Most Read

On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold.
The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted.

Japan’s Governance Changes I – The PBR 1.0 Target

The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

S&P/ASX Adhoc Index Rebalance: SVW in ASX100, BGL in ASX200

Shareholders have approved OZ Minerals Ltd (OZL AU)‘s acquisition by BHP Group Ltd (BHP AU) and OZL is expected to stop trading after the close on 18 April.
OZ Minerals Ltd (OZL AU) will be replaced by Bellevue Gold (BGL AU) in the S&P/ASX 200 (AS51 INDEX) and by Seven Group Holdings (SVW AU) in the S&P/ASX 100.
There has been huge short covering on Seven Group Holdings (SVW AU) and Bellevue Gold (BGL AU) over the last few months.

MSCI Taiwan May QCIR: Potential Inclusions to Drive Deletions

Based on closing prices from 12 April, we forecast 2 adds and 2 deletes for the MSCI Taiwan Index at the May QCIR.
Global Unichip (3443 TT) is a high probability index inclusion and that will drive the deletion of Giant Manufacturing (9921 TT) from the index.
Wistron Corp (3231 TT) is a potential inclusion and that could result in the deletion of Win Semiconductors (3105 TT) from the index.

KOSDAQ150 Ad Hoc Index Rebalance: Sun Kwang (003100) To Replace SK Oceanplant (100090)

Following SK Oceanplant (100090 KS) moving from the KOSDAQ to KOSPI Market, the stock will be deleted from the KOSDAQ 150 Index and replaced with Sun Kwang (003100 KS).
The change will be implemented at the close on 18 April and passive trackers will need to trade over 1x ADV on both stocks.
Sun Kwang (003100 KS) was a high probability index inclusion in June, so this brings forward the inclusion by a couple of months.

Analysis of Adani Group Shareholder Structure Changes in Q1 – Stock Moved

Every quarter, Indian companies report their “Shareholding Pattern” for all to see. They show holdings by category type, and holders over 1%.
The big news in Q1 in AdaniLand was the failed FPO, thwarted by the Hindenburg Research report, and the Adani Promoter sale of stakes in 4 companies to GQG Partners.
The details in the change of the shareholder structure are, however, interesting.

Rakuten Bank (5838 JP) – A Keenly Priced Quality Addition to the Global Neobanks Universe

By Victor Galliano

Rakuten Bank’s IPO will add an attractively valued Japanese neobank to the globally listed neobank universe; furthermore, the Rakuten Group ecosystem is a powerful tool for customer acquisition and retention
On efficiency metrics, Rakuten Bank scores well versus its key domestic peers as well as global comparables; Rakuten Group companies act as a key conduit for new clients
At the announced issue price of ¥1,400, Rakuten Bank’s PBV ratio implies an attractive 25% discount to its core Japanese peer SBI Sumishin Net Bank, for similar ROE

Hong Kong CEO & Director Dealings (13 Apr): Melco, CMGE, Differ, Sino Biopharmaceutical

The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
Stocks mentioned in this insight include: Melco International Development (200 HK), CMGE Tech (302 HK), Differ Group Auto (6878 HK), and Sino Biopharmaceutical (1177 HK)

Jardine Strategic’s Dissentient Shareholders: The Sensible And Workable Approach

Back on the 8 March 2021, Jardine Matheson (JM SP) made a cash acquisition for the 15% of Jardine Strategic (JS SP)‘s share capital it did not already own.
The US$33/share Offer price was arguably light. But with the amalgamation requiring 75% approval and Matheson providing an irrevocable to vote its 84.89% stake for the transaction, it was done.
On the 20 April 2022, the Bermuda Court dismissed Jardine’s application to strike out dissenting shareholders who acquired shares after the Offer was announced. Last month, Jardine lost its appeal.

💡 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

Apr 13

Most Read: Japan Post Holdings, Tencent, JD Health, Ecopro Co Ltd, Mirae Asset Tiger 200 It ETF, Lian Beng, Enchem, Fast Retailing and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

MSCI Korea May QCIR: Potential Adds, Deletes & ‘Extreme Price Increase’ Triggers
Japan’s Governance Changes I – The PBR 1.0 Target
Tencent (700 HK) – This Is Not the Selldown You Are Looking For
Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?
StubWorld: Ecopro’s Spike Makes No Sense
An Alternative Flow Trading Angle for K200 Rebalancing in June
Lian Beng: Family Takeout At <50% of NAV
Good Morning Japan |Fed Minutes Sinks Equities; NUGGET:Japan Post－Capital Mgmt, DX, Drones; Low PBR
Enchem: Block Deal Sale of 14% of Outstanding Shares
Fast Retailing: Inflated Earnings Expectations & Stretched Multiples, A Cause for Concern

MSCI Korea May QCIR: Potential Adds, Deletes & ‘Extreme Price Increase’ Triggers

Based on closing price from 3 April, we forecast 5 adds and 4 deletes for the MSCI Korea Index at the May QCIR.
Three of the adds are close to triggering the extreme price increase criteria – if triggered, index inclusion could be deferred to a subsequent index review.
Retail investors have been buying three of the potential adds, while foreign investors have taken the lead on two. Foreign investors have been sellers on all the potential deletions.

Japan’s Governance Changes I – The PBR 1.0 Target

The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Tencent (700 HK) – This Is Not the Selldown You Are Looking For

On April 11, Prosus (PRX NA) made an Update on Repurchase Programme that it had repurchased shares in the market from the 3-7 April. They do so every week.
This one said they would move 96 million shares of Tencent (700 HK) currently held in non-transferrable shares into CCASS so they could be sold.
The ADRs dropped in New York time. Tencent shares fell hard today. If the share price fell because of a block offering, that would be unwarranted.

