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Smartkarma Daily Briefs

Feb 15
0

Daily Brief Event-Driven: Toshiba – As Bad As It Gets? and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Toshiba – As Bad As It Gets?
  • KOSPI Size Indices – Potential Changes in March
  • Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace
  • K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:
  • Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing
  • Kirin’s Holdco Discount Could Keep Unwinding After The Price Hikes Announcement
  • Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why
  • Idemitsu (5019) – A Big Miss and A Big Buyback
  • Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023
  • Ecopro Co: A Likely Inclusion in MSCI Korea May Rebalance

Toshiba – As Bad As It Gets?

By Mio Kato

  • Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP. 
  • Despite that, we see some small positive signs across the various industrial segments. 
  • On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

KOSPI Size Indices – Potential Changes in March

By Brian Freitas

  • The review period for the March rebalance of the KOSPI Size Indices ends 28 February. The results will be announced early March and implemented at the close on 9 March.
  • We see 5 migrations between MidCap and LargeCap, 8 migrations from SmallCap to MidCap, 3 new adds to MidCap, and 11 migrations from MidCap to SmallCap.
  • Stocks migrating from SmallCap to MidCap have outperformed stocks that are migrating between other categories.

Link REIT US$2.4bn Rights Issue – Mistimed but Yield at the Rights Price Might Be the Saving Grace

By Sumeet Singh

  • Link REIT (823 HK) (LREIT) aims to undertake a 1 for 5 rights issue at a subscription price of HK$44.20/unit, to raise around US$2.4bn.
  • After announcing a S$2.2bn acquisition in late Dec 2022, the company explicitly mentioned that it didn’t need to raise any new capital. Thus, the rights issue marks an abrupt turnaround.
  • In this note, we talk about the right issue, its previous acquisition and the overall implications.

K-Pop Battle: HYBE’s Tender Offer For S.M. Entertainment:

By David Blennerhassett

  • In a move to counter Lee Soo-man’s influence, S.M.Entertainment Co (041510 KS) intends to issue new shares (9.05% on a fully diluted basis) to Kakao Corp (035720 KS).
  • Lee, with 18.4% in SM, responded by selling 14.8% to SM’s rival HYBE (352820 KS). HYBE concurrently announced a tender offer for an additional 25%, at ₩120,000/share, a 22% premium.
  • Kakao and SM are less than impressed. But these developments are a power grab for the pioneer of K-pop.

Long Short Idea: Ecopro Co Ltd & Iljin Materials on March 9 with K-New Deal Rebalancing

By Sanghyun Park

  • One constituent change is expected in the BATTERY index rebalancing as Ecopro Co Ltd surpassed Iljin Materials based on the average daily market cap during the review period.
  • Ecopro Co Ltd is a pure holding company, so it may not be subject to inclusion. However, KRX recognizes related sales from unlisted subsidiaries as sales from the holding company.
  • The actual passive impact of the rebalancing day will likely be 0.15x or more for both. This level can enable a long-short setup for these from a day trading perspective.

Kirin’s Holdco Discount Could Keep Unwinding After The Price Hikes Announcement

By Oshadhi Kumarasiri

  • A trade idea involving Kirin Holdings (2503 JP) from a Holdco perspective, which we suggested last year outperformed Topix by more than 30% in the first 9 months of 2022.
  • Since November 2022, Kirin has underperformed Topix by 18% (driven by input cost inflation) to push the Holdco discount yet again to an attractive level.
  • The price hike announcement yesterday could change the cost inflation narrative and help Kirin to keep on unwinding the Holdco discount.

Both C&T & SDS Are Still on the Table for Block Deals by Lee Seo-Hyun, Here’s Why

By Sanghyun Park

  • The family devoted all their efforts to maintaining 33.4% of voting shares in Samsung C&T, a level that can block a special resolution at the general shareholders’ meeting.
  • The most likely scenario being speculated by the market at this point is to touch both Samsung C&T and Samsung SDS. However, the C&T stake sale is to be minimized. 
  • The possibility currently circulating in the local market is that she has 0.40% (Hana Sec) and 0.62% (Hana Bank), which currently have the highest interest burden, on the table.

