Smartkarma Daily Briefs

Renesas Electronics (6723 JP) today reported full-year 2022 earnings with revenues 0.032% higher than the high end of guidance, which was better than consensus. OP was not as good.
They have guided Q1 only, with revenues up 0.2-4.6%, and non-GAAP GPM -3.9% to 54.5%, and OPM -6.6% to 32.5%. But they also announced a Tender Offer Buyback.
The buyback is smaller than I’d like, but the company has added cash despite last year’s tender offer and repaying bank borrowings. Lots to like here.

NTT (Buy) – Q3 22 Results Reaction: Mixed Quarter but Solid Mobile/Data Performance

By Kirk Boodry

Segment results for DoCoMo and NTT Data were impressive as NTT plans to restructure both businesses start to bear fruit
DoCoMo is also leading MNOs in moving past the impact of regulatory driven price reductions with Q3 service revenue largely flat YoY supported by 5G upsell and subscriber wins
Rising utility costs have had a material impact on profitability for NTT East and West but management believes upside in other areas and cost discipline provides some offset

Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

By Aki Matsumoto

There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.
There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.
If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.

PPIH – Consensus Is Discounting Personal Brands Potential

By Oshadhi Kumarasiri

Pan Pacific International Holdings (7532 JP)’s 2QFY23 was a touch above consensus with revenue at ¥504.8bn (consensus: ¥497.6bn) and OP at ¥33.6bn (consensus: ¥30.3bn).
With consensus cautious about personal brands potential, earnings have beaten consensus in each of the past five quarters.
Having already proven the personal brands earnings potential, we think it is unwarranted for consensus to discount PPIH’s personal brands growth.

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Feb 10

Daily Brief Consumer: Samyang Foods, Hesai Group, Playmates Toys, S.M.Entertainment Co, Dignity PLC, China Resources Beer Holdings, Minor International, Lvmh Moet Hennessy Louis Vuitton, Tokyo Stock Exchange Tokyo Price Index Topix, Pan Pacific International Holdings and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Korea Spin-Offs: Details and KOSPI200 Index Impact
Hesai Group IPO Trading – Managed to Break the Drought
Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie
HYBE to Acquire a 39.8% Stake in SM Entertainment
Dignity’s Last Gasps
China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity
The 2023 Box Office Looks Promising
LVMH: Long-Term Winner
Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform
PPIH – Consensus Is Discounting Personal Brands Potential

Korea Spin-Offs: Details and KOSPI200 Index Impact

Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.

Hesai Group IPO Trading – Managed to Break the Drought

By Sumeet Singh

Hesai Group (HSAI US) (HSAI) raised around US$190m in its US IPO.
HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
We have looked at the company’s past performance and valuations. In this note, we will talk about the trading updates.

Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie

By Nicolas Van Broekhoven

Playmates Toys (869 HK) has been listed since 2008 and makes TMNT toys. It has traded as high as 4 HKD/share on the back of successful TMNT movie launches
Paramount is set to launch a highly anticipated Seth Rogen-produced, TMNT movie in August 2023. In 2013/2014 the stock went up 8x on the last successful TMNT movie launch
Playmates Toys trades at negative enterprise value, hence giving a large margin of safety option to bet on the success of a TMNT revival

HYBE to Acquire a 39.8% Stake in SM Entertainment

On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.

Dignity’s Last Gasps

By Jesus Rodriguez Aguilar

Almost killed by Covid and debt burden, funeral company Dignity agreed to a 550p offer (15.5x EV/Fwd EBITDA). Shifting demographics, Baby Boomers and capex investments should provide clients and growth.
Unlike other takeout transactions, all shareholders may elect to partly reinvest in the bidding consortium: either unlisted non-voting Valderrama D shares or listed Castelnau (with Dignity making c.50% of NAV).
My base-case DCF fair value estimate is 531p, 3.5% downside vs. offer price, which seems fair. I set my TP at 550p. Spread gross/annualised is 1.1%/3.2%.

