Category

Daily Briefs

Oct 04
0

Daily Brief Japan: Japan Rental Housing Investment, Kasumigaseki Capital, Tokyo Stock Exchange Tokyo Price Index Topix and more

By | Daily Briefs, Japan

In today’s briefing:

  • Daiwa Securities Living (8986 JP): Historical Post-Offering Performance Does Not Look Good At All
  • UPDATE: Kasumigaseki Capital (3498) Moving to TOPIX. Forward Earnings/Aggressive Forecast Surprise
  • Gap in Response to Disclosures in English Compared to the Growing Presence of Overseas Investors

Daiwa Securities Living (8986 JP): Historical Post-Offering Performance Does Not Look Good At All

By Janaghan Jeyakumar, CFA

  • Midsize residential JREIT Daiwa Securities Living (8986 JP) (“DSLIC“) launched a follow-on equity offering to partially fund their recently-announced acquisitions.
  • The primary offer quantity will be 139,047 units and there will also be an over-allotment quantity of 6,953 units.
  • In this insight, we take a closer look at the details of this offering and the historical performance of DSLIC’s previous follow-on equity offerings.

UPDATE: Kasumigaseki Capital (3498) Moving to TOPIX. Forward Earnings/Aggressive Forecast Surprise

By Travis Lundy

  • Over the weekend I wrote about Kasumigaseki Capital (3498 JP)‘s move to TSE Prime and then move to TOPIX. I noted earnings would be out 3 October.  
  • I talked about the possibility of a surprise. They had revised full-year to end-Sep to ¥2bn. They got ¥2.05bn. 
  • But after growing revenue 79% last year, and growing net profit 101%, this year they expect revs +60% and Net Profit +144%. 

Gap in Response to Disclosures in English Compared to the Growing Presence of Overseas Investors

By Aki Matsumoto

  • Overseas investors feel that the disclosure of English documents by Japanese companies is slow-paced and the majority of overseas investors are not satisfied with the English disclosure.
  • Without sufficient disclosures in English, it is impossible to conduct a detailed analysis of the portfolio company. This also casts a shadow over engagement.
  • Given the narrowing coverage of sell-side analysts, companies should proactively disclose English-language materials at the earliest possible time. For long-term investors, English-language disclosures such as annual securities reports are also useful.

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Oct 03
0

Daily Brief Quantitative Analysis: Hong Kong Connect Flows: $7.3bn of Inflows in September and more

By | Daily Briefs, Quantitative Analysis

In today’s briefing:

  • Hong Kong Connect Flows: $7.3bn of Inflows in September
  • Northbound Flows Monthly (September): $5.3bn of Outflows

Hong Kong Connect Flows: $7.3bn of Inflows in September

By Ke Yan, CFA, FRM

  • We analyze the monthly Hong Kong Connect flows with our data engine.
  • We tabulate the top stocks by inflows, outflows, and holding by mainland investors.
  • We highlight inflows into ICBC,  CCB, Meituan, Innovent Biologics, Xpeng and outflows from Petrochina.

Northbound Flows Monthly (September): $5.3bn of Outflows

By Ke Yan, CFA, FRM

  • We analyze the monthly Shanghai/Shenzhen northbound Connect flows with our data engine.
  • We estimate the outflows to be $5.3bn in September and consumer discretionary, and health care sectors led the inflows.
  • We highlight inflows into BYD, Bank Of Jiangsu, Wuxi Apptec and outflows from CATL, Moutai, Wuliangye.

