Smartkarma Daily Briefs

KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares.
The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow.
In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

YFO To Take the Fight To Toyo Construction’s Board

By Shifara Samsudeen, ACMA, CGMA

YFO offered another Press Release yesterday. This one outlines what they see as Corporate Governance failures and offers a NEW POLICY.
The Corporate Governance failures are indeed, failures. Toyo’s Board has failed to be transparent with shareholders, and in not at least addressing the takeover proposal, has failed its duties.
NEW POLICY? Elect new independent directors “capable of improving the long-term corporate value and maximizing the interests of the general shareholders.” Soft war starts now.

Nidec (6594) | Down but Not Out

By Mark Chadwick

Nidec slashed its full year operating profit guidance by 48% to 110 billion yen
For Q3, Nidec reported an operating profit of 28 billion yen (-37% YoY), significantly below street expectations (51 billion)
We remain bullish, expecting cost cutting efforts to ignite a profit recovery next year

Baycurrent Consulting: High Value-Added Projects and New Consulting Areas Drive New Phase of Growth

Baycurrent’s share price has moved up 41.3% YTD with the company reporting strong earnings for 3QFY02/2023 which beat consensus estimates by a huge margin.
With pandemic conditions fading off, share price began to fall with top-line growth declining slightly. However, growth rates have bounced back, and margins have seen strong improvement reaching new highs.
Though share priced has rallied significantly over the last few months, we think there is further upside driven by value-added projects and expansion into new consulting areas.

The Real Goal of a Company that Wants to Remain in Prime Market Is to Remain in TOPIX

By Aki Matsumoto

Since simply increasing shareholder returns won’t increase corporate value/market cap, it’s more natural to present shareholder return policy together with reasonable earnings target, even when such policy is put forth.
In fact, the companies exemplified in the Nikkei article saw share prices rise for companies with positive earnings outlooks and increased conviction that they will meet their medium-term earnings targets.
This is a more serious and urgent issue for transitional companies, as companies with market cap of less than 10 billion yen in October 2023 will be excluded from TOPIX.

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Jan 25

Most Read: Oriental Land, Sabana Industrial REIT, Pidilite Industries, Kawasaki Kisen Kaisha, KB Financial, Toyo Construction, Douzone Bizon, Norwest Energy NL, China Internet Investment Finance Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End
Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix
NIFTY50 Index Rebalance Preview: No Changes Likely in March
KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?
Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE
YFO To Take the Fight To Toyo Construction’s Board
KRX New Deal Index Rebalance Preview: Some Big Impact Names
Good Morning Japan |NYSE Glitches; Stocks Mixed; While JP Freezes the Public Warms to Nuclear Power
Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer
China Internet Investment (810 HK): 98% Downside

Nikkei 225 Index Rebalance Preview (March): Potential Changes as Review Period Nears End

The review period for the Nikkei 225 (NKY INDEX) March rebalance ends next week. We highlight the 3 potential inclusions and exclusions for the index.
Lasertec Corp (6920), Oriental Land (4661) and Renesas Electronics (6723) remain our top inclusions, while Toyobo Co Ltd (3101), Nippon Light Metal (5703) and Toho Zinc (5707) could be deleted.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 1x ADV on many index constituents.

Partial Tender for Sabana Industrial REIT – Large Additional Player to the Activist Mix

On Friday, after the close, 5.4% owner of Sabana Industrial REIT (SSREIT SP) announced it had offered to buy another 10.0% in a Partial Offer at a recent high price.
The Price of the Tender Offer at S$0.465/share matches a recent (and 7-year) high and a 0.88x multiple against June 2022 NAV of S$0.53/share.
It’s a small deal (US$35mm) for a small REIT (US$350mm) but there’s an activist and an engaged not-quite sponsor, and this would make a third large unitholder in the mix.

NIFTY50 Index Rebalance Preview: No Changes Likely in March

With only 5 trading days to go in the review period, we see no constituent changes to the NIFTY Index (NIFTY INDEX) at the March rebalance.
Pidilite Industries (PIDI IN) is the highest ranked non-index constituent, but its free float market cap does not exceed 1.5x the free-float market cap of Bharat Petroleum Corp (BPCL IN).
We do not expect LTIMindtree (LTIM IN) to be added to the index in March post the merger between Larsen & Toubro (LT IN) and Mindtree Ltd (MTCL IN).

KLINE (9107) – Chances for an Additional Buyback At Q3 Earnings?

KLine is the cheapest of the three Japan majors in terms of forward consensus PER. And forward EPS ratios are improving as the company buys back shares.
The CEO mentioned in December the possibility of additional shareholder return this fiscal year based on cashflow.
In this insight, we look at what he knew then, and what he might know now, and the chances for an additional buyback (and how it might work).

