Smartkarma Daily Briefs

Great Panther (GPL US) is a deletion from the VanEck Vectors Junior Gold Miners ETF (GDXJ US). There are a lot of float changes that will result in passive flows.
One way turnover is estimated at 3.4% and will result in a one-way trade of US$106m at the September rebalance.
Most index constituents have traded poorly over the last few months and the stocks with passive inflows could outperform their peers in the short-term.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: Three Adds, Two Deletes

Sayona Mining (SYA AU), Sigma Lithium (SGML US) and Tianqi Lithium (9696 HK) will replace Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) in the index.
Sayona Mining (SYA AU) is also an inclusion to the FTSE All-Cap and S&P/ASX 200 on the same day as the VanEck Vectors Rare Earth/Strategic Metals ETF (REMX US) addition.
We had Sayona Mining (SYA AU) and Tianqi Lithium (9696 HK) as potential adds while Australian Strategic Materials (ASM AU) and Sierra Rutile Holdings (SRX AU) were high probability deletes.

Korea ETF Market Size Breakdown from a Flow Trading Perspective

By Sanghyun Park

There are 611 ETFs with a combined AUM of ₩76T. Korea is in the global top 7. ₩32T worth of ETFs belongs to local equity, half of which are index-trackers.
The market began to pay attention to the less crowded areas. The result is the rise of sector ETFs. Sector-type has also grown significantly, now with an AUM of ₩8.4T.
Lower predictability causes their rebalancings to be relatively less crowded. That is, the profit effect of acquiring prior information is much more dramatic on the day of rebalancing trading.

Last Week in Event SPACE: SOHO China, Nikkei 225 Review, SK Chemicals, SingTel, Porsche, Tyro

Soho China (410 HK)‘s Pan Shiyi is resigning to focus on “philanthropic pursuits”. That sounds like “donations”, which can be sourced from the Pans selling their stake in SOHO.
In the Nikkei 225 Annual Review, Nidec (6594 JP), SMC (6273 JP), Hoya (7741 JP) are IN. Unitika (3103 JP), Maruha (1333 JP), and Oki Electric (6703 JP) are OUT.
Volkswagen (VOW GR) confirms its intention to float a portion of its Porsche sports-car brand within weeks, in what is expected to be one of Germany’s largest-ever public debuts.

Weekly Deals Digest (11 Sep) – Giordano, DTAC/True, Link Admin, Nitro, Tyro, Ramsay, CALB, Onewo

By Arun George

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Leapmotor (2007699D HK), Onewo Space-Tech (ONEWO HK) and CALB (CALBLZ CH) are pre-marketing a US$1.5 billion, US$2.0 billion and US$2.0 billion HKEx IPOs, respectively.
Event-Driven developments – DTAC/True, Giordano International (709 HK), Link Administration (LNK AU), MyDeal.com.au Ltd (MYD AU), Nitro Software Ltd (NTO AU), Resapp Health (RAP AU), Tyro Payments (TYR AU).

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tyro, Shidax, Link Admin, Giordano, Hitachi Transport

There are 49 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Two new deals were discussed this week: Potentia’s rejected proposal forTyro Payments (TYR AU) and Oisix ra daichi (3182 JP)‘s tilt for Shidax Corp (4837 JP).
Key updates took place for Link Administration (LNK AU), Giordano International (709 HK), and Hitachi Transport System (9086 JP).

Index Rebalance & ETF Flow Recap: NKY, HSCEI, REMX, GDXJ, Link Admin

The last week had the announcement of the Nikkei 225 (NKY INDEX) September changes and the implementation of the SSE STAR50 (STAR50 INDEX) rebalance.
The coming week will have the implementation of the FTSE AW/AC, FTSE China 50/A50, Taiwan 50/Div+, STI, EPRA Nareit, S&P/ASX, REMX and GDXJ rebalances.
There were large outflows from iShares MSCI ACWI ETF (ACWI US) and iShares MSCI Emerging Markets (EEM US) during the week.

