Category

Daily Briefs

Nov 08
0

Daily Brief Health Care: WuXi XDC Cayman , CMIC Holdings, TSE Tokyo Price Index TOPIX, Remegen , Shofu Inc, Ono Pharmaceutical and more

By | Daily Briefs, Healthcare

In today’s briefing:

  • WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
  • CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650
  • WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth
  • The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market
  • Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent
  • Shofu (7979 JP) – Competitive Advantage Driving Predictability in Earnings Growth
  • Ono Pharmaceutical (4528 JP): Record H1 Earnings; Forxiga Is Flying High; FY24 Guidance Updated

WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors

By Clarence Chu

  • WuXi XDC Cayman (1877628D HK) is looking to raise US$470m in its Hong Kong IPO.
  • WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
  • In this note, we will look at the deal dynamics and share our final thoughts on valuation.

CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650

By Arun George

  • CMIC Holdings (2309 JP) has recommended an MBO tender offer of JPY2,650 per share, a 55.9% premium to the undisturbed price (7 November).
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 41.29% ownership ratio.
  • Irrevocables to accept represent a 23.29% ownership ratio. While the offer is light vs. peer multiples, the minimum acceptance condition requires a 35.1% minority acceptance rate, which is doable.

WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth

By Andrei Zakharov

  • WuXi XDC set terms for an upcoming IPO: the fast-growing CRDMO offers 178.4M shares at the price range of HK$19.90-HK$20.60, implying a market cap of ~HK$23.9B (~$3B) at the midpoint. 
  • Cornerstone investors agreed to subscribe and buy ~116M shares, assuming the IPO price of HK$20.25 at the midpoint. WuXi XDC shares will begin trading on Friday, November 17. 
  • My PT of HK$25.57 implies a ~26% upside to the IPO price at the midpoint. WuXi XDC’s premium multiples reflect 100%+ top-line growth and the company’s leadership position. 

The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market

By Aki Matsumoto

  • Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded “satisfied,” indicating a continuing mismatch between disclosure content and investor needs.
  • TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.
  • However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.

Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent

By Xinyao (Criss) Wang

  • Although RemeGen’s 23Q1-Q3 sales was better-than-expected, the Company is difficult to achieve management’s performance guidance for 2023. Since RemeGen’s commercialization logic has “undeniable flaws”, net loss would be further widened.
  • Cash balance of RemeGen was just RMB600 million by 23Q3, which is not enough to cover its high R&D/SG&A expenses. If RemeGen cannot secure sufficient financing timely, risks are significant.
  • The current valuation and investors’ expectations for RemeGen largely rely on the potential license-out deal of RC18. However, we remain caution until RC18 has sufficient evidence to win head-to-head trial.

Shofu (7979 JP) – Competitive Advantage Driving Predictability in Earnings Growth

By Astris Advisory Japan

  • Q1-2 FY3/2024 results were in line with upwardly-revised company guidance, with gross margins reaching 60.4% and a record-high quarterly level of 61.0% for Q2 FY3/2024.
  • This was driven by overseas growth for Shofu’s competitive Chemical Products (CAD/CAM resin materials and restorative filling materials) and a forex tailwind, with overseas sales making up 57.6% of total sales.
  • We have raised our earnings estimates for FY3/2024 and beyond to reflect Shofu continuing to gain market share overseas, and the resultant improvement in the sales mix

Ono Pharmaceutical (4528 JP): Record H1 Earnings; Forxiga Is Flying High; FY24 Guidance Updated

By Tina Banerjee

  • Ono Pharmaceutical (4528 JP) reported double-digit growth in revenue, operating profit, and net profit in H1FY24. Opdivo recorded revenue of ¥75B (+7% YoY). Forxiga revenue jumped 36% YoY to ¥36B.
  • Encouraged by strong performance of Forxiga and receipt of lump-sum income associated with the patent litigation settlement, Ono has raised FY24 guidance by mid-to-high single-digit percentage across all the parameters.
  • The company aims to overcome Opdivo patent cliff and accelerate growth by launching multiple products in the U.S. and Europe with large addressable markets.

