Smartkarma Daily Briefs

Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders.
Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.

Pentmaster (1665 HK): Malaysian Parent’s Offer For Pseudo Dual-Listing

By David Blennerhassett

In Pentamaster Corp: In The (EV) Driver’s Seat in February last year, I discussed Pentamaster Corp (PENT MK)‘s supply of semiconductors testers to the electric vehicle business.
A quirk of PENT was that its pseudo dual-listed twin – Pentamaster International (1665 HK) – trades at a significant discount.
In a not altogether surprising move, PENT is now seeking to take PI private by way of a Scheme at HK$1.00/share, including a HK$0.07/share dividend.

Japan: Potential Passive Selling in February

Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.
Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.

Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Arcadium Lithium (LTM AU), Seven & I Holdings (3382 JP), Get Nice Financial Group Ltd (1469 HK), ESR Group (1821 HK), Goldlion Holdings (533 HK).
Lowest spreads: Lifestyle China (2136 HK), Renewable Japan (9522 JP), Macromill, Inc (3978 JP), Fuji Soft Inc (9749 JP), Nec Networks & System Integr (1973 JP).

Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?

By Xinyao (Criss) Wang

Hopson Development (754 HK) is cash-strapped and it will most likely choose cash dividend, which would increase the likelihood that Glorious Peace’s shareholding ratio will increase to more than 50%.
If PAGD’s share price is higher than HK$6.12, there is arbitrage opportunity. Since Ping An may hope other shareholders to choose cash dividends, future stock price may fall below HK$6.12
A risk point is Ping An can actually wait for other shareholders to make their choices before making the final decisions based on the stock price situation at that time.

Korea’s Dem Leader: PBR Under 0.3x Should Be Hostile M&A Targets – Names That Could Feel the Heat

By Sanghyun Park

During the public hearing, Lee Jae-myung asked Simpac’s CFO about their 0.3x PBR, then remarked, “That’s prime territory for a hostile M&A.”
With PBRs under 0.3x, these companies may roll out shareholder returns to manage political pressure—definitely worth tracking from a value-up trading perspective.
Hanwha is interesting due to its room for shareholder returns and potential merger with Hanwha Energy. With the new Commercial Act, a public tender offer is likely. Worth watching closely.

KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.

Analyzing the Regulatory Loophole in Kaspi’s Acquisition of D-Market’s Controlling Stake and Potential Outcomes

By Dalius Tauraitis

D-Market’s controlling stake is being sold to Kaspi, acquiring Class A shares at $7.57 and Class B at $4.75.
Turkish law mandates a takeover offer for minority shares, but HEPS’s ADR structure exempts it from this requirement.
Activism efforts aim to increase HEPS’s shareholders to 500, potentially forcing Kaspi to include minority shareholders.

Strategic Transactions and Legal Developments: HEPS, ACC:OL, ABCP, BELFB, NWOR:L, EMBRAC, AVAP:L

By Dalius Tauraitis

D-Market Electronic Services & Trading’s (HEPS) controlling stake is being sold to Kaspi, exploiting a regulatory loophole to avoid a mandatory takeover offer.
Aker Carbon Capture (ACC:OL) sold its business, leaving a cash shell trading at a 20% discount to net cash.
Ambase (ABCP) is litigating over an Equity Put Right, with summary judgment motions scheduled, potentially impacting share price.

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Dec 23

Daily Brief Equity Bottom-Up: Unloved Japan Roundup-Rohm and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Unloved Japan Roundup-Rohm, Taiyo Yuden, Kose
2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers
Vesync (2148 HK): A Potential Privatisation?
Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024
Ricegrowers Ltd – Branded focus paying off
Empire Energy Group Ltd – The science says potential water impacts likely minor
Monthly Chinese Express Tracker | November Volume, ASPs | Review of YTD Performance (December 2024)

Unloved Japan Roundup-Rohm, Taiyo Yuden, Kose

By Michael Allen

Solar power will be cheaper than fossil fuels and EVs will be cheaper than ICE vehicles, but you can’t make either without the parts that Rohme excels in.
Tesla is up 201% on speculation about its FSD, but Taiyo Yuden, which makes critical parts in FSD systems is down systems, is down 43%.
Kose is down 49%, largely on China woes, but China is no longer big enough to be a problem, and Japan and other regions growth should start to take over.