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Sep 10

Daily Brief Singapore: Crowdstrike Holdings Inc, Enphase Energy, Ralph Lauren and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers
Enphase Energy: The GreenCom Networks Acquisition & Other Drivers
Ralph Lauren: Increased Digital Marketing Efforts

CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers

CrowdStrike saw its quarterly revenue exceed the $500 million threshold for the first time in the last quarter and delivered an all-around beat.
For the second consecutive quarter, gross retention increased to a new high, and dollar-based net retention soared to its highest point in seven quarters.
In the quarter, the public sector also became stronger, fueled by record-breaking success in U.S. federal and international government agencies.

Enphase Energy: The GreenCom Networks Acquisition & Other Drivers

Enphase had a good quarter and managed to exceed Wall Street expectations on all counts.
Its total revenue for the second quarter was $530.2 million, an increase of 20% from the previous quarter.
In the third quarter, they supplied microinverters rated at about 1,213 megawatts DC and actuators rated at 132.4-megawatt hours.

Ralph Lauren: Increased Digital Marketing Efforts

Ralph Lauren delivered strong results this quarter surpassing revenue expectations of Wall Street as a result of solid growth across all key regions.
Ralph delivered solid consumer metrics, which include increased net promoter scores, purchase intent, and global brand consideration through an engaging mix of performance marketing and purpose-led investments.
We provide the stock of Ralph Lauren with a ‘Hold’ rating and a revision in the target price.

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Sep 10

Daily Brief Australia: Tyro Payments and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts

Tyro Payments (TYR AU) has rejected a proposal from a Potentia-led consortium at A$1.27/share, by way of a Scheme.
Mike Cannon-Brookes’ Grok Ventures, holding 12.5% and Tyro’s largest shareholder, has backed the Offer.
Tyro’s board considered the proposal to be materially below Tyro’s fundamental value and highly opportunistic. Tyro’s share price was down 66% ytd prior to Potentia’s approach.

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Sep 10

Daily Brief Indonesia: Bank Mandiri Persero and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Indonesian Banks 2Q22 Screener; Stick with Bank Mandiri, and Negara Is Our Value Pick

Indonesian Banks 2Q22 Screener; Stick with Bank Mandiri, and Negara Is Our Value Pick

By Victor Galliano

In 2Q22, the six Indonesian banks retain their strong capital adequacy ratios, healthy credit quality and good NPL coverage; yet we see select credit quality headwinds, especially in MSME credit
We maintain our positive view on Bank Mandiri, with its attractive pre-provision profitability and healthy cost of risk, whilst trading on attractive multiples; we prefer Bank Negara to Bank Rakyat
We await stronger signals from Bank Permata for its “turn around” potential, especially if management can improve credit quality, and keep lowering its cost of risk to boost returns

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Sep 10

Daily Brief South Korea: Coupang, LG Energy Solution, Poongsan Corp and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

ESG Analysis of a Korean E-Commerce Giant: Did Coupang’s ESG Performance Really Improve?
Pullback Complete?; Commodities Heading Lower; Buying Growth/Cyclicals & A Few Utilities
Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

ESG Analysis of a Korean E-Commerce Giant: Did Coupang’s ESG Performance Really Improve?

By Ju Yeon Lee

E: In terms of resource management, Coupang was fined the most among companies that failed to fulfill their recycling obligations, and the use of plastic packaging is increasing every year.
S: Coupang was flagged for the largest number of disputes among online platforms. Not only conflicts with consumers and communities, but also the unfair labor practices are key risks.
G: Bom Kim resigned as chairman after the fire at Icheon Logistics Center. These measures were suspected of being intended to avoid punishment under the Serious Accidents Punishment Act.

Pullback Complete?; Commodities Heading Lower; Buying Growth/Cyclicals & A Few Utilities

By Joe Jasper

We are seeing signs that suggest this pullback may have run its course, as several global market indexes and Sectors appear to be making a higher low near logical support.
This includes the S&P 500, Russell 2000, MSCI ACWI (local currency), TOPIX/TOPIX Small/Nikkei 225, MSCI ACWI Technology (IXN-US), Consumer Discretionary (RXI-US), Financials (IXG-US), Industrials and (EXI-US) — add exposure.
While our overall outlook remains neutral, we continue to see a plethora of attractive buying opportunities in the new leaders.

