Smartkarma Daily Briefs

Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).

Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix

By Douglas Kim

This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

Chindata: China Merchants Potentially In The Mix

By David Blennerhassett

Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.

Sapphire Foods IPO – Smallish Stock with Big (US$550m) Multiple PE Lockup Expiry

By Shifara Samsudeen, ACMA, CGMA

In Nov 2021, Sapphire Foods Limited (SFL), one of Yum Brand’s franchisees in the Indian subcontinent, raised around US$280m in its Indian IPO.
The lock-up on its shareholders will expire soon, with a number of PE funds on its register
In this note, we will talk about the upcoming lockup expiry.

Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase

Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?

By Arun George

Nitro Software Ltd (NTO AU) has entered into a binding agreement with Alludo at A$2.00 per share via a scheme or an off-market takeover, with a 50.1% minimum acceptance condition.
This is a good move by the Board to force Potentia to improve its off-market takeover bid of A$1.80 per share. Alludo can leverage synergies to support a higher bid.
The shares are trading through Alludo’s terms as there is an expectation of Potentia returning with improved terms. The break fee implies that Potentia needs to offer at least A$2.02.

HYBE Shorting Opportunity with a Lockup Release from Dunamu

Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.

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Nov 16

Daily Brief Energy/Materials: Ecopro Co Ltd, DuPont, Occidental Petroleum and more

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

In today’s briefing:

Ecopro Group: Major Equity Grants for 2,706 Employees
DuPont de Nemours: DuPont Liveo Healthcare Solutions In China & Other Drivers
Occidental Petroleum: Collaboration With Western Midstream Partners & Other Drivers

Ecopro Group: Major Equity Grants for 2,706 Employees

By Douglas Kim

On 15 November, Ecopro Group announced a major equity grant for 2,706 employees that work for various affiliates of the Ecopro Group.
The company announced that it will provide equity grant shares worth about 10 million won per employee (for most of the Ecopro Group full time employees as of 30 September).
We like what Ecopro Group is trying to do with this equity grant program and we believe this equity grant program will positively impact Ecopro Co and Ecopro BM.

DuPont de Nemours: DuPont Liveo Healthcare Solutions In China & Other Drivers

DuPont’s stock price has surged past our target price and is witnessing a strong momentum after the company posted a solid set of results this quarter in an extremely challenging environment.
The revenue growth of the company included solid organic growth.
We provide the stock of DuPont with a ‘Buy’ rating and a revision in the target price.

Occidental Petroleum: Collaboration With Western Midstream Partners & Other Drivers

Occidental delivered a decent quarter with revenues above market expectations but missed out on the earnings expectations of analysts.
OxyChem delivered robust, strong earnings while its Permian, Rockies, International, and Gulf of Mexico teams have delivered a good operational performance.
In the Delaware Basin, Occidental delivered a good quarter-to-date results, demonstrating its high quality of subsurface and inventory expertise.

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Nov 16

Daily Brief Macro: From Capital Wars to Currency Wars: Weak US Dollar in 2023?… Or Will the Yuan Tumble To RMB10/US$? and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

From Capital Wars to Currency Wars: Weak US Dollar in 2023?… Or Will the Yuan Tumble To RMB10/US$?
China: Decisive Policy Shifts Improve Growth and Reduce Risks
Thailand Visit Note: Politics Will Determine the Growth Potential of the Economy
UK: Labour Fits the Fall Season
Indonesia: Chugging Along as 3Q22 Growth Perks Up
MADE FALSE BANK, AM RUIN*
CX Daily: The Secrets Behind a Chinese Banking Superstar’s Fall

From Capital Wars to Currency Wars: Weak US Dollar in 2023?… Or Will the Yuan Tumble To RMB10/US$?

By Michael J. Howell

Watch the CNY as well as DXY. Chinese Yuan has broken out of its long-established target band. Net capital outflows are very weak. Could the CNY test RMB10/US$?
China’s broken economy needs a new source of demand that can create less debt dependent future GDP growth. Devaluation may prove the solution
Oct/ Nov show PBoC injecting more liquidity into Chinese money markets after year of tightness, following attempts to support the Yuan. Lower CNY will allow PBoC more space to ease

China: Decisive Policy Shifts Improve Growth and Reduce Risks

By Manu Bhaskaran

The economy continues to wilt under the pressure of multiple headwinds including new surges of covid infections and the deflating real estate sector.
In response, China’s leaders have effected a decisive shift in policy. Covid restrictions will be more calibrated. Downside risks in real estate will be more vigorously addressed as well.
Challenges remain including a likely weakening of the export sector. We expect more policy support which should suffice to produce a modest rebound in growth.

