Daily Briefs

The pre-condition for the Nws Holdings (659 HK) voluntary general offer from the Cheng family is satisfied. The total offer (HK$9.15 + 2H dividend) is HK$9.46 per share.
The key condition is (majority vote) approval by independent NWD shareholders. NWD’s share price decline and dependency on NWS earnings/cash flow support a NO vote.
A reasonable offer which reduces NWD’s gearing, results in a special dividend and helps reduce the holding company discount supports the YES vote. We think that the YES vote prevails.

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys

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 – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.

SSE50 Index Rebalance Preview: Consolidating After Big Outperformance

Over 90% of the way through the review period, we see 9 potential adds/10 potential deletes in December. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 6.1% at the December rebalance leading to a one-way trade of CNY 5.27bn. Index arb balances could increase the impact on the stocks.
The adds have outperformed the deletes this year though there has been a deterioration in performance over the last few months.

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Oct 09

Daily Brief Equity Bottom-Up: Quick Take on ‘Golden Week’ Headline Tourism Traffic: Limited Improvement and more

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

In today’s briefing:

Quick Take on ‘Golden Week’ Headline Tourism Traffic: Limited Improvement, & Shy of Expectations
VIS (5347:TT): The Outlook Is a Bit Slower in 4Q23F
Dongfang Electric (1072 HK): Don’t Miss Out on This Undervalued Play
Taiwan Tech Weekly: Samsung & Nanya Earnings; AI Names Rebound Again
Banks lead Q3 2023 net institutional inflow
REIT Watch – Three S-Reits buck the trend in September

Quick Take on ‘Golden Week’ Headline Tourism Traffic: Limited Improvement, & Shy of Expectations

By Daniel Hellberg

Outbound daily traffic during the long holiday down -15% vs 2019, and short of expectations
Total domestic trips up 4% vs 2019, but average daily trips -9% & average daily spending -4%
Ten months in, the pace of China’s 2023 tourism recovery remains disappointingly sluggish

VIS (5347:TT): The Outlook Is a Bit Slower in 4Q23F

By Patrick Liao

Vanguard’s order visibility is about two months, and its order backlog is also about two months now.
Vanguard’s goal is to establish a 12″ wafer Fab, which we estimate will likely be viable around 2026F.
We believe that technology nodes below 28nm HKMG, specifically 40nm and below, would be suitable for transfer.

Dongfang Electric (1072 HK): Don’t Miss Out on This Undervalued Play

By Osbert Tang, CFA

The YTD underperformance of Dongfang Electric (1072 HK) has put it on very attractive PER of 5.8x for FY23. More importantly, it has delivered both earnings and new order growth.
Financial position has improved with net cash of Rmb16.5bn and its recurring earnings soared 26.5% at 1H23. The adverse economic environment has not had an impact on its operations.
New orders amounted to Rmb48.9bn (+33.3% YoY), a record high, and we estimate backlog at Rmb166bn. This equals 2.5x FY23F revenue and suggests forward earnings are well covered.

Taiwan Tech Weekly: Samsung & Nanya Earnings; AI Names Rebound Again

By Vincent Fernando, CFA

Samsung Electronics and Nanya Technology will report their results this week. Samsung could reportedly increase NAND prices this month, giving a potential hint to the memory outlook they will provide.
Hon Hai will begin mass production of its Model C electric car in 4Q23E in Taiwan. This will provide a proof point for Hon Hai’s global EV platform business model.
Top gainers recently have included rebounding AI names — One can consider using the bounce to find AI shorts to pair against an Nvidia long.

Banks lead Q3 2023 net institutional inflow

Banks lead Q3 2023 net institutional inflow INSTITUTIONS were again net buyers of Singapore stocks over the five trading sessions through to Oct 5, with S$100 million of net institutional inflow, and 24 primary-listed companies conducting buybacks with a total consideration of S$38.5 million.
ComfortDelGro saw S$71 million of net institutional fund inflow in Q3 2023, after booking S$44 million of net institutional fund outflow in H1 2023.