Poongsan Corp: Spin-Off of Defense Business Is Negative for Existing Minority Shareholders

By Douglas Kim

On 7 September, Poongsan Corp announced a physical division spin-off of its defense business unit. This is likely to have a negative impact on the existing shareholders of Poongsan Corp.
Its proposal to spin off the defense business comes at a bad time when investors are very cautious about companies trying to spin off valuable businesses into a separate entity.
Poongsan’s spin-off is excluded from the need to include stock purchase rights.

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Sep 10

Daily Brief United States: Nasdaq-100 Stock Index, Intuit Inc, Crowdstrike Holdings Inc, Palo Alto Networks, Sunpower Corp, Ralph Lauren, Tyler Technologies, Enphase Energy, Sunrun Inc and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

US Fresh Sell Levels
Intuit Inc: Value Proposition
CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers
Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers
SunPower Corporation: The IKEA Collaboration & Other Major Drivers
Ralph Lauren: Increased Digital Marketing Efforts
Tyler Technologies: Recent Acquisitions
Enphase Energy: The GreenCom Networks Acquisition & Other Drivers
Sunrun Inc: New Level 2 EV Charger & Other Drivers

US Fresh Sell Levels

By Thomas Schroeder

US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.

Intuit Inc: Value Proposition

Intuit had a strong quarter and delivered an all-around beat while continuing its focus on small businesses and customers.
It delivered strong margins and strong growth in the quarter.
There was a rise in the volatility in personal loans and various personal loan partners tightened the undertaking, but with volume from the other partners, Intuit was able to offset this negative impact.

CrowdStrike Holdings: Increasing Cybercrime & Ransomware Upside & Other Drivers

CrowdStrike saw its quarterly revenue exceed the $500 million threshold for the first time in the last quarter and delivered an all-around beat.
For the second consecutive quarter, gross retention increased to a new high, and dollar-based net retention soared to its highest point in seven quarters.
In the quarter, the public sector also became stronger, fueled by record-breaking success in U.S. federal and international government agencies.

Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers

Palo Alto Networks’ management has continued to make significant investments to transform the company and take advantage of the rapidly growing and large market opportunity in cybersecurity.
Palo Alto Networks is looking to grab a large chunk of market share and become a leader in the firewall market.
We provide the stock of Palo Alto Networks with a ‘Hold’ rating with a revision in the target price.

SunPower Corporation: The IKEA Collaboration & Other Major Drivers

SunPower delivered a strong set of in Q2 surpassing Wall Street expectations on all counts.
These elements increase customer motivation to add rooftop solar while also giving the residential solar sector greater price power than in recent memory.
Furthermore, SunPower renewed its agreement with Dream Finders Homes in Colorado in the new home market and extended its arrangement with KB Homes internationally.

Ralph Lauren: Increased Digital Marketing Efforts

Ralph Lauren delivered strong results this quarter surpassing revenue expectations of Wall Street as a result of solid growth across all key regions.
Ralph delivered solid consumer metrics, which include increased net promoter scores, purchase intent, and global brand consideration through an engaging mix of performance marketing and purpose-led investments.
We provide the stock of Ralph Lauren with a ‘Hold’ rating and a revision in the target price.

Tyler Technologies: Recent Acquisitions

Tyler Technologies is benefitting from positive trends in the environment of the public sector market as its demo activities, and RPF continue to trend positively.
The company leveraged successful cross-selling efforts and multi-suite wins to deliver a solid quarter with revenues and earnings surpassing Wall Street expectations.
Overall, we provide the stock of Tyler Technologies with a ‘Hold’ rating with a revision in the target price.

Enphase Energy: The GreenCom Networks Acquisition & Other Drivers

Enphase had a good quarter and managed to exceed Wall Street expectations on all counts.
Its total revenue for the second quarter was $530.2 million, an increase of 20% from the previous quarter.
In the third quarter, they supplied microinverters rated at about 1,213 megawatts DC and actuators rated at 132.4-megawatt hours.

