Smartkarma Daily Briefs

As expected, Japan Post Bank (7182 JP) has announced their ToSTNeT-3 buyback of ¥70 billion on Day 1 of the potential TN-3 Buyback period.
Also as somewhat expected, investors and traders pushed up the stock price today after the news there would be a buyback, hoping to buy then sell, or short today’s close.
Japan Post Holdings (6178 JP) will offer shares. Others obviously will too. How this works and what you have to watch out for discussed below.

Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows

Today after the close, Kansai Paint (4613 JP) announced a passel of crossholders would sell 26.2mm shares in a Secondary Offer. They also announced a buyback.
The buyback, spending up to ¥12bn to buy back up to 8.2mm shares, starts after the Offering is delivered, and extends until 15 March 2024.
This offering reduces cross-holder “strategic holdings” by a third. This will impact FFW. Complicated index impacts will occur over time.

TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023

By Janaghan Jeyakumar, CFA

Some low liquidity stocks in the TOPIX Index carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will enjoy buying flows from passive trackers of TOPIX.
In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2023.

Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside

By Mark Chadwick

Investors have completely ignored “The New MCG”. If management can hit EBITDA targets, we see over 50% upside for the stock
Rapid cost cuts of Y135 billion will be a catalyst for the share price
Transformation to leaner, more focused group with strategic growth in EVs, hydrogen, semicon and health

Kansai Paint Placement – Hardly an Outstanding First Offering Since Listing

By Ethan Aw

Kansai Paint’s shareholders aim to raise around US$291m via a secondary follow-on offering. This is a large deal to digest, at 34 days of three month ADV.
The firm has also mentioned that it will conduct a share buyback of up to 8.2m shares worth approximately 3.5% of TSO or US$87.6m (JPY12bn). This will begin after settlement.
In this note, we will talk about the placement and run the deal through our ECM framework.

Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead

By Michael Causton

The convenience store sector was one of the worst hit by a downturn in sales during the early pandemic, but all three major chains have implemented changes and improvements.
Results for the first three quarters of FY2022 show that the big companies are almost all trading above 2019 levels already.
While top line growth at home will be increasingly hard to come by in a saturated sector, innovations will help boost same-store sales a little and profit a bit more.

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Mar 01

Daily Brief India: Nexus Select Trust, Varun Beverages Ltd, Dr. Reddy’s Laboratories, China Jinmao Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Nexus Select Trust Pre-IPO – The Positives – Forecasting Robust Growth
Varun Beverages Ltd- Forensic Analysis
Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio
Morning Views Asia: China Jinmao Holdings, Vedanta Resources

Nexus Select Trust Pre-IPO – The Positives – Forecasting Robust Growth

By Sumeet Singh

Nexus Select Trust (NST IN) is looking to raise up to US$500m in its upcoming India IPO.
NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
In this note, we will talk about the positive aspects of the deal.

Varun Beverages Ltd- Forensic Analysis

By Nitin Mangal

Varun Beverages Ltd (VBL IN) is engaged in manufacturing, selling, bottling and distribution of beverages of Pepsi brand.
It operates mostly in India but also looks after, Sri Lanka, Nepal, Zambia, Morocco and Zimbabwe, as per franchisee agreement with PepsiCo India.
Key forensic concerns include unusual accounting with respect to containers, trend in discounting, advances to a related entity, etc and some governance alarms.

Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio

By Tina Banerjee

Dr. Reddy’s Laboratories (DRRD IN) entered into a definitive agreement to acquire the U.S. retail generic prescription product portfolio of Mayne Pharma (MYX AU) for $105M.
The deal will add approximately 85 approved generic products and four pipeline products. For the fiscal year ending June 30, 2022, this portfolio generated revenue of $111M.
Considering the revenue potential, the acquisition price seems to be reasonable. Being a high margin and limited competition portfolio, the acquisition will be earnings accretive for Dr. Reddy’s.