2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers

By Devi Subhakesan

DFI Retail Group Holdings (DFI SP), a leading retail player in Asia, is navigating sector headwinds through strategic pivots and cost cuts to drive superior margins and returns.
After hitting a 10-year low in early August, DFI Retail’s stock rebounded, driven by strong 1H2024 earnings that reflected the impact of management’s initiatives.
With an attractive dividend yield, strong cash flow, and a positive earnings growth outlook, DFI Retail offers a low-risk, high-return opportunity for investors in 2025.

Vesync (2148 HK): A Potential Privatisation?

By Osbert Tang, CFA

Vesync (2148 HK)‘s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited.
1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.
Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector’s average PER multiple implies ~70% higher than the pre-suspension price.

Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024

RaaS interviewed Ricegrowers Group CFO Dimitri Courtelis following the company’s H1 FY25 results.
This is a full transcript of the interview.

Ricegrowers Ltd – Branded focus paying off

RaaS has published an update on and interview with FMCG agri-group Ricegrowers which trades as SunRice (ASX:SGLLV) following the release of its interim report last week in which it delivered RaaS-adjusted EBITDA of $67.9m (+10%) in line with our forecasts and NPAT of $31.2m (+4%), below our forecasts due to a higher than expected tax rate (28% vs our 22%).Branded sales represent ~70% of total SGLLV sales, with the benefits of new brands, brand extensions and increased ranging evident in the H1 FY25 result.
Across Rice Food, Riviana and CopRice EBITDA growth far outpaced revenue growth, with EBITDA margins for Rice Food +400bps, +330bps for CopRice and +140bps for Riviana.
SGLLV added SavourLife and Simply Delish to the portfolio over the half and can be expected to add and extend further brands in pursuit of its 2030 revenue target of $3.0b.

Empire Energy Group Ltd – The science says potential water impacts likely minor

RaaS has published a flash comment on NT-focused gas explorer/producer Empire Energy Group (ASX:EEG) following the recently released findings of the Independent Expert Scientific Committee (IESC) on unconventional gas in the Beetaloo which has assessed the potential environmental impact and risk on water resources to be ‘minor’ if appropriate mitigation strategies are implemented.
The article published on the NT News website, also references comments from the Federal Department of Climate Change, Energy, Environment and Water (DCEEW) which concluded that exploration work (to date) did not meet the legal threshold of being a matter of national environmental significance to be assessed under national environmental law.
In our view, these findings from both assessments are positive for operators with respect to current gas development plans and potential future phases of gas expansion.

Monthly Chinese Express Tracker | November Volume, ASPs | Review of YTD Performance (December 2024)

By Daniel Hellberg

Volume growth & price declines both moderated in November vs preceding months
We believe most express companies should be experiencing margin expansion in Q424
We finish with a review 2024’s winners and losers in China’s ecomm fulfillment space

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Dec 23

Daily Brief Macro: Global Monetary Easing Cycle Becomes More Idiosyncratic and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Global Monetary Easing Cycle Becomes More Idiosyncratic
Equity Return Expectations Under An Alien Invasion
The Darker Side of the Hindenburg Omen

Global Monetary Easing Cycle Becomes More Idiosyncratic

By Said Desaque

The Swiss and Canadian central banks cut their respective policy rates by 50 basis points. The former faces currency appreciation and deflationary risks. Canada faces higher unemployment and deteriorating growth.
The European Central Bank is taking a gradual policy easing path in 2025. Policy outlooks for the Reserve Bank of Australia and Bank of England are more data dependent.
The Fed cut its policy rate by 25 basis points as expected, but fewer reductions are now expected in 2025 due to a more robust economic outlook compared to September.

Equity Return Expectations Under An Alien Invasion

By Cam Hui

We are subscribers to Occam’s Razor, or the simplest explanation is the most satisfactory, and recent UFOs sightings are of terrestrial origin.
It’s nevertheless a worthwhile exercise to consider asset return expectations under the scenario of an extra-terrestrial alien invasion.
Our study of an alien invasion opens the door to discussing return studies. Standard assumptions about returns to bonds and equity risk premiums are useful only up to a point.

The Darker Side of the Hindenburg Omen

By Cam Hui

Current market conditions are characterized by a strong S&P 500 that’s near its all-time high and weak breadth.
The closest template to these circumstances is August 1972, which is just before the final Nifty Fifty top.
As the market undergoes its inevitable bounce due to oversold conditions, investors should monitor technical conditions for negative divergences, which could be the signal for a long-term cyclical top.

