Smartkarma Daily Briefs

Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors

By Aki Matsumoto

While 80% of Japanese institutional investors place a high value on corporate respect for human rights, only 10% of companies have conducted human rights due diligence.
Japanese institutional investors should make it “visible” to their beneficiaries how they require companies to respect human rights in their engagement and how they encourage effective responses.
To ensure that the guidelines don’t end up as mere figure of speech, the government should make concrete policies to ensure that respect for human rights takes root in society.

Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago

There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago.
That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.

Deep Dive: Komatsu (6301, KMTUY)

By Value Punks

Industrials have been quite resilient this year. Their stocks prices have run up as sector earnings fared better-than-expected, and as investors have looked for safety under the cover of ‘real economy’ stocks during a year in which tech is down big.
You may think that the train has left the station already with blue chip industrials like Caterpillar and Deere.
They’re certainly trading near all time highs! But hold on. There is one train which hasn’t left yet, and that is Komatsu.

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Nov 07

Daily Brief Energy/Materials: Sk Chemicals Co Ltd/New, Kunlun Energy, ABM Investama and more

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

In today’s briefing:

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning
Kunlun Energy (135 HK): Kunlun Gas 3Q22 Masked by Non-Operating Factors
Morning Views Asia: ABM Investama, NagaCorp Ltd, Times China, Yuexiu Property

MSCI Korea November SAIR: Potential Changes, Impact, Short Interest & Pre-Positioning

By Brian Freitas

We see 1 potential inclusion and 12 potential deletions for the MSCI Korea Index at the November SAIR. The final changes will depend on what day MSCI uses.
Nearly all the stocks have over 4 days of ADV to trade from passive trackers. There have been big moves on short interest and excess volume on some stocks.
The announcement will be made Friday morning pre-market open and there could be some big moves in the stocks this week.

Kunlun Energy (135 HK): Kunlun Gas 3Q22 Masked by Non-Operating Factors

By Osbert Tang, CFA

3Q22 result of Kunlun Gas is weaker than expected, but this is due to lower other income and surge in non-operating expenses. Without them, profit growth is actually more encouraging.
While there is gross margin squeeze on higher input costs, Kunlun managed to reduce operating costs by 14.1%, successfully mitigated the negative impact.
Kunlun Gas contributed 62.5% of 1H22 net profit of Kunlun Energy (135 HK). Its solid 36.2% 9M22 earnings growth still points to healthy underlying momentum for its parent.

Morning Views Asia: ABM Investama, NagaCorp Ltd, Times China, Yuexiu Property

By Charles Macgregor

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

ABM Investama
NagaCorp Ltd
Times China
Yuexiu Property

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Nov 07

Daily Brief Industrials: Mitsui & Co Ltd, Toshiba Corp, Komatsu Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling
Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago
Deep Dive: Komatsu (6301, KMTUY)

Mitsui & Co (8031) Buyback – Big Profit, Big Div, Big Buyback, Some Index Selling

Mitsui & Co Ltd (8031 JP) on 1 November reported its results for H1 2022. H1 Revenue +37.1%yoy, OP+27.2%yoy, NP+33.2%yoy to ¥539bn. Full-year NP forecast +22.5% to ¥980bn.
Mitsui raised its dividend forecast (previously scheduled to rise from ¥105/share to ¥120/share) to ¥130/share and announced a ¥140bn buyback, adding to the ¥100bn announced in May completed in September.
The first ¥58.6bn was done in a ToSTNeT-3 buyback. Now there is another ¥79.4bn to go. There’s also a fair bit of index selling the next 6mos.

Toshiba (6502) – Funding Deadline Risk Was Known 6+ Weeks Ago

There are several bits of news in the past few weeks indicating financing commitments might not meet the 7 Nov deadline. Principal among them the JIC/JIP split many weeks ago.
That suggested the 30 Sep and subsequent deadlines would be delayed. And it appears we now have the reason for it, and that is another cause of financing commitment delay.
This development suggests activists have another quiver in their arrow should privatisation not succeed. Toshiba has cheapened in the meantime.

Deep Dive: Komatsu (6301, KMTUY)

By Value Punks

Industrials have been quite resilient this year. Their stocks prices have run up as sector earnings fared better-than-expected, and as investors have looked for safety under the cover of ‘real economy’ stocks during a year in which tech is down big.
You may think that the train has left the station already with blue chip industrials like Caterpillar and Deere.
They’re certainly trading near all time highs! But hold on. There is one train which hasn’t left yet, and that is Komatsu.

