Smartkarma Daily Briefs

Dec 28

Daily Brief TMT/Internet: Hollysys Automation Technologies, SK Inc, Datamatics Global Services, Whispir Ltd, XL Axiata and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Hollysys (HOLI US): Dazheng Consortium “Trumps” Ascendent’s Bid
Updated NAV on SK Inc Post 660 Billion Pre-IPO Investment in SK Pharmteco
Datamatics Global Services Ltd: Forensic Analysis
Whispir (WSP AU) Backs Soprano’s Bump
XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence

Hollysys (HOLI US): Dazheng Consortium “Trumps” Ascendent’s Bid

By David Blennerhassett

On the 13 December, Bloomberg reported that the Recco-led group consortium was weighing a revised Offer to be “significantly higher than the $26.50-a-share cash offer from Ascendent Capital”
On the 24 December, a buyer consortium led by Dazheng Group announced an all-cash proposal of US$29.00/share, a 9.4% premium to Ascendent’s Offer. “Credible” financing is in place.
“The Consortium stands ready to engage with the Board“. The Board should engage. The one curious aspect of this latest Offer is the apparent absence of Recco’s involvement.

Updated NAV on SK Inc Post 660 Billion Pre-IPO Investment in SK Pharmteco

By Douglas Kim

It was reported today that SK Pharmteco completed a 660 billion won in pre-IPO funding valuing the company at 4 trillion won.
Prior to this investment, SK Inc owned a 100% stake in SK Pharmteco. After this investment, it is estimated that SK Inc will own about 83.5% stake in SK Pharmteco.
Our base case valuation of SK Inc is NAV of 19.0 trillion won (NAV per share of 258,967 won), representing a 47% upside from current levels.

Datamatics Global Services Ltd: Forensic Analysis

By Nitin Mangal

Datamatics Global Services (DATA IN) or DGSL has seen a good operational performance especially since F23, on the back of a difficult IT macro environment.
Yet there are some discomforts on the forensic side, especially related to cash component. Low cash yield due to significant current account balances in subsidiaries raises alarm bells.
We find opaqueness regarding some important disclosures including Ind AS 115- Revenues and Ind AS 116- Leases. Decision to increase remuneration cap size also leaves us perplexed.

Whispir (WSP AU) Backs Soprano’s Bump

By David Blennerhassett

Soprano has upped its Offer for Whispir Ltd (WSP AU) to A$0.55/share, and has secured board support.
Pendula has a higher (indicative) Offer of A$0.60/share; however Whispir sees Soprano’s terms as superior due to the “conditionality, uncertainty and timing of progressing to a binding transaction with Pendula”.
Soprano’s Offer for Whispir closes on the 10 January – unless extended.

XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence

By Angus Mackintosh

XL Axiata (EXCL IJ) continues to stand as the most direct way to play the data demand in Indonesia as well as being the most convergent of the listed telcos.
Although it saw some seasonal slowdown in 3Q, the solid growth trajectory remains intact for this year with the completion of the Link Net restructuring driving convergence growth.
XL Axiata (EXCL IJ) raised data prices again in November and will continue to ride the wave of price reparation over the coming quarters in a more rational pricing environment.

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Dec 28

Daily Brief Health Care: Sinopharm Group Co Ltd H and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1

Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1

By Xinyao (Criss) Wang

Sinopharm’s 23Q1-Q3 results were below expectations. The main reason for weak performance was due to the anti-corruption campaign, which led to profound and rapid changes in fundamentals and policy end.
In Q4, the impact of anti-corruption would weaken and traditional distribution business would recover.So, 23Q4 performance should be better than Q3, but 23H2 performance would still be worse than 23H1.
We lowered our forecast for 2023 – Revenue and net profit could achieve single-digit growth. Due to the high base in 23H1, growth in 24H1 could still be under pressure.