Idemitsu (5019) – A Big Miss and A Big Buyback

By Travis Lundy

  • On 14 February 2023, Idemitsu Kosan (5019 JP) reported Q3 results. They were less impressive than one would have hoped. 
  • Lower USDJPY and lower Dubai crude prices mean a JPY 90bn hit to inventory marks, but the rest of the petro business made almost no money in the quarter. 
  • However, the company announced a large buyback. THAT is worth looking at. 

Potential Inclusions & Exclusions in KOSPI 200 Rebalance in May 2023

By Douglas Kim

  • We discuss potential inclusions and exclusions of the upcoming KOSPI 200 rebalance in May 2023. With regards to the upcoming KOSPI 200 rebalance, we like the following long-short trading strategy.
  • We would short a basket of potential exclusions from KOSPI 200 rebalance which would include the bottom 5% of KOSPI 200 index (10 stocks).
  • We would go long a basket of potential inclusions in KOSPI 200 rebalance which include four stocks including Dentium, Jeju Air, Samyang Foods, and DGB Financial. 

Ecopro Co: A Likely Inclusion in MSCI Korea May Rebalance

By Douglas Kim

  • Ecopro Co Ltd (086520 KS) is one of the likely inclusions in the MSCI Korea rebalance in May 2023.
  • Many investors have pushed up share price of Ecopro Co, already factoring in that this stock will be included in the next round of MSCI Korea index rebalancing.
  • Our NAV analysis of Ecopro Co suggests an implied NAV per share of 207,087 won, representing a 5% upside from the current price. 

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Feb 14
0

Daily Brief ESG: Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand and more

By | Daily Briefs, ESG

In today’s briefing:

  • Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

Earlier Timing of Disclosure in English May Create Another Mismatch with Investor Demand

By Aki Matsumoto

  • Regarding the three most in-demand documents, only 30-50% of companies with over 30% foreign ownership disclose them in English. The mismatch between overseas investors’ demand and companies’ disclosure continues.
  • If TSE requires faster timing of disclosure in English, companies may limit the materials they disclose in English due to increased burden. Disclosing necessary materials is more important than timing.
  • In order to encourage companies to disclose in English in their annual securities reports, the Corporate Governance Code should clearly state the disclosure in English in the annual securities report.

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Feb 14
0

Daily Brief United States: S&P 500, Harley Davidson, Bakkt, Coca Cola Co, Coinbase, Binance Coin and more

By | Daily Briefs, United States

In today’s briefing:

  • EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event
  • The Electric Dream
  • Enhancing Focus on B2B2C; Sunsetting Consumer App
  • How Attractive Is Coca-Cola’s Dividend As The Company Reports Full Year Results?
  • Bitcoin And The Tax-Loss Harvesting Rally
  • The End of BUSD

EQD | SPX Index : CPI Data Is Set to Raise Inflation Fears Again.Use Daily Options to Play the Event

By Simon Harris

  • January CPI is due on Tuesday 14th and the market is expecting the biggest rise since October
  • The SPX has rallied over 7% since December but the Yield Curve has been moving higher and the equity rhetoric is turning negative
  • We look at a short-term trading opportunity in the options market to play the print

The Electric Dream

By subSPAC

  • Over a dozen companies focused on building out Electric Vehicles have gone public through a SPAC merger in the past two years, albeit with mixed results.
  • Legendary Motorcycle Maker Harley Davidson shocked the public markets in 2021 when it announced that it was spinning off its EV segment LiveWire through a $1.8 billion SPAC merger.
  • The move came as the legacy bike maker has faced a period of slowing sales, losing market share to competitors, and failing to reach younger first-time riders.

Enhancing Focus on B2B2C; Sunsetting Consumer App

By Water Tower Research

  • Bakkt is enhancing its focus onto scalable B2B2C products and sunsetting its consumer app.
  • Bakkt will continue its core focus of providing businesses with crypto and loyalty experiences for their customers through SaaS and API solutions on a secure and compliant platform.
  • President & CEO Gavin Michael commented that as the company continues to “gain traction with our B2B2C strategy, we are laser focused on providing our partners and clients with seamless solutions that best serve their needs.

How Attractive Is Coca-Cola’s Dividend As The Company Reports Full Year Results?

