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Smartkarma Daily Briefs

Oct 01
0

Daily Brief Consumer: Descente Ltd, T Gaia Corp, Swiggy, PDD Holdings, TSE Tokyo Price Index TOPIX, Pepsico Inc, Harley Davidson, British American Tobacco and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Itochu (8001 JP) Lowball TOB for Descente (8114) Is Here – Trades Tight But No Big Holder Appeared
  • T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
  • T-Gaia (3738 JP): Reality Check as Bain Launches a Takeunder
  • Swiggy Pre-IPO Tearsheet
  • Descente (8114 JP): Itochu’s (8001 JP) Tender Offer Launches
  • China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui
  • Not Many Companies Have Implemented Full-Scale Improvements in Return on Capital
  • PepsiCo Inc.: What Are The Challenges Responsible For Their Moderated Guidance? – Major Drivers
  • Harley-Davidson Inc.: Expansion Into Electric Motorcycles & Global Market Penetration! – Major Drivers
  • British American Tobacco p.l.c.: Strategic Investments in Heated Products & Modern Oral Products Driving Growth! – Major Drivers

Itochu (8001 JP) Lowball TOB for Descente (8114) Is Here – Trades Tight But No Big Holder Appeared

By Travis Lundy

  • Today, Itochu Corp (8001 JP) announced that it had received SAMR approval and would launch its Tender Offer to take private its affiliate, Descente Ltd (8114 JP). 
  • As warned last year, Descente is cheap on a forward basis due to very strong growth and profitability of Descente China Holdings but Itochu can downplay that future.
  • And indeed, it appear they did, and unless someone takes them to task, this probably gets done. So far, nobody has.

T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder

By Travis Lundy

  • Today, just before the close, the Nikkei put out a scoop that Bain would buy T Gaia Corp (3738 JP) for ¥140bn. Sounds big. It was a 30% discount.
  • There is a three Tender Offer process whereby minorities, who could be squeezed out regardless, are offered the opportunity to block the deal by not tendering at ¥2,670.
  • This not-quite “majority of minority” of the super-minority is an interesting governance condition established by the Special Committee. It bears some study.

T-Gaia (3738 JP): Reality Check as Bain Launches a Takeunder

By Arun George

  • T Gaia Corp (3738 JP) disclosed a Bain tender offer at JPY2,670, a 35.9% premium to the undisturbed price but a 27.2% discount to the last close.
  • Bain has set the minimum number of shares to be purchased at a 12.67% ownership ratio to appease the Board, which has a neutral recommendation. 
  • Bain hopes the offer’s harsh reality check will burst the share price bubble, nudging minorities to accept. An auction process suggests that the chance of a competing offer is low.   

Swiggy Pre-IPO Tearsheet

By Akshat Shah

  • Swiggy (1255298D IN) Swiggy is looking to raise about US$1.25bn in its upcoming India IPO. The deal will be run by Kotak, Citi, Jefferies, Avendus, JPM, BofA and ICICI.
  • Swiggy Limited (Swiggy) is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
  • The platform can also be used to make restaurant reservations (Dineout), event bookings (SteppinOut), product pick-up/drop-off services (Genie) and other hyperlocal commerce activities (Swiggy Minis).

Descente (8114 JP): Itochu’s (8001 JP) Tender Offer Launches

By Arun George

  • Descente Ltd (8114 JP) has announced that Itochu Corp (8001 JP)’s tender offer precondition has been satisfied. The offer terms are unchanged at JPY4,350 per share. 
  • The offer is arguably light due to the peer re-rating and historical trading ranges. It is also below the midpoint of the special committee’s IFA DCF valuation range. 
  • Nevertheless, the offer will likely succeed. There is no vocal opposition, the volume traded through terms is low, and the offer implies a premium multiple compared to peers. 

China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui

By Ming Lu

  • Temu as a subsidiary of PDD becomes the second largest global e-commerce website.
  • Meituan merges departments into fewer business units to cut expenses further.
  • Mercedes-Benz left the joint venture with BYD, as its high end products are not as popular as Tesla models.

