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Smartkarma Daily Briefs

Health Care: Ryman Healthcare, WuXi AppTec Co. Ltd. and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Ryman Healthcare (RYM NZ): Strong Base Business Is Outshined by Regulatory Overhangs
  • WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention

Ryman Healthcare (RYM NZ): Strong Base Business Is Outshined by Regulatory Overhangs

By Tina Banerjee

  • Ryman Healthcare (RYM NZ) is expected to see pent-up demand, with the gradual re-opening of New Zealand. Long-term demand environment is expected to be positive, due to favorable macro tailwind.
  • However, the company is facing regulatory risk. One of its sites in Australia has ongoing litigation risk. Possibility of renewed COVID-19-related restrictions can not be overruled.
  • While Ryman has long-term growth engines, these overhangs may limit the near-term upside potential of Ryman shares.  

WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention

By Xinyao (Criss) Wang

  • The weak performance of WuXi AppTec’s investment business dragged down the overall net profit growth, which could get worse considering the macro uncertainties, leading to the change of valuation logic.
  • The gross profit margin showed a declining trend, and cost control in the context of inflation becomes urgent. Reduced cash balance, weaker short-term solvency and liquidity should also be noticed.
  • With majority revenue from overseas markets, external uncertainties (e.g. geopolitical conflict, complex Sino-US relationship, etc.) may be greater than expected. Investors may need to be ready for this.

Before it’s here, it’s on Smartkarma

Macro: Big Changes to Capital Gains Taxes on Korean Equities for Local Retail Investors Starting 2023 and more

By | Daily Briefs, Macro

In today’s briefing:

  • Big Changes to Capital Gains Taxes on Korean Equities for Local Retail Investors Starting 2023
  • Revisiting the US Dollar View and Its Implications for EM Currencies
  • CX Daily: Shanghai’s Rocky Road to Rebooting
  • CX Daily: Five Things to Know About China’s Overarching Financial Stability Law
  • India Macro Meter – Growth Holding Up; Sequential Momentum Improves

Big Changes to Capital Gains Taxes on Korean Equities for Local Retail Investors Starting 2023

By Douglas Kim

  • There are some big changes to the capital gains taxes for Korean retail investors of domestic stocks in 2023 which could accelerate selling of domestic stocks by the local investors.
  • The change in the way capital gains taxes are calculated starting 2023 for local investors will result in higher taxes overall for about 100k local investors.
  • The overall change in capital gains tax is negative on the Korean stock market and many investors will likely accelerate their selling of domestic stocks in 2H 2022. 

Revisiting the US Dollar View and Its Implications for EM Currencies

By Gautam Jain, PhD, CFA

  • As the US dollar approaches its highest level in a decade in line with my expectation, I reiterate my view of the dollar remaining strong in the near term.
  • The dollar spike coincides with the rise in US rates volatility, which makes sense as the market is trapped between Fed tightening and risk aversion arising from rising recession probability.
  • As the year progresses, I expect the dollar to weaken and the environment to turn supportive of EM currencies. Until then, I recommend relative-value trades and hedging with the euro.

CX Daily: Shanghai’s Rocky Road to Rebooting

By Caixin Global

  • Rebooting / Cover Story: Shanghai’s rocky road to rebooting.

  • Covid-19 / Beijing starts mass Covid testing as it imposes lockdowns.

  • Corruption / Graft probes ensnare college buddies who were top bankers.


CX Daily: Five Things to Know About China’s Overarching Financial Stability Law

By Caixin Global

  • Five Things to Know About China’s Overarching Financial Stability Law

  • Chinese citizens submitted 20% more requests for government information in 2021

  • China’s Covid outbreaks take bite out of local economic growth


India Macro Meter – Growth Holding Up; Sequential Momentum Improves

By Nirmal Bang

  • Early data for March’22 indicate that 67.74% indicators were in the positive territory on YoY basis, up from 59.4% in Feb’22.
  • Around 80.56% indicators (where 2-year CAGR can be calculated) were above the pre-pandemic level in March’22, up from 61.1% in Feb’22.
  • On a sequential basis, growth witnessed improvement, with 78.13% indicators in the positive territory in March’22, up from 53.13% in Feb’22.
    •  

