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Smartkarma Daily Briefs

Nov 15
0

Daily Brief Thematic (Sector/Industry): Good Morning Japan | The Hawk Vs The Dove..the Dove Has It ! and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Good Morning Japan | The Hawk Vs The Dove..the Dove Has It !
  • Baron Funds Q3 2022 Report – Letter From Ron
  • Merion Road Capital Q3 2022 Investor Letter
  • SaltLight Capital Management Q3 2022 Co-Investor Letter
  • Weekly Stock Bullfinder – Week of 11/14

Good Morning Japan | The Hawk Vs The Dove..the Dove Has It !

By Mark Chadwick

  • Good Morning Japan:  We strive to provide the very best breaking macro, stock and thematic overnight news that will impact your trading day in Japan. FOLLOW US to keep abreast!
  • OVERNIGHT:  Partial reversal – Sell BETA/Buy Momentum; Contrasting views from the Fed; Amazon cuts 10,000; FedEx furloughs workers – probably the doves it; Positive China – finally the bottom in?
  • JAPAN: Flat open vs Cash on the NKY; Buybacks continues – now the megabanks get involved; Not a heavy news day but watch out for Matsumotokio(3088) -strong 2Qs

Baron Funds Q3 2022 Report – Letter From Ron

By Fund Newsletters

  • Baron is an asset management firm focused on delivering growth equity investment solutions known for long-term, fundamental, active approach to growth investing.
  • We expect additional, substantial appreciation for Tesla and SpaceX.
  • 84.3% of our assets are NOT invested in Tesla and SpaceX, but rather are invested in other exceptionally attractive growth companies.
  • We have always believed that any recessions or declines in the value of our growth business holdings would not be long-lasting.
  • Think long term about everything, guard your reputation zealously, make sure your balance sheet is as close to impregnable as possible.

Merion Road Capital Q3 2022 Investor Letter

By Fund Newsletters

  • Merion Road Capital Management LLC is a registered investment adviser. We focus on value-oriented investing through rigorous fundamental analysis of a company’s operations.
  • Q3 2022 was a disappointing quarter.
  • We should extend our investment horizon exactly when others shorten theirs.

SaltLight Capital Management Q3 2022 Co-Investor Letter

By Fund Newsletters

  • SaltLight Capital Management started in 2015 and has grown tremendously, with assets under management doubling each year. Our investment process is continuously evolving.
  • Despite the market downturn our cumulative redemptions are a mere basis points of the fund.
  • We are more concerned with the ‘two birds in the bush’ so to speak; and then extending the adage further: what is the price implying to catch these plump birds.
  • With a more concentrated portfolio of businesses, portfolio volatility can be higher, but volatility can be compensated with higher returns.
  • We have no conviction about the direction of the market – we don’t believe one can consistently predict this with high accuracy.

Weekly Stock Bullfinder – Week of 11/14

By Weekly Stock Bull Finder

  • This past week the news was dominated by political midterm election results and a brewing crypto market implosion but also featured a late week rally after a surprising CPI inflation print which beat estimates on Thursday.
  • While pundits can posit various reasons for Thursday and Friday’s market rallies, there appears to be at least a few brewing catalysts that could carry positive momentum into 2023 which include 1) continued downside surprises in either CPI or PCE inflation data which would allow the Fed to back off its aggressive tightening campaign 2) steps leading to Chinese economy reopening reducing existing supply chain bottlenecks 3) steps leading to a ceasefire or peace agreement in Ukraine and 4) significant improvement in EU energy security situation resulting in lower EU inflation.
  • In the near term, it appears as of this writing that political gridlock in Washington D.C. will be upon us for the next 2 years removing the worst case scenarios of any significant market-negative legislation (i.e. tax hikes, etc.) being passed.

