Smartkarma Daily Briefs

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg

Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index

PayTM, which IPOed 13 months ago at Rs2150/share and now trades 75% lower “intimated” the possibility of a buyback on the 8th, and shares jumped 7.2% on the 9th.
The Board approved the INR 8.5bn buyback at max price INR 810/share late last night. The shares fell slightly today. Now we move to a postal ballot.
The buy-back rules crate interesting parameters and these buy-back terms provide interesting opportunities.

Alpha Generation Through Share Buybacks in Korea: December 2022

By Douglas Kim

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in the past two months.
In addition to these share buybacks, there has also been more recent news flow regarding the share purchases of Samsung Electronics by numerous senior directors.
In the past month, some of the larger market cap companies including KT&G, Douzone Bizon, and Hyundai Elevator that have been buying back shares have been outperforming KOSPI.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Adani Enterprises (ADE IN) is looking to raise INR200bn (US$2.4bn) via a further public offering. The company has obtained board approval and is now awaiting shareholder approval.
It is the flagship company of the Adani Group. The group’s listed entities’ stock performance over the past few years has made the founder one of the richest persons globally.
However, the stock is expensive and has had some issues in the past. In this note, we take an early look at the possible placement and its impact.

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Dec 15

Daily Brief Macro: CX Daily: China Unplugs Travel Tracking System as Covid Curbs Ease and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

CX Daily: China Unplugs Travel Tracking System as Covid Curbs Ease
UK: Inflation Broadly Less Excessive

CX Daily: China Unplugs Travel Tracking System as Covid Curbs Ease

By Caixin Global

Travel tracking /: China unplugs travel tracking system as Covid curbs ease
Covid-19 /: Beijing beefs up health care system to handle Covid surge
Finance and economy /: China and Saudi Arabia agree on $50 billion of deals

UK: Inflation Broadly Less Excessive

By Phil Rush

UK inflation eased in Nov-22 to 10.7% and 14% on the CPI and RPI. An extremely early collection date is probably partly to blame for the broadly less intense outcome.
Underlying inflationary pressures remain excessively high, despite the monthly impulse in the median rate falling from its peak as expected.
We still see inflation past its peak but likely to remain persistently above the target. UK monetary policy will need to tighten further and is unlikely to reverse until 2024.

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Dec 15

Daily Brief Equity Bottom-Up: Meituan Food Delivery 4Q Updates and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Meituan Food Delivery 4Q Updates
Terumo Corp (4543 JP): H1FY23 Results Reflect Continued Recovery from the Pandemic
Shizuoka – Indigestion
Baidu: Initiation of Coverage – Market Position & Key Drivers
Alibaba Health Information Technology (241.HK) FY23H1 – Concerns Behind the Performance Turnaround
Wynn Resorts
Banorte and BanBajio – October Data Trends, a First Look at 4Q 2022; Returns Pressure Building?
Peloton Interactive Inc.: Initiation of Coverage – Challenging Macro Environment & Other Factors
Our Models Suggest National Retail Properties Could Surge
Western Digital Corporation: Initiation of Coverage – Recent Collaborations & Other Drivers

Meituan Food Delivery 4Q Updates

By Xin Yu, CFA

Meituan food delivery order growth slowed down in Oct and Nov due to covid restrictions.
Meituan Instashopping continued to grow fast in terms of its daily orders.
TikTok food delivery service so far hasn’t posed big threats to Meituan.

Terumo Corp (4543 JP): H1FY23 Results Reflect Continued Recovery from the Pandemic

By Tina Banerjee

Terumo Corp (4543 JP) recorded double-digit revenue growth in H1FY23, with record-high Q2 revenue exceeding ¥200 billion. All three businesses of Terumo reported growth during H1FY23.
Cardiac and vascular segment remained the key growth driver and grew 21%, driven by a 24% y/y growth in overseas revenue amid the recovery and growth of medical demand.
Inflation and normalization of sales and marketing activities impacted the profitability of the company. To improve profitability Terumo has taken further price increase in second half.

Shizuoka – Indigestion

By Daniel Tabbush

Credit costs in September quarter are showing steep delta YoY and QoQ
Accelerated credit growth in past six months may mean there is more to come
Funding cost surge is keeping net interest income growth near zero despite swelling loans

Baidu: Initiation of Coverage – Market Position & Key Drivers

This is our first report on Chinese internet behemoth, Baidu.
The company’s operating loss and margin year over year and quarter over quarter for AI Cloud improved.
Their new AI businesses, like AI Cloud and Intelligent Driving, are in line with China’s national ambitions and digital innovation.

