Smartkarma Daily Briefs

Oct 06

Daily Brief Quantitative Analysis: Naspers & Prosus: Risk off Trade Puts Pressure on Discounts and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Naspers & Prosus: Risk off Trade Puts Pressure on Discounts, NAV Update for Q2 FY24 Released
ASX Short Interest Weekly (Sep 29th): Liontown, BHP, Macquarie, NAB, Santos, Fortescue Metals

Naspers & Prosus: Risk off Trade Puts Pressure on Discounts, NAV Update for Q2 FY24 Released

By Charlotte van Tiddens, CFA

During the last two weeks both discounts have widened by more than 1 percentage point, likely driven by risk-off sentiment as opposed to idiosyncratic factors.
Management have released the NAV update for Q2 of FY24. Naspers’ NAV can be found here and Prosus’ NAV here.
During the quarter, Prosus’ discount widened by 4.2 percentage points to 39.8% and Naspers’ discount widened by 3.6 percentage points to 46.6%, erasing cross-holding unwind gains.

ASX Short Interest Weekly (Sep 29th): Liontown, BHP, Macquarie, NAB, Santos, Fortescue Metals

By Ke Yan, CFA, FRM

We analyzed the changes in short interest of ASX Stocks as of Sep 29th (reported today) which has an aggregated short interest worth USD16.0bn.
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 Liontown, BHP, Macquarie, NAB, Santos, Fortescue Metals, Woodside Energy, Evolution Mining.

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Oct 06

Daily Brief ESG: Policy Shareholdings and more

By Smartkarma Daily Briefs | Daily Briefs, ESG

In today’s briefing:

Policy Shareholdings, if Reduced, Should Be Used for Profitable Investments
Vale – ESG Report – Lucror Analytics

Policy Shareholdings, if Reduced, Should Be Used for Profitable Investments

By Aki Matsumoto

TSE market reorganization triggered the reduction of policy shareholdings, and now the test will be whether policy shareholdings can be reduced in order to raise ROE, which is sluggishly growing.
Companies that maintain excessive policy shareholdings should provide a rational explanation of their holding policies and the reasons for each shareholding in their corporate governance reports and annual securities reports.
Improving OP Margin, which is highly correlated with ROE, is a shortcut to raising ROE. Policy shareholdings, should not be accumulated in cash on hand, but used for profitable investments.

Vale – ESG Report – Lucror Analytics

By Charles Macgregor

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We view Vale’s ESG as “Adequate”, given its “Adequate” scores for all pillars. Controversies are “Material”, while Disclosure is “Strong”.

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Oct 06

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Stocks Down as Investors Await Payrolls; Downbeat on Airline Sustainability Plans and more

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

In today’s briefing:

Ohayo Japan | Stocks Down as Investors Await Payrolls; Downbeat on Airline Sustainability Plans
China Property Developers In Distress – Weekly News & Announcements Tracker | 29 Sep – 5 Oct, 2023

Ohayo Japan | Stocks Down as Investors Await Payrolls; Downbeat on Airline Sustainability Plans

By Mark Chadwick

OVERSEAS: Stocks weaker ahead of Friday Non-farm payroll data; yields ease slightly; UK’s Metro Bank stock -30%
JAPAN: Nikkei futures point to flat opening; Kyowa Kirin to acquire UK biotech company; Honda N-Box best selling car in Japan
JapanX – Reality starting to sink in as airlines worry about the costs of sustainability

China Property Developers In Distress – Weekly News & Announcements Tracker | 29 Sep – 5 Oct, 2023

By Robert Ciemniak

A weekly curated selection of Chinese news articles and company announcements focused on developers in distress
We look for their deals, updates, specific project progress news (‘local signals’), as well as relevant local research commentaries about the market
We do not verify the underlying data or provide any opinion, we only select and summarize the information; See direct links to sources

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Oct 06

Daily Brief ECM: Tian Tu Capital IPO Trading – Subscription Rates Were Lukewarm and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Tian Tu Capital IPO Trading – Subscription Rates Were Lukewarm
Ecoeye IPO Valuation Analysis

Tian Tu Capital IPO Trading – Subscription Rates Were Lukewarm

By Clarence Chu

Tian Tu Capital (1390587D CH) raised around US$144m in its Hong Kong IPO.
Tian Tu Capital (TTC) is a private equity/venture capital investor and fund manager with a focus on Chinese consumer brands and companies.
We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

Ecoeye IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Ecoeye IPO is 45,421 won per share, representing 31% higher than the high end of the IPO price range.
Given the solid upside, we have a positive view of Ecoeye IPO. The target P/E multiple of 28.8x is based on a 20% premium to the comps’ average valuation multiple.
We believe this premium valuation multiple is appropriate given higher sales growth rate and operating margin for Ecoeye as compared to the comps.

