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Smartkarma Daily Briefs

Jul 10
0

Consumer: Rakuten Inc, Asbury Automotive and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo
  • LRT Capital Management June 2022 Investor Update
  • LRT Capital Management June 2022 Investor Update

Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo

By David Blennerhassett

  • Silchester’s effort to raise awareness in Chugoku Bank (8382 JP) failed. Still, if you had a basket of regional bank longs and shorts, Chugoku would be in the short basket. 
  • Dye & Durham reloads a higher Offer after Link Administration (LNK AU)‘s rejection. This probably still needs a (small) bump in terms to get up. 
  • Rakuten Inc (4755 JP)is trading at a significant discount to its SOTP. A part of its Fintech segment (Rakuten Bank) could be worth ~50% of total market cap.

LRT Capital Management June 2022 Investor Update

By Fund Newsletters

  • LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
  • June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
  • What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
  • We will happily own many technology companies if their valuations become more attractive.

LRT Capital Management June 2022 Investor Update

By Fund Newsletters

  • LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
  • June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
  • What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
  • We will happily own many technology companies if their valuations become more attractive.

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Jul 10
0

United States: Asbury Automotive and more

By | Daily Briefs, United States

In today’s briefing:

  • LRT Capital Management June 2022 Investor Update

LRT Capital Management June 2022 Investor Update

By Fund Newsletters

  • LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
  • June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
  • What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
  • We will happily own many technology companies if their valuations become more attractive.

Before it’s here, it’s on Smartkarma

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Jul 10
0

Equity Bottom-Up: Paramount Bed Holdings Co Lt, Yaskawa Electric and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Paramount Bed (7817 JP): Record High Revenue Clocked in FY22; New Management Target Announced
  • Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

Paramount Bed (7817 JP): Record High Revenue Clocked in FY22; New Management Target Announced

By Tina Banerjee

  • Paramount Bed Holdings Co Lt (7817 JP) announced record high sales in FY22, driven by strong demand of hospital beds and achieved management target two year ahead of plan.
  • While near-term challenges including high input cost and semiconductor supply shortage negatively impact FY23 performance, Paramount aims to achieve 33% revenue growth and 50bps operating margin expansion during FY22–27.   
  • Paramount is a strong play on COVID recovery. The shares gained 15% since I published bullish note on the company on January 17, 2022. More stream is still left.   

Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

By Mark Chadwick

  • Q1 OP +8%, but core OP (pre-adjustments) fell 18% YoY on significant decline in profitability 
  • Bulls may point to the surprising strength in orders, but the boost from China re-opening and weaker yen are not reflective of the underlying outlook
  • We think Yaskawa will be hard-pressed to make full year guidance of ¥72b. Stay bearish for now

Related tickers: Paramount Bed Holdings Co Lt (7817.T), Yaskawa Electric (6506.T)

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Jul 10
0

Most Read: Nexteer Automotive, Pylon Technologies Co Ltd, Bank Of Iwate, Asbury Automotive and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Nexteer (1316): Unjustly Punished and Bounce Soon?
  • China Stimulus: These Are the Key Beneficiaries
  • Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
  • JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips
  • LRT Capital Management June 2022 Investor Update

Nexteer (1316): Unjustly Punished and Bounce Soon?

By Henry Soediarko

  • Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world. 
  • It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value. 
  • Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector. 

China Stimulus: These Are the Key Beneficiaries

By Osbert Tang, CFA

Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA

By Brian Freitas

  • Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
  • There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
  • Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.

JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips

By Travis Lundy

  • Silchester aimed at four mid-sized regional banks and one tiny one. All four efforts failed, but two of the four banks are probably worth looking at. 
  • Bank Of Iwate (8345 JP) is the small one (tiny) worth looking at. It is 0.17x book, <7x earnings, 1.2x market cap in equity holdings, and better-than-average NIM.
  • Over time, value will out. And while not multi-bagger compelling, the mechanical value arithmetic is interesting.

LRT Capital Management June 2022 Investor Update

By Fund Newsletters

  • LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
  • June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
  • What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
  • We will happily own many technology companies if their valuations become more attractive.