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Dec 23

Daily Brief Australia: Empire Energy, Ricegrowers Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Empire Energy Group Ltd – The science says potential water impacts likely minor
Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024
Ricegrowers Ltd – Branded focus paying off

Empire Energy Group Ltd – The science says potential water impacts likely minor

RaaS has published a flash comment on NT-focused gas explorer/producer Empire Energy Group (ASX:EEG) following the recently released findings of the Independent Expert Scientific Committee (IESC) on unconventional gas in the Beetaloo which has assessed the potential environmental impact and risk on water resources to be ‘minor’ if appropriate mitigation strategies are implemented.
The article published on the NT News website, also references comments from the Federal Department of Climate Change, Energy, Environment and Water (DCEEW) which concluded that exploration work (to date) did not meet the legal threshold of being a matter of national environmental significance to be assessed under national environmental law.
In our view, these findings from both assessments are positive for operators with respect to current gas development plans and potential future phases of gas expansion.

Ricegrowers (SunRice ASX:SGLLV) Interview Transcript 23 December 2024

RaaS interviewed Ricegrowers Group CFO Dimitri Courtelis following the company’s H1 FY25 results.
This is a full transcript of the interview.

Ricegrowers Ltd – Branded focus paying off

RaaS has published an update on and interview with FMCG agri-group Ricegrowers which trades as SunRice (ASX:SGLLV) following the release of its interim report last week in which it delivered RaaS-adjusted EBITDA of $67.9m (+10%) in line with our forecasts and NPAT of $31.2m (+4%), below our forecasts due to a higher than expected tax rate (28% vs our 22%).Branded sales represent ~70% of total SGLLV sales, with the benefits of new brands, brand extensions and increased ranging evident in the H1 FY25 result.
Across Rice Food, Riviana and CopRice EBITDA growth far outpaced revenue growth, with EBITDA margins for Rice Food +400bps, +330bps for CopRice and +140bps for Riviana.
SGLLV added SavourLife and Simply Delish to the portfolio over the half and can be expected to add and extend further brands in pursuit of its 2030 revenue target of $3.0b.

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✓ Company Data and News
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Dec 23

Daily Brief Singapore: DFI Retail Group Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers

2025 High Conviction: DFI Retail – Churning Free Cash by Turning the Right Levers

By Devi Subhakesan

DFI Retail Group Holdings (DFI SP), a leading retail player in Asia, is navigating sector headwinds through strategic pivots and cost cuts to drive superior margins and returns.
After hitting a 10-year low in early August, DFI Retail’s stock rebounded, driven by strong 1H2024 earnings that reflected the impact of management’s initiatives.
With an attractive dividend yield, strong cash flow, and a positive earnings growth outlook, DFI Retail offers a low-risk, high-return opportunity for investors in 2025.

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

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

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Dec 23

Daily Brief South Korea: Hanwha Corporation, Posco DX and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Korea’s Dem Leader: PBR Under 0.3x Should Be Hostile M&A Targets – Names That Could Feel the Heat
KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

Korea’s Dem Leader: PBR Under 0.3x Should Be Hostile M&A Targets – Names That Could Feel the Heat

By Sanghyun Park

During the public hearing, Lee Jae-myung asked Simpac’s CFO about their 0.3x PBR, then remarked, “That’s prime territory for a hostile M&A.”
With PBRs under 0.3x, these companies may roll out shareholder returns to manage political pressure—definitely worth tracking from a value-up trading perspective.
Hanwha is interesting due to its room for shareholder returns and potential merger with Hanwha Energy. With the new Commercial Act, a public tender offer is likely. Worth watching closely.

KOSPI Size Indices: Overlap Between Global Passive Selling & Downward Migrations

The review period for the March rebalance of the KOSPI Size Indices commenced on 1 December and will end on 28 February.
A quarter of the way through the review period, we forecast 37 migrating stocks. Among new listings, 1 could be added to LargeCap, 3 to MidCap and 2 to SmallCap.
Four downward migrations were deleted from a global index in November. Now, three more downward migrations could be deleted from the same global index in February.

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

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

Dec 23

Daily Brief China: Shanghai Henlius Biotech , Ping An Healthcare and Technology, Vesync, Hang Seng Index, S.F. Holding and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January
Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?
Vesync (2148 HK): A Potential Privatisation?
EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 16-20
Monthly Chinese Express Tracker | November Volume, ASPs | Review of YTD Performance (December 2024)

Henlius (2696 HK): Interesting Shareholder Movements with the Vote on 22 January

Shanghai Henlius Biotech (2696 HK)’s IFA opines that Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer is fair and reasonable. The vote is on 22 January.
The key condition is approval by at least 75% of independent H Shareholders (<10% of all independent H Shareholders rejection). There are recent movements in H Share substantial shareholders.
Key shareholders should be supportive of the cash/scrip offer. At the last close and for a 15 February payment, the gross/annualised spread is 2.9%/16.9%.