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Oct 06

Daily Brief South Korea: Eoflow , POSCO Holdings, Samsung Biologics , Ecoeye and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem
Eoflow: Ozempic and Wegovy Reducing Need for Disposable Insulin Injection Devices + Ongoing Lawsuit?
Exploring the Launch of a Posco Group-Focused ETF: Flow Trading Insights
Samsung Biologics (207940 KS): Raises 2023 Sales Guidance Second Time This Year; Buy the Dip
Ecoeye IPO Valuation Analysis

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem

By Arun George

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.

Eoflow: Ozempic and Wegovy Reducing Need for Disposable Insulin Injection Devices + Ongoing Lawsuit?

By Douglas Kim

Eoflow’s share price has dropped 27% lower than the proposed tender offer price of 30,000 won. Two major factors have negatively impacted Eoflow (294090 KS)’s share price.
First, in September 2023, there were new data that suggested that popular weight loss drugs including Ozempic and Wegovy could reduce the need for insulin injections with patients with diabetes.
Second, the ongoing lawsuit by Insulet continues to remain a major headache. Eoflow is not a KISS (“Keep It Simple Stupid”) stock.

Exploring the Launch of a Posco Group-Focused ETF: Flow Trading Insights

By Sanghyun Park

KRX approved the listing of ACE POSCO Group Focus. This fund mirrors the performance of the FnGuide POSCO Group Focus Index. KRX will announce the listing date next week.
This index encompasses 6 Posco affiliates and 4 non-Posco stocks. The top 3 constituents, each assigned a 25% weight, are POSCO Holdings, Posco International, and Posco Future M.
We should explore various long-short setups for stocks within the local battery sector (long Posco affiliates and short others), starting with the listing of this ACE POSCO Group Focus ETF.

Samsung Biologics (207940 KS): Raises 2023 Sales Guidance Second Time This Year; Buy the Dip

By Tina Banerjee

Samsung Biologics (207940 KS) expects 2023 revenue to grow by more than 20% YoY compared to 15–20% YoY growth expectations earlier, due to better-than-expected utilization of Plant 4.
For the first time in the company’s history, Samsung Biologics has won contracts worth nearly KRW3T during the first half of 2023, with eight contracts worth more than KRW100B each.
Anticipating strong demand, Samsung Biologics is building its fifth manufacturing plant with 180KL capacity, which is expected to be completed by April 2025.

Ecoeye IPO Valuation Analysis

By Douglas Kim

Our base case valuation of Ecoeye IPO is 45,421 won per share, representing 31% higher than the high end of the IPO price range.
Given the solid upside, we have a positive view of Ecoeye IPO. The target P/E multiple of 28.8x is based on a 20% premium to the comps’ average valuation multiple.
We believe this premium valuation multiple is appropriate given higher sales growth rate and operating margin for Ecoeye as compared to the comps.

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Oct 06

Daily Brief Event-Driven: EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem
PICC’s (1339 HK) Lifetime Low Implied Stub
Exploring the Launch of a Posco Group-Focused ETF: Flow Trading Insights
Boustead Plantations (BPLANT MK): LTAT Emerges as a White Knight

EOFLOW/Medtronic Tender: Proposed Preliminary Injunction Is a Problem

By Arun George

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.

PICC’s (1339 HK) Lifetime Low Implied Stub

By David Blennerhassett

People’s Insurance (PICC) (1339 HK) is currently trading at an all-time low implied stub.
Stripping out PICC’s 68.98% stake in PICC Property & Casualty H (2328 HK), the market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date.
PICC is outperforming the HSI. It’s just that PICC P&C is on a hot streak, possibly driven (pun intended) by EV insurance.

Exploring the Launch of a Posco Group-Focused ETF: Flow Trading Insights

By Sanghyun Park

KRX approved the listing of ACE POSCO Group Focus. This fund mirrors the performance of the FnGuide POSCO Group Focus Index. KRX will announce the listing date next week.
This index encompasses 6 Posco affiliates and 4 non-Posco stocks. The top 3 constituents, each assigned a 25% weight, are POSCO Holdings, Posco International, and Posco Future M.
We should explore various long-short setups for stocks within the local battery sector (long Posco affiliates and short others), starting with the listing of this ACE POSCO Group Focus ETF.

