Daily Briefs

The Allkem/Livent “merger of equals” discussed in Allkem/Livent (AKE AU | LTHM US) Merger Of Lithium Equals Has Index Surprises and Allkem/Livent: Enlarged Charging Unit is on track.
As of the end of last month, all approvals are received or are expected to be received. The Scheme Booklet is expected next month. Deal is expected to close end-CY2023.
The deal STILL has interesting side issues with index. Even more interesting than Newcrest/Newmont. This is an update with more detail as we probably have 8-10 weeks left.

KOSDAQ150 Index Rebalance Preview: Posco DX Listing Transfer

The KRX has preliminarily approved Posco DX (022100 KS)‘s listing transfer from the KOSDAQ Market to the KOSPI Market.
Posco DX (022100 KS) has announced that its stock will start trading on the KOSPI Market from the open on 2 January.
We expect Temc (425040 KS) to replace Posco DX (022100 KS) in the KOSDAQ 150 Index (KOSDQ150 INDEX) at the close on 28 December.

HSTECH Index Rebalance Preview: Tongcheng Travel (780 HK) Could Replace GDS (9698 HK)

Tongcheng Travel Holdings (780 HK) is expected to replace GDS Holdings (9698 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the March review.
Constituent changes and capping changes will result in a one-way turnover of 2.32% and that will result in a round-trip trade of US$628m.
Short interest on Tongcheng Travel Holdings (780 HK) is near its lows while there has been some recent short covering in GDS Holdings (9698 HK).

Index Rebalance & ETF Flow Recap: HSTECH, SIG/CWG, KQ150, REPT BATTERO

It was a busy week with rebalance implementations at the close of trading on Thursday in Korea and then across the region on Friday.
The SET 50 Index changes should be announced this week and the Yuanta TW Div+ ETF will continue to implement the changes till Thursday.
There were inflows to China ETFs during the week while there were big outflows from Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) ETFs.

Allkem+Livent=Arcadium : Expected Index Flows

Yesterday during the day, Allkem Ltd (AKE AU) shareholders approved the Scheme and Livent (LTHM US) shareholders approved the merger. The deal is done. Allkem last trades 21 Dec.
NEWCO starts trading 4 January in the US but the Arcadium Lithium CDIs start trading 22 Dec in Australia. S&P/ASX announced they will replace Allkem in the ASX200.
But I have been asked for a breakdown of flows and timing again, so I have put it into a handy table which I hope makes it less confusing.

Fujitsu General (6755) – Fujitsu Wants Out, May Force the Issue

In 2019, it became apparent Fujitsu Ltd (6702 JP) wanted to sell down its stakes in non-core businesses (Shinko Electric, Fujitsu General, and FDK), and move on to better things.
In early January 2023, a Bloomberg article suggested a sale process. A 20 Jan 2023 article suggested Fujitsu General’s auction was imminent. I wrote a piece. It was not bullish.
The stock rose a bit, then fell 40+% through last week. Now another article suggests some urgency at Fujitsu. That changes things.

Kurabo (3106) – Bigly Buyback And Share Cancellation for A Valueful Value Trap With Hidden Value

Kurabo announced a bigly buyback on Tuesday. At last price it is equivalent to 8+% of shares out. Most likely to target buybacks from cross-holders.
The company is not cash-rich, but it is financial asset and real estate-rich. And it trades at cheap multiples without even thinking about those assets (themselves worth the market cap).
The TSE’s “PBR1 OR BUST” movement combined with starting low valuation, high payout, excess assets, mean this value trap has room to move.

KOSDAQ150 Adhoc Index Rebalance: TEMC Added; Short Covering Expected in PoscoDX

Posco DX (022100 KS) will move from the KOSDAQ Market to the KOSPI Market on 2 January. That means KOSDAQ150 Index (KOSDQ150 INDEX) deletion at the close on 28 December.
In line with our forecast, Temc (425040 KS) will be added to the KOSDAQ 150 Index (KOSDQ150 INDEX) as a replacement.
Short interest increased in Posco DX (022100 KS) following its inclusion in a global index and there should continue to be unwinding over the next week.

