Smartkarma Daily Briefs

Of the four peers, only Coupang adopts the gross method. Since the others adopt the net method, it is impossible to compare PSR with OASIS, which uses the gross method.
If they really want to use PSR, it should only be compared with Coupang. Even if we apply CPNG’s current EV/Sales multiple (1.36x), it would only slightly exceed ₩0.5T.
A more logical way would be to use EV/GMV. Even in this case, it wouldn’t be easy to expect a valuation higher than ₩0.5T.

IQIYI Follow-On Offering – Might Be Expected but Its Track Record Is…

By Sumeet Singh

IQIYI aims to raise around US$500m via a follow-on ADS offering.
While the company hasn’t stated its use of proceeds, it will probably use most of it to redeem convertible notes
In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Wuxi Biologics Placement (2269 HK) – Things Are No Longer Easy When the Magic of CXO Wears Off

By Xinyao (Criss) Wang

WuXi Bio announced the placing of existing shares by substantial shareholder. Obviously, the share price was in “comfortable position” for the management, so they think it’s time to take action.
WuXi Bio faces the uncertainty of future high growth.GSK deal/AD drug orders cannot offset the loss of COVID-19 orders.We advised to invest when it’s in “sector resonance” with “difference in expectations”.
What we’re most worried about this year isn’t recession/depression but Taiwan, which is the last card the US hasn’t yet played. If situation’s really bad,something may happen in Taiwan Strait.

Oasis Corporation IPO – Sole Profitable Player but Maybe Not for Long

By Ethan Aw

OASIS Corp (1799513D KS) is looking to raise up to US$166m in its upcoming Korea IPO.
Oasis Corporation is an early morning delivery service business that delivers fresh food to consumers. It runs an e-commerce platform named ‘Oasis Market’ as well as offline stores.
Oasis Corporation aims to boost its sales and presence by further improving on its omnichannel strategy. However, its explosive growth appears likely to have been driven by COVID-induced lockdown measures.

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Jan 18

Daily Brief Credit: Asia HY Trade Book – January 2023 – Lucror Analytics and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Asia HY Trade Book – January 2023 – Lucror Analytics
Morning Views Asia: Country Garden Holdings Co, Powerlong Commercial Management Holdings

Asia HY Trade Book – January 2023 – Lucror Analytics

By Charles Macgregor

The Asia HY Trade Book for January 2023 includes a summary of our recommendations, as well as our high-conviction ideas. The report also features relative-value charts and lists of the bonds across Asia (ex-Japan) HY and crossover credits.

Morning Views Asia: Country Garden Holdings Co, Powerlong Commercial Management Holdings

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.

Country Garden Holdings Co
Powerlong Commercial Management Holdings
Yuexiu Property

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Jan 18

Daily Brief Event-Driven: Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site
Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
Kingston Financial’s (1031 HK) Vote on 9 February
DAX/MDAX/SDAX Quiddity Leaderboard Mar 23: Vantage Tower and Other Interesting Names
ETF Arbitrage in Korea: Names Suitable for Pair Trades
Kingston Financial (1031 HK): 9th Feb Scheme Vote. IFA Says Fair

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site

By David Blennerhassett

On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites.

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares.
This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price.
Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

Kingston Financial’s (1031 HK) Vote on 9 February

By Arun George

The Kingston Financial (1031 HK) scheme document is out with the scheme meeting scheduled for 9 February. The IFA considers the offer to be fair and reasonable.
Key conditions include approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and the headcount test. No shareholder holds a blocking stake.
Peer re-rating increases the headcount test risk. At the last close and for the 10 March payment, the gross and annualised spread is 5.3% and 42.2%, respectively.

DAX/MDAX/SDAX Quiddity Leaderboard Mar 23: Vantage Tower and Other Interesting Names

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Vantage Towers (VTWR GR) is currently undergoing a Tender Offer and this could have interesting index consequences over the next few weeks.
As it stands, there seems to be one change between MDAX and SDAX and there are multiple names hovering close to the border for DAX, MDAX, and SDAX.