Morning Views Asia: China Jinmao Holdings, 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
Vedanta Resources

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Mar 01

Daily Brief Industrials: Arwana Citramulia, Mineral Resources, ACCO Brands, XP Power Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Arwana Citramulia (ARNA IJ) – Capacity-Driven Future
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible
ACCO: Restructuring the Cash Machine
XP Power – Entering FY23 with positive momentum

Arwana Citramulia (ARNA IJ) – Capacity-Driven Future

By Angus Mackintosh

Arwana Citramulia released a solid set of numbers for FY2022 but we expect growth to continue for the next two years driven by new capacity in higher margin products.
The company’s new capacity will be focused on expanding its porcelain tile business but it will also expand its higher-margin DigI UNO ceramic product, which will be positive for margins.
Arwana Citramulia (ARNA IJ) remains a top-quality and high-growth industrial choice in Indonesia. Valuations are attractive with a single-digit PER and high teens EOS growth for the next two years.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible

By Brian Freitas

The review period for the March rebalance ended yesterday. Announcement of the changes will be made on 10 March and will be implemented at the close on 17 March.
Mineral Resources (MIN AU) is a potential index inclusion if it is added to the index universe with lithium revenues nearing the 50% threshold.
ioneer Ltd (INR AU) is very close to the 98% deletion threshold and could be removed from the index at the March rebalance.

ACCO: Restructuring the Cash Machine

By Hamed Khorsand

ACCO affirmed our industry concerns when it reported fourth quarter results that were lower than consensus estimates and resulted in free cash flow falling shy of the Company’s forecasts.
ACCO has a business that can generate significant amount of free cash flow the second half of each year depending on how much volume it can sell
ACCO is undertaking a restructuring effort to improve efficiencies to generate greater free cash flow from a tougher retail environment.

XP Power – Entering FY23 with positive momentum

By Shifara Samsudeen, ACMA, CGMA

XP Power (XP) battled through FY22 to meet strong customer demand despite numerous supply chain challenges. H2 performance was significantly better than H1 as supply chain pressures started to ease, and XP enters FY23 with a record £308m order book. The company is targeting 10% organic revenue growth across the cycle and a return to historic profitability levels; we expect XP to make progress towards these targets in FY23 and FY24 while reducing gearing.

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Mar 01

Daily Brief TMT/Internet: Appier Group, HKBN Ltd, KMW Co Ltd, WCP, iQIYI Inc, Meta Platforms (Facebook), Salesforce.Com Inc, Chipmos Technologies, Shenandoah Telecommunications Company, Pinduoduo and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023
HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer
Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9
End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023
IQiyi: Upbeat 4Q Is Only Temporary
Meta Platforms: Even More Bullish
Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know
ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle
SHEN: Slower Adds from a Larger Network
[Pinduoduo (PDD US) Target Price Change]: Cut TP for Higher Losses from Temu

TOPIX Index Upweights: Final Predictions for The “The Big April Basket” 2023

By Janaghan Jeyakumar, CFA

Some low liquidity stocks in the TOPIX Index carry a liquidity factor of 0.75x resulting in their actual index weights being smaller than their default weights.
These names are reviewed every April and if the liquidity factor of a stock gets removed, the stock will enjoy buying flows from passive trackers of TOPIX.
In this insight, we take a look at Quiddity’s final predictions for the names that are likely to see their Liquidity Factors removed in April 2023.

HKBN (1310 HK): Trading Halt, HGC’s Rumoured Takeover Offer

By Arun George

Bloomberg reported HKBN Ltd (1310 HK) has received a takeover offer from HGC Global Communications at a valuation of more than US$1 billion (implies around HK$6 per share).
The shares rose 11.6% to HK$5.59 before entering a trading halt. The rumoured price is underwhelming compared to historical multiples and share prices.
HKBN has a relatively concentrated shareholder register which suggests that the rumoured takeover premium of around 20% is not going to cut it.

Long Short Setup on Douzone Bizon & KMW with K-New Deal Rebalancing on March 9

By Sanghyun Park

Another valuable long-short opportunity has arisen this time with K-New Deal rebalancing. The pair consists of Douzone Bizon and KMW, which have switched places in the Internet Index’s top three.
Due to their relatively low trading volume, the passive flow size (x ADTV) that this pair will face at the closing price on March 9th is expected to be significant.
This creates sufficient opportunities for a Long-Short setup in terms of day or swing trading. As KMW is a constituent of the KOSDAQ 150, it is possible to short KMW.