Alibaba Health Information Technology (241.HK) FY23H1 – Concerns Behind the Performance Turnaround

By Xinyao (Criss) Wang

Although Alibaba Health turned loss into profit in FY23H1, it was mainly benefited from the obvious effect of expenses control,which isn’t a long-term solution to achieve the goal of profit.
Alibaba Health has a more difficult problem. The logic of relying on multiple entrances to obtain customers to drive online drug sales has failed to bring higher revenue growth.
In other to keep sustainable growth, it’s important for Alibaba Health to further improve user conversion rate. It is also urgent to actively expand new business growth points.

Wynn Resorts

This is our first report on Wynn Resorts, a well-known operator of casinos and resorts across the globe.
The company observed strength throughout the casino, with record gross gaming revenue and record hotel revenue, driven by strength in both ADR and occupancy on the nongaming side.
In addition, Wynn is progressing with the planning for Wynn Marjan, their integrated resort in the United Arab Emirates.

Banorte and BanBajio – October Data Trends, a First Look at 4Q 2022; Returns Pressure Building?

By Victor Galliano

We analyse key trends to October 2022 for Banorte and Banco del Bajio, two of the top three ROE generating banks in Mexico which also trade on premium PBV ratios
For both, the challenges are funding costs that rise faster than loan yields, crimping credit spreads, as well as the indications that cost of risk may have bottomed out
Although the operating expenses ratio is well controlled so far, it seems unlikely that it can improve much more; these data trends add weight to our cautious view on Banorte

Peloton Interactive Inc.: Initiation of Coverage – Challenging Macro Environment & Other Factors

By Pearl Gray Equity and Research

This is our first report on Peloton Interactive, one of the most popular interactive fitness platforms in the world.
The company delivered a disappointing set of results as it failed to meet Wall Street expectations with respect to revenues as well as earnings.
We initiate coverage on the stock of Peloton Interactive, Inc. with a ‘Hold’ rating.

Our Models Suggest National Retail Properties Could Surge

The Gordon’s Growth Model suggests National Retail Properties is severely undervalued.
In addition, a seasonal ARIMA model indicates the REIT’s dividend yield might be sustainable.
The REIT could be an outlier in 2023, according to the Gordon’s growth model.

Western Digital Corporation: Initiation of Coverage – Recent Collaborations & Other Drivers

This is our first report on Western Digital Corporation, one of the largest manufacturers and distributors of data storage devices and solutions in the world.
The HDD revenue of Western Digital during the quarter declined modestly.
Western Digital is deep into qualifying its most recent generation of hard drives, including its 26-terabyte UltraSMR hard drives, at numerous OEM and U.S. cloud customers.

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Dec 15

Most Read: Omni Bridgeway, Alibaba (ADR), Li Auto, Haidilao, Toyo Construction, Acotec Scientific Holdings, Yashili International Holdings, China Communications Construction, WCP and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)
China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks
HSTECH: Index Handling Changes & Flows in March
Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications
Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue
Acotec/Boston Scientific: Even Higher Proration
Toyo Construction (1890 JP): Pot Shots and Warning Shots
Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg
CSI REITs Index: An Investable Benchmark Launches Today
Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP

S&P/ASX Index Rebalance Preview: A Busy March (Maybe January and February Too)

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.

China ADRs Delisting – Friday Could Be Judgment Day for over US$800bn Mcap of Stocks

PCAOB officials concluded their Hong Kong visit last month and PCAOB is due to announce its annual judgment on whether it had adequate access to US listed China companies.
The Hong Kong visit was on the back of the 26th Aug 2022 announcement by PCAOB and CSRC that they had entered into an agreement with US authorities for access.
In this note, we’ll talk about the latest developments, possible outcomes and implications.

HSTECH: Index Handling Changes & Flows in March

Hang Seng Indexes has changed the index handling treatment for Secondary Listings and Dual Primary Listings from the next rebalance in March.
The change could result in Tencent Music Entertainment Group (1698 HK) replacing Ming Yuan Cloud Group (909 HK) in the index.
There could be passive buying on Li Auto (2015 HK) and XPeng (9868 HK) due to an increase in the index shares with outflows on other index constituents.

Haidilao’s Imminent SpinOff of the Super Hi Overseas Business – Index Treatment and Implications

On 11 July, Haidilao (6862 HK) announced it would propose to spin off its international restaurant business (13-15% of revenue) to shareholders and employees. Shareholders approved in August.
There were interim announcements and indeed interim reports with some information, but not a lot. But Super Hi International Holding was headed for separate listing in HK.
Last week, Haidilao said it was going ahead with a Listing by Introduction pending listing approval by HKEX. Haidilao shares go ex- 16 December. Index providers have announced treatment.

