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Smartkarma Daily Briefs

India: Nmdc Ltd, Bank Of Baroda, HDFC Bank, Hindustan Aeronautics Ltd and more

By | Daily Briefs, India

In today’s briefing:

  • Strong pricing and volumes augur well
  • Pick of the Week – Bank of Baroda
  • Strong earnings outlook; trading at
    2 Std. Dev. below its 10-year avg.
  • Supplies from Russia critical for RoH revenues

Strong pricing and volumes augur well

By Motilal Oswal

  • The process of commissioning of the steel plant has already started and hot metal production is likely to start in 1HFY23. We believe the demerger of the Nagarnar Iron and Steel Company (NISP) will be the key trigger for the stock.
  • Thereafter, the government is likely to call for bids from potential suitor, which should likely culminate into sale of the government’s holding in the steel plant to the new owner.
  • .
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.

Pick of the Week – Bank of Baroda

By Edelweiss

  • Established in 1908 by Maharaja Sayajirao Gaekwad of Baroda, BoB was one of the 14 banks that were nationalised in 1969
  • The bank has merged with Dena and Vijaya Bank and is now the second largest PSU bank in the country
  • It has been one of the early players to have identified the potential and importance of international presence
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.

Strong earnings outlook; trading at
2 Std. Dev. below its 10-year avg.

By Motilal Oswal

  • Retail loan growth revives; expect strong traction to sustain HDFCB exhibited robust traction in corporate and commercial banking segments until FY21, which offset the softness in retail lending.
  • However, the bank has witnessed a healthy pick-up in retail loans recently, which grew at an average of 5% QoQ over the past two quarters.
  • The growth in auto financing business continued to remain tepid due to softer trends in passenger vehicle financing while the twowheeler segment continued to report sequential decline.
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.

Supplies from Russia critical for RoH revenues

By ICICI Securities Limited

  • Hindustan Aeronautics (HAL) procures Rs40-42bn worth of spares and parts (used in ROH) from Russia, for which it has maintained inventory to cater to the requirement for at least next 8-9 months.
  • The company is also focusing on indigenous production of Russian supplies to reduce the import dependence.
  • Management mentioned that Russia has confirmed to supply critical raw material to the company, but the payment mechanism is yet to be established.
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

United States: Crowdstrike Holdings Inc, GitLab, Global Clean Energy Holdings, Aurora Acquisition Corp, Epam Systems, Opko Health Inc and more

By | Daily Briefs, United States

In today’s briefing:

  • Crowdstrike FY4Q22: (Bear) Case Adjourned
  • Recent IPO Insights: Gitlab
  • GCEH: Almost Online, Initiating with Buy
  • Better’s SPAC Deal Could be Another SoftBank Disaster
  • Deep Dive: EPAM Systems (EPAM US)
  • Opko Health (OPK US): Diagnostic Business on Solid Grip; Pharmaceutical Business Ready to Take-Off

Crowdstrike FY4Q22: (Bear) Case Adjourned

By Aaron Gabin

  • Crowdstrike printed a superb quarter, continues to beat and raise despite overblown competitive concerns with new disclosures around non-endpoint ARR shows this becoming a true platform.
  • Revenue growth (+63%), Margin expansion (+570bps) and FCF generation (46% FCF margins) shows best in class rule of 40 SaaS metric.
  • Next catalyst is Analyst Day in April, expect LT targets to get increased.

Recent IPO Insights: Gitlab

By Aaron Gabin

  • Gitlab is down 61% since its IPO and trades at 16x forward sales, now reasonable for years of 40% like growth expected.
  • At $6B valuation, would make an attractive acquisition candidate for Google/Amazon or some of the growing DevSecOps players like Datadog.
  • Dynamic TAM with long runway ahead, very underpenetrated, strong secular tailwinds.

