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Smartkarma Daily Briefs

May 23
0

Japan: ROHM Co Ltd, NTT (Nippon Telegraph & Telephone), Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Rohm (6963 JP): Short-Term Caution, Long-Term Buy
  • NTT (9432) Pullback Target to Buy for Rise to 4,250
  • About an Article on Strengthening ESG Fund Monitoring

Rohm (6963 JP): Short-Term Caution, Long-Term Buy

By Scott Foster

  • FY Mar-22 sales and profits were well ahead of guidance. Management is forecasting further growth this year, but mostly in 1H.
  • Margins are under pressure from rising production costs and depreciation, but cash flow and the balance sheet are strong.
  • Gearing to vehicle electrification and should provide protection on the downside and support long-term growth. 

NTT (9432) Pullback Target to Buy for Rise to 4,250

By Thomas Schroeder

  • NTT’s rising channel will dominate trade with the topside to induce a rally stall on the back of RSI non confirmation of new price highs amid waning buy volumes.
  • RSI triangulation and bear divergence (non confirmation of new price highs) implies a deeper pullback to trendline. Priced in the bulk of good news for now.
  • May buy volumes have slows as the rise matures. Us the top of the noted range to reduce and buy a pullback near trendline support.

About an Article on Strengthening ESG Fund Monitoring

By Aki Matsumoto

  • I would like to discuss the Nikkei article, “FSA surveyed 37 asset management companies offering ESG-related investment trusts and found that 40% of them have no ESG professionals.”
  • If it’s impossible to have a ESG professional, and if a fund called ESG fund is set up because of revenue needs, then perhaps the fees need to be reviewed.
  • As for ESG wash, since ESG is scheduled to be included in annual securities reports from FY2023, ESG wash of the issuing company is expected to become an issue.

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May 23
0

Macro: Last Major Currency Peg: Hong Kong’s Fate Could Be Determined by the Fed and Geopolitics and more

By | Daily Briefs, Macro

In today’s briefing:

  • Last Major Currency Peg: Hong Kong’s Fate Could Be Determined by the Fed and Geopolitics
  • Washed Out Enough?
  • From FOMO to GIDOT (Glad I Don’t Own That)

Last Major Currency Peg: Hong Kong’s Fate Could Be Determined by the Fed and Geopolitics

By Said Desaque

  • Prior to 1983, Hong Kong experienced economic overheating and high inflation. The currency peg’s inception coincided with the rising anti-inflationary credibility of Fed policy conduct. 
  • Hong Kong is, however, now totally exposed to any draconian attempts by the Fed to recoup lost credibility via tighter policy settings.
  • China needs its own sovereign-controlled financial hub.  Hong Kong could be China’s financial centre, but recent currency weaponisation implies tenability of the currency board becomes increasingly driven by geopolitics.

Washed Out Enough?

By Cam Hui

  • A review of different sentiment metrics indicates an atmosphere of heightened fear.
  • The intermediate path of least resistance for U.S. equity prices is still down.
  • We continue to believe the risk/reward is tilted to the upside in the short run. 

From FOMO to GIDOT (Glad I Don’t Own That)

By Cam Hui

  • The U.S. equity outlook is highly dependent on an uncertain economic outlook.
  • P/E multiples are adequate if the economy sidesteps a recession, but the risks are skewed to the downside.
  • If the Fed becomes more hawkish, the economy collapses into recession, or if further supply chain disruptions pressure inflation, downside risk could be considerably higher.

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May 23
0

Thailand: Total Access Communication and more

By | Daily Briefs, Thailand

In today’s briefing:

  • Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili

Merger Arb Mondays (23 May) – True Corp, DTAC, Ramsay, VNET, Link Admin, Alliance Aviation, Yashili

By Arun George

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May 23
0

Equity Bottom-Up: ASM Pacific Technology, ROHM Co Ltd, WuXi AppTec Co. Ltd., Orient Overseas International, Dr. Reddy’s Laboratories and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • ASMP (522.HK):  Hang Seng Tech Index (HSTECH INDEX) Took Out ASMP with NIO Inc (9866 HK).
  • Rohm (6963 JP): Short-Term Caution, Long-Term Buy
  • WuXi AppTec (603259.CH/2359.HK)- The Private Placement and Shanghai Yingyi’s Illegal Share Reduction
  • Orient Overseas Intl (316 HK): Cursed by Index Inclusion?
  • Dr. Reddy’s Laboratories (DRRD IN) 4QFY22: Double-Digit Sales Growth; One-Off Charge Impacted Profit

ASMP (522.HK):  Hang Seng Tech Index (HSTECH INDEX) Took Out ASMP with NIO Inc (9866 HK).