REIT Watch – Three S-Reits buck the trend in September

IN THE third quarter of 2023, the Straits Times Index (STI) generated a 2.1 per cent total return, bringing its nine-month total return to 3.3 per cent.
During the quarter, the STI marginally outpaced the FTSE Asean Extended 60 Index and FTSE Asia Pacific Index, which recorded total returns of 1.1 per cent and declines of 1.1 per cent, respectively.
On the other side of the “higher-for-longer” Fed funds rate outlook, the iEdge S-Reit Index declined 4.2 per cent in total return in Q3 2023.

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Oct 09

Daily Brief Macro: Global Monetary Policy Outlook: Bracing for an Asymmetric Policy Rate Path and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Global Monetary Policy Outlook: Bracing for an Asymmetric Policy Rate Path
The Outside-The-Box Way to Play A Relief Rally
Term Premium and Real Rates: Drivers of Risk Appetite
The Hoo-Ha in the Bond Market

Global Monetary Policy Outlook: Bracing for an Asymmetric Policy Rate Path

By Said Desaque

Monetary policy conduct in Western economies is still dominated by inflation considerations, particularly tight labour markets. Strong demand for services makes it difficult for central banks to lower policy rates.
Tight labour markets are no longer regarded by central banks as being compatible with price stability. Labour hoarding will slow disinflation, making it more difficult to quickly reduce policy rates.
Central banks are reviewing their estimates of their neutral policy rates due to the different inflationary backdrop. Various factors suggest that higher neutral policy rates for a considerable period.

The Outside-The-Box Way to Play A Relief Rally

By Cam Hui

The stock market is oversold, washed out and poised for a FOMO relief rally.
Our review of sector relative performance leads us to believe that the leadership in a rebound will be led by the cyclically sensitive materials stocks.
In particular, gold and gold stocks have defied their inverse correlation to USD strength and could be strong beneficiaries under a relief rally scenario.

Term Premium and Real Rates: Drivers of Risk Appetite

By Cam Hui

The financial markets have taken a risk-off tone as bond yields rose against a backdrop of better news on inflation and employment, and expectations that the Fed has finished hiking.
If the nominal Fed Funds rate stays steady and inflation falls, this will induce higher real rates, excessively tight monetary conditions and eventually a pivot toward easing.
We believe the market is at or near the point of maximum pain and investors should be prepared for a FOMO scramble for bonds and risky assets.

The Hoo-Ha in the Bond Market

By Thomas Lam

The upward spike in Treasury yields, particularly at the longer-end, has introduced market anxieties lately
But the recent jump in the 10-year yield, unlike earlier periods, seems to be influenced by the unobserved term premium component
I introduce my long-maturity term premium estimate, attempt to tease out statistical relationships and conjecture on the potential rate path

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Oct 09

Daily Brief Australia: Liontown Resources and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

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Oct 09

Daily Brief South Korea: Eoflow , EcoPro Materials and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety

Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys

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 – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).

Ecopro Materials IPO – Thoughts on Valuation – Needs a Margin of Safety

By Ethan Aw

EcoPro Materials (ECO123 KS) is looking to raise up to US$500m in its Korean IPO.
Ecopro Materials (EPM) manufactures and sells high-nickel precursors, one of the key materials for high-nickel cathode materials for secondary (rechargeable) batteries.
In our previous note, we covered the company’s performance and undertook a peer comparison. In this note, we will share our thoughts on valuation.

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Oct 09

Daily Brief Singapore: Marco Polo Marine, Sabana Industrial REIT and more

By Smartkarma Daily Briefs | Daily Briefs, Singapore

In today’s briefing:

Banks lead Q3 2023 net institutional inflow
REIT Watch – Three S-Reits buck the trend in September

Banks lead Q3 2023 net institutional inflow

Banks lead Q3 2023 net institutional inflow INSTITUTIONS were again net buyers of Singapore stocks over the five trading sessions through to Oct 5, with S$100 million of net institutional inflow, and 24 primary-listed companies conducting buybacks with a total consideration of S$38.5 million.
ComfortDelGro saw S$71 million of net institutional fund inflow in Q3 2023, after booking S$44 million of net institutional fund outflow in H1 2023.