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Nov 15
0

Daily Brief ECM: Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts and more

By | Daily Briefs, ECM

In today’s briefing:

  • Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts
  • Bionote IPO – Delayed Timeline & Updated Valuation Analysis
  • Fusion Micro Finance IPO Trading – Weak Demand Seems Justified
  • Marriott International: Acquiring The City Express Brand Portfolio & Other Developments
  • Global Health IPO Trading – Relatively Cheap and Good

Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts

By Ethan Aw

  • Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
  • Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
  • In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

Bionote IPO – Delayed Timeline & Updated Valuation Analysis

By Douglas Kim

  • Bionote has delayed its IPO timeline. Now, the company expects to complete its IPO in late December. The book building for the institutional investors will now start on 8 December.
  • Our updated base case valuation is target price of 16,966 won per share, which is 6% lower than the low end of the IPO price range. 
  • Given the downside risk relative to the IPO price range, we have a Negative View of the BioNote IPO. 

Fusion Micro Finance IPO Trading – Weak Demand Seems Justified

By Ethan Aw

  • Fusion Micro Finance Ltd (1053199D IN) raised approximately US$134m in its India IPO.  
  • Fusion Micro Finance (FMF) is a non-banking financial company – microfinance institution (NBFC-MFI) that provides financial services to unserved and underserved women in rural and peri-rural areas across India.
  • We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand for the deal and the trading dynamics.

Marriott International: Acquiring The City Express Brand Portfolio & Other Developments

By Baptista Research

  • Marriott delivered a mixed set of results for the third quarter.
  • The leisure demand for the quarter remained strong and far above 2019 levels.
  • Travelers are apparently continuing to mix pleasure and work visits, according to third quarter day-of-the-week trends.

Global Health IPO Trading – Relatively Cheap and Good

By Ethan Aw

  • Global Health (Medanta) (GH IN) raised approximately US$268m in its India IPO.  
  • Global Health (GH) is a hospital network that operates under the Medanta brand. The firm currently has five hospitals in operation and one more planned for development. 
  • We have looked at various aspects of the deal in our previous notes. In this note, we talk about the demand for the deal and the trading dynamics.

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Nov 15
0

Daily Brief Macro: Bear Market Rally or Turning Point (Again)? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Bear Market Rally or Turning Point (Again)?
  • The Commodity Report #77
  • The Week that Was in ASEAN@Smartkarma – Diagnosed with Prodia, ITail, and Jardine C&C
  • CX Daily: Will Europe Pour More Money Into China?

Bear Market Rally or Turning Point (Again)?

By The Macro Compass

  • Do you remember July? Here we are again: left to assess whether we are looking at a bear market rally or a sustainable turning point for the stock market.
  • Last week’s softer than expected inflation print spurred a massive rally across asset classes: the 60-40 portfolio posted one of its strongest 2-day performances ever, precious metals zoomed higher while the US Dollar took a beating.
  • The magnitude of the market reaction was exacerbated by technical reasons we will discuss, but to assess medium-term implications we need to break down the CPI report and take a broader look at the global macro puzzle.

The Commodity Report #77

By The Commodity Report

  • Fundamentally speaking, it was nearly a perfect week for commodities as much major news aligned during the week after China eased some Covid restrictions, raising hopes of a demand recovery in the world’s second-biggest economy. 
  • Almost all major commodities traded higher following China’s move to reduce the time that travelers and close contacts of infected people must spend in quarantine, a significant amendment to the Covid Zero policy.
  • China’s loosening of restrictions strengthened a rally that began on Wall Street, with risk assets rising after US inflation slowed.

The Week that Was in ASEAN@Smartkarma – Diagnosed with Prodia, ITail, and Jardine C&C

By Angus Mackintosh

CX Daily: Will Europe Pour More Money Into China?

By Caixin Global

  • Business / Cover Story: Will Europe pour more money into China?