Toyo (1890) Says “We Reject”. YFO Says “But We Didn’t Talk”. Medium-🌶🌶🌶 Hostile Activism To Ensue

In March, Toyo Construction (1890 JP) agreed to be bought out by INFRONEER Holdings (5076 JP) for ¥770/share. One activist objected, and bought 28%. They then said they’d pay ¥1,000.
The Infroneer deal failure started an acrimonious back and forth. The hostility lessened over the summer, but despite activist Yamauchi Family Office’s protestations of love, no deal as of November.
Today saw another press release, delaying things. The contents are 🌶🌶🌶. NOW things are getting more interesting. Hostility is back. Medium-spicy. Three 🌶 out of five.

Acotec/Boston Scientific: Even Higher Proration

By David Blennerhassett

Back on the 12 December, Acotec Scientific Holdings (6669 HK) announced a Partial Offer from Boston Scientific (BSX US)
The Offer Price of $20/share is for up to 65% of shares out. Irrevocables total up to 60.14% of shares out, sufficient to clear the minimum tendering condition.
My initial read was that the proration was simply 65%. That was wrong. It is higher. Plus there are some interesting quirks to avoid breaching the public float post-Offer.

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

Yashili (1230 HK): Monthly Update Suggests that Pre-Condition Satisfaction in the Final Leg

Yashili International Holdings (1230 HK)‘s latest monthly update suggests that the remaining pre-condition, the 25% Yashili acquisition, is entering the final stages towards being satisfied.
The wording “in the course of processing the relevant application” suggests that the government authorities will grant the new registration certificate, which should be received shortly.
The gross spread is 6.2%. The downside is low as both Danone SA (BN FP) and China Mengniu Dairy Co (2319 HK) can waive conditions to satisfy the pre-condition.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

Recent IPOs Carrying Putback Option in Korea: Market’s Attention Is on WCP

By Sanghyun Park

WCP has the largest gap between the exercise and current prices (-16%). And its retail allocation is also the largest (5.44% of SO). In addition, it is subject to short-selling.
The deadline is January 2nd. A large-scale option exercise will be unavoidable if the share price does not exceed ₩54,000 by that date.
It is very likely that WCP’s share price will experience strong downward pressure for a week after January 2nd. We need to consider a position setup that actively utilizes this.

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Dec 15

Daily Brief Energy/Materials: Taekwang Industrial and more

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

In today’s briefing:

A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

A Win for Truston Asset Mgmt: Corporate Activism Worked on Taekwang Industrial

By Douglas Kim

This insight provides the details of how a local asset management company called Truston Asset Mgmt has been able to win a corporate activism battle against Taekwang Industrial.
Taekwang Industrial has repeatedly been boggled down by numerous corporate governance related issues for more than a couple of decades.
The overall result should be a modest positive sentiment on Taekwang Industrial’s shares in the near term which still trades at dirt cheap P/B multiple of 0.2x.

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Dec 15

Daily Brief TMT/Internet: Paytm, Meituan, Douzone Bizon, GoTo, Alibaba Health Information Technology, Baidu, Western Digital, Ziff Davis and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index
Meituan Food Delivery 4Q Updates
Alpha Generation Through Share Buybacks in Korea: December 2022
Our IPO Calls for 2022
Alibaba Health Information Technology (241.HK) FY23H1 – Concerns Behind the Performance Turnaround
Baidu: Initiation of Coverage – Market Position & Key Drivers
Peloton Interactive Inc.: Initiation of Coverage – Challenging Macro Environment & Other Factors
Western Digital Corporation: Initiation of Coverage – Recent Collaborations & Other Drivers
Declining Business Short Candidates: Ziff Davis, Burlington Stores, Nat’l Vision, Otis Wwld, Monro

PayTM (One 97 Communications) Announces a BUYBACK – Overhang Vs Feelings Vs Buyback Vs Index

By Shifara Samsudeen, ACMA, CGMA

PayTM, which IPOed 13 months ago at Rs2150/share and now trades 75% lower “intimated” the possibility of a buyback on the 8th, and shares jumped 7.2% on the 9th.
The Board approved the INR 8.5bn buyback at max price INR 810/share late last night. The shares fell slightly today. Now we move to a postal ballot.
The buy-back rules crate interesting parameters and these buy-back terms provide interesting opportunities.

Meituan Food Delivery 4Q Updates

By Xin Yu, CFA

Meituan food delivery order growth slowed down in Oct and Nov due to covid restrictions.
Meituan Instashopping continued to grow fast in terms of its daily orders.
TikTok food delivery service so far hasn’t posed big threats to Meituan.

Alpha Generation Through Share Buybacks in Korea: December 2022

By Douglas Kim

In this insight, we discuss the alpha generation through companies that have been buying back their shares in the Korean stock market in the past two months.
In addition to these share buybacks, there has also been more recent news flow regarding the share purchases of Samsung Electronics by numerous senior directors.
In the past month, some of the larger market cap companies including KT&G, Douzone Bizon, and Hyundai Elevator that have been buying back shares have been outperforming KOSPI.

