Smartkarma Daily Briefs

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.

Norwest Energy Rejects MinRes’ Offer

In its Target Statement released this afternoon, Norwest Energy NL (NWE AU) has rejected Mineral Resources (MIN AU)‘s off-market scrip Offer.
Norwest concluded the Offer was opportunistic and did not boast an appropriate premium for control.
MinRes’ Offer closes on the 6 February – unless extended.

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Jan 11

Daily Brief TMT/Internet: KT Corp, Alibaba (ADR), Darktrace, S&P 500, Creative Technology and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
Aequitas 2023 Asia IPO Pipeline – Hong Kong
Darktrace: Undervalued Cyber Defense Unicorn. A Steep Discount Is Unjustified
EQD | SPX and NDX : Its US CPI Time and We Look at Trading Opportunites in the Options Market
Creative Technology: After the Passing of Founder, Is the Company’s Independence at Stake?

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
The February inclusion is pretty tight, but May seems like we could be looking out for it.

Aequitas 2023 Asia IPO Pipeline – Hong Kong

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.

Darktrace: Undervalued Cyber Defense Unicorn. A Steep Discount Is Unjustified

By Andrei Zakharov

Darktrace is a cyber security and AI unicorn backed by leading VC firms. The company was founded in Cambridge, UK, in 2013 and crossed the $500M ARR mark in 2022.
Darktrace (DARK LN) currently trades at ~4x EV/CY22E revenues, a steep discount relative to other US-based cybersecurity peers that trade at an average of ~9x EV/CY22E revenues.
The cyber defense company achieved GAAP Op Margin and FCF Margin break-even in FY21 and FY22, with an opportunity to deliver profitable stellar growth in the coming years.

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

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

Most Read: MatsukiyoCocokara, Kakao Pay, Swire Pacific (A), KT Corp, Fast Retailing, Huazhu Group, China Internet Investment Finance Holdings, Alibaba (ADR), Alibaba Group, Xiabuxiabu Catering Mgt Chn Hldgs and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI Feb 2023 QCIR Preview: Nearing the Start of the Review Period
How Should We Play with Kakao Pay’s MSCI Inclusion Event?
StubWorld: Swire And China’s Opening
Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
Fast Retailing: Another Beat Would Suggest That FR’s North America & Europe Expansion Is Viable
H World (HTHT) Follow-On Offering – A More Genuine Need
Bubble Warning: China Internet Investment (810 HK) Suspended
Aequitas 2022 IPOs and Placements Performance Review – From the Busiest Year to the Slowest Year
Alibaba (9988 HK): Still Significant Upside After Surging
Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern

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.

How Should We Play with Kakao Pay’s MSCI Inclusion Event?

Kakao Pay is the only possibility to be included in the February MSCI IR. It comfortably beats both the full market cap and float market cap hurdles.
It can be assumed that the full-fledged emergence of local institutional flows targeting MSCI inclusion contributed to some extent to Kakao Pay’s outperformance early this year.
More extreme reverse flow trading could emerge. In other words, there is a possibility that the share price will turn into a sell-off even before the MSCI announcement.

StubWorld: Swire And China’s Opening

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%.

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
The February inclusion is pretty tight, but May seems like we could be looking out for it.

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.

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

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

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.

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

By Shifara Samsudeen, ACMA, CGMA

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.

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.

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.

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Jan 11

Daily Brief Industrials: Visional and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

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

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

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 11

Daily Brief Consumer: MatsukiyoCocokara, Fast Retailing, Huazhu Group, Xiabuxiabu Catering Mgt Chn Hldgs, Korea Kolmar Holdings, LG Household & Health Care-Pref, China Education Group, WD-40 Company, Home24 and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

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
H World (HTHT) Follow-On Offering – A More Genuine Need
Xiabuxiabu (520 HK): GA Clean-Up Trade Not a Concern
Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
Discussing the Currently Widened Pref-Ord Disparity in Korea
China Education Group (CEG) Completed the Placement for Potential M&As
WDFC: The Floodgates of Inventory
XXXLutz Consortium/Home24: Final Results and Delisting

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.

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

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.

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.

Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV

By Douglas Kim

On 10 January, Korea Kolmar Holdings (024720 KS) announced that it plans to cancel 1.1 million shares to be acquired through redemption of redeemable convertible preferred shares.
Korea Kolmar Holdings currently has a market cap of 314 billion won so this share cancellation represents nearly 17% of its market cap.
This large shares cancellation should have a positive impact on Korea Kolmar Holdings’ share price. It is also trading at 40% discount to its NAV.

Discussing the Currently Widened Pref-Ord Disparity in Korea

Many of the PREFERRED shares in Korea entered the short-term oversold territory versus ORDINARY (on a 20-day moving average).
The liquidity boom that started in the local bond market at the beginning of the year seems to have led to the relative outperformance of ORDINARY.
We should consider collective trading, which utilizes the oversold condition across the entire PREF zone, rather than an individual approach to a specific PREF at this point.

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.

