Smartkarma Daily Briefs

Activist Murakami-san and entities spent 4+ years going from 2% to 30% of Central Glass (4044 JP). In that period, they helped management change governance.
There were buybacks, asset sales, cross-holding sale decisions, and a new Mid-Term Management Plan. The stock went up, so now it is time to get out.
True to Murakami-san style/form, it is an own-share Tender Offer by the TargetCo which means most other active holders can’t really participate. It’s high-quality greenmailgagement.

LG Energy Flow Crunch with Additional Passives: K200/MSCI Up-Weight & LIT Inclusion

By Sanghyun Park

LG Energy’s locked shares approach 96-97% of SO. Now, we will see an additional passive flow equivalent to another 1% of SO: KOSPI 200/MSCI Standard up-weights and LIT inclusion.
Each passive impact is also substantial. The MSCI up-weight alone will cause an impact equivalent to 2.44x ADTV. It would be 2.20x for the KOSPI 200 and 1.03x for LIT.
For the KOSPI 200 December review, the event-driven flow will likely focus on up-weights, including LG Energy. For LIT, we should consider an aggressive LONG/SHORT with LG Chem.

Chubu Steel Plate (5461) – Unusual TOPIX Inclusion Possibility

Today, Nagoya Premier-listed Chubu Steel Plate (5461 JP) announced that it had applied today to be listed in Tokyo.
It is one of very few Japan names not listed in Tokyo. A TSE listing examination will be conducted, and there is a possibility it moves to TSE Prime.
There are 6 key segment transfer and listing requirements to gain a listing in TSE Prime. Chubu Steel Plate is really close.

S&P/ASX Quiddity Leaderboard Dec 22: Couple of High-Impact Intra-Review Changes Possible

By Janaghan Jeyakumar, CFA

In this insight, we take a look at the potential index changes for S&P ASX 200, 100, 50, and 20 in the run up to the December 2022 Rebalance.
Tassal (TGR AU) and Nearmap Ltd (NEA AU) could get deleted from ASX200 before the December Rebalance, triggering high-impact intra-review additions. There should be two changes in the Review itself.
Pilbara Minerals (PLS AU) is close to becoming an ASX 50 ADD and Lendlease Group (LLC AU) is close to becoming an ASX 50 DEL in the December 2022 review.

Kito (6409) – KKR/Crosby Takeover Launches – High Premium in Weak Year, But Still Light to Value

KKR-Owned Crosby got SAMR approval to buy Kito Corporation (6409 JP) several days ago apparently and has launched its deal. It will be a 21-day tender. Very quick.
It was a strong premium, but still a light price, at announcement. And that was when USD/yen was lower. Since then, earnings and forecasts are way up. But price unchanged.
What looked like a likely candidate for bump agitation has seen none (that I am aware of) so this is pretty straightforward.

CALB IPO: Valuation Insights

By Arun George

CALB (CALBLZ CH) has launched its HKEx listing at HK$38.00-51.00 per share to raise up to US$1.7 billion. Books are open from 23 to 28 September.
We previously discussed the IPO in CALB IPO: The Bull Case, CALB IPO: The Bear Case, CALB IPO: Updates Support the Bull Case, CALB IPO: What’s It Worth?.
CALB should be, at least, valued in line with the median peer multiples. CALB is attractively valued at the IPO price range. We would participate.

Porsche IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Porsche is EV of 83.6 billion EUR, implied market cap of 88.9 billion EUR, and target base case price target of 98 EUR per share.
This represents 23% higher than the mid-point of the IPO price range. Given the relative solid upside, we have a Positive View of the Porsche IPO.
The market related risk is clearly the biggest risk for the Porsche IPO right now in our view.

Sands China (1928 HK): Positives And Negatives

By Shifara Samsudeen, ACMA, CGMA

Macau gaming companies gained this week as Hong Kong is expected to ease Covid restrictions, with Macau expected to follow suit.
Last week, the six incumbent Macau gaming operators submitted tenders for the gaming concessions, together with last-minute interloper, the Genting Group.
Sands China (1928 HK) has borrowed heavily and also leads other Macau gaming plays in dividends paid out to shareholders. This may not be lost on Macau officials.

Socionext Pre-IPO Valuation – Thoughts on Valuation

By Clarence Chu

Socionext (6526 JP) is looking to raise up to US$285m in its Japan IPO.
As stated in our earlier notes, Socionext has been growing its number of design wins per year historically, which should aid to its near/medium term sales and profitability.
In our previous note, we undertook a peer comparison. In this note, we will talk about valuations.