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Dec 28

Daily Brief Industrials: Grab Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Grab Holdings (GRAB US) – Risks and Rewards in 2024

Grab Holdings (GRAB US) – Risks and Rewards in 2024

By Angus Mackintosh

Grab Holdings looks set to move toward cashflow breakeven in 2H2024 having hit adjusted EBITDA breakeven in 3Q2023 as it successfully struck a delicate balance between growth and profitability.
The sale of 75% of Tokopedia by GoTo may mean more intense competition in Indonesia as it focuses on online delivery services but Grab is well-positioned to deal with this.
2024 will see the potential completion of the Transcab deal plus a potential acquisition in food delivery increasing scale and competitiveness. Valuations are attractive relative to growth and financial position.

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Dec 28

Daily Brief Financials: Nuvama Wealth Management, JPY and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

Nuvama: Stellar Start as an Independent Listed Entity
Part Two: JGB Yields Spike Cause Yen Mayhem

Nuvama: Stellar Start as an Independent Listed Entity

By Ankit Agrawal, CFA

Nuvama reported its first quarterly result since its listing, as a demerged entity. It reported strong growth across all its business segments.
Wealth management revenues grew 30% YoY, adjusted for one-off accounting impact. Cyclical recovery in the capital markets segment further helped.
Nuvama has potential to scale up rapidly and grow its profitability exponentially led by growth and operating leverage. At the current valuation, an investment in Nuvama has potential to triple.

Part Two: JGB Yields Spike Cause Yen Mayhem

By Untying The Gordian Knot

On December 6, 2023, Deputy Gov. Ryozo Himino and other policy board members signalled increasing optimism on price and wage increases.
Himino said at a press conference following a meeting on Wednesday that exiting the negative rate policy would have relatively little impact on Japan’s economy.
“We will carefully assess the situation and consider the timing and procedure of how to exit” negative rates.

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Dec 28

Daily Brief Consumer: Shenzhou Intl Group Holdings, TSE Tokyo Price Index TOPIX and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity
Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity

By Steve Zhou, CFA

Nike (NKE US) reported 2QFY24 results last week with a guidance cut, as the company cut FY24 full-year sales guidance to around +1%, compared to +mid-single-digit in the previous guidance.
Shenzhou Intl Group Holdings (2313 HK) saw its stock drop by 8% the following day, given that Nike is Shenzhou’s most important customer, making up 30% of Shenzhou’s sales.
Nike’s inventory is down another 14% yoy, and down high-single-digit compared to the previous quarter 1QFY24.

Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

By Aki Matsumoto

Not much progress has been made in the early disclosure of convocation notices. The key to even earlier disclosure of convocation notices is the moving up of earnings announcement dates.
Overseas investors require that all materials in the notice of convocation be provided translated in English, and only 27.3% of prime market listed companies have responded.
Few companies file their annual securities reports prior to AGMs. This can be taken as companies’ intention to provide as little detailed information as possible to shareholders prior to AGMs.

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Dec 28

Daily Brief Quantitative Analysis: KRX Short Interest Weekly (Dec 22nd): Hanwha Solutions and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

KRX Short Interest Weekly (Dec 22nd): Hanwha Solutions, Samsung Electron, Hyundai Motor

KRX Short Interest Weekly (Dec 22nd): Hanwha Solutions, Samsung Electron, Hyundai Motor

By Ke Yan, CFA, FRM

We analyzed the changes in short interest of KRX Stocks as of Dec 22nd which has an aggregated short interest worth USD9.9bn.
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 Hanwha Solutions, Samsung Electron, Hyundai Motor.

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Dec 28

Daily Brief ESG: Companies Keen to Reduce Administrative Costs and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

Companies Keen to Reduce Administrative Costs, but Reluctant to Provide Convenience to Shareholders

By Aki Matsumoto

Not much progress has been made in the early disclosure of convocation notices. The key to even earlier disclosure of convocation notices is the moving up of earnings announcement dates.
Overseas investors require that all materials in the notice of convocation be provided translated in English, and only 27.3% of prime market listed companies have responded.
Few companies file their annual securities reports prior to AGMs. This can be taken as companies’ intention to provide as little detailed information as possible to shareholders prior to AGMs.

