This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Tech Weekly: TSMC Taking More Samsung Customers; Hon Hai Unveils Major AI Projects
- Samsung’s foundry business is losing more customers to TSMC, who is perceived as lower risk.
- TSMC, UMC Monthly Sales: TSMC up strong but plateauing, UMC lackluster, confirming 2 big trends.
- Memory Monitor: Nanya results miss; highlights weakness in non-AI demand.
2. TSMC (2330.TT; TSM.US): The Productivity and Profitability Are the Essential Competitiveness.
- For 2nm technology, Taiwan Semiconductor (TSMC) (2330 TT) should start Apple (AAPL US) iPhone 17 production in the middle of 2025, most likely.
- TSMC’s competitors, Samsung Electronics (005930 KS) and Intel Corp (INTC US) are running foundry business and keeping owning manufacturing business at the same time, which is contradictory to purely foundry business.
- To making the advanced chip in the US, we consider the main main concern still the cost.
3. TSMC Q324 Earnings Preview
- September 2024 revenues of NT$251.87 billion, an increase of 0.4% MoM and an increase of 39.6% YoY.
- Year to date revenue through September 2024 now totals NT$2,025.85 billion, an increase of 31.9% YoY.
- Anticipating Q4 revenue forecast of $25.7 billion, up 10% QoQ. This would mean full year 2024 revenues of $88.8 billion, a 28.3% YoY increase
4. Cerebras Files Intent To IPO. This Will Be Interesting
- Cerebras presently derives up to 87% of its revenue from G42
- Microsoft gatecrashed Cerebras party with a $1.5 billion investment in G42 to “accelerate AI development and global expansion”
- G42 “severed its ties” with China in advance of the Microsoft investment
5. Graphene. Wonder Material Or Hype Magnet?
- Two decades ago, graphene hit the headlines after two professors at University of Manchester managed to isolate a slice of the just one-atom thick substance using scotch tape
- Marketed as being 200 times stronger than steel, graphene rapidly gained “wonder material” status and spawned a tidal wave of graphene based products, companies and investment opportunities
- At least four “Graphene” companies listed on London’s AIM, collectively once worth north of $1 billion, have either delisted or been reduced to penny stock status.
6. UMC (2303.TT; UMC.US): 4Q24 Outlook Blurred; QCOM Opens up a New Chance; Considering Selling Fab 8S.
- United Microelectron Sp Adr (UMC US)’s outlook for 4Q24 is expected to show a decrease of around -5% QoQ, with a minimum gross margin of 30%.
- Qualcomm Inc (QCOM US) moving out of Semiconductor Manufacturing International Corp (SMIC) (981 HK) and has opened up opportunities for UMC.
- UMC is considering selling its 8″ Fab, known as 8S, due to its consistently poor performance.
7. Nuclear Zeitgeist Part 1: A Reactor Primer
- Last month, the DOE published a paper about the commercial liftoff of Advanced Nuclear.
- Larry Ellison mentioned that SMRs (Small modular reactors) will power data centers in the future, and Microsoft will unshutter 3 Mile Island for one last puff of a half-smoked cigarette. Just a few years ago, it was closed for economic reasons.
- This is going to be the first in a series about Nuclear Power. Today, I’ll talk about Nuclear Reactors and the basics.
8. Taiwan Semi Monthly Tracker Red Flags Double MoM In September 2024
- Seven Taiwan semi companies from our list of sixteen are now showing negative YoY monthly growth as of September 2024, up from just three a month earlier
- Companies with a strong exposure to the AI Acceleration market are on track for strong revenue growth YoY in 2024. ASPEED is on track to double revenues this year.
- For many of the remainder, what tepid growth they had been experiencing may be starting to stall. Watch this space.
9. Taiwan Dual-Listings Monitor: TSMC Spread Back to Elevated Range; ASE Short Interest Spikes Higher
- TSMC: +18.6% Premium; Spread Has Returned to Previous Elevated Trading Range
- UMC: +1.5% Premium; Wait for Higher Level Before Shorting the Spread
- ASE: +4.2% Premium; Can Consider Going Long the Spread at Current Level
10. Memory Monitor: Nanya Results Miss; Highlights Weakness in Non-AI Demand
- Nanya Tech’s 3Q24 results missed expecations by a wide margin, coming in with a net loss instead of the consensus expectation for a profit.
- Nanya highlighed weakness in non-AI end applications for memory and cut its 2024E Capex guidance by nearly 25%, signaling caution towards the current market cycle.