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Nov 08
0

Daily Brief Consumer: Sankyo Co Ltd, DPC Dash, Sichuan Baicha Baidao Industrial, Ace Hardware Indonesia, iShares Russell 2000 ETF, Sumber Alfaria Trijaya Tbk Pt and more

By | Consumer, Daily Briefs

In today’s briefing:

  • Sankyo (6417) – Second Go-Round for a BIG Buyback
  • DPC Dash (1405 HK): Recipe for Multibagger
  • Sichuan Baicha Baidao Pre-IPO – The Positives – Riding on Franchise Store Expansion
  • Ace Hardware Indonesia (ACES IJ) – Renaissance in Motion
  • Just Another Counter-Trend Rally, or Something More? DXY and Treasury Yields Breaking Key Supports
  • Sumber Alfaria Trijaya (AMRT IJ) – Running Ahead of the Pack

Sankyo (6417) – Second Go-Round for a BIG Buyback

By Travis Lundy

  • Back in late September, Sankyo Co Ltd (6417 JP) announced a 10mm share buyback along with a new dividend policy. Only 4.22mm shares showed up to sell. 
  • The largest holder – Exec Chair Busujima-san – sold 2.22mm shares under his own name and his company’s name. Hikari Tsushin, which had been selling in the market, didn’t participate.
  • Now Sankyo has launched another 10mm share ToSTNeT-3 buyback tomorrow (8 Nov) AM at ¥6,099/share. They may not complete. But they may continue buying later. They have oodles of cash.

DPC Dash (1405 HK): Recipe for Multibagger

By Eric Chen

  • We believe the company is well positioned in China’s rapidly growing pizza market thanks to its strong brand and superior store economics. 
  • Despite stock rally post 1H23 results, market still underestimates its earnings for both near and long term. We expect RMB250 million net profit for 2024 versus break-even by consensus.  
  • History suggests DPC Dash has recipe for attractive stock return driven by its highly visible growth that can shield it from macro situations, which is desperately needed by China investors.  

Sichuan Baicha Baidao Pre-IPO – The Positives – Riding on Franchise Store Expansion

By Sumeet Singh

  • Sichuan Baicha Baidao Industrial (SBBI) is looking to raise up to US$300m in its upcoming HK IPO. 
  • SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.6%.
  • In this note, we talk about the positive aspects of the deal.

Ace Hardware Indonesia (ACES IJ) – Renaissance in Motion

By Angus Mackintosh

  • Ace Hardware Indonesia (ACES IJ) booked an impressive set of 3Q2023 results after registering a strong improvement in SSSG over the last few months as well as increasing store count.
  • The company has booked particularly strong performance outside Java, where spending power has proved to be strong, with the company’s digital promotions boosting sales significantly and complementing offline sales. 
  • Ace Hardware Indonesia (ACES IJ) has regained its lustre with a more coherent set of initiatives to drive future growth from promotions to new store formats. Valuations remain reasonable.

Just Another Counter-Trend Rally, or Something More? DXY and Treasury Yields Breaking Key Supports

By Joe Jasper

  • We believe there is significant evidence that the broad equity market has bottomed, and a year-end rally has begun. This report elaborates on this main point
  • Last week (10/31/23) we discussed how the $SPX and $QQQ did not display decisive breakdowns, and that a break above 4165-4200 and $350-$355, respectively, would be bullish, that’s what happened
  • Additionally, we discussed how risk/reward favored buyers with the $IWM testing 1.5-year support at $162-$163, a logical spot for small-caps to bounce, especially when we considering persistent bullish breadth divergences.

Sumber Alfaria Trijaya (AMRT IJ) – Running Ahead of the Pack

By Angus Mackintosh

  • Sumber Alfaria Trijaya (AMRT IJ) came through a slower 3Q2023 with much stronger growth than peers, with SSSG and rapid store expansion driving growth, and margins improving concurrently.
  • The company added more than 1,300 new stores for 9M2023 and looks set to add a record 1,800 by year-end, with new Alfamidi and Lawson stores driving growth.
  • AMRT will see an even stronger seasonally higher 4Q2023, with SSSG likely to pick up boosted by supplier rebates and news store contributions. FY2024 looks set to be equally strong.

