All Posts By

Smartkarma Daily Briefs

Jul 09
0

United States: Dollar Index, Carter’s Inc and more

By | Daily Briefs, United States

In today’s briefing:

  • EM and Asian FX Break Points that Will Inflect Risk
  • Palm Valley Capital Fund Second Quarter 2022 Commentary

EM and Asian FX Break Points that Will Inflect Risk

By Thomas Schroeder

  • USD bull energy appears unabated amid yield dips and risk on phases. Red flags are brewing for USD breakout levels in EM and vulnerable FX in Asia.
  • The greenback will find a short term top ahead or into the Fed rate hike. A USD pullback in July/August if viewed as a fresh buying opportunity.
  • We see September/October (will start in August) and Q1 2023 as windows for USD power moves/breakouts that would lead equity risk (bear phases).

Palm Valley Capital Fund Second Quarter 2022 Commentary

By Fund Newsletters

  • The Palm Valley Capital Fund invests in small cap stocks. While our Fund is new, its underlying absolute return-based investment strategy is not. We have practiced the same strategy throughout our careers in investment management.
  • Investors’ faith in central banks is currently being tested by the highest U.S. inflation in over 40 years.
  • Two-thirds of the nonfinancial members in the Russell 2000 Index are either unprofitable or trade above 20x EV/EBIT.
  • The median EBIT growth since 2019 for small caps in the sub 10x EV/EBIT bucket is an astonishing 194%.
  • Small caps didn’t sell off enough to create compelling opportunities across the board and the market simply unwound its undeserved gains from 2021.

Before it’s here, it’s on Smartkarma

Learn More
Jul 09
0

India: Haier Smart Home Co Ltd and more

By | Daily Briefs, India

In today’s briefing:

  • India Channel Insight #41 | Haier, Samsung, Voltas

India Channel Insight #41 | Haier, Samsung, Voltas

By Pranav Bhavsar

Before it’s here, it’s on Smartkarma

Learn More
Jul 09
0

Macro: So and more

By | Daily Briefs, Macro

In today’s briefing:

  • So, Recession?
  • July Market Thinking

So, Recession?

By The Macro Compass

  • Amongst the many forward-looking economic indicators I focus on, you will know by now that one of my preferred metrics is my G5 Credit Impulse series: it measures the pace of change of credit creation in the 5 largest economies worldwide and it serves as a very reliable leading indicator (6-15 months lead time) for economic growth and the performance of several asset classes.
  • Why? Because as our structural ability to deliver economic growth is impaired by weak demographics and stagnant productivity, we learnt that printing money out of thin air works as a (temporary) substitute: the more money we inject in the private sector, the more likely we’ll get a cyclical boost to economic growth.
  • Slow down that process, and growth will cyclically slow down too.

July Market Thinking

By Mark Tinker

  • June ended with one of the worst first half performances for capital markets for decades, representing a serious blow to wealth in that both Bonds and Equities have been hit badly.
  • We continue to believe that the underlying stress is coming from fixed income markets, which remain the key area to watch as they unwind the excess liquidity pumped into them over a decade of QE and more recently at the start of Covid, when the Fed had to inject liquidity to prevent a run on the whole fixed income ETF complex.
  • At the end of May/beginning of June we saw a few signs of stabilisation only to see them unwind rapidly in the first half of the month.

Before it’s here, it’s on Smartkarma

Learn More
Jul 09
0

Equity Bottom-Up: Haier Smart Home Co Ltd, Nexteer Automotive, Sri Trang Gloves (Thailand) Public Company Limited, Shift Inc, Z Holdings and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • India Channel Insight #41 | Haier, Samsung, Voltas
  • Nexteer (1316): Unjustly Punished and Bounce Soon?
  • Sri Trang Gloves (STGT TB): 2022 Started On a Weak Note; Lower ASP Is Industry Wide Phenomena
  • Shift 3Q: Earnings Below Consensus but Heavy Hiring Spend Should Help in the Long Run
  • Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year

India Channel Insight #41 | Haier, Samsung, Voltas

By Pranav Bhavsar

Nexteer (1316): Unjustly Punished and Bounce Soon?

By Henry Soediarko

  • Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world. 
  • It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value. 
  • Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector. 

