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Smartkarma Daily Briefs

Jan 11
0

Daily Brief Australia: Norwest Energy NL and more

By | Australia, Daily Briefs

In today’s briefing:

  • Norwest Energy Rejects MinRes’ Offer

Norwest Energy Rejects MinRes’ Offer

By David Blennerhassett

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Jan 11
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Daily Brief Singapore: Rex International Holding, Creative Technology and more

By | Daily Briefs, Singapore

In today’s briefing:

  • Rex: Diversification or Deworsification?
  • Creative Technology: After the Passing of Founder, Is the Company’s Independence at Stake?

Rex: Diversification or Deworsification?

By Nicolas Van Broekhoven

  • Rex International Holding (REXI SP) has announced further investments outside of its core oil&gas portfolio both related to its major shareholder. A major red flag.
  • It is unclear whether these investments will bring real value to Rex as minority investors generally hate related party transactions without clear justification.
  • The latest drilling campaign in Oman again encountered operational issues giving fuel to the bears that Rex is not capable of successfully operating its own fields.

Creative Technology: After the Passing of Founder, Is the Company’s Independence at Stake?

By Nicolas Van Broekhoven

  • Sim Wong Hoo, founder, and CEO of Creative Technology (CREAF SP), passed away last week.
  • Sim Wong Hoo controls 33% of Creative. He has two children but they are not involved in the company. What will happen to his stake is a big unknown. 
  • The IP portfolio of Creative Technology (CREAF SP) could be appealing to other technology companies. Given its large cash position, the Enterprise Value is only 34M USD.

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Jan 11
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Daily Brief United States: Ethereum, S&P 500, WD-40 Company and more

By | Daily Briefs, United States

In today’s briefing:

  • Profitability of Ethereum and a Short-Term Rally Ahead of the Shanghai Upgrade in March
  • EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market
  • WDFC: The Floodgates of Inventory

Profitability of Ethereum and a Short-Term Rally Ahead of the Shanghai Upgrade in March

By Edward Wu

  • Ethereum is the only profitable blockchain, a analysis of revenue and expense of Ethereum;
  • Ethereum staking ratio is the lowest among all PoS blockchains and the Shanghai upgrade in March will change this;
  • Why will there be a short-term rally ahead of the Shanghai upgrade?

EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market

By Simon Harris

  • US CPI data is due on Thursday 12th January and is likley to be another important data point
  • SPX Index is down nearly 5% since November and NDX Index is down nearly 8% over the same period
  • We look for short-term trading opportunities in the options market

WDFC: The Floodgates of Inventory

By Hamed Khorsand

  • WDFC reported fiscal first quarter (November 2022) results where sales declined more than expected while past price increases helped gross margin rebound from the August quarter
  • WDFC’s inventory maintained its incline reaching a new record and is now $119.1 million. We believe WDFC’s inventory hides the true cost of the business
  • The lack of demand remains a headwind that is leading to higher inventory levels. The scale of increase in inventory should continue to play a factor on WDFC’s earnings quality

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Jan 11
0

Daily Brief China: Swire Pacific (A), Huazhu Group, China Internet Investment Finance Holdings, Xiabuxiabu Catering Mgt Chn Hldgs, China Education Group, Alibaba (ADR), Sunac China Holdings and more

By | China, Daily Briefs

In today’s briefing:

  • StubWorld: Swire And China’s Opening
  • H World (HTHT) Follow-On Offering – A More Genuine Need
  • Bubble Warning: China Internet Investment (810 HK) Suspended
  • Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
  • China Education Group (CEG) Completed the Placement for Potential M&As
  • Aequitas 2023 Asia IPO Pipeline – Hong Kong
  • Morning Views Asia: China Jinmao Holdings, Sunac China Holdings, Sunny Optical

StubWorld: Swire And China’s Opening

By David Blennerhassett

  • Retailers /hoteliers will welcome the return of Chinese travellers, with ~US$250bn in annual spending. That should bode well for mall operators like Swire Properties and, in turn, Swire Pacific.
  • Preceding my comments on Swire 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%.