Leapmotor IPO: Forecasts and Valuation

Leapmotor (2007699D HK) is a leading smart EV company in China. The company plans to raise net proceeds of US$904m through its HKEx IPO.
In our previous insight Leapmotor IPO: Stuck in the Middle , we concluded that the company will have to compromise on margins to grow its top line.
Our valuation analysis suggests that Leapmotor’s shares are not even attractive at the lower-end of the IPO price range and the premium vs local peers is hard to justify.

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Sep 22

Daily Brief Australia: Link Administration and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

But Wait … Even More Penalties In The Link Admin/D&D Situation

But Wait … Even More Penalties In The Link Admin/D&D Situation

Earlier this week, Link Administration (LNK AU) rejected Dye & Durham’s revised proposal to factor in any redress payments from the UK’s FCA in regards to the Woodford Fund.
FCA has now assessed an appropriate penalty of £50mn in addition to the previously announced restitution payment of £306.1mn.
The FCA is all but telegraphing it will default LFSL unless Link steps in. Link says it has made no such commitment. D&D should walk.

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Sep 22

Daily Brief Industrials: Central Glass, SKYX Platforms, Air China Ltd (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Central Glass (4044 JP) – Huge Buyback Tender, Meant For Murakami-San’s Exit, Not Yours
SKYX Platforms Inc. – Investment Thesis
Air China (753 HK): Can It Sustain the Outperformance?

Central Glass (4044 JP) – Huge Buyback Tender, Meant For Murakami-San’s Exit, Not Yours

Activist Murakami-san and entities spent 4+ years going from 2% to 30% of Central Glass (4044 JP). In that period, they helped management change governance.
There were buybacks, asset sales, cross-holding sale decisions, and a new Mid-Term Management Plan. The stock went up, so now it is time to get out.
True to Murakami-san style/form, it is an own-share Tender Offer by the TargetCo which means most other active holders can’t really participate. It’s high-quality greenmailgagement.

SKYX Platforms Inc. – Investment Thesis

This is our first report on SKYX Platforms and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
Another important fact about SKYX Platforms is that the company’s management comprises several former GE and NEC employees which is a big positive.
We believe that there is a good chance the company’s offerings may become universally accepted in the years to come.

Air China (753 HK): Can It Sustain the Outperformance?

By Osbert Tang, CFA

Despite record losses in 2Q22, share price of Air China Ltd (H) (753 HK) has rallied 14% YTD, outperformed the 23.9% decline in HSCEI and its Chinese peers.
Air China’s stub value has returned to pre-pandemic level, but is primarily driven by the A-share. Cathay Pacific (293 HK) recovery is an important catalyst for narrowing H-A share discount.
News flow over the next 12 months, mostly related to further relaxation of quarantine requirements, will be positive. The surge in demand should support elevated passenger yield.

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Sep 22

Daily Brief Energy/Materials: Chubu Steel Plate and more

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

In today’s briefing:

Chubu Steel Plate (5461) – Unusual TOPIX Inclusion Possibility

Chubu Steel Plate (5461) – Unusual TOPIX Inclusion Possibility

Today, Nagoya Premier-listed Chubu Steel Plate (5461 JP) announced that it had applied today to be listed in Tokyo.
It is one of very few Japan names not listed in Tokyo. A TSE listing examination will be conducted, and there is a possibility it moves to TSE Prime.
There are 6 key segment transfer and listing requirements to gain a listing in TSE Prime. Chubu Steel Plate is really close.

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Sep 22

Daily Brief Health Care: Angelalign Technology, Jupiter Wellness and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued
Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22
Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over

Angelalign Technology (6699 HK): 1H22 Profit Drops As Challenging Operating Environment Continued

By Tina Banerjee

Angelalign Technology (6699 HK) has reported muted H1 2022 results, which were negatively impacted by the resurgence of the COVID-19 pandemic in China and the corresponding restrictions.
Revenue from core business of clear aligner treatment grew just 3% y/y. However, lower ASP and higher cost of sales, pulled down the gross profit margin by 930bps to 60.2%.
Thus far in H2 2022, China has imposed lockdowns in multiple major cities. With the uncertainty over the duration of COVID, no immediate respite is seen in Angelalign’s business.

Jupiter Wellness – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 09/22

This is our first report on Jupiter Wellness and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
With all of these developments, a stock priced at 63 cents appears to be highly affordable and supports our positive outlook.
Overall, we believe that Jupiter has phenomenal growth prospects and is an excellent investment prospect.

