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Smartkarma Daily Briefs

Apr 13
0

Macro: South African Rand’s Outperformance Is Overdone and more

By | Daily Briefs, Macro

In today’s briefing:

  • South African Rand’s Outperformance Is Overdone
  • UK: More For Less In Work

South African Rand’s Outperformance Is Overdone

By Gautam Jain, PhD, CFA

  • Given the current uncertainties stemming from the Fed monetary tightening and Russia’s invasion, trading opportunities are creeping up as short-term mispricing tend to occur in such environments.
  • One such opportunity could be the South African rand, which has outperformed on a year-to-date basis relative to other emerging market currencies.
  • I see headwinds for the rand: the carry is low in real terms and versus volatility, the current account is set to deteriorate, growth remains a concern and it’s expensive.

UK: More For Less In Work

By Phil Rush

  • The shrinking UK labour market drove another 11bps decline in the unemployment rate to 3.8% in Feb-22. Average hours are continuing to rebound rather than headcount.
  • People over 50 are voluntarily leaving work with little interest in returning, which makes it unlikely they will be available to fulfil high business demand for labour.
  • Wage growth is failing to keep pace with excessive inflation. The squeeze is most intense for lower-income workers who are typically most likely to spend income.

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Apr 13
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Industrials: Park24 Co Ltd, Tokyo Electron, Toyo Construction, Zardoya Otis SA and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Park24 Placement – Large Deal to Digest and a Long Settlement Period
  • Tokyo Electron (8035 JP): Delays and Uncertainty
  • Toyo Construction (1890) – Mystery Holders Now 17% (Or More)
  • Otis/Zardoya Otis: Squeeze-Out

Park24 Placement – Large Deal to Digest and a Long Settlement Period

By Clarence Chu

  • Park24 Co Ltd (4666 JP) aims to raise around JPY25.5bn (US$210m) via selling 16m new shares at a fixed price of JPY1,644, representing a 9.9% discount to last close.
  • Proceeds from the deal will be geared towards digital investment towards improving the firm’s business efficiency and for expanding its mobility fleet.
  • In this note, we will talk about the firm’s track record and run the deal through our ECM framework.

Tokyo Electron (8035 JP): Delays and Uncertainty

By Scott Foster

  • As of February, TEL expected the global wafer fab equipment market to grow by nearly 20% in calendar 2022. This seems increasingly unlikely.
  • Japanese data shows equipment demand leveling off while the economic situation deteriorates and semiconductor capacity expansion projects are delayed.
  • The shares have dropped 22% since the beginning of January and are now selling at 20x management’s EPS guidance for FY Mar-22. Not cheap in historical terms.

Toyo Construction (1890) – Mystery Holders Now 17% (Or More)

By Travis Lundy

  • WK 1-3 Limited are now (as of a week ago) 17.34% of Toyo Construction’s share register. They bought 40+% of volume in the relevant period, as I suggested they might.
  • On a realtime basis, they could be 20+%, but because no single entity is there they would not become top shareholder as a triumvirate.
  • I offer consolidated thoughts and like the idea of buying the dip.

Otis/Zardoya Otis: Squeeze-Out

By Jesus Rodriguez Aguilar

  • Otis Worldwide Corp (OTIS US) increases its stake in Zardoya Otis SA (ZOT SM) to 95.51% after the takeover bid. The settlement date is 12 April.
  • Otis has decided to proceed with the squeeze-out. Next 3 May will be the date.
  • The outcome is in line with expectations and my recommendation to tender. Gross spread is 0.43%, and 6.31% is the estimated annualised return (assuming settlement on 6 May).

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Apr 13
0

South Korea: SK Telecom, Samsung Biologics Co.,, ONE Store, Viva Republica and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KT Corp & SK Telecom: Potential Changes Driven by Foreign Buying
  • Samsung Biologics: Post-Offering Trading Dynamics on Potential Overhang
  • One Store IPO – Outpaced Industry, Bottom-End Seems Justified
  • Viva Republica (Toss): To Become the First Decacorn in Korea

KT Corp & SK Telecom: Potential Changes Driven by Foreign Buying

By Brian Freitas

  • Foreign investors have continued to buy Korea telecom companies. The buying has pushed the foreign room lower. This will have implications for the stocks in MSCI and FTSE indices.
  • KT Corp (030200 KS)‘s foreign room has dropped below 15% and this could lead to the stock not being added to the MSCI Korea Index at the May SAIR. 
  • SK Telecom (017670 KS)‘s foreign room has dropped significantly and further buying over the next week could see the stock deleted from the MSCI Korea Index at the May SAIR. 