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Before it’s here, it’s on Smartkarma

India: Kotak Mahindra Bank, Sea Ltd, Mindtree Ltd, Life Insurance Corp of India (LIC), Tata Communications, Aditya Birla Capital Ltd, Tatva Chintan Pharma Chem, Azure Power Global Ltd and more

By | Daily Briefs, India

In today’s briefing:

  • Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible
  • India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy
  • S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance (Final)
  • Life Insurance Corp of India (LIC) IPO: Lower Issue Size & Valuation; Index Inclusion Timeline
  • Life Insurance Corporation of India Pre-IPO – India’s Largest IPO Will Not Get Any Passive Support
  • ICICI Bank: Pulling Further into the Lead; Happy Trade-Offs Ahead
  • Tata Communications: Revenue Growth Disappoints Again
  • Aditya Birla Capital – Management Change: New CEO to Take Charge Come June
  • Tatva Chintan Pharma Chem – Strong Pipeline of High-Value New Products
  • Morning Views Asia: Azure Power Global Ltd

Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible

By Brian Freitas

  • Kotak Mahindra Bank (KMB IN) is not a part of the FTSE All-World Index since the foreign room was less 20% over the last couple of years.
  • Foreign room is 19.8% as of end March and small foreign selling is needed for Kotak Mahindra Bank to be added to the FTSE All-World Index at the September SAIR.
  • If added to the FTSE All-World Index, passive trackers will need to buy 38.2m shares (US$861m; 11.1 days ADV; 22 days delivery volume) of Kotak Mahindra Bank (KMB IN).

India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy

By Pranav Bhavsar


S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance (Final)

By Janaghan Jeyakumar, CFA

  • The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
  • This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
  • In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Semi-annual Rebalance.

Life Insurance Corp of India (LIC) IPO: Lower Issue Size & Valuation; Index Inclusion Timeline

By Brian Freitas


Life Insurance Corporation of India Pre-IPO – India’s Largest IPO Will Not Get Any Passive Support

By Sumeet Singh

  • Government of India (GoI) is looking to raise around US$2.7bn via selling a 3.5% stake in Life Insurance Corporation of India (LIC) in its upcoming India IPO. 
  • This is less than half of its initial plans in terms of fundraising target and comes at less than half of its initial valuation target.
  • In this note, we will talk about the likely final deal terms and the likelihood of fast entry in the various indices.

ICICI Bank: Pulling Further into the Lead; Happy Trade-Offs Ahead

By HDFC Securities

  • ICICI Bank: ICICI Bank (ICICIBC) delivered yet another strong quarter, with superior all-round balance sheet metrics (growth and asset quality), reflecting in +59% YoY growth in net profit
  • The bank continued to gain traction on both sides of the balance sheet, with average CASA clocking 45% and YoY loan growth at 17%
  • Net slippages were negative, resulting in negligible credit costs (adjusted for contingent provisions), as the stressed pool (restructured portfolio at 1%, BB & below portfolio at 1.3%) declined 40bps sequentially

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Tata Communications: Revenue Growth Disappoints Again

By ICICI Securities Limited

  • Tata Communications’ (TCom) Q4FY22 data business net revenue grew only 5% YoY (+0.7% QoQ) which is below expectations.
  • This should be partially weak from orderbook of Q3; while orderbook funnel has sequentially improved, management commentary does indicate gradual recovery in revenue growth.
  • TCom revenue growth faced headwinds from fewer feet on the street, delay in decision making and under-performance of usage-based services.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Aditya Birla Capital – Management Change: New CEO to Take Charge Come June

By ICICI Securities Limited

  • Countercyclical diversified conglomerate evolution – ABCL has, over the past decade under Mr. Srinivasan’s leadership, seeded, nurtured and evolved as a countercyclical diversified conglomerate.
  • Ms. Mulye too would focus on accelerating ABCL’s unique business proposition flowing from group synergies.
  • Outlook for NBFC/HFC business: For ABCL’s NBFC business, we believe strong focus in retail and SME (scaling it up to 65%)
  •  

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Tatva Chintan Pharma Chem – Strong Pipeline of High-Value New Products

By ICICI Securities Limited

  • Tatva Chintan’s Q4FY22 revenue declined 9.3% YoY and was 11% below our estimates on higher dip in SDA revenue.
  • However, gross margin expansion of 280bps QoQ, despite inferior revenue mix, was a positive surprise.
  • It anticipates SDA revival only in H2FY23, and has guided for flattish revenue for FY23.

