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Smartkarma Daily Briefs

Most Read: Taiwan Glass Industry, Nidec Corp, Hitachi Metals, CALB, Alibaba Group, DB Hitek Co., Ltd., Swire Pacific (A), Monadelphous, Onewo, Nikkei 225 and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows
  • Two Days Left Til Nikkei 225 Juggled Review Starts
  • Bain Launches Hitachi Metals (5486) Tender Offer
  • CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023
  • Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo
  • New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
  • StubWorld: Swire/Cathay And Hong Kong’s “Opening”
  • S&P/​​​​ASX Index Rebalance Preview: A Few High Impact Adds
  • Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
  • Late-Stage Capitulation in Asia

FTSE TWSE Dividend+ Quiddity Leaderboard Dec 22: Market Consultation Could Cause Massive Flows

By Janaghan Jeyakumar, CFA

  • The FTSE Taiwan Dividend+ Index is a fascinating index. The rebalance works the opposite way from most float market cap-weighted indices, but maintains a grounding in positive fundamentals.
  • It has issues, shown in the recent non-constituent review which nonetheless saw ~10% one-way flow. And more flows has meant more impact to changes.
  • FTSE Russell has commenced a consultation closing shortly, with the goal of increasing members from 30 to 50. This provides for some interesting potential changes.

Two Days Left Til Nikkei 225 Juggled Review Starts

By Travis Lundy

  • The Nikkei announced its Annual Nikkei 225 Average Review on 5 September. It was 3 OUT 3 IN as expected. Then they added Shizuoka Bank (8355 JP) to the mix. 
  • ShizuGin will form a holding company, so out it goes on Wednesday. NIDEC (6594) goes in. Then SMC (6273) and (7741) replace Unitika (3103) and Oki Electric (6703) Friday.
  • Then ShizuGin goes back in Monday, and Maruha Nichiro (1333) is deleted. The “big trade” here? The ¥550bn+ funding trade. But the change in ADDs’ Real World Float is Real.

Bain Launches Hitachi Metals (5486) Tender Offer

By Travis Lundy

  • We had the heads up days (or a week plus) ago, and now it is official. Bain launches its Tender Offer for Hitachi Metals (5486 JP) tomorrow at ¥2,181/share.
  • The company’s trade name will be changed to PROTERIALS (i.e. losing “Hitachi”) which should be fine. It was non-core anyway. 
  • This is still a large-ish deal – up to ¥434bn. MktCap is ¥930bn. But minimum is only 56.8mm shares because they get the parent vote anyway. Done deal. 

CALB (3931 HK) IPO: Earliest Passive Flows & Stock Connect Inclusion in 2023

By Brian Freitas

  • CALB (3931 HK) is looking to raise between US$1.29bn-US$1.73bn by selling 265.85m shares at a price range of HK$38-51/share.
  • CALB (3931 HK) will not get Fast Entry to any indices but should be added to the HSCI and Stock Connect in March and to the FTSE All-World in June.
  • Peer performance has been fairly mixed in the recent past. Stock trading weak post listing could provide buying opportunities ahead of the passive inflows.

Alibaba (9988 HK): A Visit to ‘Freshippo Outlets’, a Discount Grocery Store of Freshippo

By Ming Lu

  • We visited a store of Freshippo Outlets in Shanghai in workhour.
  • We believe the store is popular and accumulating more customers.
  • However, the digitalized services bring some difficulties to old customers.

New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek

By Sanghyun Park

  • A South Korean lawmaker introduced legislation that would mandate that appraisal right exercise prices in split-off listings (equity carve-out) be based on asset/earnings value rather than market price (stock price).
  • We may find an arb opening in DB Hitek. The appraisal price based on the asset/earnings value is at an 11.31% premium to the last close.
  • If DB HiTek postpones the split-off listing to next year, FY22 earnings should be reflected. In this case, the appraisal price will be at a 90% premium.