REIT Watch – Three S-Reits buck the trend in September

IN THE third quarter of 2023, the Straits Times Index (STI) generated a 2.1 per cent total return, bringing its nine-month total return to 3.3 per cent.
During the quarter, the STI marginally outpaced the FTSE Asean Extended 60 Index and FTSE Asia Pacific Index, which recorded total returns of 1.1 per cent and declines of 1.1 per cent, respectively.
On the other side of the “higher-for-longer” Fed funds rate outlook, the iEdge S-Reit Index declined 4.2 per cent in total return in Q3 2023.

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Oct 09

Daily Brief India: HDFC Bank (ADR), Greentown China and more

By Smartkarma Daily Briefs | Daily Briefs, India

In today’s briefing:

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
Morning Views Asia: Greentown China, Tata Motors ADR

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium

Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.

Morning Views Asia: Greentown China, Tata Motors ADR

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.

Greentown China
Tata Motors ADR

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Oct 09

Daily Brief China: Nws Holdings, Trip.com, Greentown China, Dongfang Electric and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

NWS Holding (659 HK): Pre-Condition Satisfied
Quick Take on ‘Golden Week’ Headline Tourism Traffic: Limited Improvement, & Shy of Expectations
Morning Views Asia: Greentown China, Tata Motors ADR
Dongfang Electric (1072 HK): Don’t Miss Out on This Undervalued Play

NWS Holding (659 HK): Pre-Condition Satisfied

The pre-condition for the Nws Holdings (659 HK) voluntary general offer from the Cheng family is satisfied. The total offer (HK$9.15 + 2H dividend) is HK$9.46 per share.
The key condition is (majority vote) approval by independent NWD shareholders. NWD’s share price decline and dependency on NWS earnings/cash flow support a NO vote.
A reasonable offer which reduces NWD’s gearing, results in a special dividend and helps reduce the holding company discount supports the YES vote. We think that the YES vote prevails.

Quick Take on ‘Golden Week’ Headline Tourism Traffic: Limited Improvement, & Shy of Expectations

By Daniel Hellberg

Outbound daily traffic during the long holiday down -15% vs 2019, and short of expectations
Total domestic trips up 4% vs 2019, but average daily trips -9% & average daily spending -4%
Ten months in, the pace of China’s 2023 tourism recovery remains disappointingly sluggish

Morning Views Asia: Greentown China, Tata Motors ADR

By Charles Macgregor

Greentown China
Tata Motors ADR

Dongfang Electric (1072 HK): Don’t Miss Out on This Undervalued Play

By Osbert Tang, CFA

The YTD underperformance of Dongfang Electric (1072 HK) has put it on very attractive PER of 5.8x for FY23. More importantly, it has delivered both earnings and new order growth.
Financial position has improved with net cash of Rmb16.5bn and its recurring earnings soared 26.5% at 1H23. The adverse economic environment has not had an impact on its operations.
New orders amounted to Rmb48.9bn (+33.3% YoY), a record high, and we estimate backlog at Rmb166bn. This equals 2.5x FY23F revenue and suggests forward earnings are well covered.

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Oct 09

Most Read: Eoflow , Haitong International Securities Group, Inageya Co Ltd, Nws Holdings, Liontown Resources, Cheng Shin Rubber Ind Co., Ltd., Kokusai Electric , HDFC Bank (ADR), Li Auto and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem
Haitong Int’l Securities (665 HK): A 114% Offer Premium Should Do The Trick
Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year
NWS Holding (659 HK): Pre-Condition Satisfied
Liontown Resources (LTR AU): Passive Selling on Lower Float
Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics
Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys
ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu
HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium
Quiddity Leaderboard for Hang Seng Index Dec 23: High Conviction Names Have Decent Momentum Vs HSI

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem

The US judge has proposed a preliminary injunction which prevents Eoflow (294090 KS) from using Insulet Corp (PODD US)’s trade secrets and disclosing them to any third party.
Eoflow and other defendants must respond by 5 October. The court hearing is set for 16 October. The potential trial is to be discussed in Spring of 2024.
Medtronic Plc (MDT US) faces a difficult choice. If the injunction is enforced, Medtronic would acquire a ring-fenced asset exposed to potential court-determined liabilities.