Not Many Companies Have Implemented Full-Scale Improvements in Return on Capital

By Aki Matsumoto

  • Certainly, the “TSE’s request” has begun to change companies’ mindsets, but what we focus on now is whether they have put the plan into action and whether it’s producing results.
  • The importance of investor engagement is also indicated in the Japan Investor Relations Association’s survey summary. Companies that receive overseas investor engagement are furthering their efforts to improve profitability.
  • Even among companies with high IR awareness, few have taken serious steps to reform their business portfolios, as under 60% have begun to reform business portfolios.

PepsiCo Inc.: What Are The Challenges Responsible For Their Moderated Guidance? – Major Drivers

By Baptista Research

  • PepsiCo’s 2024 second quarter earnings report reflects a complex landscape shaped by strategic adjustments and variable consumer behavior, especially in the context of a challenging US market.
  • The company’s results are indicative of both resilience and areas requiring attention, navigating ongoing economic shifts and consumer sentiment.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Harley-Davidson Inc.: Expansion Into Electric Motorcycles & Global Market Penetration! – Major Drivers

By Baptista Research

  • Harley-Davidson recently reported its financial results for the second quarter of 2024, showcasing several advancements and challenges in its performance.
  • The company reported a 12% increase in consolidated revenue, driven by growth in both the Harley-Davidson Motor Company (HDMC) and the Harley-Davidson Financial Services (HDFS) sectors, marking a resilient performance amid prevailing economic headwinds.
  • The earnings per share showed a significant improvement at $1.63, and the overall operating income grew by 9% to $241 million.

British American Tobacco p.l.c.: Strategic Investments in Heated Products & Modern Oral Products Driving Growth! – Major Drivers

By Baptista Research

  • The latest earnings presentation from British American Tobacco (BAT) provided an in-depth view of the company’s performance and strategic approaches amidst its significant transitory phase.
  • BAT is navigating through a challenging market landscape, marked by robust investments in transformation and innovation, particularly aimed to strengthen their U.S. business and accelerate new category offerings globally.
  • Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

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Sep 30
0

Daily Brief Quantitative Analysis: KRX Foreign Holding Weekly (Sep 27th): Sk Hynix and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • KRX Foreign Holding Weekly (Sep 27th): Sk Hynix, Naver, Hyundai Motor, Samsung Electronics
  • TWSE Foreign Holding Weekly (Sep 27th): TSMC, Evergreen Marine Corp Taiwan
  • TWSE Short Interest Weekly (Sep 27th): Ase Industrial, Mediatek, Alchip Technologies

KRX Foreign Holding Weekly (Sep 27th): Sk Hynix, Naver, Hyundai Motor, Samsung Electronics

By Ke Yan, CFA, FRM

  • We analyzed the changes in foreign holdings of KRX stocks as of Sep 27th which has an aggregated holding worth USD565.8bn.
  • We estimate that foreign flows to be outflows of USD805mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
  • We highlight changes of foreign holdings in Sk Hynix, Naver, Hyundai Motor, Samsung Electronics.

TWSE Foreign Holding Weekly (Sep 27th): TSMC, Evergreen Marine Corp Taiwan

By Ke Yan, CFA, FRM

  • We analyzed the changes in foreign holdings of TWSE Stocks as of Sep 27th which has an aggregated holding worth USD1,017.5bn.
  • We estimate that foreign flows to be inflows of USD3,224mln. We tabulate the league table for top changes by value for 1W/4W/1Y and top stocks held by foreign institutions.
  • We highlight changes of foreign holdings in TSMC, Evergreen Marine Corp Taiwan, Hon Hai Precision Industry, Wan Hai Lines, Jinan Acetate Chemical, Asmedia Technology, Ase Industrial.

TWSE Short Interest Weekly (Sep 27th): Ase Industrial, Mediatek, Alchip Technologies

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of TWSE Stocks as of Sep 27th which has an aggregated short interest worth USD21.1bn.
  • We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
  • We highlight short interest changes in Ase Industrial, Mediatek, Alchip Technologies, Quanta Computer, Eva Airways, Realtek Semiconductor.