  • China-U.S. / Xi calls for China-U.S. relations to return to ‘right course’

  • Banking / Exclusive: Agricultural Bank of China to name Fu Wanjun president

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Nov 15
0

Daily Brief Equity Bottom-Up: Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22 and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22
  • Recruit 2Q: Outlook for HR Tech Business Becomes Challenging
  • Smartkarma Corporate Webinar | PRIME US REIT: Diversity and Stability in the US Real Estate Sector
  • China Internet Weekly (14Nov2022): NetEase, Activision Blizzard, Alibaba, Tencent, IQiyi, Suning.com
  • Fanuc (6954) | This Time Is Different
  • GoTo: Large Job Cuts to Improve Financials?
  • Rakuten Mobile: Expecting Losses To Shrink With Symphony & Energy Turning Profitable
  • Back in Hong Kong stocks
  • A Pair Trade Between NCSoft & Netmarble Corp
  • Jiangsu Expressway (177 HK): Positive Updates from Management

Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22

By Victor Galliano

  • Headline 2QFY22 results for Softbank Group were in the black, largely due to the Alibaba stake sale, but the group’s three funds registered an aggregate USD10bn of valuation losses
  • FTX’s write-down to zero will cost Softbank’s Vision Fund 2 USD100m in 3Q22, our main concern is what the VC funding downturn means for portfolio valuations in the coming quarter
  • The group’s NAV discount has now tightened meaningfully; we believe that this makes it less advantageous for management to announce another share buy-back programme

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) reported 2QFY03/2023 earnings today. Revenue increased 25.3% YoY to JPY878.4bn (vs consensus JPY842.7bn) while EBIT decreased 8.2% YoY to JPY108.5bn (vs consensus JPY116.1bn).
  • HR Tech’s top line growth further slowed down to 40.2% YoY while adjusted EBITDA margin of the segment declined to 30.4% from 40.6% in the same period a year ago.
  • The company’s 2QFY03/2023 earnings were better than we expected, however, it shows that the earnings growth is slowing down with weakening of labour markets globally.

Smartkarma Corporate Webinar | PRIME US REIT: Diversity and Stability in the US Real Estate Sector

By Smartkarma Research

In the upcoming webinar, Harmeet Bedi, Deputy CEO and CFO of PRIME US REIT, will share a short company presentation. After which, he will engage in a fireside chat with Smartkarma Insight Provider, Sumeet Singh. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Tuesday, 29 November 2022, 17:00 SGT/HKT.

About Prime US REIT
 
Listed on 19 July 2019 on the Main Board of the Singapore Exchange, Prime US REIT
(“PRIME”) is a well-diversified real estate investment trust focused on stabilised income-producing prime office assets in the United States. With the objectives to achieve long-term growth in distributions per unit and net asset value per unit while maintaining a robust capital structure, PRIME offers investors unique exposure to a high-quality portfolio of 14 Class A freehold office properties which are strategically-located in 13 key U.S. office markets. PRIME’s portfolio has a total carrying value of US$1.67 billion as at 30 September 2022.

Disclaimer: Do note that this webinar will be a live-only event. A recording will not be available afterwards. 

China Internet Weekly (14Nov2022): NetEase, Activision Blizzard, Alibaba, Tencent, IQiyi, Suning.com

By Ming Lu

  • NetEase and Activision Blizzard will possibly terminate their cooperation next January.
  • Singles’ Day sales were not very successful for e-commerce apps such as Alibaba and JD.com.
  • IQiyi announced a revenue share rule to short TV series producers, including cost per mille and membership fee.

Fanuc (6954) | This Time Is Different

By Mark Chadwick

  • Machine Tool Orders in Japan decreased to 141 billion yen in October from 149 billion yen a year ago.
  • The 5.4% decline marks the start of the third downturn in Machine Tool Orders over the past decade. 
  • We analyse those downturns and believe that Fanuc’s stock price has probably hit bottom, but THIS TIME IS DIFFERENT

GoTo: Large Job Cuts to Improve Financials?

By Shifara Samsudeen, ACMA, CGMA

  • Bloomberg reported on Friday that GoTo (GOTO IJ) is planning to cut more than 1k jobs across all its divisions to cutdown its costs and improve its financials.
  • Though GoTo’s top line has continued to expand, the company continues to burn cash and the losses have further widened during the recent quarters.
  • GoTo’s shares rose 11.7% during Friday’s trade, however, share price is still down by about 45%  from the company’s IPO price.