By Vladimir Dimitrov, CFA

  • Coca-Cola delivered nearly 36% total return in a matter of only two and a half years.
  • There are a number of positive signs leading to a high probability of a dividend increase during 2023, according to the company’s full-year 2022 results.
  • Coca-Cola (NYSE:KO) has been one of the best-performing large-cap consumer staple companies in recent years.

Bitcoin And The Tax-Loss Harvesting Rally

By Kevin George

  • Bitcoin sold off in December and rallied in January for a reason.
  • Big banks are coming with a digital payments option. Big banks will have a digital payment option in the coming days.
  • Bitcoin sold off last month and rallied again in January, with a rise in popularity in the wake of contagion.

The End of BUSD

By Kaiko

  • Price Movements: cbETH, Coinbase’s liquid staking derivative, started trading at a discount after news broke that the SEC had fined Kraken $30mn. 
  • Market Liquidity: LocalBitcoins shut down after 10 years of service after competition and a prolonged bear market sapped trade volume. 
  • Derivatives: ETH options markets look bullish but more volatile than BTC. 

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Feb 14
0

Daily Brief China: Huitongda, Yashili International Holdings, Taste Gourmet, Meituan, Koolearn, UBTech Robotics, China Communications Construction, Weibo Corp, Li Auto and more

By | China, Daily Briefs

In today’s briefing:

  • Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up
  • Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?
  • Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.
  • [Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan
  • Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business
  • Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental
  • UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated
  • China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth
  • [Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY
  • [Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023

Huitongda Lock-Up – US$1.1bn Pre-IPO Lock-Up Expiry. China-Based Funds at Least 40% Up

By Clarence Chu

  • Huitongda (9878 HK) was listed on 18th Feb 2023, when it raised US$285m in its HK IPO. Its one-year lockup will expire on 17th February 2023.
  • Huitongda (HTD) is a commerce and service platform serving businesses in the lower-tier retail markets of China.
  • Coming up for one-year lockup expiry are HTD’s pre-IPO investors. With the exception of Alibaba and SOE backers, the bulk of HTD’s pre-IPO investors are still currently in the money.

Yashili (1230 HK): Pre-Condition Finally to Be Satisfied?

By Arun George

  • Yashili International Holdings (1230 HK) latest monthly update notes that Dumex Key Condition 2 is satisfied paving the way towards completing the Dumex China Disposal. 
  • The completion of the remaining pre-condition, the 25% Yashili acquisition, depends on the completion of the Dumex China Disposal, which now looks imminent.
  • We think the pre-condition will be satisfied by the end of February and the scheme document will be despatched by early April. At the last close, the spread is 6.2%.

Taste Gourmet: Encouraging 3Q 2023, Super Set Up for Q4.

By Sameer Taneja

  • Earnings for Q3 2023 came in at 17.5 mn HKD up 5% YoY, about 15% below our expectations due to closure costs incurred on some restaurants in November. 
  • The company added four restaurants in December 2022 which should result in strong revenue growth in January 2023. We expect monthly revenue to surpass HKD 80 mn. 
  • Post the recent rally, the stock trades at 8.2x/5.2x FY23e/24e, with a 7.3%/11.5% FY23e/24e dividend yield assuming a 60% payout. We see this as an extremely cheap HK recovery play. 

[Meituan (3690 HK) Downgrade to SELL]: The Rise of Douyin Is Likely to Hurt Meituan

By Shawn Yang

  • We expect Meituan to report 18% YoY topline growth in C4Q22, in line with cons. Our non-IFRS net margin est. is 1.9ppt higher than cons.
  • In-Store would be impacted by Douyin’s category expansion and deepening penetration in lower-tier cities.
  • We downgrade Meituan to SELL and cut TP to HK$137 due to pressure from competition for in-store.

Meituan to Hire 10k Employees to Compete with Douyin’s Food Delivery Business

By Shifara Samsudeen, ACMA, CGMA

  • On Tuesday last week, short-video app Douyin announced that it plans to offer its food delivery service in more Chinese cities expanding its current trial in Beijing, Chengdu and Shanghai.
  • Following this, on Wednesday last week, Meituan announced that it plans to recruit 10,000 workers in 1Q2023 across a number of its business divisions including technology development and customer services.
  • Though we don’t expect Douyin’s entry into food delivery to have large impact, increased competitive pressure and headcount increase would drag down Meituan’s profitability in the near-term.