By Patrick Liao

  • On May 20, Hang Seng Tech Index (HSTECH INDEX) took out ASMP (522.HK) and replaced by NIO Inc (9866 HK).
  • Apparently, the EV has a better future outlook, and NIO is riding on the right wind even it’s still lost making.
  • Meanwhile, we think ASMP’s should see another hike in 3Q22, and its revenue was forecasted between US$670 million and US$740 million in 2Q22.

Rohm (6963 JP): Short-Term Caution, Long-Term Buy

By Scott Foster

  • FY Mar-22 sales and profits were well ahead of guidance. Management is forecasting further growth this year, but mostly in 1H.
  • Margins are under pressure from rising production costs and depreciation, but cash flow and the balance sheet are strong.
  • Gearing to vehicle electrification and should provide protection on the downside and support long-term growth. 

WuXi AppTec (603259.CH/2359.HK)- The Private Placement and Shanghai Yingyi’s Illegal Share Reduction

By Xinyao (Criss) Wang

  • It’s understandable to take advantage of current market value and reserve capital in advance.Considering potential risks, how low the price of proposed issuance has to be to feel “safe enough”?
  • Yingyi’s illegally reducing its holdings of WuXi AppTec could be a signal– Yingyi and other shareholders/executives are not confident in WuXi AppTec’s outlook, who may not regain its glory days.
  • We recommend investors to view this proposed issuance rationally. If investors want to trade, a good strategy is to catch rebound after plunge, although the temporary rebound does not last.

Orient Overseas Intl (316 HK): Cursed by Index Inclusion?

By Osbert Tang, CFA

  • While Orient Overseas International (316 HK) will welcome its inclusion in Hang Seng Index, there is risk that it will follow the pattern that new inclusions performed badly post entry.
  • Globally, many container shipping stocks have retreated from their peaks in Mar this year, but OOIL is still hovering around its peak level, making is susceptible to a correction.
  • Challenging factors include softening sequential momentum, peaking out of spot rates, weaker demand picture, increase in supply pressure and declining earnings trend are weighing on the industry and the company.

Dr. Reddy’s Laboratories (DRRD IN) 4QFY22: Double-Digit Sales Growth; One-Off Charge Impacted Profit

By Tina Banerjee

  • Dr. Reddy’s Laboratories (DRRD IN) reported 15% y/y growth in revenue in Q4, driven by strong performance across all the markets. Adjusted for one-offs, net profit grew 54% y/y.
  • Despite pricing pressure, the U.S. business should continue its growth momentum with better traction in key products launched in FY22 and upcoming new launches, including generic version of Revlimid.
  • Inflationary pressure (raw material, freight), lower offtake of COVID-related products in India, and currency headwinds in emerging markets are some downside risks for the company.

Related tickers: ASM Pacific Technology (0522.HK), ROHM Co Ltd (6963.T), WuXi AppTec Co. Ltd. (2359.HK), Orient Overseas International (0316.HK), Dr. Reddy’s Laboratories (REDY.NS)

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May 23
0

Industrials: ROHM Co Ltd, Orient Overseas International, Siemens Gamesa Renewable Energy, S.A., TeamLease Services and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Rohm (6963 JP): Short-Term Caution, Long-Term Buy
  • Orient Overseas Intl (316 HK): Cursed by Index Inclusion?
  • Siemens Energy Finally Drops the Bomb
  • TeamLease – Strong Demand to Drive Growth in FY23

Rohm (6963 JP): Short-Term Caution, Long-Term Buy

By Scott Foster

  • FY Mar-22 sales and profits were well ahead of guidance. Management is forecasting further growth this year, but mostly in 1H.
  • Margins are under pressure from rising production costs and depreciation, but cash flow and the balance sheet are strong.
  • Gearing to vehicle electrification and should provide protection on the downside and support long-term growth. 

Orient Overseas Intl (316 HK): Cursed by Index Inclusion?