Boustead Plantations (BPLANT MK): LTAT Emerges as a White Knight

By Arun George

Boustead Plantations (BPLANT MK) shares have been on a rollercoaster ride. As Kuala Lumpur Kepong (KLK MK) pulls its offer, LTAT has emerged as an unlikely white knight.
LTAT aims to launch a general offer at RM1.55 per share, in line with KLK’s aborted MGO price. The government will backstop LTAT’s funding for the offer.
LTAT is vague on approvals and timing. Regulatory approvals should be a formality as LTAT is the Armed Forces pension fund. At the last close, the gross spread was 10.7%.

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Oct 06

Daily Brief Credit: Tesla’s Problem Is Fading Demand and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

Tesla’s Problem Is Fading Demand, Not Disruptive Factory “Updates”
Medco Energi – Earnings Flash – H1 FY 2023 Results – Lucror Analytics
Morning Views Asia: AAC Technologies Holdings, Tata Motors ADR

Tesla’s Problem Is Fading Demand, Not Disruptive Factory “Updates”

By Vicki Bryan

Factory shutdowns for “updates” doesn’t explain Tesla’s huge Q3 miss on deliveries.
Why? Because bloated excess inventory was enough to cover the 20k “miss” some 3-5x.
A better explanation: Tesla’s accelerating demand erosion, which I have been tracking since last year in every major market.

Medco Energi – Earnings Flash – H1 FY 2023 Results – Lucror Analytics

By Leonard Law, CFA

Medco Energi’s H1/23 results were acceptable in our view. The company’s earnings were soft, weighed down by lower O&G selling prices despite higher production volumes. That said, we expect Medco’s earnings to rebound in H2, considering the recent rally in oil prices. Positively, the company’s leverage and liquidity profile remain strong. We believe Medco will be able to accommodate its USD 400-800 mn acquisition in the Middle East without breaching the 2.5x net leverage target.

In addition, we note positively Amman Mineral Nusa Tenggara’s (AMMN) successful IPO in July 2023. We note that Medco’s 21% stake in AMMN is worth USD 6.1 bn (based on AMMN’s current market cap of c. USD 29 bn), which is far larger than Medco’s own market cap of USD 2.2 bn.

Morning Views Asia: AAC Technologies Holdings, 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.

AAC Technologies Holdings
Tata Motors ADR

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Oct 06

Daily Brief Equity Bottom-Up: Eoflow: Ozempic and Wegovy Reducing Need for Disposable Insulin Injection Devices + Ongoing Lawsuit? and more

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

In today’s briefing:

Eoflow: Ozempic and Wegovy Reducing Need for Disposable Insulin Injection Devices + Ongoing Lawsuit?
FAST RETAIL (9983) | 3 Reasons Why Guidance Could Miss
Xinyi Glass (868 HK): More Resilient Than Perceived
TSMC (2330.TT): The Advanced Technology Nodes Are Looking at Upside in 2024F
NEE & NEP Selloff Prompted by Higher for Longer Rates Sentiment
Samsung Biologics (207940 KS): Raises 2023 Sales Guidance Second Time This Year; Buy the Dip
SBI Holdings – Pages of Affiliates | Strong Securities | Banks Doing Well | Accelerating Profit
China Power International (2380 HK): Continuing the Turnaround Trend
GeoPark Limited (NYSE: GPRK): CPO-5 wells back online. Multiple discoveries in Colombia and Ecuador
ATEN: Order Delays Continue, PT to $15

Eoflow: Ozempic and Wegovy Reducing Need for Disposable Insulin Injection Devices + Ongoing Lawsuit?

By Douglas Kim

Eoflow’s share price has dropped 27% lower than the proposed tender offer price of 30,000 won. Two major factors have negatively impacted Eoflow (294090 KS)’s share price.
First, in September 2023, there were new data that suggested that popular weight loss drugs including Ozempic and Wegovy could reduce the need for insulin injections with patients with diabetes.
Second, the ongoing lawsuit by Insulet continues to remain a major headache. Eoflow is not a KISS (“Keep It Simple Stupid”) stock.

