Smartkarma Daily Briefs

There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

China Healthcare Weekly (Sep.8)- 9th VBP, Reliable Profit Model of Biotech, Medlive, China’s Outlook

By Xinyao (Criss) Wang

The 9th national VBP has begun. We analyzed the major big varieties with sales over RMB1 billion included in this VBP and the impact on related domestic pharmaceutical companies.
“Concept validation” of the business model of Chinese Biotech companies has been completed. Even under enormous pressure of medical insurance fee control policy, drug sales remain a reliable profit model.
Medlive’s weak share price performance has a reason. The significant profitability increase in 23H1 wasn’t from the improvement of main business. Its business model needs time to be further validated.

NetEase Inc.: New Gaming Studio Launch & Other Major Drivers

NetEase delivered a mixed set of results in the quarter, with revenues well below expectations, but managed an earnings beat.
Revenues from the Fantasy Westward Journey Saga continued to increase year over year in the quarter, again impressing the industry with this IP’s enduring appeal.
In the second quarter, Cloud Music’s GP margin increased significantly because of the growth of membership services and ongoing cost-cutting initiatives.

Quiddity A/H Premium Weekly (Sep 8): ICBC, ABC, CCB, BOC, Vanke, NCL, Rails

The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
New stimulus measures appear to be triggering FOMO on real estate stocks, but a foreshortened week, yet again, makes one wonder. There IS money being applied though.
I expect more measures and more buying. I am not sure I would want to be short any Hs with a deep discount to the A the next few months.

Nongfu Spring (9633 HK): Within Striking Distance

By Steve Zhou, CFA

Nongfu Spring (9633 HK) has been trading flat since April 2021, even though earnings have grown 36% yoy in 2021, 19% yoy in 2022, and 25% yoy in 1H23.
We believe a forward PE lower than 35x would be a great entry price for Nongfu (37x currently), with upside potential in earnings from explosive growth in unsweetened tea.
A business that has a long run-way for growth, strong management, strengthening moat, great cash flow, and on top of that counter-cyclical, deserves a premium valuation anywhere in the world.

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Sep 10

Daily Brief Japan: JMDC , Lasertec Corp, ZOZO Inc, Softbank Group, Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH
Last Week in Event SPACE: Nikkei 225 Flow, Aquila Acquisition, Axiata, Intage, Liontown/Albemarle
ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel
After Selling the Property, There Appears to Be No Set Plan for How the Cash Will Be Used

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH

The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

Last Week in Event SPACE: Nikkei 225 Flow, Aquila Acquisition, Axiata, Intage, Liontown/Albemarle

By David Blennerhassett

The Nikkei Index Team announced the changes to the Nikkei 225. That triggers flows of about ¥480bn a side, and some big, big changes.
As interest rates and inflation remain high, investors will (should) continue to prefer lower-risk investments over higher-risk growth companies such as de-SPACed Aquila Acquisition Corporation (7836 HK).
The Liontown Resources (LTR AU) / Albemarle Corp (ALB US) transaction looks done. However, Gina Rinehart may have other ideas.

ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, things are getting busy again with multiple deals live across the region, whic his a refreshing change from the slow start in the first half.
There were only a few placement this week, but what the lacked in volume they made up for in size.

After Selling the Property, There Appears to Be No Set Plan for How the Cash Will Be Used

By Aki Matsumoto

The need to obtain investment capital for future business development or the presence of stakeholders with a strong desire to improve asset efficiency may be the catalyst for selling property.
Of course, cash should be used to return to shareholders, but the stock market expects more profit growth, so higher profit margins and ROE are required.
The data from Ministry of Finance indicates that cash still hasn’t been spent on investments. Cash appears to be currently being used reluctantly for investments that will generate future profits.