Rakuten Mobile: Expecting Losses To Shrink With Symphony & Energy Turning Profitable

By Oshadhi Kumarasiri

  • With e-commerce and fintech segments performing reasonably well, Rakuten Inc (4755 JP)’s Q3 results were mostly in line with expectations.
  • However, the Mobile segment failed to live up to expectations with the segment’s operating loss narrowing by just ¥3.4bn to ¥120.9bn in 3Q22.
  • Nonetheless, we are excited about the prospects of Rakuten Mobile through the success of Rakuten Symphony as the business is close to signing 12 new corporate customers.

Back in Hong Kong stocks

By Turtles all the way down

  • Early this year I was quite pessimistic on Hong Kong stocks.
  • But since then the Hang Seng is down another 20% or so. A lot of stocks with 9-10%+ dividend yields are laying around.
  • I should have been a bit quicker writing this up, but then you are getting it for free.

A Pair Trade Between NCSoft & Netmarble Corp

By Douglas Kim

  • In this insight, we discuss a pair trade between NCSOFT Corp (036570 KS) (go long) and Netmarble Corporation (251270 KS) (go short).
  • NCSoft is currently trading at lower valuation multiples (in terms of EV/EBITDA and P/E) than Netmarble, which we believe is not justified.
  • One of the key risk factors of Netmarble is that it could be excluded from the MSCI Korea Index in 2023/2024.

Jiangsu Expressway (177 HK): Positive Updates from Management

By Osbert Tang, CFA

  • Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable. 
  • We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
  • Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B. 

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Nov 15
0

Daily Brief Event-Driven: Wharf Holdings (4 HK): MSCI Deletion and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas
  • Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t
  • Warrego Enters Into A Scheme With Beach
  • HSCI Index Rebalance and Stock Connect: Changes at the Margins
  • Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread
  • Nitro Software: KKR’s $2.00/Share Firm Offer

Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas

By Brian Freitas

  • In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
  • The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
  • Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t

By Sumeet Singh

Warrego Enters Into A Scheme With Beach

By David Blennerhassett

  • The Stokes’ family-backed Beach Energy (BPT AU) is offering Warrego Energy (WGO AU)‘s shareholders $0.20/share, in cash, by way of a Scheme. That’s a 36% premium to the one-month VWAP.
  • A contingent value payment may be payable to Warrego shareholders from the sale of Warrego’s Spanish assets within 12 months
  • Warrego’s board unanimously recommend the Beach deal. The transaction is expected to complete in early March.  The wild card is whether Strike Energy (STX AU) pitches a revised Offer.

HSCI Index Rebalance and Stock Connect: Changes at the Margins

By Brian Freitas

  • We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
  • Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
  • Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

By Arun George

  • Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
  • There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
  • There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

Nitro Software: KKR’s $2.00/Share Firm Offer

By David Blennerhassett

  • Adobe rival Nitro Software Ltd (NTO AU)  has announced KKR (via Alludo) has firmed its $2.00/share Offer, by way of a Scheme, in tandem with an off-market takeover.
  • Both the Scheme and takeover are subject to FIRB and MACs/prescribed occurrences. The takeover is subject to a 50.1% acceptance hurdle. The proposals have the unanimous support of Nitro’s board.
  • The Transaction Booklet is expected to be despatched to shareholders in early February 2023, with a Scheme Meeting expected to be held in March 2023.