StubWorld: Swire/Cathay And Hong Kong’s “Opening”

By David Blennerhassett

  • After Hong Kong announced abandoning hotel quarantine for inbound travellers, Cathay Pacific (293 HK) gained 2.6% last Friday, but finished up just 1%. That probably sums up the situation.
  • Preceding my comments on Cathay and Swire Pacific (19 HK) are the current setup/unwind tables for Asia-Pacific Holdcos. 
  • These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

S&P/​​​​ASX Index Rebalance Preview: A Few High Impact Adds

By Brian Freitas

  • At the December rebalance, we expect changes to the S&P/ASX 50 Index and S&P/ASX 200 (AS51 INDEX). Announcement is on 2 December with implementation on 16 December.
  • If added to the S&P/ASX 200 (AS51 INDEX), passive trackers will need to buy over 9 days of ADV on Monadelphous (MND AU) and ioneer Ltd (INR AU).
  • Shorts have dropped on nearly all potential adds and deletes over the last couple of months. With shorts at low levels, short covering will have limited impact at the rebalance.

Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion

By Brian Freitas

  • Onewo (2602 HK) is looking to raise between US$700m-US$784m by selling 116.714m shares at a price range of HK$47.1-52.7/share. Indications are that the IPO will be priced close to mid-point.
  • Given the domestic shares and unlisted foreign shares will not be converted to H-shares, there is no chance of MSCI inclusion and a small chance of FTSE inclusion.
  • Onewo (2602 HK) is also unlikely to be added to the HSCI and consequently will not be added to Stock Connect.

Late-Stage Capitulation in Asia

By Thomas Schroeder

  • Call for markets that held up in Asia to buckle in late September (NKY, ASX, Nifty) is unfolding. Following our core short group – HSI, Taiwan and Korea.
  • DJI new low a lead signal for the SPX and RTY to test sub-June lows in late September/early October on capitulation that sets up a tactical long strike.
  • NKY and ASX are the first two markets in Asia to buy back into at lower range levels with undershoot risk.

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Daily Brief Energy/Materials: Hanwha Solutions, Growatt Technology and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Hanwha Solutions: Biggest Restructuring Measures in 50 Years
  • Growatt Technology IPO: The Bear Case

Hanwha Solutions: Biggest Restructuring Measures in 50 Years

By Douglas Kim

  • On 23 September, Hanwha Solutions announced a set of restructuring measures which are probably the biggest ever moves by the company in the past 50 years.
  • The spin-off of the Hanwha Galleria is a good move. Clearly, having both the renewable energy and a luxury department store business under one roof does not make much sense.
  • We also like the company’s move expand its U.S. solar module production capacity. The total amount of potential benefit could be nearly US$2 billion over the next decade. 

Growatt Technology IPO: The Bear Case

By Arun George

  • Growatt Technology (1833969D CH), a leading PV inverters manufacturer, will seek a listing hearing for a US$1 billion HKEx IPO in October, according to press reports.
  • In Growatt Technology IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case. 
  • The key elements of the bear case rest on rising customer concentration risk, high dependence on Brazil for growth, limited pricing power and a shift to FCF burn. 

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Daily Brief Utilities: CRB Commodity Index and more

By | Daily Briefs, Utilities Sector

In today’s briefing:

  • The Commodity Report #70

The Commodity Report #70

By The Commodity Report

  • At the beginning of the week, China was redoubling its efforts to bolster food security by trying to cut the amount of soybeans that get turned into animal feed.
  • China is by far the world’s biggest importer of soybeans, which account for the bulk of its consumption.
  • A lower ratio would of course mean fewer soybean imports needed as demand would somehow decline a bit.

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Daily Brief Industrials: Xinjiang Goldwind Science & Technology H and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

By Osbert Tang, CFA

  • Xinjiang Goldwind Science & Technology H (2208 HK) had a tough 2Q22; but with the recent retreat in share price, the stock appears attractive now at 8.5x FY23F PER.  
  • Goldwind has many growth initiatives backing its outlook. These include solid order backlog, upside on gross margin, contribution from wind farms and growth from the servicing business.
  • Its WTG backlog of 24.1GW is 1.3x higher QoQ and well covers revenue for next two years. Further strategic disposals of wind farm will help realising underlying asset values.  