Index Rebalance & ETF Flow Recap: STAR50, SET50, AMFI, KOSDAQ150

The adhoc KOSDAQ 150 Index rebalance and the regular Nifty200 Momentum30 Index rebalance will be implemented on Thursday and the SET 50 Index rebalance will be implemented on Friday.
The review cutoff period for a whole bunch of indices ends on 29 December and the announcement of the results and implementation will take place early next year.
There were big inflows to China ETFs and to Emerging Market ETFs including iShares Core Emerging Mar (IEMG US), Vanguard Emerging Markets (VWO US) and iShares Emerging Markets (EMXC US).

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Jan 01

Daily Brief Australia: ADX Energy Ltd, Sterling Energy PLC and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

ADX Energy (ASX: ADX): Narrowing uncertainty and resources range at Anshof
ADX Energy (ASX: ADX): Adding further exploration prospects with MND to the FY24 programme
Auctus on Friday – 08/12/2023

ADX Energy (ASX: ADX): Narrowing uncertainty and resources range at Anshof

• The Anshof-2 well encountered high quality Eocene sands with at least 12 metres vertical thickness and porosity of ~20%. • The top of the Eocene sand was encountered ~40-50 m higher than expected, suggesting a much larger and flatter structure than expected in the P50 case. • The better-than-expected reservoir quality and thicker sands suggest better well deliverability and higher flow rates, which result in a higher production plateau and lower development cost with a positive impact on NPV.

ADX Energy (ASX: ADX): Adding further exploration prospects with MND to the FY24 programme

• ADX has farmed out a 50% interest in an exploration area with in the ADX AT I licence to MND in return for a A$0.73 mm back costs payment plus A$7.34 mm funding in exploration drilling. • The exploration area farmed-out to MND includes the LICHT and IRR gas prospects. • The LICHT prospect location (16.2 bcf gross best case prospective resources) has already received a drilling permit including the environmental clearance.

Auctus on Friday – 08/12/2023

________________________________________ ADX Energy (ADX AU)C; target price of A$0.80 per share: Adding further exploration prospects in FY24 – ADX has farmed out a 50% interest in an exploration area within the ADX AT I licence to MND in return for a A$0.73 mm back costs payment plus A$7.34 mm funding in exploration drilling.
The exploration area farmed-out to MND includes the LICHT and IRR gas prospects.
The cash and carry component alone values 10% of the project at US$220 mm or US$440 mm for Chariot’s residual 20% interest (£0.31/sh).

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Jan 01

Daily Brief Thailand: Valeura Energy Inc and more

By Smartkarma Daily Briefs | Daily Briefs, Thailand

In today’s briefing:

Valeura Energy (TSX: VLE): Restarting Wassana

Valeura Energy (TSX: VLE): Restarting Wassana

• Production at Wassana has restarted, in line with management’s guidance. • The drilling rig will be mobilized to Wassana in the coming days to drill three horizontal production wells. • In 2024, Valeura will also drill wells targeting reserve adds including at Wassana North, Jasmine and Nong Yao.

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Jan 01

Daily Brief Japan: Lifenet Insurance Company, TSE Tokyo Price Index TOPIX, Misumi Group and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Lifenet: Oasis Management Is Now Another Major Shareholder Besides Effissimo
The Objective of an MBO Is Not to Strip Bothersome Activist Investors of Their Equity Interests
Misumi Group (9962 JP): Heads up for 3Q Results in Late January

Lifenet: Oasis Management Is Now Another Major Shareholder Besides Effissimo

By Alec Tseung

Oasis Management has become a major shareholder in Lifenet in November. Together with another activist investor, Effissimo Capital (the largest shareholder), they now control >30% of the company.
Company announced some new partnerships/initiatives to drive growth but they don’t seem to be materially different from what it has been doing to turn around its declining VoNB.
Unless we can see a sustained trend of improving VoNB, it’s difficult to justify the premium valuation vs. the other more established peer.