Content is external broker report sourced from online content aggregator through publicly available sources and is displayed below for general informational purposes only. Refer full disclaimer below.


Morning Views Asia: Azure Power Global Ltd

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.


Before it’s here, it’s on Smartkarma

Equity Capital Markets: SK Shieldus and more

By | Daily Briefs, ECM

In today’s briefing:

  • SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales

SK Shieldus Controversies: Excessive Valuations & Suspicious Surge in Internal Sales

By Sanghyun Park

  • Suppose we grouped S1 and Taiwan Secom with the Physical/Integrated Security weighting and then applied the Cybersecurity weighing to Ahnlab and CyberOne. We would have 11.40x, substantially lower than 14.85x.
  • SK Shieldus’ sales were ₩1.55T, an increase of ₩0.22T (16.8%) from the previous year. But 65% of last year’s sales increase was derived from the internal deals with SK Group.
  • How the company and the bankers will respond to those mentioned above two controversial aspects will be the most crucial point in determining the success or failure of this IPO.

Before it’s here, it’s on Smartkarma

TMT: Razer Inc, AKM Industrial, Sea Ltd, Koei Tecmo Holdings, Mindtree Ltd, Chindata Group, Omron Corp, Amazon.com Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Razer Inc (1337 HK): Storm In A Tea Cup
  • Razer’s Scheme: And that Is a Pass
  • AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
  • India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy
  • Koei Tecmo – Potential For a Breakdown
  • S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance (Final)
  • Cloud Chronicles: Chindata Attracting Bytes
  • Omron – Better IAS Results Conceal Healthcare Segment Underperformance
  • Chindata: Plenty of Upside Left
  • Giverny Capital Asset Management Q1 2022 Letter

Razer Inc (1337 HK): Storm In A Tea Cup

By David Blennerhassett

  • Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.  
  • The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup. 
  • Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close. 

Razer’s Scheme: And that Is a Pass

By Arun George

  • Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
  • Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme. 
  • At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.

AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment

By David Blennerhassett

  • Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
  • The despatch of the Scheme Document has been delayed until the 10 June. 
  • Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.

India Channel Insight #33 | Shopee, Flipkart, Meesho, Swiggy

By Pranav Bhavsar


Koei Tecmo – Potential For a Breakdown

By Mio Kato

  • Koei Tecmo’s earnings yesterday were on the strong side with 4Q OP beating by 28.7% despite a 1.79% miss at the top line. 
  • Thus, the typical pattern of heavy expensing of development costs in 4Q was missing and combined with some one offs could make hurdles for next year high. 
  • With the stock struggling to gain positive momentum and few clear positive catalysts on the horizon we remain negative.

S&P BSE Indices (SENSEX Family): Quiddity Leaderboard for June 2022 Rebalance (Final)

By Janaghan Jeyakumar, CFA

  • The S&P BSE family of indices represents the performance of stocks listed on the Bombay Stock Exchange (BSE) across various sizes, themes, industries, and strategies.
  • This series will mainly focus on the following indices of the S&P BSE family: S&P BSE 500, S&P BSE 200, S&P BSE 100, and S&P BSE SENSEX.
  • In this insight, we take a look at the leading candidates who could become Adds/Deletes during the June 2022 Semi-annual Rebalance.

Cloud Chronicles: Chindata Attracting Bytes

By David Blennerhassett

  • According to Bloomberg, Bain Capital-backed Chindata Group (CD US) is being scoped out by industry players.
  • GDS Holdings (ADR) (GDS US) is rumoured to be interested in merging with Chindata. PE outfit PAG and EQT AB (EQT SS)-backed EdgeConneX are also, reportedly, in the mix.
  • Chindata’s shares popped but are still 64% below its IPO price. This rumour follows data center provider 21Vianet (VNET US)‘s recent proposal from Hina Group and Shanghai’s Industrial Bank. 