ETF Arbitrage in Korea: Names Suitable for Pair Trades

As for the one using the creation/redemption mechanism, the tracking error (market value – NAV) is still too tight to call this an arbitrage opening.
Then, at this point, we need to pay attention to ETF arbitrage from a pair trade perspective. There are a total of 3 pairs we can consider for this.
The mean reversion cycle is still not short. However, the diversion range is not extensive, so we can aim for a relatively stable setup in a market with increased volatility.

Kingston Financial (1031 HK): 9th Feb Scheme Vote. IFA Says Fair

By David Blennerhassett

The Scheme Booklet is now out and Kingston Financial (1031 HK)‘s shareholders can vote on Chu Yuet Wah’s Offer on the 9 February.
The Cancellation price of HK$0.30/share was a 47.78% premium to the undisturbed prices. It will not be increased.
Currently trading at a gross/annualised spread of 5.3%/44.4%, assuming payment on the 10 March.

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Jan 18

Daily Brief Crypto: Sporting Crypto – 16th Jan 2023: Manchester United Football Club’s NFT Drop and more

By Smartkarma Daily Briefs | Crypto, Daily Briefs

In today’s briefing:

Sporting Crypto – 16th Jan 2023: Manchester United Football Club’s NFT Drop

Sporting Crypto – 16th Jan 2023: Manchester United Football Club’s NFT Drop

By Sporting Crypto

Manchester United are arguably the biggest European football brand on the planet.
So when they signed a deal in excess of £20m per year with layer 1 blockchain solution Tezos, eyebrows were raised.
Mainly due to the bad reputation Web3 has within football generally.

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Jan 18

Daily Brief Equity Bottom-Up: TSI Holdings (3608) – New Year and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap
Semen Indonesia (SMGR IJ) – A Set Up with New Capacity and Lower Costs
Fu Shou Yuan (1448 HK): Latest Mortality Rate Supports Long-Term Outlook
Fast Retailing: Growth Markets Look Weak & Uniqlo Japan Profitability Affected By Rising Wages
Money Forward: Top Line Expands, Yet to See Meaningful Turnaround in Profitability
Amvis Holdings Inc (7071 JP): Scale Expansion to Drive Revenue Growth; Formulated New 3-Year Plan
Cameco: A Turnaround Is En Route

TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap

By Shifara Samsudeen, ACMA, CGMA

Last April I wrote about Tsi Holdings (3608 JP) which was trading at 0.5x EV/EBITDA and where I suggested it could double in 2-3yrs.
The day after I wrote, the stock closed at ¥312/share, briefly touched ¥480 before ending the year at ¥444. On Friday they announced Q3 earnings, now TTM EV/EBITDA is 2.5x.
They also announced a buyback, and the stock is up further. It is worth looking into the details both near-term and what they mean longer-term.

Semen Indonesia (SMGR IJ) – A Set Up with New Capacity and Lower Costs

By Angus Mackintosh

Semen Indonesia came through the worst of 2022 with flat sales, despite lower volumes, with profits rising by +18.9%, driven by cost savings, reduced debt, and use of DMO coal.
4Q2022 may see a slowdown given. the onset of the rainy season but the company is well-positioned to ride a recovery in 2023 with additional capacity from Semen Baturaja.
Semen Indonesia (SMGR IJ) is well set up for a recovery in earnings for the next two years, with great synergies to come from Semen Baturaja. Valuations are well-below historic.

Fu Shou Yuan (1448 HK): Latest Mortality Rate Supports Long-Term Outlook

By Osbert Tang, CFA

China recorded 270,000 increases in deaths in 2022 to 10.41m (+2.7% YoY, vs. flat in 2020). This is a sad demographic trend but favourable to Fu Shou Yuan (1448 HK).
Death rate of 0.74% has returned to the 1974 level. With termination of “zero COVID” policy, this is poised to increase. This will also stimulate demand for its pre-need services.
Despite a 73% rebound in share price from trough, valuation is still undemanding at 14.4x FY23F PER. This implies a 35% discount to the average of 22x since 2013.