Ping An Healthcare and Technology (1833 HK) – Cash Dividend Or Scrip Dividend?

By Xinyao (Criss) Wang

Hopson Development (754 HK) is cash-strapped and it will most likely choose cash dividend, which would increase the likelihood that Glorious Peace’s shareholding ratio will increase to more than 50%.
If PAGD’s share price is higher than HK$6.12, there is arbitrage opportunity. Since Ping An may hope other shareholders to choose cash dividends, future stock price may fall below HK$6.12
A risk point is Ping An can actually wait for other shareholders to make their choices before making the final decisions based on the stock price situation at that time.

Vesync (2148 HK): A Potential Privatisation?

By Osbert Tang, CFA

Vesync (2148 HK)‘s suspension may suggest privatisation by the Yang family (68.8% stake). With US$192m public float and US$216m net cash, out-of-pocket cash needed is limited.
1H24 is decent with a 37.5% earnings growth and 3.3pp margin expansion. The consensus forecast of 4.8% growth in 2H24 is conservative, providing a good opportunity for privatisation.
Benchmarking the take-out price to the 3-year average P/B will mean a 33% upside while the sector’s average PER multiple implies ~70% higher than the pre-suspension price.

EQD | Hong Kong Index Options Weekly – HSI and HSCEI December 16-20

By John Ley

Sleepy week highlighted by small closing price ranges that were among the 3-5 quietest of the year.
Volumes across both indexes were down about 1/3 from the prior week.
Despite low volumes open interest expanded across out-of-the-money options for both Puts and Calls.

Monthly Chinese Express Tracker | November Volume, ASPs | Review of YTD Performance (December 2024)

By Daniel Hellberg

Volume growth & price declines both moderated in November vs preceding months
We believe most express companies should be experiencing margin expansion in Q424
We finish with a review 2024’s winners and losers in China’s ecomm fulfillment space

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

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
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✓ Company Data and News
✓ Events & Webinars

Dec 23

Daily Brief Japan: Nec Networks & System Integr, Kioxia Holdings , Kokusai Electric , Seven & I Holdings, ROHM Co Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

NEC Networks (1973 JP) Next To Last Showdown – NEC Lowers Minimum, Bumps Tiny, Ignores Synergies
ECM Weekly (22nd Dec 2024) – LG CNS, Kioxia, Vishal Mega, IGI, Sai Life, Ventive, Paras
Japan: Potential Passive Selling in February
Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius
Unloved Japan Roundup-Rohm, Taiyo Yuden, Kose

NEC Networks (1973 JP) Next To Last Showdown – NEC Lowers Minimum, Bumps Tiny, Ignores Synergies

By Travis Lundy

On Friday, NEC Corp (6701 JP) raised the price for its Tender Offer on Nec Networks & System Integr (1973 JP) from ¥3,250 to ¥3,300.
It also lowered the minimum to 10.153mm shares (6.82%). It had proposed to do so earlier but NESIC demanded a bump, and NEC didn’t want to.
Now it’s bumped. That’s the “final price.” But it still does not include “a fair allocation of a portion of the value that cannot be realised without an acquisition.”

ECM Weekly (22nd Dec 2024) – LG CNS, Kioxia, Vishal Mega, IGI, Sai Life, Ventive, Paras

By Sumeet Singh

Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
On the IPO front, all of the India listings managed to do well, while Kioxia Holdings (285A JP) managed to provide steady returns as well.
On the placements front, there were only a few deals in India, led by Mankind Pharma.

Japan: Potential Passive Selling in February

Currently, 9 stocks could be deleted from global passive portfolios in February. The deletion will lead to liquidity events where trackers will need to sell multiple days of ADV.
There has been a buildup on shorts on few stocks with minimal positioning in the other stocks. That could change once the calendar ticks over to 2025.
Kokusai Electric (6525 JP) is a potential inclusion to the Nikkei 225 (NKY INDEX) in March and this deletion could provide liquidity to enter a position ahead of that announcement.

Merger Arb Mondays (23 Dec) – Seven & I, Fuji Soft, NEC Networks, Pentamaster, Goldlion, Henlius