage oil play with recoverable oil potential of around 7bn barrels – this is the next big thing.
Australis represents a highly leveraged and attractive exposure to the transformational potential of the TMS oil play.

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Mar 10

Daily Brief Industrials: Dai Nippon Printing, Fangda Carbon New Material Co, Ltd., Doosan Robotics, Hosokawa Micron, SITC International and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs
Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months
Doosan Robotics (Number One Player in Collaborative Robots in Korea) & NAV Analysis of Doosan Corp
Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback
SITC International (1308 HK): Still Not Easy to Find the Bright Spot

Dai Nippon Printing (7912) – Whoop There It Is! ¥100bn Buyback in a Year, ¥300bn in 3yrs

Elliott Management was noted several weeks ago to have bought near 5% of Dai Nippon Printing (7912 JP). The stock popped when people found out.
Then the stock popped when the company said they’d announce the outline for their new Mid-Term Management Plan on 9 March, and that would include more capital allocation measures.
Today we got the Outline. There are more capital allocation measures. The numbers look big. Nuance is required to understand the impacts over time.

Fangda Carbon New Material GDR Listing – Share Price Has Outperformed Index over the past 3 Months

Fangda Carbon New Material Co, Ltd. (600516 CH) is looking to raise around US$124m in its Swiss GDR listing. Huatai is the sole bookrunner in the deal.
The firm is offering 13.91m GDRs (1 GDR to 10 A-shares) for sale at US$8.63-8.9/GDR, or at a 8.3-11.1% discount to last close on the A-share leg.
As per the firm, it plans to use the net proceeds from the offering to support its business expansion, repay debt, supplement working capital and for general corporate purposes.

Doosan Robotics (Number One Player in Collaborative Robots in Korea) & NAV Analysis of Doosan Corp

The Doosan Group is aiming to complete the IPO of Doosan Robotics in 2H 2023. Doosan Robotics is expected to be one of the largest IPOs in Korea in 2023.
The local media have mentioned that Doosan Robotics could receive at least 1 trillion won (US$0.8 billion) in market cap valuation.
Established in 2015, Doosan Corp owns a 90.9% stake in Doosan Robotics, which is the largest collaborative robot manufacturer in Korea.

Hosokawa Micron (6277 JP) – Big Accretive Cross-Holder Share Buyback

Today after the close, Hosokawa Micron (6277 JP) – a company which is all about powders and particles – announced a ToSTNeT-3 buyback of 1.35mm shares (8.26% TSO) tomorrow AM.
Nisshin Seifun Group (2002 JP) and subsidiary Nisshin Engineering said they would offer some shares in. The HM announcement said financial institutions might sell.
Hosokawa Micron is cheap, and this is accretive. Worth a closer look.

SITC International (1308 HK): Still Not Easy to Find the Bright Spot

By Osbert Tang, CFA

We stay bearish on SITC International (1308 HK) despite record net profit in FY22. The collapse in spot freight rate will take a toll on FY23 earnings.
Management is also conservative on outlook, citing both demand and supply issues. It expects gross margin to return to pre-pandemic levels (17-20%) in the future, vs. 41.8% in 2H22.
Market consensus is just too optimistic, projecting just 37% YoY decline in earnings for FY23. We believe actual earnings may be at least 18-27% lower than current street forecasts.

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Mar 10

Daily Brief Health Care: Celltrion Healthcare, Hanall Biopharma, Basecare Medical Device and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Alpha Generation Through Share Buybacks in Korea: 1Q 2023
Hanall Biopharma (009420 KS): Lead Pipeline Asset Moved a Step Closer to Commercialization in China
Basecare Medical Device (2170.HK)- There’s Valuation Repair Expectation, but Long-Logic Is Untenable

Alpha Generation Through Share Buybacks in Korea: 1Q 2023

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in 1Q 2023.
We provide a list of 23 stocks in the Korean stock market that have announced share buyback programs in 1Q 2023.
Some of the larger companies (with more than 1 trillion won in market cap) that have recently announced share buybacks including Celltrion Healthcare have been outperforming the market.