- While the company’s new DDR5 capacity ramp-up should support stronger margins into 2025E, Nanya has yet to show a signifcant margin upturn in the cycle.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Rigaku Holdings IPO – Upside Remains Attractive
- Rigaku Holdings (268A JP) is looking to raise up to US$756m in its Japan IPO.
- Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
- In our earlier notes, we looked at the firm’s past performance and discussed our thoughts on valuation. In this note, we look at Rigaku’s valuation at the final indicative range.
2. Tokyo Metro IPO Valuation Analysis
- Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
- Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
- Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.
3. Hyundai Motor India Sets IPO Price Range
- Hyundai Motor India (1342Z IN) has set an IPO price range of 1,865 to 1,960 rupees per share, aiming for a valuation as high as US$19 billion.
- Hyundai Motor (005380 KS) is selling a 17.5% stake in Hyundai Motor India in this public offering. Hyundai Motor India IPO is scheduled to trade starting 22 October.
- Our updated base case valuation of Hyundai Motor India is market cap of US$19.7 billion based on P/E of 25.9x our estimated net profit of 64.1 billion INR.
4. USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%
- Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering.
- Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
- Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.
5. Hyundai Motor India IPO – RHP Updates, Valuation Getting Tricky
- Hyundai Motor (005387 KS) is looking to raise around US$3.3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we looked at the company’s past performance. In this note, we will talk about its RHP updates and valuations.
6. Hyundai Motor India IPO: Analysis of Latest Financials Signal Challenging Year Ahead
- After 3 years of strong revenue and profits growth, Hyundai Motor India is likely to face a challenging year ahead based on the analysis of 1QFY2025 financials provided in RHP.
- Hyundai Motor India (1342Z IN)‘s strong exports growth in FY2025 will not offset the weakness in domestic sales. This could result in low single-digit revenue growth for the year.
- Increased royalty costs starting in FY2025, coupled with impact of lower cash reserves after special dividend paid out to parent will likely compress profit margins compared to the previous year.
7. Tokyo Metro IPO – Will Price at the Top, but Isn’t Particularly Cheap
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.4bn in its Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
8. Akeso Placement – Opportunistic Raise, past Deal Record Has Been Mixed but Relative Size Is Small
- Akeso Biopharma Inc (9926 HK) is looking to raise around US$200m from its primary placement. Proceeds from the placement will be used for R&D.
- Past deals in the name haven’t done well recently but the shares have been doing well and the deal size remains small.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
9. CR Beverage IPO: Valuation First-Look
- China Resources Beverage (CRB HK), China’s largest purified drinking water company, is premarketing an HKEx to raise US$0.5-1 billion.
- We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
- In this note, we present our forecasts and examine CR Beverage’s potential valuation range for the first time.
10. Rigaku Holdings (268A JP) IPO: Valuation Insights
- Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement, and testing instruments. It is seeking to raise up to US$737 million.
- We previously discussed the IPO in Rigaku Holdings (268A JP) IPO: The Bull Case and Rigaku Holdings (268A JP) IPO: The Bear Case.
- In this note, we discuss valuation. Our analysis suggests that Rigaku is attractively valued at the IPO price compared to peer multiples.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. 7&I Results and Plans – The Good, The Bad, The Ugly, The Respectable, Unfortunate, and Encouraging
- H1 sales were GOOD. H1 earnings were BAD. New forecasts are UGLY. The CVS initiatives are RESPECTABLE, but US CVS market environment UNFORTUNATE. The creation of the new Holdco ENCOURAGING.
- The Couche-Tard Bid? That’s SEPARATE. Confidential. But three weeks after receiving the new proposal, it hasn’t been publicly rejected. So that’s a thing.
- 7&i is progressing with its Standalone Plan, as it should, because ACT’s bid is more a show of faith for discussions. The York Holdings structure is INTERESTING.
2. Revised Couche-Tard Bid for 7&I and a Flurry of News Items Ahead of Earnings
- This AM, partway through the morning session, Bloomberg carried an article saying Alimentation Couche-Tard (ATD CN) had upped its bid for Seven & I Holdings (3382 JP) to US$18.19/share.
- The stock popped, then faded sharply. Near and after the close we got more headlines. Some of these preview tomorrow’s earnings report. Some preview the restructuring announcements.
- The Nikkei comment regarding an earnings shortfall vs Plan suggests weaker US convenience store sales and consumer footfall are to blame. Details will matter. But I’d buy dips.
