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Smartkarma Daily Briefs

Oct 19
0

Daily Brief Singapore: Singapore Medical and more

By | Daily Briefs, Singapore

In today’s briefing:

  • Singapore Medical’s VGO: IFA Says It Is Not Fair but Reasonable

Singapore Medical’s VGO: IFA Says It Is Not Fair but Reasonable

By Arun George

  • The IFA has declared the Singapore Medical (SMG SP) VGO (S$0.37 cash or one new share in the offeror) from management (chairman, CEO, exec director) is “not fair but reasonable.” 
  • The offer is light, and hitting the 90% minimum acceptance condition will be challenging. There is a remote chance of a bump as the offer has not been declared final.
  • Irrevocables remain at 51.67% of outstanding shares. The current gross spread of 1.4% is not an attractive risk/reward profile. Take profits and head for the exit.

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Oct 19
0

Daily Brief Industrials: Toshiba Corp, Recruit Holdings, Bobst Group SA, Berli Jucker, China Energy Engineering and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News
  • Recruit Buyback – A Temporary Support to Falling Share Price
  • Bobst’s Minorities Takeout: Additional Acceptance Period
  • Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name
  • Energy China (3996 HK): Positive Developments in All Fronts

Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News

By Travis Lundy

  • A week after JIP gets preferred status and we had rumoured bid prices, we now have an article saying JIC/Bain is still in it, and a new article today.
  • Today’s “new” article says JIP’s bid price is what the first leak suggested, which is below ¥6,000/share. Other articles suggest bidders are finding that securing financing is tough. 
  • Investors should look at process and understand the difference between this one and most others. It matters. Some news is not news, other than telling you the dance has started.

Recruit Buyback – A Temporary Support to Falling Share Price

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) announced a buyback yesterday for a maximum of 42m (2.55% of total shares outstanding) shares for an aggregate of JPY150bn from the market.
  • Recruit’s shares closed at JPY4,257 per share at the end of yesterday’s trading, and shares have moved up almost 5% during today’s trade following the buyback announcement.
  • This is Recruit’s second buyback in 2022 where some of its shareholders reduced their stakes during the previous buyback (tender offer agreements) in January this year.

Bobst’s Minorities Takeout: Additional Acceptance Period

By Jesus Rodriguez Aguilar

  • JBF now controls 63.66% of the share capital of Bobst. Tendered shares represent just c.10.3%. The additional acceptance period runs until 21 October.
  • The CHF 78/share offer represents 6.6x EV/Fwd EBITDA vs. 7.5x for Swiss industrial machinery peers. Unsurprisingly, the shares have been trading slightly above terms since the (opportunistic) offer announcement. 
  • If 3.01% of shares are tendered during the reopened period, JBF could potentially delist the company. Although this could be challenged in courts, buying above the offer price seems risky.

Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) between now and the December 2022 Rebalance.
  • There is an ongoing market consultation with significant implications for constituent selection and there is also a potential intra-review change due to the DTAC-TRUE merger.
  • Based on the latest available data, there could three or four index changes during the December 2022 Rebalance depending on the outcome of the DTAC-TRUE merger.

Energy China (3996 HK): Positive Developments in All Fronts

By Osbert Tang, CFA

  • China Energy Engineering (3996 HK) witnessed a good acceleration in quarterly new contracts in this year. We estimate current backlog equals to 6.4x its FY21 revenue.
  • It is well geared towards China’s new energy development, as reflected by a 108.3% YoY surge in new energy contracts. Its pumped storage new contract value leaped 144x in 1H22.
  • The spin-off of Gezhouba Explosive in the A-share market is progressing well with approval from shareholders in Sep. The stock’s 4.1x PER and 0.33x P/B look undemanding.