H World (HTHT) Follow-On Offering – A More Genuine Need

By Sumeet Singh

  • H World Group (HTHT US) aims to raise around US$260m via a follow-on ADS offering.
  • The company plans to use the proceeds mostly for investment. This will be the first deal by the company post its H-share listing in 2020.
  • In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

Bubble Warning: China Internet Investment (810 HK) Suspended

By David Blennerhassett

  • China Internet Investment Finance Holdings (810 HK) (CII), an investment manager, is currently suspended pursuant to the Hong Kong Code on Takeovers and Mergers. 
  • CII has thrice responded to unusual price action in its share price in the past four months. Shares are up a staggering ~1,000% in the past six months.
  • This insight provides some background information on CII. Trading at 64x book value, this is one avoidable company. 

Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern

By Eric Chen

  • Company’s second largest shareholder General Atlantic sold out entire holdings at 5.9% to 6.4% discount to Monday close. 
  • The placement reflected mainly General Atlantic’s attempt to time market to recoup a 10-year investment instead of any negative read of company fundamentals, in our view.
  • Recent newsflow continues pointing to steady recovery in all business lines of Xiabu group.  Its valuation discount relative to peers  has not captured strong turnaround prospects. Sector top pick. 

China Education Group (CEG) Completed the Placement for Potential M&As

By Xin Yu, CFA

  • China Education Group (CEG) completed the placement of HKD1.61bn on Jan 9.
  • CEG used to do 2-3 M&As per year and had a decent track record.
  • CEG also has chances to acquire public companies or their assets.

Aequitas 2023 Asia IPO Pipeline – Hong Kong

By Sumeet Singh

  • In this note, we will take a look at the Asia Pacific IPO pipeline for 2023, starting with Hong Kong. 
  • This list has been compiled on a best effort basis from tracking the company filings and through various other sources.
  • The deals you see in this note are only a part of our full IPO pipeline tracker. Feel free to drop us a message for additional information on these IPOs.

Morning Views Asia: China Jinmao Holdings, Sunac China Holdings, Sunny Optical

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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Jan 11
0

Daily Brief Japan: MatsukiyoCocokara, Fast Retailing, Visional and more

By | Daily Briefs, Japan

In today’s briefing:

  • MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
  • Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
  • HRTech Sector Series: Hybrid Work Models and Metaverse to See More Prominence in 2023

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period

By Brian Freitas

  • We expect a number of changes to the MSCI Standard indices for the Asia Pacific region at the first Quarterly Comprehensive Index Review to be implemented on 28 February.
  • As usual, most changes are expected in China with a smattering of adds and deletes for the other markets.
  • On average, the adds have outperformed the deletes over the last few weeks and months and pre-positioning should continue for the next couple of weeks.

Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable

By Oshadhi Kumarasiri

  • Although it looks quite challenging, we think Fast Retailing (9983 JP) should beat consensus when it reports 1QFY23 results on 12th Jan 2023.
  • We think shares could briefly touch 2021 highs on a relatively strong beat as it would suggest that the company’s aggressive expansion plans in North America and Europe are viable.
  • Thus, we would look to buy Fast Retailing with a short investment horizon. We see considerable downside risks over a full-year period.

HRTech Sector Series: Hybrid Work Models and Metaverse to See More Prominence in 2023

By Shifara Samsudeen, ACMA, CGMA

  • This is the Third of HRTech sector series and the four companies that we have covered under this series have since reported earnings.
  • HRTech market has undergone rapid changes and 2023 will bring in more value to the recent transformation such as Hybrid work models and metaverse that the industry has witnessed.
  • Of the four companies, except for Recruit, other three continues to perform positively with Visional recording the highest growth among the four.

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Jan 10
0

Daily Brief ESG: A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential and more

By | Daily Briefs, ESG

In today’s briefing:

  • A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential

A Company Invested by an Activist Should Understand that It’s Not Fully Exploiting Its Potential

By Aki Matsumoto

  • Since the median P/B of companies listed on TSE is 1.0, Japanese companies will continue to attract the keen attention of activist investors around the world.
  • Many Japanese managers can rest on their laurels with share prices that don’t command premium because of silent shareholders like cross-holding and BoJ that little care about share price performance.
  • There are many companies that publish management strategies that only give a sense of doing, and the stock price does not fall but keeps not significantly outperforming.