Angelalign Technology (6699.HK) 22H1 – Still “Bubble” in Valuation; The Era of High Margin Is Over

By Xinyao (Criss) Wang

Due to declining performance, lack of core competitiveness and increasing competition, the market has to re-examine the growth potential and outlook of Angelalign.The era of high margin is fading away.
Angelalign’s low-price strategy is easily hit by similar products with lower prices. Once its price loses advantage, it will directly lead to a rapid and substantial decline in overall performance.
Due to its worse-than-expected 2022H1 performance and economic downturn, we lowered our 2022 forecast of Angelalign. Angelalign shouldn’t be valued that much higher than Align Technology, expecting more downside ahead.

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Sep 22

Daily Brief Thailand: Total Access Communication and more

By Smartkarma Daily Briefs | Daily Briefs, Thailand

In today’s briefing:

True/DTAC Pop As Council Of State Rules NBTC Has No Teeth
DTAC/True Merger: Council of State’s Decree Paves the Way for Completion

True/DTAC Pop As Council Of State Rules NBTC Has No Teeth

According to media reports, Thailand’s Council of State has ruled the NBTC has no authority to approve or reject the True Corp (TRUE TB) / Total Access Communication (DTAC TB) merger.
The NBTC can prescribe measures to govern the deal but these appear almost of no consequence.
The ruling is a positive development for the merger getting over the line. Both stocks enjoyed strong gains today.

DTAC/True Merger: Council of State’s Decree Paves the Way for Completion

By Arun George

The press reports that the Council of State has stated that the regulator, NBTC, can only prescribe measures to govern the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The Council of State decree paves the way for the merger to complete and the launch of the VTOs. The NBTC remedial measures will likely focus on consumer protection measures.
The current share price ratio is 9.150x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 4.4% and 1.8%, respectively.

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Sep 22

Daily Brief TMT/Internet: Link Administration, Twitter Inc, Total Access Communication, Softbank Group, Xperi, Teradyne Inc, Five9 Inc, F5 Networks Inc and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

But Wait … Even More Penalties In The Link Admin/D&D Situation
Twitter V. Elon V Twitter: Elon Finally Hits A Vein
True/DTAC Pop As Council Of State Rules NBTC Has No Teeth
Softbank Group – A Surplus of VC Cash Could Re-Energize Vision Fund’s Investment Pace
DTAC/True Merger: Council of State’s Decree Paves the Way for Completion
XPER: Unlocking Value Thru Separation
Teradyne Inc: Initiation of Coverage – Business Strategy & Key Drivers
Five9 Inc: Initiation of Coverage – Partnership With Kyndryl & Other Drivers
F5 Inc: Initiation of Coverage – Business Strategy & Key Drivers

But Wait … Even More Penalties In The Link Admin/D&D Situation

Earlier this week, Link Administration (LNK AU) rejected Dye & Durham’s revised proposal to factor in any redress payments from the UK’s FCA in regards to the Woodford Fund.
FCA has now assessed an appropriate penalty of £50mn in addition to the previously announced restitution payment of £306.1mn.
The FCA is all but telegraphing it will default LFSL unless Link steps in. Link says it has made no such commitment. D&D should walk.

Twitter V. Elon V Twitter: Elon Finally Hits A Vein

By Vicki Bryan

Bondholders on alert as a whistleblower complaint gives Elon’s case the substance he lacked as he tries break his agreement to buy Twitter
But this doesn’t win Elon’s case—he has to prove deliberate fraud, which is far from clear
It’s much easier for Twitter to prove Elon’s biggest complaint is buyers’ remorse—which isn’t sufficient grounds to terminate the deal.

True/DTAC Pop As Council Of State Rules NBTC Has No Teeth

According to media reports, Thailand’s Council of State has ruled the NBTC has no authority to approve or reject the True Corp (TRUE TB) / Total Access Communication (DTAC TB) merger.
The NBTC can prescribe measures to govern the deal but these appear almost of no consequence.
The ruling is a positive development for the merger getting over the line. Both stocks enjoyed strong gains today.

Softbank Group – A Surplus of VC Cash Could Re-Energize Vision Fund’s Investment Pace

By Kirk Boodry

News reports indicate venture capital firms are sitting in cash reserves 2x normal levels and that needs to be put to work
We expected a narrowing of public v private valuation levels was needed for Softbank to pivot from recent defensive but competition for deals may be more relevant
Access to investment capital is easier after settling of Alibaba-linked derivative contracts and Softbank has showed as recently as 2020 asset sales that it can lever up quickly

DTAC/True Merger: Council of State’s Decree Paves the Way for Completion

By Arun George

The press reports that the Council of State has stated that the regulator, NBTC, can only prescribe measures to govern the Total Access Communication (DTAC TB)/True Corp Pcl (TRUE TB) merger.
The Council of State decree paves the way for the merger to complete and the launch of the VTOs. The NBTC remedial measures will likely focus on consumer protection measures.
The current share price ratio is 9.150x vs the swap ratio of 10.221x. At last close, DTAC and True’s gross spread to the VTO price is 4.4% and 1.8%, respectively.