Fast Retailing: Growth Markets Look Weak & Uniqlo Japan Profitability Affected By Rising Wages

By Oshadhi Kumarasiri

Fast Retailing (9983 JP)’s 1QFY23 results were below consensus estimates with OP missing consensus by 13.2%.
The outlook for the rest of the year doesn’t seem too well either with Domestic profitability held back by rising wages and growth markets affected by slowing demand for apparel.
Even though China could emerge from COVID to boost Uniqlo’s profits, we see significant downside risk to Fast Retailing’s FY23 guidance.

Money Forward: Top Line Expands, Yet to See Meaningful Turnaround in Profitability

Money Forward (3994 JP) reported 4QFY11/2022 results yesterday. Revenue increased 42.5% YoY to JPY6.2bn (vs consensus JPY6.0bn) driven by growth in both MF Business and MF Home.
Operating losses for the quarter widened to JPY2.2bn (34.8% of revenue) from JPY661m (15.2% of revenue) in the same quarter last year (vs consensus JPY2.0bn).
Though MF’s top line continues to grow, we have not yet seen a meaningful improvement in its profitability, and we think, MF’s shares are overvalued compared to its counterpart freee.

Amvis Holdings Inc (7071 JP): Scale Expansion to Drive Revenue Growth; Formulated New 3-Year Plan

By Tina Banerjee

Amvis Holdings Inc (7071 JP) recorded 51% YoY revenue growth to ¥22B in FY22, 3% ahead of guidance. The company has added 16 facilities (825 beds), exceeding its initial plan.
Buoyed by strong FY22 results, business expansion, and favorable demand scenario, Amvis has raised FY23 guidance. In FY23, the company aims to open 19 new facilities.
Amvis has formulated the new three-year plan, “Amvis 2025”. The company is accelerating the pace of opening Ishinkan to bring up the number to 127 by September 30, 2025.

Cameco: A Turnaround Is En Route

By Pearl Gray Equity and Research

Plans are being made to reroute Inkai’s production to avoid Russian infrastructure and port reliance.
The firm’s joint acquisition of equipment supplier, Westinghouse, might add valuable cost synergies and improve Cameco’s economies of scope.
Uranium prices remain supportive, and an operational pivot could realign Cameco stock’s valuation.

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Jan 18

Daily Brief Macro: Will Singapore Gain or Lose from Hong Kong and China’s Reopening? and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Will Singapore Gain or Lose from Hong Kong and China’s Reopening?
Pockets of Resilience in the Technology Sector
Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023
CX Daily: Where to Now for Alibaba in the Post-Jack Ma Era?
UK: Workers Demand Forceful Tightening
Monday Morning Musings
What’s Working on the Short Side?

Will Singapore Gain or Lose from Hong Kong and China’s Reopening?

By Manu Bhaskaran

Singapore has been a beneficiary of Hong Kong and China’s pandemic mismanagement and policy missteps, enjoying the relocation of businesses and high-worth individuals.
Singapore will face increased competition from Hong Kong’s efforts to reclaim some of its lost business and investment activity, but Singapore is well-placed to keep most of its gains.
The reopenings are a positive-sum game for both of Asia’s financial centres, but relying on its rivals’ mistakes is not a sustainable long-term economic strategy.

Pockets of Resilience in the Technology Sector

By Manu Bhaskaran

Macroeconomic headwinds are taking their toll on consumer sentiment. Intentions for big-ticket purchases are falling, and firms are experiencing smaller order books.
Enterprise technology investment will be supported by a range of long-run factors. Demand from this segment will provide a buffer against cyclical challenges.
The industry will face macroeconomic difficulties and slower growth, but opportunities exist in certain segments and geographies that can take advantage of secular trends.

Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023

In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2023.
The pref/common shares ratio of the 28 companies in this insight declined from 68.9% on 16 July 2022 to 65% on 16 January 2023, which is a short term reversal.
We see some attractive longer-term opportunities for Amorepacific Corp, Doosan Fuel Cell, LG H&H, and LG Chem, which have high discounts for the preferred shares versus their counterpart common shares.

CX Daily: Where to Now for Alibaba in the Post-Jack Ma Era?