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Nov 08
0

Daily Brief Quantitative Analysis: KRX Shorts: Top Changes Prior to Short Ban and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • KRX Shorts: Top Changes Prior to Short Ban

KRX Shorts: Top Changes Prior to Short Ban

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of KRX Stocks as of Nov 3rd which has an aggregated short interest worth USD12.7bn.
  • 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 Ecopro, Samsung Sdi Co, Sk Hynix, Jusung Engineeri, Hyundai Bioscien, Leeno Industrial.

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Nov 08
0

Daily Brief Technical Analysis: Just Another Counter-Trend Rally and more

By | Daily Briefs, Technical Analysis

In today’s briefing:

  • Just Another Counter-Trend Rally, or Something More? DXY and Treasury Yields Breaking Key Supports

Just Another Counter-Trend Rally, or Something More? DXY and Treasury Yields Breaking Key Supports

By Joe Jasper

  • We believe there is significant evidence that the broad equity market has bottomed, and a year-end rally has begun. This report elaborates on this main point
  • Last week (10/31/23) we discussed how the $SPX and $QQQ did not display decisive breakdowns, and that a break above 4165-4200 and $350-$355, respectively, would be bullish, that’s what happened
  • Additionally, we discussed how risk/reward favored buyers with the $IWM testing 1.5-year support at $162-$163, a logical spot for small-caps to bounce, especially when we considering persistent bullish breadth divergences.

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Nov 08
0

Daily Brief ESG: The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market and more

By | Daily Briefs, ESG

In today’s briefing:

  • The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market

The Problem Is that Companies that Don’t Want to Do Discloser in English Are Listed on Prime Market

By Aki Matsumoto

  • Companies disclosing in English increased to 97.2% in 2023 prime market. However, only 15% of overseas investors responded “satisfied,” indicating a continuing mismatch between disclosure content and investor needs.
  • TSE will prioritize the documents according to whether disclosure requires immediacy, and divide companies into mandatory companies and effort companies according to the size and foreign ownership of a company.
  • However, disclosure in English of lower priority documents would be more difficult. Separating companies would allow the prime market to include companies that don’t need to interact with global investors.

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Nov 08
0

Daily Brief ECM: WuXi XDC Cayman IPO – Decent Upside from IPO Range and more

By | Daily Briefs, ECM

In today’s briefing:

  • WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors
  • Trading Strategy of Ecopro Materials IPO Post Book Building Results and Short Selling Ban
  • WuXi XDC Cayman IPO: Robust Top Line Growth but Margins Remain Under Pressure
  • Sichuan Baicha Baidao Pre-IPO – The Positives – Riding on Franchise Store Expansion
  • WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth
  • Muthoot Microfin Pre-IPO – Accelerating Profitability Growth

WuXi XDC Cayman IPO – Decent Upside from IPO Range, Bulk of the Deal Taken up by Marquee Investors

By Clarence Chu

  • WuXi XDC Cayman (1877628D HK) is looking to raise US$470m in its Hong Kong IPO.
  • WuXi XDC Cayman (WXDC) is a CRDMO focused on the global antibody drug conjugates (ADC) and broader bioconjugate market providing integrated and end-to-end services.
  • In this note, we will look at the deal dynamics and share our final thoughts on valuation.

Trading Strategy of Ecopro Materials IPO Post Book Building Results and Short Selling Ban

By Douglas Kim

  • Ecopro Materials reported disappointing IPO book building results. IPO price has been finalized at 36,200 won, which is at the low end of the IPO price range.
  • The demand ratio was 17.2 to 1 which was low. Total IPO offering amount was 419 billion won. Ecopro Materials will start trading on 17 November. 
  • Our base case valuation of Ecopro Materials is target price of 37,436 won per share, which is 3.4% higher than the IPO price. We remain negative on this IPO.

