Smartkarma Daily Briefs

We currently see one change each for the ASX20 and ASX100 indices, 4 changes for the S&P/ASX 200 and 10 adds/ 6 deletes for the ASX300 Index in March.
There could be an addition to the S&P/ASX 200 (AS51 INDEX) in January following Pendal Group (PDL AU)‘s acquisition by Perpetual Ltd (PPT AU).
PEXA Group (PXA AU) is a potential inclusion to the S&P/ASX 200 (AS51 INDEX) if Link Administration (LNK AU)‘s in-specie distribution of PEXA shares to its shareholders is approved.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace Ming Yuan Cloud (909 HK)

Tongcheng-Elong Holdings Ltd (780 HK) could replace Ming Yuan Cloud Group (909 HK) in the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
One way turnover is estimated at 2.1% resulting in a one-way trade of HK$1.7bn. Passive trackers will need to buy nearly 10x ADV on Tongcheng-Elong Holdings Ltd (780 HK).
After being deleted from the MSCI China Index at the November SAIR, this could be the next major index deletion for Ming Yuan Cloud Group (909 HK).

HSCEI Index Rebalance Preview: Shenhua Energy (1088) Could Replace China Feihe (6186)

Nearing the end of the review period for the March rebalance, we see China Shenhua Energy Co H (1088 HK) replacing China Feihe (6186 HK) in the HSCEI INDEX.
Estimated one-way turnover is 1.64% resulting in a one-way trade of HK$1.02bn with passives needing to buy 1x ADV on China Shenhua Energy and selling 1.7x ADV on China Feihe.
The change will lead to an increase in the fair value of the HSCEI 2023 dividend futures by over 3 DIPS. Could be more if China Shenhua pays a special.

Index Rebalance & ETF Flow Recap: ASX, HSTECH, TWDiv+, EPRA Nareit, HSCEI, PCOMP, STAR50, REMX, GDXJ

The rebalance implementation of the KOSPI2, KOSDQ150, CSI 300, CSI 500, STAR50 and other indices took place on 8/9 December. Plus MSCI/FTSE deletes due to Northbound Stock Connect changes.
Friday will see the implementation of the FTSE All-World/All-Cap, EPRA Nareit, S&P/ASX, KLCI, FTSE China and Sensex indices. The FTSE Taiwan Dividend+ Index will have the largest flows.
Big weekly redemptions from the Mirae Asset Tiger Top 10 ETF (292150 KS), ChinaAMC China 50 ETF (510050 CH) and IShares Core MSCI Asia Ex Japan ETF (3010 HK).

SET50 Index Rebalance: CENTEL, COM7, DELTA, RATCH Added; BLA, IRPC, KCE, SAWAD Out

Central Plaza Hotel, Com7 PCL, Delta Electronics Thai and Ratch Group will replace Bangkok Life Assurance, IRPC PCL, KCE Electronics PCL and Srisawad Power in the SET 50 Index.
Passive trackers will need to buy between 2-4 days of ADV on the adds while selling between 0.6-3 days of ADV on the deletes.
The adds have significantly outperformed the deletes over the last few months. We’d use any big moves over the next couple of days to trim positions.

Index Rebalance & ETF Flow Recap: S&P/ASX, HSCEI, HSTECH, Haidilao/Super Hi, CSI REIT

It was a busy Friday with the implementation of the December rebalance for multiple indices. The Yuanta/P-shares Taiwan Dividend Plus ETF will continue to rebalance over the next 4 days.
The coming week should be relatively quiet with the announcement of the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) changes expected.
There were large inflows to ETFs focused on China, Korea, Japan, Taiwan. There were inflows to Hang Seng H Share Index ETF and outflows from Tracker Fund of Hong Kong.

Nojima (7419) Launches Buyout of Conexio (9422)

By Travis Lundy

Nojima Corp (7419 JP) is buying out Conexio Corp (9422 JP) majority owner Itochu Corp (8001 JP) along with minorities. At a 59% premium, it looks good.
However, in terms of normalised EV/EBITDA or EV/FCF multiple, this is not expensive.
And while the major seller/target and friendlies are oh so close, the register is more interesting than the yuho top 10 shareholder list suggests.

Swire Now Buying Back B Shares Only

By Travis Lundy

In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

Futu (FUTU US / 3588 HK): Dual Primary Listing, Stock Connect & Potential HSCI/HSTECH Inclusion

Futu Holdings Ltd (FUTU US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 30 December.
Following the changes to the handling of Dual-Primary-listed companies, Futu Holdings Ltd (FUTU US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
Futu Holdings Ltd (FUTU US) should also be added to the HSCI at the March rebalance and should be added to Southbound Stock Connect late July/ early August.