By Caixin Global

Cover Story: Where to now for Alibaba in the post-Jack Ma era?
World elite return to Winter Davos as recession fears mount
China runs short of anti-immune deficiency drug as Covid panic buying clears shelves

UK: Workers Demand Forceful Tightening

By Phil Rush

The UK unemployment rate remained at 3.7% in Nov-22, and another rise into yearend no longer looks likely. Resilience should ease in Q1 amid vacancies’ renewed declines.
Relatively stable unemployment and rising wage settlements suggest the cycle is not yet burning out. Pay growth trends remain inconsistent with the inflation target.
Monetary policy faces a double threat from excessive inflation expectations and cyclical pressures. We still expect another forceful (50bp) response in February.

Monday Morning Musings

By Mark Tinker

We are re-introducing two regular posts, Monday Morning Musings and Friday Market Thinking to book-end the week, on the basis that regular postings are appreciated by readers, as well as providing a good discipline for ourselves.
Other posts will continue obviously. The idea of ‘Musings’ is that while none of the following might merit a full post of their own, they might perhaps add up to some interesting observations (of sorts).
This week, it is all back to ‘normal’ as Davos man hops on a Private Jet and returns to their snowy ancestral home to talk once again about climate change and world poverty for the World Economic Forum.

What’s Working on the Short Side?

By Eric Fernandez, CFA

Over the past 30 days, the best shorts underperformed the universe by -19.5%, (-19.1%, vs. 0.4%, ) Compared to the universe, they
Were $1,889mn smaller cap, had 57% higher beta, had higher long term forecast earnings growth,
Had higher next 12M sales growth yet had lower next 12M EPS growth,

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Jan 18

Most Read: Mizuho Financial Group, Relia Inc, Tencent, Tsi Holdings, WM Motor Technology Co Ltd, OASIS Corp, Hong Kong Aerospace Technology, Meritz Fire & Marine Insurance and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance
Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP
Quiddity Primer for HSCEI Rebalance Events
TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap
WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement
OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It
Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site
Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023
Good Morning Japan |Rally Sputters as Earnings in Focus; GS Misses; BOJ – DAY OF RECKONING

Thinking About Japanese Banks – Go Big, Go Small, Go Insurance

Japanese Banks have had a good run recently. From the day before the BOJ changed the 10yr yield target in December in its YCC programme to today, +30% vs TOPIX.
The question is how that is spread out. There are lots of banks. Some are cheaper than others. Some are better than others. Can we draw conclusions to trade better?
If you are looking at Japanese Banks to play a change in BOJ policy when Governor Kuroda’s term ends shortly, there are definitely conclusions one can draw. I offer comments.

Mitsui & Co To Buy Out Relia (4708) – Moshi Moshi Is TOO CHEAP

Mitsui&Co has been in Relia Inc (4708 JP) for a long time. As part of investing in BPO/RPA/AI services, they are buying out Relia, merging it with a KDDI sub.
They are buying it at an all-time high, and a 50% premium. Looks nice. But it’s not nice enough.
This is one of those times when I can reiterate, Japan Needs More Cowbell.

Quiddity Primer for HSCEI Rebalance Events

By Janaghan Jeyakumar, CFA

The Hang Seng China Enterprises Index (HSCEI INDEX) is one of the most widely discussed indices in the Hang Seng Indices family.
The HSCEI serves as a benchmark to reflect the overall performance of “Mainland” Securities listed in Hong Kong.
In this insight, we take a brief look at the selection criteria and the historical price performance of past Rebalance Events.

TSI Holdings (3608) – New Year, New Buyback, Still Good, Still Cheap

Last April I wrote about Tsi Holdings (3608 JP) which was trading at 0.5x EV/EBITDA and where I suggested it could double in 2-3yrs.
The day after I wrote, the stock closed at ¥312/share, briefly touched ¥480 before ending the year at ¥444. On Friday they announced Q3 earnings, now TTM EV/EBITDA is 2.5x.
They also announced a buyback, and the stock is up further. It is worth looking into the details both near-term and what they mean longer-term.