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Oct 03
0

Daily Brief Event-Driven: BPlant/KLK: This Is Getting (Even More) Political and more

By | Daily Briefs, Event-Driven

In today’s briefing:

  • BPlant/KLK: This Is Getting (Even More) Political
  • Boustead Plantations (BPLANT MK): A Transaction Mired in Political Debate
  • Yuanta/​P-Shares Taiwan Dividend Plus ETF: 20% One-Way Turnover & US$2.72bn Trade
  • Alpha Generation Through Share Buybacks in Korea: August & September 2023
  • Hollysys (HOLI US): Board Starts a Formal Sale Process
  • Symbio: Aussie Broadband Lobs Competing NBIO
  • Quiddity A/H Premium Tracker (To Sep28): Hs Suffer Vs As Despite Inflows
  • EQD | S&P/ASX200 Index Stuck, But Could Bounce Soon

BPlant/KLK: This Is Getting (Even More) Political

By David Blennerhassett

  • On the 24 August, Kuala Lumpur Kepong (KLK MK) entered an agreement with Boustead Holdings (BHB), Boustead Plantations (BPLANT MK)‘s largest shareholder, to acquire a 33% plus 1 share stake.
  • Upon the completion of the agreement, KLK – together with BHB and LTAT – would make a Mandatory Offer for BPlant. The Offer Price would be RM1.55/share, a lifetime high
  • It all looked pretty straightforward. However the BHB/LTAT agreement has twice been delayed. This may still get done. But there remain a number of political kinks to be ironed out. 

Boustead Plantations (BPLANT MK): A Transaction Mired in Political Debate

By Arun George

  • Boustead Plantations (BPLANT MK) shares are down 16%, resulting in proprietary day trading and intraday short selling being suspended. The transaction is mired in political debate. 
  • The bull case is that Kuala Lumpur Kepong (KLK MK) continues on-market purchases and the opposition will compromise, paving the way for deal completion. Timing is the key risk. 
  • The bear case is a deal break. The downside is limited as the government will need another buyer, the shares trade below the undisturbed price, and the undemanding valuation. 

Yuanta/​P-Shares Taiwan Dividend Plus ETF: 20% One-Way Turnover & US$2.72bn Trade

By Brian Freitas

  • Using data from the close on 28 September, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
  • There will also be capping and funding flows that will lead to a one-way turnover of 19.8% and a one-way trade of US$1.36bn.
  • There are 15 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

Alpha Generation Through Share Buybacks in Korea: August & September 2023

By Douglas Kim

  • In this insight, we discuss the alpha generation through companies that announced share buybacks in Korea in August and September 2023.
  • We provide a list of 18 stocks in the Korean stock market that have announced share buyback programs in August and September 2023.
  • The top three market cap stocks that have announced share repurchases include Celltrion Inc (068270 KS), Celltrion Healthcare (091990 KS), and KT&G Corporation (033780 KS). 

Hollysys (HOLI US): Board Starts a Formal Sale Process

By Arun George

  • The Hollysys Automation Technologies (HOLI US) Board succumbs to shareholder pressure by announcing the formation of a special committee to conduct a formal sale process.
  • Hollysys has received non-binding proposals from six parties since December 2020. The most recent is a non-binding proposal from the Recco consortium at US$25.00 per share.
  • The Board’s change of heart should encourage previous bidders to re-engage. Recco’s offer, while attractive, is not a knockout bid, suggesting a possible bidding war. 

Symbio: Aussie Broadband Lobs Competing NBIO

By David Blennerhassett

  • On the 22 September, Symbio Holdings (SYM AU) received a best and final NBIO from Superloop Ltd (SLC AU) : A$1.425 cash and 2.14 Superloop shares for each Symbio share.
  • Those indicative terms backed out an implied price of A$2.85/share, or a 20% premium to undisturbed.  Now Aussie Broadband (ABB AU) has snuck in with a superior cash/scrip Offer.
  • The competing Offer’s implied consideration of A$3.151/share boasts a larger cash component vs. Superloop.  Symbio’s board is supportive if terms are firmed. Superloop’s Offer has now lapsed. 

Quiddity A/H Premium Tracker (To Sep28): Hs Suffer Vs As Despite Inflows

By Travis Lundy

  • The Brand-Spanking New (8 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
  • We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 47 Trade Recommendations.
  • The last 7 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%.