WuXi XDC Cayman IPO: Robust Top Line Growth but Margins Remain Under Pressure

By Shifara Samsudeen, ACMA, CGMA

  • WuXi XDC Cayman (1877628D HK) is a leading contract research, development and manufacturing organisation (CRDMO) focused on the global antibody-drug conjugate (“ADC”) and broader bioconjugate market.
  • The company has announced the terms for its HKEx IPO and plans to raise proceeds of around US$470m through the IPO.
  • Wuxi XDC’s revenues have seen robust growth during the last 3-years driven by growth in ADC market while margins have continued to decline.

Sichuan Baicha Baidao Pre-IPO – The Positives – Riding on Franchise Store Expansion

By Sumeet Singh

  • Sichuan Baicha Baidao Industrial (SBBI) is looking to raise up to US$300m in its upcoming HK IPO. 
  • SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.6%.
  • In this note, we talk about the positive aspects of the deal.

WuXi XDC IPO Valuation Analysis: Premium Multiples Reflect 100%+ Top-Line Growth

By Andrei Zakharov

  • WuXi XDC set terms for an upcoming IPO: the fast-growing CRDMO offers 178.4M shares at the price range of HK$19.90-HK$20.60, implying a market cap of ~HK$23.9B (~$3B) at the midpoint. 
  • Cornerstone investors agreed to subscribe and buy ~116M shares, assuming the IPO price of HK$20.25 at the midpoint. WuXi XDC shares will begin trading on Friday, November 17. 
  • My PT of HK$25.57 implies a ~26% upside to the IPO price at the midpoint. WuXi XDC’s premium multiples reflect 100%+ top-line growth and the company’s leadership position. 

Muthoot Microfin Pre-IPO – Accelerating Profitability Growth

By Ethan Aw

  • Muthoot Microfin (1363943D IN) is looking to raise up to US$163m in its upcoming India IPO. 
  • Muthoot Microfin (MMF) is a microfinance institution providing micro-loans to women customers with a focus on the rural regions of India.
  • MMF has undergone fast network expansion, which allowed the firm to nearly double its AUM over the track record period. 

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Nov 08
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Winning Streak Continues; A Beneficiary of EV Battery Testing and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan | Winning Streak Continues; A Beneficiary of EV Battery Testing
  • Weekly Sustainable Investing Surveyor – Week Ended November 3, 2023

Ohayo Japan | Winning Streak Continues; A Beneficiary of EV Battery Testing

By Mark Chadwick

  • Overseas: SPX +0.3%, Nasdaq +0.9%; Lower Treasury yields boosted mega-cap tech stocks. Datadog +28% on earnings beat
  • Today: NKY Futs +0.6% v cash. JPY 150.4/$; Real wages remain weak; Yen record low vs Asian currencies
  • JapanX | A Small Cap Powering the EV Revolution with Environmental Test Chambers

Weekly Sustainable Investing Surveyor – Week Ended November 3, 2023

By Water Tower Research

  • The WTR Sustainable Index was up by 5.8% W/W versus the S&P 500 Index (up 5.9%), the Russell 2000 Index (up 7.6%), and the Nasdaq Index (up 6.5%).
  • Energy Technology (13.5% of the index) was up by 10.5%, while Industrial Climate and Ag Technology (48.7% of the index) was up 5.5%, ClimateTech Mining was down 1.3%, and Advanced Transportation Solutions was up 5.2%.
  • Top 10 Performers: LILM, HLGN, LICY, PEV, ARVL, FHYD, GMGMF, HASI, TMC, GCEI

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Nov 08
0

Daily Brief Credit: Morning Views Asia: Alam Sutera Realty and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Alam Sutera Realty, China Vanke , Vedanta Resources
  • Morning Views Asia: Delta Dunia Makmur, ENN Natural Gas, Greentown China

Morning Views Asia: Alam Sutera Realty, China Vanke , Vedanta Resources

By Charles Macgregor

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

Morning Views Asia: Delta Dunia Makmur, ENN Natural Gas, Greentown China

By Charles Macgregor

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

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Nov 08
0

Daily Brief Event-Driven: Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban
  • TOPIX Inclusions: Who Is Ready (Nov 2023)
  • Sankyo (6417) – Second Go-Round for a BIG Buyback
  • Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well
  • Hollysys (HOLI US): Ascendent Capital Joins the Fray
  • Momentum Trading Opportunities Among Top 50 Stocks in KOSPI With Highest Short Interest Ratios
  • CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650
  • SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out
  • Telefonica/Telefonica Deutschland Holding AG: Offer for Minorities
  • EQD | The Hang Seng Index May Go Higher