3. Haitong Securities (6837 HK)/GTJA (2611 HK) Merger Is a Done Deal
- Guotai Junan Securities (2611 HK) and Haitong Securities Co Ltd (H) (6837 HK) all-scrip merger is set at an exchange ratio of 0.62x.
- The merger is conditional on the GJTA/Haitong shareholder vote, which is low risk. Regulatory approvals are a formality as they involve two entities with SOE backgrounds.
- The share exchange ratio is attractive compared to historical price ratios and precedent transactions. The recent material re-rating of peers is irrelevant to the vote as the offer is all-scrip.
4. Guotai Junan (2611 HK)/Haitong (6837 HK)’s Merger: A Win For H-Shareholders
- A month after China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong Securities (H) (6837 HK), announced an intention to merge, we have a firm deal.
- Via a share swap, each Haitong H share may be exchanged for 0.62 H shares of GJS. A similar ratio is in place for the As. Cash options are afforded
- Conditions include GJS and Haitong shareholder approval; plus the usual suspects on the regulatory front. The key risk, as with TCM (570 HK)‘s Offer, is one of timing.
5. 7-Eleven Corporation: A Clear Strategy for Long-Term Value, Founding Family Return to Super-Stores
- Seven & I released 1H24 earnings today as well as details on planned restructuring of its business. Results included some one-off items hitting operating profit as well as lower footfall.
- The bigger news was the plan to hive off the non-CVS retail operations into a new company, York Holdings, leaving a newly named 7-Eleven Corporation running CVS globally.
- Unusually, Seven also mentioned the possibility of new strategic partners investing in York, including even the “original founding families”, suggesting one way of holding on to control.
6. MBK Rules Out Further Tender Price Hike for Korea Zinc, Game Plans Shift
- MBK’s strategy is clear: they believe they have the upper hand with the current price level and are optimistic about a favorable ruling on the second injunction.
- All eyes are on Choi to raise the price by this Friday, the 11th, before the deadline, especially with the FSS’s scrutiny looming.
- If that happens, MBK will likely go all-in on the second injunction whose hearing is on the 18th. Choi raising the price this Friday won’t significantly boost Korea Zinc’s stock.
7. HSCI Index Rebalance Preview: Midea Group (300 HK) To Be Added in December; Stock Connect Next Week
- There were only 13 new listings on the Main Board of the HKEX (388 HK) in the third quarter of the year.
- Of those stocks, we only see Midea Group (300 HK) having a chance of being added to the HSCI in December.
- Midea Group (300 HK) should be added to Southbound Stock Connect next week after the price stabilisation period has ended.
8. Shin Kong and Taishin – There’s a Good Value Swap Trade To Do Here
- Media reports indicate that the shareholder base of Shin Kong Financial Holding (2888 TT) and Taishin Financial Holding (2887 TT) have approved their merger.
- Shin Kong meeting results were public just before the market closed. The results from Taishin were known earlier. The market and spread were un-moved. If anything, things widened a little.
- Next, the two companies try to get fair Trade Commission, FSC, and Exchange approval to join to become Taishin Shin Kong FHC. And there’s a good trade to do here.
9. Hyundai Motor India: Index Entry Timing for India’s Biggest IPO
- Hyundai Motor India (1342Z IN) is looking to list on the exchanges by selling up to INR 279bn (US$3.3bn) of stock at a valuation of up to INR 1,593bn (US$19bn).
- The anchor allocations will be completed early next week, and the stock is expected to start trading on 22 October.
- The stock will not get Fast Entry to global indices. Inclusion at regular rebalances should take place in February and June next year.
10. Seven & I Holdings (3382 JP): Pressure Mounts with a Couche-Tard Revised Offer
- In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a revised non-binding proposal from Alimentation Couche-Tard (ATD CN).
- The rumoured revised offer is US$18.19, a 22.4% premium to the initial US$14.86 offer. The revised terms are attractive vs precedent transactions and analyst price targets.
- The Board would cite regulatory concerns and the revised offer’s implied discount compared to peer multiples. At tomorrow’s results, the Board must present a credible alternative value generation path.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. HK/CHINA: Market Pullback and Investors’ Cognitive Dissonance
- The investment community’s response to the historic rallies in HK and China markets over the last couple of weeks unsurprisingly continues to be pessimistic.
- China’s objective of changing market sentiment is beginning to bear fruit as mainland investors open stock accounts at a record pace. Household wealth has increased by 20T yuan last month.
- Technical market indicators point to continued high volatility during this leg of the secular bull market.