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Nov 15
0

Most Read: Delhivery, Wharf Holdings, Golden Energy & Resources, Sumitomo Precision Products, Softbank Group, Warrego Energy, Brilliance China Automotive, Nearmap Ltd and more

By | Daily Briefs, Most Read

In today’s briefing:

  • MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises
  • FTSE All-World/​​​​​All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry
  • Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy
  • Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas
  • Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase
  • Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done
  • Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22
  • Warrego Enters Into A Scheme With Beach
  • HSCI Index Rebalance and Stock Connect: Changes at the Margins
  • Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

MSCI Nov 2022 SAIR: In-Line; Plus a Few Surprises

By Brian Freitas

FTSE All-World/​​​​​All-Cap Index Rebalance Preview: Potential Inclusions & Lock-Up Expiry

By Brian Freitas

  • We see 4 potential adds, 1 close add and 1 potential delete for the FTSE All-World/All-Cap indices at the upcoming QIR that will be implemented at close on 16 December.
  • The largest impact will be the passive selling on Golden Agri Resources (GGR SP) due to a nationality change from Singapore to Ineligible.
  • There is a big lock-up expiry on Delhivery where US$2.89bn of shares will be free for trading on 21 November – that is significantly larger than the potential passive buying.

Index Rebalance & ETF Flow Recap: MSCI STD, Jardine C&C, Golden Agri, Delhivery, Origin Energy

By Brian Freitas

Wharf Holdings (4 HK): MSCI Deletion, Short Interest & Trade Ideas

By Brian Freitas

  • In a surprise, MSCI announced the deletion of Wharf Holdings (4 HK) from the MSCI China Index at the November SAIR that will be implemented at the close 30 November.
  • The stock dropped 14.3% on Friday as volume spiked 26x compared to ADV and 14m shares were shorted on the day.
  • Total short interest is estimated to be significantly lower than the estimated selling from passive MSCI trackers and there could be a move lower over the next few days.

Merger Arb Mondays (14 Nov) – Golden Energy, Perpetual/Pendal, Origin Energy, Warrego, Uzabase

By Arun George

Sumitomo Precision Products (6355) Buyout by Sumitomo Corp – Likely To Get Done

By Travis Lundy

  • On Friday, Sumitomo Corp (8053 JP) announced a bid for equity affiliate (they own 27+% but Nippon Steel 15%, top 2 is 40+%) Sumitomo Precision Products (6355 JP). 
  • It’s a one-year high and 4-year high price, and 8x average 10yr EV/EBITDA but 4.6x 2024e EBITDA from the Mid Term Plan. And way below a 10-year high. 
  • This gets done if Retail agrees to the tender. If 50% put in, that should do it. So I expect this gets done.

Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22

By Victor Galliano

  • Headline 2QFY22 results for Softbank Group were in the black, largely due to the Alibaba stake sale, but the group’s three funds registered an aggregate USD10bn of valuation losses
  • FTX’s write-down to zero will cost Softbank’s Vision Fund 2 USD100m in 3Q22, our main concern is what the VC funding downturn means for portfolio valuations in the coming quarter
  • The group’s NAV discount has now tightened meaningfully; we believe that this makes it less advantageous for management to announce another share buy-back programme

Warrego Enters Into A Scheme With Beach

By David Blennerhassett

  • The Stokes’ family-backed Beach Energy (BPT AU) is offering Warrego Energy (WGO AU)‘s shareholders $0.20/share, in cash, by way of a Scheme. That’s a 36% premium to the one-month VWAP.
  • A contingent value payment may be payable to Warrego shareholders from the sale of Warrego’s Spanish assets within 12 months
  • Warrego’s board unanimously recommend the Beach deal. The transaction is expected to complete in early March.  The wild card is whether Strike Energy (STX AU) pitches a revised Offer.

HSCI Index Rebalance and Stock Connect: Changes at the Margins

By Brian Freitas

  • We see 3 potential adds for the HSCI in December. We also see 26 potential adds and 16 potential deletes for the index in March.
  • Following the March rebalance, we see 22 potential inclusions to Stock Connect while we expect 37 stocks to be removed from the link.
  • Some of the potential deletions/ Stock Connect drops have large Southbound holdings and some of these positions could be pared back over the next few months.

Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

By Arun George

  • Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
  • There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
  • There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

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Nov 15
0

Daily Brief Energy/Materials: Warrego Energy, Silver, Conocophillips and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Warrego Enters Into A Scheme With Beach
  • The Commodity Report #77
  • ConocoPhillips: Partnership With Qatar Energy & Other Developments

Warrego Enters Into A Scheme With Beach

By David Blennerhassett

  • The Stokes’ family-backed Beach Energy (BPT AU) is offering Warrego Energy (WGO AU)‘s shareholders $0.20/share, in cash, by way of a Scheme. That’s a 36% premium to the one-month VWAP.
  • A contingent value payment may be payable to Warrego shareholders from the sale of Warrego’s Spanish assets within 12 months
  • Warrego’s board unanimously recommend the Beach deal. The transaction is expected to complete in early March.  The wild card is whether Strike Energy (STX AU) pitches a revised Offer.

The Commodity Report #77

By The Commodity Report

  • Fundamentally speaking, it was nearly a perfect week for commodities as much major news aligned during the week after China eased some Covid restrictions, raising hopes of a demand recovery in the world’s second-biggest economy. 
  • Almost all major commodities traded higher following China’s move to reduce the time that travelers and close contacts of infected people must spend in quarantine, a significant amendment to the Covid Zero policy.
  • China’s loosening of restrictions strengthened a rally that began on Wall Street, with risk assets rising after US inflation slowed.

ConocoPhillips: Partnership With Qatar Energy & Other Developments

By Baptista Research

  • ConocoPhillips’ stock has continued its phenomenal bull run and continues to reach new highs as the company delivered a solid third quarter result surpassing Wall Street expectations in terms of revenues as well as earnings.
  • This is especially true for U.S. shale, where the rate of production increase across the board is being constrained by quickly rising costs and an exceedingly constrained supply.
  • The company is well-positioned to address these long-term supply challenges thanks to the depth and high quality of its unconventional U.S. inventory and broad global portfolio.

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Nov 15
0

Daily Brief Industrials: Recruit Holdings, Fanuc Corp, Growatt Technology, Jiangsu Expressway (H) and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Recruit 2Q: Outlook for HR Tech Business Becomes Challenging
  • Fanuc (6954) | This Time Is Different
  • Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts
  • Jiangsu Expressway (177 HK): Positive Updates from Management

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) reported 2QFY03/2023 earnings today. Revenue increased 25.3% YoY to JPY878.4bn (vs consensus JPY842.7bn) while EBIT decreased 8.2% YoY to JPY108.5bn (vs consensus JPY116.1bn).
  • HR Tech’s top line growth further slowed down to 40.2% YoY while adjusted EBITDA margin of the segment declined to 30.4% from 40.6% in the same period a year ago.
  • The company’s 2QFY03/2023 earnings were better than we expected, however, it shows that the earnings growth is slowing down with weakening of labour markets globally.

Fanuc (6954) | This Time Is Different

By Mark Chadwick

  • Machine Tool Orders in Japan decreased to 141 billion yen in October from 149 billion yen a year ago.
  • The 5.4% decline marks the start of the third downturn in Machine Tool Orders over the past decade. 
  • We analyse those downturns and believe that Fanuc’s stock price has probably hit bottom, but THIS TIME IS DIFFERENT

Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts

By Ethan Aw

  • Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
  • Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
  • In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

Jiangsu Expressway (177 HK): Positive Updates from Management

By Osbert Tang, CFA

  • Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable. 
  • We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
  • Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B. 

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Nov 15
0

Daily Brief TMT/Internet: Softbank Group, Paytm, Activision Blizzard, Nearmap Ltd, GoTo, Nitro Software Ltd, NCSOFT Corp, Taiwan Semiconductor (TSMC) – ADR, Paypal Holdings and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22
  • Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t
  • China Internet Weekly (14Nov2022): NetEase, Activision Blizzard, Alibaba, Tencent, IQiyi, Suning.com
  • Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread
  • GoTo: Large Job Cuts to Improve Financials?
  • Nitro Software: KKR’s $2.00/Share Firm Offer
  • A Pair Trade Between NCSoft & Netmarble Corp
  • Softbank Group – Earnings Flash – Q2 FY 2022-23 Results – Lucror Analytics
  • Taiwan Tech Weekly: Buffet Invests in TSMC, Hon Hai Issues Improving, China Chip Imports Slump
  • PayPal Inc: The PayPal Zettle Terminal & Other Recent Drivers