Five Most Aggressive Corporate Activists Moving the Korean Market: Align, KCGI, FCP, Truston, & LIFE

By Douglas Kim

In this insight, we discuss the five most aggressive corporate activist firms that have been moving the Korean equity market in the past year.
They include Align Partners Capital Management, KCGI, Flashlight Capital Partners, Truston, and LIFE Asset Management.
Share prices of 15 companies that the corporate activist firms have invested in Korea are up on average 9.7% YTD, outperforming KOSPI which is up 7.1% in the same period.

YFO To Take the Fight To Toyo Construction’s Board

YFO offered another Press Release yesterday. This one outlines what they see as Corporate Governance failures and offers a NEW POLICY.
The Corporate Governance failures are indeed, failures. Toyo’s Board has failed to be transparent with shareholders, and in not at least addressing the takeover proposal, has failed its duties.
NEW POLICY? Elect new independent directors “capable of improving the long-term corporate value and maximizing the interests of the general shareholders.” Soft war starts now.

KRX New Deal Index Rebalance Preview: Some Big Impact Names

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

Good Morning Japan |NYSE Glitches; Stocks Mixed; While JP Freezes the Public Warms to Nuclear Power

By Mark Chadwick

OVERSEAS. Stocks Mixed as SPX -0.1% as NYSE Glitches on Open; MSFT Beats but Chip Giant Texas Instruments weak; DoJ calls for Google Ad Break up
JAPAN. NKY Futs -0.4% vs Cash; USDJPY steady at 130.19; Japan Freezes – No Joke; Nikkei Survey shows public sentiment toward Nuclear Power improving; Nidec misses; Elliot tgts DNP
DAILY NUGGET. Is Japan Stuck ? This is the view of outgoing BBC reporter. We disagree – changes are happening.

Norwest Energy (NWE AU): The Board Perplexing Succumbs to MinRes’ Revised Offer

Mineral Resources (MIN AU) has revised its offer from 1 MinRes share for every 1,367 NWE shares to 1 MinRes share for every 1,300 NWE shares. The offer is unconditional.
The Norwest Energy NL (NWE AU) Board now recommends the offer. Most of the value uplift is due to the 17.4% increase in MinRes’ share price since 15 December.
MinRes’ revised off-market takeover offer is fair in comparison to Warrego Energy (WGO AU)’s bids and historical ranges. However, this is predicated on the MinRes maintaining its share price run.

China Internet Investment (810 HK): 98% Downside

By David Blennerhassett

Bubble-Stock China Internet Investment Finance Holdings (810 HK) (CIIFH) was suspended on the 10 January pursuant to the Hong Kong Code on Takeovers and Mergers.
It has now announced a possible voluntary conditional takeover. No price was mentioned and terms remain indeterminate.
CIIFH, which invests primarily in listed Hong Kong securities, is trading at an eye-watering 59.5x NAV. 98% downside from here is conceivable.

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Jan 24

Daily Brief Industrials: Toyo Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.
YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed.
There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

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Jan 24

Daily Brief Industrials: Toyo Construction and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

Toyo Construction (1890 JP): YFO Fires Another Salvo at the Board

By Shifara Samsudeen, ACMA, CGMA

Due to the inability of getting a fair hearing from Toyo Construction (1890 JP)’s Board, YFO’s strategy now is to replace some of the Board at the June AGM.
YFO’s latest press release also catalogues the Board’s shockingly poor corporate governance in relation to its tender offer at JPY1,000. Crucially, a special committee is yet to be formed.
There is no timeline update on the tender which was set to start in late January. YFO continues to maintain that it will not withdraw its proposal.

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Jan 24

Daily Brief TMT/Internet: Tencent, Taiwan Semiconductor (TSMC) – ADR, Bitcoin and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

China Internet Weekly (23Jan2023): Tencent, Meituan, NetEase, Activision Blizzard
Taiwan Tech Weekly: Dutch & Japan China Restrictions End-January, Realtek Results Show Pain in PCs
FTT Returns From the Dead

China Internet Weekly (23Jan2023): Tencent, Meituan, NetEase, Activision Blizzard

By Ming Lu

The authorities approved three of Tencent’s games in January 2023 after five in December 2022.
Tencent closed its XR business and terminated a property rental contract.
NetEase refused to extend service for Activision Blizzard for additional six months.

Taiwan Tech Weekly: Dutch & Japan China Restrictions End-January, Realtek Results Show Pain in PCs

By Vincent Fernando, CFA

New China semiconductor restrictions could be announced by the Netherlands and Japan by end-January.
Realtek 4Q22 results — Signals weakness for companies serving the PC market, and could get worse in 1Q23E.
Western Digital & Kioxia could merge NAND flash units to create a rival to Samsung.