EQD | S&P/ASX200 Index Stuck, But Could Bounce Soon

By Nico Rosti

  • The S&P/ASX 200 INDEX is trading below the Q3 WEEKLY support at 7072 (OVERSOLD). It closed down 2 weeks in a row (CC=-2) and this week is also down (CC=-3).
  • As previously discussed the index is stuck in a range since August 2021, but from a short-term tactical viewpoint it could bounce soon, still remaining in range.
  • Current support range is 7072-6900, there is a good chance to see a bounce from this area within 2 weeks.

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Oct 03
0

Daily Brief Thematic (Sector/Industry): Ohayo Japan: US Big Tech Higher; Shipping Giants Join Hydrogen Supply Chain and more

By | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

  • Ohayo Japan: US Big Tech Higher; Shipping Giants Join Hydrogen Supply Chain
  • Mattress Imports – July Imports Drop Sharply; ITC Preliminary Finding Favors US Petitioners

Ohayo Japan: US Big Tech Higher; Shipping Giants Join Hydrogen Supply Chain

By Mark Chadwick

  • OVERSEAS: Dow Jones falls 0.2%, Yields surge ahead of Friday Jobs report, Nvidia up almost 3%
  • JAPAN: Nikkei futures -0.5% vs cash. Tankan (business sentiment) improved in the third quarter, particularly among big non-manufacturers, reaching levels not seen since 1991
  • JAPAN X: Three Japanese Shipping Giants join Hydrogen Supply Chain. Japan is well on its way to achieving its hydrogen targets

Mattress Imports – July Imports Drop Sharply; ITC Preliminary Finding Favors US Petitioners

By Water Tower Research

  • Somewhat belatedly, we update our continuing analyses on US mattress imports, with the July 2023 mattress import data as posted on the Department of Commerce, US International Trade Commission Data Web.

  •  Importantly, we also discuss and comment on the progress of the July 2023 anti-dumping duty (AD) / countervailing duty (CVD) petition and the preliminary investigations by the USITC.

  • Following an August 18 conference, the USITC issued a Preliminary Findings and Staff Report that found “a reasonable indication that an industry in the United States is materially injured by reason of imports of mattresses” from 12 countries listed under New AD12 at the right.

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Oct 03
0

Daily Brief ECM: Alibaba Cloud IPO: Regulatory Optimism Amidst Stability Challenges and more

By | Daily Briefs, ECM

In today’s briefing:

  • Alibaba Cloud IPO: Regulatory Optimism Amidst Stability Challenges
  • JSW Infrastructure IPO Trading – Decent Subscription Rates Although Anchor Quality Was Mediocre
  • CaiNiao Smart Logistics Pre-IPO Part 1 | Business Model | Key Relationships | Differentiators
  • Kokusai Electric Pre-IPO – Peer Comparison

Alibaba Cloud IPO: Regulatory Optimism Amidst Stability Challenges

By Oshadhi Kumarasiri

  • Last week, the Cyberspace Administration of China (CAC) put forth a proposal to relax certain stringent regulations concerning the transfer of sensitive data to foreign countries.
  • This could be advantageous for Alibaba Group Holding (9988 HK)‘s Cloud business, especially as a potential candidate for an IPO following the recent IPO filing of the logistics arm, Cainiao.
  • Despite improved regulations, concerns about stability, leadership, and financial performance pose hurdles for Alibaba Cloud’s IPO.

JSW Infrastructure IPO Trading – Decent Subscription Rates Although Anchor Quality Was Mediocre

By Clarence Chu

  • JSW Infrastructure (5978490Z IN) raised US$336m in its India IPO.
  • JSW Infrastructure (JSWI) is the fastest growing port-related infrastructure company in terms of growth in installed cargo handling capacity and cargo volumes handled during FY20 to FY22, according to CRISIL.
  • We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

CaiNiao Smart Logistics Pre-IPO Part 1 | Business Model | Key Relationships | Differentiators

By Daniel Hellberg

  • Business model: how does CaiNiao get paid, and by whom, and for what?
  • Key relationships with parent Alibaba and with China’s listed express companies
  • Differentiators: what makes CaiNiao different from other e-comm logistics names?