Trading Opportunities Targeting Potential ADR Discount Increases from Korea’s Short-Selling Ban

By Sanghyun Park

  • Given Korea’s blanket ban on short-selling, we should concentrate on the likelihood of these ADRs being significantly discounted compared to their underlying shares.
  • It should persist for an extended period, highlighting the importance of continuously monitoring ADR spreads over the next 2-3 months to seize the opportune entry timing.
  • Since all these carry single-stock futures, a flexible setup targeting this spread can be designed, ideally incorporating currency hedges.

TOPIX Inclusions: Who Is Ready (Nov 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.
  • Our main pre-event candidate CELSYS (3663 JP) has outperformed TOPIX by ~12.6% since 1 Sep (when it was highlighted) and 6 Nov 2023.
  • There are three TOPIX Inclusion events confirmed for the end of November and two other interesting pre-event names we are closely monitoring.

Sankyo (6417) – Second Go-Round for a BIG Buyback

By Travis Lundy

  • Back in late September, Sankyo Co Ltd (6417 JP) announced a 10mm share buyback along with a new dividend policy. Only 4.22mm shares showed up to sell. 
  • The largest holder – Exec Chair Busujima-san – sold 2.22mm shares under his own name and his company’s name. Hikari Tsushin, which had been selling in the market, didn’t participate.
  • Now Sankyo has launched another 10mm share ToSTNeT-3 buyback tomorrow (8 Nov) AM at ¥6,099/share. They may not complete. But they may continue buying later. They have oodles of cash.

Japan H1 Bank Earnings: Last Minute Update; Suruga Bank Reacts Well

By Travis Lundy

  • I wrote Japan H1 Bank Earnings: Interest/Fees Up, Expenses/Credit Costs Down – Opportunity Abounds, Still last week mentioning the trends in guidance revisions.
  • Since then, five have reported H1. +20%, +53%, +23% vs guidance; +25.6%, and +28.2% vs Last Year. Eight more have added new guidance, weighted average H1 up 48%. 
  • Four more report tomorrow, eight on Thurs, 43 on Friday. The Top 5 are all next Mon/Tues. Watch for comments about portfolio restructuring efforts in H2 as market yields rise.

Hollysys (HOLI US): Ascendent Capital Joins the Fray

By Arun George

  • Ascendent Capital has made a non-binding proposal for Hollysys Automation Technologies (HOLI US) at US$26.00 per share, a 4.0% premium to the MBO and Recco proposal of US$25.00 per share. 
  • Ascendent has also become the largest shareholder by securing 13.69% of outstanding shares at an average price of A$20.84 per share. Ascendant is supportive of the special meeting request.
  • The Board has tried several delaying tactics, but the emergence of Ascendant ramps up the pressure on the Board to conduct a transparent sale process and address shareholder concerns. 

Momentum Trading Opportunities Among Top 50 Stocks in KOSPI With Highest Short Interest Ratios

By Douglas Kim

  • In this insight, we discuss near-term momentum trading opportunities among the top 50 stocks in KOSPI with highest short interest ratios.
  • Given the recent temporary ban on stock short selling in Korea, there is likely to be increased volatility in the stock market. 
  • We have identified 10 companies in particular that have high short interest ratios, among the worst performing stocks YTD, but with strongest share price performance in the past two days.

CMIC Holdings (2309 JP): MBO Tender Offer at JPY2,650

By Arun George

  • CMIC Holdings (2309 JP) has recommended an MBO tender offer of JPY2,650 per share, a 55.9% premium to the undisturbed price (7 November).
  • The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 41.29% ownership ratio.
  • Irrevocables to accept represent a 23.29% ownership ratio. While the offer is light vs. peer multiples, the minimum acceptance condition requires a 35.1% minority acceptance rate, which is doable.