Softbank Group (9984 JP) –Vision and LatAm Funds Take Another USD10bn Valuation Hit in 2Q 22

By Victor Galliano

  • Headline 2QFY22 results for Softbank Group were in the black, largely due to the Alibaba stake sale, but the group’s three funds registered an aggregate USD10bn of valuation losses
  • FTX’s write-down to zero will cost Softbank’s Vision Fund 2 USD100m in 3Q22, our main concern is what the VC funding downturn means for portfolio valuations in the coming quarter
  • The group’s NAV discount has now tightened meaningfully; we believe that this makes it less advantageous for management to announce another share buy-back programme

Paytm (One 97) Lockup – US$4bn+ Lockup Expiry, Some Large Shareholders Are Underwater, a Lot Aren’t

By Sumeet Singh

China Internet Weekly (14Nov2022): NetEase, Activision Blizzard, Alibaba, Tencent, IQiyi, Suning.com

By Ming Lu

  • NetEase and Activision Blizzard will possibly terminate their cooperation next January.
  • Singles’ Day sales were not very successful for e-commerce apps such as Alibaba and JD.com.
  • IQiyi announced a revenue share rule to short TV series producers, including cost per mille and membership fee.

Nearmap (NEA AU)’s Update Results in an Unwarranted Increase in the Spread

By Arun George

  • Nearmap Ltd (NEA AU)’s litigation and trading update resulted in the spread to Thoma Bravo’s A$2.10 offer widening to 7.7%. The scheme meeting is on 25 November.
  • There is no chance that the MAC clause will be triggered due to the downbeat trading update. However, the update is softening the stance of some of the retail dissenters.
  • There is a small chance of a bump as peers have re-rated. Nevertheless, the low spread prior to the update suggested that the risk of the NO vote was minimal.

GoTo: Large Job Cuts to Improve Financials?

By Shifara Samsudeen, ACMA, CGMA

  • Bloomberg reported on Friday that GoTo (GOTO IJ) is planning to cut more than 1k jobs across all its divisions to cutdown its costs and improve its financials.
  • Though GoTo’s top line has continued to expand, the company continues to burn cash and the losses have further widened during the recent quarters.
  • GoTo’s shares rose 11.7% during Friday’s trade, however, share price is still down by about 45%  from the company’s IPO price.

Nitro Software: KKR’s $2.00/Share Firm Offer

By David Blennerhassett

  • Adobe rival Nitro Software Ltd (NTO AU)  has announced KKR (via Alludo) has firmed its $2.00/share Offer, by way of a Scheme, in tandem with an off-market takeover.
  • Both the Scheme and takeover are subject to FIRB and MACs/prescribed occurrences. The takeover is subject to a 50.1% acceptance hurdle. The proposals have the unanimous support of Nitro’s board.
  • The Transaction Booklet is expected to be despatched to shareholders in early February 2023, with a Scheme Meeting expected to be held in March 2023.

A Pair Trade Between NCSoft & Netmarble Corp

By Douglas Kim

  • In this insight, we discuss a pair trade between NCSOFT Corp (036570 KS) (go long) and Netmarble Corporation (251270 KS) (go short).
  • NCSoft is currently trading at lower valuation multiples (in terms of EV/EBITDA and P/E) than Netmarble, which we believe is not justified.
  • One of the key risk factors of Netmarble is that it could be excluded from the MSCI Korea Index in 2023/2024.

Softbank Group – Earnings Flash – Q2 FY 2022-23 Results – Lucror Analytics

By Trung Nguyen

Softbank Group (SBG) has delivered acceptable Q2/22-23 results. Despite the large loss on investments, the company monetised an even greater amount of Alibaba shares to record a large quarterly net gain. As a result, the financial risk profile did not deteriorate. LTV was mostly stable q-o-q, improving since March 2022. Liquidity has strengthened, and now covers four years of planned bond redemptions.