Kokusai Electric Pre-IPO – Peer Comparison

By Sumeet Singh

  • KKR is looking to raise around US$750m via selling a stake in Kokusai Electric (6525 JP) (KE) in its Japan IPO.
  • KE main business activities consist of the manufacturing, sales and maintenance service of semiconductor manufacturing equipment.
  • In our previous notes we have looked at the company’s past performance. In this note, we will undertake a peer comparison.

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Oct 03
0

Daily Brief Credit: Morning Views Asia: Medco Energi and more

By | Credit, Daily Briefs

In today’s briefing:

  • Morning Views Asia: Medco Energi, Tata Motors ADR

Morning Views Asia: Medco Energi, 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.

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Oct 03
0

Daily Brief Equity Bottom-Up: Haitong Securities – Portugal Bank Goodwill Impairment Surge | Overall: High Costs and more

By | Daily Briefs, Equity Bottom-Up

In today’s briefing:

  • Haitong Securities – Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue
  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023
  • UOB – Weaker Credit | Struggling Cost Base | Moving to Trading | A Changing Face
  • HEC Pharma (1558 HK): Robust 1H23 Performance on Flu Outbreak in China
  • REIT Watch – Positive rent reversions recorded across Singapore office market
  • China Population Policies Impact on Healthcare Companies Series – Part 2
  • An Update with Rajesh Vashist of SiTime
  • China Comm Const (1800 HK): Well Worth Revisiting
  • GTX: Previewing with a Weak Euro
  • Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips

Haitong Securities – Portugal Bank Goodwill Impairment Surge | Overall: High Costs, Poor Revenue

By Daniel Tabbush

  • With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons
  • The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs
  • Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs

Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

By Douglas Kim

  • In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.
  • Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.
  • We highlight 38 pair trades that involve Korean holdcos and opcos.

UOB – Weaker Credit | Struggling Cost Base | Moving to Trading | A Changing Face

By Daniel Tabbush

  • UOB can be harder hit than peers due to its greater SME focus. SME’s may be less able to absorb or pass on higher costs, or manage worse demand.
  • Domestic credit growth is at -4.1% in July YoY, from -3.3% YoY in June and from 2.1% in May. This can represent risk-aversion, worse demand, deteriorating credit metrics in SG.
  • UOB’s Greater China lending is SGD52bn, nearly identical to Thailand, Malaysia combined. Building & Construction NPLs rose from SGD1.1bn to SGD1.4bn HoH to 2Q23.

HEC Pharma (1558 HK): Robust 1H23 Performance on Flu Outbreak in China

By Tina Banerjee

  • Yichang HEC Changjiang Pharma (1558 HK) reported a whopping 148% YoY growth in revenue to RMB3,209M in 1H23. Net profit rebounded to RMB3,209M from a loss of RMB33M in 1H22.
  • In H1 2023, revenue from Kewei, approved for first-line treatment of influenza, jumped 186% YoY to RMB2,881M, representing ~90% of total revenue, mainly due to spiking flu cases in China.
  • Recently, the company obtained approval for premixed Protamine human insulin injection and submitted marketing application for its self-developed product, Yiqibuvir for the treatment of chronic Hepatitis C in China.

REIT Watch – Positive rent reversions recorded across Singapore office market

By Geoff Howie

  • Singapore Grade A office rent and core CBD Occupancy According to CBRE Research’s latest Singapore Occupier Sentiment Survey, office utilisation in Asia-Pacific outpaced that in Europe and the US.
  • Similarly, MPACT saw positive rental reversions in its latest Q2FY23 update, with Mapletree Business Centre at 7.1 per cent and the rest of Singapore office properties and business parks at 8.9 per cent.
  • Looking ahead, MPACT expects rents for business parks to remain flat or stable with minimal growth in 2023 despite the expected rise in vacancy, as new and good-quality business parks will command higher rental rates.

