Category

Daily Briefs

Nov 06
0

Daily Brief Equity Bottom-Up: Saizeriya (7581 JP):  Best Pick For Asia/China Restaurant Space and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Saizeriya (7581 JP):  Best Pick For Asia/China Restaurant Space
  • Dongfang Electric (1072 HK): We See an Opportunity
  • China Healthcare–A Pair Trade Between China TCM (570.HK) And Pientzehuang Pharmaceutical (600436.CH)
  • State Gas Limited – Growth Starts with the First PJ and That’s Imminent

Saizeriya (7581 JP):  Best Pick For Asia/China Restaurant Space

By Steve Zhou, CFA

  • I continue to believe that Saizeriya is the best pick for gaining exposure to Asia/China restaurant space.
  • Saizeriya has a very clear business strategy and focus:  price.  The founder Yasuhiko Shogaki made it clear that price always comes first, and everything else second. 
  • Looking ahead, the runway for growth in China is huge.  The company is currently only in 3 cities for a total of 373 stores as of end-FY23 year ending August.

Dongfang Electric (1072 HK): We See an Opportunity

By Osbert Tang, CFA

  • The collapse in share price of Dongfang Electric (1072 HK) is too excessive. The concerns on margin and orders are overplayed and its latest financial result is solid.
  • Recurring profit surged 24.8% in 3Q23 and gross margin expanded both YoY and QoQ. For 9M23, new orders rose 19.2% to reach 98% of full-year FY22 level.
  • We estimate backlog at Rmb197bn, or 3x consensus FY23F revenue, and this provides excellent protection to forward earnings. Its 5.8x and 4.4x PERs are just too undervalued.

China Healthcare–A Pair Trade Between China TCM (570.HK) And Pientzehuang Pharmaceutical (600436.CH)

By Xinyao (Criss) Wang

  • The recovery of concentrated TCM granules business makes us optimistic about China TCM’s 2023 full-year performance growth. The resurgence of pandemic and privatization rumor always attract the attention of investors.
  • Pientzehuang’s 23Q3 performance was disappointing. Consumption downgrade makes the strategy of raising prices no longer effective. There is downward pressure on valuation as performance will not turn around soon.
  • The investment logic of rigid demand is more convincing than consumption upgrading. So, China TCM is more likely to outperform Pientzehuang. Our view is long China TCM, and short Pientzehuang.

State Gas Limited – Growth Starts with the First PJ and That’s Imminent

By Research as a Service (RaaS)

  • State Gas Limited (ASX:GAS) is a junior energy producer and explorer with assets concentrated in the Bowen Basin, Queensland.
  • Having secured some $7mn in equity financing, the company is well progressed in the construction phase of the Rolleston West CNG Project (RW-CNG), with production set to commence in December.
  • First gas is always a critical event driver in demonstrating the commercial potential of the assets and providing a platform from which growth strategies can emanate.

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Nov 06
0

Daily Brief Macro: Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds and more

By | Daily Briefs, Macro

In today’s briefing:

  • Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds
  • Will Euro Shrink to Parity to the Dollar on Diverging Macro Economic Conditions?
  • How the U.S. Could Both Be In A Bull and Bear Market
  • Nine Reasons Why This Rally Has Legs
  • US Treasury Continues Yield Curve Control as Short-Term Interest Rate Expectations Dip

Steno Signals #72 – When a Recession Meets a Melt-Up in Equities and Bonds

By Andreas Steno

  • Happy Sunday and welcome to our flagship editorial! What a week.
  • The BoJ no longer has a firm guidance towards higher 10yr bond yields, the Fed accepted higher long bond yields as an excuse to pause and economic data has been abysmal.
  • That cocktail has so far allowed the everything rally to thrive in a way we haven’t seen in quarters, but the feedback loop introduced by the big central banks may limit the scope of the bear market rally.

Will Euro Shrink to Parity to the Dollar on Diverging Macro Economic Conditions?

By Srinidhi Raghavendra

  • Since December 2002, the euro has traded above parity to the USD with the only exception being the last quarter of 2022.
  • Following central banks rate decisions to pause hikes across both sides of the Atlantic, volatility in the Euro/USD pair is near 12-month lows.
  • Low volatility equates to lower option premiums. Periods of low volatility offer best opportunity for going long options.

How the U.S. Could Both Be In A Bull and Bear Market

By Cam Hui

  • U.S. equity averages recently violated their 200 dma but a historical study found that violations are benign as long as the moving average is rising.
  • The rising dma is only evident in the megacap growth-dominated S&P 500. Mid and small caps are becoming value candidates.
  • How you position yourself will depend on your time horizon and whether you are a momentum or value investor.