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Sep 10

Daily Brief Energy/Materials: Evolution Mining, Zhejiang Huayou Cobalt , Newcrest Mining, Liontown Resources and more

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

In today’s briefing:

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact
MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover
Newcrest Mining (NCM AU): Scheme Meeting on 13 October
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newcrest/Newmont, Dic Corp, Golden Eagle, Mason, MPIC

MVIS Global Junior Gold Miners Index Rebalance: One Add, One Delete, Float, Capping = Big Impact

There is one add, one delete, one listing change, plus float and capping changes for the VanEck Vectors Junior Gold Miners ETF (GDXJ US) in September.
Estimated one-way turnover is 6.1% and that results in a one-way trade of US$240m. There are 31 stocks with over 1 day of ADV to trade from passive trackers.
There will be some same way and some opposite flows between the VanEck Vectors Junior Gold Miners ETF (GDXJ) and S&P/ASX 200 (AS51) trackers at the close on 15 September.

MVIS Global Rare Earth/Strategic Metals Index Rebalance: One Add, Two Deletes & Big Turnover

There is one add and two deletes for the MVIS Global Rare Earth/Strategic Metals Index at the September rebalance. Plus there are free float and capping changes.
One way turnover is estimated at 11.1% and will result in a one-way trade of US$58m. There are a few stocks with over 0.5 days of ADV to trade.
The inclusion of Sociedad Quimica y Minera de Chile (SQM US) and deletion of Zhejiang Huayou Cobalt (603799 CH) are surprises.

Newcrest Mining (NCM AU): Scheme Meeting on 13 October

By Arun George

Newcrest Mining (NCM AU)‘s IE considers Newmont Mining (NEM US)’s offer of 0.400 Newmont shares per Newcrest share + special dividend + FY2023 dividend to be reasonable but not fair.
The IE valued Newcrest at US$18.64-21.13 per share vs. the transaction value of US$17.10-18.70 per share. The sharp sector de-rating, including Newmont’s shares, has impacted the scrip-heavy offer.
The offer remains attractive compared to peer multiples, historical prices and VWAP exchange ratios. At the last close prices and for the 6 November payment, the gross/annualised spread is 1.2%/7.8%.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Newcrest/Newmont, Dic Corp, Golden Eagle, Mason, MPIC

By David Blennerhassett

I tally 50 – 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 this week: the Tender Offer for Dic Corp (4631 JP) and the Partial Offer for Intage Holdings (4326 JP).
Key updates took place for Newcrest Mining (NCM AU), Liontown Resources (LTR AU), Golden Eagle Retail (3308 HK), Mason Group Holdings (273 HK), and Metro Pacific Investments Co (MPI PM).

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Sep 10

Daily Brief Industrials: Severfield PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Severfield – FY24 in line, but risks edge up further on

Severfield – FY24 in line, but risks edge up further on

Severfield’s AGM statement highlights that FY24 is expected be in line with management expectations and that the quality of the orderbooks – both in the UK and Europe, and India – remains a key support for the future. That said, the outlook for the UK and continental Europe is less robust in the short term than it was due to the impact of high inflation and the rising interest rate cycle. The FY24e P/E rating of c 7x remains comfortably below the long-term average of 10.0x, implying that some risk is discounted in the rating. The stock yields more than 5%.

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Sep 10

Daily Brief TMT/Internet: Taiwan Semiconductor (TSMC) – ADR, Computershare Ltd, Intuit Inc, Netapp Inc, Lasertec Corp, NetEase , Analog Devices, Softbank Group and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC
MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes
Intuit Inc.: Launch of QuickBooks Workforce Mobile Application & Other Major Developments
NetApp Inc.: Relaunch of NetApp Channel Program & Other Developments
Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH
NetEase Inc.: New Gaming Studio Launch & Other Major Drivers
Analog Devices: Wireless BMS Integration Could Be The Next Big Thing! Major Drivers
ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel

MVIS US Listed Semiconductor 25 Index Rebalance: Upweight for TSMC

The upcoming rebalance of the MVIS US Listed Semiconductor 25 Index will be implemented on 15 September. There are no constituent changes, but there are float and capping changes.
The VanEck Vectors Semiconductor (SMH US) ETF tracks the index and has an AUM of US$9.7bn.
Estimated one-way turnover is 5.9% resulting in a one-way trade of US$595m. The stocks are extremely liquid, the impact on the stock in terms of ADV to trade is small.