Samsung Biologics: Post-Offering Trading Dynamics on Potential Overhang

By Sanghyun Park

  • Samsung Biologics (207940 KS) has succeeded in a rights offering worth ₩3.2T to the existing shareholders. The subscription rate of the existing shareholders and the ESOP came out at 100.25%.
  • The size of immediately floatable shares is estimated at 1 million, representing 1.55% of SO and 22.82x ADTV. It is a size that will significantly impact the short-term flow.
  • There is a sufficient circumstantial probability that the 1M new stocks, currently at a 20% return, will lead to immediate profit realization after listing.

One Store IPO – Outpaced Industry, Bottom-End Seems Justified

By Clarence Chu

  • ONE Store (ONE KS) is looking to raise up to US$228m in its Korean IPO.
  • One Store is a mobile app market platform, formed by a cooperation between South Korea’s three telecom carriers, together with Naver Corp, an internet firm in South Korea.
  • Given the lack of direct comparables, one way to look at valuation would be to compare the firm to its historical asking valuations.

Viva Republica (Toss): To Become the First Decacorn in Korea

By Douglas Kim

  • Viva Republica (Toss), one of the largest fintech companies in Korea, is expected to become the first decacorn in Korea in 2Q 2022. 
  • Toss is expected to have a value range of 10 trillion won to 15 trillion won in the upcoming funding round in 2Q 2022. 
  • Kakao Bank has P/S multiple of 20.2x in 2021. Applying this multiple on Viva Republica’s sales of 781 billion won, this would imply a valuation of 15.8 trillion won. 

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Apr 13
0

United States: NFT and more

By | Daily Briefs, United States

In today’s briefing:

  • Sporting Crypto: GOALS Raise $15m Seed Round to Build Multiplayer Soccer Game

Sporting Crypto: GOALS Raise $15m Seed Round to Build Multiplayer Soccer Game

By Sporting Crypto

  • Swedish startup GOALS have raised a $15m seed round to help build an alternative to EA’s FIFA video game series.
  • GOALS is a play-and-earn game that allows users to own in-game assets as NFTs.
  • It’s being pitched as an Arcade-like football game with less realism than the likes of EA Sports’ FIFA, or Konami’s Pro Evolution Soccer (now eFootball).

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Apr 13
0

India: Meghmani Organics, HDFC Bank, Solar Industries India, Tata Consultancy Svcs and more

By | Daily Briefs, India

In today’s briefing:

  • Meghmani Organics Ltd- Forensic Analysis
  • HDFC Bank/HDFC Ltd Merger: Will Catalyze Growth, Not Dampen It
  • Solar Industries: Strategic Investment in UAS Start-Up
  • TCS: Strong Performance; Robust Execution

Meghmani Organics Ltd- Forensic Analysis

By Nitin Mangal

  • Meghmani Organics (MEGH IN) group was reconstructed lately; the NCLT approved the demerger post F21, as Meghmani Finechem was listed as new entity, while MOL got demerged with its subsidiary.
  • MOL continues with the flagship Agrochemicals and Pigments business while MFL takes care of ChlorAlkali products and derivatives. 
  • However, even post the restructuring of the group, MOL continues to have several setbacks in its balance sheet, as highlighted in the insight.

HDFC Bank/HDFC Ltd Merger: Will Catalyze Growth, Not Dampen It

By Ankit Agrawal, CFA

  • A first look at the merger suggests that the value proposition is tilted towards HDFC Ltd (“HDFC”) vs HDFC Bank (“HDFCB”), given the declining regulatory arbitrage between large-NBFCs and banks
  • However, given HDFCB’s intense focus on growing its distribution prowess, HDFCB stands to benefit immensely from the merger and is thus a win-win deal.
  • With the expanded distribution network and cross-sell synergies, HDFCB, despite the larger base, will benefit from an accelerated growth post-merger.