China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity

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.
Bullish price action and LT momentum failure in Oct/Nov 2023 could be compared to holding a fully inflated balloon under water. Eventually it must rise.
January 2023 delivered that spike and a recent correction and multi-day test of key support has delivered an impulsive positive price response today. Target an 8.5% tactical upswing towards 63.90.

The 2023 Box Office Looks Promising

By Michael Fritzell

The cinema industry has been suffering from COVID-19 restrictions, in particular social distancing measures that have kept cinema operating rates low.
Now that the release pipeline looks strong again, cinemas will be on a path to recovery. I doubt that the global box office will reach the 2019 level this year, but it will get closer to that number.
Cinema operators worth mentioning include North America’s Cinemark, Cineplex and Marcus Corporation, China’s IMAX China and Thailand’s Major Cineplex.

LVMH: Long-Term Winner

By Alexis Dwek

LVMH’s sales’ growth is supported by a rebound in China, resumption of Chinese outbound travel, resilient US demand and higher marketing investments in 2H22 which should bear fruit this year.
The Company holds leading market positions in each of its brands, as it benefits from substantial financial backing to invest and innovate.
The Company has a high-quality management with decades of experience!

Quality Issues Are a Common Challenge for TSE Market Restructuring and Corporate Governance Reform

By Aki Matsumoto

There seems to be consensus on the end of the transitional measures in 3 years. Even if this issue is finally settled, the issue of prime market quality will remain.
There’s no better solution to raise stock price than for companies to develop their own strategies and expand corporate value. TSE should promote metabolism and improve quality of the market.
If the quality of corporate governance is an issue, it is necessary to encourage change in boards that are dominated by male internal executive directors and lack diversity.

PPIH – Consensus Is Discounting Personal Brands Potential

By Oshadhi Kumarasiri

Pan Pacific International Holdings (7532 JP)’s 2QFY23 was a touch above consensus with revenue at ¥504.8bn (consensus: ¥497.6bn) and OP at ¥33.6bn (consensus: ¥30.3bn).
With consensus cautious about personal brands potential, earnings have beaten consensus in each of the past five quarters.
Having already proven the personal brands earnings potential, we think it is unwarranted for consensus to discount PPIH’s personal brands growth.

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Feb 10

Daily Brief United States: Hesai Group, New Relic Inc, Vertex Pharmaceuticals and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Hesai Group IPO Trading – Managed to Break the Drought
New Relic: Impressive 3QFY23. Profitable Growth Accelerated Driven By Efficiency Initiatives
Vertex Pharmaceuticals (VRTX US): Mixed 4Q22 Results; Upbeat 2023 Guidance

Hesai Group IPO Trading – Managed to Break the Drought

By Sumeet Singh

Hesai Group (HSAI US) (HSAI) raised around US$190m in its US IPO.
HSAI is a manufacturer of three-dimensional light detection and ranging (Lidar) solutions. It has shipped over 103,000 Lidar units from 2017 to the end of 2022.
We have looked at the company’s past performance and valuations. In this note, we will talk about the trading updates.

New Relic: Impressive 3QFY23. Profitable Growth Accelerated Driven By Efficiency Initiatives

By Andrei Zakharov

New Relic reported a solid quarter pushing shares up ~18% during the regular trading session as y/y revenue growth accelerated while gross margin and operating income continued to expand.
We like New Relic’s fundamentals and transformation plan driven across the business. The company raised the outlook for FY23 revenue as 3QFY23 results exceeded guidance.
New Relic invites investors to an Analyst Day in May, where the company will announce the FY24 financial plan details and give more color about the updated GTM strategy.