Before it’s here, it’s on Smartkarma

Learn More
Jul 10
0

Industrials: Pylon Technologies Co Ltd, Asbury Automotive and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
  • LRT Capital Management June 2022 Investor Update

Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA

By Brian Freitas

  • Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
  • There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
  • Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.

LRT Capital Management June 2022 Investor Update

By Fund Newsletters

  • LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
  • June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
  • What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
  • We will happily own many technology companies if their valuations become more attractive.

Before it’s here, it’s on Smartkarma

Learn More
Jul 10
0

Japan: Bank Of Iwate, Rakuten Inc, Paramount Bed Holdings Co Lt, Yaskawa Electric and more

By | Daily Briefs, Japan

In today’s briefing:

  • JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips
  • Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo
  • Paramount Bed (7817 JP): Record High Revenue Clocked in FY22; New Management Target Announced
  • Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

JAPAN ACTIVISM:  Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips

By Travis Lundy

  • Silchester aimed at four mid-sized regional banks and one tiny one. All four efforts failed, but two of the four banks are probably worth looking at. 
  • Bank Of Iwate (8345 JP) is the small one (tiny) worth looking at. It is 0.17x book, <7x earnings, 1.2x market cap in equity holdings, and better-than-average NIM.
  • Over time, value will out. And while not multi-bagger compelling, the mechanical value arithmetic is interesting.

Last Week in Event SPACE: Chugoku Bank, Link Admin, Rakuten, Tassal, Pipedo

By David Blennerhassett

  • Silchester’s effort to raise awareness in Chugoku Bank (8382 JP) failed. Still, if you had a basket of regional bank longs and shorts, Chugoku would be in the short basket. 
  • Dye & Durham reloads a higher Offer after Link Administration (LNK AU)‘s rejection. This probably still needs a (small) bump in terms to get up. 
  • Rakuten Inc (4755 JP)is trading at a significant discount to its SOTP. A part of its Fintech segment (Rakuten Bank) could be worth ~50% of total market cap.

Paramount Bed (7817 JP): Record High Revenue Clocked in FY22; New Management Target Announced

By Tina Banerjee

  • Paramount Bed Holdings Co Lt (7817 JP) announced record high sales in FY22, driven by strong demand of hospital beds and achieved management target two year ahead of plan.
  • While near-term challenges including high input cost and semiconductor supply shortage negatively impact FY23 performance, Paramount aims to achieve 33% revenue growth and 50bps operating margin expansion during FY22–27.   
  • Paramount is a strong play on COVID recovery. The shares gained 15% since I published bullish note on the company on January 17, 2022. More stream is still left.   

Yaskawa Electric (6506) | Don’t Be Fooled by the “strong” Q1 Print

By Mark Chadwick

  • Q1 OP +8%, but core OP (pre-adjustments) fell 18% YoY on significant decline in profitability 
  • Bulls may point to the surprising strength in orders, but the boost from China re-opening and weaker yen are not reflective of the underlying outlook
  • We think Yaskawa will be hard-pressed to make full year guidance of ¥72b. Stay bearish for now

Before it’s here, it’s on Smartkarma

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Jul 10
0

South Korea: WCP, Soosan Industries and more

By | Daily Briefs, South Korea

In today’s briefing:

  • WCP IPO Valuation Analysis
  • Soosan Industries Pre-IPO – Pro-Nuclear Growth Angle and Better Track Record Vs Peers

WCP IPO Valuation Analysis

By Douglas Kim

  • Our base case valuation of WCP is EV of 2.4 trillion won, implied market cap of 3.0 trillion won and target price of 87,805 won per share. 
  • Given the lack of upside relative to the IPO price range (80,000 won to 100,000 won), we would PASS on this IPO deal.
  • We forecast the company to generate revenue of 229.1 billion won (up 23.5% YoY) in 2022. We estimate operating margin of 14.8% in 2022, lower than 21.8% in 2021.

Soosan Industries Pre-IPO – Pro-Nuclear Growth Angle and Better Track Record Vs Peers

By Clarence Chu

  • Soosan Industries (126720 KS) is looking to raise up to US$189m in its Korean IPO. 
  • Soosan Industries (SSI) is a private maintenance firm that provides general maintenance services for power plants in South Korea.
  • In our view, despite being a much smaller player, it has recorded better margins and profitability growth, warranting it to trade at least inline with its direct peer, KKPS.