End of Mandatory Lock-Up Periods for 35 Companies in Korea in March 2023

By Douglas Kim

We discuss end of the mandatory lock-up periods for 35 stocks in Korea in March 2023, among which 8 are in KOSPI and 27 are in KOSDAQ.
These 35 stocks on average could be subject to further selling pressures in March and could underperform relative to the market.
Among these 35 stocks, the top 5 market cap stocks include Nh Investment & Securities, WCP, Bionote, Jeio, and Dreamtech.

IQiyi: Upbeat 4Q Is Only Temporary

IQIYI Inc (IQ US) ‘s share price is up 30.8% YTD primarily driven by upbeat 4Q2022 results. The main highlight was strong increase in members alongside improvement in OPM.
The company’s aggressive cost cutting measures have helped reach operating profits, however, we don’t think this is sustainable given user growth depends on content.
We expect iQiyi’s 1Q2023E results to be strong driven by the launch of The Knockout series, however, further cutting down costs will impact the company’s long-term prospects.

Meta Platforms: Even More Bullish

By Aaron Gabin

The recently announced Meta Verified could generate an incremental $2.2B in revenues.
Incremental layoffs being reported could amount to $5B in incremental savings this year.
Between the two reports, we could easily see 10% upside to EPS.

Salesforce.com’s Upcoming Earnings: 3 Things You Need To Know

By Vladimir Dimitrov, CFA

Share buybacks and stock-based compensation also will be an important part of the upcoming earnings release.
GAAP operating profitability will be in the spotlight as the company lays off a significant amount of its workforce.
The level of share buybacks will be a key part of Salesforce’s growth strategy.

ChipMOS: Semiconductor Packaging & Testing Signs of Recovery, Cheap Through Cycle

By Vincent Fernando, CFA

ChipMOS results missed expectations with capacity utilization falling, dragging down profitability.
The company sees 1Q23E as the bottom for its performance, followed by a 2Q23E rebound. However, it says it believes the Memory industry may take longer to recover.
We believe ChipMOS is cheap if one looks through the cycle, and it is relatively unloved by the Street hence the expectations bar is set low.

SHEN: Slower Adds from a Larger Network

By Hamed Khorsand

SHEN reported better than expected fourth quarter revenue as more customers subscribe to faster broadband speeds
Our focus is on the seasonally low number of customer additions in the quarter even though SHEN was building out its optical fiber network.
Our negative bias has been built on SHEN’s capital expenditure plans requiring the Company to build debt and the timing of when SHEN would reach free cash flow positive

[Pinduoduo (PDD US) Target Price Change]: Cut TP for Higher Losses from Temu

By Shawn Yang

We conducted interviews with Temu and Shein merchants. We expect Temu to be more aggressive in expansion. Most metrics of Temu are improving, and it creates increasing pressure on Shein.
Yet, investors should be aware about Temu’s widening losses and the possible margin drag in the domestic eCommerce business due to the subsidy campaign launched by JD.
We revised our forecasts on Temu’s GMV/non-GAAP net loss in 2023 from USD 2bn/(1)bn to USD 5bn/(3)bn. We cut PDD’s TP to US$100.

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Mar 01

Daily Brief Energy/Materials: Kansai Paint, Posco Chemical Co Ltd, Mitsubishi Chemical, Newcrest Mining, Air Products & Chemicals, Inc, Gold, Cameco Corp, Tupras-Turkiye Petrol Rafinerileri, Holcim and more

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

In today’s briefing:

Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows
KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms
Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside
(Mostly) Asia M&A, Feb 2023: Newcrest Mining, S.M Entertainment, Kanematsu, Nissin Electric
Kansai Paint Placement – Hardly an Outstanding First Offering Since Listing
A Real Dividend Grower
The Highlights of USDAs 2023 Commodity Outlook // Where Stock Prices Are Headed in 2023
Cameco: The Tide Has Turned, Bet On Momentum
Another Solid Quarter; Maintain Buy Recommendation
Holcim: +15% Since Initial Note. 2022 a Remarkable Year!

Kansai Paint (4613 JP) Secondary Offering & Buyback and All the Subsequent Flows

Today after the close, Kansai Paint (4613 JP) announced a passel of crossholders would sell 26.2mm shares in a Secondary Offer. They also announced a buyback.
The buyback, spending up to ¥12bn to buy back up to 8.2mm shares, starts after the Offering is delivered, and extends until 15 March 2024.
This offering reduces cross-holder “strategic holdings” by a third. This will impact FFW. Complicated index impacts will occur over time.