Revised CGT/SST in Korea: Intense Selling Flow on T-1 Ex-Date Will Be Intact Until 2024

By Sanghyun Park

The all-inclusive CGT will be implemented in 2025. The current partial capital gains tax will be maintained until 2024. And the STT will drop from 0.23% to 0.15% in 2024.
The critical cause of an arb opportunity on ex-date price correction+dividend yield has been the yearend selling flow on T-1 ex-date for the purpose of tax avoidance by majority shareholders.
So, from this year to 2024, we should keep an eye on this arbitrage opportunity, which will continue to arise.

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Dec 24

Daily Brief South Korea: Jeio, Temc and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

JEIO Lowers IPO Price Range
TEMC IPO Valuation Analysis

JEIO Lowers IPO Price Range

JEIO, a manufacturer of carbon nanotubes for rechargeable batteries, has lowered its IPO price range and offering amount in order to list on the KOSDAQ market.
The company lowered the IPO price range to 10,000 won to 13,000 won from 15,000 won to 18,000 won range previously.
Our base case valuation of JEIO is target price of 11,268 won per share, which is 2% lower than the mid-point of the IPO price range.

TEMC IPO Valuation Analysis

Our base valuation of TEMC is target price of 38,363 won per share. At the mid point of the IPO price range, our target price would represent a 10% upside.
Typically, we require a 15-20% upside in terms of target price versus the IPO price. In this case, given the lack of upside, we have a Negative View.
Our target price is based on a target P/E of 8.5x in 2023 which is the average P/E of the comps.

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Dec 24

Daily Brief Singapore: Sea Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Trading Sea Ltd in 2023: It Is Still The Same Beast

Trading Sea Ltd in 2023: It Is Still The Same Beast

By Oshadhi Kumarasiri

Trading Sea Ltd (SE US) shares this year may not be as straightforward as the previous year.
With the share price at pre-COVID levels, swing highs could be difficult to swallow for those of us who would like to remain short Sea Ltd in 2023.
Nonetheless, we would be short Sea-Ltd at the turn of the year as we think valuation multiples could fall to a new all-time low with all segments facing stiff challenges.

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Dec 24

Daily Brief United States: Micron Technology, Blackrock Inc, Coinbase and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Micron’s FQ1 23 Earnings. Yikes!
The S&P 500 Has Further Lows Ahead In 2023
Binance: Waiting For The Other Shoe To Drop

Micron’s FQ1 23 Earnings. Yikes!

By Semicon Alpha

Micron yesterday announced FQ1 revenues of $4.1 billion, , down 39% sequentially and down 47% year over year.
This was still within the forecasted range, albeit at the very low end of the scale.
Gross margin came in at 22.9%, down approximately 17 percentage points sequentially, primarily due to lower pricing.

The S&P 500 Has Further Lows Ahead In 2023

China is the real pivot that could drive stocks, say investors.
China’s economic growth could be a real pivot for stocks, they say.
China’s economy is a key factor in the growth of the country’s economy, according to analysts.

Binance: Waiting For The Other Shoe To Drop

A DOJ investigation adds further negative sentiment to the ‘black box’ of the finance exchange.
The DOJ investigation is being investigated by the Department of Justice, which is under investigation into the exchange exchange exchange between banks and banks.
The investigation is expected to conclude in the coming weeks. The investigation will be conducted by the Justice Department.

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Dec 24

Daily Brief Energy/Materials: Temc and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

TEMC IPO Valuation Analysis

TEMC IPO Valuation Analysis

Our base valuation of TEMC is target price of 38,363 won per share. At the mid point of the IPO price range, our target price would represent a 10% upside.
Typically, we require a 15-20% upside in terms of target price versus the IPO price. In this case, given the lack of upside, we have a Negative View.
Our target price is based on a target P/E of 8.5x in 2023 which is the average P/E of the comps.

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Dec 24

Daily Brief Indonesia: Telekomunikasi Indonesia, Alami and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Telekomunikasi Indonesia (TLKM IJ) – Increasingly Digital
ParagonCorp Arm Pours Funding into Indonesian Shariah Fintech Firm

Telekomunikasi Indonesia (TLKM IJ) – Increasingly Digital

By Angus Mackintosh

Telekomunikasi Indonesia (TLKM IJ) produced what looked like a decent set of 9M2022 numbers as it seeks out its future digital reincarnation.
Data continues to dominate revenues, making up 81% of Telkomsel revenue, with Indihome becoming increasingly important at nearly 20% of total revenue, with data centres set to become increasingly important.
The recent sell-off looks more to do with year-end liquidity flows than fundamentals with valuations looking increasingly attractive.

ParagonCorp Arm Pours Funding into Indonesian Shariah Fintech Firm

By Tech in Asia

Alami, an Indonesia-based Shariah fintech startup, has secured an undisclosed amount in a capital injection from Paragon Beneva Investama, an investment arm of local cosmetics firm ParagonCorp.
Founded in 2018, Alami is a peer-to-peer lender that provides invoice financing to MSMEs in Indonesia.
The company has disbursed over 3 trillion rupiah (over US$191 million) to fund over 10,000 MSME projects across various strategic sectors in the country.