Solar Industries: Strategic Investment in UAS Start-Up

By ICICI Securities Limited

  • Solar Industries (SOIL) surprised with an investment (undisclosed amount) in an unarmed aerial solutions (UAS) company ZMotion Autonomous (ZM) incorporated in CY18.
  • This is the second announced start-up investment by SOIL after a strategic stake (Rs175mn) into Skyroot – a space start-up helping ISRO with propulsion systems (SOIL incidentally also received ToT on 7th Apr’22 (propellant casting for Dual Pulse propulsion system).
  • The rationale for the strategic investment has been shown as “will strengthen SOIL’s initiative to introduce weaponised unmanned aerial vehicle (UAVs) for offensive and counter drone system for defensive roles”.

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.

TCS: Strong Performance; Robust Execution

By Axis Direct

  • In Q4FY22, Tata Consultancy Services Ltd (TCS) reported revenue growth of 3.4% QoQ in Rupee terms, beating our expectations.
  • The company’s revenues stood at Rs 50,591 Cr, up 15.8% YoY.
  • We recommend a BUY rating on the stock and assign a 31x P/E multiple to its FY24E earnings of Rs 135.2/share to arrive at a TP of Rs 4,200/share, implying an upside of 14% from the CMP.

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.

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Apr 12
0

Financials: Japan Post Insurance, Turkiye Garanti Bankasi As, B. Riley Prince 150 Merger Corp and more

By | Daily Briefs, Financials

In today’s briefing:

  • Topix FFW Transition – Insurance Sector a Big Net Sell
  • BBVA/Garanti: Offer Period, Shares at a 9% Premium to Offer Price
  • Betting on the Future of Esports

Topix FFW Transition – Insurance Sector a Big Net Sell

By Travis Lundy

  • The TOPIX Insurance Sector sees the worst net flows as a percentage of index weight among the 33 sectors in the April-June FFW Transition.
  • On a net basis, rebalance flows favour Japan Post Insurance (7181 JP) vs T&D Holdings (8795 JP) (finishing a buyback) and Dai Ichi Life Insurance (8750 JP) (just finished).
  • JPI has underperformed both over the last three years despite growing BVPS by more. And earnings should be a blowout. 

BBVA/Garanti: Offer Period, Shares at a 9% Premium to Offer Price

By Jesus Rodriguez Aguilar

  • The deal for 50.15% of Garanti has received the relevant authorizations and approval from the market regulator. The  offer memorandum has been published. The offer period started on 4 April.
  • BBVA should pay €1,605 million (as of 11 April), €644 million less than upon announcement due to Turkish lira depreciation. Some fund managers have voiced their intention of not tendering.
  • The shares trade roughly in line with peers and are likely to continue their bull run in the short term. It is increasingly difficult the offer succeeds without a sweetening.

Betting on the Future of Esports

By subSPAC

  • In October last year, esports-focused FaZe Clan announced a SPAC deal with B Riley Principal, making it the first billion-dollar deal in its category.
  • Critics have argued that the company’s deal is premature, often comparing it to a meme stock
  • Despite the criticism, there’s more to Faze Clan’s SPAC deal than first meets the eye

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Apr 12
0

Health Care: PHC Holdings, Virtus Health, Asymchem Laboratories and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • PHC Holdings IPO Lock-Up – Stock Might Be Cheap but It’s Stuck with a US$1bn Overhang
  • The Panel Joins CapVest In Virtus’ Corner
  • CapVest Fights Back with Revised Offers for Virtus
  • Asymchem Laboratories (6821.HK/002821.CH) – Concerns on Future Growth Momentum

PHC Holdings IPO Lock-Up – Stock Might Be Cheap but It’s Stuck with a US$1bn Overhang

By Sumeet Singh

  • PHC Holding had raised US$645m in its Japan IPO in Oct 2021, after the deal was downsized and priced at the low-end.
  • PHC is engaged in the development, manufacturing and sale of healthcare devices and services. The company has three main segments: Diabetes Management; Healthcare Services; and Diagnosis/Life Science.
  • The pre-IPO shareholders will be released from the lockup today on 11th Apr 2022. Its largest shareholder is KKR, who still owns a 39% stake in the company. 