GCEH: Almost Online, Initiating with Buy

By Hamed Khorsand

  • We are initiating coverage of Global Clean Energy Holdings (GCEH) with a Buy Rating and $7.55 target.
  • GCEH is in the final stages of turning a crude oil refinery into a renewable fuel refinery utilizing camelina as its primary feedstock.
  • GCEH has also obtained a product offtake and purchase agreement with Exxon Mobil (XOM) for nearly all of the production from its under-construction refinery, scheduled for commercial production in 2022

Better’s SPAC Deal Could be Another SoftBank Disaster

By subSPAC

  • Things have gone from bad to worse at digital mortgage firm Better.com.
  • Back in May last year, the company was riding a high of closing $500 million in funding from SoftBank, while announcing plans to go public at a $7.7 billion valuation with Aurora Acquisition
  • However, things turned sour for the company, with negative press coverage, weaker financials due to a changing market, and low employee morale due to the antics of the CEO

Deep Dive: EPAM Systems (EPAM US)

By Value Punks

  • EPAM is a high quality IT services provider that has been compounding earnings at a high rate for the last 10 years
  • The stock is currently dislocated – down more than 70% as of the date of writing.
  • EPAM’s delivery centers are distributed throughout the world but have a major presence in Ukraine, Belarus and Russia (clients are mostly based in the US and Europe).

Opko Health (OPK US): Diagnostic Business on Solid Grip; Pharmaceutical Business Ready to Take-Off

By Tina Banerjee

  • Opko Health Inc (OPK US)‘s core clinical testing business began to return to pre-pandemic volumes, while COVID-19- testing volume is expected to decline significantly.
  • Opko’s pharmaceutical business is expected to clock mid-to-high single-digit growth in 2022, with Rayaldee and Ngenla being launched in the international markets.
  • While diagnostic revenue is expected to decline 40% y/y, pharmaceutical business is anticipated to clock mid-to-high single-digit growth in 2022.

Before it’s here, it’s on Smartkarma

Japan: Toshiba Corp, Capcom Co Ltd, Square Enix Holdings, Koei Tecmo Holdings, Tokyo Stock Exchange Tokyo Price Index Topix, KOMEDA Holdings Co Ltd and more

By | Daily Briefs, Japan

In today’s briefing:

  • Toshiba – ISS Advises Against Breakup Plan
  • Capcom – Street Fighter 6 and ExoPrimal Strengthen Pipeline
  • Square Enix – Four Games at State of Play Show Depth of Content
  • Koei Tecmo – Some Nice Signs But Downside Risks Need To Be Priced In First
  • Japan’s Governance: ESG Fund Considerations
  • Komeda Holdings (3543): Solid February Wholesale Sales Amid Difficult Environment

Toshiba – ISS Advises Against Breakup Plan

By Mio Kato

  • This morning Institutional Shareholder Services recommended against both Toshiba’s break up plan and 3D’s alternative proposal. 
  • Both proposals looked uncertain and with ISS coming out against them it now appears more likely that both will be rejected. 
  • That leaves Toshiba in limbo once again and we aren’t convinced the exit will be a privatisation.

Capcom – Street Fighter 6 and ExoPrimal Strengthen Pipeline

By Mio Kato

  • Following on from a recent Street Fighter 6 reveal, Capcom announced new IP Exoprimal at today’s Sony State of Play. 
  • The two announcements strengthen Capcom’s pipeline for FY23 and FY24 although leaks had already revealed the likely launch timing of SF6. 
  • Exoprimal is new news, however, and provides a glimpse into Capcom’s strategic thinking.

Square Enix – Four Games at State of Play Show Depth of Content

By Mio Kato

  • Square Enix had four of the twelve titles featured at today’s Sony State of Play. 
  • While none of the titles was one of they IPs for Square Enix they demonstrate the depth of IP possessed. 
  • In addition, the trailers point to Square Enix’s domestic development studios maintaining high quality standards even for smaller titles.