China Population Policies Impact on Healthcare Companies Series – Part 2

By Xinyao (Criss) Wang

  • Several provinces have successively introduced policies to encourage childbirth. Increasing medical insurance reimbursement and special additional deduction standards for personal income tax would be the common direction. 
  • This year is mainly a period of intensive introduction of relevant fertility support policies, so the impact on company’s performance is limited.The focus would be on next year’s financial results.
  • We analyzed the performance of Livzon Pharmaceutical Group In (000513 CH),BGI Genomics (300676 CH) and Jinxin Fertility Group (1951 HK) based on their 23H1 reports, and adjusted our forecast accordingly.

An Update with Rajesh Vashist of SiTime

By Douglas O’Laughlin

  • This week, Rajesh Vashist of SiTime came to talk about SiTime’s new product launch, Epoch. 
  • SiTime is still the least understood story in semiconductors because timing is one of the least understood products or applications in semiconductors.
  • Timing chips. They are the heartbeat of any system in any communications, processing, computing, or all of the above.

China Comm Const (1800 HK): Well Worth Revisiting

By Osbert Tang, CFA

  • The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
  • 2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
  • There should not be concerns about CCCC’s contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.

GTX: Previewing with a Weak Euro

By Hamed Khorsand

  • GTX is scheduled to report third quarter results on October 24, 2023, as the Company continues to make strides in expanding its product offering
  • The third quarter results should serve as a catalyst since the Company was expected to repurchase shares and reduce its debt balance during the period
  • The impact from the ongoing strike in North America is likely to have minimal impact to GTX if it were to continue for an extended period of time

Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips

By Water Tower Research

  • MillerKnoll earnings sparked a second week of outperformance for the commercial/contract furniture stocks, which rose ~8% in a week when broader indices were roughly flat.

  • MLKN reported adjusted EPS of $0.37 in 1QFY24, above consensus of $0.21 consensus, and upped guidance.
  • Shares jumped 27% on Wednesday. All three major US firms in the sector advanced last week.

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Oct 03
0

Daily Brief Macro: Steno Signals #67 – 150bps Higher 10yr Yields and Parity up Next in EURUSD? and more

By | Daily Briefs, Macro

In today’s briefing:

  • Steno Signals #67 – 150bps Higher 10yr Yields and Parity up Next in EURUSD?
  • Testing Times Loom for US Treasury Market Functionality with Potential Global Consequences
  • FX Watch: The world needs a Riyadh accord more than a Plaza Accord 2.0
  • Positioning Watch – Oil Longs Are Not as Big as You Think
  • The Week That Was in ASEAN@Smartkarma – Sea Ltd & TikTok, Prodia, and Matahari Department Store

Steno Signals #67 – 150bps Higher 10yr Yields and Parity up Next in EURUSD?

By Andreas Steno

  • There are good reasons to chant “Europe, Europe, Europe” on the golf course, but not in financial markets as Europe is once again tested by commodity developments.

  • Oil markets remain in the driver’s seat of everything in Global Macro and even if it already feels like this energy squeeze is old hat, we find a continued strong risk/reward in betting on higher energy prices.

  • Our “chart of the week” reveals that the paper-market volume behind this latest oil market rally is very low, leaving the fear of a stretched positioning relatively dampened, which will allow the undersupplied physical market to drive price action.

Testing Times Loom for US Treasury Market Functionality with Potential Global Consequences

By Said Desaque

  • The significant incursion into the US Treasury market by the Fed has imparted legacy issues that potentially undermine its functionality.  Primary dealers’ capacity to undertake market-making has been impaired. 
  • Hedge funds are playing a larger role in the distribution and provision of price information of Treasuries to other investors via the use of leverage in the repo market.
  • Significant dysfunctionality in the US Treasury market has adverse implications for global liquidity due to its influence on riskier segments of the capital structure,  notably corporate bonds and equities. 

FX Watch: The world needs a Riyadh accord more than a Plaza Accord 2.0

By Andreas Steno

  • “I’ve said on many occasions that I think a market-determined value for the dollar is in America’s interest.
  • And I continue to feel that way.” Janet Yellen, October 2022Janet Yellen basically wrote off the possibility of a Plaza Accord 2.0 (coordinated action against a strong USD) in Q4-2022 when the energy crisis was at its peak with a strong USD against almost all peers.
  • The current situation looks mostly reminiscent of last year, why we struggle to see why the US authorities should alter their view.