Hong Kong CEO & Director Dealings (13 Feb): Koolearn, China Gas, MOG, Hua Yin, China Environmental

By David Blennerhassett

UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated

By Andrei Zakharov

  • UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors. 
  • UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation. 
  • Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today. 

China Comm Const (1800 HK): Securing Stronger Backlog to Fuel Growth

By Osbert Tang, CFA

  • There is a sharp escalation in business momentum of China Communications Construction (1800 HK) in 4Q22, with value of new contracts signed surged 95.3% YoY to Rmb510bn.
  • New contract growth reached 21.6% in FY22, ahead of its target of 11.8%. We estimate its end-FY22 backlog at Rmb3.6trn, which is enough to cover 5x its FY22 revenue. 
  • Local governments’ special purpose bond quota may increase by 4-10% in FY23F, boosting CCCC’s contract outlook. At 2x PER, 0.2x P/B and 7.6% dividend yield, CCCC stays attractive.

[Weibo (WB US) Target Price Change]: Rebound After Temporary Disturbance, Maintain BUY

By Shawn Yang

  • We estimate that Weibo’s top line/bottom line would be 1.3%/9.0% vs cons., as the continuous cost-saving measures offset the impacts of temporary disturbance caused by reopening. 
  • We remain optimistic about Weibo’s rebound in 1H23 as the macro improves, with top line/bottom line beating cons. by 2.2%/5.5% in 2023.
  • Reiterate BUY rating and raise TP to US$ 26.9, implying 11.7X PE in 2023.

[Li Auto (LI US, BUY, TP US$40) Earnings Preview]: Riding Intact Model Cycle in 2023

By Shawn Yang

  • We expect Li Auto to report 4Q22 top line of RMB 17.5bn, in line with consensus, and recovered GPM of 21.8%, vs 12.7% in Q3.
  • We reiterate Li Auto as our top pick, because of 1) positive growth outlook in 2023 driven by strong model cycle (L9/L8/L7);
  • 2) margin upside in 2023 driven by improved product mix, sharing of auto parts among its product line up, and expanded scale economy; 3) less impacted by Tesla’s price war.

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Feb 14
0

Daily Brief Crypto: The End of BUSD and more

By | Crypto, Daily Briefs

In today’s briefing:

  • The End of BUSD

The End of BUSD

By Kaiko

  • Price Movements: cbETH, Coinbase’s liquid staking derivative, started trading at a discount after news broke that the SEC had fined Kraken $30mn. 
  • Market Liquidity: LocalBitcoins shut down after 10 years of service after competition and a prolonged bear market sapped trade volume. 
  • Derivatives: ETH options markets look bullish but more volatile than BTC. 

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Feb 14
0

Daily Brief Singapore: Thomson Medical Group Limited and more

By | Daily Briefs, Singapore

In today’s briefing:

  • Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery

Thomson Medical (TMG SP)/Tmc Life Sciences (TMCL MK): Strong H1 Result Driven By Continued Recovery

By Tina Banerjee

  • For H1FY23 Thomson Medical Group Limited (TMG SP)‘s revenue increased 27% to S$184M. The growth was mainly attributed to the increase in overall patient loads and higher average bill sizes.  
  • Despite increase in operating expenses, Thomson Medical reported a 46% YoY increase in operating profit to S$45.2M, leading to 340 basis point improvement in operating profit margin to 24.6%.
  • Thomson Medical expects its existing and new business lines to grow and is therefore cautiously optimistic of its business prospects in the current financial year.  

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Feb 14
0

Daily Brief Thematic (Sector/Industry): Good Morning Japan |Beta BACK-Ahead of CPI; Citizen Watch LEADS=>Massive Buyback; Toyota EV Shift? and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Good Morning Japan |Beta BACK-Ahead of CPI; Citizen Watch LEADS=>Massive Buyback; Toyota EV Shift?
  • Inbound Tourism up 50%, Spending Almost at 2019 Levels
  • Reform in China’s Medical Service Industry: SOE-Run Hospitals Usher in a Critical Turning Point

Good Morning Japan |Beta BACK-Ahead of CPI; Citizen Watch LEADS=>Massive Buyback; Toyota EV Shift?