Thailand Visit Note: Politics Will Determine the Growth Potential of the Economy

By Nigel Chiang

Thailand is one of the few economies that will see growth accelerate in 2023. The driving force behind Thailand’s positive cyclical outlook is the tourism recovery.
Other factors also support growth, such as ramped up public investment and a surge in FDI approvals.
The main downside risks are a prolonged slowdown in China, financial shocks, and geopolitical shocks. However, Thailand is sufficiently resilient to these risks.

UK: Labour Fits the Fall Season

By Phil Rush

The UK unemployment rate surprisingly jumped to 3.6% as the single-month rate surged by 0.3pp. It is tracking a rise towards 3.8% in Q4, about 0.1pp above the BoE view.
Demand in the official vacancies and redundancies data is falling further from their peak, toward the Adzuna version, but continues to imply a cushion to output falls.
This surprise restores the cyclical ageing of the labour market while remaining outside the “burn-out” phase. We still see hawkish pressure fitting a 50bp BoE hike in Dec-22.

Indonesia: Chugging Along as 3Q22 Growth Perks Up

By Nicholas Chia

The upbeat 3Q22 GDP speaks to our sanguine outlook for the archipelagic economy. We re-affirm our full-year forecast of 5.3% GDP growth in 2022.
Investments will spearhead growth going forward, driven by the bourgeoning interest in the commodity refining sector, the inflows of manufacturing FDI, and the enduring emphasis on infrastructure development.
Strong growth strengthens BI’s case for further tightening. BI could opt for a smaller 25bps hike, following the moderation in US inflation which buoyed market and risk sentiment.

MADE FALSE BANK, AM RUIN*

By Mark Tinker

In a world where it has taken us huge amounts of effort, paperwork, compliance and due diligence to open an office, get licensed and start to launch funds, it is genuinely baffling to watch how a pair of twenty somethings managed to first attract and then seemingly vapourise tens of billions of $ of investor money in an update of a classic bank run-albeit with a modern VC twist.
Tales of how Sam Bankman Fried (perhaps it is simply nominative determinism rather than an anagram at work) not only fried his ‘bank’ but also managed to persuade some of the biggest names in VC to invest at high valuations in an unregulated business based in the Bahamas and yet none of them even wanted a seat on the board are simply extra-ordinary.
Of course the fact that some of them included Softbank and Tiger Global should have been something of a red flag, for as Leo Lewis at the FT put it this week: “But where there is an opportunity to lose money on tech these days, Masayoshi Son still seems one step ahead of the market at having found it ages agoLeo Lewis, FT

CX Daily: The Secrets Behind a Chinese Banking Superstar’s Fall

By Caixin Global

In Depth: The secrets behind a Chinese banking superstar’s fall.
Xi raises Anti-Secession Law in talks with Biden about Taiwan, foreign minister says.
Teaching staff who harm children face lifetime ban.

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Nov 16

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Sea Ltd, Chindata Group, Nitro Software Ltd, HYBE, AVEVA Group PLC, Palantir Technologies Inc, FTX Token and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher
Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix
Sea Ltd: Another Sell-Off?
Chindata: China Merchants Potentially In The Mix
Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase
Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?
HYBE Shorting Opportunity with a Lockup Release from Dunamu
Schneider Electric Sweetens AVEVA Bid
Palantir Inc: Major Drivers
#40 The Contagion Vectors of the FTX debacle

TSMC (TSM/2330 TT): Berkshire Buying Could Push ADR Premium Higher

By Shifara Samsudeen, ACMA, CGMA

Overnight, Berkshire Hathaway Inc Cl B (BRK/B US) announced that it held 60.06m shares (US$4.43bn) of Taiwan Semiconductor (TSMC) – ADR (TSM US) as of 30 September.
That caused the ADR to spike after-hours and the local shares have rallied 8% today to close the gap with the ADR.
The ADR premium is trading near the lows and with Berkshire buying up a substantial chunk, Taiwan Semiconductor (TSMC) – ADR should trade at a bigger premium to Taiwan Semiconductor (2330).