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Sep 30
0

Daily Brief ESG: Achieving the % of Female Board Members by Matching Numbers Doesn’t Achieve the Original Goal Either and more

By | Daily Briefs, ESG

In today’s briefing:

  • Achieving the % of Female Board Members by Matching Numbers Doesn’t Achieve the Original Goal Either

Achieving the % of Female Board Members by Matching Numbers Doesn’t Achieve the Original Goal Either

By Aki Matsumoto

  • Since it’s difficult for all prime market companies to achieve the 30% female board members by 2030, the goal may be achieved by including non-statutory executive officers in board members.
  • Companies are stuck in matching numbers, and government is unwilling to address the fundamental issues. There’s risk that original objective of shifting to value-creating management through ensuring diversity is lost.
  • Policy changes to create environment where women don’t have to leave workforce for childbirth, childcare, etc., and to change people’s mindsets are impossible without the leadership of a non-diverse legislature.

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Sep 30
0

Daily Brief Credit: Morning Views Asia: Medco Energi and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Medco Energi

Morning Views Asia: Medco Energi

By Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

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Sep 30
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Mind the Futures Gap and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan | Mind the Futures Gap
  • Banking on the BoJ
  • Have the Rules for Bottom Fishing Changed?
  • A Rare Surge in China’s Stock Market – But, This Is Not a Bull Market
  • Short Note: China Property – Guangzhou/Shenzhen/Shanghai Loosen the Property Sector – Buy Now!

Ohayo Japan | Mind the Futures Gap

By Mark Chadwick

  • Stocks ended the week on a positive note, despite mixed performance on Friday, as investors focused on a key inflation report
  • Japan’s incoming Prime Minister Shigeru Ishiba advocates for accommodative monetary policy to support economic recovery, despite previous criticism of aggressive easing
  • Sumitomo Metal Mining will establish a mass production line for SiC substrates by FY2025, investing tens of billions of yen

Banking on the BoJ

By Rikki Malik

  • New LDP leader and Japanese PM favours interest rate normalisation
  • This supports our outlook for a strengthening JPY against the USD
  • The Japanese central bank may now face pressure to raise rates

Have the Rules for Bottom Fishing Changed?

By Michael Allen

  • The median stock in our Dogs of Topix basket outperformed the median stock in the Topix 400 by 4% through Sept 2024.
  • This is below the average of 7% achieved by such stocks over the past 9 years, but it was a much tougher stretch than it looked. 
  • Do we need to re-think? Much can be learned comparing the outperformers, whose median return was +34%, compared to the underperformers, which declined 23%.

A Rare Surge in China’s Stock Market – But, This Is Not a Bull Market

By Xinyao (Criss) Wang

  • The stimulus policy this time is more to convey a signal that  “China will resolutely defend the bottom of the stock market”, and more importantly, complete the pricing of important assets.
  • When global central banks really need to address US’ soaring debt risk,the process of reassessing the dollar’s status as a currency begins,which is the logic behind RMB’s rally/gold’s record highs.
  • The optimal solution to the dollar problem is a global depression, and China will not be immune. So, the current rally in stock market may not be sustainable.

Short Note: China Property – Guangzhou/Shenzhen/Shanghai Loosen the Property Sector – Buy Now!

By Jacob Cheng

  • Over the weekend, Shanghai, Shenzhen and Guangzhou, 3 of the 4 tier-1 cities, announced policy to loosen and support the property market
  • China property stocks are very policy-driven.   We think there will be more policies to be announced.  Hence it is not too late to chase the rally
  • We think COLI 688 HK, Longfor 960 HK and Sunac 1918 HK offer attractive upside and decent risk-reward profile

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Sep 30
0

Daily Brief ECM: Tokyo Metro IPO – Peer Comparison – Pre-COVID to 1Q25 and more

By | Daily Briefs, ECM

In today’s briefing:

  • Tokyo Metro IPO – Peer Comparison – Pre-COVID to 1Q25
  • CR Beverage IPO: Less Diversification, Falling Growth Rates and Inferior Margins Compared to Peers
  • ECM Weekly (30th Sep 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, Mr DIY, Smartworks, IREDA

Tokyo Metro IPO – Peer Comparison – Pre-COVID to 1Q25

By Sumeet Singh

  • Tokyo Metro (9023 JP)‘s  shareholders aim to raise up to US$2.3bn in its Japan IPO.
  • Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
  • We have looked at the company’s past performance in our previous note. In this note, we will undertake a peer comparison.