WM Motor Reverse Merger and Placement – The US$2bn Merger and US$500m Planned Placement

By Sumeet Singh

On 11th Jan 2023, WM Motor Technology Co Ltd announced its intention to merge with Apollo Future Mobility (860 HK) .
WM Motor failed to list in Hong Kong last year and this is essentially its attempt to undertake a reverse merger at a valuation well below its previous funding rounds.
In this note, we will talk about the deal dynamics and take an early look at its implications.

OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It

Of the four peers, only Coupang adopts the gross method. Since the others adopt the net method, it is impossible to compare PSR with OASIS, which uses the gross method.
If they really want to use PSR, it should only be compared with Coupang. Even if we apply CPNG’s current EV/Sales multiple (1.36x), it would only slightly exceed ₩0.5T.
A more logical way would be to use EV/GMV. Even in this case, it wouldn’t be easy to expect a valuation higher than ₩0.5T.

Hong Kong Aerospace Tech’s (1725 HK) US$1bn Rocket-Launch Site

By David Blennerhassett

On the 9th of January, 2023, the Republic of Djibouti signed an MOU with Hong Kong Aerospace Technology (1725 HK) (HKAT) to develop a (reported) US$1bn international commercial “spaceport”.
In the middle of last year, Djibouti announced plans to launch two nanosatellites to facilitate farming and other related activities.
HKAT, a recent back-door listing, has a market cap of US$258mn. Wholly-owned subsidiary Gang Hang Ke (Shenzhen) Space Technology, has been successfully involved in the launch of ten satellites.

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares.
This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price.
Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

Gap Trades in Korean Prefs Vs Common Share Pairs in 1Q 2023

In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 1Q 2023.
The pref/common shares ratio of the 28 companies in this insight declined from 68.9% on 16 July 2022 to 65% on 16 January 2023, which is a short term reversal.
We see some attractive longer-term opportunities for Amorepacific Corp, Doosan Fuel Cell, LG H&H, and LG Chem, which have high discounts for the preferred shares versus their counterpart common shares.

Good Morning Japan |Rally Sputters as Earnings in Focus; GS Misses; BOJ – DAY OF RECKONING

By Mark Chadwick

OVERSEAS: SPX snapp rally; Eearnings refocus as GS misses; Tech bid continues; TELSA +7% as analysts see merits of price cuts; Japan’s BOJ in focus.
JAPAN: NKY Futs +0.4% vs Cash; USDJPY flat at 129.16. BOJ Day -this is all that matters.
DAILY NUGGET: Sustainable Aviation Fuel thematic is ramping up. ANA and JAL recent annoucements highlight the commercial potential for the supply chain.

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Jan 18

Daily Brief South Korea: OASIS Corp, Meritz Fire & Marine Insurance, Mirae Asset TIGER Fn Metaverse ETF and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It
Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares
ETF Arbitrage in Korea: Names Suitable for Pair Trades
Oasis Corporation IPO – Sole Profitable Player but Maybe Not for Long

OASIS IPO Pricing Is Not Even Worth Reviewing: Strongly Recommend Avoiding It

Of the four peers, only Coupang adopts the gross method. Since the others adopt the net method, it is impossible to compare PSR with OASIS, which uses the gross method.
If they really want to use PSR, it should only be compared with Coupang. Even if we apply CPNG’s current EV/Sales multiple (1.36x), it would only slightly exceed ₩0.5T.
A more logical way would be to use EV/GMV. Even in this case, it wouldn’t be easy to expect a valuation higher than ₩0.5T.

Meritz Fire & Marine Insurance: Treasury Shares Cancellation of 5.9% of Outstanding Shares

After the market close today, Meritz Fire & Marine Insurance announced that it will cancel 6.57 million treasury shares, representing 5.9% of its outstanding shares.
This treasury shares cancellation by Meritz F&M Insurance should have a continued positive impact on its share price.
Share cancellation by Meritz F&M Insurance and the need to adjust to higher merger ratio are likely to lead to Meritz F&M Insurance outperforming MFG in the next few days.

ETF Arbitrage in Korea: Names Suitable for Pair Trades