Sri Trang Gloves (STGT TB): 2022 Started On a Weak Note; Lower ASP Is Industry Wide Phenomena

By Tina Banerjee

  • Sri Trang Gloves (Thailand) Public Company Limited (STGT TB) reported record high sales volume due to strong demand in existing markets and expansion into new markets.
  • However, lower ASP as a result of additional supply in the market, dragged down revenue and profitability of the company. No recovery in ASP is seen in near-term.
  • By leveraging on its locational advantage for NR glove, focusing on fast growing developing markets, and launching high-margin surgical glove in Thailand, STGT is well-positioned to outpace its Malaysian peers.

Shift 3Q: Earnings Below Consensus but Heavy Hiring Spend Should Help in the Long Run

By Shifara Samsudeen, ACMA, CGMA

  • Shift reported 3QFY08/2022 results yesterday. Revenue grew 36.1% YoY to JPY17.1bn (vs consensus JPY18.3bn) while OP grew 25.7% to JPY1.3bn (vs consensus JPY1.54bn).
  • Revenue from the largest segment Enterprise market grew 35.3% while enterprise segment grew 47.5% YoY during the quarter.
  • According to Shift, the application of revenue recognition standard has lowered revenues and OP. The drop in OPM was due to heavy SG&A expenses as a result of hiring.

Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year

By Kirk Boodry

  • Z Holdings will integrate its eCommerce platforms in a move that boosts the PayPay brand and may generate some (very) modest synergies
  • We are publishing updated forecasts and setting a new target price at ¥550 but we remain cautious on the shares in the near term as consensus remains high
  • Shares of ZHD still appear expensive at 14-16x our estimate of FY22e EBITDA and are more expensive than Alphabet at these levels (12x EBITDA)

Related tickers: Nexteer Automotive (1316.HK), Shift Inc (3697.T), Z Holdings (4689.T)

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

Singapore: CIFI Holdings and more

By | Daily Briefs, Singapore

In today’s briefing:

  • Morning Views Asia: CIFI Holdings, Lippo Malls Indonesia Retail Trust, Times China

Morning Views Asia: CIFI Holdings, Lippo Malls Indonesia Retail Trust, Times China

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.

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

TMT: Asmedia Technology, Link Administration, Apple, Softbank Group (ADR), WCP and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades
  • Link Admin Mulls Dye & Durham’s Upped Bid
  • Link Narrows the Price Gap as DND Bumps Its Lowered Offer
  • Vltava Fund – Letter To Shareholders Q2 2022
  • Softbank Group – Business as Usual
  • WCP IPO Preview

FTSE TWSE Taiwan Dividend+ Index: A Rare Gem for Index Rebal Trades

By Janaghan Jeyakumar, CFA

  • The FTSE TWSE Taiwan Dividend+ Index is an index of stocks with the highest dividend yields in the universe of the FTSE TWSE Taiwan 50 and Mid-Cap 100 Indices.
  • According to our estimates, the historical average return for index rebalance trades seems to be extremely attractive and the potential volume impact can be significant too.
  • We feel this is one of the most interesting esoteric indices in the Asia-Pacific region for index rebalance trades.

Link Admin Mulls Dye & Durham’s Upped Bid

By David Blennerhassett

  • Dye & Durham (D&D) has bumped its offer for Link Administration (LNK AU) to $4.57/share after its prior revised $4.30/share bid was rejected. 
  • Link shareholders may also receive an additional A$0.13 from the sale of the Banking and Credit Management (BCM) business under the latest offer.
  • Link said it will consider the proposal and continue to engage with D&D.

Link Narrows the Price Gap as DND Bumps Its Lowered Offer

By Arun George

  • Dye & Durham/DND has bumped its lowered offer by 6.3% to A$4.57 per share. The Link Administration (LNK AU) Board has postponed the 13 July scheme meeting to facilitate discussions. 
  • DND’s “sweetened” A$4.57 base consideration plus the potential BCM consideration of A$0.13 totals exactly A$4.70 per share. This suggests that Board is aiming for a A$4.70 base consideration.  
  • DND is clearly interested in Link. Bridging the 2.8% price gap between the buyer’s and seller’s price aspirations is not onerous and suggests a deal can get done.

Vltava Fund – Letter To Shareholders Q2 2022

By Fund Newsletters

  • Vltava is a global equity investment fund. Our objective is to achieve long-term capital growth of the assets under management while investing primarily into stocks of publicly traded companies.
  • Today, inflation is higher by multiples, it is completely out of control, and, as so often happens, the market is again teaching a lesson to those endeavoring to vanquish it.
  • Oil companies are today essentially being pilloried for extracting oil at all, meanwhile banks are refusing to finance the needed investments.