By Osbert Tang, CFA

  • While Orient Overseas International (316 HK) will welcome its inclusion in Hang Seng Index, there is risk that it will follow the pattern that new inclusions performed badly post entry.
  • Globally, many container shipping stocks have retreated from their peaks in Mar this year, but OOIL is still hovering around its peak level, making is susceptible to a correction.
  • Challenging factors include softening sequential momentum, peaking out of spot rates, weaker demand picture, increase in supply pressure and declining earnings trend are weighing on the industry and the company.

Siemens Energy Finally Drops the Bomb

By Jesus Rodriguez Aguilar

  • Siemens Energy hasn’t expected to its CMD and instead announced on Saturday late evening an €18.05/share voluntary cash tender offer for the remaining 32.9% of Siemens Gamesa it doesn’t own.
  • The consideration represents a 27.7% premium and 23.1x EV/Fwd EBITDA. It seems fair and higher than that initially expected. Siemens Energy is likely to issue a convertible.
  • Upon market open on 23 May, expect the shares to close most of the gap with the offer price. Siemens Gamesa will likely exit the Ibex 35 in H2 2022.

TeamLease – Strong Demand to Drive Growth in FY23

By Motilal Oswal

  • Strong performance, but valuations remains fair – TEAM delivered a strong operational performance in 4QFY22, with revenue up 3% QoQ on broad-based growth across verticals. It also added ~12k associates after a very strong hiring in recent quarters, benefitting from a strong demand environment.
  • Good revenue growth and margin expansion in 4QFY22 – revenue growth at 3% QoQ was a little below our estimate of 6%.
  • Key highlights from the management commentary – The management remains optimistic about its growth prospects and said that all businesses are showing a good recovery.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.

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May 23
0

Most Read: LG Energy Solution, Orient Overseas International, SPH REIT, NIO Inc, Grab and more

By | Daily Briefs, Most Read

In today’s briefing:

  • FTSE All-World/​All-Cap Index Rebalance: Inclusions, Deletions & Other Changes
  • HSI Index Rebalance: Four Weddings & A Funeral
  • SPH Offer Open – Starts to Look Interesting
  • Index Rebalance & ETF Flow Recap: MSCI, ASX, NIFTY, KRX, PCOMP, HSI, HSCEI, HSTECH, SK Tel, GoTo
  • GoTo: A Private Placement Larger Than the IPO and a 10% Potential Dilution

FTSE All-World/​All-Cap Index Rebalance: Inclusions, Deletions & Other Changes

By Brian Freitas

  • For Asia Pacific, there are 8 inclusions each to the All-World Index and the All-Cap Index at the June QIR. Quite a few have over 3 days ADV to buy.
  • There are also changes to the NOS and investability weights that will require passive funds to buy/sell a lot of stocks. Some have a reasonably large impact/flow.
  • A lot of the IPOs are trading below their offering prices and investors could be looking to sell into any rallies that take the stocks close to their IPO prices.

HSI Index Rebalance: Four Weddings & A Funeral

By Brian Freitas

SPH Offer Open – Starts to Look Interesting

By Travis Lundy

  • The SPH REIT (SPHREIT SP) Chain Offer was launched on Thursday 19 May. 
  • The Chain Offer Price has been revised lower from the original level to be S$0.9372/unit, as discussed a few times in these pages. 
  • The units have underperformed Peer Baskets for the last few months and have now fallen to the Chain Offer Price. That presents opportunities

Index Rebalance & ETF Flow Recap: MSCI, ASX, NIFTY, KRX, PCOMP, HSI, HSCEI, HSTECH, SK Tel, GoTo

By Brian Freitas

  • Plenty of review announcements after the close on Friday – HSI, HSCEI, HSTECH, FTSE AW/AC, Sensex. Most changes were as expected.
  • There are a lot of review cutoffs on Monday and announcements expected later in the week (KOSPI200, KOSDAQ150, CSI300, STAR50).
  • There were inflows to Hong Kong, Taiwan, Korea and Australia focused ETFs during the week, while there were outflows from China, Japan and India focused ETFs.

GoTo: A Private Placement Larger Than the IPO and a 10% Potential Dilution

By Shifara Samsudeen, ACMA, CGMA

  • Superapp GoTo (GOTO IJ) on Friday announced that it plans to issue 118.4bn shares through a private placement subject to shareholder approval.
  • This fresh issue accounts for 9.9% of the total outstanding shares of the company and the announcement comes 2-months after the company’s US$1.1bn IPO in March this year.
  • GoTo’s shares are down 20.4% since its IPO and the shares are trading IDR304 a piece, well below its IPO price of IDR338 per share.