The Panel Joins CapVest In Virtus’ Corner

By David Blennerhassett

  • CapVest has bumped its Scheme Offer for Virtus Health (VRT AU) to A$8.15/share. More importantly, it has increased the Takeover Offer price to A$8.10/share.
  • Separately, the Takeovers Panel has made interim orders prohibiting BGH from acquiring on market any Virtus shares above its Bid Price.
  • Virtus’s Board has unanimously determined that CapVest’s revised Offer is superior to BGH’s Bid. 

CapVest Fights Back with Revised Offers for Virtus

By Arun George

  • Including the A$0.12 permitted dividend (paid on 14 April), CapVest’s revised scheme offer is A$8.27 and the off-market takeover offer is A$8.22. The new offer addresses the capital return issue.
  • Despite today’s interims orders from the takeover panel, CapVest’s scheme transaction still has virtually no chance of getting up due to BGH’s 19.99% stake.
  • BGH’s like-for-like off-market offer price of A$8.12 per share is 1.2% below CapVest’s off-market offer, suggesting that there is more life to this takeover tussle for Virtus Health (VRT AU).

Asymchem Laboratories (6821.HK/002821.CH) – Concerns on Future Growth Momentum

By Xinyao (Criss) Wang

  • The three large orders for COVID-19 small molecule drugs are mostly one-off revenues, and after 2022, Asymchem Laboratories (6821 HK)‘s performance could decline from a high base.
  • In essence, Asymchem mainly relies on cost advantage of large-scale capacity to obtain orders.Without core leading technology in frontier of medicine, Asymchem is difficult to enjoy sustainable industry development dividend.
  • Overall, Asymchem’s moat is not strong enough, and the certainty of the Company’s long-term performance growth is also not high. It could be a short-term trade rather than long-term hold.

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Apr 12
0

Equity Bottom-Up: Tencent, Howard Hughes Corp, China Conch Venture Holdings, Asymchem Laboratories, Garrett Motion and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Tencent/Netease: China Game Approval Resumption Is a Relieve, but Not Out of Tunnel
  • HHC: NAV Rising
  • Conch Venture (586 HK): Improving Risk-Reward Profile
  • Asymchem Laboratories (6821.HK/002821.CH) – Concerns on Future Growth Momentum
  • GTX: The Macro Factor

Tencent/Netease: China Game Approval Resumption Is a Relieve, but Not Out of Tunnel

By Ke Yan, CFA, FRM

  • China announced game approval last night, after 8 months of silence.
  • We discussed in our previous note that China would resume game approval.
  • There is no game approved for Tencent and Netease this round but we believe their approval will come in due time.

HHC: NAV Rising

By Hamed Khorsand

  • HHC updated its NAV to $170 a share from $150 a share last year after the return of retail and the Las Vegas Ballpark to normal operation.
  • HHC has started to redeploy its free cash flow with $250 million portion dedicated to share repurchases. 
  • The improvements in the business we have cited over the past year contributed to HHC raising its NAV estimate

Conch Venture (586 HK): Improving Risk-Reward Profile

By Osbert Tang, CFA

  • Following CCEP spin-off and share price decline, China Conch Venture (586 HK) is now at more attractive valuations relative to the stub, on sum-of-the-parts and on PER multiple. 
  • Growth profile should improve in next two years and it has an optimistic expectation of of 76% increase in waste treatment and 79% growth in on-grid electricity for FY22.
  • New business initiatives including anode and cathode materials of lithium iron phosphate and lithium batteries and used lithium batteries treatment may provide potential medium term upside.