Softbank Group – Business as Usual

By Kirk Boodry

  • Vision Fund head Rajeev Misra will step down from Vision Fund 2 to take a new gig managing money for Midde Eastern partners. His VF1 role is unchanged for now
  • Structurally, this does not change very much as Son-san has always been the decision maker on investments and we never considered Misra as a candidate for succession
  • After surviving $47bn in public equity losses over the last year, it surprisingly looks like Misra’s departure is voluntary

WCP IPO Preview

By Douglas Kim

  • WCP is getting ready for an IPO in Korea in August. This is expected to be one of the largest IPOs in Korea post LG Energy Solution (373220 KS).
  • The IPO price range is from 80,000 won to 100,000 won. The IPO base deal size is from $560 million to $700 million.
  • WCP is a leading maker of separators which are key materials used in EV batteries.

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

Equity Capital Markets: Deewin Tianxia, SOCAR, Weilong Delicious Global, WCP and more

By | Daily Briefs, ECM

In today’s briefing:

  • Deewin Tianxia IPO – Losing Market Share in a Fragmented Market, Coupled with Pricey Valuation
  • SoCar Pre-IPO – Peer Comparison – Highly Competitive Market with Thin Margins
  • Weilong Delicious IPO: Not Very Delicious
  • WCP IPO Preview

Deewin Tianxia IPO – Losing Market Share in a Fragmented Market, Coupled with Pricey Valuation

By Clarence Chu

  • Deewin Tianxia (2418 HK) is looking to raise up to US$147m in its Hong Kong IPO.
  • Deewin Tianxia (DT) is a service provider in the commercial automobile service industry in China. 
  • Listing sentiment hasn’t been the greatest as of late and the tepid cornerstone list doesn’t help. 

SoCar Pre-IPO – Peer Comparison – Highly Competitive Market with Thin Margins

By Ethan Aw

  • SOCAR (403550 KS) is looking to raise up to US$159m in its upcoming Korea IPO. 
  • While SoCar seeks to be an all-in-one mobility solution provider, the bulk of its revenues still come from its car sharing segment. 
  • The car sharing market remains highly competitive with existing players that are already profitable. In this note, we will undertake a peer comparison of SoCar vs its listed peers

Weilong Delicious IPO: Not Very Delicious

By Shifara Samsudeen, ACMA, CGMA

  • Weilong Delicious is a is a leading spicy snack food company in China with a market share of 6.2% and ranked first among all spicy snack food enterprises in China.
  • The company’s application for a HKEx IPO has been approved and plans to raise proceeds of about US$500m.
  • Our analysis on the company’s financials reveal that its top line growth is slowing down while margins have come under pressure. We discuss the details below.

WCP IPO Preview

By Douglas Kim

  • WCP is getting ready for an IPO in Korea in August. This is expected to be one of the largest IPOs in Korea post LG Energy Solution (373220 KS).
  • The IPO price range is from 80,000 won to 100,000 won. The IPO base deal size is from $560 million to $700 million.
  • WCP is a leading maker of separators which are key materials used in EV batteries.

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

Indonesia: Bank Rakyat Indonesia and more

By | Daily Briefs, Indonesia

In today’s briefing:

  • Bank Rakyat Indonesia – Increasingly Digitalised Micro Champion

Bank Rakyat Indonesia – Increasingly Digitalised Micro Champion

By Angus Mackintosh

  • Despite what looked like a solid set of 1Q2022 results, Bank Rakyat Indonesia has seen a sharp correction in its share price, which looks unjustified given a positive outlook.
  • The bank has 84% of its loan exposure to micro and ultra-micro customers, which generates higher returns than corporate lending plus it is improving returns through increasing digitalisation.
  • Management guidance for this year remains positive, and the bank is well-positioned to take advantage of the economic recovery with abundant liquidity and a low cost of funds.

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

Consumer: Perfect Medical Health, Giordano International, Seven & I Holdings, Lotte Confectionery, SOCAR, Weilong Delicious Global, Torikizoku, Marinemax Inc and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Perfect Medical 1830 HK: The Perfect HK Recovery Play
  • Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink
  • Seven & I: Positives All Around But Upside Is Limited
  • KOSPI 200 December Rebelancing: Names Currently Close To & Out of Buffer Zone
  • Seven & I (3382) | So What if Walmart Missed
  • SoCar Pre-IPO – Peer Comparison – Highly Competitive Market with Thin Margins
  • Weilong Delicious IPO: Not Very Delicious
  • Giordano (709 HK): Cheng Family’s Offer (Even) Less Viable After Positive Profit Alert
  • Torikizoku Holdings (3193): June SSS Recovered to 85% of Pre-Pandemic Levels
  • Overearning Short Candidates: Alpha Metall, MarineMx, ON Semi, Kulicke & Soffa, Pool Co, Century Com