2. Stay Calm and Don’t Panic! Overbought Conditions Meet an Overhyped Meeting.
- A correction was natural after the fast, strong move up
- Any detailed fiscal stimulus plan will come from the State Council or the MoF
- Capital market reforms moving in the right direction with continued focus on consumption.
3. HK/China: THE BIG SHORT (SQUEEZE)
- Although the tech sector in Hong Kong has surged over the last couple of weeks there appears to be minimal short covering in US-listed China tech names.
- The performance of the “Magnificent 5” China tech names has led the rally as we outlined in Hong Kong: The Glass Is Half Full, Time to BUY Beta .
- The combination of of large outstanding short positions and a significant underweight of HK/China in international funds will lead to further upside in the tech sector.
4. Positioning Watch: Hedge Funds Caught in the China Storm, While Retail Investors Keep Piling In
- Hello everyone, and welcome back to our weekly positioning watch.
- What a week it has been in global macro once again, with Chinese equities collapsing earlier this week after the Chinese stimulus frenzy fizzled out.
- However, we are now starting to hear that Chinese authorities are taking matters seriously, planning a new round of stimulus on the 12th of October.
5. Steno Signals #120 – Liquidity and rate cuts are incoming in an already OK economy
- Just a few hours after the release of a much stronger-than-expected jobs report, Goolsbee of the FOMC highlighted the risk of undershooting inflation in the US.
- While Goolsbee is a dovish, soft-leaning member of the committee, it goes to show that you don’t turn around a supertanker like the Fed just because the NFP printed a bit better than expected.
- The Fed has set a direction, and it will take a lot to convince them not to continue cutting interest rates back toward neutral, around 3%.
6. Ministry of Finance Press Conference – First Take
- Heavyweights attended as per previous conferences. Finance Minister (FM) Lan Foan and his three deputies
- Economists’ and market expectations damped down to RMB 1.5 – 2 Trillion in stimulus.
- Some major positive points we believe, but will be a disappointment to some
7. China: Lessons from the 1997-98 Asian Crisis
- Overall, the warning from slow real credit growth on reduced credit supply and demand is the main lesson from the Asia crisis 1997-98.
- China High FX reserves; low borrowing overseas and dominance of domestic investors in Yuan markets argues against a currency crisis.
- Asia widespread banking crisis are also unlikely to repeat in China, though we see growing stress among rural banks that in the worst case could be a rural banking crisis.
8. China Economics: Is Beijing Finally Abandoning Policy Inaction?
- Beijing’s latest policy announcements show that it is no longer content with a managed slowdown. They are now committed to more energetic policy support for the economy.
- Given the slowdown’s entrenched roots, partly due to Beijing’s prior reluctance, we do not think that the current package alone will turn things around.
- But with Beijing taking the cyclical slump more seriously, further support measures are likely, which, cumulatively, may be sufficient to stabilize short-term economic conditions.
9. Examining the Bear Case for China
- Change in strategy by the Chinese authorities mean this is more than a trade
- Sentiment, valuations and positioning are still supportive despite the rally
- Overbought conditions in the very short-term and the technical picture is mixed
10. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 11 Oct 2024
- China’s economic policy remains focused on investment, with low expectations for a significant stimulus from the Ministry of Finance.
- International reserves are generally increasing across Asia, supporting currency appreciation, except for Indonesia.
- Japan’s recent data shows rising cash earnings but declining real wages and household spending, highlighting concerns in the real economy.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings Monitor: TSMC Premium Back Below 15%; ASE Short Interest Surging
- TSMC: +14.2% Premium; Can Consider Going Long at Current Level
- UMC: +1.8% Premium; The ADR Headroom Has Decreased Yet Again
- ASE: +5.4% Premium; Short Interest Surging for The Local Shares
2. Ibiden (4062 JP): Once Again a Long-Term Buy
- Sales, profits and the share price are bottoming out and good 1Q results make FY Mar-25 guidance look conservative.
- Demand for advanced packaging should drive recovery, with the operating margin regaining its previous peak in three or four years.
- Management’s long-term guidance implies a decline in the projected P/E ratio from 26x to 10X by FY Mar-28, but even 15x would make the shares an attractive investment.
3. The Cerebras IPO Stucture Sucks
- I’m not going to write about the technical side at all, as I expect Dylan Patel’s team at SemiAnalysis to do a much better job than I can do alone.