Hang Seng Index Rebalance Preview: A Year Later Than Planned – 80 Members at Last?

With no changes made at the March rebalance, we are still stuck at 76 index constituents. And it’s been a year later than originally planned to reach 80 index constituents.
We list 10 potential inclusions in June. Adding all 10 stocks will lead to around 5% one-way turnover, so there could be a mix of larger and smaller stocks added.
There will be at least 1x ADV to trade on nearly all inclusions. Short interest is over 4% of float on some stocks and there has been a recent jump.

StubWorld: Ecopro’s Spike Makes No Sense

Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Preceding my comments on Ecopro are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

An Alternative Flow Trading Angle for K200 Rebalancing in June

In KOSPI 200 IT Sector Index rebalancing in June, we should consider using Samsung SDS as a hedge for short positions on KakaoPay from a day trading perspective.
The expected performance of traditional flow trading based on passive impact has become uncertain due to flexible rebalancing trading by local pensions and short selling resumption on K200 new entrants.
As such, flow events on these sector indices that are still pretty much under the radar in the market could be a meaningful alternative for us.

Lian Beng: Family Takeout At <50% of NAV

Singaporean construction firm Lian Beng (LBG SP) has announced a voluntary unconditional cash Offer from the controlling Ong family, via investment holding company OSC Capital.
The Offer Price of S$0.62/share (not declared final) is a mediocre 8.8% premium to last close and a 59.7% discount to the 30 November 2022 NAV of S$1.538/share.
The announcement fails to mention the NAV/share. The IFA considered the 2021 Mandatory Offer of S$0.50/share not fair and not reasonable. Expect a similar conclusion

Good Morning Japan |Fed Minutes Sinks Equities; NUGGET:Japan Post－Capital Mgmt, DX, Drones; Low PBR

OVERSEAS. Inflation Benign but Fed Minutes point to (mild) recession with Hawkish bent for addl rate hikes; US Equities close in the red, giving up early CPI driven gains
JAPAN. NKY Futs -0.6% vs CASH; USDJPY 133.1; Japan Population falls below 125 million in 2022 – increases worries on low birthrate/aging society; Activists gear up ahead of Japan AGM
NUGGET. Japan Post (6178) – this low pbr stock is undergoing transformation in many areas – from balance sheet to operations. If they can execute….

Enchem: Block Deal Sale of 14% of Outstanding Shares

Chosun Business Daily reported today that Enchem is considering on conducting a block deal sale of nearly 14% of its outstanding shares, representing about 160 billion won.
Brahman PS Investment is the likely seller in this block deal sale. If the block deal sale is successful, Brahman will have gained more than 6x on its original investment.
We would not be buyers of the block deal sale mainly due to unattractive valuations, volatile profitability, and not enough block deal sale discount.

Fast Retailing: Inflated Earnings Expectations & Stretched Multiples, A Cause for Concern

By Oshadhi Kumarasiri

Consensus FY+2 EBIT seems inflated by around 16%, driven by optimistic assumptions of recovery in China and growth in North America and Europe.
However, apparel demand in China was lower than expected, while wage hikes and a potential US recession could negatively impact profitability in the short-medium term.
As risks are skewed to the downside, we remain short Fast Retailing (9983 JP) leading up to 2QFY23 results.

💡 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

Apr 12

Most Read: Kotak Mahindra Bank, Nippon Rietec, Japan Post Holdings, Newcrest Mining, Ecopro Co Ltd, Lian Beng, CELSYS, PT Trimegah Bangun Persada Tbk (Harita Nickel), Zhejiang Supcon Technology and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
Japan’s Governance Changes I – The PBR 1.0 Target
Newcrest: Newmont Bumps And Granted DD
StubWorld: Ecopro’s Spike Makes No Sense
Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62
TOPIX Inclusions: Who Is Ready (Apr 2023)
Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer
Harita Nickel IPO: Trading Debut
Zhejiang Supcon Technology GDR Listing – Momentum Has Been Strong and Not a Large Deal to Process

Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying

Kotak Mahindra Bank (KMB IN) was added to the MSCI India Index at the November 2020 SAIR. However, a LIF of 0.5 was applied due to the low foreign room.
The latest shareholding pattern as of end-March shows a foreign room higher than 25%. That should result in a removal of the LIF at the May QCIR.
The increase in foreign room is a result of FPIs selling the stock despite the inclusion of Kotak Mahindra Bank (KMB IN) in a global index in March.

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

By Janaghan Jeyakumar, CFA

The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month.
Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.

Japan’s Governance Changes I – The PBR 1.0 Target

The TSE went through a multi-year period of planning a “Market Restructuring” which ended on 4 April 2022 as the TSE split into three Sections, TSE Prime, Standard, and Growth.
After that, the TSE formed a “Council of Experts” (some very senior people) that would follow up on the changes, and recommend new measures. In January, new rule proposals dropped.
There was talk of a hard end to the transition period. Also, the Council harped on Awareness of Capital Cost and Efficiency. Most notably, for companies with PBR < 1.

Newcrest: Newmont Bumps And Granted DD

Under the revised proposal, Newmont (NEM US) has bumped the all-scrip terms for Newcrest Mining (NCM AU) to 0.400 Newmont shares – from 0.380 – for each Newcrest share held.
Including a permissible franked special dividend of up to US$1.10/share, the revised proposal represents an implied value of A$32.87/share. Newmont indicated the revised bid represents its best and final price.
Newcrest has granted Newmont confirmatory due diligence to put forward a binding proposal.