Omron – Better IAS Results Conceal Healthcare Segment Underperformance

By Mio Kato

  • Omron’s 4Q results continued the trend of weakness in the FA sector and guidance was tepid unlike Yaskawa. 
  • In particular, the Healthcare Segment’s margins appear to be normalising and poses a downside risk along with typical cyclicality. 
  • At 14x EV/OP on guidance vs. a 10x multiple that we would consider fair, there is downside risk here.

Chindata: Plenty of Upside Left

By Shifara Samsudeen, ACMA, CGMA

  • Chindata Group (CD US) is a leading carrier-neutral hyperscale data center solution provider in Asia Pacific emerging markets with a focus on China, India and Southeast Asia.
  • Bloomberg and several other news media outlets reported that the company has attracted takeover interest from other firms in the industry including rival GDS and PAG.
  • CD’s shares are down more than 65% since its IPO primarily driven by the ongoing regulatory crackdown on tech firms in China alongside US-China trade tensions.

Giverny Capital Asset Management Q1 2022 Letter

By Fund Newsletters

  • Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
  • The best companies tend to weather crises better than average ones, Poppe says.

Before it’s here, it’s on Smartkarma

Event-Driven: Air New Zealand, Hitachi Transport System, Kotak Mahindra Bank, Razer Inc, Hana Tour Service, AKM Industrial, LG Energy Solution, Kakao Pay, Beijing Enterprises Urban Resources and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers
  • Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
  • Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible
  • Razer’s Scheme: And that Is a Pass
  • Razer Inc (1337 HK): Storm In A Tea Cup
  • KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes
  • AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
  • LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today
  • Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid
  • Beijing Enterprises Urban Resources (3718 HK): Potential Offer

NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers

By Travis Lundy

  • The NZ Air Rights Trade is nearly done. Last day of trading is today. 
  • The Rights were super cheap. They ran as NZ AIR ran a bit. 
  • Now it is the time to trade NZ AIR Shares vs Peers.

Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language

By Travis Lundy

  • Hitachi has been in the process of selling Hitachi Transport System (9086 JP). An article in the Nikkei Thursday last suggested a deal was imminent (both companies report 28 April). 
  • Bloomberg carried an article this morning with more numbers and implied arithmetic. Then they revised the language in the article. 
  • There is STILL room for different interpretations of likely deal price if one tries to parse all the info provided and match it with history. But we may be there.

Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible

By Brian Freitas

  • Kotak Mahindra Bank (KMB IN) is not a part of the FTSE All-World Index since the foreign room was less 20% over the last couple of years.
  • Foreign room is 19.8% as of end March and small foreign selling is needed for Kotak Mahindra Bank to be added to the FTSE All-World Index at the September SAIR.
  • If added to the FTSE All-World Index, passive trackers will need to buy 38.2m shares (US$861m; 11.1 days ADV; 22 days delivery volume) of Kotak Mahindra Bank (KMB IN).

Razer’s Scheme: And that Is a Pass

By Arun George

  • Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
  • Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme. 
  • At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.

Razer Inc (1337 HK): Storm In A Tea Cup

By David Blennerhassett

  • Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.  
  • The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup. 
  • Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close. 


AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment

By David Blennerhassett

  • Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
  • The despatch of the Scheme Document has been delayed until the 10 June. 
  • Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.

LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today

By Sanghyun Park

  • Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
  • LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
  • These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.

Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid

By Sumeet Singh

  • Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
  • The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

Beijing Enterprises Urban Resources (3718 HK): Potential Offer

By David Blennerhassett


Before it’s here, it’s on Smartkarma

China: AKM Industrial, Beijing Enterprises Urban Resources, Chindata Group, Galaxy Entertainment Group, WuXi AppTec Co. Ltd., Steel and more

By | China, Daily Briefs

In today’s briefing:

  • AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment
  • Beijing Enterprises Urban Resources (3718 HK): Potential Offer
  • Cloud Chronicles: Chindata Attracting Bytes
  • Chindata: Plenty of Upside Left
  • Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?
  • Galaxy Entertainment:  Change in Sentiment Among Greater China Managers
  • WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention
  • China’s Steel Industry Is In for Slower Growth, Ministry Official Says

AKM (1639 HK): Pre-Cons Fulfilled; Possible Early August Payment

By David Blennerhassett

  • Flexible printed board player AKM Industrial (1639 HK) has announced the pre-conditions attached to the Scheme have now been fulfilled.
  • The despatch of the Scheme Document has been delayed until the 10 June. 
  • Trading at a gross/annualised spread of 2.5/9.6%, including the FY21 final dividend, and payment in early August.