Koei Tecmo – Some Nice Signs But Downside Risks Need To Be Priced In First

By Mio Kato

  • Koei Tecmo appears to have made some strides in improving the quality of Stranger of Paradise: Final Fantasy Origins.
  • This bodes well for the future of its business effectively reskinning its in-house titles with popular outside IPs.
  • This makes us more interested in the name but we are still waiting for the shoe to drop on investment income.

Japan’s Governance: ESG Fund Considerations

By Aki Matsumoto

  • Regarding “ESG Funds Performance” featured in Rapid Response, I would like to consider it in conjunction with an article on ESG funds that was published in Nikkei on February 6.
  • In fact, ESG funds are already underperforming when it comes to active funds. It is believed that there have been issues with stock picks.
  • As far environment, Metrical doesn’t believe in excluding it because it is in energy/commodities sector. We look at how the company is thinking and acting and moving forward on ESG.

Komeda Holdings (3543): Solid February Wholesale Sales Amid Difficult Environment

By Mita Securities

  • Komeda’s February same-store wholesale sales 97.2% vs. 2021, 102.9% vs. 2019

  • SSS vs. 2019 for food service companies: Omicron impact in February

  • Stock price trends for restaurant companies: Outperforming TOPIX despite downtrend


Before it’s here, it’s on Smartkarma

South Korea: Hana Tour Service, Hyundai Heavy Industries, Hyundai Motor Co and more

By | Daily Briefs, South Korea

In today’s briefing:

  • KOSPI 200 Rebalancing Screening: Few Noticeable Changes in the Race
  • KOSPI Lockup Releases & Likelihood of Hitting the Market
  • Close the Gap: Korean Pref Vs. Common Shares Post New South Korean President Yoon Suk-Yeol

KOSPI 200 Rebalancing Screening: Few Noticeable Changes in the Race

By Sanghyun Park

  • KOSPI 200’s June rebalancing review period is six months, from November 1 to April 30. So, we are now over 70% of the review period.
  • The addition result is similar to the screening results last month. However, one stock was newly screened. Hana Tour Service sits at the filtering borderline within the Consumer Discretionary Sector.
  • As for deletions, Bukwang Pharmaceutical is screened in the healthcare sector instead of Yungjin Pharmaceutical. S&T Motiv in the Consumer Discretionary Sector is additionally listed as a deletion candidate.

KOSPI Lockup Releases & Likelihood of Hitting the Market

By Sanghyun Park

  • KOSPI has seven lockup release events that are likely to hit the market. And all of them are IPO institutional and ESOP lockups.
  • Whether these IPO institutional/ESOP lockups will hit the market directly correlates with the return size from the offering price. And most of them are still far above the offering price.
  • Therefore, it is highly likely that a meaningful share price correction will occur on each release date. This correlation pattern has been more pronounced in recent lockup release events.

Close the Gap: Korean Pref Vs. Common Shares Post New South Korean President Yoon Suk-Yeol

By Douglas Kim

  • We highlight the closing of the pricing gaps between the Korean common and pref shares, which is likely to be accelerated by the free market promoting new Korean President Yoon.
  • These measures include strengthening investor protection in the event of a spin-off of a new business listing, incorporating compulsory tender offers, and improving short selling systems and foreign exchange operations.
  • We believe these measures to emphasize on the free markets are likely to improve minority shareholder rights and the gaps between the common and preferred shares could narrow further.

Before it’s here, it’s on Smartkarma

Macro: CX Daily: The Winners and Losers of China’s Credit Easing and more

By | Daily Briefs, Macro

In today’s briefing:

  • CX Daily: The Winners and Losers of China’s Credit Easing
  • ECB: Hawkish Return to State-Dependence
  • ECB: Hawkish Return to State-Dependence
  • Government Work Report Targets Economic Stability Driven by Fiscal Support
  • In the Line of Fire – Impact on Central European Currencies from Russia’s Invasion
  • CX Daily: China’s Pension Insurers Told to Stop Pursuing Quick and Risky Profits