Vertex Pharmaceuticals (VRTX US): Mixed 4Q22 Results; Upbeat 2023 Guidance

By Tina Banerjee

Vertex Pharmaceuticals (VRTX US) reported mixed 4Q22 results. Revenue grew 11% YoY to $2.30B, in-line with expectations. Adjusted EPS surged 25% YoY to $3.76, 7% ahead of consensus.
Revenue was driven by the strong uptake of Trikafta/Kaftrio in multiple countries internationally and continued performance of Trikafta in the U.S. Trikafta/Kaftrio revenue grew 19% YoY to $2.02B.
Vertex guided for 2023 revenue of $9.55–9.70B (+7–9%), with the low end matching current consensus. The company aims to launch five new products over the next five years.

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Feb 10

Daily Brief China: CATL (A), Playmates Toys, Kingston Financial, Baidu, China Resources Beer Holdings, iShares China Large-Cap (FXI), Nayuki Holdings, People’s Insurance (PICC), Dekon Food and Agriculture Group, Shanghai Haohai Biological Technology and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie
Kingston Financial (1031 HK) Scheme: That Is a Pass
Baidu (Bidu.US): AIGC to Bring More Potential and Empower Search Biz
China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity
EQD | FXI US: Buying the Dip Using Options
Nayuki (2150 HK) Rating Change: Broaden Addressable Market Is Priority No.1
PICC Group / PICC P&C Pair: A Cheat Sheet to Improve Your Batting Average
Dekon Food and Agriculture Group Pre-IPO Tearsheet
Shanghai Haohai Biological Technology (688366.CH/6826.HK)- Disappointing Earnings and Gloomy Outlook

CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable

By Clarence Chu

CATL (A) (300750 CH) is looking to raise up to US$6bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, China Securities, Goldman Sachs, and UBS.
The relatively large listing comes after the firm has been undertaking a series of capital raisings, since it’s A-share debut back in Jun 2018, to fund its expansion.
In this note, we discuss GDR timelines, and the firm’s recent financial performance/valuations.

Playmates Toys: Betting on Paramount’s New Teenage Mutant Ninja Turtle (TMNT) Movie

By Nicolas Van Broekhoven

Playmates Toys (869 HK) has been listed since 2008 and makes TMNT toys. It has traded as high as 4 HKD/share on the back of successful TMNT movie launches
Paramount is set to launch a highly anticipated Seth Rogen-produced, TMNT movie in August 2023. In 2013/2014 the stock went up 8x on the last successful TMNT movie launch
Playmates Toys trades at negative enterprise value, hence giving a large margin of safety option to bet on the success of a TMNT revival

Kingston Financial (1031 HK) Scheme: That Is a Pass

By Arun George

Kingston Financial (1031 HK)’s scheme resolution was approved at today’s scheme meeting – 99.89% of independent share votes cast FOR (0.09% of all independent shareholders AGAINST).
The scheme comfortably passed the headcount test with 44 FOR and 13 AGAINST the scheme (56 FOR and 20 AGAINST on a look-through basis).
The last trading is on 10 February. At the last close and for the 3 March payment, the gross and annualised spread to the offer is 3.4% and 69.3%, respectively.

Baidu (Bidu.US): AIGC to Bring More Potential and Empower Search Biz

By Shawn Yang

We estimate that Baidu’s 4Q22 top line/bottom line would miss cons. by (1.6%)/(3.1%), mostly driven by the temporal disturbance of increasing COVID cases after reopening in Dec. 2022.
However, we remain optimistic about 2023 outlook: 1) Baidu’s ads would be recovering quickly in 1H23 as macro improves, and 2) leading position in AIGC development gives Baidu more potential.
Maintain BUY rating and raise TP to US$170, implying 17.2X PE in 2023

China Resources Beer Holdings (291 HK) – ST Technical Triggers Imply 8.5% Tactical Opportunity

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.
Bullish price action and LT momentum failure in Oct/Nov 2023 could be compared to holding a fully inflated balloon under water. Eventually it must rise.
January 2023 delivered that spike and a recent correction and multi-day test of key support has delivered an impulsive positive price response today. Target an 8.5% tactical upswing towards 63.90.