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May 22
0

South Korea: KT Corp, Kakao Pay and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership
  • KOSPI 200 IT Sector Index Rebalancing Flow: Watch Kakao Pay & LG Corp

Price Comparisons of SK Telecom, KT, & LG Uplus When SK Telecom Reaches 99%+ Foreign Ownership

By Douglas Kim

  • We analyzed the different share price movements of SK Telecom relative to KT and LG Uplus from 2005 to 2022 when foreign ownership of SK Telecom remained above 99%.
  • From 2005 to 2022, KT and LG Uplus outperformed SKT in 7 and 6 out of 11 periods, respectively when the foreign ownership of SKT was above 99%.
  • Once KT’s foreign ownership rises to the 93-95% range, there will be more concerns about foreign ownership limit which means that LG Uplus could be in focus once again. 

KOSPI 200 IT Sector Index Rebalancing Flow: Watch Kakao Pay & LG Corp

By Sanghyun Park

  • We should focus on the weight changes of the existing constituents. For this, two names really stand out: Kakao Pay (+0.44x ADTV) and LG Corp (+0.37x ADTV).
  • It is because Kakao Pay and LG Corp will undergo an increase in their float rate in the KOSPI 200 rebalancing, and these up-weights will also affect this sector index.
  • Their combined inflow size (KOSPI 200 & KOSPI 200 IT) will be 1.41x and 1.16x ADTVs. This will be the most substantial, except for Kakao Bank and the new additions.

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May 22
0

India: TVS Motor , Hero Motocorp and more

By | Daily Briefs, India

In today’s briefing:

  • TVS Motors- Forensic Analysis
  • Hero Motocorp (HMCL IN) | Structural Problems Persist

TVS Motors- Forensic Analysis

By Nitin Mangal

  • TVS Motor (TVSL IN) primary setback is in the form of poor capital allocation
  • In TVS Motors: Analysis Of Various Investments , we had briefed on the investment policy of the company and how the non-core investments/subsidiaries are dragging the profits.
  • This insight is an extension of the previous one; we update on the various investments the company has undergone and how it impacts the capital allocation.

Hero Motocorp (HMCL IN) | Structural Problems Persist

By Pranav Bhavsar

  • We anticipate the uptick in retail primarily aided by the wedding season to be short-lived for Hero Motocorp (HMCL IN). 
  • HMCL has not been able to keep pace with changing consumer preferences, the limited success in premium segment and scooters is likely to remain an overhang even on new launches.  
  • Inventory correction at the dealer’s end could aid wholesales supporting valuations, but the company remains structurally unattractive. 

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May 22
0

Health Care: Taisho Pharmaceutical Holdin and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Taisho Pharmaceutical (4581 JP): A Compelling Play on Japan’s Consumer Spending Recovery

Taisho Pharmaceutical (4581 JP): A Compelling Play on Japan’s Consumer Spending Recovery

By Tina Banerjee

  • Taisho Pharmaceutical Holdin (4581 JP) is the leader in the Japanese OTC drug market. The company’s Lipovitan, Pabron and RiUP brands capture top market share in their respective categories.
  • With the re-opening of economy, increasing number of people are indulging in outdoor activities and consumer spending is recovering. These should boost Taisho’s OTC drug business.  
  • The company’s prescription pharmaceutical business is well-positioned for long-term growth, driven by strong performance of existing drugs and upcoming new product launch.

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May 22
0

Equity Capital Markets: JD.com Inc (ADR) and more

By | Daily Briefs, ECM

In today’s briefing:

  • ECM Weekly (22nd May 22) – JD, LIC, Delhivery, Leapmotor, Vista, Paradeep, Woori, Hyundai Heavy, NIO

ECM Weekly (22nd May 22) – JD, LIC, Delhivery, Leapmotor, Vista, Paradeep, Woori, Hyundai Heavy, NIO

By Sumeet Singh

  • Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
  • With LIC not delivering and Delhivery needing insurance, combined with the Korean cancellations and HK silence, it looks like its going to be a quiet few weeks for IPOs.
  • On placements, both the Korean deals were a disappointment, despite being well-flagged.

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