The Objective of an MBO Is Not to Strip Bothersome Activist Investors of Their Equity Interests

By Aki Matsumoto

Rather than “management with awareness of stock price,” the question is whether management is carrying out its duties toward “the goal of increasing shareholder interests,” to put it more accurately.
In determining TOB price, the question is whether independent committee was established, whether that committee actually functioned, and whether the directors performed their duties in the best interests of shareholders.
The real objective of an MBO is to restart the company for a sustainable expansion of corporate value, not to rip off the equity stake of a bothersome activist investor.

Misumi Group (9962 JP): Heads up for 3Q Results in Late January

By Scott Foster

The gradual upward trend in monthly sales, which has continued through November, has further to go in our estimation.
At 22x EPS guidance for FY Mar-24, the shares are at the low end of their 5-year P/E range.
Guidance remains unchanged. 3Q results are due to be announced at the end of January

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Jan 01

Daily Brief Indonesia: Criterium Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Indonesia

In today’s briefing:

Criterium Energy Ltd (TSX-V: CEQ): Sale of Bulu unlocks value and transforms the company’s balance sheet
Criterium Energy Ltd (TSX-V: CEQ): Further improvements on Mont d’Or transaction terms

Criterium Energy Ltd (TSX-V: CEQ): Sale of Bulu unlocks value and transforms the company’s balance sheet

• Criterium has signed a letter of intent to sell its 42.5% interest in Bulu for US$7.75 mm. • The company acquired the interest in Bulu for US$1.6 mm. • Criterium has previously announced a C$18.9 mm capital raise comprising a C$12.2 mm (~US$9 mm) convertible debt and C$6.7 mm (~US$4.5 mm) of new equity.

Criterium Energy Ltd (TSX-V: CEQ): Further improvements on Mont d’Or transaction terms

• The completion payment by Criterium on the closing of the Mont d’Or acquisition has been reduced by 60% to US$4.5 mm. • Only US$4.1 mm will now be repaid to Mont d’Or debt holders on completing the acquisition (US$9.6 mm previously) with US$0.5 mm being written down (US$4.3 mm previously). • On completion of the acquisition, Criterium is expected to hold US$25 mm of debt and US$8 mm in cash (including US$4.5 mm of new equity) resulting in US$17 mm in net debt (excluding US$3.0 mm of Mont d’Or residual debt to be converted into equity in 2025).

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Jan 01

Daily Brief United States: NVIDIA Corp, Marvell Technology , Gracell Biotechnologies Inc, Akamai Technologies, Analog Devices, American International Group, Best Buy Co Inc, BILL Holdings , AppLovin and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Nvidia Vs. Taiwan Short Basket: Hedge Working; CES 2024 Likely Positive for Nvidia Vs. Basket
Marvell Technology Inc.: AI and Cloud Growth – Are They the New Tech Leaders? – Major Drivers
China Healthcare Weekly (Dec.31)-New Medical Device Policy, AstraZeneca to Acquire Gracell, PD-1+ADC
Akamai Technologies Inc.: Paving the Way for a Safer
American International Group (AIG): Acquisition of UK Protection Business & Other Major Drivers
Analog Devices Inc.: Revolutionizing AI ML Systems with Innovative Power Solutions! – Major Drivers
American Airlines Group: Additions of New Routes & Other Major Drivers
Best Buy Co. Inc.: The Strategy Driving Their Membership Program Success! – Major Drivers
BILL Holdings Inc.: Transforming Financial Operations in the Face of Macroeconomic Challenges! – Major Drivers
AppLovin Corporation: AI-Driven Tech Powering Advertising – A Deep Dive! – Major Drivers

Nvidia Vs. Taiwan Short Basket: Hedge Working; CES 2024 Likely Positive for Nvidia Vs. Basket

By Vincent Fernando, CFA

Long Nvidia vs. Short Basket of Taiwan AI Concept Stocks — The trade has held steady since our last piece with Nvidia outperforming the shorts slightly.
CES 2024 will be held January 9th to 12th. It will showcase AI expanding into a wide range of Edge AI applications such as home appliances and PCs.
One can maintain the L/S trade into CES 2024 given that the Taiwan AI Short Basket constituents are unlikely to be beneficiaries of positive news flow from the event.