EQD | FXI US: Buying the Dip Using Options

By Simon Harris

Chinese equities have paused for breath this month underperforming most other global indices
The outlook for the region remains strong as reopening strength gains momentum and the Government continue to announce new supportive measures
We favour a buy the dip strategy and suggest using derivatives to play it

Nayuki (2150 HK) Rating Change: Broaden Addressable Market Is Priority No.1

By Shawn Yang

Nayuki bears the most resemblance to Starbucks in that it owns its stores and provides drink, food and space, yet its appealed audience is the narrowest;
Shopping mall opening might hit an all-time low in 2023 and is saturated. Nayuki need to think new ways to broaden its targeted market;
We downgrade Nayuki to SELL and lower TP from HK$13.9 to HK3.1

PICC Group / PICC P&C Pair: A Cheat Sheet to Improve Your Batting Average

By Stanley Tsai, CFA

To build on our earlier work on the insurance space — and as we search for beta-neutral relative value plays — we look at PICC Group-H’s SOTP valuation.
The group’s life and health business has historically traded at a steep implicit discount to China Life-H, perhaps deservedly so. But price dislocations do occur from time to time.
We share our cheat sheet on how we approach these opportunities, which are often good for a quick 10% trade. As usual, we highlight the potential risks as well.

Dekon Food and Agriculture Group Pre-IPO Tearsheet

By Ethan Aw

Dekon Food and Agriculture Group (DFAG CH) is looking to raise at least US$100m in its upcoming HK IPO. The deal will be run by CICC and Citibank.
Dekon Food and Agriculture Group (DFAG) is a livestock and poultry breeding and farming enterprise in China, focusing on the breeding and farming of pigs and yellow-feathered broilers.
As of 30th Sep 2022, its business footprint covered 39 cities across 12 provinces and autonomous regions in China.

Shanghai Haohai Biological Technology (688366.CH/6826.HK)- Disappointing Earnings and Gloomy Outlook

By Xinyao (Criss) Wang

Through continuous M&A/resource integration, Haohai has gradually established its four business segments, but such development strategy hasn’t brought ideal performance, which is disappointing if compared with Bloomage and Imeik.
The future performance driver of Haohai still lies in the medical aesthetics business, but increasing competition and declining gross margin cast doubts on the outlook and growth potential.
Shanghai Haohai Biological Technology-A (688366 CH) is overvalued. Due to lack of growth point with high certainty, we are not optimistic about the upside potential of Haohai’s valuation.

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Feb 10

Daily Brief South Korea: Samyang Foods, Samsung Sds, S.M.Entertainment Co, OASIS Corp, Krafton Inc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea Spin-Offs: Details and KOSPI200 Index Impact
Discussing the Timing of the Samsung SDS Block Deal by Lee Seo-Hyun
HYBE to Acquire a 39.8% Stake in SM Entertainment
Oasis Corp IPO Preliminary Book Building Results
Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation
Critical Details of Regulatory Filing for the SM Ent Tender Event

Korea Spin-Offs: Details and KOSPI200 Index Impact

Hyundai Dept Store Co (069960 KS), Hyundai Greenfood (005440 KS) and Oci Co Ltd (010060 KS) will spin-off divisions and list them prior to the next rebalance in June.
The equity spin-offs will result in passive flows prior to the trading suspension as well as on relisting of the stocks post the spin-off.
We expect one change to the Korea Stock Exchange Kospi 200 Index (KOSPI2 INDEX) in April as one stock will be deleted due to low market cap following the spin-off.

