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Smartkarma Daily Briefs

Aug 10
0

Daily Brief ECM: SOCAR IPO Book Building Results and more

By | Daily Briefs, ECM

In today’s briefing:

  • SOCAR IPO Book Building Results
  • SOCAR IPO: Order Table, Revised Terms, & Thinking Points

SOCAR IPO Book Building Results

By Douglas Kim

  • SOCAR announced its IPO book building results. The IPO price has been determined at 28,000 won (18% lower than the low end of the IPO range).
  • Our base case target price for SOCAR is 27,176 won, which is 3% lower than the IPO price of 28,000 won. 
  • We remain Negative on this IPO due to lack of upside. There were 348 companies involved in the IPO survey with the final demand ratio of 56 to 1.

SOCAR IPO: Order Table, Revised Terms, & Thinking Points

By Sanghyun Park

  • SOCAR’s institutional subscription rate was 56.97 to 1. It is highly unusual for an institutional competition rate to be this low among IPOs worth more than ₩1T.
  • SOCAR eventually set the price at ₩28,000 and reduced the offering volume from 4.55M to 3.64M, resulting in deal size of ₩100B at an implied market cap of ₩970B.
  • Since Lotte Rental’s buying flow may be triggered earlier than expected, we may need to consider a swing trade if the price enters an oversold territory after listing.

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Aug 10
0

Daily Brief Quantitative Analysis: Revisiting the Performance of TAA ETFs and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Revisiting the Performance of TAA ETFs

Revisiting the Performance of TAA ETFs

By Nicolas Rabener

  • There has been a boom in launching tactical asset allocation ETFs
  • However, the recent track record of these has been poor
  • Declining stock and bond markets have created a challenging environment for these

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Aug 10
0

Daily Brief Technical Analysis: Tencent New Lows in Sight and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • Tencent New Lows in Sight
  • S&P 500, Nasdaq 100 Testing Key Resistance Levels; Pause Likely; Buying Biotech

Tencent New Lows in Sight

By Thomas Schroeder

  • Tencent short from 390 is rewarding and reaching for new chart lows now that the 310 pivot support has given way and leading the likes of BABA.
  • MACD target support is the key input to align with a terminal wave 5 low to set up the macro long entry in September.
  • Undershoot risk to lower channel support with a low due in September and rally hurdles toward year end at 370/390. 420 remains the forward macro barrier to challenge/clear.

S&P 500, Nasdaq 100 Testing Key Resistance Levels; Pause Likely; Buying Biotech

By Joe Jasper

  • The weight of the evidence suggests that the lows for this bear market have likely already been established, but that does not mean it will be smooth sailing from here.
  • The SPX and NDX are both testing important resistance levels (4165-4180 and the YTD downtrend, respectively), making this a logical spot for the indexes to stall and potentially pull back.
  • Ultimately, we would expect to see support near their 50-day MAs as the market goes through a bottoming process. We remain neutral overall.

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Aug 10
0

Daily Brief Credit: Softbank Group – Earnings Flash – Q1 FY 2022-23 Results – Lucror Analytics and more

By | Credit, Daily Briefs

In today’s briefing:

  • Softbank Group – Earnings Flash – Q1 FY 2022-23 Results – Lucror Analytics
  • Morning Views Asia: China SCE, KWG Living Group, Longfor Properties, Sino-Ocean Service

Softbank Group – Earnings Flash – Q1 FY 2022-23 Results – Lucror Analytics

By Trung Nguyen

In our view, Softbank Group’s (SBG) Q1/22-23 results were dismal, with the company reporting a record loss. This was the second consecutive quarterly loss, after SBG registered a big loss just three months ago. One positive factor is liquidity, with the company holding a large amount of cash after heavily monetising its liquid assets (mostly Alibaba shares) during the quarter.

The improvement in LTV despite the steep drop in NAV signals that the ratio, as defined and reported by SBG, is open to the company’s control and manipulation. SBG still has a lot of room to monetise its asset base (JPY 4.5 tn in Alibaba shares and JPY 1.2 tn in T-Mobile/Deutsche Telekom shares). Thus, LTV is no longer meaningful, as the company appears to be able to manipulate the ratio as it wishes, as long as it has liquid assets.

Morning Views Asia: China SCE, KWG Living Group, Longfor Properties, Sino-Ocean Service

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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Aug 10
0

Daily Brief Thematic (Sector/Industry): ASEAN Consumer: Still Plenty to Benefit? and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • ASEAN Consumer: Still Plenty to Benefit?