Marvell Technology Inc.: AI and Cloud Growth – Are They the New Tech Leaders? – Major Drivers

Marvell Technology managed to surpass Wall Street’s revenue and earnings expectations, achieving a commendable revenue of $1.42 billion, marking a 6% sequential growth above the midpoint of the provided guidance.
The data center end market witnessed revenue of $556 million in the third quarter, surpassing expectations, mainly driven by robust AI revenue.
Despite the anticipated decline in enterprise on-premise revenue, Marvell’s diverse product portfolio, including PAM4 optical products and Teralynx Ethernet switches, contributed to the broad-based growth.

China Healthcare Weekly (Dec.31)-New Medical Device Policy, AstraZeneca to Acquire Gracell, PD-1+ADC

By Xinyao (Criss) Wang

Ministry of Finance and National Health Commission issued new policy strictly prohibiting public hospitals from borrowing to purchase medical equipment, which will change the investment logic of medical device sector.
“PD-1+ADC” is expected to replace “PD-1+chemotherapy” as the first-line standard therapy. This will be a huge market. So, good story of ADC CDMO (such as WuXi XDC) would continue.
The inspiration that AstraZeneca’s acquisition of Gracell brings to investors is IPO isn’t the only way for exit.Being acquired is also good, which will become more important in the future.

Akamai Technologies Inc.: Paving the Way for a Safer

Akamai Technologies, Inc. exceeded analyst expectations in terms of revenue as well as earnings, with a revenue surge to $965 million, marking a substantial 9% year-over-year growth.
The non-GAAP operating margin stood impressively at 31%, while non-GAAP earnings per share reached $1.63, reflecting a remarkable 29% year-over-year increase.
Akamai’s security segment experienced a notable 20% year-over-year growth in Q3.

American International Group (AIG): Acquisition of UK Protection Business & Other Major Drivers

AIG delivered mixed results for the previous quarter, with revenues well below analyst expectations, but managed an earnings beat.
In the third quarter, AIG continued to achieve remarkable results, demonstrating significant progress in strategic, operational, and financial objectives across the organization.
They had adjusted after-tax income of $1.2 billion, a 92% YoY increase, and consolidated net investment income reaching $3.3 billion, a 29% YoY increase.

Analog Devices Inc.: Revolutionizing AI ML Systems with Innovative Power Solutions! – Major Drivers

Analog Devices, Inc. delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings, reaching $2.7 billion, primarily fueled by substantial growth in the automotive sector.
Amid challenging times, ADI’s design win pipeline witnessed double-digit growth, buoyed by sustained momentum in Maxim revenue synergies, surpassing initial expectations.
In the consumer sector, ADI secured multiple power management sockets in portable applications, showcasing the success of its acquisition strategy.

American Airlines Group: Additions of New Routes & Other Major Drivers

American Airlines Group delivered mixed results for the previous quarter, with revenues below the analyst consensus.
The financial results for the third quarter showcased high revenues of approximately $13.5 billion, driven by a resilient demand environment and significant travel rewards program revenue.
American Airlines experienced steady domestic demand, with international demand fueling revenue growth, particularly in the Atlantic, Caribbean, and Central America regions.

Best Buy Co. Inc.: The Strategy Driving Their Membership Program Success! – Major Drivers

Best Buy Co., Inc. delivered mixed results for the previous quarter, with revenues well below analyst expectations but managed earnings beat.
The company disclosed a 6.9% decline in comparable sales, a tad below the projected figure, due to softened consumer demand during the quarter.
The third quarter witnessed growth in the paid membership base and enhanced customer satisfaction across various service offerings.