Discussing the Timing of the Samsung SDS Block Deal by Lee Seo-Hyun

By Sanghyun Park

The term of Lee’s trust contract with Hana Bank is from February 2nd to April 28th, and the volume is 1.95% of SO, the total remaining quantity owned by Lee.
The price movement on the day the previous block deals by the Lee family were executed was substantial. Of particular note is that SDS showed the most significant price impact.
We should focus on the possibility that a block deal will come to the market much earlier, as SDS is in short-term overbought territory from a valuation perspective.

HYBE to Acquire a 39.8% Stake in SM Entertainment

On 10 February (prior to market open), Seoul Economic Daily reported that HYBE will conduct a tender offer of SM Entertainment shares taking over the controlling ownership of the company.
HYBE agreed to acquire a 14.8% stake from SM Entertainment’s founder Lee Soo-Man at 120,000 won per share, which represents a 21.8% premium to the closing price on 9 February.
HYBE is also conducting a tender offer to minority shareholders and it plans to acquire up to 25% additional shares at 120,000 won per share, representing 717 billion won.

Oasis Corp IPO Preliminary Book Building Results

The local media mentioned that the preliminary book building results of the Oasis IPO were terrible.
Therefore, the company is likely to either materially lower the IPO price range or postpone the IPO altogether.
Our base case valuation of Oasis Corp is target price of 24,847 won per share, which is 18.5% lower than the low end of the IPO price range.

Krafton: Improving Corporate Governance Through Shares Cancellation & Stock Based Compensation

Krafton has announced a meaningful shareholder return policy including shares buyback, cancellation, and share based compensation in the next three years.
The combination of improving shareholder return policy along with new games development and China’s opening up of its game industry to overseas game makers are likely to positively impact Krafton.
Given Krafton’s current market cap of 8.9 trillion won, the estimated share buybacks of 713 billion won would represent 8% of market cap over three years.

Critical Details of Regulatory Filing for the SM Ent Tender Event

By Sanghyun Park

There is no cancellation risk, regardless of where and how the ongoing proxy battle will be heading and unfolding. But there is a pro rata allocation risk, though.
Regarding tax, a tender event in Korea is treated as an over-the-counter trade. So transfer income tax is imposed.
SM provides shorting instruments necessary for arb trade, and the possibility of an arb opening coming out during tendering isn’t completely dead, given the uncertainties surrounding the current proxy battle.

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Feb 10

Daily Brief Singapore: Haw Par Corp and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Haw Par Corp Is Still Trading Cheap

Haw Par Corp Is Still Trading Cheap

By David Blennerhassett

Last November I highlighted Haw Par Corp (HPAR SP)‘s multi-year trough levels on an implied stub valuation, and on an HPAR/UOB (UOB SP) ratio.
That trade has panned out well as the ratio steadily increased. But it remains below the 200 MDA.
A recovery in Tiger Balm sales is expected in Haw Par’s full-year results later this month. UOB’s financials, and UOL (UOL SP)‘s, are also due out this month.

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Feb 10

Daily Brief Indonesia: Bank Rakyat Indonesia, Blue Bird and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Bank Rakyat Indonesia (BBRI IJ) – Positive Vibes on Micro Growth and Reach
Blue Bird (BIRD IJ) – Catching the Updraft in 2023

Bank Rakyat Indonesia (BBRI IJ) – Positive Vibes on Micro Growth and Reach

By Angus Mackintosh

Bank Rakyat Indonesia (BBRI IJ) did not disappoint with a strong set of FY2022 results, which came in around 4% above expectations, driven by strong micro and expanding NIMS.
The bank also saw improving credit costs and declining provisions, which helped to drive profits and returns close to pre-pandemic levels plus the bank continues its advance on digitalisation.
Bank Rakyat will drive growth through MSME lending, which now makes up 82.5% of loans, with micro and ultra-micro having significant upsides. Valuations are attractive on 2.1x FY2023 PBV.