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Daily Brief TMT/Internet: DB Hitek Co., Ltd., Meta Platforms (Facebook), Ethereum and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek
  • Meta Platforms ($META)
  • Interoperability

New Pricing Rule for Appraisal Rights in ECO: Potential Arb Openings in DB Hitek

By Sanghyun Park

  • A South Korean lawmaker introduced legislation that would mandate that appraisal right exercise prices in split-off listings (equity carve-out) be based on asset/earnings value rather than market price (stock price).
  • We may find an arb opening in DB Hitek. The appraisal price based on the asset/earnings value is at an 11.31% premium to the last close.
  • If DB HiTek postpones the split-off listing to next year, FY22 earnings should be reflected. In this case, the appraisal price will be at a 90% premium.

Meta Platforms ($META)

By MT Capital

  • The technology sector is full of polarizing personalities, many of whom stand at the helm of some of the largest companies in the world.
  • Whether that be with the brash antics and lofty ambitions of Elon Musk, the undoubtable brilliance tainted by Bitcoin Maximalism exhibited by Jack Dorsey, the SEC-challenging twitter threads blasted by Brain Armstrong, or the naivety potentially falsely portrayed by Vlad Tenev, there is no shortage of individuals that, love or hate, you can’t help but pay attention to.
  • Mark Zuckerburg is one of those people. The man that steers the ship of of Metaverse has clear technical aptitude, a far-cry away from the resume full of consulting experience and MBAs possessed by a lot of modern c-suite executives.

Interoperability

By Etherbridge

  • Interoperability is a fascinating topic. It is a concept applicable to different systems worldwide, from communication systems, hardware and technology to groups of people.
  • We use interoperable systems every day; it is also often a background function, so many people do not even realise they are interacting with them.
  • Nevertheless, they have allowed many of our current systems to work seamlessly, including our internet and mobile devices. 

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Daily Brief Health Care: Pine Care Group, Classys, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…
  • Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth
  • Women Founders Should Be Supported Rather than Goals that Are Less Feasible for Achieving Diversity

Pine Care Group – Another MGO, Still Wrong Price Making One Wonder…

By Travis Lundy

  • In early Feb2020, the #1 shareholder of HK-based elderly home care provider Pine Care Group (1989 HK) sold a 52% stake at HK$1.647, keeping 14.99%. That triggered an Unconditional MGO. 
  • In Aug2022, much of the shareholder consortium which bought in 2020 agreed to sell 56.15% at HK$0.89/share to local privately-held developer Chinachem. That will trigger another Unconditional MGO.
  • The business has suffered under covid, but it is not clear why the business would be better now. Revenues will spike when Causeway Bay opens, but…. Sell. 

Classys (214150 KS): Overseas Expansion +Portfolio Enlargement = Consistent & Sustainable Growth

By Tina Banerjee

  • Classys (214150 KS), under new management, has announced a treasury stock acquisition program of KRW20 billion through March 2023. As of June 2022, Classys had cash equivalents of KRW68 billion.  
  • Global expansion of Classys’ latest lifting product, Shrink Universe is the near-term growth driver. The product is seeing steady domestic demand, with cumulative sales exceeding 1,000 units.
  • In August Classys received approval for its new skin care product Volnewmer. The company is expected to start selling Volnewmer in Q3 and initially targeting 100 units for the device.

Women Founders Should Be Supported Rather than Goals that Are Less Feasible for Achieving Diversity

By Aki Matsumoto

  • If we want to increase women directors even to growth market companies, we can solve this problem by extending the scope of this comply-or-explain requirement to growth market companies.
  • It is a fact that companies with top female executives have more women on their boards of directors. It’s required to create support to increase the number of women founders.
  • Rather than setting targets for the ratio of female managers, which are vague and unworkable, a framework should be created to support female founders.