StubWorld: Ecopro’s Spike Makes No Sense

Ecopro (086520 KS) is up an eye-watering 590% in the past three months, primarily on Ecopro BM (247540 KS)‘s outperformance, together with sentiment towards soon-to-be-listed 52.8% held Ecopro Materials.
Preceding my comments on Ecopro are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

Lian Beng (LBG SP): Ong Family’s Derisory Unconditional Offer at S$0.62

Lian Beng (LBG SP)/LBG has disclosed a voluntary unconditional offer from the Ong family at S$0.62 per share, an 8.8% premium to the undisturbed price (6 April).
The offer price is unattractive in comparison to peer multiples and precedent transactions. The price is not final. As the family aims to privatise LBG, a bump is likely.
The offer will likely follow the Boustead Projects (BOCJ SP) playbook, where Boustead Singapore Limited (BOCS SP) tabled a take-it-or-leave-it derisory 5.6% bump to its low-balled offer.

TOPIX Inclusions: Who Is Ready (Apr 2023)

By Janaghan Jeyakumar, CFA

Quiddity’s “Who is Ready” series of insights aims to objectively identify names listed on the Tokyo Stock Exchange that are potential additions to the TOPIX Index in future.
In the last two months, Amvis Holdings Inc (7071 JP), AXXZIA Inc (4936 JP), and Sosei Group (4565 JP) have confirmed their moves to the Prime Market.
These names appeared in our lists (A or B) of candidates with high “readiness” for TOPIX Inclusions in our recent insights.

Newcrest Mining (NCM AU): Newmont Returns with a Revised Offer

Newcrest Mining (NCM AU) disclosed a revised non-binding indicative privatisation proposal from Newmont Mining (NEM US) at 0.400 Newmont shares per Newcrest share + US$1.10 special dividend.
Since the 6 February announcement, the average implied value of the revised offer is A$29.14 per share, which is 11.6% higher than the average of the previous offer of A$26.12.
The offer is attractive in terms of historical prices and VWAP ratios but carries the volatility risk around Newmont shares and FX rates. Expect a binding proposal.

Harita Nickel IPO: Trading Debut

PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) priced its IPO at IDR1,250 per share to raise gross proceeds of US$660 million. The shares will start trading tomorrow.
We previously discussed the IPO in Harita Nickel IPO: The Bull Case, Harita Nickel IPO: The Bear Case and Harita Nickel IPO: Valuation Insights.
Peers have re-rated and the IPO price continues to imply a discount to the median peer CY2023 P/E multiple. Therefore, the IPO price remains attractive.

Zhejiang Supcon Technology GDR Listing – Momentum Has Been Strong and Not a Large Deal to Process

By Clarence Chu

Zhejiang Supcon Technology (688777 CH) is looking to raise around US$347m in its Swiss GDR listing. Huatai and CLSA are bookrunners on the deal.
The firm is offering 12.5m GDRs (1 GDR to 2 ordinary A-shares) for sale, at a 8.1-10.8% discount to last close on the A-share leg.
The deal is a relatively small one for the firm to digest, representing just 5.9 days of three month ADV on its A-share leg.

💡 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

Apr 11

Most Read: Nitori Holdings, Genesis Minerals, Nippon Rietec, KT Corp, Kotak Mahindra Bank, PDD Holdings Inc, Youlchon Chemical, Rakuten Bank and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo
TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next
A Pair Trade Between KT & LG Uplus
Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?
Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying
Pinduoduo (PDD) Short Review: Third-Party Retailers “Bombarded” Direct Sales
Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval
ECM Weekly (10th Apr 2023) – Rakuten Bank, Merdeka Battery, ZJLD, Socionext, Trial Holdings

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?

There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
This implies an essential premise for us to set up a more aggressive preemptive position on KT.

Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Golden Energy & Resources (GER SP), Liontown Resources (LTR AU), Norwest Energy NL (NWE AU), Mincor Resources NL (MCR AU), GK Goh.

TOPIX Big April Basket 23: 100% Hit Rate for High Conviction Basket; Focus on Surprises Next

By Janaghan Jeyakumar, CFA

The TOPIX liquidity factor removal names (upweights) for April 2023 were announced after the close on Friday 7th April 2023 as expected.
According to the announcement, 22 names will see their Liquidity Factors removed and experience index inflows later this month.
Today was the first day of trading post-announcement and the 22 names gained +1.1% (+0.47% vs the TOPIX Index). I feel there could be more upside for some names.

A Pair Trade Between KT & LG Uplus

In this insight, we discuss a pair trade between KT Corp (030200 KS) (go long) and LG Uplus Corp (032640 KS) (go short).
The three major reasons for going long on KT Corp include a) the potential inclusion in MSCI Korea Standard index, b) attractive valuations, and c) a new CEO.
KT Corp is a potential inclusion candidate for MSCI Korea Standard index in May 2023. With foreign room at 17%, it is comfortably above the 15% level threshold requirement.

Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?

OVERSEAS. Good Friday holidays. US Economy proving to be pretty resilient. Non-farm payrolls showed hiring continued to be strong in March. NFP was 236k vs Cons 230k. Telsa cuts prices(again)
JAPAN. NKY Futs +0.5% vs Cash as US Equity(Cash) markets closed. USDJPY 132.2. Likely see some beta led reversals of losses seen in the latter half of last week.
NUGGET. Kuroda bids Farewell after 10 years as BOJ Governor. He created a new playbook on monetary policy that will be studied for years. Net-net, positive outcome.

Kotak Mahindra Bank (KMB IN): Potential MSCI Upweight in May to Bring Close to US$1bn Passive Buying

Kotak Mahindra Bank (KMB IN) was added to the MSCI India Index at the November 2020 SAIR. However, a LIF of 0.5 was applied due to the low foreign room.
The latest shareholding pattern as of end-March shows a foreign room higher than 25%. That should result in a removal of the LIF at the May QCIR.
The increase in foreign room is a result of FPIs selling the stock despite the inclusion of Kotak Mahindra Bank (KMB IN) in a global index in March.

