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Smartkarma Daily Briefs

Feb 25
0

Daily Brief Industrials: IdeaForge Technology Limited, Caverion Corp, International Consolidated Airlines Group and more

By | Daily Briefs, Industrials

In today’s briefing:

  • IdeaForge Pre-IPO Tearsheet
  • A Good Old Fashioned Bidding War
  • IAG Acquires Air Europa

IdeaForge Pre-IPO Tearsheet

By Clarence Chu

  • IdeaForge Technology Limited (1475641D IN) is looking to raise around US$100m in its upcoming India IPO. Some of its notable pre-IPO investors include Qualcomm, Infosys, Celesta Capital (VC).
  • IdeaForge develops and manufactures unmanned aerial systems (UAS) and unmanned aerial vehicles (UAV).
  • The bookrunners on the deal are JM Financial and IIFL Securities.

A Good Old Fashioned Bidding War

By Jesus Rodriguez Aguilar

  • Triton has raised its offer price to €8.95 in cash, 5.3% above the Alternative Consideration of the Bain’s consortium improved offer (vs. my €9.01/share fair value estimate, comps-based).
  • Gross spread is +0.78%. It seems that now it is the turn of the Bain’s consortium to make a move, at least match and probably bid over Triton’s offer.
  • Bain has the main shareholders on board. As of 24 February, I estimate the paper profits of Triton to be around €31 million (minus the costs of preparing the offer).

IAG Acquires Air Europa

By Jesus Rodriguez Aguilar

  • IAG Presents better than expected Q4 2022 results and announces that it will acquire the remaining 80% of Air Europa for €400 million in a cash and shares deal.
  • The purchase price implies valuing 100% of Air Europa at €500 million, which is in line with expectations and is half of the €1,000 million agreed in November 2019.
  • Air Europa and IAG finally reach an agreement and clear an uncertainty. It makes strategic sense to create a larger intercontinental hub between Europe and Latin America in Madrid,

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Feb 25
0

Daily Brief Energy/Materials: Sino Oil And Gas Holdings, Crude Oil, Alkane Resources, Devon Energy, Ecolab Inc and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Sino Oil (702): Possible Jiangxi Jovo Offer
  • WTI Bear Triangle a Growth Negative
  • Alkane Resources – Tomingley Gold Extension Project approved
  • Devon Energy Corporation: Major Drivers
  • Ecolab Inc.: Collaboration With TotalEnergies & Other Drivers

Sino Oil (702): Possible Jiangxi Jovo Offer

By David Blennerhassett

  • Troubled coalbed methane play Sino Oil And Gas Holdings (702 HK) is currently suspended pursuant to the Hong Kong Code on Takeovers and Mergers. 
  • Sino Oil is burdened with a large convertible note and a winding-up petition.  Its auditor has disclaimed accounts since 2017 over its ability to continue as a going concern.
  • Jiangxi Jovo Energy (605090 CH) is interested in taking more than 50% of Sino Oil (via new shares), but less than 75%. Sino Oil is up >100% in the past month. 

WTI Bear Triangle a Growth Negative

By Thomas Schroeder

  • WTI’s bearish flat/triangle is setting up to break lower and a harbinger of weaker growth in coming months amid a stronger USD.
  • Bearish oil also gels with our stronger dollar and weaker demand view. It will also bring energy shares back to earth.
  • New low targets at 69 and 65 then review for a tactical recovery attempt.

Alkane Resources – Tomingley Gold Extension Project approved

By Edison Investment Research

As expected, the NSW Minister for Planning has approved Alkane’s Tomingley Gold Extension Project, allowing both open-cut mining at the Roswell and San Antonio deposits (including underground mining at the former) and extending the mine life to 2032. The approval accepts a processing rate of up to 1.75Mtpa, with underground mining due to commence at Roswell before the end of CY23. Financing has been secured via A$50m of debt funding from Macquarie Bank, together with 100koz of gold hedging at a weighted average price of A$2,825/oz (US$1,928/oz).

Devon Energy Corporation: Major Drivers

By Baptista Research

  • Devon Energy delivered a mixed performance in the last quarter of 2022.
  • The company managed to surpass the revenue expectations of Wall Street but its earnings were well below par.
  • We give Devon Energy Corporation a ‘Buy’ rating with a revised target price.

Ecolab Inc.: Collaboration With TotalEnergies & Other Drivers

By Baptista Research

  • Ecolab delivered a mixed performance in the fourth quarter.
  • Organic sales increased by 12%, and sector-wise growth was strong but the company failed to meet the revenue expectations of Wall Street.
  • Healthcare & Life Sciences resumed growth and delivered 7% organic growth.