Beijing Enterprises Urban Resources (3718 HK): Potential Offer

By David Blennerhassett


Cloud Chronicles: Chindata Attracting Bytes

By David Blennerhassett

  • According to Bloomberg, Bain Capital-backed Chindata Group (CD US) is being scoped out by industry players.
  • GDS Holdings (ADR) (GDS US) is rumoured to be interested in merging with Chindata. PE outfit PAG and EQT AB (EQT SS)-backed EdgeConneX are also, reportedly, in the mix.
  • Chindata’s shares popped but are still 64% below its IPO price. This rumour follows data center provider 21Vianet (VNET US)‘s recent proposal from Hina Group and Shanghai’s Industrial Bank. 

Chindata: Plenty of Upside Left

By Shifara Samsudeen, ACMA, CGMA

  • Chindata Group (CD US) is a leading carrier-neutral hyperscale data center solution provider in Asia Pacific emerging markets with a focus on China, India and Southeast Asia.
  • Bloomberg and several other news media outlets reported that the company has attracted takeover interest from other firms in the industry including rival GDS and PAG.
  • CD’s shares are down more than 65% since its IPO primarily driven by the ongoing regulatory crackdown on tech firms in China alongside US-China trade tensions.

Beijing Enterprises Urban Resources’ Trading Halt: Is an MGO on the Cards?

By Arun George

  • Beijing Enterprises Urban Resources (3718 HK)/BEUR and Beijing Enterprises Water Group (371 HK)/BEWG entered trading halts relating to the Code on Takeovers and Mergers and “a proposed notifiable transaction”, respectively. 
  • BEWG, the largest BEUR shareholder, has steadily increased its stake from 26.25% at BEUR’s IPO on 15 January 2020 to 29.45% as of 31 March 2022.
  • Our best guess is that the trading halts relate to a potential mandatory general offer associated with BEWG acquiring 30%+ of the voting rights. 

Galaxy Entertainment:  Change in Sentiment Among Greater China Managers

By Steven Holden

  • Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
  • Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
  • Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.

WuXi AppTec Co Ltd (2359.HK/603259.CH) 2022Q1 – Some Points Worth the Attention

By Xinyao (Criss) Wang

  • The weak performance of WuXi AppTec’s investment business dragged down the overall net profit growth, which could get worse considering the macro uncertainties, leading to the change of valuation logic.
  • The gross profit margin showed a declining trend, and cost control in the context of inflation becomes urgent. Reduced cash balance, weaker short-term solvency and liquidity should also be noticed.
  • With majority revenue from overseas markets, external uncertainties (e.g. geopolitical conflict, complex Sino-US relationship, etc.) may be greater than expected. Investors may need to be ready for this.

China’s Steel Industry Is In for Slower Growth, Ministry Official Says

By Caixin Global

  • China’s steel market has entered a period of slower growth due to weakened supply and demand from domestic Covid-19 flare-ups and conflicts overseas, a ministry official said.
  • As China confronts its worst Covid outbreak since April 2020, the steel inventories of major producers hit a two-year high of 18.5 million tons earlier this month, as pandemic controls curbed demand and disrupted transportation.
  • On the supply side, China’s crude steel output fell 10.5% year-on-year in the first quarter of 2022, while the added value of China’s ferrous metal smelting and processing industry slid 2.4% year-on-year, according to figures from the National Bureau of Statistics (NBS).