Pinduoduo (PDD) Short Review: Third-Party Retailers “Bombarded” Direct Sales

By Ming Lu

PDD’s small retailers bought out products of direct sales and claimed full refund.
The story happened to Alibaba more than ten years ago.
It can be hard for PDD to enter the high quality market.

Target May 15th for LONG Youlchon Chemical with Dongkuk Steel’s Split Approval

Through the regular rebalancing, Kum Yang and Cosmo Chemical will be included in KOSPI 200, and Youlchon Chemical will be included as an ad-hoc change due to Dongkuk Steel’s deletion.
We should prepare for an aggressive long position on Youlchon Chemical from a day trading perspective, targeting May 15th, the day after Dongkuk Steel’s general meeting.
If the meeting is scheduled for the morning, we should consider entering the position in the afternoon of the 12th.

ECM Weekly (10th Apr 2023) – Rakuten Bank, Merdeka Battery, ZJLD, Socionext, Trial Holdings

By Clarence Chu

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
While sentiment took a hit as Trial Holdings (5882 JP)‘s pulled its IPO, Rakuten Bank (5838 JP) cutting its price range leaves more upside on the table for investors.
Merdeka Battery Materials (2012725D IJ) concluded its US$586m IPO bookbuild in Indonesia, with decent upside waiting for the longer-term investor.

💡 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

Apr 10

Most Read: Nitori Holdings, Japan Airlines, Kunlun Tech, Lasertec Corp, Tencent, KT Corp, Rakuten Bank, Toyo Construction, Genesis Minerals and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Nikkei 225 Index Rebalance: Passives Trade on Friday
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Last Week in Event SPACE: ANZ/Suncorp, JCNC, Adani, Khan Bank/HS Holdings, Hong Kong Buybacks
A Pair Trade Between KT & LG Uplus
Weekly Deals Digest (09 Apr) – Rakuten Bank, ZJLD, Harita, HKBN, Toyo, Estia, Mincor, Pushpay
Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?
(Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources
Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank

There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Last Week in Event SPACE: ANZ/Suncorp, JCNC, Adani, Khan Bank/HS Holdings, Hong Kong Buybacks

In a dealbreak, ANZ (ANZ AU) will either have enough capital in a downturn or excess capital it could use to buy back stock. If behavioural remedies, SunCorp is cheaper.
Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
There is no good reason to be long Adani names, even if GQG is up 25% on his money so far.

A Pair Trade Between KT & LG Uplus

In this insight, we discuss a pair trade between KT Corp (030200 KS) (go long) and LG Uplus Corp (032640 KS) (go short).
The three major reasons for going long on KT Corp include a) the potential inclusion in MSCI Korea Standard index, b) attractive valuations, and c) a new CEO.
KT Corp is a potential inclusion candidate for MSCI Korea Standard index in May 2023. With foreign room at 17%, it is comfortably above the 15% level threshold requirement.

Weekly Deals Digest (09 Apr) – Rakuten Bank, ZJLD, Harita, HKBN, Toyo, Estia, Mincor, Pushpay

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments – Rakuten Bank (5838 JP), ZJLD Group (ZJLD HK), PT Trimegah Bangun Persada Tbk (Harita Nickel) (2230010D IJ) and Merdeka Battery Materials (2012725D IJ) IPOs.
Event-Driven developments – Golden Energy & Resources (GER SP), Toyo Construction (1890 JP), Estia Health (EHE AU), Genesis Minerals (GMD AU), Mincor Resources NL (MCR AU), Pushpay Holdings (PPH NZ).

Good Morning Japan |Jobs Galore – Strong NFP; Watch for the Fed Hawks; NUGGET: Kuroda Exits..a Hero?

OVERSEAS. Good Friday holidays. US Economy proving to be pretty resilient. Non-farm payrolls showed hiring continued to be strong in March. NFP was 236k vs Cons 230k. Telsa cuts prices(again)
JAPAN. NKY Futs +0.5% vs Cash as US Equity(Cash) markets closed. USDJPY 132.2. Likely see some beta led reversals of losses seen in the latter half of last week.
NUGGET. Kuroda bids Farewell after 10 years as BOJ Governor. He created a new playbook on monetary policy that will be studied for years. Net-net, positive outcome.

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Mincor, Toyo Construction, Pushpay, Breaker Resources

There are 45 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
One new deal was discussed on Smartkarma this past week: Breaker Resources Nl (BRB AU) all-scrip Offer from Ramelius Resources (RMS AU).
Key updates took place for Mincor Resources NL (MCR AU), Toyo Construction (1890 JP), and Pushpay Holdings (PPH NZ).

Merger Arb Mondays (10 Apr) – Genesis, Estia, Newcrest, Pushpay, Mincor, Golden Energy, Toyo

We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – 111 Inc (YI US), Alliance Aviation Services (AQZ AU), Genesis Minerals (GMD AU), Estia Health (EHE AU), Aag Energy Holdings (2686 HK), Origin Energy (ORG AU).
Lowest spreads – Healius (HLS AU), Golden Energy & Resources (GER SP), Liontown Resources (LTR AU), Norwest Energy NL (NWE AU), Mincor Resources NL (MCR AU), GK Goh.

💡 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

Apr 09

Most Read: Nitori Holdings, Japan Airlines, Kunlun Tech, Cellivery Therapeutics, Lasertec Corp, Rakuten Bank, GigaVis, Hong Kong Hang Seng Index and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Nikkei 225 Index Rebalance: Passives Trade on Friday
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)
Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)
Gigavis IPO Preview
Gigavis IPO Valuation Analysis
Hong Kong Buybacks Weekly (Apr 7th): Tencent, Aia, CSPC
EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

Nikkei 225 Index Rebalance: Passives Trade on Friday

Oriental Land (4661 JP), Renesas Electronics (6723 JP), Japan Airlines (9201 JP) will replace Toyobo (3101 JP), Nippon Light Metal (5703 JP), Toho Zinc (5707 JP) in the Nikkei 225.
Estimated one-way turnover at the rebalance is 1.08% and will result in a round-trip trade of JPY 412.8bn (US$3.16bn) at the close on 31 March.
There has been recent pre-positioning on the stocks as well as movement in short interest over the last couple of months.