XPER: Unlocking Value Thru Separation

By Hamed Khorsand

XPER held an investor day to highlight the two businesses XPER would separate into on October 1, 2022.
The expectation is the two companies operating separately would be able to grow faster without worries over customer relationship to the other segment.
Xperi has been the underpinning of our investment thesis due to the investments the Company has made in different products and customer engagements.

Teradyne Inc: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on Teradyne, a leading global supplier of automation equipment for the testing of semiconductors, wireless products, data storage and complex electronics systems.
In comparison to the previous year, industrial automation, wireless test, and system test revenues grew for Teradyne.
Teradyne is lowering its shipment plan to align with reduced mobility-related test demand, continued supply shortages, and slower industrial automation growth.

Five9 Inc: Initiation of Coverage – Partnership With Kyndryl & Other Drivers

This is our first report on Five9, a leading provider of cloud software for contact centers.
The company’s core Virtual Contact Center (VCC) cloud platform has been a major revenue driver for them.
Among key updates, Five9, along with Kyndryl, announced a partnership to offer its customers a cloud-enabled, personalized contact center experience.

F5 Inc: Initiation of Coverage – Business Strategy & Key Drivers

This is our first report on F5 Inc, a well-known provider of multi-cloud security and application delivery that helps businesses connect to their customers.
In the quarter, F5 saw a good demand as customers secured, scaled, and added their applications as demand for security fuel sales.
Service providers have driven recent demand as secure 4G cores and customers scale and start to move 5G cores in production.

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Sep 22

Daily Brief Industrials: Central Glass, SKYX Platforms, Air China Ltd (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Central Glass (4044 JP) – Huge Buyback Tender, Meant For Murakami-San’s Exit, Not Yours
SKYX Platforms Inc. – Investment Thesis
Air China (753 HK): Can It Sustain the Outperformance?

Central Glass (4044 JP) – Huge Buyback Tender, Meant For Murakami-San’s Exit, Not Yours

Activist Murakami-san and entities spent 4+ years going from 2% to 30% of Central Glass (4044 JP). In that period, they helped management change governance.
There were buybacks, asset sales, cross-holding sale decisions, and a new Mid-Term Management Plan. The stock went up, so now it is time to get out.
True to Murakami-san style/form, it is an own-share Tender Offer by the TargetCo which means most other active holders can’t really participate. It’s high-quality greenmailgagement.

SKYX Platforms Inc. – Investment Thesis

This is our first report on SKYX Platforms and we look to provide a detailed account of the various drivers that will be responsible for the company’s growth in the coming years.
Another important fact about SKYX Platforms is that the company’s management comprises several former GE and NEC employees which is a big positive.
We believe that there is a good chance the company’s offerings may become universally accepted in the years to come.

Air China (753 HK): Can It Sustain the Outperformance?

By Osbert Tang, CFA

Despite record losses in 2Q22, share price of Air China Ltd (H) (753 HK) has rallied 14% YTD, outperformed the 23.9% decline in HSCEI and its Chinese peers.
Air China’s stub value has returned to pre-pandemic level, but is primarily driven by the A-share. Cathay Pacific (293 HK) recovery is an important catalyst for narrowing H-A share discount.
News flow over the next 12 months, mostly related to further relaxation of quarantine requirements, will be positive. The surge in demand should support elevated passenger yield.

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Sep 22

Daily Brief Consumer: Mahindra & Mahindra, Shandong Fengxiang, Sula Vineyards, Countryside Partnerships, Leapmotor, Warner Music Group, Bed Bath & Beyond, EbixCash, Bruush Oral Care, Ace Hardware Indonesia and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Mahindra & Mahindra (MM IN) | The Bookings Fallacy
Fengxiang (9977 HK): MGO Expected To Follow Judicial Auction
Sula Vineyards Pre-IPO – Big Fish in a Small Pond
Vistry/Countryside Partnerships: Agreed Offer
Leapmotor IPO Valuation Analysis
Long Idea: Warner Music’s New CEO Could Prove a Catalyst
ActivistTalk: Is Bed Bath & Beyond Heading For Bankruptcy? Altman Versus The Bond Market
EbixCash Pre-IPO – The Negatives – Growing Too Fast for Its Previous Auditors, and Short Sellers
Bruush Oral Care – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22
Ace Hardware Indonesia (ACES IJ) – The Laggard Household Recovery Story

Mahindra & Mahindra (MM IN) | The Bookings Fallacy

By Pranav Bhavsar

We challenge Mahindra & Mahindra (MM IN) ‘s narrative of strong demand and booking pipeline (140k+ open bookings, excl Scorpio N as of Q1 FY23)
There is a possibility of a monthly booking rate of 10.3k for XUV700 and 5K per month for Thar being overstated.
With increasing competition (MSIL + Toyota), cancellations will increase leading to even lower waiting periods and a reduced booking pipeline.