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Dec 28

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Stocks Drift Higher; Japan Wage Hikes +5% in 2024 and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Ohayo Japan | Stocks Drift Higher; Japan Wage Hikes +5% in 2024
Fragile Vietnamese Real Estate Sector Faces Long Road to Recovery

Ohayo Japan | Stocks Drift Higher; Japan Wage Hikes +5% in 2024

By Mark Chadwick

Overseas: SPX +0.1%; Stocks drift higher; 10Y Treasury yield at 3.8%; Biotech stocks surge
Today: NKY Futs -0.5% v cash. JPY141.5; Daihatsu Motor could face over ¥100 billion in losses
Markets: Japanese business leaders foresee 5% wage hikes in FY24, driving sustained growth.

Fragile Vietnamese Real Estate Sector Faces Long Road to Recovery

By Yanqi Zhu

The Vietnamese government is in the midst of a campaign to eradicate corruption in its domestic real estate industry, which has seen bribery and embezzlement amounting to close to 3% of the country’s gross domestic product (GDP).
Despite the high-profile corruption cases that have brought the sector’s financing channels to a standstill, the aggregate credit risk profile of the Vietnamese real estate industry has largely improved in recent months, after deteriorating, on the back of widespread monetary policy support from the Vietnamese government.
The troubled sector saw a spike in its Criat credit cycle index (CCCI) since the middle of last year when deleveraging efforts for the industry by the Vietnamese government were first announced.

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Dec 28

Daily Brief Event-Driven: Kum Yang: Announces Its Shares Will Be Listed on the US Stock Market Through ADRs and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Kum Yang: Announces Its Shares Will Be Listed on the US Stock Market Through ADRs
Hollysys (HOLI US): Dazheng Consortium “Trumps” Ascendent’s Bid
Updated NAV on SK Inc Post 660 Billion Pre-IPO Investment in SK Pharmteco
Whispir (WSP AU) Backs Soprano’s Bump
OreCorp (ORR AU): Silvercorp Switches to a Takeover Offer to Counter Perseus

Kum Yang: Announces Its Shares Will Be Listed on the US Stock Market Through ADRs

By Douglas Kim

On 27 December, Kum Yang announced that its shares will be listed on the US stock market in the form of DRs, resulting in its shares rising by 11.7%.
The listing of Kum Yang ADRs is likely to have a short-term positive impact on its share price as this is likely to reduce free float of local common shares.
Nonetheless, over the next 6-12 months, we expect Kum Yang’s share price to trade much lower (30% or more) as its shares are highly overvalued.

Hollysys (HOLI US): Dazheng Consortium “Trumps” Ascendent’s Bid

By David Blennerhassett

On the 13 December, Bloomberg reported that the Recco-led group consortium was weighing a revised Offer to be “significantly higher than the $26.50-a-share cash offer from Ascendent Capital”
On the 24 December, a buyer consortium led by Dazheng Group announced an all-cash proposal of US$29.00/share, a 9.4% premium to Ascendent’s Offer. “Credible” financing is in place.
“The Consortium stands ready to engage with the Board“. The Board should engage. The one curious aspect of this latest Offer is the apparent absence of Recco’s involvement.

Updated NAV on SK Inc Post 660 Billion Pre-IPO Investment in SK Pharmteco

By Douglas Kim

It was reported today that SK Pharmteco completed a 660 billion won in pre-IPO funding valuing the company at 4 trillion won.
Prior to this investment, SK Inc owned a 100% stake in SK Pharmteco. After this investment, it is estimated that SK Inc will own about 83.5% stake in SK Pharmteco.
Our base case valuation of SK Inc is NAV of 19.0 trillion won (NAV per share of 258,967 won), representing a 47% upside from current levels.

Whispir (WSP AU) Backs Soprano’s Bump

By David Blennerhassett

Soprano has upped its Offer for Whispir Ltd (WSP AU) to A$0.55/share, and has secured board support.
Pendula has a higher (indicative) Offer of A$0.60/share; however Whispir sees Soprano’s terms as superior due to the “conditionality, uncertainty and timing of progressing to a binding transaction with Pendula”.
Soprano’s Offer for Whispir closes on the 10 January – unless extended.