CX Daily: The Winners and Losers of China’s Credit Easing

By Caixin Global

  • In Depth: The winners and losers of China’s credit easing 

  • Leaders from China, France and Germany press for settlement to Russia-Ukraine war

  • Chinese metal giant faces heavy losses on wild nickel ride


ECB: Hawkish Return to State-Dependence

By Phil Rush

  • The ECB announced an even more aggressive tapering of its asset purchases than we expected as it delivered a welcome return to explicitly state-dependent policy.
  • High inflation is hurrying policy towards the exit. We expect inflation to exceed the staff forecast again, encouraging the ECB to end net purchases with June’s EUR 20bn. 
  • Rate hikes “some time” later probably won’t be long, with our forecast for the first now three months earlier at Sep-22. Excessive core pressures are pushing global action.

ECB: Hawkish Return to State-Dependence

By Phil Rush

  • The ECB announced an even more aggressive tapering of its asset purchases than we expected as it delivered a welcome return to explicitly state-dependent policy.
  • High inflation is hurrying policy towards the exit. We expect inflation to exceed the staff forecast again, encouraging the ECB to end net purchases with June’s EUR 20bn. 
  • Rate hikes “some time” later probably won’t be long, with our forecast for the first now three months earlier at Sep-22. Excessive core pressures are pushing global action.

Government Work Report Targets Economic Stability Driven by Fiscal Support

By Li Tang

  • The NPC session at the Two Conferences saw the release of the 2022 Government Work Report, NDRC Work Report, and the Budget Work Report.
  • The financial derisking being the second economic priory (behind stability)
  • Property policy will be focused on promoting long-term rental housing and supporting genuine home demand

In the Line of Fire – Impact on Central European Currencies from Russia’s Invasion

By Gautam Jain, PhD, CFA

  • In line with my view, the US dollar remains strong, with the invasion of Ukraine by Russia providing additional safe-haven bids and putting pressure on EM currencies. 
  • Among EM currencies, the worst hit are Central European currencies as the war has created headwinds to growth in the region especially due to the spike in energy prices.
  • Authorities in the eurozone and Central Europe have taken steps to mitigate the impact on their economies but the proximity to the war means that some risk premium will remain.

CX Daily: China’s Pension Insurers Told to Stop Pursuing Quick and Risky Profits

By Caixin Global

  • In Depth: China’s pension insurers told to stop pursuing quick and risky profits

  • China Meheco links up with Pfizer to market Covid pill

  • China must address gender imbalance to tackle demographic crisis, Nobel laureate says


Before it’s here, it’s on Smartkarma

Thailand: Rajthanee Hospital, Ratch Group PCL, Com7 PCL, Ichitan Group, Index Livingmall PCL and more

By | Daily Briefs, Thailand

In today’s briefing:

  • RJH: 4Q21 Earnings Grew YoY but Drop QoQ
  • RATCH: Minor Dilution Impact from Capital Raising
  • COM7: 5G to Drive Strong Earnings Growth in 2022 and Beyond
  • ICHI: Strong Earnings Momentum with Attractive Dividend Yield
  • ILM: Positive Earnings Outlook in 2022-24

RJH: 4Q21 Earnings Grew YoY but Drop QoQ

By Pi Securities PCL, Thailand

  • Maintain HOLD rating with a TP of Bt33.50, based on 19.14xPE’22E,which is pegged to -1SD of 3-years trading mean.Despite drastic drop in 22E profit, its strategic location, combined with undemanding 
  • Its 4Q21 net profit was at Bt283m (+96%YoY, -42%QoQ), given weak QoQ revenue growth, and margin contraction due to lowered Covid-19 related contribution.
  • RJH’s 2021 earnings was at Bt1.01bn, implying +145% YoY, mainly attributed to higher contribution from Covid-related services.