Positioning Watch – Oil Longs Are Not as Big as You Think

By Andreas Steno

  • Welcome back to our weekly positioning watch, where we run through interest positioning insights/data collected throughout the week.
  • It’s safe to say that energy is all everyone is talking about with the oil rally still going strong, but the trade might have more to give as positioning is not as exhausted as some people might tell you.
  • When you take into account the number of traders in the CFTC report, oil positioning is barely anything compared to history.

The Week That Was in ASEAN@Smartkarma – Sea Ltd & TikTok, Prodia, and Matahari Department Store

By Angus Mackintosh

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Oct 03
0

Daily Brief Energy/Materials: Ecopro Co Ltd and more

By | Daily Briefs, Energy & Materials Sector

In today’s briefing:

  • Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

Korean Holdcos Vs Opcos Gap Trading Opportunities in 4Q 2023

By Douglas Kim

  • In this insight, we highlight the pricing gap divergences of the major Korean holdcos and opcos in 4Q 2023.
  • Of the 38 pair trades, 18 of them involved holdcos outperforming opcos YTD and 20 of them involved opcos outperforming holdcos in the same period.
  • We highlight 38 pair trades that involve Korean holdcos and opcos.

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Oct 03
0

Daily Brief Industrials: Taiwan Secom, JSW Infrastructure, China Communications Construction, MillerKnoll and more

By | Daily Briefs, Industrials

In today’s briefing:

  • Yuanta/​P-Shares Taiwan Dividend Plus ETF: 20% One-Way Turnover & US$2.72bn Trade
  • JSW Infrastructure IPO Trading – Decent Subscription Rates Although Anchor Quality Was Mediocre
  • China Comm Const (1800 HK): Well Worth Revisiting
  • Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips

Yuanta/​P-Shares Taiwan Dividend Plus ETF: 20% One-Way Turnover & US$2.72bn Trade

By Brian Freitas

  • Using data from the close on 28 September, there could be 6 adds and 5 deletes to the Yuanta/​P-Shares Taiwan Dividend Plus ETF in December.
  • There will also be capping and funding flows that will lead to a one-way turnover of 19.8% and a one-way trade of US$1.36bn.
  • There are 15 stocks with at least 3 days ADV to trade from passive trackers and another 10 stocks that have at least 1-day ADV to trade.

JSW Infrastructure IPO Trading – Decent Subscription Rates Although Anchor Quality Was Mediocre

By Clarence Chu

  • JSW Infrastructure (5978490Z IN) raised US$336m in its India IPO.
  • JSW Infrastructure (JSWI) is the fastest growing port-related infrastructure company in terms of growth in installed cargo handling capacity and cargo volumes handled during FY20 to FY22, according to CRISIL.
  • We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

China Comm Const (1800 HK): Well Worth Revisiting

By Osbert Tang, CFA

  • The fall in share price in the last five months have sent China Communications Construction (1800 HK) back to very attractive level. The market has misread the strong 2Q23 result.
  • 2Q23 recurring net profit surged 68.5% as 2Q22 has an inflated base. Gross margin has recorded meaningful YoY recovery while capex, particularly for BOT, has scaled back significantly. 
  • There should not be concerns about CCCC’s contract outlook. Its backlog is enough to cover 4.9x FY23F revenue and its PER of 2.7x has provided more than sufficient buffer.

Furniture/Furnishings Weekly – MLKN Results Boost Sector; Consumer Confidence Dips

By Water Tower Research

  • MillerKnoll earnings sparked a second week of outperformance for the commercial/contract furniture stocks, which rose ~8% in a week when broader indices were roughly flat.

  • MLKN reported adjusted EPS of $0.37 in 1QFY24, above consensus of $0.21 consensus, and upped guidance.
  • Shares jumped 27% on Wednesday. All three major US firms in the sector advanced last week.

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