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Jan 10
0

Daily Brief Equity Bottom-Up: Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme
  • Ant Group – Headlines Overwhelmingly Positive & Hides Micro Loans Business’ Value
  • Eisai Co (4523 JP): Alzheimer’s Drug Gets FDA Approval; Focus Is Now on the Path Forward
  • Alibaba (9988 HK): Still Significant Upside After Surging
  • Align Partners’ Corporate Activism on Korean Banks: A Media Presentation and Q&A Session
  • Giftee: Digital Gifting Surges for Consumer Businesses
  • Modern Dental Group (3600.HK)- 2023 Harsh Reality Is Hard to Avoid, but Short-Term Rally Is Possible
  • XPER: CES and a New Catalyst
  • Tractor Supply Company: Initiation of Coverage – Business Strategy & Key Drivers
  • Sporting Crypto – Top 3 Web3 Trends for the Sports Industry in 2023

Meilan Airport (357 HK): A Strategic Asset to Ride on Hainan DFS Investment Theme

By Eric Chen

  • Meilan Airport is both a strategic asset and a key beneficiary in China’s blueprint for Hainan. The hub holds an indispensable yet underappreciated position in Hainan’s DFS market.
  • While jump in depreciation and plunging passenger traffic in 2022 dealt heavy blow to the company, they also pave the way for a strong turnaround as re-opening revives travel demand.
  • We expect the company’s net profit to reach RMB600 million in 2023 and further double to RMB1.2 billion by 2025, driving share price to double in three years.

Ant Group – Headlines Overwhelmingly Positive & Hides Micro Loans Business’ Value

By Oshadhi Kumarasiri

  • News headlines on Ant Group are overwhelmingly positive these days and they try to hide the fact that the consumer finance business is worth just 1/2 of last year’s value.
  • We think the main reason why markets are so optimistic these days is that they seem to think that regulatory crackdowns on the platform economy are finally over.
  • With Jack Ma surrendering control of Ant Financial Services Group (6688 HK) just a few days ago, could anybody say that regulatory pressure is really over?

Eisai Co (4523 JP): Alzheimer’s Drug Gets FDA Approval; Focus Is Now on the Path Forward

By Tina Banerjee

  • Eisai Co Ltd (4523 JP) received speedy regulatory nod for Alzheimer’s drug LEQEMBI. Treatment with LEQEMBI should be initiated in patients with mild cognitive impairment or dementia stage of disease.
  • LEQEMBI will be available during or before the week of January 23, 2023. Eisai decided to price LEQEMBI at WAC of $26,500 per year to promote broader patient access.
  • Eisai has submitted a supplemental Biologics License Application to the FDA supporting the conversion of the Accelerated Approval of LEQEMBI to a traditional approval.

Alibaba (9988 HK): Still Significant Upside After Surging

By Ming Lu

  • A state-owned company invested in Ant Group which was also founded by Jack Ma.
  • We believe both the revenue growth rate and the operating margin will rise in following quarters.
  • We believe the stock price still has significant upside even after the surge in past four trading days.

Align Partners’ Corporate Activism on Korean Banks: A Media Presentation and Q&A Session

By Douglas Kim

  • Align Partners Capital Management (APCM) held a media presentation and a Q&A session with both the investors community and the media today.
  • Align Partners’ corporate activism of the Korean banks has been one of the biggest stories in the Korean stock market this year.
  • The Korean banks are likely to outperform the market in 1H23. Nonetheless, if there are further signs of housing price declines in Korea, this outperformance may not continue in 2H23. 

Giftee: Digital Gifting Surges for Consumer Businesses

By Michael Causton

  • The gift market has contracted in recent years as corporate and formal gift giving has declined, but companies and individuals are enthusiastic adopters of digital gifting thanks to the convenience. 
  • Businesses, in particular, are using eGifts as marketing and promotion tools and Giftee is one of the biggest beneficiaries of this trend. 
  • The convenience and low cost of these services suggests considerable potential for expansion going forward, even if the consumer online gift market will increasingly be owned by LINE.

Modern Dental Group (3600.HK)- 2023 Harsh Reality Is Hard to Avoid, but Short-Term Rally Is Possible

By Xinyao (Criss) Wang

  • Modern Dental Group (MDG) disclosed selected unaudited operational data for 22Q1-Q3. The negative trend on performance would continue to 22Q4. The overall 2022 performance of MDG would show a negative growth.
  • We may face a situation where both domestic and external demand would weaken in 2023. MDG’s overseas revenue is expected to see a bigger YoY decline than domestic revenue.
  • There would be strong expectations but weak realities in 2023Q1-Q2, during which MDG’s share price could rally in short term, but it’s not based on the improvement of its fundamentals.