Before it’s here, it’s on Smartkarma

Consumer: Hana Tour Service, S&P 500, LG Energy Solution, Kakao Pay, Z Holdings, Workman Co Ltd, Siam Wellness Group, Amazon.com Inc, Galaxy Entertainment Group, MercadoLibre and more

By | Consumer, Daily Briefs

In today’s briefing:

  • KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes
  • Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
  • LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today
  • Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid
  • Z Holdings (Buy) – FY22 Should Be Brighter
  • Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
  • SPA: Keep Eye on Tourism Recovery Ahead of Soft 1Q22
  • Giverny Capital Asset Management Q1 2022 Letter
  • Galaxy Entertainment:  Change in Sentiment Among Greater China Managers
  • Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom


Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support

By Joe Jasper

  • We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
  • There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
  • We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place

LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today

By Sanghyun Park

  • Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
  • LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
  • These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.

Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid

By Sumeet Singh

  • Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
  • The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
  • In this note, we will talk about the lock-up dynamics and updates since our last note.

Z Holdings (Buy) – FY22 Should Be Brighter

By Kirk Boodry

  • The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
  • It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
  • We are posting updated company forecasts/estimates including a separate table for PayPay

Workman to Disrupt Footwear Market with ¥60 Billion Sales Target

By Michael Causton

  • Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
  • It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
  • The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.

SPA: Keep Eye on Tourism Recovery Ahead of Soft 1Q22

By Pi Securities PCL, Thailand

  • Maintain BUY rating with a new TP of Bt9.60 (revise up by 16%) as we roll forward valuation base to 30xPE’23E which is -1SD of 5-years trading mean. 
  • We expect 1Q22E operation to be the bottom quarter at a net loss of Bt55m,ahead of earnings modestly gearing up in 2Q22 and onwards, on the back of tourism recovery.
  • In our view, recovery trend to continue into 2H22, based on full reopening country for foreign tourists post COVID crisis, with upside risk from new branches and products. 

Giverny Capital Asset Management Q1 2022 Letter

By Fund Newsletters

  • Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
  • The best companies tend to weather crises better than average ones, Poppe says.

Galaxy Entertainment:  Change in Sentiment Among Greater China Managers

By Steven Holden

  • Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
  • Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
  • Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.

Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom

By Eric Fernandez, CFA

  • This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
  • The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
  • Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom

Before it’s here, it’s on Smartkarma

United States: Razer Inc, S&P 500, Amazon.com Inc, Teekay Corp, Dollar Index, MercadoLibre, NFT, Greif Inc and more

By | Daily Briefs, United States

In today’s briefing:

  • Razer’s Scheme: And that Is a Pass
  • Razer Inc (1337 HK): Storm In A Tea Cup
  • Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
  • Giverny Capital Asset Management Q1 2022 Letter
  • Teekay Corp: A near Net-Net, Special Situation
  • Revisiting the US Dollar View and Its Implications for EM Currencies
  • Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom
  • Moonbirds. NFTs as a Funding Mechanism
  • Greif B Shares – Boring and Reliable

Razer’s Scheme: And that Is a Pass

By Arun George

  • Razer Inc (1337 HK)’s scheme was approved at today’s court meeting. The value test passed with 94.74% of the total disinterested shareholders voting in favour of the scheme.
  • Despite our reservations about the headcount test, the scheme comfortably passed the headcount test with 465 for and just 16 against the scheme. 
  • At the last close and for the 20 May payment date, the gross and annualised spread to the offer is 3.7% and 56.1%, respectively.

Razer Inc (1337 HK): Storm In A Tea Cup

By David Blennerhassett

  • Razer Inc (1337 HK)‘s Scheme was comfortably voted through by shareholders.  
  • The overarching risk to the transaction, that it may fail the headcount test, largely turned out to be a storm in a tea cup. 
  • Tomorrow is the last day of trading with payment under the Scheme on or before the 20 May. Index sell flows come at the close. 

Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support

By Joe Jasper

  • We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
  • There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
  • We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place

Giverny Capital Asset Management Q1 2022 Letter

By Fund Newsletters

  • Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
  • The best companies tend to weather crises better than average ones, Poppe says.

Teekay Corp: A near Net-Net, Special Situation

By Superfluous Value

  • I am quite wary of the shipping industry, due to an almost flawless tendency towards value destruction, but have been following Teekay Corp (NYSE:TK) for several months after the recent sale of its LNG division has left it with enough net cash to cover its market cap.
  • The group was founded by Danish shipping broker Torben Karlshoej in 1973 and has headquarters across the globe today.
  • The margin of safety seems generous today at a $333m market cap. 