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank

There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

KOSDAQ150 Ad Hoc Index Rebalance: Humasis (205470 KS) To Replace Cellivery (268600 KS)

Following Cellivery Therapeutics (268600 KS) designation as an Administrative Issue and an Investment Attention Issue, the stock will be deleted from the KOSDAQ 150 Index and replaced with Humasis (205470 KS).
The timing of the index change is currently uncertain but will be implemented latest by the close of trading on 17 April.
Humasis (205470 KS) was limit up on Friday following the ex-date of a 1:3 scrip issue. The stock could continue to move higher over the next week.

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)

Rakuten Bank (5838 JP) has priced at a new range of ¥1,300-1,400/share, down from ¥1,630-1,930/share. That lowers TTM PER and PBR to well below where SBI Sumishin was priced.
This will now be universally recognised by pre-IPO analysts as a raging buy. Even at the top end. Important considerations: Rakuten parent TAM, growth, index inclusions, etc.
There are OTHER important considerations going forward which show themselves in the documents.

Gigavis IPO Preview

Gigavis is offering 2.22 million shares in this IPO. The expected market cap of the IPO is from 436 billion won to 503 billion won.
The maximum IPO offering amount is 88.1 billion won. The IPO price is between 34,400 won to 39,700 won.
Gigavis makes automatic optical repair equipment (AOR) for the semiconductor industry.

Gigavis IPO Valuation Analysis

Our base case valuation of Gigavis IPO is target price of 61,755 won per share, representing 56% higher than the high end of the IPO price range.
We estimate the company to generate sales of 126.6 billion won (up 27% YoY) in 2023 and 150.9 billion won (up 19.2% YoY) in 2024.
Our base case valuation is based on 21.8x P/E using our estimated net profit of 35.9 billion won in 2023.

Hong Kong Buybacks Weekly (Apr 7th): Tencent, Aia, CSPC

By Ke Yan, CFA, FRM

We analyze statistics on top repurchases over one week, one month, one quarter and one year periods ended on Apr 7th based on HKEx daily reports.
In the past 7 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Cspc Pharmaceutical (1093 HK).
In the past 30 days, the top 3 companies that repurchased the most shares from the market were Tencent (700 HK), Aia (1299 HK), Swire Pacific (19 HK).

EQD | Volatility Update: Weekly Review of Vol Changes and Best Trades- Calm Before the Storm?

By Simon Harris

Weekly summary of vol changes and moves across Global Markets
Analysing ATM volatility and skew changes over the last 5 days
We suggest a few trades to take advantage of the implied vol surfaces

💡 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

Apr 08

Most Read: Nitori Holdings, Kunlun Tech, Lasertec Corp, Rakuten Bank, HS Holdings, KT Corp, Jardine Cycle & Carriage, Avalon Technologies, Samsung Electronics Pref Shares, GigaVis and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses
Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank
Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp
Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)
Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price
Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
JCNC’s Logic-Defying Valuation
Avalon Technologies IPO- Forensic Analysis
Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2023
Gigavis IPO Valuation Analysis

Nikkei 225 Index Rebalance Preview (Sep 2023): Potential Changes & Dark Horses

The review period for the Nikkei 225 (NKY INDEX) September rebalance ends end July. We highlight 3 potential inclusions and exclusions for the index.
There are a few alternate adds that are interesting and their inclusion in the index could move things around a fair bit.
Due to the large size difference between the potential adds/deletes, there will be a large funding trade with passive trackers needing to sell over 0.5x ADV on many index constituents.

Index Rebalance & ETF Flow Recap: MSCI KR, S&P/ASX, SSE50, ChiNext, NIFTY, KQ150, AMFI, Rakuten Bank

There are a bunch of implementations in the coming week, the largest being the Nikkei 225 (NKY INDEX) March rebalance.
There are some ad hoc changes to the KOSPI2 INDEX and KOSDAQ 150 Index following constituent stocks being designated as Administrative Issues and Investment Attention Issues.
Inflows to the iShares MSCI Emerging Markets ex China ETF (EMXC US) have continued and has taken AUM to a new high.

Index Rebalance & ETF Flow Recap: Nikkei225, KOSDAQ150, KT Corp

The March rebalances of the NIFTY indices and the Nikkei 225 (NKY INDEX) were implemented last week. Plus some ad hoc rebalances for the KOSPI2 INDEX and KOSDQ150 INDEX.
A quieter week coming up with multiple market holidays across markets. We also near the start of the review period for the MSCI May QCIR.
There were inflows to Tracker Fund of Hong Kong Ltd (2800 HK) and iShares FTSE/Xinhua A50 China (2823 HK) during the week while there were outflows from some Korea ETFs.

Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)

Rakuten Bank (5838 JP) has priced at a new range of ¥1,300-1,400/share, down from ¥1,630-1,930/share. That lowers TTM PER and PBR to well below where SBI Sumishin was priced.
This will now be universally recognised by pre-IPO analysts as a raging buy. Even at the top end. Important considerations: Rakuten parent TAM, growth, index inclusions, etc.
There are OTHER important considerations going forward which show themselves in the documents.

Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price

Today, it was announced that HS Holdings (8699 JP) subsidiary Khan Bank LLC – Mongolia’s largest bank – would IPO this month.
This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.
There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.

Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?