XPER: CES and a New Catalyst

By Hamed Khorsand

  • XPER used the CES event this year to make several news announcements, but the biggest news for XPER was the one released by Roku Inc. (ROKU).
  • The ROKU announcement causes TiVo being the only independent TV operating system. We believe this could result in XPER establishing greater market share for its TVOS than originally expected
  • During CES Verstel introduced a series of TVs under multiple brands that would use TiVo TVOS. Additionally, XPER revealed more automakers that are releasing car models with AutoSense and AutoStage

Tractor Supply Company: Initiation of Coverage – Business Strategy & Key Drivers

By Baptista Research

  • This is our first report on Tractor Supply Company, a major rural lifestyle retailer in the U.S. catering to recreational farmers and ranchers.
  • It delivered a mixed quarter, missing out on the revenue expectations of analysts but managing an earnings beat.
  • We initiate coverage on the stock of Tractor Supply Company with a ‘Hold’ rating.

Sporting Crypto – Top 3 Web3 Trends for the Sports Industry in 2023

By Sporting Crypto

  • What better way to start the year than to make a fool of myself by predicting some trends for 2023?
  • Forecasting or predicting anything is extremely difficult and the further out you go, the less accurate you can be.
  • That’s even the case with weather with ~ 90% accuracy on 5-day forecasts and 50% on 10-day forecasts.

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Jan 10
0

Daily Brief Credit: Genuine Parts Company: Detailed Credit Analysis & Financial Strength Evaluation Report and more

By | Credit, Daily Briefs

In today’s briefing:

  • Genuine Parts Company: Detailed Credit Analysis & Financial Strength Evaluation Report
  • Lennar Corporation: Detailed Credit Analysis & Financial Strength Evaluation Report
  • Morning Views Asia: Central China Securities, Greentown China, Melco Resorts & Entertainment
  • Tractor Supply Company: Detailed Credit Analysis & Financial Strength Evaluation Report

Genuine Parts Company: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • Genuine Parts is one of the largest distributors of automotive and industrial replacement parts and materials in the U.S.
  • The company has had a decent financial performance off-late given the ongoing resiliency of its automotive and industrial businesses.
  • Besides, their automotive business had high single-digit inflation during the third quarter.

Lennar Corporation: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • Lennar Corporation is one of the largest homebuilders and home finance service providers in the U.S.
  • The company has had a decent financial performance off-late and has strengthened its positioning for changing market conditions.
  • Both new and existing home market sales and sales prices are significantly down, and given commercial underwriting and lending restrictions, new rental properties are also being restricted.

Morning Views Asia: Central China Securities, Greentown China, Melco Resorts & Entertainment

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.

Tractor Supply Company: Detailed Credit Analysis & Financial Strength Evaluation Report

By Baptista Research

  • Tractor Supply Company is a well-known rural lifestyle retailer in the U.S. catering to recreational farmers and ranchers.
  • This company has thrived over the years despite difficult economic climates, with stable revenue growth and profits.
  • The South Atlantic and Mid-Atlantic regions have been performing particularly well for Tractor Supply.

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Jan 10
0

Daily Brief Technical Analysis: SPX Bounce to Short and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • SPX Bounce to Short
  • PayPal Holdings Inc (PYPL US): TSS Target Achieved in 12 Days (+12.5%)

SPX Bounce to Short

By Thomas Schroeder

  • SPX bounce call from 3,800 to 3,950 is unfolding with risk of an early failure. Flat pattern wants to press lower post bounce.
  • Sell points noted at 3,950 with scope to 3,980. We are using NDX and RTY as our short vehicles.
  • DXY still needs some time to base at 103/102 but a low would fit with a risk top here.

PayPal Holdings Inc (PYPL US): TSS Target Achieved in 12 Days (+12.5%)

By David Coloretti, CMT

  • On 16 December we determined that the new interim downtrend low at 69.77 would likely fail and produce an 8% to 13% correction to 75.00/78.50 in 1-2 weeks. 
  • PYPL US subsequently bottomed at 66.39, before reversing to 78.48 (+12.5% from 69.77), 12 days after our recommendation.   
  • Please refer to our publication on 19 October 2022 … “Introducing Our Tactical Trend Reversal Methodology: TSS (Trend Sustainability Score)” for a description of our proprietary TSS methodology.