Sunrun Inc: New Level 2 EV Charger & Other Drivers

By Shifara Samsudeen, ACMA, CGMA

Sunrun delivered a solid result, surpassing Wall Street expectations on all counts.
The company exceeded its volume projection and had almost 34,400 additional customers in the second quarter, including over 25,000 new subscribers.
Sunrun’s subscriber additions increased from almost 72% in Q1 to nearly 74% of its overall customer additions for the time period.

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Sep 10

Daily Brief China: Bilibili Inc, Shougang Fushan Resources, Agile Property Holdings, Palo Alto Networks and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls
Fushan Energy: Back to Interesting Levels
Chinese Property Weekly – 9 September 2022 – Lucror Analytics
Chinese Property Weekly – 9 September 2022 – Lucror Analytics
Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers

Bilibili: Profitability Sinks and Top Line Growth to Further Drop with Cost Controls

Bilibili reported 2Q2022 results yesterday. Revenue grew 9.2% YoY to RMB4.91bn (in-line with consensus), however, it declined 2.9% YoY sequentially driven by YoY decrease in revenue from mobile games.
Operating losses for the quarter further widened to RMB2.2bn (vs consensus RMB2.1bn) which accounted for 44.6% of revenues compared to 33.8% in the same period a year ago.
Bilibili Inc (BILI US) has taken several measure to improve its deteriorating profitability including headcount reduction, S&M cost cuts and close down of unprofitable businesses.

Fushan Energy: Back to Interesting Levels

By Sameer Taneja

Shougang Fushan Resources (639 HK) is back to interesting levels after a correction in HK/China and now trades at 4.5x PE/1.3x EV-EBITDA FY22e and a dividend yield of 17%.
With >50% of the market capitalization in cash (accounting for the dividend liability), there is an excellent margin of safety in the name.
A further correction of coking coal prices by 20% from these levels to 1700-1800 RMB/ton would still have the stock trading at a >10% dividend yield.

Chinese Property Weekly – 9 September 2022 – Lucror Analytics

By Charles Macgregor

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

Chinese Property Weekly – 9 September 2022 – Lucror Analytics

By Charles Macgregor

Palo Alto Networks: The NGFW Palo Alto Networks Cloud & Other Drivers

Palo Alto Networks’ management has continued to make significant investments to transform the company and take advantage of the rapidly growing and large market opportunity in cybersecurity.
Palo Alto Networks is looking to grab a large chunk of market share and become a leader in the firewall market.
We provide the stock of Palo Alto Networks with a ‘Hold’ rating with a revision in the target price.

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Sep 10

Daily Brief India: Lupin Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

Lupin Ltd (LPC IN): Muted Q1FY23 Results as The US Sales Dipped Significantly

Lupin Ltd (LPC IN): Muted Q1FY23 Results as The US Sales Dipped Significantly

By Tina Banerjee

Lupin Ltd (LPC IN) reported muted Q1FY23 performance, with revenue declining 15% y/y and 7% q/q to INR36 billion. Revenue from North America is down 24% y/y and 29% q/q.
Price erosion in the U.S. coupled with shelf stock adjustment on the higher trade inventory are creating a dent to the quarterly numbers.
We would like to see a sustainable revival in the company’s North America revenue performance and margin improvement, before taking any position in the stock.

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Sep 10

Most Read: Guangdong Investment, Farglory Land Development, Link Administration, Hitachi Transport System, Shidax Corp, Dongfang Electric, Onewo Space-Tech, Nasdaq-100 Stock Index, Tyro Payments and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

S&P Global Water Index: Market Consultation Driven Potential Changes
A Taiwan Basket Trade For A Special Index Rebal
Link Admin (LNK AU): ACCC Approval & Index Changes
Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow
Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy
Dongfang Electric (1072 HK): At Full Throttle
Onewo Space-Tech Pre-IPO – Thoughts on Valuation
US Fresh Sell Levels
Tyro Payments Rejects Potentia’s Proposal. MCB Accepts
Hong Kong Buybacks Weekly (Sep 9th): Tencent, AIA, Xiaomi

S&P Global Water Index: Market Consultation Driven Potential Changes

S&P DJI commenced a market consultation for the S&P Global Water Index on 29 July and that could lead to quite a few changes to the index in October.
We currently see 14 deletions and 10 inclusions for the index in October. Most of the changes will have a high impact from passive fund trading.
There could be more changes in April 2023 once stocks listed in Emerging Markets are included in the index.