MVIS Australia Equal Weight Index Rebalance: Float & Capping Changes

There are no constituent changes for the MVIS Australia Equal Weight Index at the September rebalance. JB Hi-Fi Ltd (JBH AU) and Charter Hall (CHC AU) have avoided deletion.
Float and capping changes will result in a one-way turnover of 3.5% and in a one-way trade of A$69m.
There is a lot of short interest on stocks that will have passive buy/sell flows, but there will not be enough volume traded for shorts to use to reduce positions.

Intuit Inc.: Launch of QuickBooks Workforce Mobile Application & Other Major Developments

Intuit Inc. managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
The company raised revenue by 13% for the entire year, produced good operating margin growth, and finished the year on a high note.
Revenue from the desktop environment and QuickBooks Desktop Enterprise revenue increased significantly.

NetApp Inc.: Relaunch of NetApp Channel Program & Other Developments

NetApp delivered an all-around beat in the most recent quarterly result.
The company’s rigorous operational management and the enthusiastic customer response to its innovation continue to yield positive results.
They are also making strategic purchases in order to lock in significant loan NAND pricing and reduce future price increases.

Index Rebalance & ETF Flow Recap: NKY, ASX, CSI300, KOSDAQ150, Yuanta ETFs, MVA, MVW, SMH

The changes at the Nikkei 225 September rebalance were announced on 4 September. The rebalance of the HSI, HSCEI, HSTECH and HSCI was implemented on the same day.
The changes to the MVIS indices were announced on 8 September and will be implemented at the close on 15 September. The S&P/ASX family will also rebalance on 15 September.
After a month and a half of big inflows to onshore China ETFs, there were small outflows from a lot of ETFs during the week.

NetEase Inc.: New Gaming Studio Launch & Other Major Drivers

NetEase delivered a mixed set of results in the quarter, with revenues well below expectations, but managed an earnings beat.
Revenues from the Fantasy Westward Journey Saga continued to increase year over year in the quarter, again impressing the industry with this IP’s enduring appeal.
In the second quarter, Cloud Music’s GP margin increased significantly because of the growth of membership services and ongoing cost-cutting initiatives.

Analog Devices: Wireless BMS Integration Could Be The Next Big Thing! Major Drivers

Analog Devices delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
The operating margin was almost 48%, the gross margin was above 72%, and the EPS was $249 million.
Analog Devices anticipates revenue of around $2.7 billion for the fourth quarter.

ECM Weekly (10th Sep 2023) – ARM, VNG, Tuhu, Integral, Doosan, Orora, JFE, RR Kabel, Samhi Hotel

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, things are getting busy again with multiple deals live across the region, whic his a refreshing change from the slow start in the first half.
There were only a few placement this week, but what the lacked in volume they made up for in size.

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Sep 10

Daily Brief Industrials: Severfield PLC and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Severfield – FY24 in line, but risks edge up further on

Severfield – FY24 in line, but risks edge up further on

💡 Before it’s here, it’s on Smartkarma

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Sep 10

Daily Brief Consumer: Williams Sonoma, Advance Auto Parts, ZOZO Inc, Nongfu Spring , Tokyo Stock Exchange Tokyo Price Index Topix and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Williams-Sonoma Inc.: 4 Surprising Takeaways From Their Recent Financial Performance – Financial Forecasts
Advance Auto Parts: Does It Have A Sustainable Competitive Advantage? – Major Drivers
Last Week in Event SPACE: Nikkei 225 Flow, Aquila Acquisition, Axiata, Intage, Liontown/Albemarle
Nongfu Spring (9633 HK): Within Striking Distance
After Selling the Property, There Appears to Be No Set Plan for How the Cash Will Be Used

Williams-Sonoma Inc.: 4 Surprising Takeaways From Their Recent Financial Performance – Financial Forecasts

Williams-Sonoma delivered a mixed result in the recent quarter, with revenues below market expectations, but it managed to surpass the analyst consensus in terms of earnings.
Williams-Sonoma achieved these outcomes despite a more promotional environment and softer industry metrics by focusing on regular price selling, leveraging the company’s market advantages, enhancing customer service, and managing costs.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

Advance Auto Parts: Does It Have A Sustainable Competitive Advantage? – Major Drivers

Advance Auto Parts delivered a mixed set of results for the previous quarter with revenues above the analyst consensus.
Their net sales increased during the quarter.
During Q2, Advance Auto Parts observed increase in DIY omnichannel and DIFM.