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Oct 19
0

Daily Brief TMT/Internet: Tyro Payments, Blibli, HYBE, Softbank Group, Viavi Solutions, CloudFlare , Arlo Technologies Inc and more

By | Daily Briefs, TMT/Internet

In today’s briefing:

  • Tyro Payments In Talks With Westpac
  • PT Global Digital Trade (BliBli) Pre-IPO – The Positives – Wide Offering, Strong COVID Bounce Back
  • Netmarble Debt Risk Victim: HYBE or NCsoft or Both?
  • Softbank Group – The Most Important Number in Q2 Results May Be ARM Royalty Revenue
  • Blibli IPO: The Bear Case
  • Blibli IPO – Indonesia E-Commerce Is Struggling, Blibli Even More So
  • Tyro Confirms Westpac as One of the Interested Suitors
  • Viavi Solutions Inc.: The Jackson Labs Acquisition & Other Drivers
  • Cloudflare Inc: Launch of CAPTCHA Substitute & Other Developments
  • ARLO: Disconnected to Ongoing Growth

Tyro Payments In Talks With Westpac

By David Blennerhassett

  • Back on the 8 September, payment provider Tyro Payments (TYR AU) rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme. 
  • Tyro has now announced it has received approaches from several parties, including Westpac (WBC AU). “None of these approaches are sufficiently definite … to warrant further disclosure at this time“.
  • Shares are currently trading at A$1.59/share. Tyro recently raised its FY23 EBITDA guidance to A$28mn-34mn, up from A$23mn-29mn. 

PT Global Digital Trade (BliBli) Pre-IPO – The Positives – Wide Offering, Strong COVID Bounce Back

By Sumeet Singh

  • PT Global Digital Trade (1437710D IJ)  (BliBli) aims to raise up to US$530m in its Indonesian IPO.
  • BliBli provides e-commerce services across Indonesia to both retail consumers and institutions
  • In this note, we’ll talk about the positive aspects of the deal.

Netmarble Debt Risk Victim: HYBE or NCsoft or Both?

By Sanghyun Park

  • Netmarble did a one-year rollover for the stock loan used for the SpinX acquisition. The maturity is again one year, and the principal amount is ₩1.5T.
  • The HYBE stake is newly included as collateral at an estimated LTV ratio of 50% because the value of NCsoft’s stake further declined, and the LTV ratio was subsequently lowered.
  • Applying the 140% loss cut ratio to HYBE and NCsoft will lead to a margin call when each stock declines 30% from the current price.

Softbank Group – The Most Important Number in Q2 Results May Be ARM Royalty Revenue

By Kirk Boodry

  • We’ve been pessimistic on prospects for ARM and recent news flow and share price performance hasn’t helped but a decent report from TSMC eases some of our concerns
  • Softbank needs high teens royalty revenue growth for ARM and TSMC as a bellwether (+30% for Q3 and Q4 guidance) is better than AMD or Nvidia
  • We remain more conservative on valuation ($37bn) than Softbank assuming high single-digit growth and c. 43% EBITDA margins

Blibli IPO: The Bear Case

By Arun George

  • Blibli (1437710D IJ), a leading Indonesian e-commerce player, has launched an IDR8.2 trillion (US$530 million) Indonesian IPO. Bookbuilding is from 17 to 24 October.
  • In Blibli IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.  
  • The key elements of the bear case rest on weak sector sentiment, an unclear path to profitability, and credible long-term funding to support the high cash burn.  

Blibli IPO – Indonesia E-Commerce Is Struggling, Blibli Even More So

By Oshadhi Kumarasiri

  • Blibli (1437710D IJ), one of Indonesia’s leading e-commerce platforms is looking to raise around $470-530m via an IPO on Indonesia Stock Exchange.
  • Looking at Shopee’s struggles in the past year and Bukalapak’s rapid fall following the IPO, we think investors are unlikely to be interested in the Blibli IPO.
  • This could mean that Blibli’s days are numbered as it is resting all hopes on the IPO to fund its short-term loan repayment obligations.