ASEAN Consumer: Still Plenty to Benefit?

By Henry Soediarko

  • ASEAN consumer has been a popular investment theme for the past two decades signaled by the success stories of the few consumer dedicated funds in the region. 
  • Consumer brands in F&B such as Bakmi GM, Milk Life, and Kopi Kenangan are still private while the best Batik brand in Indonesia, Batik Keris, is also privately owned. 
  • Plenty of opportunities in the Indonesian consumer sector are yet to hit the listed equities market. 

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Aug 10
0

Daily Brief Equity Bottom-Up: Tokyo Electron (8035 JP): Caught Out by a Decline in Sales and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Tokyo Electron (8035 JP): Caught Out by a Decline in Sales
  • LICHF: Earnings On Track To Beat Our Prior Projections
  • Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised
  • Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back
  • Kaken Pharmaceutical (4521 JP): Falling Revenue of Top-Selling Drugs Limit Near-Term Growth Prospect
  • Result Flash Q2 2022: Keepers Holdings Stellar Headlines

Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

By Scott Foster

  • A sudden decline in sales led to a 30% sequential decline in operating profit in the three months to June. Year-on-year, operating profit was down 17%.
  • Nevertheless, management left sales and profit guidance unchanged – despite cutting their semiconductor equipment demand forecast – and R&D and capital spending continue to rise. 
  • FY Mar-23 EPS guidance puts the shares on 13x earnings, but potential downside risk is considerable. Stand back while the economic recession unfolds.

LICHF: Earnings On Track To Beat Our Prior Projections

By Ankit Agrawal, CFA

  • With Q1FY23 PAT at INR 925cr+, LICHF is on track to beat our prior estimate of INR 3600cr+ for FY23 PAT.
  • We now project that LICHF can do INR 3850cr+ PAT in FY23, implying that at the current market cap of INR 21,000cr, LICHF is trading cheap at <5.5x FY23 P/E.
  • Credit cost for the quarter was slightly higher at annualized 0.5% of AUM, however, excluding slippages from the OTR book, it was in line with long-term average of around 0.2-0.3%.

Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised

By Tina Banerjee

  • Shockwave Medical Inc (SWAV US) had a solid Q2 across the board, with total revenue surging 116% y/y, driven by a 139% y/y jump in coronary products (73% of revenue).
  • The company raised 2022 revenue guidance to $465–475 million (+96–100% y/y). Revenue guidance was raised for the second time this year.
  • Shockwave shares gained 28% since I published bullish insight on the company on June 7. I believe further stream is still left.

Zhangzhou Pientzehuang Pharmaceutical (600436CH) 22H1- 2022 Is Stressful but Shares Will Bounce Back

By Xinyao (Criss) Wang

  • Due to the lockdown/pandemic, Pientzehuang Pharmaceutical’s 2022H1 performance slowed down. Considering the economic downturn and people’s cutting back spending on non-rigid consumption, the full-year revenue growth could be around 10%-20%.
  • The Company’s key challenge lies in revenue growth. However, it is not easy to increase sales largely due to the scarcity of raw materials, which limits the expansion of production.
  • Pien Tze Huang is overvalued. Share price could continue to fall,but it will bounce back due to its high moat. 2022 is a good time for bottom fishing this stock.

Kaken Pharmaceutical (4521 JP): Falling Revenue of Top-Selling Drugs Limit Near-Term Growth Prospect

By Tina Banerjee

  • Kaken Pharmaceutical (4521 JP) is reporting declining revenue from its three largest selling products, due to NHI price revision. These products together contribute more than 60% of total revenue.
  • The company’s newly launched products are growing at a rapid pace. However, the fastest growing product Ecclock contribute just 2% of total revenue.
  • Kaken guided for just 1% y/y revenue growth and 12% y/y decline in operating profit in FY23. Due to pipeline expansion, R&D expenses are likely to remain elevated.

Result Flash Q2 2022: Keepers Holdings Stellar Headlines

By Sameer Taneja

  • The Keepers Holdings, Inc. (KEEPR PM) reported solid growth in its Q2 2022 results, with 30% revenue growth YoY(%) and 44% profit growth ahead of our expectations. 
  • The stock trades at 4.5x PE ex-cash (with ~50% of the market capitalization in cash), making it a cheap discretionary consumption plays in the Philippines with good execution.
  • Further catalysts include the potential for making an accretive acquisition. More to follow once the company has its investor call on Friday the 12th of August 2022. 