FAST RETAIL (9983) | 3 Reasons Why Guidance Could Miss

By Mark Chadwick

Fast Retail Full-Year Expectations: Anticipate strong FY results, but potential FY8/24 guidance headwinds include weather impacts and yen weakness.
Management Guidance Risks: The key risk would seem to be China outlook; Japan/Europe’s heatwave impact on fall season; potential for gross margin pressures.
Valuation: Despite growth prospects, concerns over cyclicality and valuation relative to peers persist.

Xinyi Glass (868 HK): More Resilient Than Perceived

By Steve Zhou, CFA

Xinyi Glass Holdings (868 HK)‘s stable auto glass business is often overlooked, making up 39% of the company’s gross profit in 1H23.
Given the current valuation of 7x 2023E PE and 1.3x 2023E PB, the risk reward is skewed to the upside, and downside is protected with the stable auto glass business.
The company’s management has been aggressively increasing stake in the company in the last 2 months, gobbling up 11 million shares.

TSMC (2330.TT): The Advanced Technology Nodes Are Looking at Upside in 2024F

By Patrick Liao

It is expected that TSMC will have full capacity utilization of 3nm and 5nm technology nodes starting from 1Q24F.
Regarding 3nm technology, the EUV mask layer will be reduced.
The total number of iPhone 15 units sold in 2023F is expected over 85 million.

NEE & NEP Selloff Prompted by Higher for Longer Rates Sentiment

By Pranay Yadav

Higher for longer rate regime makes it difficult for NextEra Energy Partners to raise debt to fund high growth forcing a reduction in growth forecasts.
Markets have reacted sharply to slashed forecasts with shares of NEP (-52%) & NEE (-22%). Growth is expected to remain lower in the future.
NEE has performed markedly better than NEP. This is reflected by analyst price targets. However, NEE’s long-term growth story has stumbled raising investor concerns.

Samsung Biologics (207940 KS): Raises 2023 Sales Guidance Second Time This Year; Buy the Dip

By Tina Banerjee

Samsung Biologics (207940 KS) expects 2023 revenue to grow by more than 20% YoY compared to 15–20% YoY growth expectations earlier, due to better-than-expected utilization of Plant 4.
For the first time in the company’s history, Samsung Biologics has won contracts worth nearly KRW3T during the first half of 2023, with eight contracts worth more than KRW100B each.
Anticipating strong demand, Samsung Biologics is building its fifth manufacturing plant with 180KL capacity, which is expected to be completed by April 2025.

SBI Holdings – Pages of Affiliates | Strong Securities | Banks Doing Well | Accelerating Profit

By Daniel Tabbush

SBI Holdings (8473 JP) may not be the easiest company to analyze with its many pages of affiliates, but at the least, it’s profit momentum is strong.
Securities Group profit is key to the company where growth is excellent in earnings and in the number of new accounts, across many businesses.
Its two banks in Japan are doing well, growing faster than others, but still SBI Holdings (8473 JP) is more of an alternative financial company to a traditional bank.

China Power International (2380 HK): Continuing the Turnaround Trend

By Osbert Tang, CFA

Power output for China Power International (2380 HK) is healthy in Jul-Aug, following the solid trend in 1H23. The drop in hydropower has moderated and wind and solar stayed decent.
Capacity growth will reach 43% in FY23. With just 7.8% YoY in 1H23, most of the new capacity will be added in 4Q23, accelerating both output and profitability.
The parent SPIC’s massive clean energy assets are candidates for potential injection. CPI’s high EPS CAGR of 28.8% means that it well deserves premium valuation multiples.

GeoPark Limited (NYSE: GPRK): CPO-5 wells back online. Multiple discoveries in Colombia and Ecuador

By Auctus Advisors

• The Indico 6 and Indico 7 wells in the CPO-5 block in Colombia are now back online.
Each well is expected to reach 4,000 bbl/d gross production (8,000 bbl/d gross total, 2,400 bbl/d net to GeoPark).
The total gross production of both wells could reach 9,000 bbl/d by YE23.

ATEN: Order Delays Continue, PT to $15

By Hamed Khorsand

ATEN continues to experience challenges with order timing from some of its largest customers. ATEN lowered Q3 revenue forecast after North American service providers delayed their purchases in the quarter
ATEN has spent the entire year trying to add more enterprise customers to offset this volatility and, while successful, it was not enough in the third quarter.
ATEN is projecting third quarter revenue between $56.5 million and $58.5 million compared to our estimate of $75.3 million.

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