Perfect Medical 1830 HK: The Perfect HK Recovery Play

By Sameer Taneja

  • Perfect Medical Health (1830 HK) is a recovery play for HK/China beauty trading at 11.8x PE FY23, with a dividend yield of 8.5% (assuming a 100% payout).
  • With net cash (including investments) of 565 mn HKD ( > 10% of market cap ), the company is primed for M&A in an environment where restrictions have weakened competitors.
  • The chairman’s recent buying of shares ( representing a 0.41% stake ) and the company share repurchase ( representing 0.08%)  indicate the company’s confidence in its prospects. 

Giordano’s Retail Recovery Will Force the Cheng Family into a Rethink

By Arun George

  • Giordano International (709 HK)’s 1H22 net profit is expected to be in the range of HK$91-101 million, which represents YoY growth of 52-68%. Interims will be out in early August.
  • The clear sign of a retail recovery diminishes the prospect of the Cheng family’s low-ball offer of HK$1.88 per share hitting the 50%+ minimum acceptance threshold.
  • The offer price has not been declared final suggesting that the Cheng family retains some room to test shareholder appetite with an improved offer.   

Seven & I: Positives All Around But Upside Is Limited

By Oshadhi Kumarasiri

  • With OP up by 32.1% YoY, 1QFY23 was the first genuine sign of the realisation of synergies from the Speedway acquisition.
  • There could be more good news on the horizon as various news outlets have reported that the sale of Sogo Seibu is moving closer.
  • Yet we are neutral on Seven & I Holdings (3382 JP) in the short-term. We think investors needs to see the true colours of synergies for shares to break ¥6,100.

KOSPI 200 December Rebelancing: Names Currently Close To & Out of Buffer Zone

By Sanghyun Park

  • At this point, Lotte Confectionery and Miwon Specialty Chemical are currently within less than a 5% increase in market cap to beat the buffer rule.
  • Three constituents are out of the buffer zone: Cheil Worldwide, HDC Hyundai Development, and Boryung Pharmaceutical. Hanall Biopharma, Samyang Holdings, and Hyundai Home Shopping sit on the buffer zone borderline.
  • We should target Samyang Holdings and Hyundai Home Shopping for a short position against Lotte Confectionery and Miwon Specialty Chemical.

Seven & I (3382) | So What if Walmart Missed

By Mark Chadwick

  • Investors should ignore the news around restructuring….it’s nice but basically irrelevant
  • The long-term valuation proposition is driven by the core convenience store businesses in the US and Japan
  • Unlike Walmart, we think 7&I should have a good quarter in the US and beat analyst expectations for Q1

SoCar Pre-IPO – Peer Comparison – Highly Competitive Market with Thin Margins

By Ethan Aw

  • SOCAR (403550 KS) is looking to raise up to US$159m in its upcoming Korea IPO. 
  • While SoCar seeks to be an all-in-one mobility solution provider, the bulk of its revenues still come from its car sharing segment. 
  • The car sharing market remains highly competitive with existing players that are already profitable. In this note, we will undertake a peer comparison of SoCar vs its listed peers

Weilong Delicious IPO: Not Very Delicious

By Shifara Samsudeen, ACMA, CGMA

  • Weilong Delicious is a is a leading spicy snack food company in China with a market share of 6.2% and ranked first among all spicy snack food enterprises in China.
  • The company’s application for a HKEx IPO has been approved and plans to raise proceeds of about US$500m.
  • Our analysis on the company’s financials reveal that its top line growth is slowing down while margins have come under pressure. We discuss the details below.

Giordano (709 HK): Cheng Family’s Offer (Even) Less Viable After Positive Profit Alert

By David Blennerhassett

  • After the close of trading yesterday, Giordano International (709 HK)  announced a positive  profit alert
  • Giordano expects an interim net profit of HK$91mn-HK$101mn, a 52%-68% increase over the corresponding period.
  • The Cheng family’s HK$1.88/share Offer was low-balled from the onset. Substantial shareholder David Webb agrees. This deal is dead without a bump.