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Aug 10
0

Daily Brief Event-Driven: S&P Global Water Index: Market Consultation Driven Potential Changes and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • S&P Global Water Index: Market Consultation Driven Potential Changes
  • Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride
  • Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term
  • MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
  • Selected European Holdcos and DLCs: July ‘22 Report
  • Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
  • Tencent Looking to Raise Its Stake in Ubisoft at a Huge Premium
  • NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years

S&P Global Water Index: Market Consultation Driven Potential Changes

By Brian Freitas

  • S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
  • We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
  • There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.

Magic Empire Global – Not Clear Who Is Driving and Who Is Being Taken For a Ride

By Travis Lundy

  • Just days after AMTD Digital (HKD US) was ramped 30,000% to a ridiculous valuation only weeks after its IPO, Magic Empire Global (MEGL US) IPOed and rose 2000+ on Day1.
  • MEGL is a corporate advisory, helping smallcaps IPO then helping them comply with listing rules. 2 principals, 2 professionals, 5 staff with no moat had US$2.16mm in revenue in 2021.
  • And it is worth US$2.3bn – 1000 x revenues and 10,000x earnings?  This is not OK. And it smacks of something unsavoury. 

Nexon Q2 In-Line, New Buyback Plan Too Small To Matter Near-Term

By Travis Lundy

  • Nexon (3659 JP) reported Q2 earnings and Q3 forecasts today. Everything is generally “in-line” to tilting slightly light. But USD/yen volatility matters a lot. 
  • The company announced a small dividend hike, from largely meaningless to ever-so-slightly less meaningless. And a plan to buy back ¥100bn of shares over 3 years. 
  • The inheritance tax issue remains a big one, but overhang appears delayed and buyback accretion is small, and also appears delated. And there’s an index sell at end-September.

MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals

By Douglas Kim

  • We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals. 
  • The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom. 
  • The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom). 

Selected European Holdcos and DLCs: July ‘22 Report

By Jesus Rodriguez Aguilar

  • Discounts to NAV of covered holdcos haven’t shown a clear trend during July/beginning of August. Investors have favored Swedish hodlcos, disliked GBL’s results and avoided the Heineken/Heineken Holdings trade.
  • Discounts to NAV: Alba, 42.8%; GBL, 34.5%; Heineken Holdings to 21.5%; Industrivärden C, 7.8%; Investor B, 14.3%; Porsche Automobile Holding to 29.4%. Rio Tinto DLC tightened to 16.2%.
  • Spreads tend to widen in bear markets but short term recoveries provide opportunities on tightening discounts. If anything, recommended trades are: Industrivärden C vs. listed assets, Porsche, Rio Tinto (DLC).

Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea

By Sanghyun Park

  • The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
  • The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
  • This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.

Tencent Looking to Raise Its Stake in Ubisoft at a Huge Premium

By Shifara Samsudeen, ACMA, CGMA

  • Reuters and several other news media outlets reported that Tencent (700 HK) is looking to raise its stake in French game publisher Ubisoft as it seeks to expand overseas.
  • Tencent owns approx. 5.0% of Ubisoft which was acquired in 2018 and is said to have reached out to the founding family Guillemot to buy a stake from their ownership.
  • As we mentioned in our previous insight, Tencent has been excluded for the fourth time from new game approvals which had impacted its online games biz.

NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years

By Douglas Kim

  • After the market close on 9 August, NHN Corp announced that it will cancel treasury shares equivalent to 10% of outstanding shares in the next three years. 
  • This is a tremendous management move to improve shareholder return policy. 
  • A 10% share cancellation of outstanding shares is a major move and this is likely to result in a sharp appreciation of NHN’s share price in the next several weeks. 

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Aug 10
0

Daily Brief South Korea: Kakao Pay, SOCAR, Foosung Co Ltd, NHN Corp and more

By | Daily Briefs, South Korea

In today’s briefing:

  • MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals
  • SOCAR IPO Book Building Results
  • Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea
  • SOCAR IPO: Order Table, Revised Terms, & Thinking Points
  • NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years

MSCI Korea: Potential Inclusions & Exclusions in August 2022 Highlighted by Locals

By Douglas Kim

  • We discuss the potential inclusions and exclusions in the next MSCI Korea Index rebalance announcement (12 August) that are being highlighted by the locals. 
  • The potential inclusion candidates in the MSCI Korea Index emphasized by the locals in August 2022 include LG Energy Solution and Kakao Pay; potential exclusion candidate include SK Telecom. 
  • The overall assessment of the MSCI Korea Index rebalance in August is rather mixed. There are two potential inclusions (LG Energy Solution and Kakao Pay) and one exclusion (SK Telecom). 