Hanall Biopharma (009420 KS): Lead Pipeline Asset Moved a Step Closer to Commercialization in China

By Tina Banerjee

Hanall Biopharma (009420 KS)‘s partner Harbour BioMed reported positive top-line results from Phase 3 trial of batoclimab in myasthenia gravis in China. 250K people suffer from myasthenia gravis in China.
Harbour BioMed plans to file for marketing approval of batoclimab this year. Hanall is eligible for high-single-digits to mid-teen percentage royalties on net sales of batoclimab.
Hanall reported record high revenue of KRW110 billion in 2022. However, net profit plunged 78% to KRW2 billion due to increased investments in R&D.

Basecare Medical Device (2170.HK)- There’s Valuation Repair Expectation, but Long-Logic Is Untenable

By Xinyao (Criss) Wang

Basecare has its strength in reproductive genetics medical device industry. Its performance improved based on 22H1 results. If positive momentum continues, Basecare is able to achieve breakeven in foreseeable future.
However, the actual market penetration of assisted reproduction in China is much lower than expected. This means the growth ceiling of Basecase is uncertain, indicating potential problems in long-term logic.
Basecase’s market value has fallen below its cash balance. There’s a mismatch between the intrinsic value and market price, so we expect that valuation repair could occur in the future.

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Mar 10

Daily Brief Financials: Japan Post Bank, Swire Pacific (A), Pavilion Real Estate Investment Trust, Itau CorpBanca, Powerlong Real Estate Holdings, European Assets Trust Plc, Tether and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

The March BOJ Meeting, April Handover, the Japan Post Bank (7182) Offering, and Follow-On
StubWorld: Swire Pac/Prop & Cathay FY22 Results
Pavilion REIT Placement – MY$2.2bn (US$487m) Acquisition Expected to Increase Distributable Income
Itaú Unibanco Offer for Itaú Corpbanca Minorities; Good Value or Value Trap?
Morning Views Asia: Powerlong Commercial Management Holdings
European Assets Trust – Tentative signs of recovery in Europe
The Scramble for Silvergate Alternatives

The March BOJ Meeting, April Handover, the Japan Post Bank (7182) Offering, and Follow-On

Tomorrow is BOJ Governor Kuroda’s last Monetary Policy Meeting, capping a ten year run as one of the most dynamic central bankers in the world.
Tomorrow is also the day BEFORE the first day on which the Japan Post Bank (7182 JP) mega offering could price and the last day of bookbuild indications.
I am not saying this is not coincidence, but it is worth thinking about the interplay.

StubWorld: Swire Pac/Prop & Cathay FY22 Results

By David Blennerhassett

There were some positive takeaways from Swire stable’s set of FY22 accounts; however, the Hong Kong office segment faces increased vacancy rates, and new supply in 2023.
Preceding my comments on Swire are the current setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Pavilion REIT Placement – MY$2.2bn (US$487m) Acquisition Expected to Increase Distributable Income

By Shifara Samsudeen, ACMA, CGMA

Pavilion Real Estate Investment Trust (PREIT MK) is expected to raise MYR$1.27bn (US$280m) to partially fund its acquisition of Pavilion Bukit Jalil mall (PBJ mall).
Non-Interested unitholders will vote on the planned acquisition in the next EGM to be held on 22 March 2023.
In this note, we will discuss the deal dynamics, details on the planned acquisition, and the REIT’s recent financial performance.

Itaú Unibanco Offer for Itaú Corpbanca Minorities; Good Value or Value Trap?

By Victor Galliano

At first sight, Itaú Unibanco’s offer for the minorities of Itaú Corpbanca is great value for Itaú Unibanco shareholders, but we do not believe that this is so clear cut
In Chile, Itaú Corpbanca is addressing its scale issue through cost control and its digital banking strategy; Colombia is more of a challenge, not helped by President Petro’s anti-business attitude
We see this as a fair offer for Itaú Corpbanca shareholders, given the drag from Colombia; yet it needs a successful Colombia disposal to create value for Itaú Unibanco shareholders

Morning Views Asia: Powerlong Commercial Management Holdings

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.

Powerlong Commercial Management Holdings

European Assets Trust – Tentative signs of recovery in Europe

By Edison Investment Research

In times of economic stress or extreme investor risk aversion, small-cap stocks are frequently indiscriminately sold down by investors, which has created significant headwinds for European Assets Trust (EAT) over the past 12 months. Factors like stock market volatility created by the war in Ukraine and associated secondary effects such as supply chain disruption, lower economic growth, higher inflation and more hawkish central bank activity have contributed to weak investor sentiment towards European small-cap stocks. Also, the rotation away from long-duration growth assets has presented seismic challenges for managers regardless of asset class, but especially for European smaller companies. In our November 2022 update on EAT, we made the case for backing the experienced management duo, and continue to believe that once markets focus on the fundamentals of the innovation, growth and cheapness in the market, EAT and European smaller companies are well placed to outperform again.