There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
This implies an essential premise for us to set up a more aggressive preemptive position on KT.

JCNC’s Logic-Defying Valuation

Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic.

Avalon Technologies IPO- Forensic Analysis

By Nitin Mangal

Avalon Technologies (6594468Z IN) has launched its Initial Public Offering.
The company states to have one of the highest ROCEs in the industry, one of the important reasons of high ROCE is unusual accounting treatment of capital reserve.
Other forensic concerns include lack of cash generation and some auditor discomforts.

Gap Trades in Korean Prefs Vs Common Share Pairs in 2Q 2023

In this insight, we discuss numerous gap trades involving Korean preferred and common shares in 2Q 2023.
The excessive gaps in the preferred and common shares of CJ Corp, Samsung Electronics, and LG Electronics could reverse in the next several months, in our view.
We see some attractive longer-term opportunities for Amorepacific Corp, Doosan Fuelcell, LG Electronics, and Samsung SDI which have especially high discounts for the preferred shares versus their counterpart common shares.

Gigavis IPO Valuation Analysis

Our base case valuation of Gigavis IPO is target price of 61,755 won per share, representing 56% higher than the high end of the IPO price range.
We estimate the company to generate sales of 126.6 billion won (up 27% YoY) in 2023 and 150.9 billion won (up 19.2% YoY) in 2024.
Our base case valuation is based on 21.8x P/E using our estimated net profit of 35.9 billion won in 2023.

💡 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

Apr 07

Most Read: Rakuten Bank, Kawasaki Kisen Kaisha, DB Inc, KT Corp, Jardine Cycle & Carriage, ZJLD Group, HS Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Bank IPO – Lower Range Makes It Even More Attractive
Rakuten Bank IPO: New Price Range Is a Steal
MSCI Japan May QCIR: Couple of Potential Changes
DB Group: Kim Family Feud Leading to a Potential M&A Fight?
Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?
Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)
JCNC’s Logic-Defying Valuation
ZJLD Group Pre-IPO Peer Comparison – Smallest but Compensated with Growth. Sentiment Picking Up
Rakuten Bank IPO Valuation: A Deep Value Play in Japanese Banking
Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price

Rakuten Bank IPO – Lower Range Makes It Even More Attractive

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$630m in its Japan listing in April 2023.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuations in the IPO price range.

Rakuten Bank IPO: New Price Range Is a Steal

Rakuten Bank (5838 JP) has set its IPO price at JPY1,300-1,400 per share which is 20%-29% lower than the IPO reference price range of JPY1,630-1,960 per share.
We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: Valuation Insights.
The new price range values Rakuten Bank at a discount vs peers for the ROE it delivers. SBI Sumishin Net Bank (7163 JP) strong post-IPO performance suggests strong sector sentiment.

MSCI Japan May QCIR: Couple of Potential Changes

Based on the last close, we expect Kawasaki Kisen Kaisha (9107 JP) to replace Nihon M&A Center (2127 JP) in the MSCI Japan Index at the May QCIR.
Passive trackers will need to buy less than 1x ADV on Kawasaki Kisen Kaisha (9107 JP) while selling over 5x ADV on Nihon M&A Center (2127 JP).
Kawasaki Kisen Kaisha (9107 JP) trades cheaper than its closest peers and there are some interesting market neutral trades there.

DB Group: Kim Family Feud Leading to a Potential M&A Fight?

In this insight, we discuss another very interesting situation brewing which is the potential family feud at the DB Group.
One of the scenarios of the Kim family at DB Group is a sibling conflict between Nam-Ho Kim (Chairman) and his sister Ju-Won Kim.
Our base case valuation of DB Inc is target market cap of 488 billion won or 2,428 won per share, which is 36% higher than current price.

Why Will KT’s Foreign Room Stay Above 15% Until MSCI Review Period?

There is only one factor that could have affected KT’s foreign flow in mid-February, and that is the repurchase of its shares.
If KT continues its buyback at the current pace, which is highly likely, we can bet that the foreign room will not fall below 15% until MSCI’s review period.
This implies an essential premise for us to set up a more aggressive preemptive position on KT.

Rakuten Bank (5838) IPO – New Price Is One To Take (Part 1)

Rakuten Bank (5838 JP) has priced at a new range of ¥1,300-1,400/share, down from ¥1,630-1,930/share. That lowers TTM PER and PBR to well below where SBI Sumishin was priced.
This will now be universally recognised by pre-IPO analysts as a raging buy. Even at the top end. Important considerations: Rakuten parent TAM, growth, index inclusions, etc.
There are OTHER important considerations going forward which show themselves in the documents.

JCNC’s Logic-Defying Valuation

Jardine Cycle & Carriage (JCNC SP)‘s implied stub value is around its highest-ever level, dating back to 2004.
The simple ratio of JCNC/ Astra International (ASII IJ) is also the highest level outside the brief spikes post-Covid and during the 2008 GFC.
There is no apparent justification for the current valuation. And a takeover from Jardine Matheson Holdings (JM SP) at these levels appears unrealistic.

ZJLD Group Pre-IPO Peer Comparison – Smallest but Compensated with Growth. Sentiment Picking Up

By Clarence Chu

ZJLD Group (ZJLD HK) is looking to raise up to US$500m in its upcoming Hong Kong IPO.
ZJLD Group (ZJLD) is a Chinese liquor company primarily producing baijiu.
In this note, we discuss the industry dynamics and undertake a peer comparison.

Rakuten Bank IPO Valuation: A Deep Value Play in Japanese Banking

By Oshadhi Kumarasiri

Rakuten Bank announced its IPO price range at ¥1,300-1,400 per share, which is 20-29% lower than the initially indicated price range at the time of filling of the IPO prospectus.
The new price puts Rakuten Bank (5838 JP) on 4.9-5.3x FY+2 PE, which is the lowest in Japan’s banking sector.
Japanese banks usually trade at a price-to-book of 0.2x per 1% ROE. This indicates that Rakuten Bank, which is priced at 1.0-1.1x, may deserve a fair price-to-book of over 2.0x.