Torikizoku Holdings (3193): June SSS Recovered to 85% of Pre-Pandemic Levels

By Mita Securities

  • Same-store sales were 643.8% vs. June 2021 (1648.4% for May), 115.9% vs. June 2020 (684.1% for May), and 84.7% vs. June 2019 (83.2% for May)
  • Compared to June 2021, the guest count was 601.0% (1591.9% for May), and the average check was 107.1% (103.5% for May)
  • The number of stores at the end of June was 617 (flat MoM). The number of company-owned stores was 386 (flat MoM)

Overearning Short Candidates: Alpha Metall, MarineMx, ON Semi, Kulicke & Soffa, Pool Co, Century Com

By Eric Fernandez, CFA

  • This model seeks companies that are potentially “overearning”, defined as companies with unusually high margins relative to their own history or relative to the industry. 
  • The reasons for the margin increases are sometimes unsustainable or fraudulent. The  critical judgement involves to what extent unsustainable margins are embedded in a company’s forecasts and/or the stock’s valuation. 
  • These shorts tend to have moderate to higher betas, higher valuations due to recent strong results and good short responses to subsequently disappointing earnings.

Before it’s here, it’s on Smartkarma

Learn More
Jul 08
0

Financials: Clearpool, Bank Rakyat Indonesia, Chugoku Bank, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Financials

In today’s briefing:

  • Crypto Lending Sector Series
  • Bank Rakyat Indonesia – Increasingly Digitalised Micro Champion
  • JAPAN ACTIVISM:  Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target
  • The Light and Dark Sides of the Creation of the TSE Prime Market Make Us Think Again
  • Companies Holding “Continuation Meetings” Will Hold Them on the Days of Concentration of the AGMs

Crypto Lending Sector Series

By Rose Choy

  • In May and June, the market witnessed Luna/UST’s collapse, the liquidation of Three Arrows Capital (a large crypto fund), and insolvencies of major centralized crypto lending firms. 
  • Excessive leverage, poor risk management and lending practices in the lending sector exacerbated the market sell-off amidst a global macro risk-off. How will the lending sector emerge from the rubble?
  • We discuss the crypto lending landscape, deep dive into DeFi protocols Aave and Clearpool, share insights from some institutional borrowers and come up with key lessons learned for the future. 

Bank Rakyat Indonesia – Increasingly Digitalised Micro Champion

By Angus Mackintosh

  • Despite what looked like a solid set of 1Q2022 results, Bank Rakyat Indonesia has seen a sharp correction in its share price, which looks unjustified given a positive outlook.
  • The bank has 84% of its loan exposure to micro and ultra-micro customers, which generates higher returns than corporate lending plus it is improving returns through increasing digitalisation.
  • Management guidance for this year remains positive, and the bank is well-positioned to take advantage of the economic recovery with abundant liquidity and a low cost of funds.

JAPAN ACTIVISM:  Silchester’s Chugoku Bank AGM Ploy Fails – Won’t Be an Activism Target

By Travis Lundy

  • Silchester International Investors targeted the AGMs of four Japanese regional banks in which it had held shares for 12-17yrs writing open letters, and asking each for a small special dividend.
  • One was heavily over-capitalised and significant cross-holding owning Chugoku Bank (8382 JP) 
  • Their Shareholder Proposal flopped badly. The shareholder structure isn’t there to support it, now or in future, and among regional banks, this is on the “less attractive” side valuation-wise.

The Light and Dark Sides of the Creation of the TSE Prime Market Make Us Think Again

By Aki Matsumoto

  • I would like to discuss the points on the Nikkei article, “Mercari’s Prime Market Approval Raises Hopes for Growth Market to Include Similar Companies in the Future.”
  • Mercari’s listing on prime market is a great hope for companies planning to list on prime market, and the inclusion in the TOPIX is also positive for their stock price.
  • “Transitional measures” companies need to carefully discuss the feasibility of the plan for meeting the listing criteria and whether they should continue to be listed as before.

Companies Holding “Continuation Meetings” Will Hold Them on the Days of Concentration of the AGMs

By Aki Matsumoto

  • I would like to discuss the issues on the Nikkei article titled “Over 10 Companies Hold ‘Continuation Meetings’ of Shareholders’ Meetings Due to Improper Accounting, etc.”
  • Companies that hold “continuation meetings” are divided into 2 groups: inappropriate accounting and China lockdown. However, the companies in both groups plan to hold AGMs on days AGMs are concentrated.
  • It is too much to ask shareholders for voting without financial results, and many companies seem intent on avoiding dialogue with shareholders by holding AGM on such a concentration day.

Before it’s here, it’s on Smartkarma

Learn More