By Mark Chadwick

  • OVERSEAS. Beta Roars back as SPX regains 4100 support; All SPX sector positive(ex-Energy); CPI in focus as US 2Yr Yields still at 4.5%; Fed Pause or Acceleration-is the question
  • JAPAN. NKY Futs +1.0% vs Cash; Yen Weakens to 132.45 vs US;  JGB at 2% next year ? So says Koll; Citizen Watch shakes things up with Massive Buyback
  • DAILY NUGGET.  Buybacks been been certainly improving in Japan. But this action from Citizen Watch takes it to another level.

Inbound Tourism up 50%, Spending Almost at 2019 Levels

By Michael Causton

  • Inbound tourism only got going again from October but the pent up demand to visit Japan has meant a surge in visitors. 
  • Since many tourists also have stuffed wallets due to curtailed spending during the pandemic and the Yen is at very low levels, there is much higher spending. 
  • Key beneficiaries are listed below among department stores, premium fashion stores and drugstores.

Reform in China’s Medical Service Industry: SOE-Run Hospitals Usher in a Critical Turning Point

By Xinyao (Criss) Wang

  • Thirteen important departments formulated the “Work Plan for Supporting the High-quality Development of State-owned Enterprise (SOE)-run Medical Institutions”(the “Work Plan”), which reflects a significant change in government’s attitude towards SOE-run hospitals.
  • The core goal of “Work Plan” is to make public medical system bigger and stronger.Changes will occur with the participation of central enterprises. It’s time to change the thinking mode.
  • Government-Run hospitals/SOE-run hospitals are still the main force of China’s medical service market. Their status will be higher than that of private hospitals, whose development space would be further squeezed.

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Feb 14
0

Daily Brief ECM: UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated and more

By | Daily Briefs, ECM

In today’s briefing:

  • UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated

UBTech Robotics Hong Kong IPO: Capital Dried Up as Fundamentals Deteriorated

By Andrei Zakharov

  • UBTech Robotics, a leader in AI-powered robotics in China, filed for a Hong Kong IPO with Guotai Junan Capital leading the offering. The company plans to sell H-shares to investors. 
  • UBTech Robotics mulled IPO in 2019, but the company postponed domestic listing in China. In May 2018, UBTech Robotics closed an $820M Series C round at a $5B post-money valuation. 
  • Despite challenges, we remain bullish on China’s AI industry and consumer robotics market. However, UBTech’s fundamentals deteriorated, capital dried up, and IPO looks risky today. 

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Feb 14
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Daily Brief Credit: Morning Views Asia: China SCE and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: China SCE, Hopson Development

Morning Views Asia: China SCE, Hopson Development

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.

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Feb 14
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Daily Brief India: Crompton Greaves, Berger Paints India and more

By | Daily Briefs, India

In today’s briefing:

  • Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023
  • Berger Paints (BRGR IN) / Pidilite Industries (PIDI IN) | Fundamental Factors Back the Signal

Crompton Greaves (CGPOWER IN) – Uptrend Maintains Potential To 400/410 (+20%) In H1 2023

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 2020/2023 uptrend has delivered unbelievable gains. With the uptrend at historic new highs, it is difficult to identify targets and key resistance levels (using regular charts).
  • Today we turn to the quarterly LOG chart and identify 400/410 as the next major resistance level and H1 2023 target (+20%).

Berger Paints (BRGR IN) / Pidilite Industries (PIDI IN) | Fundamental Factors Back the Signal

By Pranav Bhavsar

  • Berger Paints India (BRGR IN) / Pidilite Industries (PIDI IN) are exposed to similar customers but different demand dynamics offering an opportunity to build an L/S trade.
  • The valuation premium commanded by PIDI over BRGR is not justified in spite of having a similar customer base, similar growth and capital allocation profile.
  • The Price ratio of the pair BRGR/PIDI has been trading in a tight range since September 2022 and is now showing signs of breaking out of the sideway trend.

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