Last Week in Event SPACE: Nikkei 225 Flow, Aquila Acquisition, Axiata, Intage, Liontown/Albemarle

By David Blennerhassett

The Nikkei Index Team announced the changes to the Nikkei 225. That triggers flows of about ¥480bn a side, and some big, big changes.
As interest rates and inflation remain high, investors will (should) continue to prefer lower-risk investments over higher-risk growth companies such as de-SPACed Aquila Acquisition Corporation (7836 HK).
The Liontown Resources (LTR AU) / Albemarle Corp (ALB US) transaction looks done. However, Gina Rinehart may have other ideas.

Nongfu Spring (9633 HK): Within Striking Distance

By Steve Zhou, CFA

Nongfu Spring (9633 HK) has been trading flat since April 2021, even though earnings have grown 36% yoy in 2021, 19% yoy in 2022, and 25% yoy in 1H23.
We believe a forward PE lower than 35x would be a great entry price for Nongfu (37x currently), with upside potential in earnings from explosive growth in unsweetened tea.
A business that has a long run-way for growth, strong management, strengthening moat, great cash flow, and on top of that counter-cyclical, deserves a premium valuation anywhere in the world.

After Selling the Property, There Appears to Be No Set Plan for How the Cash Will Be Used

By Aki Matsumoto

The need to obtain investment capital for future business development or the presence of stakeholders with a strong desire to improve asset efficiency may be the catalyst for selling property.
Of course, cash should be used to return to shareholders, but the stock market expects more profit growth, so higher profit margins and ROE are required.
The data from Ministry of Finance indicates that cash still hasn’t been spent on investments. Cash appears to be currently being used reluctantly for investments that will generate future profits.

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Sep 10

Daily Brief Financials: Abacus Group, Vinhomes , Royal Bank Of Canada, Toronto Dominion Bank, China Vanke (H) and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow
MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes
Royal Bank of Canada: Exploring the Global Markets for Rapid Expansion! – Major Drivers
The Toronto-Dominion Bank: Redefining Banking with Strategic Investments! – Major Drivers
Quiddity A/H Premium Weekly (Sep 8): ICBC, ABC, CCB, BOC, Vanke, NCL, Rails

MVIS Australia A-REITs Index Rebalance: Abacus Group Deletion Means More Outflow

As expected, Abacus Group (ABG AU) will be deleted from the MVIS Australia A-REIT Index at the close on 15 September.
Abacus Group (ABG AU) will also be deleted from the S&P/ASX 200 (AS51 INDEX) on the same day, so this increases the sell flow on the stock.
Estimated one-way turnover at the rebalance is 3.8% resulting in a one-way trade of A$23.8m. There are a few stocks with over 1x ADV to trade from passive trackers.

MarketVector Vietnam Local Index Rebalance: Some Big Impact Changes

There are no constituent changes for the index but there are float and capping changes that will be implemented at the close on 15 September.
Estimated one-way turnover is 3.3% and the one-way trade is US$21.5m. There are eight stocks where passive trackers need to trade over 1 day of ADV.
After large creations for Market Vectors Vietnam ETF (VNM US) at the start of the year, there has not been a lot of follow-on activity as the market moves higher.

Royal Bank of Canada: Exploring the Global Markets for Rapid Expansion! – Major Drivers

Royal Bank of Canada managed to exceed analyst expectations in terms of revenue and earnings.
Revenue increased by 19% to $14.5 billion because of the strength of their diversified business strategy, which delivered revenue growth across all of their businesses.
In Corporate Banking and Investment Banking, the Royal Bank of Canada kept moving its operations toward globalization and expanded the range of industries and products it served.

The Toronto-Dominion Bank: Redefining Banking with Strategic Investments! – Major Drivers

The Toronto-Dominion Bank delivered a mixed result in the recent quarter, with revenues above market expectations but failed to surpass the analyst consensus regarding earnings.
Revenue increased yearly, mostly due to margin improvement in the company’s retail sectors.
Earnings in the Canadian Personal and Commercial Banking division were $1.7 billion, with revenue increasing by 7% and operating leverage significantly improving.