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Feb 25
0

Daily Brief Health Care: Zoetis Inc and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Zoetis Inc.: Launch Of CircoMatch & Other Drivers

Zoetis Inc.: Launch Of CircoMatch & Other Drivers

By Baptista Research

  • Zoetis delivered a decent set of results for the last quarter of 2022 meeting analyst expectations as well as the high end of its management guidance.
  • Despite the economic challenges, ongoing pandemic recovery, and the political unpredictability brought on by the war in Ukraine, they delivered operational growth for the year in each of their top 13 markets.
  • The company’s unique companion animal portfolio drove its 8% operational revenue increase for the year, growing 14% operationally.

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Feb 25
0

Daily Brief Consumer: Techtronic Industries, Alibaba Group, Goldwin Inc, iShares MSCI ACWI ETF, Coca Cola Co, Marriott International, Restaurant Brands Intern and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Techtronic Industries (669 HK): Forensic Analysis Viewpoint
  • Alibaba: Post Earnings Price Reaction Confirms Investors Are Worried Of a Fading Core-Business
  • Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment
  • Branded Camping from Goldwin and Snow Peak
  • MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities
  • The Coca-Cola Company: Major Drivers
  • Marriott International Inc.: Major Drivers
  • Restaurant Brands International Inc.: Major Drivers

Techtronic Industries (669 HK): Forensic Analysis Viewpoint

By Arun George

  • Jehoshaphat’s short report has alleged that Techtronic Industries (669 HK)/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.
  • Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.
  • TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.

Alibaba: Post Earnings Price Reaction Confirms Investors Are Worried Of a Fading Core-Business

By Oshadhi Kumarasiri

  • Alibaba’s 3QFY23 results marginally topped consensus. With the share price dropping 0.65% cf. +0.35% for the index, both results and the price reaction were in line with our expectations.
  • Yesterday’s results confirm that Alibaba (ADR) (BABA US)’s core businesses, Taobao and Tmall are in trouble and cost-cutting elsewhere is insufficient to offset the short-term weakness.
  • Therefore, we do think that this is a good opportunity to profit on the short side with Alibaba shares having the potential to fall another 40-45% in the short term.

Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment

By Shifara Samsudeen, ACMA, CGMA

  • Techtronic Industries (669 HK) was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.
  • As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.
  • We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.

Branded Camping from Goldwin and Snow Peak

By Michael Causton

  • After decades of industrial, urban focus, city-dwelling Japanese first began a tentative reengagement with nature through hiking two decades ago. 
  • This has evolved into more extended trips that began to include camping and visits to wilder areas.
  • These excursions are still a bit forbidding for many, so camping and outdoor activities in a park managed by a trusted brand have strong appeal, providing new revenue for brands.

MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities

By Joe Jasper

  • In our latest int’l reports we have preached caution, and since January we have discussed our expectations for $93 to cap upside on the ACWI-US
  • Thus far, $93 has proven to be rock-solid resistance, and ACWI-US now displays a 4.5-month uptrend violation signaling the pullback has officially begun.
  • We would expect this pullback to continue down to $86-87 at minimum, and potentially $84 (December 2022 low). Even $75-77 (the 2022 lows) is not out of the question.

The Coca-Cola Company: Major Drivers

By Baptista Research

  • Coca-Cola had a successful year in 2022.
  • In spite of the difficult macro environment, the company performed well and expanded by concentrating on broadening the scope of its offerings.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Marriott International Inc.: Major Drivers

By Baptista Research

  • Marriott International had a decent business recovery in 2022 and the company delivered an all-around beat in the last quarter.
  • The number of leisure transient room nights in the fourth quarter increased compared to 2019.
  • Their mobile app users, digital room nights, and digital income all increased in 2022, each by 32% year over year.

Restaurant Brands International Inc.: Major Drivers

By Baptista Research

  • Restaurant Brands International has delivered a mixed set of results in the quarter with revenues well above analyst expectations.
  • However, the company missed out on meeting earnings expectations as the profitability was lower for Tim Hortons, Burger King, and Popeyes in the domestic market.
  • We give Restaurant Brands International a ‘Hold’ rating with a revised target price.