Blue Bird (BIRD IJ) – Catching the Updraft in 2023

By Angus Mackintosh

Blue Bird is an iconic brand in Indonesia, where consumers take a BlueBird not a taxi, much like taking a Gojek, and in taxi terms, it embodies trust and reliability.
The company had a tough time through COVID but is now firmly on a recovery track, with revenue per taxi in 4Q2022 20% above pre-pandemic levels, with more to come.
Blue Bird (BIRD IJ) is a beneficiary of the tech winter in that ride-hailing companies are spending less on promotions, easing competition. Valuations are attractive in recovery.

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Feb 10

Daily Brief India: Adani Enterprises, Mankind Pharma, HDFC Bank, KPIT Technologies, LIC Housing Finance and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case
Mankind Pharma Pre-IPO – Thoughts on Valuations
HDFC Bank: Q3FY23 Growth Was Somewhat Muted, but Long-Term Growth Potential Remains Intact
KPIT: On Track to Beat FY23 Guidance
LICHF: One-Off Discretionary Provisioning Impacted Q3FY23, But Q4FY23 Is On Track to Be Strong

Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case

Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review.
They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies.
We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

Mankind Pharma Pre-IPO – Thoughts on Valuations

By Sumeet Singh

Mankind Pharma is looking to raise around US$1bn in its upcoming India IPO.
MP is a pharmaceutical company engaged in developing, manufacturing and marketing a range of pharmaceutical formulations across various acute and chronic therapeutic areas, as well as several consumer healthcare products.
We have looked at the company background and undertaken a peer comparison in our previous notes. In this note, we will talk about valuations.

HDFC Bank: Q3FY23 Growth Was Somewhat Muted, but Long-Term Growth Potential Remains Intact

By Ankit Agrawal, CFA

HDFC Bank (HDFCB IN) continues to focus on growing its offline distribution network and added 684 new branches in Q3FY23, taking the total to 7183.
It is also focusing on niche under-penetrated segments like Gold Loans and Wealth Management. Its Payment Acceptance Points network has also seen rapid growth.
QoQ loan growth was somewhat muted, largely due to underwhelming growth on the corporate side as pricing in the marketplace is not as remunerative due to elevated competition.

KPIT: On Track to Beat FY23 Guidance

By Ankit Agrawal, CFA

KPIT reported strong Q3FY23 earnings with organic revenue growth of 24.6% YoY and 4.9% QoQ. Including Technica acquisition, revenue growth was 17.3% QoQ and 31.9% YoY in $ terms.
EBITDA margin stayed steady QoQ at 18.5%. Deal wins were strong with Q3FY23 TCV of $272mm. KPIT is on track to beat its prior FY23 growth outlook.
Despite caution in the IT services sector, KPIT is seeing robust demand as automotive OEMs continue to spend on new automotive tech R&D.

LICHF: One-Off Discretionary Provisioning Impacted Q3FY23, But Q4FY23 Is On Track to Be Strong

By Ankit Agrawal, CFA

LICHF reported Q3FY23 earnings that was lower than expected due to the increase in provisioning. LICHF reported annualized credit cost of 1.2% vs expected run-rate of <0.5%.
The higher provisioning was done purely from a management overlay perspective for extra caution. It led the PCR to rise to 51% vs 43%+ earlier.
The higher provisioning was not due to asset quality deterioration. In fact, asset quality improved slightly with GNPA at 4.75% vs 4.90% QoQ.

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Feb 10

Most Read: Toshiba Corp, Ebos Group Ltd, Adani Enterprises, Haw Par Corp, CATL (A), Samyang Foods, Samsung Sds and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI Acts Quickly: Unmitigated Bad News for Adani Group Companies
Toshiba (6502) – Whoop! There It Is!
MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises
Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case
Toshiba – The Nikkei Finally Speaks
Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part
Haw Par Corp Is Still Trading Cheap
CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable
Korea Spin-Offs: Details and KOSPI200 Index Impact
Discussing the Timing of the Samsung SDS Block Deal by Lee Seo-Hyun

MSCI Acts Quickly: Unmitigated Bad News for Adani Group Companies

In an unprecedent step, MSCI will reassess the float and likely lower the FIF of the Adani Group companies at the February QCIR. There will be BIG passive selling.
The affected securities will be further reviewed as part of the scheduled Full Country Float Review during the May QCIR. There could be some index deletions and BIGGER passive selling.
Expect active selling before the passive selling and the rally in the Adani Group stocks over the last couple of days should come to a grinding halt today.