RATCH: Minor Dilution Impact from Capital Raising

By Pi Securities PCL, Thailand

  • Last week analyst meeting came out in a positive tone. We maintain the BUY call based on target price of Bt48.0 derived using SOTP methodology, implying 9.0xPE’22E.
  • The 1Q22 earnings is expected to soften QoQ due to seasonal weak contribution from Hydro projects, RAC (Australia), and weak domestic SPP margins. The earnings should pick up 2Q22 onwards
  • The 2022 net profit growth will be supported by 1)full year profit recognition of 377MWe projects added in 2021 (Yandin&collector wind farm) and 2) 150MWe new project COD in 2022.

COM7: 5G to Drive Strong Earnings Growth in 2022 and Beyond

By Pi Securities PCL, Thailand

  • We upgrade COM7 to BUY and raise TP by 34% to Bt92.50 derived from 34.5xPE’22E (+0.25SD of 5-Yr trading average).Our rating reflects a positive outlook toward its strong potential growth 
  • We downgrade our target PE to 34.5xPE’22 (+0.25SD) from 39.0xPE’22 (+1SD) previously to reflect declining earnings momentum. We believe recurring earnings growth at CAGR of 45% over past two years 
  • We expect strong earnings growth in 2022 at +23% driven by strong iPhone 14 sales due to growing 5G device penetration.

ICHI: Strong Earnings Momentum with Attractive Dividend Yield

By Pi Securities PCL, Thailand

  • We reiterate our BUY rating for ICHI with a target price of Bt13.0 based on 25xPE’22E, the five-years average trading range and close to Thailand consumer staples.
  • We expect strong earnings momentum to continue to grow both YoY and QoQ in 1Q22 and continue in 2Q22 from high season quarter.Currently,ICHI trading at 20xPE’22E cheaper than its five-years
  • We expect earnings to grow at CAGR of11%in the next three year to reach Bt742m by 2024 supported by launching new products and new markets expansion,as well as margin expansion 

ILM: Positive Earnings Outlook in 2022-24

By Pi Securities PCL, Thailand

  • Yesterday analyst meeting came out with a positive tone.We maintain BUY rating with a target price of Bt21.0, derived from 18xPE’22E,+1SD from three years average trading range or 50% discount
  • We expect earnings to grow to Bt764m in 2024E or +19%CAGR (2022-24E) from -5%CAGR(2019-21), driven by 1) solid SSSG and online sales, 2) solid recovery in rental income
  • To implement a more aggressive strategy after COVID-19, the management aims to expand 1-2 new stores per year from 2023 onwards.

Before it’s here, it’s on Smartkarma

Health Care: Arrail Group, Rajthanee Hospital, Opko Health Inc and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • Arrail IPO: Peer Comparison and Valuation
  • RJH: 4Q21 Earnings Grew YoY but Drop QoQ
  • Opko Health (OPK US): Diagnostic Business on Solid Grip; Pharmaceutical Business Ready to Take-Off

Arrail IPO: Peer Comparison and Valuation

By Shifara Samsudeen, ACMA, CGMA

  • Arrail, the largest dental services provider in China’s premium dental service market has announced the terms for its IPO.
  • The company plans to raise net proceeds of approx. HK$590m (US$75.9m) through issuing 46.5m at a price of HK$14.62 per share.
  • Cornerstone investors have agreed to purchase approx. US$65m worth of shares and these investors include Abax, Harvest, Hudson Bay, OrbiMed and TVHKL.

RJH: 4Q21 Earnings Grew YoY but Drop QoQ

By Pi Securities PCL, Thailand

  • Maintain HOLD rating with a TP of Bt33.50, based on 19.14xPE’22E,which is pegged to -1SD of 3-years trading mean.Despite drastic drop in 22E profit, its strategic location, combined with undemanding 
  • Its 4Q21 net profit was at Bt283m (+96%YoY, -42%QoQ), given weak QoQ revenue growth, and margin contraction due to lowered Covid-19 related contribution.
  • RJH’s 2021 earnings was at Bt1.01bn, implying +145% YoY, mainly attributed to higher contribution from Covid-related services.