Khan Bank IPO Is Here – At IPO Price, the Stake Is Worth More than HS Holdings’ Share Price

Today, it was announced that HS Holdings (8699 JP) subsidiary Khan Bank LLC – Mongolia’s largest bank – would IPO this month.
This is a big deal. The IPO is for 10% of the bank (US$521mm equivalent). Priced at 4x Dec 2022 earnings for a bank which has ~ 25% ROE.
There is a reason to expect substantial realisation of this value within 2023 due to a section of Feb 2021 Amended Mongolian Banking Law. Plus there is boatloads of cash.

💡 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

Apr 06

Most Read: Hindustan Aeronautics Ltd, Rakuten Bank, Global X Lithium & Battery Tech ETF, Toyo Construction, DB Inc, Adani Green Energy, Kawasaki Kisen Kaisha and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Rakuten Bank IPO: Valuation Insights
MSCI India May QCIR: Potential Changes & Special Treatment of Adani Group Stocks
Rakuten Bank IPO: New Price Range Is a Steal
Pre-Positioning Targeting Solactive Global Lithium Index’s October Rebalancing
Rakuten Bank IPO – Lower Range Makes It Even More Attractive
Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands
DB Group: Kim Family Feud Leading to a Potential M&A Fight?
GQG Calls Adani Names 5Yr “Multi-Baggers” – It Works at 30% EPS CAGR if You Torture the Numbers
MSCI Japan May QCIR: Couple of Potential Changes
Good Morning Japan |Recession Fears Dominate; NUGGET: Panasonic+Stellantis =Expanded Battery Profits

Rakuten Bank IPO: Valuation Insights

Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise up to $878m. Pricing is on 5 April and the listing is on 21 April.
We previously discussed the IPO in Rakuten Bank IPO: The Investment Case and Rakuten Bank Vs SBI Sumishin Net Bank.
In this note, we discuss valuation. Our analysis suggests that Rakuten Bank is fairly valued at the IPO price range of JPY1,630-1,960 per share. We would participate in the IPO.

MSCI India May QCIR: Potential Changes & Special Treatment of Adani Group Stocks

Currently, we see 1 high probability inclusion and 2 high probability deletions from the MSCI India Index at the May QCIR. Plus there are stocks close to the cutoffs.
There will be selling on two Adani Group stocks following a lowering of the Foreign Inclusion Factor (FIF). That could increase if one of them is deleted from the index.
As expected, Hindustan Aeronautics Ltd (HNAL IN) has continued to move higher post the placement and there could be more buying in the weeks ahead.

Rakuten Bank IPO: New Price Range Is a Steal

Rakuten Bank (5838 JP) has set its IPO price at JPY1,300-1,400 per share which is 20%-29% lower than the IPO reference price range of JPY1,630-1,960 per share.
We previously discussed the IPO in Rakuten Bank IPO: The Investment Case, Rakuten Bank Vs SBI Sumishin Net Bank and Rakuten Bank IPO: Valuation Insights.
The new price range values Rakuten Bank at a discount vs peers for the ROE it delivers. SBI Sumishin Net Bank (7163 JP) strong post-IPO performance suggests strong sector sentiment.

Pre-Positioning Targeting Solactive Global Lithium Index’s October Rebalancing

LG Energy Solution and Samsung SDI will remain in the index as top stocks of pack makers, respectively. Ecopro BM will almost certainly replace L&F in the category of Cathode.
SK IE Technology will newly join the index with Separator’s top stock. On the other hand, Lotte Energy Materials and SKC are unlikely to be included.
This event can be a critical inflection point in predicting the counter-flow for short positions against Ecopro BM and L&F in advance.

Rakuten Bank IPO – Lower Range Makes It Even More Attractive

By Sumeet Singh

Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$630m in its Japan listing in April 2023.
RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
In our earlier notes, we have looked at the company’s past performance and undertook a peer comparison. In this note, we talk about valuations in the IPO price range.

Toyo Construction FY23 Profit Forecast – 105% Payout = 6.5%, Lots of Shares Changing Hands

Two weeks ago, Toyo Construction (1890 JP) released a new Mid-Term Management Plan with a new investment plan, and a new capital plan (100% payout, ¥50/share minimum div til Mar-2026).
Obvious goal: get the stock above ¥1,000/share so YFO’s ¥1,000 bid looks unattractive. Then they attacked on a FEFTA basis, saying YFO’s foreign entities need permission to go over 10%.
Now Toyo has released a March 2024 forecast, with a ¥63/share dividend and 105% guided payout. The stock popped. LOTS of shares trading. Now only up small.

DB Group: Kim Family Feud Leading to a Potential M&A Fight?

In this insight, we discuss another very interesting situation brewing which is the potential family feud at the DB Group.
One of the scenarios of the Kim family at DB Group is a sibling conflict between Nam-Ho Kim (Chairman) and his sister Ju-Won Kim.
Our base case valuation of DB Inc is target market cap of 488 billion won or 2,428 won per share, which is 36% higher than current price.

GQG Calls Adani Names 5Yr “Multi-Baggers” – It Works at 30% EPS CAGR if You Torture the Numbers

The Adani names are seeing new news and commentary. SEBI is probing offshore deals for rules violations, SEBI filed an interim report Sunday with the Court, Cements are refinancing US$4bn.
GQG’s Jain was interviewed by Bloomberg TV in NY saying he sees his Adani basket being a “multi-bagger in five years.”
Assuming growth and margins equivalent to peer max rates, all profits reinvested, and 100% gain in stock price in 5yrs, NP CAGR=33%, 2028 EV/EBITDA average of four names is 29.4x.