- However, I want to note some of the funniest aspects because landmines are everywhere for this IPO. Of course, it’s driven by G42, but it’s much worse than you think. Here’s the prelim S-1.
- G42 is pretty much the only customer.
4. Apple Supply Chain Monitor: Key IPhone Suppliers Didn’t Rally With Apple; Opportunity for Rebound?
- Key iPhone components suppliers’ share prices have substantially underperformed Apple, particularly Largan Precision, Genius Electronic Optical, and Zhen Ding.
- There are reasons for iPhone 16 upgrade optimism. We also note that key suppliers failed to rally with Apple shares post-Fed rate cut.
- Apple suppliers’ 2025E forecasts haven’t fallen much so far, despite the negative stock market reaction. If negative iPhone 16 reports prove exaggerated, Largan, Genius, and Zhen Ding could rebound.
5. Taiwan Tech Weekly: Apple Shifting AR Strategy After Meta Orion Showcase; Apple Supply Chain Monitor
- Apple Set to Launch iPhone SE 4 and Updated iPad Air in Early 2025: Key Developments to Watch
- META’s Orion AR Glasses: Next Major Computing Platform After the Smartphone?
- Apple Supply Chain Monitor: Key IPhone Suppliers Didn’t Rally With Apple; Opportunity for Rebound?
6. GlobalFoundries. Share Price Down 17% Below IPO Price & Down 30% Since July. But Why?
- Tier 2 foundry revenue recovery is taking far longer than most expected.
- Globalfoundries 2024 CapEx is less than one tenth of what SMIC is spending. Even Hua Hong is spending more. This makes investors nervous.
- Globalfoundries CapEx strategy is a pragmatic one and will pay dividends in the years to come
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Tokyo Metro IPO – Thoughts on Valuation
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about valuations.
2. Tokyo Metro (9023 JP) IPO: Valuation Insights
- Tokyo Metro (9023 JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
- We previously discussed the IPO in Tokyo Metro (9023 JP) IPO: The Bull Case and Tokyo Metro (9023 JP) IPO: The Bear Case.
- In this note, we discuss valuation. Our analysis suggests that Tokyo Metro is attractively valued at the IPO price compared to peer multiples.
3. Tokyo Metro IPO – Peer Comparison – Pre-COVID to 1Q25
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- We have looked at the company’s past performance in our previous note. In this note, we will undertake a peer comparison.
4. Rigaku Holdings (268A JP) IPO: The Bull Case
- Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
- In Japan, Rigaku’s XRD (X-ray diffraction) has a high market share of 75%. Around 70% of its revenue is derived from customers outside Japan.
- The bull case rests on high customer switching costs, peer-leading revenue growth, top-quartile profitability, FCF generation, and low leverage.
5. Rigaku IPO – Peer Comparison – Compensating for Smaller Scale with Better Growth and Margins
- Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
- Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
- In our earlier notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison.
6. K Bank IPO – Should Price Below Its Range
- K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
- K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
- In our previous note, we have looked at the company’s past performance and undertaken a peer comparison. In this note, we will talk about valuations.
7. Swiggy Pre-IPO Tearsheet
- Swiggy (1255298D IN) Swiggy is looking to raise about US$1.25bn in its upcoming India IPO. The deal will be run by Kotak, Citi, Jefferies, Avendus, JPM, BofA and ICICI.
- Swiggy Limited (Swiggy) is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
- The platform can also be used to make restaurant reservations (Dineout), event bookings (SteppinOut), product pick-up/drop-off services (Genie) and other hyperlocal commerce activities (Swiggy Minis).
8. China Resources Beverage Pre-IPO – Updated Thoughts on Valuation
- China Resources Beverage (CRB HK) is looking to raise up to US$1bn in its upcoming Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- In our earlier notes, we talked about the company’s past performance and provided our initial thoughts on valuations. In this note, we will relook at valuations post its PHIP updates.
9. China Resources Beverage Pre-IPO – PHIP Updates – Revenue Slowing, Margins Growing
- China Resources Beverage (CRB HK) is looking to raise up to US$1bn in its upcoming Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- In our earlier notes, we talked about the company’s past performance and provided our thoughts on valuations. In this note, we will look at updates from its most recent filings.
10. Rigaku Holdings (268A JP) IPO: The Bear Case
- Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement and testing instruments. It is seeking to raise up to US$760 million.
- In Rigaku Holdings (268A JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on weakening forward growth indicators, China revenue risk, rising cash conversion cycles, mid-tier FCF margin and large post-IPO share overhang.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. HSTECH Index Rebalance Preview: $800m Round-Trip Trade
- The review period for the December rebalance of the Hang Seng TECH Index (HSTECH INDEX) ended on 30 September.