Revisiting the US Dollar View and Its Implications for EM Currencies

By Gautam Jain, PhD, CFA

  • As the US dollar approaches its highest level in a decade in line with my expectation, I reiterate my view of the dollar remaining strong in the near term.
  • The dollar spike coincides with the rise in US rates volatility, which makes sense as the market is trapped between Fed tightening and risk aversion arising from rising recession probability.
  • As the year progresses, I expect the dollar to weaken and the environment to turn supportive of EM currencies. Until then, I recommend relative-value trades and hedging with the euro.

Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom

By Eric Fernandez, CFA

  • This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
  • The key judgement is whether a slowdown is temporary or the beginning of a trend.  These shorts tend to have high valuations and betas.  Multiple compression accelerates the stock’s decline.
  • Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom

Moonbirds. NFTs as a Funding Mechanism

By Carbono Insights

  • The latest sensation in the NFT space is some automatically generated pixel art animals that people are buying for astonishing amounts of money to use as their profile pictures.
  • Yet here we are again. This new collection is Moonbirds: a set of 10.000 (yes, they also used the 10k number) cute little creatures, and it has broken records with over $281M in sales.
  • The reason being, probably, that they have masterfully recapped under one collection some of the best practices in the NFT space, and then added their own flavor.

Greif B Shares – Boring and Reliable

By Turtles all the way down

  • They make steel/plastic/fibre/paper based industrial packaging. 10-15% ROIC including intangibles, and nearly 20% ROIC on tangible assets.
  • Earnings this year will only be a tad bit higher than in 2019 (before synergies of their early 2019 Caraustar acquisition were realized), so it is not a Covid winner.
  • Yet it trades at a historically low PE multiple

Before it’s here, it’s on Smartkarma

Most Read: Japan Post Insurance, Lake Resources Nl, Air New Zealand, Hitachi Transport System, Kotak Mahindra Bank and more

By | Daily Briefs, Most Read

In today’s briefing:

  • TOPIX April Rebalance – Two Days To Go
  • S&P/ASX Index Rebalance Preview: Potential Changes in May & June
  • NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers
  • Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language
  • Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible

TOPIX April Rebalance – Two Days To Go

By Travis Lundy

  • There are two days to go until the TOPIX April-end rebalance. 
  • On an average-weighted, sector-neutral basis, the “announcement to event” trade is -0.3% from 7 April to 25 April. The rest of the buy vs sell basket is doing worse.
  • There should be ¥740bn-ish to buy and sell (each) on Wednesday at the close. If you have trades to execute in Japan, the attached spreadsheet shows where there is opportunity.

S&P/ASX Index Rebalance Preview: Potential Changes in May & June

By Brian Freitas


NZ AIR Rights Almost Done – Discounted Vs Regional “Shut-In” Peers

By Travis Lundy

  • The NZ Air Rights Trade is nearly done. Last day of trading is today. 
  • The Rights were super cheap. They ran as NZ AIR ran a bit. 
  • Now it is the time to trade NZ AIR Shares vs Peers.

Hitachi Transport (9086 JP) – Deciphering Takeover Price by Newspaper Article Language

By Travis Lundy

  • Hitachi has been in the process of selling Hitachi Transport System (9086 JP). An article in the Nikkei Thursday last suggested a deal was imminent (both companies report 28 April). 
  • Bloomberg carried an article this morning with more numbers and implied arithmetic. Then they revised the language in the article. 
  • There is STILL room for different interpretations of likely deal price if one tries to parse all the info provided and match it with history. But we may be there.

Kotak Mahindra Bank (KMB IN): Foreign Room Increases; FTSE Inclusion in Sep Possible

By Brian Freitas

  • Kotak Mahindra Bank (KMB IN) is not a part of the FTSE All-World Index since the foreign room was less 20% over the last couple of years.
  • Foreign room is 19.8% as of end March and small foreign selling is needed for Kotak Mahindra Bank to be added to the FTSE All-World Index at the September SAIR.
  • If added to the FTSE All-World Index, passive trackers will need to buy 38.2m shares (US$861m; 11.1 days ADV; 22 days delivery volume) of Kotak Mahindra Bank (KMB IN).

Before it’s here, it’s on Smartkarma