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Jul 09
0

Event-Driven: Noah Holdings, Shiga Bank, Jiangxi Ganfeng Lithium, Li Auto and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China
  • JAPAN ACTIVISM:  Silchester Target Shiga Bank Dings the Div Proposal Badly
  • Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)
  • Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China

By Douglas Kim

  • In our view, Noah Holdings is a solid acquisition candidate as the largest independent wealth management services provider in China. 
  • The Chinese regulators made a change to the ETF market to overseas investors via Hong Kong called ETF Connect and this is likely to benefit companies such as Noah. 
  • As China’s financial markets become larger and more liberalized, there will be a premium on companies such as Noah Holdings with leading market share in China’s wealth management services. 

JAPAN ACTIVISM:  Silchester Target Shiga Bank Dings the Div Proposal Badly

By Travis Lundy

  • In April, Silchester went after Shiga Bank (8366 JP)(JAPAN ACTIVISM:  Silchester Goes After Shiga Bank), with an open letter decrying destruction of shareholder value, asking for a special dividend. 
  • They said Shiga Bank had excess cross-holdings and perennially low ROE (it does). Silchester asked for a minimal special div as a signal. Shareholders dinged their request at the AGM. 
  • Shiga Bank had a decent runup in the last several months – far outstripping its peers. Now it is rich. Time to take the trade off.

Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

  • Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
  • Overall, the net inflow over the past week was ~US$1.3bn, split US$0.7bn for Shanghai and US$0.6bn for Shenzhen.
  • The largest inflows were into Tencent (700 HK) and Li Auto (2015 HK). The largest outflow was in Meituan (3690 HK) and Great Wall Motor (2333 HK).

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Jul 09
0

China: Noah Holdings, Nexteer Automotive, Jiangxi Ganfeng Lithium, Li Auto, CIFI Holdings, Agile Property Holdings and more

By | China, Daily Briefs

In today’s briefing:

  • Noah Holdings: Rich Pickings but Patience Required
  • Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China
  • Nexteer (1316): Unjustly Punished and Bounce Soon?
  • Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)
  • Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)
  • Weekly Wrap – 08 Jul 2022
  • Weekly Wrap – 08 Jul 2022
  • Chinese Property Weekly – 8 July 2022 – Lucror Analytics
  • Chinese Property Weekly – 8 July 2022 – Lucror Analytics

Noah Holdings: Rich Pickings but Patience Required

By Arun George

  • Noah Holdings (NOAH US) priced its H Share at HK$292.00 per share (US$18.60 per ADS) to raise gross proceeds of US$41 million. The H Share will trade on 13 July. 
  • The H Share listing is primarily to address the risk of a potential US delisting. With cash accounting for around 50% of the market cap, Noah is well capitalised. 
  • The valuation is attractive for a company well-positioned to take advantage of any improving market sentiment and an easing of the risk-off sentiment.

Noah Holdings: A Solid Takeout Candidate as the Largest Independent Wealth Mgmt Provider in China

By Douglas Kim

  • In our view, Noah Holdings is a solid acquisition candidate as the largest independent wealth management services provider in China. 
  • The Chinese regulators made a change to the ETF market to overseas investors via Hong Kong called ETF Connect and this is likely to benefit companies such as Noah. 
  • As China’s financial markets become larger and more liberalized, there will be a premium on companies such as Noah Holdings with leading market share in China’s wealth management services. 

Nexteer (1316): Unjustly Punished and Bounce Soon?

By Henry Soediarko

  • Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world. 
  • It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value. 
  • Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector. 

Shanghai/​​​​​​​Shenzhen Northbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

  • Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
  • Overall, the net inflow over the past week was ~US$1.3bn, split US$0.7bn for Shanghai and US$0.6bn for Shenzhen.
  • The largest inflows were into Tencent (700 HK) and Li Auto (2015 HK). The largest outflow was in Meituan (3690 HK) and Great Wall Motor (2333 HK).