Buffett’s Investment in TSMC – Impact on Samsung Electronics and SK Hynix

By Douglas Kim

This insight will discuss the impact of Buffett’s investment in Taiwan Semiconductor (TSMC) – ADR (TSM US) on Samsung Electronics (005930 KS) and SK Hynix (000660 KS).
We believe that Buffett’s sizeable investment in TSMC is likely to have a positive impact on Samsung Electronics and SK Hynix.
This would be similar to how Buffett’s investment in the Japanese trading companies which has had a positive impact on the major Korean trading companies.

Sea Ltd: Another Sell-Off?

By Oshadhi Kumarasiri

The last leg of Sea Ltd (SE US)’s original bull thesis is about to break with Shopee’s revenue expected to start declining from 3Q22 onwards.
However, a lower-than-expected operating loss, driven by cost-cutting could get the bulls excited for a short while following the 3Q22 results due later this week.
With the business remaining unprofitable after cost-cutting, we think 3Q22 results could be another opportunity to profit on the short-side as the FV of Sea could be around $10bn EV.

Chindata: China Merchants Potentially In The Mix

By David Blennerhassett

Bain Capital-backed Chindata Group (CD US) is on the move after Bloomberg flagged – again – interest from industry players.
This time, SOE-backed China Merchants Group is understood to be mulling a takeover of Chindata. Shares are up 23% since that article earlier this month.
Back in April, Bloomberg mentioned GDS Holdings (ADR) (GDS US), PE outfit PAG, and EQT AB (EQT SS)-backed EdgeConneX were rumoured to be interested in merging with Chindata.

Chindata Takeover: China Merchants Enters as Government Interest in Data Centers Increase

Chindata Group (CD US) is the leading carrier-neutral hyperscale data center solutions provider in Asia Pacific emerging markets.
At the beginning of the month, Bloomberg reported a takeover offer for Chindata from China Merchants Group, which is a state-owned company.
Several state-owned companies have shown interest towards acquiring data centers and data center companies, which is likely to be in line with China’s strategy of digitization.

Nitro (NTO AU)’s Binding Offer from Alludo to Force Potentia’s Hand?

By Arun George

Nitro Software Ltd (NTO AU) has entered into a binding agreement with Alludo at A$2.00 per share via a scheme or an off-market takeover, with a 50.1% minimum acceptance condition.
This is a good move by the Board to force Potentia to improve its off-market takeover bid of A$1.80 per share. Alludo can leverage synergies to support a higher bid.
The shares are trading through Alludo’s terms as there is an expectation of Potentia returning with improved terms. The break fee implies that Potentia needs to offer at least A$2.02.

HYBE Shorting Opportunity with a Lockup Release from Dunamu

Dunamu may not be in a financial situation that will allow it to hold HYBE shares. With FTX’s liquidity crisis, Upbit’s liquidity management risk will inevitably rise to the surface.
Doubts about whether the size of Upbit’s assets is sufficiently absorbing the shock of a bank run are still strongly raised in the local market.
These concerns are likely to affect HYBE’s share price as the December 9 release approaches, and yes, we need to design short position setups aimed at this.

Schneider Electric Sweetens AVEVA Bid

By Jesus Rodriguez Aguilar

Schneider increased its cash offer by 4% to 3,225p/share, 47% premium, implied equity value of c.£9,863m and EV of £10,569m, 27.8x EV/Fwd EBIT. Schneider said the sweetened bid is final.
The deal seems dilutive for Schneider: it would mean an implied Fwd P/E of 31.4x vs. 18.7x for Schneider and should increase Schneider’s debt leverage to 1.9x.
The increased offer had been anticipated as the spread had been positive since the offer announcement. Gross spread has now turned negative and is -1.91% (including dividend) as of 14 November. Long.

Palantir Inc: Major Drivers

Palantir delivered a mixed set of results in the last quarter.
Its $478 million in revenue surpassed Wall Street expectations but the company missed out on the earnings expectations of analysts.
U.S. commercial business expanded for the ninth consecutive quarter, up 53% yearly.