The significant debt reduction and acceleration of share buybacks showed that SBG is trying to balance shareholders’ and creditors’ interests. In the past, SBG appeared more aligned towards shareholders’ interests, with frequent mentions of the share price’s discount to NAV, as well as large share purchases since 2016.

Taiwan Tech Weekly: Buffet Invests in TSMC, Hon Hai Issues Improving, China Chip Imports Slump

By Vincent Fernando, CFA

  • Berkshire Hathaway Inc Cl B (BRK/B US) disclosed that it has acquired about 60.1m shares in Taiwan Semiconductor (TSMC) – ADR (TSM US).  
  • Hon Hai is receiving local government support to recruit/return workers in order to ease its crisis there. Meanwhile, it will also quadruple its India-based iPhone manufacturing staff.
  • UMC’s ADR premium is 0% and could see a bounce given the surge in TSMC.

PayPal Inc: The PayPal Zettle Terminal & Other Recent Drivers

By Baptista Research

  • PayPal’s financial performance was impressive and the company managed to deliver an all-around beat.
  • This will make it simple for PayPal’s merchant community to utilize their iPhone as a mobile point of sale without using a dongle or other payment terminals.
  • In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

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Nov 15
0

Daily Brief Industrials: Recruit Holdings, Fanuc Corp, Growatt Technology, Jiangsu Expressway (H) and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Recruit 2Q: Outlook for HR Tech Business Becomes Challenging
  • Fanuc (6954) | This Time Is Different
  • Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts
  • Jiangsu Expressway (177 HK): Positive Updates from Management

Recruit 2Q: Outlook for HR Tech Business Becomes Challenging

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) reported 2QFY03/2023 earnings today. Revenue increased 25.3% YoY to JPY878.4bn (vs consensus JPY842.7bn) while EBIT decreased 8.2% YoY to JPY108.5bn (vs consensus JPY116.1bn).
  • HR Tech’s top line growth further slowed down to 40.2% YoY while adjusted EBITDA margin of the segment declined to 30.4% from 40.6% in the same period a year ago.
  • The company’s 2QFY03/2023 earnings were better than we expected, however, it shows that the earnings growth is slowing down with weakening of labour markets globally.

Fanuc (6954) | This Time Is Different

By Mark Chadwick

  • Machine Tool Orders in Japan decreased to 141 billion yen in October from 149 billion yen a year ago.
  • The 5.4% decline marks the start of the third downturn in Machine Tool Orders over the past decade. 
  • We analyse those downturns and believe that Fanuc’s stock price has probably hit bottom, but THIS TIME IS DIFFERENT

Growatt Technology Pre-IPO Peer Comparison – Performed Well on Many Fronts

By Ethan Aw

  • Growatt Technology (1833969D CH) is looking to raise about US$500m in its upcoming Hong Kong IPO. 
  • Growatt Technology is a global distributed energy solution provider, specializing in sustainable energy generation, storage and consumption, as well as energy digitalization. 
  • In our previous notes, we looked at the company’s past performance. In this note, we undertake a peer comparison.

Jiangsu Expressway (177 HK): Positive Updates from Management

By Osbert Tang, CFA

  • Jiangsu Expressway (H) (177 HK) has seen marginally weaker traffic in 4Q22 relative to 3Q22 due to sporadic COVID outbreaks but the magnitude is manageable. 
  • We welcome its indication that stable absolute DPS level will be maintained, with additional target to increase gradually. That means secured FY22 and FY23 yield of at least 8.3%.
  • Clean energy investment and exit of property business will improve earnings quality. Projected ROE of over 13% also provides good justification for upside to its 0.8x P/B. 

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Sign Up for Free

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  • ✓ Unlimited Research Summaries
  • ✓ Personalised Alerts
  • ✓ Custom Watchlists
  • ✓ Company Data and News
  • ✓ Events & Webinars
Sign Up for Free