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Jan 10
0

Daily Brief ECM: Bilibili Follow-On Offering – Seems Opportunistic and more

By | Daily Briefs, ECM

In today’s briefing:

  • Bilibili Follow-On Offering – Seems Opportunistic
  • China Education Group Placement – Recent Momentum Has Been Strong but past Deals Were Mixed
  • Lotte Chemical Offering: Schedule Clarifications & Trading Considerations
  • TEMC: Reduces IPO Price & Bookbuilding Results
  • Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year
  • Bilibili Follow-On Offering: Limited Upside
  • Honasa Consumer Pre-IPO Tearsheet

Bilibili Follow-On Offering – Seems Opportunistic

By Sumeet Singh

  • Bilibili Inc (BILI US)  aims to raise around US$400m via a follow-on ADS offering.
  • The company plans to use most of the proceeds to redeem its 2026 notes.
  • In this note, we will talk about the deal dynamics and  run the deal through our ECM framework.

China Education Group Placement – Recent Momentum Has Been Strong but past Deals Were Mixed

By Sumeet Singh

  • China Education Group (839 HK) is looking to raise up to US$209m in its top-up placement. 
  • This will be the fourth placement by the group since its listing in 2017, we have earlier looked at the past three placements as well.
  • In this note, we will look  at the deal dynamics and run the deal through our ECM framework.

Lotte Chemical Offering: Schedule Clarifications & Trading Considerations

By Sanghyun Park

  • The subscription starts on January 19, so the pricing is January 16, three trading days earlier. The shorting restriction runs until January 16, which means the 16th is inclusive.
  • There was no arb spread opening during the last four trading days of the subscription rights trade period. Nonetheless, this event had some impact on Lotte Chemical’s futures trading.
  • Considering this, the trade that can be considered at this point would be unhedged shorting. We target potential inflow to adjust the second issuing price downwardly and post-listing overhangs.

TEMC: Reduces IPO Price & Bookbuilding Results

By Douglas Kim

  • TEMC announced its IPO price of 28,000 won, which was lower than the IPO price range of 32,000 won to 38,000 won.
  • There were 560 institutions that participated in the IPO bookbuilding survey and the demand ratio was 31.3 to 1.
  • Our base valuation is 38,363 won per share, representing a 37% upside to the IPO price of 28,000 won. The reduced IPO price has made the IPO more attractive.

Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year

By Sumeet Singh

  • 2022 marked our seventh year covering Equity Capital Markets (ECM) in Asia Pacific. 2022 was rather quiet ending with us covering one of the lowest number of IPOs and placements.
  • We ended 2022 with an accuracy rate of 74.6% across 55 IPOs that we covered and 70.5% across 78 placements. 
  • For those not familiar with our coverage, we aim to cover all IPOs and placements with a minimum deal size of US$100m across Asia-Pacific, including China ADRs.

Bilibili Follow-On Offering: Limited Upside

By Shifara Samsudeen, ACMA, CGMA

  • Bilibili announced a follow-on equity offering of 15.34m ADS priced at $26.65 per ADS partially in exchange for convertible senior notes due 2026 (US$384.8m) and to replenish its cash reserves.
  • Each ADS represents one ordinary share and new equity offering of 15.34m shares will account for approx. 3.7% of the company’s extended share capital post follow-on offering.
  • Bilibili Inc (BILI US) ADS dropped 5.76% following the announcement of the follow-on offering and we believe there is limited upside.

Honasa Consumer Pre-IPO Tearsheet

By Ethan Aw

  • Honasa Consumer (1652951D IN) is looking to raise about US$350m in its upcoming India IPO. The deal will be run by Kotak, Citibank, JM Financial and JP Morgan.
  • Honasa Consumer is the largest digital-first beauty and personal care (BPC) company in India in terms of revenue for FY22 (Year ended 31st Mar 2022) according to RedSeer. 
  • Honasa Consumer’s product portfolio includes products in the baby care, face care, body care, hair care, color cosmetics and fragrances segments. 

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