- We do not forecast any constituent changes for the index. Capping changes will lead to a one-way turnover of 2.15% and a round-trip trade of HK$6.1bn (US$785m).
- If any stocks have outsized moves on expectations of being added to or deleted from the index, there could be opportunities to enter trades.
2. Tokyo Metro (9023 JP) IPO: TPX Inclusion in November; Global Indices: One in October, One in Feb
- Tokyo Metro (9023 JP)‘s listing has been approved by the JPX and the stock is expected to start trading on the Prime Market from 23 October.
- At the reported indicative IPO price of JPY 1100/share, Tokyo Metro (9023 JP) will be valued at JPY 639.1bn (US$4.49bn).
- The stock should be added to one global index on 29 October, to the TOPIX INDEX on 28 November, while another global index inclusion will need to wait till February.
3. HSCEI Index Rebalance Preview: High & Low Probability Changes
- PICC Property & Casualty H (2328 HK) inclusion and Longfor Properties (960 HK) deletion are high probability changes for the Hang Seng China Enterprises Index (HSCEI INDEX) in December.
- There is a lower probability of China Resources Power (836 HK) being added and of Sino Biopharmaceutical (1177 HK) being deleted at the rebalance.
- There has been big short covering in PICC Property & Casualty (2328 HK) over the last couple of months while shorts would have covered Longfor Properties (960 HK) recently.
4. Mar25 Nikkei 225 Rebal: Considering Fast Retailing Capping…. Again…
- At end-September, the Nikkei 225 semi-annual review imposed a “cap” on Fast Retailing (9983 JP) in the Average, applying a 0.9 coefficient to the Price Adjustment Factor.
- At its current weight, Fast Retailing will be capped again in March 2025. If the stock outperforms Nikkei 225 by another 3% before 31 January 2025, it could be double-capped.
- And an additional 16% would mean ¥1.1trln of sales in March. But like last time, this is a rubber band which stretches. Too far, and selling pressure is obvious.
5. Shin Kong (2888 TT) Deal – Activism, Proxy Advice, Proxy Fight, Voting Risk, and Discounts
- Taishin Financial Holding (2887 TT) has raised its bid for Shin Kong Financial Holding (2888 TT) and CTBC Financial Holding (2891 TT) has dropped its bid after FSC rejection.
- Shin Kong’s Board approved the revised (25% higher) Taishin bid. Shares in Shin Kong fell sharply on the FSC rejection of the CTBC bid.
- Taishin’s bid clearly has governance/related party issues and a significant portion of the “non-Taishin” reps on the Shin Kong Board had issues. October 9th passage is not a done deal.
6. Korea Zinc’s Buyback Tender Offer at ₩830,000: Market Vibe Still Leans Towards MBK
- Korea Zinc is launching a 3.21M share buyback (15.5% of total shares) via a KRW 2.66T tender offer at ₩830,000 per share, with Bain Capital involved.
- If tendered shares fall short, Korea Zinc and Bain Capital will buy all. If over the target, they’ll buy pro rata. Below 1,215,283 shares, they will opt out.
- Should we dive into Korea Zinc’s risky buyback or choose safer, lower-priced MBK? The market vibe favors MBK, reflected in Korea Zinc’s closing price today.
7. T-Gaia (3738 JP) – Potential Premium Takeout Story Turns To An Ugly Takeunder
- Today, just before the close, the Nikkei put out a scoop that Bain would buy T Gaia Corp (3738 JP) for ¥140bn. Sounds big. It was a 30% discount.
- There is a three Tender Offer process whereby minorities, who could be squeezed out regardless, are offered the opportunity to block the deal by not tendering at ¥2,670.
- This not-quite “majority of minority” of the super-minority is an interesting governance condition established by the Special Committee. It bears some study.
8. FnGuide Semiconductor Top10 Index Rebalance Preview: Wonik IPS to Replace ISC
- Today is the last trading day in the review period for the October rebalance of the FnGuide Semiconductor Top10 Index.
- Wonik Ips (240810 KS) is a high probability add and ISC Co Ltd (095340 KS) is a high probability delete. This will reverse the changes from the April rebalance.
- Passive trackers will need to buy over 3.5x ADV in Wonik Ips (240810 KS) and sell nearly 2x ADV in ISC Co Ltd (095340 KS).