CR Beverage IPO: Less Diversification, Falling Growth Rates and Inferior Margins Compared to Peers

By Shifara Samsudeen, ACMA, CGMA

  • The Chinese drinking water and beverage maker, China Resources Beverage (CRB HK) has filed for an IPO on the HKEx to raise around US$1.0bn.
  • The company’s operations are heavily concentrated towards drinking water products where the market competition is intensifying leading into a price war.
  • CR Beverage’s margins are inferior compared to peer Nongfu Spring (9633 HK) who has diversified into other beverage products from drinking water to grow its financials.

ECM Weekly (30th Sep 2024) – Tokyo Metro, Rigaku, China Resources, K Bank, Mr DIY, Smartworks, IREDA

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,  it hasn’t been this busy for a while, with deals live in Japan and Korea, and possible launches in Hong Kong and India as well.
  • On the placements front, there were a few China ADR blocks and other placements across the region.

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Sep 30
0

Daily Brief Equity Bottom-Up: Best Outright and Pair Trades for an Ishiba-Led LDP and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Best Outright and Pair Trades for an Ishiba-Led LDP
  • BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)
  • Global Health (MEDANTA IN): Margins Pressure To Continue; Possible Takeover Bid In Future
  • Weekly Consumer Tales: Pop Mart’s Unique Appeal-Miniso’s Yonghui Buy-China Stimulus-MTR’s Spicy IPO
  • MercadoLibre:  Entering the Global Stage
  • Tencent Music (TME): All Cheerful Data in Music, To Grow in Q3 After 3 Flat Years
  • Silergy (6415.TT): Positive Optimistic Future Outlook
  • China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui
  • Ricegrowers Ltd – Moving valuation to FY25f consensus
  • Takamiya (2445 JP) – 1Q Follow-Up

Best Outright and Pair Trades for an Ishiba-Led LDP

By Andrew Jackson

  • Expect continued buying in defense related, as well as banks and life insurance, renewable energy, rails, and medical IT plays with Shigeru Ishiba at the helm. 
  • The Market will be quick to rotate out of names which spiked into Friday’s close on expectation for a Sanae Takaichi win in the LDP election.  
  • Ishiba has been a vocal critic of Abenomics, and his potential policies aimed at higher taxes for investment incomes and capital gains are set to weigh on the Japanese market. 

BUY/SELL/HOLD: Hong Kong Stock Updates (September 28)

By David Mudd

Global Health (MEDANTA IN): Margins Pressure To Continue; Possible Takeover Bid In Future

By Tina Banerjee

  • Global Health (Medanta) (MEDANTA IN) reported double-digit growth in revenue in Q1FY25, while sluggish developing hospitals was a drag on the margins.
  • The company plans to add 1,000–1,500 beds in next 2–3 years, with most of the planned bed addition being at greenfield projects entailing higher capex per bed.
  • Medanta does offer synergy as a possible takeover candidate for a leading hospital operator.

Weekly Consumer Tales: Pop Mart’s Unique Appeal-Miniso’s Yonghui Buy-China Stimulus-MTR’s Spicy IPO

By Devi Subhakesan

  • Welcome to Consumer Tales & Trends, your weekly roundup of the latest corporate developments, investment reports and sector events in the consumer industry.
  • Despite weak consumer spending in China, there are a few bright spots—an example is Pop Mart International Group (9992 HK)’s strong sales growth partly driven by the “red lipstick effect.”
  • Miniso (MNSO US)’s stock plunged early last week but quickly recovered, reinforcing our view that its deal with Yonghui Superstores Co., (601933 CH) has some promise.

MercadoLibre:  Entering the Global Stage

By Steven Holden

  • MercadoLibre continues its climb, hitting new highs in both Average Weight (0.4%) and Funds Invested (23.42%).
  • In the last six months, 4.2% of funds have added MercadoLibre to their portfolios, while key EM holdings HDFC Bank and AIA Group have seen declining ownership.
  • 20 new positions have been opened over the last 6-months, with Goldman Sachs Global Impact Opportunities and Fidelity Special Situations among the fresh buyers, against only 6 closures.

Tencent Music (TME): All Cheerful Data in Music, To Grow in Q3 After 3 Flat Years

By Ming Lu

  • The weak business, social entertainment, become insignificant in recent quarters.
  • All operating data in music is promising, including paying user base, ARPPU, and sublicensing revenue.
  • We set an upside of 20% and a price target of US$14.80 for the end of 2025.