KRX New Deal Index Rebalance Preview: Potential Flows as Announcement Looms

By Brian Freitas

The review period for the March rebalance ended on 31 January, changes will be announced in the next few days and implemented at the close of trading on 9 March.
We forecast one add/delete for the Secondary Battery Index and Game Index, and a couple of adds/deletes for the BBIG Index. There will be a lot of capping changes.
The largest inflows are expected on Posco Chemical (003670 KS) and Douzone Bizon (012510 KS); the largest outflows are expected on SK Innovation (096770 KS) and KMW (032500 KS).

Mitsubishi Chemical (4188) | Unlocking Value – 50% Upside

By Mark Chadwick

Investors have completely ignored “The New MCG”. If management can hit EBITDA targets, we see over 50% upside for the stock
Rapid cost cuts of Y135 billion will be a catalyst for the share price
Transformation to leaner, more focused group with strategic growth in EVs, hydrogen, semicon and health

(Mostly) Asia M&A, Feb 2023: Newcrest Mining, S.M Entertainment, Kanematsu, Nissin Electric

By David Blennerhassett

For the month of February, 14 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$23bn.
The average premium for the new deals announced (or first discussed) in February was 34%.
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Kansai Paint Placement – Hardly an Outstanding First Offering Since Listing

By Ethan Aw

Kansai Paint’s shareholders aim to raise around US$291m via a secondary follow-on offering. This is a large deal to digest, at 34 days of three month ADV.
The firm has also mentioned that it will conduct a share buyback of up to 8.2m shares worth approximately 3.5% of TSO or US$87.6m (JPY12bn). This will begin after settlement.
In this note, we will talk about the placement and run the deal through our ECM framework.

A Real Dividend Grower

By Pearl Gray Equity and Research

One of top three global industrial gas suppliers well positioned to capitalise on renewables growth like hydrogen
Unbroken history of annual dividend increases for the past 40 years
Risks include execution hiccups and cost overruns

The Highlights of USDAs 2023 Commodity Outlook // Where Stock Prices Are Headed in 2023

By The Commodity Report

The agency estimates that roughly 46% of Ukraine’s wheat production lies in areas where the war is currently threatening the planting process.
US Soybean Crush Margin remains very high and therefore continues to support soybean meal prices
USDA is expecting a larger uptick in planted acres for Wheat and Rice but a large drop in planted acres for Cotton.

Cameco: The Tide Has Turned, Bet On Momentum

Cameco Corporation is in the middle of a substantial turnaround, which investors could soon price.
The company’s financial results improved in 2022, it has secured a record number of supply contracts.
The momentum anomaly is set to play its hand, but the stock still possesses valuation concerns, according to the company.

Another Solid Quarter; Maintain Buy Recommendation

Tupras is Turkey’s largest refiner in Turkey supplying roughly 55% of Turkey’s petroleum product needs and 57% of Turkey’s storage capacity. The refineries produce a full range of refined petroleum products including gasoline
Company is owned 53% by KOC, the largest private conglomerate in Turkey that accounts for an estimated 7% of the country’s GDP.
Tupras produced a stellar set of 4Q 2022 results reflecting significant margin improvement; Revenue and EBITDA were up 104% and 212% over 4Q 2021 respectively. We maintain our buy recommendation

Holcim: +15% Since Initial Note. 2022 a Remarkable Year!

By Alexis Dwek

2022: A year of record performance and successful transformation for Holcim
Solutions & Products reaching 19% of net sales and fast expansion in the most attractive market of North America
We increase our target price to CHF 71, implying 22% upside from here

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Mar 01

Daily Brief Industrials: Arwana Citramulia, Mineral Resources, ACCO Brands, XP Power Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Arwana Citramulia (ARNA IJ) – Capacity-Driven Future
MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible
ACCO: Restructuring the Cash Machine
XP Power – Entering FY23 with positive momentum

Arwana Citramulia (ARNA IJ) – Capacity-Driven Future

By Angus Mackintosh

Arwana Citramulia released a solid set of numbers for FY2022 but we expect growth to continue for the next two years driven by new capacity in higher margin products.
The company’s new capacity will be focused on expanding its porcelain tile business but it will also expand its higher-margin DigI UNO ceramic product, which will be positive for margins.
Arwana Citramulia (ARNA IJ) remains a top-quality and high-growth industrial choice in Indonesia. Valuations are attractive with a single-digit PER and high teens EOS growth for the next two years.