9. Emart’s Tender Offer for Shinsegae Construction: Arb Trading Angles
- E Mart Inc is launching a tender offer for 27.33% of Shinsegae Eng & Construction, offering ₩18,300 per share, a 14% premium, from September 30 to October 29.
- This tender’s got zero cancellation or proration risk since they’re all in to buy every share tendered. That makes it a prime event for close spread tracking and trading opportunities.
- Emart needs 95% of Shinsegae Construction’s shares to delist, requiring 22% of the remaining 27%. If they can’t get it, a stock swap with Emart shares is likely.
10. Court Dismisses Injunction; Korea Zinc to Announce Buyback Tender Offer Soon
- The court rejected MBK and Young Poong’s injunction to block Korea Zinc’s buyback, allowing Choi’s side to continue using buybacks to defend control.
- Korea Zinc plans an emergency board meeting to launch a tender offer, using internal funds, to buy back shares at 800K-850K KRW starting around October 7.
- If Choi converts discretionary reserves into distributable profits, Korea Zinc could unlock 2-3 trillion KRW for the buyback, but uncertainty keeps the stock around 700K KRW.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. CHINA: Why so Many Investors/Analysts Got It Wrong and What’s Really Happening
- HK/China stock markets are re-rating quickly sentiment became overly pessimistic.
- A stock market bottom precedes a property market bottom by years.
- China’s markets have languished due to the government’s focus on supply-side solutions. That focus has now shifted to include demand-side stimulus efforts as the PBOC Put accelerates.
2. Portfolio Watch: The outlook is brightening into October
- Everything is about the ongoing rally in Chinese equities at the moment, with China now being the best yielding country in the world in equity space after both the PBoC and the Politburo coming through with stimulus proposals, which has caught all China bears on the wrong side of the trade.
- We learned today that the PBoC is cutting the standing lending facility rates by 20 bps, a move not seen since the pandemic broke out.
- They have normally cut the interest rates in the lending facility by 10 bps at a time, so this is likely a sign that they’re truly willing to do something about the slump in growth / real estate.
3. Gap Trade Opportunities in Korean Prefs Vs Common Share Pairs in 4Q 2024
- In this insight, we discuss numerous gap trade opportunities involving Korean preferred and common shares in 4Q 2024.
- Among the 27 major pair trades (prefs vs. common shares), 16 of the pref stocks outperformed their common shares counterparts so far this year.
- The 27 Korean preferred stocks’ average prices increased by 8.3% from end of 2023 to 2 October 2024 (excluding dividends), outperforming their common counterparts which were up on average 5.4%.
4. EM Fixed Income Focus: The impact of geopolitics on EM
- Macro backdrop evolving with upcoming US elections and Middle East tensions impacting EM assets
- Mixed bag on macro side with softer inflation in EM, better revisions in US growth but soft manufacturing PMIs
- China as tiebreaker with further policy support, rally in equities, and implications for Fed and commodities prices; geopolitical risks and US election as wild cards to watch
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. China Liquidity Watch: USD easing allowed China to ease, but there is a caveat..
- The USD market will be flooded with liquidity in Q4, accompanied by rate cuts, providing Chinese authorities with a window of opportunity to ease policy.
- However, there is one issue: CNY liquidity is tightening now.
- Welcome to our weekly China Watch, where we examine Chinese assets through the lens of Western investors and markets.
6. The Winners and Losers From Central Bank Stimulus
- Markets have taken on a risk-on tone on the news of global central bank stimulus. Gold has rallied the most as real rates fell, equities rose and bond prices fell.
- But the market’s risk-on psychology appears to be stretched and fragile.
- While the long-term bullish trend is quite real, the consensus is susceptible to reversals should growth disappoint in the near-term.
7. US Rates: Cash on the sidelines or just cash?
- Money fund balances have continued to grow despite Fed rate cuts due to attractive yields relative to other liquidity products
- Most of the cash in money funds is liquidity money, making them a compelling place to park cash
- Money funds tend to see inflows heading into an easing cycle and persist even as the yield curve begins to disinvert or steepen, with outflows only occurring once the curve stabilizes.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
8. Week at a Glance – Squuuuuuuuuueeeeeeze!
- Happy Monday, let’s dive into the most critical stuff we are on the look out for this week.
- Morning moves: It seems like physical commodities markets are catching up to the China stimulus story from last week, in tandem with the Hang Seng.