Tyro Confirms Westpac as One of the Interested Suitors

By Arun George

  • Tyro Payments (TYR AU) confirmed that it has “received approaches from several parties expressing interest in a potential change of control transaction, including Westpac Banking (WBC AU).”
  • Tyro previously rejected a A$1.27 offer from the Potentia consortium. Grok’s get-out clause with Potentia sets the floor price of a competing bid at A$1.52 per share.
  • The last close of A$1.59 is higher than the floor price. Triangulating the value of a rival bid across several data points suggests a competing offer of around A$2.

Viavi Solutions Inc.: The Jackson Labs Acquisition & Other Drivers

By Baptista Research

  • Viavi had a strong performance in the final quarter of its fiscal year 2022 and the company delivered an all-around beat.
  • For fiscal Q4 2022, the SE business’s revenue was constant from year to year.
  • Strong NE bookings during the fiscal fourth quarter led to a seasonally stronger Q1 backlog and demand visibility.

Cloudflare Inc: Launch of CAPTCHA Substitute & Other Developments

By Baptista Research

  • Despite the heightened economic unpredictability, Cloudflare had a good quarter and managed to deliver an all-around beat.
  • The company generated $234 million in sales in Q2, up 54% from the same period last year.
  • They now have 1,749 customers that pay them more than $100,000 annually after recently adding 212 additional large customers.

ARLO: Disconnected to Ongoing Growth

By Hamed Khorsand

  • ARLO has the help of a product purchase agreement to smooth out lumpiness in consumer spending in the current macroenvironment
  • While ARLO is targeting a higher income consumer with products that are priced higher than competition, there is still a risk that could have played out in September.
  • Number of paid subscribers should continue to rise in the third quarter with possibility it could be materially higher than our forecast

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Oct 19
0

Daily Brief Industrials: Toshiba Corp, Recruit Holdings, Bobst Group SA, Berli Jucker, China Energy Engineering and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News
  • Recruit Buyback – A Temporary Support to Falling Share Price
  • Bobst’s Minorities Takeout: Additional Acceptance Period
  • Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name
  • Energy China (3996 HK): Positive Developments in All Fronts

Toshiba (6502) – There Is Actual News, and There Are Datapoints Which Masquerade as News

By Travis Lundy

  • A week after JIP gets preferred status and we had rumoured bid prices, we now have an article saying JIC/Bain is still in it, and a new article today.
  • Today’s “new” article says JIP’s bid price is what the first leak suggested, which is below ¥6,000/share. Other articles suggest bidders are finding that securing financing is tough. 
  • Investors should look at process and understand the difference between this one and most others. It matters. Some news is not news, other than telling you the dance has started.

Recruit Buyback – A Temporary Support to Falling Share Price

By Shifara Samsudeen, ACMA, CGMA

  • Recruit Holdings (6098 JP) announced a buyback yesterday for a maximum of 42m (2.55% of total shares outstanding) shares for an aggregate of JPY150bn from the market.
  • Recruit’s shares closed at JPY4,257 per share at the end of yesterday’s trading, and shares have moved up almost 5% during today’s trade following the buyback announcement.
  • This is Recruit’s second buyback in 2022 where some of its shareholders reduced their stakes during the previous buyback (tender offer agreements) in January this year.

Bobst’s Minorities Takeout: Additional Acceptance Period

By Jesus Rodriguez Aguilar

  • JBF now controls 63.66% of the share capital of Bobst. Tendered shares represent just c.10.3%. The additional acceptance period runs until 21 October.
  • The CHF 78/share offer represents 6.6x EV/Fwd EBITDA vs. 7.5x for Swiss industrial machinery peers. Unsurprisingly, the shares have been trading slightly above terms since the (opportunistic) offer announcement. 
  • If 3.01% of shares are tendered during the reopened period, JBF could potentially delist the company. Although this could be challenged in courts, buying above the offer price seems risky.