Weekly Wrap – 08 Jul 2022

By Charles Macgregor

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

  1. Times China
  2. Powerlong Real Estate Holdings
  3. Kwg Property Holding
  4. Country Garden Holdings Co
  5. China South City

and more…

Weekly Wrap – 08 Jul 2022

By Charles Macgregor

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

  1. Times China
  2. Powerlong Real Estate Holdings
  3. Kwg Property Holding
  4. Country Garden Holdings Co
  5. China South City

and more…

Chinese Property Weekly – 8 July 2022 – Lucror Analytics

By Charles Macgregor

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

Chinese Property Weekly – 8 July 2022 – Lucror Analytics

By Charles Macgregor

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

Before it’s here, it’s on Smartkarma

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Jul 09
0

Consumer: Haier Smart Home Co Ltd, Nexteer Automotive, Li Auto, Carter’s Inc, Z Holdings and more

By | Consumer, Daily Briefs

In today’s briefing:

  • India Channel Insight #41 | Haier, Samsung, Voltas
  • Nexteer (1316): Unjustly Punished and Bounce Soon?
  • Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)
  • Palm Valley Capital Fund Second Quarter 2022 Commentary
  • Palm Valley Capital Fund Second Quarter 2022 Commentary
  • Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year

India Channel Insight #41 | Haier, Samsung, Voltas

By Pranav Bhavsar

Nexteer (1316): Unjustly Punished and Bounce Soon?

By Henry Soediarko

  • Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world. 
  • It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value. 
  • Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector. 

Shanghai/​​​​​​​Shenzhen Southbound Connect: Weekly Moves (8 July 2022)

By David Blennerhassett

  • Inside is a recap of movements in the last week relating to the Shanghai and Shenzhen-Hong Kong Stock Connect facilities, broken down by company and industry.
  • Overall, the net inflow over the past week was ~US$1.3bn, split US$0.7bn for Shanghai and US$0.6bn for Shenzhen.
  • The largest inflows were into Tencent (700 HK) and Li Auto (2015 HK). The largest outflow was in Meituan (3690 HK) and Great Wall Motor (2333 HK).

Palm Valley Capital Fund Second Quarter 2022 Commentary

By Fund Newsletters

  • The Palm Valley Capital Fund invests in small cap stocks. While our Fund is new, its underlying absolute return-based investment strategy is not. We have practiced the same strategy throughout our careers in investment management.
  • Investors’ faith in central banks is currently being tested by the highest U.S. inflation in over 40 years.
  • Two-thirds of the nonfinancial members in the Russell 2000 Index are either unprofitable or trade above 20x EV/EBIT.
  • The median EBIT growth since 2019 for small caps in the sub 10x EV/EBIT bucket is an astonishing 194%.
  • Small caps didn’t sell off enough to create compelling opportunities across the board and the market simply unwound its undeserved gains from 2021.

Palm Valley Capital Fund Second Quarter 2022 Commentary

By Fund Newsletters

  • The Palm Valley Capital Fund invests in small cap stocks. While our Fund is new, its underlying absolute return-based investment strategy is not. We have practiced the same strategy throughout our careers in investment management.
  • Investors’ faith in central banks is currently being tested by the highest U.S. inflation in over 40 years.
  • Two-thirds of the nonfinancial members in the Russell 2000 Index are either unprofitable or trade above 20x EV/EBIT.
  • The median EBIT growth since 2019 for small caps in the sub 10x EV/EBIT bucket is an astonishing 194%.
  • Small caps didn’t sell off enough to create compelling opportunities across the board and the market simply unwound its undeserved gains from 2021.

Z Holdings (Neutral) – PayPay Rebranding of ECommerce; We Remain Cautious in a Rebuilding Year

By Kirk Boodry

  • Z Holdings will integrate its eCommerce platforms in a move that boosts the PayPay brand and may generate some (very) modest synergies
  • We are publishing updated forecasts and setting a new target price at ¥550 but we remain cautious on the shares in the near term as consensus remains high
  • Shares of ZHD still appear expensive at 14-16x our estimate of FY22e EBITDA and are more expensive than Alphabet at these levels (12x EBITDA)

Before it’s here, it’s on Smartkarma

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