MVIS Global Rare Earth/Strategic Metals Index Rebalance Preview: One Add, One Delete Possible

By Brian Freitas

The review period for the March rebalance ended yesterday. Announcement of the changes will be made on 10 March and will be implemented at the close on 17 March.
Mineral Resources (MIN AU) is a potential index inclusion if it is added to the index universe with lithium revenues nearing the 50% threshold.
ioneer Ltd (INR AU) is very close to the 98% deletion threshold and could be removed from the index at the March rebalance.

ACCO: Restructuring the Cash Machine

By Hamed Khorsand

ACCO affirmed our industry concerns when it reported fourth quarter results that were lower than consensus estimates and resulted in free cash flow falling shy of the Company’s forecasts.
ACCO has a business that can generate significant amount of free cash flow the second half of each year depending on how much volume it can sell
ACCO is undertaking a restructuring effort to improve efficiencies to generate greater free cash flow from a tougher retail environment.

XP Power – Entering FY23 with positive momentum

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Mar 01

Daily Brief Health Care: Dr. Reddy’s Laboratories, Gracell Biotechnologies Inc, BeiGene, Oryzon Genomics and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio
Gracell Biotechnologies Inc (GRCL.US) – The Overall Outlook for CAR T Therapy Is Highly Uncertain
[BeiGene, LTD. (BGNE US) Target Price Change]: Non-China Growth Drives the Biz…Maintain BUY
Oryzon Genomics – KOL event puts near-term catalysts in the spotlight

Dr. Reddy’s Laboratories (DRRD IN): New Acquisition to Bolster US Generic Product Portfolio

By Tina Banerjee

Dr. Reddy’s Laboratories (DRRD IN) entered into a definitive agreement to acquire the U.S. retail generic prescription product portfolio of Mayne Pharma (MYX AU) for $105M.
The deal will add approximately 85 approved generic products and four pipeline products. For the fiscal year ending June 30, 2022, this portfolio generated revenue of $111M.
Considering the revenue potential, the acquisition price seems to be reasonable. Being a high margin and limited competition portfolio, the acquisition will be earnings accretive for Dr. Reddy’s.

Gracell Biotechnologies Inc (GRCL.US) – The Overall Outlook for CAR T Therapy Is Highly Uncertain

By Xinyao (Criss) Wang

Although the pipeline has characteristics, Gracell’s R&D progress cannot catch up with the speed of the transformation of global CGT investment climate. Its commercialization performance could be much lower than expected.
There’s “practical obstacles” for the use of CAR-T, which cannot solve the actual clinical needs at this stage. Doctors would choose other solutions. So, the actual market space is small.
Investors can do short-term trade when Gracell’s valuation is lower than peers, but due to the highly uncertain long-term prospects of this company, we do not recommend long-term hold.

[BeiGene, LTD. (BGNE US) Target Price Change]: Non-China Growth Drives the Biz…Maintain BUY

By Shawn Yang

BeiGene (BGNE) reported C4Q22 top line missing our estimate by 13%. Main reason for the miss is weaker than expected BRUKINSA and Tislelizumab sales in China;
While China growth does appear to be a drag, international sales is robust and has potential. Consensus is also reasonable with gross margin having upside;
We cut TP from US$225 to US$219 and maintain BUY. Reliance on international sales heightens BGNE’s political risk.

Oryzon Genomics – KOL event puts near-term catalysts in the spotlight

At Oryzon’s recent key opinion leader (KOL) event, management elaborated on the near-term clinical catalysts for its lead assets iadademstat, in oncology, and vafidemstat, in central nervous system (CNS) indications. Following the positive results of the ALICE trial, the company is fast approaching the initiation of the Phase Ib FRIDA study for iadademstat in FLT3+ relapsed/refractory (r/r) acute myeloid leukaemia (AML) patients. Management believes the r/r AML setting may represent a faster route to market for iadademstat, targeting a patient population with currently limited and sub-optimal treatment options. Management originally guided for FRIDA to be initiated by end-2022; however, this delay has been attributed to slower-than-expected trial site activation. Management has communicated that trial site activation is now progressing and that FRIDA could begin imminently. Additionally, interim data analysis from the PORTICO study in borderline personality disorder (BPD) in Q123 represents a significant catalyst for vafidemstat in the company’s leading CNS programme.