Asymchem Laboratories (6821.HK/002821.CH) – Concerns on Future Growth Momentum

By Xinyao (Criss) Wang

  • The three large orders for COVID-19 small molecule drugs are mostly one-off revenues, and after 2022, Asymchem Laboratories (6821 HK)‘s performance could decline from a high base.
  • In essence, Asymchem mainly relies on cost advantage of large-scale capacity to obtain orders.Without core leading technology in frontier of medicine, Asymchem is difficult to enjoy sustainable industry development dividend.
  • Overall, Asymchem’s moat is not strong enough, and the certainty of the Company’s long-term performance growth is also not high. It could be a short-term trade rather than long-term hold.

GTX: The Macro Factor

By Hamed Khorsand

  • In the first quarter, automakers have been back to stops and starts with segments of their production runs due to parts availability
  • GTX’s product mix makes the Company vulnerable to the ongoing supply chain issues arising from the war in Ukraine
  • In March 2022 there was a 7.2 magnitude earthquake in Japan that resulted in power loss and infrastructure damages

Related tickers: Tencent (0700.HK), Howard Hughes Corp (HHC.N), China Conch Venture Holdings (0586.HK), Garrett Motion (GTX)

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Apr 12
0

Japan: Japan Post Insurance, NTT (Nippon Telegraph & Telephone), PHC Holdings, Kohnan Shoji, MonotaRO Co Ltd, Monogatari Corp, KOMEDA Holdings Co Ltd and more

By | Daily Briefs, Japan

In today’s briefing:

  • Topix FFW Transition – Insurance Sector a Big Net Sell
  • Strong Telecom Flows in TOPIX FFW Transition Months
  • PHC Holdings IPO Lock-Up – Stock Might Be Cheap but It’s Stuck with a US$1bn Overhang
  • Kohnan Shoji (7516) Buyback – Shareholder Return? Activist Defense? Future MBO? All of the Above?
  • MonotaRO (3064): Neutral Impression on March Sales; Effects of Price Hikes Appearing
  • Monogatari Corporation (3097): Signs of Recovery Among Senior Customers at Yuzuan
  • Komeda Holdings (3543): Wholesale Sales on a Recovery Track in March; Food Service Industry Update

Topix FFW Transition – Insurance Sector a Big Net Sell

By Travis Lundy

  • The TOPIX Insurance Sector sees the worst net flows as a percentage of index weight among the 33 sectors in the April-June FFW Transition.
  • On a net basis, rebalance flows favour Japan Post Insurance (7181 JP) vs T&D Holdings (8795 JP) (finishing a buyback) and Dai Ichi Life Insurance (8750 JP) (just finished).
  • JPI has underperformed both over the last three years despite growing BVPS by more. And earnings should be a blowout. 

Strong Telecom Flows in TOPIX FFW Transition Months

By Travis Lundy

  • The April-June TSE FFW Methodology Revision moves favour certain sectors over others. There is nearly ¥500bn of telecom stocks to buy with 60+% of that in four names.
  • Other factors may support some of the names as well. 
  • There is enough excess buying to warrant trading tilts and keeping fundamental positions even as forward earnings multiples have expanded to multi-year highs.

PHC Holdings IPO Lock-Up – Stock Might Be Cheap but It’s Stuck with a US$1bn Overhang

By Sumeet Singh

  • PHC Holding had raised US$645m in its Japan IPO in Oct 2021, after the deal was downsized and priced at the low-end.
  • PHC is engaged in the development, manufacturing and sale of healthcare devices and services. The company has three main segments: Diabetes Management; Healthcare Services; and Diagnosis/Life Science.
  • The pre-IPO shareholders will be released from the lockup today on 11th Apr 2022. Its largest shareholder is KKR, who still owns a 39% stake in the company. 

Kohnan Shoji (7516) Buyback – Shareholder Return? Activist Defense? Future MBO? All of the Above?

By Travis Lundy

  • Yesterday after the close, 500+ store home centre operator Kohnan Shoji (7516 JP) announced full-year earnings (revs -0.2%, OP -16.6%, NP -16.4%yoy) and a buyback. 
  • The buyback is for up to 1.2mm shares and up to ¥4bn to spend from here to end Sep 2022.
  • The shareholder register is interesting, diverse, and makes one wonder whether the buyback is to soften the blow of lower income, defence against an activist, or something else.