#40 The Contagion Vectors of the FTX debacle

By Carbono Insights

Time flies in crypto. If you swap “years” for “hours” in this quote from Marvin, the Paranoid Android from The Hitchhiker’s Guide to the Galaxy, you get a glimpse of what crypto has been like in recent weeks.
“The first ten million years were the worst,” said Marvin, “and the second ten million years, they were the worst too. The third ten million years I didn’t enjoy at all. After that, I went into a bit of a decline.”
In the last few weeks, FTX has exploded, and somehow it keeps exploding.

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Nov 16

Daily Brief Industrials: Harmonic Drive Systems, Sungeel Hitech, Monadelphous, Tokyo Electron, Washtec, Dongfang Electric, Escorts Kubota Limited, Thermax, Atlantia SpA, Daiei Kankyo and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name
Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns
Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
Edizione & KKR/Atlantia: What Now?
Daiei Kankyo Pre-IPO – Steady, at Best

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

By Scott Foster

Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Roughly half of the 20-trading day reference period for the December 2022 Rebalance is now complete.
Among the names identified as potential index changes, Washtec (WSU GR) appears to be a very high impact name with around 50+ days of volume to buy.

Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years

By Osbert Tang, CFA

China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK).
CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges.

Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns

By Pranav Bhavsar

Escorts Kubota Limited (ESCORTS IN) reported a 69 bps YoY gain in market share, but a -540 bps drop in EBITDA margins in spite of a 2% price hike.
We believe the product and management issues highlighted earlier, are likely to ensure both margins and market share do not cross 10% for FY23.
As per the FY22 Annual Report, auditors have received whistle-blower complaints, but no details are disclosed. Credit-impaired trade receivables are also increasing. Stock is not cheap and hence the caution.

Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure

By Tina Banerjee

In Q2FY23, Thermax (TMX IN) recorded strong revenue growth of 41% y/y to Rs20.8bn, driven by strong growth across all the three segments.
The company bore the brunt of high raw material prices as EBIT margins saw a 900 bps decline y/y to 6.9%. However, EBIT margin improved 200 bps over Q1FY23.
The order book of the company grew 46% y/y to Rs94.8bn. Order book is well diversified across sectors. Domestic orders comprised ~84% of the order book.

Edizione & KKR/Atlantia: What Now?

By Jesus Rodriguez Aguilar

Schema Alfa now holds 87.350% of Atlantia and has waived the 90% Threshold Condition. The offer will be reopened 21-25 November at same terms (settlement 2 December).
Schema Alfa has no obligation to acquire the shares of minority shareholders, moreover it could call an EGM to seek approval for a merger with Atlantia and delist Atlantia.
Gross spread is 0.09%. Accept offer, considering this was almost a knock-out bid with minimal interloper risk and the most likely scenario is delisting by the end of the year.

Daiei Kankyo Pre-IPO – Steady, at Best

Daiei Kankyo (9336 JP) (DK), a waste management company, aims to raise around US$280m in its Japan IPO.
Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
In this note, we talk about the company’s past performance.

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Nov 16

Daily Brief Health Care: Olympus Corp, Suzuken Co Ltd, Yunkang Group, Apollo Hospitals Enterprise, Micro-Tech Nanjing Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Olympus Placement – Had Been Doing Well, till Recently
Suzuken Buyback (9987 JP) – The Best News In Years
Yungkang Group Lock-Up – Shares Benefited from a Protracted Lockdown. Shareholders Could Monetise
Apollo Hospitals Enterprise (APHS IN): Mixed 2QFY23 Result; Outlook Is Positive
Micro-Tech Nanjing (688029.CH)-Worth a Spot on the Watch List Due to Possibility of Dilemma Reversal

Olympus Placement – Had Been Doing Well, till Recently

MUFG aims to raise around US$255m via selling around 1% of Olympus Corp (7733 JP).
The stock has been doing well recently and MUFG has sold before. Although, the recent earnings updates didn’t go down too well.
In this note, we will run the deal through our ECM framework and comment on other deal dynamics.

Suzuken Buyback (9987 JP) – The Best News In Years

Suzuken Co Ltd (9987 JP) last Friday announced earnings which beat expectations and raised forecasts well above consensus. But Implied H2 did not change, suggesting full-year is lowballed.
The company announced a buyback over 5 months, but today (Tuesday) announced a ToSTNeT-3 buyback for the full size (6% or so) that morning.
It looks like insider selling, which in addition to being accretive would be bullish on a governance basis.