Toshiba (6502) – Whoop! There It Is!

As mentioned yesterday here and more clearly by Mio Kato in Toshiba – Good News?, the Nikkei was strangely silent over the fact that loan details were agreed.
The Nikkei comes out with a surprise article this morning saying they hear the Commitment Letter has been handed over. It also says the “Final Bid” is “about ¥2trln.”
Toshiba shares quickly reacted badly quickly. The article deserves parsing and I try to clarify the arguments.

MSCI Feb 2023 QCIR: Mostly In-Line; Couple of Surprises

MSCI has announced the changes for the February QCIR. For Asia Pacific, there are 20 adds and 14 deletes for the MSCI Standard Index with the most changes in China.
There are no surprises on the adds or deletes. However, there are a couple of stocks that are surprises on not being added to or deleted from the index.
The largest impact will be on Ebos Group Ltd (EBO NZ) – though there will be pre-positioning on the stock.

Adani Group – MSCI Will Treat Very Adani Funds as a Very Special Case

Shortly after the Hindenburg Report came out, MSCI said it was seeking feedback from clients. They got it, and last night announced they would conduct a special review.
They concluded some holders heretofore in the float might not be float. They announce results tonight. That can only be bad news for Adani Group companies.
We don’t know numbers yet, but passive inclusion was one reason why stocks skyrocketed. Few of the companies will be unaffected. Some could be heavily affected.

Toshiba – The Nikkei Finally Speaks

By Mio Kato

The Nikkei was out this morning with its belated take on JIP securing financing.
The article was nevertheless rather negative in its tone causing Toshiba to drop as much as 3.6% before recovering most of those losses.
We aren’t entirely sure it should have but Toshiba Tec does pique our interest.

Toshiba (6502 JP): Formal Offer Lodged, Now for the Hard Part

By Arun George

The Nikkei reports that Japan Industrial Partners (JIP), the preferred bidder, has finally secured financing and submitted a final offer to Toshiba Corp (6502 JP)’s Board.
Nikkei notes that JIP expects to spend about JPY2 trillion on the acquisition suggesting an offer price around JPY4,750 per share, -4% below the undisturbed price of JPY4,957.60 (21 April).
The hard part now is getting the Board to accept the unremarkable offer and the banks’ conditions. If the Board succumbs, the next challenge is to get shareholders to accept.

Haw Par Corp Is Still Trading Cheap

By David Blennerhassett

Last November I highlighted Haw Par Corp (HPAR SP)‘s multi-year trough levels on an implied stub valuation, and on an HPAR/UOB (UOB SP) ratio.
That trade has panned out well as the ratio steadily increased. But it remains below the 200 MDA.
A recovery in Tiger Balm sales is expected in Haw Par’s full-year results later this month. UOB’s financials, and UOL (UOL SP)‘s, are also due out this month.

CATL GDR Listing Early Look – Past Deals Have Done Well. Valuations Somewhat Justifiable

By Clarence Chu

CATL (A) (300750 CH) is looking to raise up to US$6bn in its upcoming Swiss GDR listing. Bookrunners on the deal are CICC, China Securities, Goldman Sachs, and UBS.
The relatively large listing comes after the firm has been undertaking a series of capital raisings, since it’s A-share debut back in Jun 2018, to fund its expansion.
In this note, we discuss GDR timelines, and the firm’s recent financial performance/valuations.

Korea Spin-Offs: Details and KOSPI200 Index Impact