The Scramble for Silvergate Alternatives

By Kaiko

Crypto optimists have said for the last few months that the worst is behind us.
Just in the last year we’ve seen the collapse of crypto hedge funds, lenders and exchanges.
They say the bad actors have been removed from the space and there’s only good news from here

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Mar 10

Daily Brief Consumer: Techtronic Industries, JD.com Inc., Yashili International Holdings, DPC Dash, MGM China Holdings, Perfect Medical Health, Continental AG, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True
JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.
Yashili (1230 HK): It’s Taken a While – Pre-Condition Satisfied
DPC Dash IPO: No Match For Pizza Hut
MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames
Yashili (1230 HK): China Mengniu’s Scheme Triggered
Perfect Medical: China Operations Update, Suggests 100% Upside From Here
Continental: +12% in Under Three Weeks. Strong Results. Take Profit.
Human Capital Measures Should Not Be a Case Of “Plowing the Field and Forgetting the Seeds”

Techtronic’s Rebuttal: Some Clarifications Are Too Good to Be True

Following Jehoshaphat’s allegations that profits are inflated dramatically over a decade with manipulative accounting, Techtronic Industries (669 HK) has issued a rebuttal clarifying that the accusations are without any merit.
TTI’s beyond comparison performance is due to world class brands such as Milwaukee, Ryobi and Hoover which have helped top line grow at 13% CAGR over the past 13 years.
Nevertheless, we have assessed some of the company’s clarifications here which seemed too good to be true.

JD.com (9618 HK): 2022, Historical Low Growth, But Historical High Margin.

By Ming Lu

JD’s revenue growth rate reached its historical low in 2022, but we believe it will recover in following two years.
JD’s operating margin hit its historical high in 2022 and we believe the improvement will continue.
We believe EPS will grow by more than 100% in 2022 and the stock has an upside of 42%.

Yashili (1230 HK): It’s Taken a While – Pre-Condition Satisfied

By Arun George

Yashili International Holdings (1230 HK) announced that the pre-condition is satisfied – around 10 months since the 6 May 2022 announcement of China Mengniu Dairy Co (2319 HK)’s HK$1.20 offer.
Yashili has received an extension for the despatch of the scheme document to a date no later than 31 August. We think the scheme document is despatched by early April.
The scheme risk is low. At the current price and for a late May payment, the gross and annualised spread is 2.6% and 12.2%, respectively.

DPC Dash IPO: No Match For Pizza Hut

By Oshadhi Kumarasiri

After giving up the IPO plan late last year, DPC Dash (1405 HK) has restarted its IPO with hopes of capitalising on China’s reopening boom.
DPC Dash is not positioned to benefit from the ending of lockdowns. It also didn’t outperform Pizza Hut when dine-in demand was absent.
Therefore, DPC Dash is likely going to remain a minor player in a segment dominated by Pizza Hut.

MGM China and Its US Parent Bought Together Maximizes Potential Returns on Covid Endgames

By Howard J Klein

What may appear duplicative asset segment in MGM actually spreads risk and improves overall margin of safety for both stocks.
MGM China is a pure Macau play while MGM Resorts International is a strong bet on global reach of its gaming properties.
Buying both is insurance against a possible recession downside because of the geographically and demographically diverse customer bases of both enities.

Yashili (1230 HK): China Mengniu’s Scheme Triggered

By David Blennerhassett

The 25% stake sale/acquisition in Yashili International (1230 HK) was expected five business days after the Dumex China Disposal – and that is what transpired. This satisfies the Scheme conditions.
After ten months, Danone (BN FP) offloaded its chilled dairy business, acquired Yashili’s Dumex China baby formula ops, and offloaded its 25% stake in Yashili to China Mengniu (2319 HK).
Now Yashili minority shareholders will get their chance to vote for China Mengniu’s Scheme, potentially in early May.