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Feb 25
0

Most Read: Ebos Group Ltd, DGB Financial Group, Japan Post Bank, Techtronic Industries, DB Hitek Co., Ltd., Ihara Science, S&P 500 and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs
  • Japan Post Holdings To Effectively “Re-IPO” Japan Post Bank (7182 JP)
  • KOSPI200 Index Rebalance Preview: Changes in April & June
  • Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang
  • Techtronic Industries (669 HK): JR Puts Down That Tool
  • Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea
  • Ihara Science (5999 JP) – Here Comes The Bumpitrage
  • Techtronic Industries (669 HK): Forensic Analysis Viewpoint
  • SPX Range Ahead of Next Leg Down
  • Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment

Index Rebalance & ETF Flow Recap: MSCI, CSI500, XIN9I, DTAC/TRUE, Newcrest, Adani, Korea Spinoffs

By Brian Freitas

  • MSCI announced the changes to the GIMI on Friday as part of the February QCIR. MSCI also announced a review of the free float of the Adani Group companies.
  • FTSE will announce the changes to the All-World and All-Cap indices after the close of trading on Friday, 17 February. The same day is the S&P/ASX review cutoff for March.
  • Yet another weekly outflow for the IShares Edge MSCI Min Vol Emerging Markets ETF (EEMV US) taking the YTD outflow to over US$2.5bn.

Japan Post Holdings To Effectively “Re-IPO” Japan Post Bank (7182 JP)

By Travis Lundy

  • Overnight a Reuters article suggested Japan Post Holdings (6178 JP) had started talks to sell a near 30%) stake in Japan Post Bank (7182 JP), the first sale since IPO. 
  • A sale is designed with two aims: 1) the TSE requires a 35% tradable share ratio, and 2) JPH is supposed to lower holdings in JPB to <50% by 2025.
  • This event may include a buyback, and has moving parts, and flows on the back end, but fundamentally a sale would effectively constitute a “re-IPO” of the shares.

KOSPI200 Index Rebalance Preview: Changes in April & June

By Brian Freitas

Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang

By Sumeet Singh

  • Japan Post Holdings (6178 JP) is looking to trim its stake in Japan Post Bank (7182 JP) by a third, as per Reuters. 
  • The deal would be worth around US$9bn and could come as soon as next month.
  • In this note, we talk about the news and take an early look at the possible selldown.

Techtronic Industries (669 HK): JR Puts Down That Tool

By David Blennerhassett

  • Jehoshaphat Research (JR) argues the case that Techtronic Industries (669 HK) has been engaged in “snowballing” to maintain margin growth.
  • JR flags TTI is the only public company in the world (with over $1bn in revenues) exhibiting positive sequential gross margin change in every semi-annual period over ten years.
  • Short interest had been picking up ahead of the short sell report. Shares fell 19% before being suspended in the afternoon session.  

Never-Seen Price Pattern Detected in a Split-Off Event Granting Appraisal Rights in Korea

By Sanghyun Park

  • A rather unusual price movement came out on February 20 for HLB. On the first trading day after the board of directors’ decision, the price reached the upper daily limit.
  • The short covering got to a temporarily excessive level in the process of securing appraisal rights should be the reason that led to the upper limit.
  • We should design a trading setup targeting excessive short covering-triggered price overheating in split-off events. At this point, the most likely candidate to pursue a split-off is DB Hitek.

Ihara Science (5999 JP) – Here Comes The Bumpitrage

By Travis Lundy

  • In my first piece, Ihara Science (5999 JP) Sees the Chairman Launch an MBO. I Might Expect Excitement I noted that the price was too low. I expected activist efforts.
  • The price did not trade below the Tender Offer Price after it opened for trading. That was a sign this wasn’t going to go easy.
  • This morning I am made aware of a letter from one of the “active if not activist” shareholders saying the price is too low. Hint: It is.

Techtronic Industries (669 HK): Forensic Analysis Viewpoint

By Arun George

  • Jehoshaphat’s short report has alleged that Techtronic Industries (669 HK)/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.
  • Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.
  • TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.

SPX Range Ahead of Next Leg Down

By Thomas Schroeder

  • SPX 3,980 is where a mild bounce should unfold. 4,060 sell resistance then the set-up calls for a break below 3,980 to test lower targets.
  • This next leg down will cause more damage in EM/Asia and Europe. MACD on the verge of an ugly break below the “0” acceleration line.
  • US 10yr yield dip is a buy for a push above the 3.95% pivot resistance with new highs in store.

Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment

By Shifara Samsudeen, ACMA, CGMA

  • Techtronic Industries (669 HK) was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.
  • As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.
  • We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.

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Feb 25
0

Daily Brief ESG: Zee Entertainment- Litigations Scare and more

By | Daily Briefs, ESG

In today’s briefing:

  • Zee Entertainment- Litigations Scare

Zee Entertainment- Litigations Scare

By Nitin Mangal

  • Zee Entertainment Enterprises (Z IN) have yet again been bombarded with a corporate hurdle since the NCLT has admitted the company into CIRP relating to Siti Cable Network (SITINET IN).
  • It is found that ZEEL has created provisions in the balance sheet, however it should be noted that the CRIP might lead to cash outflow in future. 
  • Apart from the current CIRP, ZEEL also has other litigation risks that should not be overlooked.