Silergy (6415.TT): Positive Optimistic Future Outlook

By Patrick Liao

  • China’s central bank cuts rates and unveils new measures to combat economic slowdown, creating a more relaxed monetary policy environment to stimulate consumption and investment.
  • Silergy’s Automotive segment remains a driving force, especially with the addition of the Electric Vehicle ( EV) market.
  • While Silergy faced demand insufficiency previously, it has indicated that the end demand is expected to revive by the end of 2024 from the 4th quarter.

China Consumption Weekly (30 Sep 2024): PDD, Meituan, BYD, Benz, Miniso, Yonghui

By Ming Lu

  • Temu as a subsidiary of PDD becomes the second largest global e-commerce website.
  • Meituan merges departments into fewer business units to cut expenses further.
  • Mercedes-Benz left the joint venture with BYD, as its high end products are not as popular as Tesla models.

Ricegrowers Ltd – Moving valuation to FY25f consensus

By Research as a Service (RaaS)

  • RaaS has published an update report on agri-FMCG group Ricegrowers, trading as SunRice (ASX:SGLLV), updating our Sum of The Parts (SoTP) valuation as we move from FY24 estimates/consensus data to FY25.
  • In moving our consensus valuation year from FY24 to FY25, we look back on selected RaaS peer EPS growth trends over the past four years (FY23a-FY26f inclusive).
  • Only four stocks including SGLLV [the others (ASX:TWE), (ASX:RIC) and (SB:EBRO)] have not or are not forecast to have a down year during this period.

Takamiya (2445 JP) – 1Q Follow-Up

By Sessa Investment Research

  • Takamiya (hereafter, the Company) reported its 1Q FY2025/3 sales of ¥9,745 mn (-1.5% YoY), operating profit of ¥262 mn (-35.8% YoY), ordinary profit of ¥344 mn (-44.1% YoY), and profit attributable to owners of parent (hereafter, net profit) of ¥195 mn (-53.2% YoY).
  • By segment, the Platform Business and Overseas Business saw increases in both sales and profit, while the Rental Business saw sales increase but profit decline, and the Sales Business saw declines in both sales and profit.

  • 1H 2025/3 and the full-year forecast remains unchanged from the initial forecast.

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Sep 30
0

Daily Brief Event-Driven: Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles
  • FujiSoft (9749) – Somewhat Inexplicable Renewed Opinion of Fairness on KKR Tender
  • Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts
  • Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac
  • Tokyo Metro (9023 JP) IPO:  TPX Inclusion in November; Global Indices: One in October, One in Feb
  • FnGuide Semiconductor Top10 Index Rebalance Preview: Wonik IPS to Replace ISC
  • China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception
  • EQD / NSE Vol Update / Vols Bogged Down by Holiday Shortened Week in Spite of Upcoming Event Risks
  • Tender Offer and Taking Private of Shinsegae E&C by E Mart
  • Nippon Steel/US Steel: Appealing Expected Value

Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles

By Sanghyun Park

  • E Mart Inc is launching a tender offer for 27.33% of Shinsegae Eng & Construction, offering ₩18,300 per share, a 14% premium, from September 30 to October 29.
  • This tender’s got zero cancellation or proration risk since they’re all in to buy every share tendered. That makes it a prime event for close spread tracking and trading opportunities.
  • Emart needs 95% of Shinsegae Construction’s shares to delist, requiring 22% of the remaining 27%. If they can’t get it, a stock swap with Emart shares is likely.

FujiSoft (9749) – Somewhat Inexplicable Renewed Opinion of Fairness on KKR Tender

By Travis Lundy

  • On the 19th of September, KKR amended the terms and Scheme/Structure of its Tender Offer for Fuji Soft Inc (9749 JP). I thought the new terms coercive. 
  • On the 26th, FujiSoft decided there had been no change detrimental to general shareholders. On the 27th, KKR amended the Tender Offer Registration Statement to reflect FSI’s revised Opinion.
  • That means Bain needs to change FSI’s mind or come out with a big number before the end of the First Tender, leaving lots of stock for Round Two.

Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts

By Travis Lundy

Merger Arb Mondays (30 Sep) – Canvest, Henlius, CPMC, Xingda, Fuji Soft, Capitol, Dyna-Mac

By Arun George

Tokyo Metro (9023 JP) IPO:  TPX Inclusion in November; Global Indices: One in October, One in Feb

By Brian Freitas

  • Tokyo Metro (9023 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 23 October.
  • At the reported indicative IPO price of JPY 1100/share, Tokyo Metro (9023 JP) will be valued at JPY 639.1bn (US$4.49bn).
  • The stock should be added to one global index on 29 October, to the TOPIX INDEX on 28 November, while another global index inclusion will need to wait till February.

FnGuide Semiconductor Top10 Index Rebalance Preview: Wonik IPS to Replace ISC

By Brian Freitas

China Healthcare Weekly (Sep29)- Henlius Privatization Update, NHSA Fee Control, Hansoh Is Exception

By Xinyao (Criss) Wang

  • The medical insurance statistics reflected that medical insurance funds are facing increasing pressure. If income/expenditure maintain average growth rates in recent years, there would be a deficit state in 2024.
  • Due to increasing pressure on medical insurance fund, the entire process of innovative drug evaluation/NRDL negotiation this year will be more strictly enforced, but Hansoh (3692 HK) is an exception.
  • For Henlius’ privatization, completing Pre-Conditions in 24Q4 looks tight. Considering Chinese New Year holiday, the privatization may not be completed until at least mid-to-late February 2025.The deal will get up.

EQD / NSE Vol Update / Vols Bogged Down by Holiday Shortened Week in Spite of Upcoming Event Risks

By Sankalp Singh

  • Nifty50 IVs have finally cracked below 11.0% levels – in spite of upcoming event-risks. Moves lower have been exacerbated by the holiday shortened week.   
  • Vol-Regime Model has switched to “Low & Down” vol-state in Nifty50. Tactical implications:  Short Vega exposure less favourable going forward.
  • Risk premia selloff has driven Vol Term-Structure deeper into Contango. Smile & Skew characteristics have compressed in congruence with lower IVs.

Tender Offer and Taking Private of Shinsegae E&C by E Mart

By Douglas Kim

  • E Mart Inc (139480 KS) is conducting a tender offer of 27.33% of Shinsegae Eng & Construction (034300 KS) (2,126,611 shares) and trying to take the company private afterwards.
  • The tender offer price is 18,300 won, which is 14% higher than the closing price on Friday (27 September).
  • Tender offer is likely to result in higher price of Shinsegae E&C in the near term but it could be difficult for E Mart to take it private this year. 

Nippon Steel/US Steel: Appealing Expected Value

By Jesus Rodriguez Aguilar

  • On September 26, Nippon Steel’s president affirmed the company’s commitment to completing the United States Steel (X US) acquisition by year-end, despite the CFIUS review being extended until December.
  • U.S. Steel, with an expected value of $45.19/share offers 27% upside potential. This discount, driven by acquisition/fundamental value, supports a buy recommendation thus, I would be long U.S. Steel.
  • If the deal were to succeed, the likelihood of it closing before the end of 2024 is low, primarily due to the complexities surrounding the American presidential elections.

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Sep 30
0

Daily Brief Macro: China:  Record Bearish Positioning Ahead of Stimulus and more

By | Daily Briefs, Macro

In today’s briefing:

  • China:  Record Bearish Positioning Ahead of Stimulus
  • The Winners and Losers From Central Bank Stimulus
  • Supportive Backdrop for US Equities, but the Events of 2000 Pose a Warning Against Complacency
  • Is the Fed Ahead or Behind the Curve
  • Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 30)
  • Eurozone HICP Preview (Oct 1): Headline Back Below Target and Backed Up By Survey Signs
  • FX Weekly Strategy: September 30th – October 4th

China:  Record Bearish Positioning Ahead of Stimulus

By Steven Holden

  • China & HK allocations among Global funds have hit new lows, with 25.5% of funds avoiding the region entirely and a record 79.6% underweight versus the benchmark.
  • In the six months leading up to recent stimulus measures, another 5.4% of funds fully exited their China & HK exposure.
  • Tencent and Alibaba are well below their 2020 highs, while AIA Group ownership moved lower and China Construction Bank continues its long-term decline

The Winners and Losers From Central Bank Stimulus

By Cam Hui

  • Markets have taken on a risk-on tone on the news of global central bank stimulus. Gold has rallied the most as real rates fell, equities rose and bond prices fell.
  • But the market’s risk-on psychology appears to be stretched and fragile.
  • While the long-term bullish trend is quite real, the consensus is susceptible to reversals should growth disappoint in the near-term.