Our IPO Calls for 2022

As 2022 comes to an end, we revisit our IPO calls over the last 12-months and how these stocks have performed to assess the effectiveness of our calls.
We made explicit buy/sell calls on 12 IPOs during this period with a hit-rate of 83.3% with Grab, GoTo, Cloud Music, SenseTime and Leapmotor IPOs making the highest returns.
We also wrote on several other IPOs during this period, however, those IPOs have not received approval yet.

Alibaba Health Information Technology (241.HK) FY23H1 – Concerns Behind the Performance Turnaround

By Xinyao (Criss) Wang

Although Alibaba Health turned loss into profit in FY23H1, it was mainly benefited from the obvious effect of expenses control,which isn’t a long-term solution to achieve the goal of profit.
Alibaba Health has a more difficult problem. The logic of relying on multiple entrances to obtain customers to drive online drug sales has failed to bring higher revenue growth.
In other to keep sustainable growth, it’s important for Alibaba Health to further improve user conversion rate. It is also urgent to actively expand new business growth points.

Baidu: Initiation of Coverage – Market Position & Key Drivers

This is our first report on Chinese internet behemoth, Baidu.
The company’s operating loss and margin year over year and quarter over quarter for AI Cloud improved.
Their new AI businesses, like AI Cloud and Intelligent Driving, are in line with China’s national ambitions and digital innovation.

Peloton Interactive Inc.: Initiation of Coverage – Challenging Macro Environment & Other Factors

This is our first report on Peloton Interactive, one of the most popular interactive fitness platforms in the world.
The company delivered a disappointing set of results as it failed to meet Wall Street expectations with respect to revenues as well as earnings.
We initiate coverage on the stock of Peloton Interactive, Inc. with a ‘Hold’ rating.

Western Digital Corporation: Initiation of Coverage – Recent Collaborations & Other Drivers

This is our first report on Western Digital Corporation, one of the largest manufacturers and distributors of data storage devices and solutions in the world.
The HDD revenue of Western Digital during the quarter declined modestly.
Western Digital is deep into qualifying its most recent generation of hard drives, including its 26-terabyte UltraSMR hard drives, at numerous OEM and U.S. cloud customers.

Declining Business Short Candidates: Ziff Davis, Burlington Stores, Nat’l Vision, Otis Wwld, Monro

By Eric Fernandez, CFA

Sales declines, margin compression, cuts in SG&A and cuts in guidance and estimates feature in our Declining Businesses model.
Declining business shorts tend to be lower beta, have longer time horizons, and tend to produce steadier (although slower) short returns.
Today we are flagging: Ziff Davis, Burlington Stores, Natl Vision, Otis Wwld, Monro

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Dec 15

Daily Brief Industrials: Toyo Construction, China Communications Construction, Adani Enterprises and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Toyo Construction (1890 JP): Pot Shots and Warning Shots
CSI REITs Index: An Investable Benchmark Launches Today
Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Adani Enterprises (ADE IN) is looking to raise INR200bn (US$2.4bn) via a further public offering. The company has obtained board approval and is now awaiting shareholder approval.
It is the flagship company of the Adani Group. The group’s listed entities’ stock performance over the past few years has made the founder one of the richest persons globally.
However, the stock is expensive and has had some issues in the past. In this note, we take an early look at the possible placement and its impact.

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Dec 15

Daily Brief Industrials: Toyo Construction, China Communications Construction, Adani Enterprises and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Toyo Construction (1890 JP): Pot Shots and Warning Shots
CSI REITs Index: An Investable Benchmark Launches Today
Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans

Toyo Construction (1890 JP): Pot Shots and Warning Shots

YFO’s press release alleges the Toyo Construction (1890 JP) Board will not recommend the tender as YFO is not a suitable owner rather than the JPY,1000 price being too low.
The Board responded that YFO violated the NDA by disclosing the reasons for the Board’s disapproval. This damages the understanding between the parties, an essential precondition to recommending the offer.
The start of the tender has been pushed back to late January 2023. YFO is committed and will not withdraw the offer for any reason that shareholders may consider unreasonable.

CSI REITs Index: An Investable Benchmark Launches Today

The China Securities Index (CSI) will launch the CSI REITs Index today. The index currently has 14 constituents, and the REITs will be capped at 15% of the index weight.
We expect another 6 REITs to be added to the index at the March rebalance. And then at least another 3 more in June.
The launch of the index should result in ETFs and other passive investment products being floated which should further enhance market liquidity and bring long-term benefits to the market.

Adani Enterprise US$2.4bn Raising Early Look – Lots to Think About: Controversies, Debt, Grand Plans