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Dec 24

Daily Brief Japan: Japan Securities Finance Co and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected

Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected

By Aki Matsumoto

Companies wouldn’t accept shareholder proposals, interpreting that they need’t disclose individual executive compensation if it’s below certain amount and that they can continue holding policy-shares if the policy is defined.
Even if JSF claims to have enhanced corporate governance practices, it is reasonable for shareholders to demand a review of its management strategy for a company with below average ROE.
The company, which doesn’t require very large capital expenditures, plays a role in the infrastructure of the capital market, and has an oligopoly on the market, may be worth more.

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Dec 24

Daily Brief TMT/Internet: Sea Ltd, Telekomunikasi Indonesia, Jeio, Alami, Micron Technology, Coinbase and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Trading Sea Ltd in 2023: It Is Still The Same Beast
Telekomunikasi Indonesia (TLKM IJ) – Increasingly Digital
JEIO Lowers IPO Price Range
ParagonCorp Arm Pours Funding into Indonesian Shariah Fintech Firm
Micron’s FQ1 23 Earnings. Yikes!
Binance: Waiting For The Other Shoe To Drop

Trading Sea Ltd in 2023: It Is Still The Same Beast

By Oshadhi Kumarasiri

Trading Sea Ltd (SE US) shares this year may not be as straightforward as the previous year.
With the share price at pre-COVID levels, swing highs could be difficult to swallow for those of us who would like to remain short Sea Ltd in 2023.
Nonetheless, we would be short Sea-Ltd at the turn of the year as we think valuation multiples could fall to a new all-time low with all segments facing stiff challenges.

Telekomunikasi Indonesia (TLKM IJ) – Increasingly Digital

By Angus Mackintosh

Telekomunikasi Indonesia (TLKM IJ) produced what looked like a decent set of 9M2022 numbers as it seeks out its future digital reincarnation.
Data continues to dominate revenues, making up 81% of Telkomsel revenue, with Indihome becoming increasingly important at nearly 20% of total revenue, with data centres set to become increasingly important.
The recent sell-off looks more to do with year-end liquidity flows than fundamentals with valuations looking increasingly attractive.

JEIO Lowers IPO Price Range

JEIO, a manufacturer of carbon nanotubes for rechargeable batteries, has lowered its IPO price range and offering amount in order to list on the KOSDAQ market.
The company lowered the IPO price range to 10,000 won to 13,000 won from 15,000 won to 18,000 won range previously.
Our base case valuation of JEIO is target price of 11,268 won per share, which is 2% lower than the mid-point of the IPO price range.

ParagonCorp Arm Pours Funding into Indonesian Shariah Fintech Firm

By Tech in Asia

Alami, an Indonesia-based Shariah fintech startup, has secured an undisclosed amount in a capital injection from Paragon Beneva Investama, an investment arm of local cosmetics firm ParagonCorp.
Founded in 2018, Alami is a peer-to-peer lender that provides invoice financing to MSMEs in Indonesia.
The company has disbursed over 3 trillion rupiah (over US$191 million) to fund over 10,000 MSME projects across various strategic sectors in the country.

Micron’s FQ1 23 Earnings. Yikes!

By Semicon Alpha

Micron yesterday announced FQ1 revenues of $4.1 billion, , down 39% sequentially and down 47% year over year.
This was still within the forecasted range, albeit at the very low end of the scale.
Gross margin came in at 22.9%, down approximately 17 percentage points sequentially, primarily due to lower pricing.

Binance: Waiting For The Other Shoe To Drop

A DOJ investigation adds further negative sentiment to the ‘black box’ of the finance exchange.
The DOJ investigation is being investigated by the Department of Justice, which is under investigation into the exchange exchange exchange between banks and banks.
The investigation is expected to conclude in the coming weeks. The investigation will be conducted by the Justice Department.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 24

Daily Brief Financials: Japan Securities Finance Co, Blackrock Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected
The S&P 500 Has Further Lows Ahead In 2023

Not Sure if Activist Investor’s Agenda Will Be Approved, but JSF’s Value May Be Higher than Expected

By Aki Matsumoto

Companies wouldn’t accept shareholder proposals, interpreting that they need’t disclose individual executive compensation if it’s below certain amount and that they can continue holding policy-shares if the policy is defined.
Even if JSF claims to have enhanced corporate governance practices, it is reasonable for shareholders to demand a review of its management strategy for a company with below average ROE.
The company, which doesn’t require very large capital expenditures, plays a role in the infrastructure of the capital market, and has an oligopoly on the market, may be worth more.

The S&P 500 Has Further Lows Ahead In 2023