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Daily Brief Industrials: Xinjiang Goldwind Science & Technology H and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

Xinjiang Goldwind (2208 HK): Getting to a More Attractive Point Again

By Osbert Tang, CFA

  • Xinjiang Goldwind Science & Technology H (2208 HK) had a tough 2Q22; but with the recent retreat in share price, the stock appears attractive now at 8.5x FY23F PER.  
  • Goldwind has many growth initiatives backing its outlook. These include solid order backlog, upside on gross margin, contribution from wind farms and growth from the servicing business.
  • Its WTG backlog of 24.1GW is 1.3x higher QoQ and well covers revenue for next two years. Further strategic disposals of wind farm will help realising underlying asset values.  

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Daily Brief Financials: Onewo, NIFTY Index, Times China and more

By | Daily Briefs, Financials

In today’s briefing:

  • Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion
  • EQD | NIFTY Index: Option Selling Strategies for Short-Term Yield  (RIL,SBIN,SBILIFE,COAL,INFY,BRIT)
  • Morning Views Asia: Tata Steel Thailand, Times China

Onewo (2602 HK): No Passive Flow or Stock Connect Inclusion

By Brian Freitas

  • Onewo (2602 HK) is looking to raise between US$700m-US$784m by selling 116.714m shares at a price range of HK$47.1-52.7/share. Indications are that the IPO will be priced close to mid-point.
  • Given the domestic shares and unlisted foreign shares will not be converted to H-shares, there is no chance of MSCI inclusion and a small chance of FTSE inclusion.
  • Onewo (2602 HK) is also unlikely to be added to the HSCI and consequently will not be added to Stock Connect.

EQD | NIFTY Index: Option Selling Strategies for Short-Term Yield  (RIL,SBIN,SBILIFE,COAL,INFY,BRIT)

By Simon Harris

  • We screen the NIFTY Index components for yield enhancing opportunites
  • We screen for expensive options and combine with stock performances to find the best candidates
  • We identity 6 stocks where selling short-term premium makes sense

Morning Views Asia: Tata Steel Thailand, 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.


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Daily Brief Consumer: Shandong Fengxiang, Alibaba Group, Fast Retailing and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Merger Arb Mondays (26 Sep) – Fengxiang, Lifestyle, EVOC, DTAC/True, VNET, 111, Ramsay, Genex
  • Alibaba: Accelerating Retail Sales, and a Depressed Comp Base, Bode Well for Near-Term Earnings
  • Fast Retailing (9983) | Elevated Multiple and Guidance Risk
  • China Internet Weekly (26Sep2022): S.F., STO, YTO, Yunda, JD Logistics, Alibaba, Baidu, Trip.com


Alibaba: Accelerating Retail Sales, and a Depressed Comp Base, Bode Well for Near-Term Earnings

By Wium Malan, CFA

  • In line with previously reported trends in Chinese retail sales growth, the large Chinese eCommerce operators reported a decline (or contraction) in GMV growth in 2Q2022.
  • Following a contraction between March and May this year, China’s retail sales growth has returned to growth since June, which continued in July and accelerated in August.
  • Alibaba’s next reported quarter’s annualised growth will be on an extremely depressed base.

Fast Retailing (9983) | Elevated Multiple and Guidance Risk

By Mark Chadwick

  • Fast Retailing’s share price has risen 24% year-to-date, outperforming the index and global peers
  • The share price has been driven by multiple expansion, which we believe is now at risk of reversing
  • With an uncertain economic backdrop, we believe management may issue conservative guidance for the next fiscal year. We turn Bearish.

China Internet Weekly (26Sep2022): S.F., STO, YTO, Yunda, JD Logistics, Alibaba, Baidu, Trip.com

By Ming Lu

  • Revenues of major express parcel companies grew rapidly in August.
  • JD logistics will provide logistics service to live streaming retailers on Douyin.
  • In 2Q22, revenue of Trip.com decreased by 32% YoY and operating profit turned negative.

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Daily Brief Credit: Morning Views Asia: Tata Steel Thailand and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Tata Steel Thailand, Times China

Morning Views Asia: Tata Steel Thailand, 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.


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