BILL Holdings Inc.: Transforming Financial Operations in the Face of Macroeconomic Challenges! – Major Drivers

BILL Holdings, Inc. surpassed the revenue expectations as well as the earnings expectations of Wall Street, marking a milestone with Q1 revenue surpassing $300 million, a remarkable 33% YoY increase.
Despite surpassing expectations and witnessing strong customer adoption, the company faced growing macroeconomic pressures toward the end of the quarter, persisting into October.
In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

AppLovin Corporation: AI-Driven Tech Powering Advertising – A Deep Dive! – Major Drivers

AppLovin Corporation delivered an all-around beat in the previous quarter, experiencing substantial year-over-year and quarter-over-quarter revenue growth.
As part of the portfolio optimization program, the apps sector marked its first quarter of quarter-over-quarter revenue growth, generating a total revenue of $864 million, surpassing guidance with an adjusted EBITDA of $490 million, up 63% year-over-year.
In the app segment, revenue grew 5% sequentially to $360 million, representing the initial quarter of growth since the portfolio optimization initiative began.

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Jan 01

Daily Brief China: Weiqiao Textile Co, Vinda International, Alibaba (ADR), Baidu, NetEase and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp
(Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric
Alibaba Group Holding Limited: Can Their Upgraded AI Model To Challenge Microsoft & Amazon? – Major Drivers
Baidu Inc.: A Game-Changing Strategy That’s Shaping AI’s Future! – Major Drivers
NetEase Inc.: Inside the Strategies Fueling Their Gaming Industry Takeover! – Major Drivers

Merger Arb Mondays (01 Jan) – Weiqiao Textile, IRC, IJTT, JSR, Shinko Electric, Hollysys, OreCorp

By Arun George

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads – Irc Ltd (1029 HK), Hollysys Automation Technologies (HOLI US), JSR Corp (4185 JP), Shinko Electric Industries (6967 JP), Adbri (ABC AU), Probiotec Ltd (PBP AU).
Lowest spreads – Tietto Minerals Ltd (TIE AU), A2B Australia (A2B AU), T&K Toka Co Ltd (4636 JP), Tokyo Rakutenchi (8842 JP), Pact Group Holdings (PGH AU).

(Mostly) Asia M&A, Dec 2023: Vinda, Adbri, Perpetual, CPMC, Sigma Health, Shinko Electric

By David Blennerhassett

For the month of December 2023, 16 new deals (firm and non-binding) were discussed on Smartkarma with an overall announced deal size of ~US$10bn.
The average premium for the new deals announced (or first discussed) in December was 44.7%. The average YTD is 39% (117 deals).
This compares to the average premium for all deals in 2022 (106 deals), 2021 (165 deals), 2020 (158 deals), and 2019 (145 deals) of 41%, 33%, 31%, and 31% respectively.

Alibaba Group Holding Limited: Can Their Upgraded AI Model To Challenge Microsoft & Amazon? – Major Drivers

Alibaba Group Holding Limited delivered a mixed set of results for the previous quarter, with revenues below the analyst consensus.
For Taobao and Tmall Group, the emphasis lies on user-centric strategies, universal market coverage, multi-tiered consumer engagement, and maintaining price competitiveness.
The Local Services Group concentrates on location-based technology services, with Amap focusing on mobility and Ele.me on-demand services.

Baidu Inc.: A Game-Changing Strategy That’s Shaping AI’s Future! – Major Drivers

Baidu managed to exceed analyst expectations in terms of revenue as well as earnings in the most recent quarter sustaining solid revenue, profit, and cash flow.
The strategic reinvention of the product portfolio with ERNIE and ERNIE bot played a pivotal role in achieving these results.
Baidu successfully launched EB4 ahead of expectations, attributing it to a unique end-to-end 4-layer AI infrastructure and valuable user feedback.

NetEase Inc.: Inside the Strategies Fueling Their Gaming Industry Takeover! – Major Drivers