Haitong Int’l Securities (665 HK): A 114% Offer Premium Should Do The Trick

By David Blennerhassett

When Haitong International Securities Group (665 HK) was suspended on the 27 September, a punchy premium was expected if controlling shareholder Haitong Securities Co (600837 CH) was launching an Offer.
And that is what we got: a $1.52/share Offer, by way of a Scheme, and a 114% premium to last close. Terms have been declared final.
This is a pre-conditional Offer, requiring approvals from approvals from Shanghai SASAC, CSRC, NDRC, and the Shanghai branch of the PBOC.

Aeon (8267) Partial Tender at ¥1610 for Inageya (8182) Aiming for Takeover Next Year

By Travis Lundy

Aeon Co Ltd (8267 JP) and Inageya Co Ltd (8182 JP) agreed in late April to prepare a plan so Aeon would buy 51% this year.
They would combine Inageya with 53+%-owned United Super Markets (3222 JP) aiming for a ¥1trln sales supermarket chain in Kanto. That is due end- calendar 2024.
There is a partial offer to buy 33+% of Inageya at a small premium, and inadequate price before merging next year. Cross-holders determine pro-ration.

NWS Holding (659 HK): Pre-Condition Satisfied

The pre-condition for the Nws Holdings (659 HK) voluntary general offer from the Cheng family is satisfied. The total offer (HK$9.15 + 2H dividend) is HK$9.46 per share.
The key condition is (majority vote) approval by independent NWD shareholders. NWD’s share price decline and dependency on NWS earnings/cash flow support a NO vote.
A reasonable offer which reduces NWD’s gearing, results in a special dividend and helps reduce the holding company discount supports the YES vote. We think that the YES vote prevails.

Liontown Resources (LTR AU): Passive Selling on Lower Float

Liontown Resources (LTR AU) is trading near A$3/share, the level of Albemarle Corp (ALB US)‘s revised offer and where Hancock Prospecting has been buying recently.
With Hancock Prospecting accumulating a stake of nearly 17% over the last month, there will be a float reduction for Liontown Resources (LTR AU) in the next few months.
Short interest has been increasing and the passive selling could provide an exit for the shorts. But Hancock Prospecting could also use the opportunity to buy more Liontown Resources stock.

Index Rebalance & ETF Flow Recap: Taiwan Div+, Nifty50, Cainiao IPO, Delta Electronics

The Philippines Stock Exchange PSEi Index (PCOMP INDEX) rebalance was implemented last week and there were interesting moves at the close on implementation day.
The focus this week will be on pre-positioning for a global index rebalance where the review period commences next week.
Units outstanding on iShares Emerging Markets (EMXC US) are at a new high while there continue to be redemptions in iShares Emerging Markets (EEM US).

Merger Arb Mondays (09 Oct) – Eoflow, Haitong Intl, NWS, Boustead, Newcrest, Liontown, Hollysys

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 – Haitong International Securities Group (665 HK), 111 Inc (YI US), Eoflow (294090 KS), Hollysys Automation Technologies (HOLI US), IMAX China Holding (1970 HK), BPLANT.
Lowest spreads – Yaizu Suisankagaku Industry (2812 JP), Healius (HLS AU), T&K Toka Co Ltd (4636 JP), Pact Group Holdings (PGH AU), Seiko Pmc Corp (4963 JP).

ECM Weekly (8th Oct 2023) – Kokusai, J&T Global, Doosan, Cainiao, Ecopro, UBox, JSW Infra, Seibu

By Sumeet Singh

Aequitas Reserach puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
In the IPO space, Doosan Robotics (454910 KS) lived up to its hype, while JSW Infrastructure continued India’s strong run.
In the placement space, IDFC First Bank Limited (IDFCBK IN) launched its well flagged QIP, while CALB Group (3931 HK)‘s shareholders were released from their IPO lockup.

HDFC Bank (HDFCB IN): Increasing Foreign Room & Decreasing ADR Premium