Nine Reasons Why This Rally Has Legs

By Cam Hui

  • The stock market reached an extreme oversold condition and a relief rally is underway. Every oversold rally begins with short covering, but needs more buying fuel to continue.
  • Evidence of insider buying, even after the onset of the rally, provides bottom-up fundamental support to further gains.
  • In addition, psychological relief from macro uncertainty also provides top-down bullish fuel for a sustainable advance,

US Treasury Continues Yield Curve Control as Short-Term Interest Rate Expectations Dip

By Said Desaque

  • Excessive reliance on T-bill issuance by the Treasury reflects a form of yield curve control to prevent a higher term premium from damaging US financial conditions.
  • The impact of higher borrowing on bank reserves has been reduced by the return of money market funds as investors and their lower participation in the Fed’s Reverse Repo Programme.
  • Persistently high government borrowing for geopolitical conflicts will raise the real return demanded by Treasury investors, because defence spending does not beneficially impact the supply-side of the economy.

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Nov 05
0

Most Read: Gs Yuasa Corp, Youngone Holdings, GMO Payment Gateway, Tuhu Car , Kyocera Corp, KCE Electronics PCL, Korea Stock Exchange KOSPI 200, SK Square , Softbank Group and more

By | Daily Briefs, Most Read

In today’s briefing:

  • Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade
  • KOSPI200 Index Rebalance Preview: The Tail End
  • Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning
  • HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running
  • Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?
  • SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close
  • Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
  • Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT
  • SoftBank Group (9984 JP): Results Preview, Key Topics
  • Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?

Solactive Global Lithium Index Rebalance: 45% Turnover & US$980m Trade

By Brian Freitas

  • Solactive has announced the constituent changes for the Global Lithium Index. There are 8 adds and 9 deletes with implementation at the close on 31 October.
  • Estimated one-way turnover is in excess of 22% and will result in a one-way trade of US$490m. There are 11 stocks with estimated passive flows greater than 1x ADV.
  • The index is not very widely tracked and there could be big moves in stocks today and over the next few days – especially where there is multiple days ADV.

KOSPI200 Index Rebalance Preview: The Tail End

By Brian Freitas

  • With the review period nearly complete, we expect 7 changes to the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) in December. Couple of changes are low probability though.
  • The Materials sector could be the biggest gainer at the rebalance while nearly all deletions could come from the Consumer Discretionary sector.
  • The impact on the potential inclusion ranges from 0.15-15 days of ADV while the impact on the potential deletions varies from 1.7-8.1 days of ADV.

Index Rebalance & ETF Flow Recap: KS200, KQ150, Yuanta Div+, LIT, HSCI, IDX, Japan Positioning

By Brian Freitas

HSCI Index Rebalance Preview: Tuhu Car in the Driver’s Seat; Keep Inc in the Running

By Brian Freitas

  • There were only 14 new listing on the Main Board of the HKEX (388 HK) in the third quarter. Half of the listings were in the last week of September.
  • Of those stocks, only Tuhu Car (9690 HK) and Keep (3650 HK) have a chance of being added to the HSCI in December and then into Southbound Stock Connect.
  • Keep Inc (3650 HK) could be added to Stock Connect in early December while Tuhu Car (9690 HK) will have to wait till April for inclusion to the link.

Kyocera (6971) And Their $10bn KDDI Stake – Did They Get CorpGov Religion?

By Travis Lundy

  • Yesterday, Kyocera Corp (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI shares (after an AGM disaster).
  • The company had already planned to borrow ¥500bn against the KDDI stake to return capital to shareholders. That was in the price 5+ months ago. 
  • The new hope is that Kyocera just got Corporate Governance Religion. I have my doubts, and even if it did, you have to look carefully at their ambitious plans.

SET50 Index Rebalance Preview: One High Probability Change; Another One Is Close

By Brian Freitas

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation

By Sanghyun Park

  • We should consider the complete prohibition of short selling for the next six months as practically finalized.
  • Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
  • We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

Exploring Fresh Flow Trading Prospects for SK Square: Targeting Exclusion from KOSPI 200 IT

By Sanghyun Park

  • KRX did not acknowledge any business relevance between SK Square and the Semicon industry, leading to its exclusion from the KRX Semicon after the GICS change.
  • We should consider the strong possibility that this same approach will be applied in the upcoming December KOSPI 200 IT rebalancing.
  • If we observe a somewhat unusual downward trend in SK Square’s price from the 15th, this could be seen as a hint foretelling the announcement of SK Square’s exclusion.