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Feb 25
0

Daily Brief ECM: IdeaForge Pre-IPO Tearsheet and more

By | Daily Briefs, ECM

In today’s briefing:

  • IdeaForge Pre-IPO Tearsheet
  • Marriott International Inc.: Major Drivers

IdeaForge Pre-IPO Tearsheet

By Clarence Chu

  • IdeaForge Technology Limited (1475641D IN) is looking to raise around US$100m in its upcoming India IPO. Some of its notable pre-IPO investors include Qualcomm, Infosys, Celesta Capital (VC).
  • IdeaForge develops and manufactures unmanned aerial systems (UAS) and unmanned aerial vehicles (UAV).
  • The bookrunners on the deal are JM Financial and IIFL Securities.

Marriott International Inc.: Major Drivers

By Baptista Research

  • Marriott International had a decent business recovery in 2022 and the company delivered an all-around beat in the last quarter.
  • The number of leisure transient room nights in the fourth quarter increased compared to 2019.
  • Their mobile app users, digital room nights, and digital income all increased in 2022, each by 32% year over year.

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Feb 25
0

Daily Brief Credit: Shui On Land – Tear Sheet – Lucror Analytics and more

By | Credit, Daily Briefs

In today’s briefing:

  • Shui On Land – Tear Sheet – Lucror Analytics

Shui On Land – Tear Sheet – Lucror Analytics

By Leonard Law, CFA

We view Shui On as “Medium Risk” on the LARA scale. Our opinion is underpinned by the company’s portfolio of high-quality assets situated in prime locations in major Chinese cities. Shui On has a large investment property portfolio, which generates sufficient recurring revenue to cover more than 1x of adjusted interest expense. The investment properties were worth CNY 51.2 bn as at end-June 2022, covering net debt by 1.7x. Moreover, the company can dispose assets to boost cash flow if needed. These positive factors are balanced against Shui On’s small scale and lumpy earnings profile.

Our fundamental Credit Bias on Shui On is “Stable”, supported by the improved operating and financing environment for stronger Chinese developers. The company has a high-quality asset base and sizeable investment property portfolio, which would support access to bank financing. We also believe Shui On’s differentiated business model (compared to peers with heavy reliance on property development) will thrive in the post-property crisis environment.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”. Shui On’s management appears to place a strong emphasis on ESG issues, and we note positively the company’s high level of disclosure and transparency.

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Feb 25
0

Daily Brief Thematic (Sector/Industry): Smartkarma Webinar | Global Liquidity Outlook for 2023 and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Smartkarma Webinar | Global Liquidity Outlook for 2023

Smartkarma Webinar | Global Liquidity Outlook for 2023

By Smartkarma Research

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Michael J. Howell as he shares more about his thoughts on the global liquidity outlook for 2023. From questions like why liquidity is so important for investors, to tracking the global liquidity cycle, join us in this next installment as we dive deep into the topic alongside Michael.

The webinar will be hosted on Wednesday, 1 March 2023, 17:00 SGT/HKT.

Michael J. Howell is Managing Director at CrossBorder Capital, an investment advisory firm specialising in macro-investing. Founded in 1996 with an international client base, CrossBorder focuses on monitoring and understanding global liquidity and capital flows.

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Feb 25
0

Daily Brief Technical Analysis: WTI Bear Triangle a Growth Negative and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • WTI Bear Triangle a Growth Negative
  • MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities
  • Tencent Short Cover Target

WTI Bear Triangle a Growth Negative

By Thomas Schroeder

  • WTI’s bearish flat/triangle is setting up to break lower and a harbinger of weaker growth in coming months amid a stronger USD.
  • Bearish oil also gels with our stronger dollar and weaker demand view. It will also bring energy shares back to earth.
  • New low targets at 69 and 65 then review for a tactical recovery attempt.

MSCI ACWI Uptrend Break; Defensives to Shine; Ideas in Staples, Health Care, Telecomm, Utilities

By Joe Jasper

  • In our latest int’l reports we have preached caution, and since January we have discussed our expectations for $93 to cap upside on the ACWI-US
  • Thus far, $93 has proven to be rock-solid resistance, and ACWI-US now displays a 4.5-month uptrend violation signaling the pullback has officially begun.
  • We would expect this pullback to continue down to $86-87 at minimum, and potentially $84 (December 2022 low). Even $75-77 (the 2022 lows) is not out of the question.

Tencent Short Cover Target

By Thomas Schroeder

  • Tencent faced formidable resistance at 385 where old lows and old highs coincided and was our short level outlined on January 17.
  • 300 is our base line downside target. March will be a bearish month. Buy zone at sub-300.
  • Macro is constructive if 270 holds. Current decline is labeled a deep correction of the October to late January rally.

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