Yungkang Group Lock-Up – Shares Benefited from a Protracted Lockdown. Shareholders Could Monetise

By Clarence Chu

Yunkang Group (2325 HK) was listed on 18th May 2022, with its six month lockup expiring on 17th November 2022.
Yunkang Group is a medical operation service provider in China and as per F&S, had a market share of 3.7% in China’s medical operation service market as per 2020 revenue.
Coming up for six-month lockup expiry are the controlling shareholders and cornerstones. With protracted lockdowns underway in China, this stock has continued to benefit, currently trading 86.3% above IPO price.

Apollo Hospitals Enterprise (APHS IN): Mixed 2QFY23 Result; Outlook Is Positive

By Tina Banerjee

Apollo Hospitals Enterprise (APHS IN) recorded 14% y/y growth in revenue in Q2FY23. Occupancy in both the mature as well as new hospitals improved in Q2FY23 compared to prior quarter.
Q2FY23 reported EBITDA declined 8% y/y to INR5.65 billion due to impact of 24/7 operating costs, which stood at INR1.74 billion (vs INR475 million in Q2FY22).
In October, Apollo Hospitals entered into a definitive agreement to acquire 60% stake in Kerala First Health Services Limited, which offers Ayurveda medical services under the “AyurVAID Hospitals” brand.

Micro-Tech Nanjing (688029.CH)-Worth a Spot on the Watch List Due to Possibility of Dilemma Reversal

By Xinyao (Criss) Wang

Micro-Tech Nanjing Co Ltd (688029 CH) would face lower-than-expected performance growth in 2022, but the logic of import substitution and increasing demand for endoscopy consumables would help drive future growth.
Centralized procurement is a problem, but Micro-Tech’s leading position of endoscopy consumables in China is stable, which wouldn’t be easily affected by centralized procurement when compared with other domestic companies.
The valuation of Micro-Tech should be lower than Mindray and Sonoscape, since these two companies have much better performance (both growth and profitability), product competitiveness, business layout and outlook.

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Nov 16

Daily Brief Industrials: Harmonic Drive Systems, Sungeel Hitech, Monadelphous, Tokyo Electron, Washtec, Dongfang Electric, Escorts Kubota Limited, Thermax, Atlantia SpA, Daiei Kankyo and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue
KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation
S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec
Tokyo Electron (8035 JP): Sell into the Bear Market Bounce
DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name
Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years
Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns
Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure
Edizione & KKR/Atlantia: What Now?
Daiei Kankyo Pre-IPO – Steady, at Best

Nabtesco and Harmonic Drive – The Second Half of Splitsville So Pressure to Continue

In February 2021 Nabtesco Corp (6268 JP) announced it would sell half of its stake in Harmonic Drive Systems (6324 JP) to concentrate on its own products and growth.
It was a not-very-well-held secret Nabtesco had invested wanting to own HDS. HDS didn’t want to be owned. Eventually Nabtesco gave up. So they sold over time into low float.
Now they are letting go of the other half. Sale structure means ongoing pressure.

KODEX Battery ETF Rebalancing & SungEel Hitech Trading Situation

Given SunEel’s market cap and the level of relevance to the rechargeable battery business, KODEX will likely include it this time around.
If you are looking for a short-selling opportunity, I recommend adjusting the timing after this KODEX ETF passive event.
If you are long targeting the KOSDAQ 150 inclusion, I recommend taking a slightly longer holding window to additionally target the passive inflow of the KODEX ETF.

S&P/ASX Index Rebalance Preview: Shrinking Number of Changes in Dec

Volatile stock prices could mean one change for the S&P/ASX 50 Index and one change for the S&P/ASX 200 (AS51 INDEX) at the December rebalance.
Atlas Arteria (ALX AU) could replace Lendlease Group (LLC AU) in the S&P/ASX 50 Index, while Monadelphous (MND AU) could replace St Barbara Ltd (SBM AU) in the S&P/ASX 200.
Short interest on St Barbara Ltd (SBM AU) has spiked in the last few weeks and there could be short covering ahead of implementation of the changes.