Opko Health (OPK US): Diagnostic Business on Solid Grip; Pharmaceutical Business Ready to Take-Off

By Tina Banerjee

  • Opko Health Inc (OPK US)‘s core clinical testing business began to return to pre-pandemic volumes, while COVID-19- testing volume is expected to decline significantly.
  • Opko’s pharmaceutical business is expected to clock mid-to-high single-digit growth in 2022, with Rayaldee and Ngenla being launched in the international markets.
  • While diagnostic revenue is expected to decline 40% y/y, pharmaceutical business is anticipated to clock mid-to-high single-digit growth in 2022.

Before it’s here, it’s on Smartkarma

Industrials: Toshiba Corp, Jardine Matheson Holdings, Hyundai Heavy Industries, Hyundai Motor Co, Hindustan Aeronautics Ltd and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Toshiba – ISS Advises Against Breakup Plan
  • Jardine Matheson (JM SP): Reloading The Buyback?
  • KOSPI Lockup Releases & Likelihood of Hitting the Market
  • Close the Gap: Korean Pref Vs. Common Shares Post New South Korean President Yoon Suk-Yeol
  • Supplies from Russia critical for RoH revenues

Toshiba – ISS Advises Against Breakup Plan

By Mio Kato

  • This morning Institutional Shareholder Services recommended against both Toshiba’s break up plan and 3D’s alternative proposal. 
  • Both proposals looked uncertain and with ISS coming out against them it now appears more likely that both will be rejected. 
  • That leaves Toshiba in limbo once again and we aren’t convinced the exit will be a privatisation.

Jardine Matheson (JM SP): Reloading The Buyback?

By David Blennerhassett

  • Jardine Matheson Holdings (JM SP)‘s underlying net profit in FY21 was up 39% against 2020, and just 5% shy of 2019’s level.
  • The latest US$250mn buyback program appears to have been completed.
  • Shares are down ~5% since the FY21 results. At a ~28% discount to NAV, JMH is inexpensive here. 

KOSPI Lockup Releases & Likelihood of Hitting the Market

By Sanghyun Park

  • KOSPI has seven lockup release events that are likely to hit the market. And all of them are IPO institutional and ESOP lockups.
  • Whether these IPO institutional/ESOP lockups will hit the market directly correlates with the return size from the offering price. And most of them are still far above the offering price.
  • Therefore, it is highly likely that a meaningful share price correction will occur on each release date. This correlation pattern has been more pronounced in recent lockup release events.

Close the Gap: Korean Pref Vs. Common Shares Post New South Korean President Yoon Suk-Yeol

By Douglas Kim

  • We highlight the closing of the pricing gaps between the Korean common and pref shares, which is likely to be accelerated by the free market promoting new Korean President Yoon.
  • These measures include strengthening investor protection in the event of a spin-off of a new business listing, incorporating compulsory tender offers, and improving short selling systems and foreign exchange operations.
  • We believe these measures to emphasize on the free markets are likely to improve minority shareholder rights and the gaps between the common and preferred shares could narrow further.

Supplies from Russia critical for RoH revenues

By ICICI Securities Limited

  • Hindustan Aeronautics (HAL) procures Rs40-42bn worth of spares and parts (used in ROH) from Russia, for which it has maintained inventory to cater to the requirement for at least next 8-9 months.
  • The company is also focusing on indigenous production of Russian supplies to reduce the import dependence.
  • Management mentioned that Russia has confirmed to supply critical raw material to the company, but the payment mechanism is yet to be established.
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

Most Read: Toshiba Corp, Jardine Matheson Holdings, Jinko Solar, Hana Tour Service, Hyundai Heavy Industries and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Toshiba – ISS Advises Against Breakup Plan
  • Jardine Matheson (JM SP): Reloading The Buyback?
  • STAR50 Index Rebalance Preview (June): Back to the All Important Question
  • KOSPI 200 Rebalancing Screening: Few Noticeable Changes in the Race
  • KOSPI Lockup Releases & Likelihood of Hitting the Market

Toshiba – ISS Advises Against Breakup Plan

By Mio Kato

  • This morning Institutional Shareholder Services recommended against both Toshiba’s break up plan and 3D’s alternative proposal. 
  • Both proposals looked uncertain and with ISS coming out against them it now appears more likely that both will be rejected. 
  • That leaves Toshiba in limbo once again and we aren’t convinced the exit will be a privatisation.