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

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

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

Nov 07

Daily Brief TMT/Internet: Blibli, Tokyo Stock Exchange Tokyo Price Index Topix, Tencent, Datadog Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Blibli IPO: Trading Debut
Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors
China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom
Grounding Myself in this Market Cycle

Blibli IPO: Trading Debut

Blibli (1437710D IJ) priced its IPO at IDR450 per share to raise net proceeds of US$508 million. The shares will start trading on 8 November.
We have previously discussed the IPO in Blibli IPO: The Bull Case, Blibli IPO: The Bear Case, Blibli Vs Tokopedia Vs Bukalapak Vs Lazada Vs Shopee, Blibli IPO: Valuation Insights.
Despite peer multiple derating, the IPO price remains unattractive compared to global and Asian-focused e-commerce peers.

Huge Gap in Awareness of Human Rights Between Japanese Companies and Investors

By Aki Matsumoto

While 80% of Japanese institutional investors place a high value on corporate respect for human rights, only 10% of companies have conducted human rights due diligence.
Japanese institutional investors should make it “visible” to their beneficiaries how they require companies to respect human rights in their engagement and how they encourage effective responses.
To ensure that the guidelines don’t end up as mere figure of speech, the government should make concrete policies to ensure that respect for human rights takes root in society.

China Internet Weekly (7Nov2022): Tencent, Alibaba, Kuaishou, JD.com, Autohome, China Unicom

By Ming Lu

Tencent and Alibaba are rumored to be acquired by state-owned companies.
Tencent charges for originally free function and JD.com re-organized to cut cost.
Autohome’s revenue stopped declining in 3Q22 and it is time to accumulate.

Grounding Myself in this Market Cycle

By BluSuit

At the moment of writing this, it’s 2:30 pm on a Sunday and I am in a ground blind. Every year at about this time of the year I take a few days off of work to unplug, have a few drinks with other family members and run off to the middle of the woods.
I get some of my best thinking done out here while I wait for a White Tail Buck to come by. It’s blissful.
Regardless of where I am or what I am doing, I am and always have been committed to maintaining my transparency, my thoughts and my investing story/process to all of you.

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Nov 07

Daily Brief Financials: Metro Pacific Investments Co, Perpetual Ltd, Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

MSCI SEA EM Nov SAIR: High Impact Deletions Expected
Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

MSCI SEA EM Nov SAIR: High Impact Deletions Expected

By Brian Freitas

There should be quite a few deletions for South East Asia Emerging Markets. The number of potential inclusions is smaller and have a smaller probability of being added.
While the passive flow on the potential deletions is not massive, the impact in terms of days of ADV to trade is very high in most cases.
There has been a steady increase in cumulative excess volume on a few of the potential deletions and there will be unwinding against the passive flow.

Weekly Deals Digest (06 Nov) – Perpetual, Pendal, Nitro, ReadyTech, VNET, Singapore Medical, Blibli

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Blibli (1437710D IJ) priced at IDR450, Giant Biogene Holding (2367 HK) solid trading debut.
Event-Driven developments – Nitro Software Ltd (NTO AU), Perpetual Ltd (PPT AU), ReadyTech Holdings Ltd (RDY AU), China VAST, Singapore Medical (SMG SP), 21Vianet Group (VNET US).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

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Nov 07

Daily Brief Health Care: Akeso Biopharma Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Akeso Biopharma (9926.HK) – The Recent Business Progress, the Valuation and the Challenges

Akeso Biopharma (9926.HK) – The Recent Business Progress, the Valuation and the Challenges

By Xinyao (Criss) Wang

Akeso has made some business progress. We analyzed the commercialization outlook/concerns on its late stage products. Akeso still stays at the level of biotech, a long way from becoming biopharma.
The core challenge is whether bispecific antibody can bring better marginal clinical benefits than the combination of two mab, and why patients are willing to pay higher price for them?
The sales forecast of Akeso’s late stage products could be RMB2 billion to RMB3 billion. The market value by the end of Nov 4 was just reasonable but not undervalued.

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Nov 07

Daily Brief Consumer: I-Tail, Yashili International Holdings, Astra International, Tube Investments of India, Swedish Match AB, DraftKings Inc and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

I-Tail Corporation IPO: The Bull Case
Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro
Astra International (ASII IJ) – Driving into Indonesia’s Growth Areas
MSCI India November SAIR: Potential Changes & Higher Foreign Holding
Elliot Tenders Its Stake
King No More

I-Tail Corporation IPO: The Bull Case

I-Tail (ITC TB), Thai Union Group (TU TB)’s pet care division, has started pre-marketing an up to US$600 million SET IPO, according to press reports.
I-Tail is one of the largest original equipment manufacturers (OEMs) for wet cat & dog food in Asia, according to Frost & Sullivan.
The key elements of the bull case rest on strong top-line growth, market share gains, ambitious growth plans and the highest margin profile among peers.