Thailand SET50 Quiddity Leaderboard Dec 22: BJC Is the Most Interesting Name

By Janaghan Jeyakumar, CFA

  • In this insight, we take a look at the potential index changes for the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) between now and the December 2022 Rebalance.
  • There is an ongoing market consultation with significant implications for constituent selection and there is also a potential intra-review change due to the DTAC-TRUE merger.
  • Based on the latest available data, there could three or four index changes during the December 2022 Rebalance depending on the outcome of the DTAC-TRUE merger.

Energy China (3996 HK): Positive Developments in All Fronts

By Osbert Tang, CFA

  • China Energy Engineering (3996 HK) witnessed a good acceleration in quarterly new contracts in this year. We estimate current backlog equals to 6.4x its FY21 revenue.
  • It is well geared towards China’s new energy development, as reflected by a 108.3% YoY surge in new energy contracts. Its pumped storage new contract value leaped 144x in 1H22.
  • The spin-off of Gezhouba Explosive in the A-share market is progressing well with approval from shareholders in Sep. The stock’s 4.1x PER and 0.33x P/B look undemanding.

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Oct 19
0

Daily Brief Energy/Materials: Pidilite Industries, Oil India Ltd and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • NIFTY Indices: HDFC/HDFCB Merger Driven Market Consultation
  • Oil India (OINL IN): Value Trap, Avoid

NIFTY Indices: HDFC/HDFCB Merger Driven Market Consultation

By Brian Freitas

Oil India (OINL IN): Value Trap, Avoid

By Gauri Anand

  • Low valuations (3x Earnings, 8% cash yield) and an under supplied Oil market, nice value concoction  
  • However, large part of value hinges on growth beyond FY25E, execution challenges and regulatory intervention may necessitate additional debt to fund ongoing capex
  • Thus deleveraging unlikely, narrowing TV for traditional fuels – risks both earnings and valuations 

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Oct 19
0

Daily Brief Consumer: Perfect Medical Health, LG Electronics, Tokyo Stock Exchange Tokyo Price Index Topix, General Mills, McCormick & Company and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Perfect Medical: Correction Provides An Opportunity For Entry
  • A Pair Trade Between LG Corp & LG Electronics
  • The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point
  • General Mills Inc: Major Drivers
  • McCormick & Co.: Major Drivers

Perfect Medical: Correction Provides An Opportunity For Entry

By Sameer Taneja

  • Post the massive correction in the China market, Perfect Medical Health (1830 HK) trades at 9.6x/6.9x PE FY23e/24e with a 10.4%/14.6% dividend yield assuming a 100% payout ratio.
  • From interactions with the management, HK’s operations are in good health, with Q2 revenues normalizing to precovid levels. China has yet to recover as intermittent lockdowns plague its operations. 
  • With cash and financial investments over 550 mn HKD ( 16% of market capitalization ), the company has the opportunity to make accretive acquisitions to grow its business.

A Pair Trade Between LG Corp & LG Electronics

By Douglas Kim

  • In this insight, we discuss a pair trade between LG Corp (003550 KS) (go long) and LG Electronics (066570 KS) (go short).
  • LG Electronics is likely to have continued weakening results, due to rising interest rates on the household disposable income in major countries.
  • Our base case valuation analysis of LG Corp suggests an implied price of 93,905 won per share, representing 19% upside from current levels.

The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point

By Aki Matsumoto

  • It is useful for statutory documents disclosing a company’s medium-to-long-term management strategy to include information on “human capital,” which plays a role in sustainable growth.
  • If the mandatory timing of the information to be disclosed in annual securities report is accelerated, there is risk that the information will be similar to that of other companies.
  • The government should not stick to 2023 for the mandatory inclusion in annual securities reports, but should give companies time to encourage them to deepen what they include.