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Mar 01

Daily Brief Consumer: Astra International, Varun Beverages Ltd, Coupang, Heineken Holding NV, Lawson Inc, Sheng Siong, L’Oreal SA, Trip.com, China Yuhua Education, Olympic Industries and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Astra International (ASII IJ) – Rewarding Investors for an Extraordinary Year
Varun Beverages Ltd- Forensic Analysis
What to Check at Coupang Earnings Call Tomorrow
FEMSA/Heineken Holding Chain: Stake Sales and Share Price Spread
Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead
Sheng Siong (SSG SP): Slowing Sales. Dividend Yield Not Rewarding Enough
L’Oreal: Beauty in the Making
On the Path to Recovery
China Yuhua Education (6169 HK): Issues Are Not over Yet
Bangladesh Stock Picks | Quarterly Updates | OLYMPI, SQTT, BPML

Astra International (ASII IJ) – Rewarding Investors for an Extraordinary Year

By Angus Mackintosh

Astra International’s results reflected its exposure to commodities, especially coal, through heavy equipment and mining through United Tractors (UNTR IJ) but most divisions booked growth as the economy recovered.
The company’s core auto and financing business made much more than half of its profits and also contributed to its growth with a slower performance from agri-business and construction.
Astra International (ASII IJ) announced a generous 85%-dividend payout to reward investors for its coal exposure in 2022, implying a 10% dividend yield. Valuations remain significantly below historical averages.

Varun Beverages Ltd- Forensic Analysis

By Nitin Mangal

Varun Beverages Ltd (VBL IN) is engaged in manufacturing, selling, bottling and distribution of beverages of Pepsi brand.
It operates mostly in India but also looks after, Sri Lanka, Nepal, Zambia, Morocco and Zimbabwe, as per franchisee agreement with PepsiCo India.
Key forensic concerns include unusual accounting with respect to containers, trend in discounting, advances to a related entity, etc and some governance alarms.

What to Check at Coupang Earnings Call Tomorrow

By Sanghyun Park

We first check whether additional cost savings have been achieved in the center and whether there has been any deterioration in short-term liquidity due to the hasty pursuit of automation.
Then, we check the soundness of new businesses such as quick commerce, which boasts delivery within 30 minutes but carries the risk of deteriorating short-term profitability.
Lastly, we check how seriously Coupang’s real estate cost structure has deteriorated and assess the risk that this could lead to devaluation by potentially undermining Coupang’s growth premium.

FEMSA/Heineken Holding Chain: Stake Sales and Share Price Spread

By Jesus Rodriguez Aguilar

Following an accelerated bookbuild, Femsa’s interest in Heineken decreased to 5.1% and in Heineken Holding to 6.3%. Overall the economic participation in Heineken Group decreased from 14.76% to 8.13%.
At current market prices, Heineken could afford buying half of the remaining holdings of FEMSA (both Heineken and Heineken Holding), and still be within 2.5x leverage target (2023e consensus estimates).
The discount has been tightening since Q3 2022, so far to 16.3%, still above the 10.4% average of the last ten years, and rather large considering such a simple structure.

Japanese Convenience Stores: Back with a Plan but Muted Growth Ahead

By Michael Causton

The convenience store sector was one of the worst hit by a downturn in sales during the early pandemic, but all three major chains have implemented changes and improvements.
Results for the first three quarters of FY2022 show that the big companies are almost all trading above 2019 levels already.
While top line growth at home will be increasingly hard to come by in a saturated sector, innovations will help boost same-store sales a little and profit a bit more.