SoftBank Group (9984 JP): Results Preview, Key Topics

By Victor Galliano

  • WeWork appears to be approaching bankruptcy; we expect SoftBank’s exposure to be at least USD1.4bn including credit lines
  • Arm Holdings post-IPO performance has been lacklustre, but we continue to believe that it remains dangerously over-valued against peers – and Arm provides 30% of the group’s equity value
  • We believe that JPY depreciation has supported SoftBank Group’s share price (given the high share of USD-denominated portfolio assets); in addition, we still see risks to current private company valuations

Korean Government Ready to Temporarily Suspend Short-Selling: A Move to Gain More Votes?

By Douglas Kim

  • On 3 November, numerous local media outlets reported that the Korean government is likely to temporarily suspend short selling in the Korean stock market.
  • According to a high level ruling party official, the Korean government plans to announce temporary ban on short selling stocks no later than on 15 November for about six months.
  • There is a major legislative election in Korea in April 2024. If there is a temporary ban on short selling stocks, this could be viewed negatively by many foreign investors. 

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Nov 05
0

Daily Brief Australia: Origin Energy and more

By | Australia, Daily Briefs

In today’s briefing:

  • Last Week in Event SPACE: Hokuhoku, Origin Energy, KDDI, BoJ

Last Week in Event SPACE: Hokuhoku, Origin Energy, KDDI, BoJ

By David Blennerhassett

  • If you are still long the Financial Group (8377 JP) from before, stay long.If you sold Hokuhoku from before, be long again, and buy on weakness
  • Disaster for arb players as AusSuper rewrites the record books as an investor class and shoots down Brookfield’s sweetened Offer for Origin Energy (ORG AU).
  • Kyocera (6971 JP) announced Q2 results and lowered its full-year forecast. Then the CEO said it was “reconsidering” what to do with KDDI (9433 JP) shares (after an AGM disaster).

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Nov 05
0

Daily Brief South Korea: Korea Stock Exchange KOSPI 200, Samsung Electronics, Eoflow and more

By | Daily Briefs, South Korea

In today’s briefing:

  • Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation
  • Samsung. Strategic Shift Reverses Memory ASP’s Downward Spiral
  • (Mostly) Asia-Pac Weekly Risk Arb Wrap: Tietto Teraoka Seisakusho, Symbio, Celltrion Health, EOFlow

Trading Opportunities from Korea’s Sudden Short Selling Ban & Resulting Futures Backwardation

By Sanghyun Park

  • We should consider the complete prohibition of short selling for the next six months as practically finalized.
  • Following the individual stock short selling ban, both position hedging and short demand will inevitably shift to the futures market, consequently inducing unavoidable immediate backwardation.
  • We should design a setup that not only actively seizes sell arbitrage opportunities but also effectively capitalizes on the downward price pressure stemming from spot selling.

Samsung. Strategic Shift Reverses Memory ASP’s Downward Spiral

By William Keating

  • Q323 revenues of KRW 67.4 trillion, up 12.3% QoQ but still down 7% YoY. 
  • Operating profit KRW 2.4 trillion, a big improvement on the KRW 0.67 trillion in the second quarter but a far cry from the KRW 10.85 trillion in the year-ago quarter
  • While Memory has turned the corner, yet further productions cuts are still required

(Mostly) Asia-Pac Weekly Risk Arb Wrap: Tietto Teraoka Seisakusho, Symbio, Celltrion Health, EOFlow

By David Blennerhassett

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Nov 05
0

Daily Brief India: KPIT Technologies, Shriram Finance and more

By | Daily Briefs, India

In today’s briefing:

  • KPIT: Raises Its Full-Year FY24 Guidance
  • Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI

KPIT: Raises Its Full-Year FY24 Guidance

By Ankit Agrawal, CFA

  • KPIT raised its full-year FY24 revenue growth guidance to 37%+ from 27-30% earlier, led by a strong Q2FY24 performance. EBITDA margin guidance has been also raised to 20%+ from 19-20%.
  • Despite wage hike impact of 250bp, EBITDA margin came in at 20%, at the upper end of the 19-20% FY24 guidance. Operating leverage and realization improvement helped offset the impact.
  • With the strong Q2 performance, we are upgrading our FY24 PAT estimate to INR 580cr+ vs INR 550cr+ earlier and FY25 PAT of INR 730cr+ vs INR 700cr+ earlier.