Jardine Matheson (JM SP): Reloading The Buyback?

By David Blennerhassett

  • Jardine Matheson Holdings (JM SP)‘s underlying net profit in FY21 was up 39% against 2020, and just 5% shy of 2019’s level.
  • The latest US$250mn buyback program appears to have been completed.
  • Shares are down ~5% since the FY21 results. At a ~28% discount to NAV, JMH is inexpensive here. 

STAR50 Index Rebalance Preview (June): Back to the All Important Question

By Brian Freitas


KOSPI 200 Rebalancing Screening: Few Noticeable Changes in the Race

By Sanghyun Park

  • KOSPI 200’s June rebalancing review period is six months, from November 1 to April 30. So, we are now over 70% of the review period.
  • The addition result is similar to the screening results last month. However, one stock was newly screened. Hana Tour Service sits at the filtering borderline within the Consumer Discretionary Sector.
  • As for deletions, Bukwang Pharmaceutical is screened in the healthcare sector instead of Yungjin Pharmaceutical. S&T Motiv in the Consumer Discretionary Sector is additionally listed as a deletion candidate.

KOSPI Lockup Releases & Likelihood of Hitting the Market

By Sanghyun Park

  • KOSPI has seven lockup release events that are likely to hit the market. And all of them are IPO institutional and ESOP lockups.
  • Whether these IPO institutional/ESOP lockups will hit the market directly correlates with the return size from the offering price. And most of them are still far above the offering price.
  • Therefore, it is highly likely that a meaningful share price correction will occur on each release date. This correlation pattern has been more pronounced in recent lockup release events.

Before it’s here, it’s on Smartkarma

Equity Bottom-Up: Rex International Holding, Dowa Holdings, Japan Tobacco, Bilibili Inc, Upstart Holdings Inc, Invitae Corp, TOA Paint (Thailand), B Grimm Power and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Rex: Bargain Purchase and Auditor Fantasy Valuations
  • Conviction Call Dowa – Add Into This Correction
  • Japan Tobacco 2022 High Conviction Update: The Russia Ukraine War Impact Is a Bit Overdone
  • Bilibili: All Things Point to Slowdown in Earnings Growth
  • Upstart Holdings: Fast-Growing, Profitable, Cash Generative with Share Buybacks
  • Upstart Holdings: Slowdown In Revenue Growth And Tightening Of Credit Markets
  • Solvency Risk Short Candidates: Invitae, AMC, 2U Inc., Delek US
  • TOA: Squeeze Margin Pressured 1H22 Earnings
  • BGRIM: Rising Gas Cost to Drag SPP Margins in 1H22

Rex: Bargain Purchase and Auditor Fantasy Valuations

By Nicolas Van Broekhoven

  • Rex International Holding (REXI SP) reported FY21 results in late February which showed a dramatic improvement over FY20 due to rising oil prices and increased production
  • Accounting wise the picture was muddied by auditor fantasy valuation exercises which understated FY21 results. FY22 to be a “clean” year where positive cash flow impact becomes clearer to market.
  • Since 08/03/22 Rex trades on the SGX mainboard and remains the best pure-play oil bet in the Singapore market. Current oil prices indicate an FY22 cash flow bonanza.

Conviction Call Dowa – Add Into This Correction

By Mio Kato

  • Our 2022 conviction call Dowa Holdings is up 25% since we made that call and was up as much as 44% a few days ago. 
  • We believe the recent correction is a simple reaction to the speed at which it had been rising. 
  • We see significant further upside and unlike peers we believe all-time high earnings can be sustained even with commodity price moderation.