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

XXXLutz Consortium/Home24: Final Results and Delisting

By Jesus Rodriguez Aguilar

The offer has ended. The bidding consortium has secured 92.67% of home24 shares (including capital increase and share purchases). Completion still remains subject to customary antitrust approvals.
Unsurprisingly, the shares are now trading at a 8.07% discount to the offer price. Delisting is looming and holdouts have not a sell-out right.
It is still puzzling to me why >7% of shares have not been tendered. The bidders might make a delisting offer, but not necessarily at the offer price.

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Jan 11

Daily Brief Financials: Swire Pacific (A), SBFC Finance Limited, Ethereum, Bharat Highways InVIT, Sunac China Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

StubWorld: Swire And China’s Opening
SBFC Finance IPO: Forensic Analysis
Profitability of Ethereum and a Short-Term Rally Ahead of the Shanghai Upgrade in March
Bharat Highways InVIT Pre-IPO Tearsheet
Morning Views Asia: China Jinmao Holdings, Sunac China Holdings, Sunny Optical

StubWorld: Swire And China’s Opening

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%.

SBFC Finance IPO: Forensic Analysis

By Nitin Mangal

SBFC Finance Limited (SBFC123 IN) plans to come up with INR 16 bn IPO which comprises INR 7.5 bn worth of fresh issue.
The company is MSME focused NBFC-ND-SI, and has shown attractive growth in AUM, disbursements in the last few years. SBFC also offers loans against gold.
However, there are a few perils that must not be overlooked, such as lack of provisioning, low NII growth, mixed peer positioning, and few governance setbacks.

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?

Bharat Highways InVIT Pre-IPO Tearsheet

By Ethan Aw

Bharat Highways InVIT (BHINV IN) is looking to raise about US$242m in its upcoming India IPO. The deal will be run by ICICI Securities, Axis Capital, HDFC Bank and IIFL Securities.
Bharat Highways InVIT is an infrastructure investment trust established to acquire, manage and invest in a portfolio of infrastructure assets in India.
The InVIT’s initial asset portfolio will consist of seven road assets, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh with an aggregate length of approximately 497.292km.

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.

China Jinmao Holdings
Sunac China Holdings
Sunny Optical

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Jan 11

Daily Brief India: SBFC Finance Limited, Bharat Highways InVIT and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

SBFC Finance IPO: Forensic Analysis
Bharat Highways InVIT Pre-IPO Tearsheet

SBFC Finance IPO: Forensic Analysis

By Nitin Mangal

SBFC Finance Limited (SBFC123 IN) plans to come up with INR 16 bn IPO which comprises INR 7.5 bn worth of fresh issue.
The company is MSME focused NBFC-ND-SI, and has shown attractive growth in AUM, disbursements in the last few years. SBFC also offers loans against gold.
However, there are a few perils that must not be overlooked, such as lack of provisioning, low NII growth, mixed peer positioning, and few governance setbacks.

Bharat Highways InVIT Pre-IPO Tearsheet

By Ethan Aw

Bharat Highways InVIT (BHINV IN) is looking to raise about US$242m in its upcoming India IPO. The deal will be run by ICICI Securities, Axis Capital, HDFC Bank and IIFL Securities.
Bharat Highways InVIT is an infrastructure investment trust established to acquire, manage and invest in a portfolio of infrastructure assets in India.
The InVIT’s initial asset portfolio will consist of seven road assets, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh with an aggregate length of approximately 497.292km.

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Jan 11

Daily Brief South Korea: KT Corp, Korea Kolmar Holdings, LG Household & Health Care-Pref and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight
Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV
Discussing the Currently Widened Pref-Ord Disparity in Korea

Foreign Ownership Limit Stocks in Korea: KT Is Again in the Limelight

KT’s foreign room has been rising since early September last year. If this trend continues, it will likely approach the inclusion borderline of 15% within a month or two.
This trend is expected to continue for the time being as the tough relationship between the KT CEO and the government seems unlikely to be resolved in the short term.
The February inclusion is pretty tight, but May seems like we could be looking out for it.

Korea Kolmar Holdings: Shares Cancellation of 17% of Market Cap + Deep Discount to NAV

By Douglas Kim

On 10 January, Korea Kolmar Holdings (024720 KS) announced that it plans to cancel 1.1 million shares to be acquired through redemption of redeemable convertible preferred shares.
Korea Kolmar Holdings currently has a market cap of 314 billion won so this share cancellation represents nearly 17% of its market cap.
This large shares cancellation should have a positive impact on Korea Kolmar Holdings’ share price. It is also trading at 40% discount to its NAV.

Discussing the Currently Widened Pref-Ord Disparity in Korea

Many of the PREFERRED shares in Korea entered the short-term oversold territory versus ORDINARY (on a 20-day moving average).
The liquidity boom that started in the local bond market at the beginning of the year seems to have led to the relative outperformance of ORDINARY.
We should consider collective trading, which utilizes the oversold condition across the entire PREF zone, rather than an individual approach to a specific PREF at this point.

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✓ Company Data and News
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Jan 11

Daily Brief Australia: Norwest Energy NL and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Norwest Energy Rejects MinRes’ Offer

Norwest Energy Rejects MinRes’ Offer