Sheng Siong (SSG SP): Slowing Sales. Dividend Yield Not Rewarding Enough

By Devi Subhakesan

Sheng Siong reported a notable decline in same-store sales and operating profits (ex-one off income) for 6M/FY Dec2022 even as it marginally increased annual dividend payout to 70.5%.
With Singapore’s 10-year Gov. bond yields at 3.34% (vs. sub1%, 3 years ago), dividend yield players like Sheng Siong (SSG SP) may not offer attractive risk-reward at current levels.
Sheng Siong has traded at dividend yields ranging 3%-3.9% over past 3 years, mostly at a premium to Gov. bond yields. Given muted dividend growth potential, stock faces downside risk.

L’Oreal: Beauty in the Making

By Alexis Dwek

L’Oréal is a high-quality company that will keep delivering in the years to come and keep outperforming the market.
In the short-term, we see further growth drivers moving forward, such as the reopening of China, as well as a resumption of Chinese outbound travel.
In the longer-term, L’Oréal sees untapped market opportunities in many growth regions, such as Brazil, India, Indonesia, and Mexico; markets that are seeing new interest in Beauty.

On the Path to Recovery

Trip.com reported a strong growth in booking volumes during CNY. Booking volumes remain strong in Feb 2023
Outbound travel is likely to accelerate in 2H 2023
Ending almost three-years of zero-Covid policy, China’s domestic and outbound travel enjoyed a long-awaited boom post China’s reopening and lifting of travel restrictions.

China Yuhua Education (6169 HK): Issues Are Not over Yet

By Osbert Tang, CFA

Despite the rally in share price after trading resumption and a reasonable FY22 result, there are still several tough issues faced by China Yuhua Education (6169 HK).
Cash management, especially for offshore; no dividend payout in the near term; availability of CB refinancing and weakened margins are just some of the challenges.
Conversion to profit-basis for its schools and the operating outlook for new schools are also added issues that it needs to address. In our view, risks still outweigh return.

Bangladesh Stock Picks | Quarterly Updates | OLYMPI, SQTT, BPML

By Pranav Bhavsar

Olympic Industries (OLYMPI BD) posted a strong set of financial results, and the current valuations are not overly demanding, making OLYMPI attractive.
Square Textiles (SQTT BD) was impacted by a strong dollar and a weak demand environment. The current valuations reflect the worst-case scenario, which makes SQTT an attractive candidate to watch.
Although Bashundhara Paper Mills (BPML BD) revenues have remained steady margins have been impacted. Therefore, it may be wise to wait for a better entry point before investing in BPML.

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Mar 01

Daily Brief Financials: Japan Post Bank, GK Goh Holdings, Nexus Select Trust, Barclays PLC, DBS, Law Debenture Corp Plc/Fund, China Jinmao Holdings, NFT, Supermarket Income REIT and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Japan Post Bank (7182 JP) ¥70bn ToSTNeT-3 Buyback
G. K. Goh Holdings (GKG SP): Conditional VGO at S$1.26
Nexus Select Trust Pre-IPO – The Positives – Forecasting Robust Growth
Broadly Stable Results; Well Capitalised
FY23 NIM Guidance Trimmed Despite Earnings Beat
The Law Debenture Corporation – Standing the test
Morning Views Asia: China Jinmao Holdings, Vedanta Resources
Sporting Crypto – 27th Feb 2023: Are NBA Top Shots Securities?
Supermarket Income REIT – Reducing NAV but focusing on income

Japan Post Bank (7182 JP) ¥70bn ToSTNeT-3 Buyback

As expected, Japan Post Bank (7182 JP) has announced their ToSTNeT-3 buyback of ¥70 billion on Day 1 of the potential TN-3 Buyback period.
Also as somewhat expected, investors and traders pushed up the stock price today after the news there would be a buyback, hoping to buy then sell, or short today’s close.
Japan Post Holdings (6178 JP) will offer shares. Others obviously will too. How this works and what you have to watch out for discussed below.

G. K. Goh Holdings (GKG SP): Conditional VGO at S$1.26

By Arun George

GK Goh Holdings (GKG SP) has disclosed a voluntary conditional offer from management at S$1.26 per share, a 38.5% premium to the undisturbed price (24 February).
The offer price is final barring a competitive situation. The VGO has a 90%+ minimum acceptance condition which can be waived or lowered. Irrevocables represent 62.89% of outstanding shares.
The offer price is attractive in comparison to historical trading ranges. The offer will remain open for at least 28 days which points to the earliest of 11 April close.