MonotaRO (3064): Neutral Impression on March Sales; Effects of Price Hikes Appearing

By Mita Securities

  • Parent company sales in March were 19.771bn yen (+17.4% YoY), slightly below the company’s monthly target
  • The number of business days was 22, one day less than in March 2021. The sales growth rate per business day was +22.7% YoY (+21.4% for February).
  • Sales to SMEs (monotaro.com) increased by around +13% YoY, below the company’s target.

Monogatari Corporation (3097): Signs of Recovery Among Senior Customers at Yuzuan

By Mita Securities

  • Same-store sales for directly-owned stores were 108.2% vs. March 2021 (102.9% for February), 94.0% vs. March 2020 (70.2% for February)
  • The business environment was unfavorable for the company which mainly operates all- you can-eat restaurant formats, as requests for shorter operating hours continued until mid-March
  • However, we have the impression that the company did well despite the difficult business environment

Komeda Holdings (3543): Wholesale Sales on a Recovery Track in March; Food Service Industry Update

By Mita Securities

  • Wholesale sales to franchisees (same-store basis) in March were 103.0% vs. March 2021 (97.2% for February)
  • We have the impression that in-store dining sales have been improving generally due to lifting of the shorter operating hours requests
  • It appears that the market responded positively to the lifting of the shorter operating hour requests in late March

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Apr 12
0

Most Read: GoTo, Emtek, Greatview Aseptic Packaging, KT Corp, Japan Post Insurance and more

By | Daily Briefs, Most Read

In today’s briefing:

  • GoTo Gojek Tokopedia IPO: Potential LQ45, IDX30, IDX80 Index Fast Entry & Impact
  • MSCI May 2022 Index Rebalance Preview: Last Week Before the Start of the Review Period
  • Greatview (468 HK): A Packing Case Pick
  • MSCI Korea Rebalancing: Cautions with KT & Hyundai Heavy Industries
  • Topix FFW Transition – Insurance Sector a Big Net Sell

GoTo Gojek Tokopedia IPO: Potential LQ45, IDX30, IDX80 Index Fast Entry & Impact

By Brian Freitas

  • GoTo (GOTO IJ) lists on the IDX tomorrow. The IDX has GoTo (GOTO IJ)‘s free float at 66% which would mean IDX30, LQ45 and IDX80 Fast Entry index inclusion. 
  • If included in the indices at a free float of 66%, GoTo (GOTO IJ) will have a weight of 13.55% in the IDX30 Index and 12.12% in the LQ45 Index.
  • Passive trackers will then need to buy 13.2% of the real float on the stock. Active funds will also buy the stock as it would appear in their benchmarks.

MSCI May 2022 Index Rebalance Preview: Last Week Before the Start of the Review Period

By Brian Freitas

Greatview (468 HK): A Packing Case Pick

By David Blennerhassett

  • Earlier this year, Jardine Matheson Holdings (JM SP) was understood to be exploring the sale of its 28% stake in Greatview Aseptic Packaging (468 HK).
  • GA Pack announced its full-year results late last month and for the first time since 2012, opted not to pay a final dividend.
  • Shares are down 20% since that non-dividend announcement. That’s convenient.

MSCI Korea Rebalancing: Cautions with KT & Hyundai Heavy Industries

By Sanghyun Park

  • KT’s inclusion possibility is still high, but if the foreign ownership continues to increase at the current rate until April end, there is a possibility that the inclusion will fail.
  • Suppose HHI faces a little over a 10% price correction. In that case, its market cap will fall below ₩10T, and it will stand on the screening borderline.
  • We need to consider closing our LONG positions for these two earlier.

Topix FFW Transition – Insurance Sector a Big Net Sell

By Travis Lundy

  • The TOPIX Insurance Sector sees the worst net flows as a percentage of index weight among the 33 sectors in the April-June FFW Transition.
  • On a net basis, rebalance flows favour Japan Post Insurance (7181 JP) vs T&D Holdings (8795 JP) (finishing a buyback) and Dai Ichi Life Insurance (8750 JP) (just finished).
  • JPI has underperformed both over the last three years despite growing BVPS by more. And earnings should be a blowout. 

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