SSE50 Index Rebalance Preview: Five Potential Changes; Hygon Stands Out

By Brian Freitas

  • With the review period complete, we see 9 stocks in inclusion zone and 10 in deletion zone. However, there can be a maximum of 5 changes at a review.
  • We estimate a one-way turnover of 4.7% at the December rebalance leading to a one-way trade of CNY 3.86bn. Index arb balances could increase the impact on the stocks.
  • Apart from being added to the SSE50 Index, Hygon Information Technology (688041 CH) could also be added to other local/global indices over the next few weeks and months.

Telefonica/Telefonica Deutschland Holding AG: Offer for Minorities

By Jesus Rodriguez Aguilar

  • Telefonica SA (TEF SM) surprised everyone with a €2.35/share voluntary cash offer for the minorities in Telefonica Deutschland Holding (O2D GR), 37.6% premium, 4.4x EV/Fwd EBITDA (vs.5.1x Telefonica), €1970 million value.
  • The premium is attractive, c.31% premium to median IBES consensus TP, so I believe the offer will succeed. There will be no additional acceptance period. Spread is +0.17%.
  • Telefonica will add 7% more leverage at a time it is seeking the opposite: on the cards are some sort of divestment of Virgin Media O2 or a dividend cut.

EQD | The Hang Seng Index May Go Higher

By Nico Rosti

  • The Hang Seng Index closed last week at 17664.12 (CC=+2), currently rallying this week, but there is a chance for a short-lived pullback (i.e. closing this week down).
  • The current global equities bounce should continue for the entire month of November: the HSI may continue rallying for +2 weeks (if it does not close down this week).
  • Price targets to watch for the end of the rally (i.e. shortable) are between 18300 and 18700.

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Nov 08
0

Daily Brief Equity Bottom-Up: DPC Dash (1405 HK): Recipe for Multibagger and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • DPC Dash (1405 HK): Recipe for Multibagger
  • Nintendo (7974) | Stock Performance Ahead ‘Switch 2’ Speculation
  • Ace Hardware Indonesia (ACES IJ) – Renaissance in Motion
  • OCBC – 10 Nov Results | Credit Costs +150% Then +250% | ~4% Loans Greater China CRE | Insurance Risk
  • Novatek (3034.TT): It’s Likely Quarterly Sales Will Return to Normal Seasonality in 2024F.
  • [Week 10] Namaste India 🙏 | Earnings Edition – Final Part
  • Sumber Alfaria Trijaya (AMRT IJ) – Running Ahead of the Pack
  • Vanguard (5347.TT): The Smartphone and Computing/NB/TV Sectors Have Turned to Normal.
  • Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent
  • Rent.com.au Ltd – Portal Back on Track, Capital Raise to Support RentPay

DPC Dash (1405 HK): Recipe for Multibagger

By Eric Chen

  • We believe the company is well positioned in China’s rapidly growing pizza market thanks to its strong brand and superior store economics. 
  • Despite stock rally post 1H23 results, market still underestimates its earnings for both near and long term. We expect RMB250 million net profit for 2024 versus break-even by consensus.  
  • History suggests DPC Dash has recipe for attractive stock return driven by its highly visible growth that can shield it from macro situations, which is desperately needed by China investors.  

Nintendo (7974) | Stock Performance Ahead ‘Switch 2’ Speculation

By Mark Chadwick

  • Nintendo’s Q2 results show solid performance but still fall short of expectations, with a conservative full-year profit outlook
  • The impending release of “Switch 2” in 2H24 raises questions about the company’s ability to replicate the original Switch’s success
  • We see the current 11x EV/EBIT as fair for the stock and do not anticipate a valuation breakout until the market can assess the credentials of “Switch 2”

Ace Hardware Indonesia (ACES IJ) – Renaissance in Motion

By Angus Mackintosh

  • Ace Hardware Indonesia (ACES IJ) booked an impressive set of 3Q2023 results after registering a strong improvement in SSSG over the last few months as well as increasing store count.
  • The company has booked particularly strong performance outside Java, where spending power has proved to be strong, with the company’s digital promotions boosting sales significantly and complementing offline sales. 
  • Ace Hardware Indonesia (ACES IJ) has regained its lustre with a more coherent set of initiatives to drive future growth from promotions to new store formats. Valuations remain reasonable.