Japan Tobacco 2022 High Conviction Update: The Russia Ukraine War Impact Is a Bit Overdone

By Oshadhi Kumarasiri

  • Japan Tobacco (2914 JP)’s share price fell 14% from the bottom end of the upward trend channel and underperformed Topix by 6% over the last 15 days.
  • Even if Russia yields zero dollars, we think the impact on JT’s valuation could be around 20%.
  • With demand for cigarettes expected to go up during these war times, we think the market reaction of this scale is unwarranted.

Bilibili: All Things Point to Slowdown in Earnings Growth

By Shifara Samsudeen, ACMA, CGMA

  • Bilibili Inc (BILI US) reported 4Q2021 results last week where revenues increased 50.6% YoY to RMB 5.8bn while operating losses increased to RMB 2bn compared to RMB 903m in 4Q2020.
  • This marks the lowest YoY growth in top line since 2Q2019. Though all segments experienced YoY growth in revenue, we have observed that the growth is slowing down.
  • The company also has announced a share buyback of up to US$500m of its ADS over the next 24 months

Upstart Holdings: Fast-Growing, Profitable, Cash Generative with Share Buybacks

By Arun George

  • Upstart Holdings Inc (UPST US) is both a consumer Internet brand as well an online loan origination platform. 
  • Upstart is a rare fintech that has established credibility by delivering high growth with profits and cash generation. The healthy 2022 outlook underscores the long-term potential. 
  • While the ongoing market volatility is a near-term risk, the tech sell-off presents an opportunity to gain exposure to a good story at an attractive valuation. 

Upstart Holdings: Slowdown In Revenue Growth And Tightening Of Credit Markets

By Andrei Zakharov

  • We see limited upside potential for Upstart Holdings Inc (UPST US)  shares after reporting a record 200%+ YoY revenue growth rate in CY’21.   
  • Our calculations suggest insiders sold ~$1.5 billion worth of Upstart shares since August 2020, including Third Point, CEO of Upstart Holdings, and management of the fintech company. 
  • Rising interest rates and tightening of credit markets may negatively impact revenue, keeping in mind that Upstart Holdings Inc (UPST US)  primarily facilitates unsecured personal loans on the platform.

Solvency Risk Short Candidates: Invitae, AMC, 2U Inc., Delek US

By Eric Fernandez, CFA

  • This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
  • The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.
  • This week we flag: Invitae, AMC, 2U Inc., and Delek US

TOA: Squeeze Margin Pressured 1H22 Earnings

By Pi Securities PCL, Thailand

  • Yesterday analyst meeting came out with a negative tone.We expect TOA net profit in 1H22to weaken YoY due to an increase in raw material cost in spite of upward selling 
  • We expect earnings drop both QoQ and YoY in 1Q22 caused by squeezed GPM from rising raw material cost. In contrast,revenue will be expanded YoY supported by demand for painting 
  • We revised down 2022-23 earnings by 3-7% in 2022-23E to factor in further decrease in gross profit margin caused by a rise in material cost following spike in oil price.

BGRIM: Rising Gas Cost to Drag SPP Margins in 1H22

By Pi Securities PCL, Thailand

  • The analyst meeting came out in a negative tone, as the projected rise in gas cost will pressure the SPP margins and drag the earnings in 1H22.  
  • We expect 1Q22 recurring profit to soften due to continued rise of fuel cost. The earnings should bottom out in 1H22 and pick up gradually 3Q22 onwards.
  • The SPP gas price has rose to Bt336/ MMBTU in 4Q21 compared to Bt268/MMBTU in 3Q21.According to management guidance the gas prices are further expected to rise near Bt450/MMBTU level

Related tickers: Rex International Holding (REXI.SI), Dowa Holdings (5714.T), Japan Tobacco (2914.T), Bilibili Inc (BILI.O), Invitae Corp (NVTA.N), TOA Paint (Thailand) (TOA.BK), B Grimm Power (BGRIM.BK)

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