General Mills Inc: Major Drivers

By Baptista Research

  • General Mills delivered a mixed result for the previous quarter, failing to meet market expectations on the revenue front but delivering an earnings beat.
  • The HMM cost savings, along with gains from pricing mix, offset inflation, deleverage, and the other types of operating costs benefitted General Mills’ bottom-line and helped deliver an earnings beat.
  • The good news was that General Mills’ service levels increased slightly.

McCormick & Co.: Major Drivers

By Baptista Research

  • McCormick had a disappointing quarter with a 3% top-line growth from the same quarter last year, just on par with expectations.
  • The management remains focused on managing inventory levels and removing inefficiencies across the supply chain.
  • High meat prices had an influence on grilling-related items compared to last year, although grilling is remains popular compared to pre=pandemic levels.

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Oct 19
0

Daily Brief Financials: China Vast Industrial Urban Development, Russell 2000 Index, Agung Podomoro Land and more

By | Daily Briefs, Financials

In today’s briefing:

  • China VAST (6166 HK): Expect November Scheme Meeting As Pre-Cons Satisfied
  • Bear Market Rally Remains in Play; Russell 2000 (IWM) Short-Term Breakout; Buys in Banks & Insurance
  • Morning Views Asia: Agung Podomoro Land

China VAST (6166 HK): Expect November Scheme Meeting As Pre-Cons Satisfied

By David Blennerhassett

Bear Market Rally Remains in Play; Russell 2000 (IWM) Short-Term Breakout; Buys in Banks & Insurance

By Joe Jasper

  • Despite a few tumultuous trading days, the S&P 500 remains above its 200-week MA (3590-3600) and the Russell 2000 (IWM) remains above $163 — both important support levels moving forward.
  • We continue to see potential for a bear market rally (~+10% from the lows) as long as these support levels hold.
  • Bear market rallies would be confirmed by bullish reversals of the 2-month downtrends, or above 3810 on the SPX and above $174 on the IWM, and the latter happened today.

Morning Views Asia: Agung Podomoro Land

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.

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Oct 19
0

Daily Brief ESG: The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point

The Timing of the Mandatory Disclosure of Human Capital Information Should Not Be a Sticking Point

By Aki Matsumoto

  • It is useful for statutory documents disclosing a company’s medium-to-long-term management strategy to include information on “human capital,” which plays a role in sustainable growth.
  • If the mandatory timing of the information to be disclosed in annual securities report is accelerated, there is risk that the information will be similar to that of other companies.
  • The government should not stick to 2023 for the mandatory inclusion in annual securities reports, but should give companies time to encourage them to deepen what they include.

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Oct 19
0

Daily Brief Technical Analysis: Bear Market Rally Remains in Play; Russell 2000 (IWM) Short-Term Breakout; Buys in Banks & Insurance and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • Bear Market Rally Remains in Play; Russell 2000 (IWM) Short-Term Breakout; Buys in Banks & Insurance

Bear Market Rally Remains in Play; Russell 2000 (IWM) Short-Term Breakout; Buys in Banks & Insurance

By Joe Jasper

  • Despite a few tumultuous trading days, the S&P 500 remains above its 200-week MA (3590-3600) and the Russell 2000 (IWM) remains above $163 — both important support levels moving forward.
  • We continue to see potential for a bear market rally (~+10% from the lows) as long as these support levels hold.
  • Bear market rallies would be confirmed by bullish reversals of the 2-month downtrends, or above 3810 on the SPX and above $174 on the IWM, and the latter happened today.

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Oct 19
0

Daily Brief Quantitative Analysis: Is the Carry Trade a Diversifying Strategy? and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Is the Carry Trade a Diversifying Strategy?

Is the Carry Trade a Diversifying Strategy?

By Nicolas Rabener

  • The carry trade was positive across most asset classes in YTD 2022
  • And the correlations to the S&P 500 were low historically
  • However, the carry trade crashed when stocks crashed, ie provided limited diversification benefits

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