Quiddity A/H Premium Weekly (Sep 8): ICBC, ABC, CCB, BOC, Vanke, NCL, Rails

The Brand-Spanking New (three weeks old) A-H Monitor has tables, charts, measures galore.
New stimulus measures appear to be triggering FOMO on real estate stocks, but a foreshortened week, yet again, makes one wonder. There IS money being applied though.
I expect more measures and more buying. I am not sure I would want to be short any Hs with a deep discount to the A the next few months.

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Sep 10

Daily Brief Health Care: Celltrion Inc, JMDC , Eubiologics, EMIS Group PLC, Medlive Technology, SIGA Technologies and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue
Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing
EuBiologics (206650 KS): Solid 1H23 Performance; Oral Cholera Vaccine on A Consistent Growth Path
EMIS Group – H123 on track; 21.3p interim dividend declared
China Healthcare Weekly (Sep.8)- 9th VBP, Reliable Profit Model of Biotech, Medlive, China’s Outlook
SIGA Technologies – Notable CMO appointment to position for growth

Progress of Merger Between Celltrion Inc and Celltrion Healthcare & Appraisal Rights Issue

By Douglas Kim

The appraisal right prices of Celltrion Inc (068270 KS) is 150,813 won (2.2% higher than current price) and Celltrion Healthcare (091990 KS) is 67,251 won (1.9% higher than current price).
Celltrion Inc has mentioned that the merger could be cancelled if the total amount of appraisal share purchase amount exceeds 1 trillion won.
Although some investors are likely to exercise their appraisal rights in this merger, we would attach a higher probability of this merger getting completed (80-90%+).

Omron Partial Offer for JMDC (4483) – The Engagement Is On! This Is the Script, This Is the Timing

In February 2022, Noritsu Koki (7744 JP) sold a chunk of JMDC (4483 JP) to Omron Corp (6645 JP) for nearly US$1bn. 7mos later, Omron supported a primary offering.
Now Omron is going to 50+%, as Noritsu Koki is getting out. Other investors have to participate for this to succeed.
The question of pro-ration may be a question of Elmer vs Mr Partridge. But Elmer has a point here.

EuBiologics (206650 KS): Solid 1H23 Performance; Oral Cholera Vaccine on A Consistent Growth Path

By Tina Banerjee

Eubiologics (206650 KS) recorded 24% YoY revenue growth to KRW31B in 1H23, due to strong export demand of oral cholera vaccine. Operating profit jumped 6x, while net profit surged 3x.
In May 2023, Eubiologics and its partner have launched Euvichol-Plus in India. With a huge unmet need, Euvichol, an effective cholera vaccine is expected to see strong uptrend in India.
Eubiologics has signed a technology transfer agreement with DEK Vaccines to enable the domestic production and supply of the cholera vaccine in Ghana. This opens additional revenue stream for Eubiologics.

EMIS Group – H123 on track; 21.3p interim dividend declared

EMIS reported H123 revenue and adjusted operating profit in line with board expectations. Revenue grew 2% year-on-year and adjusted operating profit was 7% higher, with an adjusted operating margin of 26.9% (+120bp y-o-y). The company closed H123 with net cash of £48.5m. Assuming the takeover of EMIS is not effective prior to 7 October, on 23 October the company will pay an interim dividend of 21.3p to shareholders on the register on 6 October.

China Healthcare Weekly (Sep.8)- 9th VBP, Reliable Profit Model of Biotech, Medlive, China’s Outlook

By Xinyao (Criss) Wang

The 9th national VBP has begun. We analyzed the major big varieties with sales over RMB1 billion included in this VBP and the impact on related domestic pharmaceutical companies.
“Concept validation” of the business model of Chinese Biotech companies has been completed. Even under enormous pressure of medical insurance fee control policy, drug sales remain a reliable profit model.
Medlive’s weak share price performance has a reason. The significant profitability increase in 23H1 wasn’t from the improvement of main business. Its business model needs time to be further validated.

SIGA Technologies – Notable CMO appointment to position for growth