Fengxiang (9977 HK): MGO Expected To Follow Judicial Auction

The controlling shareholders of Shandong Fengxiang Co Ltd-H (9977 HK), a company engaged in chicken breeding, slaughtering, and processing, are unable to meet their debts.
As such, these shareholders who hold 70.92% of shares out in Fengxiang, via domestic shares, have been forced into a judicial auction, the completion of which may trigger an MGO.
Taking pointers from Dongzheng Automotive Finance (2718 HK)‘s recent auction means we back out a possible payment around late December – on the assumption an unconditional MGO is triggered.

Sula Vineyards Pre-IPO – Big Fish in a Small Pond

By Ethan Aw

Sula Vineyards (1332009D IN) is looking to raise about US$175m in its upcoming India IPO.
Sula Vineyards (SV) distributes wines under a bouquet of brands. In addition to its flagship brand “Sula,” popular brands include “RASA,” “Dindori”, “The source,” “Satori”, “Madera” & “Dia”.
The firm has managed to stay profitable with margin expansion despite COVID-19. However, wine appears to remain a very small part of the Indian alcohol consumption market.

Vistry/Countryside Partnerships: Agreed Offer

By Jesus Rodriguez Aguilar

FTSE-250 constituent Vistry Group (VTY LN) has agreed to buy rival Countryside Partnerships (CSP LN) in a recommended cash&stock deal that values embattled Countryside at c.£1.25 billion (lower than previous offers).
Consideration is 1 CSP LN=0.255 VTY LN+60p, 9.1% premium, 7.0x EV/Fwd EBITDA and 1.3x P/Fwd BV, which seems cheap. The sector is pricing in many potential bad news.
Gross spread is +2.1%. It has only been negative during three days since the deal announcement. I would wait for the spread to become negative before taking a position.

Leapmotor IPO Valuation Analysis

By Douglas Kim

Our base valuation of Leapmotor HKD 34.9 per share, which is 27% lower than the low end of the IPO price range of HKD 48 per share.
Given the steep downside of our target price (6-12 month period) relative to the IPO price range, we are Negative on the Leapmotor IPO.
Leapmotor is selling 130.82 million shares in the IPO at a price range of HKD 48 to HKD 62 per share, scaling back the size of the IPO considerably.

Long Idea: Warner Music’s New CEO Could Prove a Catalyst

By Aaron Gabin

Warner Music hired YouTube’s Chief Business Officer Robert Kyncl as its new CEO, an impressive executive well positioned to expand music monetization to newer frontiers.
The stock has roundtripped its $25 June 2020 IPO price after doubling.
There is a compelling “comping the comp” catalyst path for 2023, as streaming revenues reaccelerate, and Kyncl renegotiates static licensing deals with Peloton, Tiktok, etc.

ActivistTalk: Is Bed Bath & Beyond Heading For Bankruptcy? Altman Versus The Bond Market

By Robert Sassoon

Bed Bath & Beyond’s fundamentals have continued deteriorate resulting in the departure of the man brought in to turn the struggling home goods retailer less than 3 years ago
Amid an unfriendly operating environment and short term liquidity issues, the specter of bankruptcy for this one-time iconic retailer has been raised
The Altman Z-Score model which has decent track record for bankruptcy prediction, suggests there is no imminent danger. If correct, there is a potentially lucrative trade in BBBY’s bonds

EbixCash Pre-IPO – The Negatives – Growing Too Fast for Its Previous Auditors, and Short Sellers

By Sumeet Singh

EbixCash (EC) is looking to raise around US$800m in its upcoming India IPO. The deal will be run by Motilal, Equirus, ISec, SBI Caps and Yes Securities.
EC is a provider of digital products and services in the B2C, B2B and financial technology arena. Its has four primary business segments: Payment solutions, travel, financial technologies and BPO.
In this note, we talk about the not-so-positive aspects of the deal

Bruush Oral Care – Investment Thesis, Key Drivers, Financial & Price Forecasts, DCF Valuation 07/22