OCBC – 10 Nov Results | Credit Costs +150% Then +250% | ~4% Loans Greater China CRE | Insurance Risk

By Daniel Tabbush

  • In past 2 quarters OCBC (OCBC SP) saw its credit costs rise 150% YoY and then 250% YoY. For almost all of the preceding 8 quarters YoY growth was negative.
  • It holds 3.8% of total loans in Greater China CRE, a sector that has seen visible deterioration in some banks, like Standard Chartered (STAN LN) and HSBC Holdings (HSBA LN).
  • Great Eastern Holdings (GE SP) is seeing weakness in main revenue lines, with worsening policy claims. Its profit delta this year is distorted from the base effect.

Novatek (3034.TT): It’s Likely Quarterly Sales Will Return to Normal Seasonality in 2024F.

By Patrick Liao

  • It’s likely that quarterly sales will return to normal seasonality in 2024F, and the Smartphone demand has shown some signs of recovery.
  • Revenue/ GM/ OPM are declined 8.6%/ 2.7%/ 2.7% in 4Q23F, but we consider the end market might be recovery. 
  • The OLED penetration rate in smartphones is 42.5% in 2023F , and it’s anticipated that Novatek Microelectronics Corp (3034 TT) will exceed the market in terms of OLED sales.

[Week 10] Namaste India 🙏 | Earnings Edition – Final Part

By Pranav Bhavsar

Sumber Alfaria Trijaya (AMRT IJ) – Running Ahead of the Pack

By Angus Mackintosh

  • Sumber Alfaria Trijaya (AMRT IJ) came through a slower 3Q2023 with much stronger growth than peers, with SSSG and rapid store expansion driving growth, and margins improving concurrently.
  • The company added more than 1,300 new stores for 9M2023 and looks set to add a record 1,800 by year-end, with new Alfamidi and Lawson stores driving growth.
  • AMRT will see an even stronger seasonally higher 4Q2023, with SSSG likely to pick up boosted by supplier rebates and news store contributions. FY2024 looks set to be equally strong.

Vanguard (5347.TT): The Smartphone and Computing/NB/TV Sectors Have Turned to Normal.

By Patrick Liao

  • It remains cautiously optimistic for the 2024 outlook despite limited order visibility.  
  • The Vanguard wafer shipment has decreased by 8-10% QoQ, with the ASP declining by 0-2% QoQ. The GM for 4Q23F is projected to be 22-24%. 
  • The smartphone and computing/NB/TV sectors have returned to normal levels.

Remegen (9995.HK/688331.CH) – The Survival Problem Is Becoming Imminent

By Xinyao (Criss) Wang

  • Although RemeGen’s 23Q1-Q3 sales was better-than-expected, the Company is difficult to achieve management’s performance guidance for 2023. Since RemeGen’s commercialization logic has “undeniable flaws”, net loss would be further widened.
  • Cash balance of RemeGen was just RMB600 million by 23Q3, which is not enough to cover its high R&D/SG&A expenses. If RemeGen cannot secure sufficient financing timely, risks are significant.
  • The current valuation and investors’ expectations for RemeGen largely rely on the potential license-out deal of RC18. However, we remain caution until RC18 has sufficient evidence to win head-to-head trial.

Rent.com.au Ltd – Portal Back on Track, Capital Raise to Support RentPay

By Research as a Service (RaaS)

  • Rent.com.au Limited (ASX:RNT) is a purpose-led company seeking to empower home renters through its technology platform and a growing number of aligned transactional services.
  • The company has reported Q1 FY24 revenue of $0.786m, with the search engine, Rent.com.au, returning to positive EBITDA of ~$0.05m.
  • Separately the company has launched a fully-underwritten entitlement offer to raise $1.95m at $0.017/share to support the commercialisation of its fintech platform RentPay. 

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