Perfect Medical: China Operations Update, Suggests 100% Upside From Here

By Sameer Taneja

Perfect Medical Health (1830 HK) released an operating update during market hours (see: Operations Update) that signaled China has turned around to almost normalized (pre-covid) revenues.
While Feb is very late in the financial year (March End FY), and data turning around now does not move the needle for FY23e, it bodes well for FY24e profits.
The stock trades at 14.7x/11.5x FY23e/24e PE(x) with a 7.2%/9.2% FY23e/FY24e dividend yield with net cash and LT investments at 14% of market cap), making this an exciting investment.

Continental: +12% in Under Three Weeks. Strong Results. Take Profit.

By Alexis Dwek

2022: Consolidated sales of €39bn (+16.7 percent); Adjusted EBIT of €2bn (+5.2 percent). CEO: We succeeded in reaching sales and earning targets for the year, “a respectable result”
2023: Conti expects higher earnings supported by sustained market recovery
Our TP remains €86. Given the strong performance since our initial note, the recovery in margins being better understood and €1bn in headwinds in 2023, we recommend taking profit here

Human Capital Measures Should Not Be a Case Of “Plowing the Field and Forgetting the Seeds”

By Aki Matsumoto

More companies have made progress in the last 6 months as more companies have made only human capital policies. Specific measures will probably not become visible until April or later.
If companies are required to disclose their policies in a hasty manner, they may end up with a list of unrealistic measures in addition to policies that have no substance.
Companies are expected to spend the next year disseminating their human capital policies internally and implementing specific human capital measures to strengthen their own competitiveness.

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Mar 09

Daily Brief Australia: Carsales.Com Ltd, X2M Connect ltd, Recce Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Carsales Renounceable Entitlement Offer – Following up on a Decade-Old Acquisition
X2M Connect Limited – Solid Operating Leverage Demonstrated in H1 23
Recce Pharmaceuticals – Seeking a breakthrough in sepsis

Carsales Renounceable Entitlement Offer – Following up on a Decade-Old Acquisition

By Ethan Aw

Carsales.Com Ltd (CAR AU) aims to raise around US$330m (A$501m) via a renounceable entitlement offer. The deal is relatively large to digest at 28.2 days of three month ADV.
The use of proceeds will be to acquire 40% of Webmotors SA and strengthen its balance sheet.
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

X2M Connect Limited – Solid Operating Leverage Demonstrated in H1 23

X2M Connect Limited (ASX:X2M) has reported a 23% reduction in RaaS-adjusted EBITDA losses (to $2.4m) for H1 FY23 on the back of operating leverage from 96% sales growth, 135% gross profit growth and just a 14% increase in operating costs.
While sales growth was driven by hardware sales (connected devices +100% over the pcp), hardware margins have improved ~500bps and connected devices in the field ultimately drive SaaS/maintenance fees (platform fees).
Cash at bank was $3.05m with an additional net $0.5m received in January 2023 from an R&D tax credit.

Recce Pharmaceuticals – Seeking a breakthrough in sepsis

By Edison Investment Research

Recce Pharmaceuticals is developing a novel class of broad-spectrum synthetic anti-infective drugs to which, so far, all tested bacteria have been unable to develop resistance. This could be a very desirable trait given widespread concerns about antimicrobial resistance (AMR). The lead indication for Recce’s synthetic polymer antibiotic, Recce 327 (R327), is sepsis, a substantial area of unmet need with significant mortality and high costs of care. A Phase Ib/IIa multiple-dose study of an intravenous (IV) R327 formulation in healthy subjects is planned to start in H1 CY23. The company is also assessing other infection indications, such as complicated urinary tract infections (UTIs). A topical (spray-on) formulation of R327 is also being assessed in human trials for burn wound infections, and a new study for diabetic foot infections is expected to start shortly. We value Recce at A$497m, or A$2.79/share.

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Mar 09

Daily Brief South Korea: DGB Financial Group, HYBE and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Meritz Merger Approved: Let’s Now Discuss Key Dates & Entry Points For LONG DGB Financial
HYBE: May Be Seeking to Raise As Much as 1 Trillion Won (Will Investors Support This Plan)?

Meritz Merger Approved: Let’s Now Discuss Key Dates & Entry Points For LONG DGB Financial

K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.
From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.
We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.

HYBE: May Be Seeking to Raise As Much as 1 Trillion Won (Will Investors Support This Plan)?