SOCAR IPO Book Building Results

By Douglas Kim

  • SOCAR announced its IPO book building results. The IPO price has been determined at 28,000 won (18% lower than the low end of the IPO range).
  • Our base case target price for SOCAR is 27,176 won, which is 3% lower than the IPO price of 28,000 won. 
  • We remain Negative on this IPO due to lack of upside. There were 348 companies involved in the IPO survey with the final demand ratio of 56 to 1.

Appraisal Rights (& Possibly Preemptive Too) To Be Granted in an ECO in Korea

By Sanghyun Park

  • The Korea FSC disclosed the policy agenda, which was presented to President Yoon. The implementation will likely be in the fourth quarter.
  • The FSC stated that it would grant appraisal rights to the shareholders of a parent company in an ECO (equity carve-out).
  • This rule will likely be applied to DB Hitek and Foosung. Hence, our trading setup targeting these ECO events will require more sophisticated modifications.

SOCAR IPO: Order Table, Revised Terms, & Thinking Points

By Sanghyun Park

  • SOCAR’s institutional subscription rate was 56.97 to 1. It is highly unusual for an institutional competition rate to be this low among IPOs worth more than ₩1T.
  • SOCAR eventually set the price at ₩28,000 and reduced the offering volume from 4.55M to 3.64M, resulting in deal size of ₩100B at an implied market cap of ₩970B.
  • Since Lotte Rental’s buying flow may be triggered earlier than expected, we may need to consider a swing trade if the price enters an oversold territory after listing.

NHN: Cancellation of Treasury Shares Equivalent to 10% of Outstanding Shares Over Next 3 Years

By Douglas Kim

  • After the market close on 9 August, NHN Corp announced that it will cancel treasury shares equivalent to 10% of outstanding shares in the next three years. 
  • This is a tremendous management move to improve shareholder return policy. 
  • A 10% share cancellation of outstanding shares is a major move and this is likely to result in a sharp appreciation of NHN’s share price in the next several weeks. 

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Aug 10
0

Daily Brief Industrials: Tokyo Electron and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

Tokyo Electron (8035 JP): Caught Out by a Decline in Sales

By Scott Foster

  • A sudden decline in sales led to a 30% sequential decline in operating profit in the three months to June. Year-on-year, operating profit was down 17%.
  • Nevertheless, management left sales and profit guidance unchanged – despite cutting their semiconductor equipment demand forecast – and R&D and capital spending continue to rise. 
  • FY Mar-23 EPS guidance puts the shares on 13x earnings, but potential downside risk is considerable. Stand back while the economic recession unfolds.

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Aug 10
0

Daily Brief United States: Shockwave Medical Inc, S&P 500 and more

By | Daily Briefs, United States

In today’s briefing:

  • Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised
  • S&P 500, Nasdaq 100 Testing Key Resistance Levels; Pause Likely; Buying Biotech

Shockwave Medical Inc (SWAV US): Recovery from COVID Drove Q2 Sales; 2022 Revenue Guidance Raised

By Tina Banerjee

  • Shockwave Medical Inc (SWAV US) had a solid Q2 across the board, with total revenue surging 116% y/y, driven by a 139% y/y jump in coronary products (73% of revenue).
  • The company raised 2022 revenue guidance to $465–475 million (+96–100% y/y). Revenue guidance was raised for the second time this year.
  • Shockwave shares gained 28% since I published bullish insight on the company on June 7. I believe further stream is still left.

S&P 500, Nasdaq 100 Testing Key Resistance Levels; Pause Likely; Buying Biotech

By Joe Jasper

  • The weight of the evidence suggests that the lows for this bear market have likely already been established, but that does not mean it will be smooth sailing from here.
  • The SPX and NDX are both testing important resistance levels (4165-4180 and the YTD downtrend, respectively), making this a logical spot for the indexes to stall and potentially pull back.
  • Ultimately, we would expect to see support near their 50-day MAs as the market goes through a bottoming process. We remain neutral overall.

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