MSCI Japan May QCIR: Couple of Potential Changes

Based on the last close, we expect Kawasaki Kisen Kaisha (9107 JP) to replace Nihon M&A Center (2127 JP) in the MSCI Japan Index at the May QCIR.
Passive trackers will need to buy less than 1x ADV on Kawasaki Kisen Kaisha (9107 JP) while selling over 5x ADV on Nihon M&A Center (2127 JP).
Kawasaki Kisen Kaisha (9107 JP) trades cheaper than its closest peers and there are some interesting market neutral trades there.

Good Morning Japan |Recession Fears Dominate; NUGGET: Panasonic+Stellantis =Expanded Battery Profits

OVERSEAS. SPX -0.2% as Equities continued with Recession trade overnight with Defensive >Cyclicals; Tech, Discretionary, Industrials stocks hit; ADP Employment+Services PMI add fuel to Recession narrative; Next up: Non-Farm Payrolls
JAPAN. NKY Futs -0.4% vs Cash; USDJPY 131.4; As US recession narrative strenghtens, expect selling of US exposed Discretionary; China weighs export ban on Rare earths;Rakuen cuts Bank IPO price
NUGGET. Panasonic+Stellantis=Expansion of Battery Profits. IF Panasonic and Stellantis can agree, it could mean significant share price upside.

💡 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

Apr 05

Most Read: Toshiba Corp, Kingsoft Corp, Ecopro Co Ltd, CUBox, Tencent, Merdeka Battery Materials, Australia and New Zealand Banking Group (ANZ) and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Toshiba – As Bad As It Gets?
Macro Watch: The Banking Crisis Is Likely to Accelerate in Coming Weeks
StubWorld: Impairments Weigh Down Kingsoft Solid Results
MSCI Korea May QCIR: Potential Adds, Deletes & ‘Extreme Price Increase’ Triggers
CUBox IPO Valuation Analysis
HK Buybacks Q1 2023: 8 Names Are 90% of the Total – AIA, Tencent, StanChart, Greatwall the Big 4
Merdeka Battery Materials IPO – Commercializing One of the World’s Largest Nickel Mines
Singapore Banks: Breaking Out
ACCC Sour on ANZ/Suncorp Bank Deal Makes for A Good Trade
Merdeka Battery Materials IPO Peer Comparison & Valuation – Might Be Worth a Shot

Toshiba – As Bad As It Gets?

By Mio Kato

Toshiba results looked rather poor at the headline on account of additional one-off costs leading to a guidance downgrade to ¥95bn in OP.
Despite that, we see some small positive signs across the various industrial segments.
On balance, however, the downgrade and tight lips on the JIP bid leave little to be positive about in the near term.

Macro Watch: The Banking Crisis Is Likely to Accelerate in Coming Weeks

By Andreas Steno

The banking crisis will continue to rage until the Fed and the ECB accept the underlying reason for the deposit flight
Banks cannot cope with an über-inverted yield curve, why cuts are needed asap to contain the situation
It will likely get worse before it gets better consequently

StubWorld: Impairments Weigh Down Kingsoft Solid Results

Despite the topline growth of 20%, Kingsoft Corp (3888 HK) recorded a loss in FY22 after a large impairment for its holding in Kingsoft Cloud (KC US).
Preceding my comments on Kingsoft are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

MSCI Korea May QCIR: Potential Adds, Deletes & ‘Extreme Price Increase’ Triggers

Based on closing price from 3 April, we forecast 5 adds and 4 deletes for the MSCI Korea Index at the May QCIR.
Three of the adds are close to triggering the extreme price increase criteria – if triggered, index inclusion could be deferred to a subsequent index review.
Retail investors have been buying three of the potential adds, while foreign investors have taken the lead on two. Foreign investors have been sellers on all the potential deletions.

CUBox IPO Valuation Analysis

Our base case valuation of CUBox is target price of 34,172 won per share, which is 47% higher than the high end of the IPO price range of 23,200 won.
Our base case valuation uses our estimated sales of 24.5 billion won for the company in 2023 and P/S multiple of 17.2x.
Given that CUBox is a leading player in the AI technology driven facial recognition in Korea, many investors are likely to pay higher premium for its technology.

HK Buybacks Q1 2023: 8 Names Are 90% of the Total – AIA, Tencent, StanChart, Greatwall the Big 4

In Q1 2023, 86 different Hong Kong-listed companies bought back shares either locally or on foreign exchanges. Total buybacks were HK$22.856bn.
8 Companies made up 90% of the total. On average, they bought back shares 4 days out of every 10 within the quarter.
A lot of the smaller companies doing buybacks were significant portions of their volume.

Merdeka Battery Materials IPO – Commercializing One of the World’s Largest Nickel Mines

By Ethan Aw

Merdeka Battery Materials (2012725D IJ) is looking to raise around US$580m in its Indonesian IPO.
It has the largest resource globally in terms of contained nickel at the Konawe Nickel Mine (the SCM Mine), according to Wood Mackenzie.
MBM aims to become a vertically integrated battery materials player. Through a series of acquisitions, it owns one of the world’s largest nickel mines.

Singapore Banks: Breaking Out

By Steven Holden

A record 25.3% of Global funds have exposure to Singapore Banks, breaking out of a range of between 18% and 24% over the last decade.
DBS Group favoured by investors, owned by 17.7% of funds compared to 11.2% in UOB and 7% in OCBC.
After the recent rotation, Singapore Banks are now the 4th most widely held Bank exposure, behind US, Indian and Canadian Banks but ahead of fellow European and Asian peers.

ACCC Sour on ANZ/Suncorp Bank Deal Makes for A Good Trade