A Taiwan Basket Trade For A Special Index Rebal

By Travis Lundy

The FTSE TWSE Taiwan indices get rebalanced in line with the standard FTSE Global indices – on the third Friday of September.
The most interesting one is the probably the least famous. It has only one change but it has massive re-weightings because of the way the index is constructed.
Historical patterns suggest a right-way long-short basket, reversed on the event, is a good trade.

Link Admin (LNK AU): ACCC Approval & Index Changes

The ACCC will not oppose the proposed acquisition of Link Administration (LNK AU) by Dye & Durham removing a major hurdle. Other regulatory approvals are still pending.
If regulatory clearances are received in the next week and the Court approves the Scheme, Link Administration (LNK AU) will stop trading at the close on 15 September.
We estimate passive trackers across all indices will need to sell 35.53m shares (A$153m; 18 days of ADV) of Link Administration (LNK AU) at the close on 15 September.

Hitachi Transport (9086 JP) – Tender Launch Likely Soon But Watch for Flow

By Travis Lundy

Hitachi Transport System (9086 JP) has had a “long” wait to get its approvals, but EC and China are in, any remaining should be in shortly.
Yesterday, as a footnote on the SG Holdings offering document, there was a comment about SG Holdings selling shares. This was likely more good corporate governance hygiene than warning.
Shares are down this morning. I’d expect final approvals and launch quite soon. I would therefore look to buy the dip on flow – block or not.

Oisix-Shida Stoush with SHiDAX Suggests Strong but Subtle Strategy

By Travis Lundy

Shidax Corp (4837 JP) is a food service business in the midst of a so-far reasonably successful restructuring. The family had a partner in Unison and hoped to extend.
The founding family and Unison now have ~60% together, and they vote together. Unison wants out. The family wants Oisix ra daichi (3182 JP) in. So Oisix has tendered.
But SHiDAX sees the conflict and minorities getting hosed. So they object. The “easy” solution is a full MBO with Oisix support.

Dongfang Electric (1072 HK): At Full Throttle

By Osbert Tang, CFA

Strong new orders in 2H22 and FY23 are the drivers for Dongfang Electric (1072 HK) after it posted a 31.6% earnings growth and new orders of Rmb36.7bn in 1H22.
Demand outlook for its major products including coal-fired, gas turbine, renewable, pumped storage and hydrogen energy are all very encouraging.
We estimate order backlog will equal to 1.6x FY22F revenue by year-end. Despite solid outperformance, DEC is still cheap at 12.6x and 9.8x PERs for FY22 and FY23.

Onewo Space-Tech Pre-IPO – Thoughts on Valuation

By Sumeet Singh

Onewo Space-Tech (ONEWO HK) aims to raise upto US$2bn in its Hong Kong IPO. OST is a property management service provider primarily owned by China Vanke (2202 HK).
As per Frost & Sullivan, amongst the residential community service providers in China, OST ranked first. It also ranked first in the commercial space integrated services market in China.
In this note, we provide our earnings estimates and thoughts on valuation.

US Fresh Sell Levels

By Thomas Schroeder

US bounce in line off of SPX 3,900 support. Index trendline resistances will offer fresh sell points with NDX our top short pick in the US.
RTY was our long pick off of 1,775 support, to trade a bounce toward trendline and will then turn bearish again.
NDX 12,500 zone the fresh short area. DAX and weaker Asia still a high conviction short group.

Tyro Payments Rejects Potentia’s Proposal. MCB Accepts