OreCorp (ORR AU): Silvercorp Switches to a Takeover Offer to Counter Perseus

By Arun George

Silvercorp Metals (SVM US) has switched to an off-market takeover offer. The Orecorp Ltd (ORR AU) consideration remains unchanged at A$0.19 cash and 0.0967 SVM shares per ORR share.
The takeover offer is conditional on a 50.1% minimum acceptance condition, achievable in the absence of a superior proposal.
The crucial question is whether Perseus Mining (PRU AU) is comfortable with SVM effectively controlling ORR. We think that there is a low probability of Perseus launching a competing proposal.

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Dec 28

Daily Brief Equity Bottom-Up: Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity and more

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

In today’s briefing:

Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity
Datamatics Global Services Ltd: Forensic Analysis
Grab Holdings (GRAB US) – Risks and Rewards in 2024
Nuvama: Stellar Start as an Independent Listed Entity
XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence
Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1

Shenzhou Intl (2313 HK): Nike Guidance Cut Presents An Opportunity

By Steve Zhou, CFA

Nike (NKE US) reported 2QFY24 results last week with a guidance cut, as the company cut FY24 full-year sales guidance to around +1%, compared to +mid-single-digit in the previous guidance.
Shenzhou Intl Group Holdings (2313 HK) saw its stock drop by 8% the following day, given that Nike is Shenzhou’s most important customer, making up 30% of Shenzhou’s sales.
Nike’s inventory is down another 14% yoy, and down high-single-digit compared to the previous quarter 1QFY24.

Datamatics Global Services Ltd: Forensic Analysis

By Nitin Mangal

Datamatics Global Services (DATA IN) or DGSL has seen a good operational performance especially since F23, on the back of a difficult IT macro environment.
Yet there are some discomforts on the forensic side, especially related to cash component. Low cash yield due to significant current account balances in subsidiaries raises alarm bells.
We find opaqueness regarding some important disclosures including Ind AS 115- Revenues and Ind AS 116- Leases. Decision to increase remuneration cap size also leaves us perplexed.

Grab Holdings (GRAB US) – Risks and Rewards in 2024

By Angus Mackintosh

Grab Holdings looks set to move toward cashflow breakeven in 2H2024 having hit adjusted EBITDA breakeven in 3Q2023 as it successfully struck a delicate balance between growth and profitability.
The sale of 75% of Tokopedia by GoTo may mean more intense competition in Indonesia as it focuses on online delivery services but Grab is well-positioned to deal with this.
2024 will see the potential completion of the Transcab deal plus a potential acquisition in food delivery increasing scale and competitiveness. Valuations are attractive relative to growth and financial position.

Nuvama: Stellar Start as an Independent Listed Entity

By Ankit Agrawal, CFA

Nuvama reported its first quarterly result since its listing, as a demerged entity. It reported strong growth across all its business segments.
Wealth management revenues grew 30% YoY, adjusted for one-off accounting impact. Cyclical recovery in the capital markets segment further helped.
Nuvama has potential to scale up rapidly and grow its profitability exponentially led by growth and operating leverage. At the current valuation, an investment in Nuvama has potential to triple.

XL Axiata (EXCL IJ) – Riding the Wave of Price Reparation and Convergence

By Angus Mackintosh

XL Axiata (EXCL IJ) continues to stand as the most direct way to play the data demand in Indonesia as well as being the most convergent of the listed telcos.
Although it saw some seasonal slowdown in 3Q, the solid growth trajectory remains intact for this year with the completion of the Link Net restructuring driving convergence growth.
XL Axiata (EXCL IJ) raised data prices again in November and will continue to ride the wave of price reparation over the coming quarters in a more rational pricing environment.

Sinopharm Group (1099.HK) – Performance Pressure May Continue Until 2024H1

By Xinyao (Criss) Wang

Sinopharm’s 23Q1-Q3 results were below expectations. The main reason for weak performance was due to the anti-corruption campaign, which led to profound and rapid changes in fundamentals and policy end.
In Q4, the impact of anti-corruption would weaken and traditional distribution business would recover.So, 23Q4 performance should be better than Q3, but 23H2 performance would still be worse than 23H1.
We lowered our forecast for 2023 – Revenue and net profit could achieve single-digit growth. Due to the high base in 23H1, growth in 24H1 could still be under pressure.

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

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

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