Nexus Select Trust Pre-IPO – The Positives – Forecasting Robust Growth

By Sumeet Singh

Nexus Select Trust (NST IN) is looking to raise up to US$500m in its upcoming India IPO.
NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
In this note, we will talk about the positive aspects of the deal.

Broadly Stable Results; Well Capitalised

Barclays PLC (Barclays; “the bank”) was established in 1690 and is headquartered in London. The bank has a strong presence in the UK.
The bank has two principal business segments – Barclays UK and Barclays International. Barclays international is split into corporate and investment banking (CIB) and consumer, cards and payments (CCP).
The bank has a global presence, with a focus on the UK, EU and the US.

FY23 NIM Guidance Trimmed Despite Earnings Beat

2022 net profit up 20% YoY, beating expectations.
Final dividend of 42 S cents/share and special dividend of 50 S cents/share proposed.
Flags downside risks to 2023 peak group NIM guidance, while keeping guidance for mid-single digit loan and double-digit fee income growth.

The Law Debenture Corporation – Standing the test

In challenging conditions, The Law Debenture Corporation (LWDB) has reported robust 2022 results. IPS delivered its fifth consecutive year of growth, in line with its mid-to-high single-digit target. The extreme polarisation of equity market performance, with only a handful of large companies generating positive returns worked against the investment managers’ consistent, diversified, value-driven approach in 2022. Nonetheless, LWDB’s track record of outperformance over three, five and 10 years remains. The share price return was positive while DPS, held or increased for 44 years, rose 5.2% to 30.5p.

Morning Views Asia: China Jinmao Holdings, Vedanta Resources

By Charles Macgregor

China Jinmao Holdings
Vedanta Resources

Sporting Crypto – 27th Feb 2023: Are NBA Top Shots Securities?

By Sporting Crypto

Last week there were headlines from media publishers that read something along the lines of; NBA-Branded ‘Top Shot Moments’ NFTs May Be Securities, Judge Rules in Dapper Labs Case
This brewed discourse around 1) Top Shots themselves being securities and 2) NFTs as a thing being securities.
Both 1) and 2) are wrong in my opinion, for a variety of reasons.

Supermarket Income REIT – Reducing NAV but focusing on income

Ahead of interim results for the six months ended 31 December 2022 (H123), Supermarket Income REIT (SUPR) has reported its externally assessed property valuation. The like-for-like 13.3% decline is below the broad market decline of c 19% but above our assumption. We have reduced our FY23e EPRA NTA per share by c 10% to 91p but our forecasts for EPRA earnings, dividends and dividend cover are unchanged.

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Mar 01

Daily Brief Credit: Long 9-Yr Sustainable Bond – Buy from 6.375% and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Long 9-Yr Sustainable Bond – Buy from 6.375%
Another Solid Quarter; Maintain Buy Recommendation
Broadly Stable Results; Well Capitalised
Morning Views Asia: China Jinmao Holdings, Vedanta Resources

Long 9-Yr Sustainable Bond – Buy from 6.375%

The Emirate of Sharjah (Sharjah) is looking to issue a Long 9-year (November 2032 maturity) Sustainable Bond during today’s business.
Initial pricing has just been announced at UST10+310bps (~6.85%).
Based on the current Sharjah sovereign Eurobond curve (SHJGOV), we see fair value (FV) for the new Long 9-year (2032) notes in the “low-to-mid 6.0% area”, given that the existing Sharjah (SHJGOV) 3.625% 2033s are currently yielding 6.2%, while the other two Eurobonds on the curve (the SHJGOV 4.0% 2050 and SHJGOV 4.375% 2051) are currently yielding 6.92% and 6.99%, respectively, at the long end.

Another Solid Quarter; Maintain Buy Recommendation

Tupras is Turkey’s largest refiner in Turkey supplying roughly 55% of Turkey’s petroleum product needs and 57% of Turkey’s storage capacity. The refineries produce a full range of refined petroleum products including gasoline
Company is owned 53% by KOC, the largest private conglomerate in Turkey that accounts for an estimated 7% of the country’s GDP.
Tupras produced a stellar set of 4Q 2022 results reflecting significant margin improvement; Revenue and EBITDA were up 104% and 212% over 4Q 2021 respectively. We maintain our buy recommendation

Broadly Stable Results; Well Capitalised