Merger Arb Mondays (07 Nov) – Yashili, Fengxiang, Kingston, Pendal, Perpetual, ReadyTech, Nitro

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Alliance Aviation Services (AQZ AU), 21Vianet Group (VNET US), 111 Inc (YI US), Pendal Group (PDL AU), Genex Power Ltd (GNX AU), O2Micro International (OIIM US).
Lowest spreads – Tyro Payments (TYR AU), Nitro Software Ltd (NTO AU), Tassal (TGR AU), OZ Minerals Ltd (OZL AU), China Vast Industrial Urban Development (6166 HK), PTB.

Astra International (ASII IJ) – Driving into Indonesia’s Growth Areas

By Angus Mackintosh

Astra International (ASII IJ)‘s recent 9M2022 numbers confirmed its position as a well-rounded way to play Indonesia’s economic recovery through autos and commodities through its controlling stake in United Tractors.
The company has continued to deploy its war chest of funds from the Bank Permata sale, investing in commercial vehicle leasing, hydro-power, and digital banking in 3Q2022 alone.
Astra International (ASII IJ trades on 9.0x FY2023 PER and 8.5x FY2024E PER versus its 5-year average forward PER of 14x, making it attractive at current levels.

MSCI India November SAIR: Potential Changes & Higher Foreign Holding

By Brian Freitas

Post the end of the review period, we see 7 potential adds and 2 potential deletes for the MSCI India Index at the November SAIR.
Inclusion in the index will require passive trackers to buy 6-21 days of ADV on the stocks. That increases to 16-45 days of delivery volume.
Cumulative excess volume indicates pre-positioning on most potential adds. Foreign Portfolio Investors (FPI) have increased their holding on all potential adds over the July-September quarter.

Elliot Tenders Its Stake

By Jesus Rodriguez Aguilar

4 November was the deadline to tender. PMI threatened to walk away if it didn’t reach 90%. Some funds that opposed the deal trimmed their stakes, likely bought by arbs.
The FT has reported that Elliot (10.5% stake) has tendered and that by 4 November over 80% acceptances were recorded. PMI is very likely to reach now over 90% acceptances.
Results will be announced on 7 November, with settlement on 11 November. The squeeze-out procedure is likely be initialed as soon as possible after settlement. Gross spread is 0.87%.

King No More

By subSPAC

Fantasy Sportbook Operator DraftKings saw its shares drop by 28% at the close on Friday, recording the worst in its trading history even as its management and CEO remained upbeat about the company’s future.
What was surprising about the steep decline was the fact that the company beat analyst expectations both on the revenue and EPS front in its most recent quarter while also raising its full-year guidance.
The market remains skeptical about the company’s business model and its decision to prioritize growth over profitability, a stark comparison to its peers who have cut costs in recent months.

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Nov 07

Daily Brief Quantitative Analysis: Hong Kong Connect Flows (Nov 4th): Tencent and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Hong Kong Connect Flows (Nov 4th): Tencent, Meituan, Wuxi Biologics, Li Ning
TWSE Short Interest Weekly (Nov 4th): Hon Hai, Evergreen Marine, Wan Hai Lines
A-H Premium Weekly (Nov 4th): First Tractor, Maanshan Iron
Northbound Flows (Nov 4th): Moutai, Yangtze Power, Yili, East Money, Wintech

Hong Kong Connect Flows (Nov 4th): Tencent, Meituan, Wuxi Biologics, Li Ning

We analyze the weekly Hong Kong Connect flows with our data engine for holding position as of November 4th.
The top stocks by inflows and outflows were tabulated for all market, HSCEI, mid cap and s/mid cap groups.
We highlight inflows into Tencent, Meituan, Wuxi Biologics, Li Ning.

TWSE Short Interest Weekly (Nov 4th): Hon Hai, Evergreen Marine, Wan Hai Lines

We analyzed the changes in short interest of TWSE Stocks as of Nov 4th which has an aggregated short interest worth USD12.1bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
We highlight short interest changes in Hon Hai, Evergreen Marine, Wan Hai Lines.

A-H Premium Weekly (Nov 4th): First Tractor, Maanshan Iron

We analyse the changes of A-H premium on 142 stocks over the last week. The average A-H premium was 130.7% as of Nov 4th.
The average A-H premium changed by -4.4ppt weeok on week, led by health care, financials, utilities and offset by consumer staples, real estate, consumer discretionary.
We highlight weekly changes in A-H premium for First Tractor, Maanshan Iron, Datang Intl, Cansino, Jushi, Fudan Microelectronics.

Northbound Flows (Nov 4th): Moutai, Yangtze Power, Yili, East Money, Wintech