Supportive Backdrop for US Equities, but the Events of 2000 Pose a Warning Against Complacency

By Said Desaque

  • There is a possibility of a repeat of the events in 2000 Q4 and 2001 Q1, when economic conditions unravelled quickly and labour hoarding crushed corporate profits and equity valuations.
  • Lower interest rates will typically support equities unless the corporate sector has committed large and persistent strategic mistakes, such as excessive investment or bad lending.
  • Unfolding political events could push the economy into recession, despite the best efforts of the Fed. Profligate fiscal policy conduct could present challenges for the economy after the election.

Is the Fed Ahead or Behind the Curve

By Cam Hui

  • Bonds expect a second half-point cut at the next FOMC meeting, which is rare outside of recessions, while stocks are cheering the prospects of a soft landing.
  • As the Fed’s focus shifts from its price stability mandate to its full employment mandate, investor expectations will depend on the strength of the jobs market.
  • As leading indicators of employment weaken, the upcoming September Jobs Report could prove to be pivotal to market psychology.

Technically Speaking, Breakouts and Breakdowns: HONG KONG (SEPTEMBER 30)

By David Mudd

  • Hong Kong dollar is strengthening as demand picks up and the carry trade unwinds quickly.  Put/Call Skew declines for HSTech Index as traders sentiment reverses.
  • Hengan International Group (1044 HK) and Galaxy Entertainment Group (27 HK) had breakouts from declining wedge patterns and have now formed new uptrends.
  • Wuxi Biologics (2269 HK) had a breakout reversal from a U-shaped pattern indicating more upside.  The stock’s 200 DMA may provide little resistance to further re-rating.

Eurozone HICP Preview (Oct 1): Headline Back Below Target and Backed Up By Survey Signs

By Alex Ng

  • Lower fuel prices will be a key factor in September’s HICP, pulling y/y rate to 1.9%, which would be lowest in three years and despite little change in services inflation.  
  • Indeed, the risk is of an even lower outcome. This may be short-lived given adverse base effects later this year before a more sustained fall below 2% occurs through 2025. 
  • But the September projection is in line with ECB thinking as it leads to a Q3 outcome of 2.2%. 

FX Weekly Strategy: September 30th – October 4th

By Alex Ng

  • US employment report will be the focus. EUR/USD upside looks more restricted. Still scope for JPY and AUD gains.
  • The US employment report at the end of the week is the main focus. We look for a significantly stronger than consensus report, with a 180k rise in non-farm payrolls
  • This suggests an underlying USD positive pict ure for the week, but the payroll number isn’t released until Friday.

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Sep 30
0

Daily Brief Australia: Pacific Smiles, Ricegrowers Ltd and more

By | Australia, Daily Briefs

In today’s briefing:

  • Pacific Smiles: Key Shareholders Reject Genesis’ Terms
  • Ricegrowers Ltd – Moving valuation to FY25f consensus

Pacific Smiles: Key Shareholders Reject Genesis’ Terms

By David Blennerhassett

  • MA Financial (13.43% of shares out) and Alison Hughes (9.94%) said they will reject Genesis A$1.8675/share offer for Pacific Smiles (PSQ AU); therefore the 90% acceptance condition cannot be met.
  • Separately, PSQ’s board also rejected terms, as Genesis Offer is below NDC’s A$2.05/share Offer; plus terms are “opportunistic” as they do not account for PSQ’s recent strong financial improvement. 
  • What now? Genesis has the flexibility to bump. Expect that to occur. They won’t fold their tent in response to this latest development.

Ricegrowers Ltd – Moving valuation to FY25f consensus

By Research as a Service (RaaS)

  • RaaS has published an update report on agri-FMCG group Ricegrowers, trading as SunRice (ASX:SGLLV), updating our Sum of The Parts (SoTP) valuation as we move from FY24 estimates/consensus data to FY25.
  • In moving our consensus valuation year from FY24 to FY25, we look back on selected RaaS peer EPS growth trends over the past four years (FY23a-FY26f inclusive).
  • Only four stocks including SGLLV [the others (ASX:TWE), (ASX:RIC) and (SB:EBRO)] have not or are not forecast to have a down year during this period.

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