Tokyo Electron (8035 JP): Sell into the Bear Market Bounce

By Scott Foster

Tokyo Electron (TEL) has cut sales guidance for 2H of FY Mar-23 by more than 25% and operating profit guidance by more than 50%.
Half of the reduction in sales guidance is due U.S. sanctions on China. Management does not expect demand to pick up until the second half of next year.
The share price has risen by more than 30% in the past five weeks after a slight decline in U.S. inflation. Projected valuations are not particularly attractive.

DAX/MDAX/SDAX Quiddity Leaderboard Dec 22: Washtec Is a High-Impact Name

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices.
Roughly half of the 20-trading day reference period for the December 2022 Rebalance is now complete.
Among the names identified as potential index changes, Washtec (WSU GR) appears to be a very high impact name with around 50+ days of volume to buy.

Dongfang Electric (1072 HK) And CIMC Enric (3669 HK): Two Stocks for the Next Five Years

By Osbert Tang, CFA

China’s ambition to build into a strong manufacturing country as revealed in 20th Party Congress should place Dongfang Electric (1072 HK) and CIMC Enric Holdings (3899 HK) in excellent positions.
The leadership in power and new energy equipment industry, improving gross margin outlook, well-covered order book and undemanding multiples are the key merits of Dongfang Electric (1072 HK).
CIMC Enric Holdings (3899 HK)‘s good presence in clean energy, chemical/environmental and liquid food segments, global product competitiveness, secured order backlog and net cash position are its major edges.

Escorts Kubota (ESCORTS IN) | Costly Market Share Gains & AR Concerns

By Pranav Bhavsar

Escorts Kubota Limited (ESCORTS IN) reported a 69 bps YoY gain in market share, but a -540 bps drop in EBITDA margins in spite of a 2% price hike.
We believe the product and management issues highlighted earlier, are likely to ensure both margins and market share do not cross 10% for FY23.
As per the FY22 Annual Report, auditors have received whistle-blower complaints, but no details are disclosed. Credit-impaired trade receivables are also increasing. Stock is not cheap and hence the caution.

Thermax (TMX IN): Strong Order Book Entails Visibility Amid Margin Pressure

By Tina Banerjee

In Q2FY23, Thermax (TMX IN) recorded strong revenue growth of 41% y/y to Rs20.8bn, driven by strong growth across all the three segments.
The company bore the brunt of high raw material prices as EBIT margins saw a 900 bps decline y/y to 6.9%. However, EBIT margin improved 200 bps over Q1FY23.
The order book of the company grew 46% y/y to Rs94.8bn. Order book is well diversified across sectors. Domestic orders comprised ~84% of the order book.

Edizione & KKR/Atlantia: What Now?

By Jesus Rodriguez Aguilar

Schema Alfa now holds 87.350% of Atlantia and has waived the 90% Threshold Condition. The offer will be reopened 21-25 November at same terms (settlement 2 December).
Schema Alfa has no obligation to acquire the shares of minority shareholders, moreover it could call an EGM to seek approval for a merger with Atlantia and delist Atlantia.
Gross spread is 0.09%. Accept offer, considering this was almost a knock-out bid with minimal interloper risk and the most likely scenario is delisting by the end of the year.

Daiei Kankyo Pre-IPO – Steady, at Best

Daiei Kankyo (9336 JP) (DK), a waste management company, aims to raise around US$280m in its Japan IPO.
Daiei Kankyo is involved in the waste management and related businesses in Japan. The core of its operations consists of its waste management and recycling business.
In this note, we talk about the company’s past performance.

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Nov 16

Daily Brief Financials: Country Garden Services Holdings, Square Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Buy Country Garden Services on China Property Sector Recovery
Block Inc (formerly Square Inc): Continuing Bullish Approach Towards Crypto

Buy Country Garden Services on China Property Sector Recovery

By Xin Yu, CFA

Chinese government outlined 16 steps to support the property industry on Nov 11
The newly released measures clearly show that the government has reversed its attitude toward property industry, which may trigger the end of the downcycle.
During the property sector rebound, Country Garden Services (CGS) can be a good investment. The company has a solid track record and shows attractive valuation.

Block Inc (formerly Square Inc): Continuing Bullish Approach Towards Crypto