FTT Returns From the Dead

By Kaiko

Price Movements: BTC gained another 10% this week despite news that Genesis had filed for bankruptcy, with a reported $5bn in liabilities.
Market Liquidity: Trade volume on the largest Asia-based exchanges fell to multi-year lows amid a tough regulatory environment in the region.
Derivatives: BTC open interest has dropped 25% as a short squeeze hits derivatives traders.

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Jan 24

Daily Brief Utilities: Electricite De France Sa and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

République Française/EDF: Squeeze-Out

République Française/EDF: Squeeze-Out

By Jesus Rodriguez Aguilar

On 6 July, the French Prime Minister said that France would have 100% of EDF. I recommended BUY at €8.98 in the wake of a very willing big-pocketed buyer.
The French state now holds 92.71% of voting rights in EDF, and intends to initiate the squeeze-out within three months from closing (up to 22 March).
Although the shares are still liquid, gross spread is 0-2 bps, and therefore there is no trade worth considering, in my view, just selling into the sustained purchase order/await squeeze-out.

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Jan 24

Daily Brief Health Care: Takeda Pharmaceutical, Sciclone Pharmaceuticals, Medlab Clinical and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Takeda Strengthens Oncology Portfolio with HUTCHMED’s Fruquintinib Acquisition
Sciclone Pharmaceuticals (6600.HK) – The Business, the Outlook and the Challenges
Medlab Clinical – NanaBis development centre stage in 2023

Takeda Strengthens Oncology Portfolio with HUTCHMED’s Fruquintinib Acquisition

Takeda announced Monday that it has entered into an exclusive licensing agreement with HUTCHMED (China) for further development and commercialisation of Fruquintinib outside of Mainland China, Macau and Hong Kong.
Takeda will pay HUTCHMED $400m upfront and up to $730m in additional potential payments relating to regulatory, development and commercial sales milestones, as well as royalties on net sales.
Fruquintinib was approved in China in 2018, is a highly selective, oral VEGFR1/2/3 Tyrosine Kinase Inhibitor and offers potential new treatment option for patients with refractory metastatic colorectal cancer (CRC).

Sciclone Pharmaceuticals (6600.HK) – The Business, the Outlook and the Challenges

By Xinyao (Criss) Wang

Zadaxin has been the biggest performance driver of SciClone, but it would face the risk of losing market share and increased pricing pressures after generic drugs were included in VBP.
SciClone is primarily a pharmaceutical development/sales company, rather than a research-based innovative drug company.The increasingly low cost performance of in-licensed products has made the capital “reconsider” and be more rational.
SciClone is a good stock for short-term trade, especially by taking advantage of the positive momentum after it reaches licensing deals/launches new products, but we’re concerned about its long-term prospects.

Medlab Clinical – NanaBis development centre stage in 2023

By Edison Investment Research

As Medlab Clinical moves into 2023, the expected commencement of a Phase III trial for NanaBis (the company’s cannabinoid based analgesic therapy) in cancer-induced bone pain will be the focus for investors. Management made considerable progress towards Phase III in 2022, by switching to a purely synthetic cannabinoid formulation and gathering encouraging real-world data on NanaBis use. We believe these actions should maximise the potential for NanaBis in both a regulatory and a commercial setting. We note that successful progression of the company’s programmes will be contingent on Medlab’s ability to raise capital, given the short cash runway (funded into March 2023) and recent setback with the Nasdaq listing plans. We update our estimates to reflect the financing risk and macro uncertainty, resulting in our valuation decreasing to A$183.5m or A$80.4/share, from A$236.1m or A$103.5/share.

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Jan 24

Daily Brief Energy/Materials: Warrego Energy, Pidilite Industries, Natural Gas and more

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

In today’s briefing:

Warrego (WGO AU): End-Game Scenarios
NIFTY50 Index Rebalance Preview: No Changes Likely in March
The Commodity Report #87

Warrego (WGO AU): End-Game Scenarios

Warrego Energy (WGO AU)’s offers from Hancock and Strike Energy (STX AU) close on 31 January and 13 February, respectively. As time passes, the chance of a further bump is slim.
Mineral Resources (MIN AU) is the kingmaker. A MinRes/Strike pairing results in a combined min of 49.83% to a max of 73.93% of outstanding shares (if Hancock retains its stake).
A MinRes/Hancock pairing results in a combined min of 45.21% to a max of 69.32% of outstanding shares (if Strike retains its stake). This is the likely scenario.

NIFTY50 Index Rebalance Preview: No Changes Likely in March