Index Rebalance & ETF Flow Recap: NEXT50, SET50, L&F, Onewo, Celltrion, AMFI

By Brian Freitas

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Nov 05
0

Daily Brief Japan: Daito Trust Construct, Nikkei 225, Astellas Pharma, TSE Tokyo Price Index TOPIX and more

By | Daily Briefs, Japan

In today’s briefing:

  • Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year
  • EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?
  • Astellas Pharma (4503 JP): Underwhelming H1 Result; Massive Cut in FY24 Profit Guidance
  • Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”

Daito Trust Construction (1878) – Big Buyback, Dense Register, 120% Payout This Year

By Travis Lundy

  • Daito Trust last week announced H1 earnings, its 50% dividend payout ratio, and a ¥50bn stock buyback which results in a shareholder payout ratio of ~120% over the next year.
  • This should help to keep ROE high, and as it is a clear distribution of surplus, it should help keep the multiple up.
  • It is worth looking at shareholder structure to see how this buyback will be taken.

EQD | Nikkei 225 (NKY)’s November Rally: How Far Can It GO?

By Nico Rosti

  • The Nikkei closed the month of October down, 4 months down in a row (CC=-4), very OVERSOLD MONTHLY. The 30600 support indicated in our last MONTHLY insight did hold somehow.
  • We think the Nikkei could continue to rally in November, but this explosive, fast rally, at one point will have to retrace back, before it can continue up.
  • The index could rally for 2 months, into December. The target prices for the end of the rally are near 34000.

Astellas Pharma (4503 JP): Underwhelming H1 Result; Massive Cut in FY24 Profit Guidance

By Tina Banerjee

  • Astellas Pharma (4503 JP) reported just 0.6% YoY revenue growth to ¥767B in H1FY24, while operating profit plunged 57% YoY and net profit decreased 67% YoY.
  • Generic competition in Lexiscan impacted topline. Increase in SG&A expenses related to new drug launch and higher amortization of intangible assets, pulled down the operating as well as net profit.
  • Astellas has downwardly revised FY24 forecasts for profit items by more than 50% after taking into consideration the increases in higher expenses.

Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”

By Aki Matsumoto

  • The average P/B has remained flat since March end, when TSE requested improvements for companies with P/Bs below 1x, and TOPIX has risen in line with the rise in BPS.
  • Given the lack of progress in improving ROE, companies have many issues to resolve in improving returns through the appropriate allocation of cash and capital.
  • Since it’s no longer possible to show early results simply by leaving it to managers, the use of TOB/MBO will be a shortcut to raising shareholder returns and corporate value.

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Nov 05
0

Daily Brief China: Wuxi Biologics and more

By | China, Daily Briefs

In today’s briefing:

  • ECM Weekly (5th Nov 2023)- Midea, WuxiXDC, Cello, Honasa, Qyuns, Ecopro, Lalatech, Mankind, TWE, VNT

ECM Weekly (5th Nov 2023)- Midea, WuxiXDC, Cello, Honasa, Qyuns, Ecopro, Lalatech, Mankind, TWE, VNT

By Sumeet Singh

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Nov 05
0

Daily Brief Quantitative Analysis: TWSE Short Interest Weekly (Nov 3rd): Alchip Tech and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • TWSE Short Interest Weekly (Nov 3rd): Alchip Tech, Via Tech, Wiwynn, Taiwan Cement, Wistron

TWSE Short Interest Weekly (Nov 3rd): Alchip Tech, Via Tech, Wiwynn, Taiwan Cement, Wistron

By Ke Yan, CFA, FRM

  • We analyzed the changes in short interest of TWSE Stocks as of Nov 3rd which has an aggregated short interest worth USD14.3bn.
  • 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 Alchip Tech, Via Tech, Wiwynn, Taiwan Cement, Wistron, Century Iron.

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Nov 05
0

Daily Brief ESG: Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest” and more

By | Daily Briefs, ESG

In today’s briefing:

  • Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”

Valuations Will Rise when the Management Changes To “Maximizing Shareholder Interest”

By Aki Matsumoto

  • The average P/B has remained flat since March end, when TSE requested improvements for companies with P/Bs below 1x, and TOPIX has risen in line with the rise in BPS.
  • Given the lack of progress in improving ROE, companies have many issues to resolve in improving returns through the appropriate allocation of cash and capital.
  • Since it’s no longer possible to show early results simply by leaving it to managers, the use of TOB/MBO will be a shortcut to raising shareholder returns and corporate value.

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