- Over the end of last, Japan’s elections pushed USD/JPY lower, leading investors to sell the Nikkei rather aggressively due to a clear hawkish expected lean from the new PM Ishiba.
9. China’s Serial Rate Cuts: What Are Them and Are They Effective in Reviving the Falling Economy (2)
- Our earlier articles state the natures and description of several monetary actions by PBOC last week, highlighting a possibility of stock rallly
- This article on the other hand dicussess the economic benefits of the monetary policies, which are more relevant from the authority’s point of view.
- For stock market still, we believe the RMB 800 billion fund, given a RMB 2-3 trillions daily transaction volume and 60% LTV leverage , has long been dumped into market.
10. Asia Economics: Despite Geopolitical Risks, Emerging Asia Is at an Upward Turning Point
- Economic policy in the US and China, the two most important economic partners for emerging Asia, is turning more supportive of global growth.
- Oil prices are also entering a period of “lower for longer”; Saudi Arabia’s signal of reversing its production cuts will exert downward pressure on oil prices, largely to Asia’s benefit.
- The overall result of these developments is to open up more scope for policy loosening, strengthen export demand and encourage more investments, to emerging Asia’s benefit.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. United Microelectronics: Intel Foundry Should Take a Stake; Latest News Makes This More Likely
- Given UMC’s partnership with Intel to produce chips using Intel’s 12nm fab capacity, we believe latest Intel developments increase the opportunity for Intel Foundry to take a stake in UMC.
- Intel’s Foundry business makes a strong partner for UMC who has deep foundry experience and talent, but doesn’t have leading edge fabs nor the balance sheet to build them.
- If Intel Foundry Services spins out or Intel strengthens its balance sheet through a deal with Qualcomm/Apollo, the potential for a deeper UMC-Intel Foundry partnership becomes even more compelling.
2. Memory Monitor: Micron Results Show Clear Signs of Memory Market Upswing; DRAM Growth Upgraded
- Micron’s latest results show a clear improvement in the Memory cycle. The company’s gross margin increased and guided for a further strong margin increase next quarter.
- Micron increased its overall DRAM industry growth forecast while maintaining its NAND flash forecast. Micron reiterated expectations for FY2025E to deliver record revenue for the company, with improving profitability.
- Positive news for fallen Memory industry shares — Within our Memory universe we have Structural Long ratings for Micron Technology (MU US), SK Hynix (000660 KS), and Silicon Motion Technology (SIMO US).
3. Memory Monitor: Upcoming Micron Results & Outlook Key Amid Reports of Inventory Liquidation
- Memory stocks underperformed the market, falling sharply with the recent overall market rout and failing to rebound sufficiently with the latest market rally.
- Leading Memory names Micron, SK Hynix, Samsung are all substantially below their 52-week highs after market reports of slowing memory demand from PC and mobile industries and inventory liquidation.
- Taiwan names Nanya Tech, Silicon Motion, Phison are all we below their highs. Micron results on September 25th MT will provide a major outlook update for the market.
4. Micron. Zoom, Zoom, Zoom, We’re Going To The Moon…
- Q424 revenue $7.8 billion which was $200 million above the guided midpoint, up 14% QoQ and up 93% YoY.
- Q125 revenue of $8.7 billion with gross margin 39.5%. This will be the company’s highest ever quarterly revenue
- On track for ~20% share of a $25 billion HBM market in 2025
5. Micron and WFE
- Just two weeks ago, I wrote about how I thought this was a mid-memory cycle.
- I mainly supported the memory companies if you didn’t read between the lines (ChatGPT o1 (Strawberry) and Memory)
- Fast-forward a week, and it seems that the calls for the end of memory were a bit premature.
6. Silergy (6415.TT): Positive Optimistic Future Outlook
- China’s central bank cuts rates and unveils new measures to combat economic slowdown, creating a more relaxed monetary policy environment to stimulate consumption and investment.
- Silergy’s Automotive segment remains a driving force, especially with the addition of the Electric Vehicle ( EV) market.
- While Silergy faced demand insufficiency previously, it has indicated that the end demand is expected to revive by the end of 2024 from the 4th quarter.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Tokyo Metro (9023 JP) IPO: The Bull Case
- Tokyo Metro (TKYMETRO JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
- Tokyo Metro is held 53.42% by the Minister of Finance and 46.58% by the Tokyo Metropolitan Government.
- The bull case rests on a core high-quality asset, future growth drivers, top-quartile profitability, high FCF generation, and peer-leading dividend payout.
2. Tokyo Metro IPO – The Positives – Quasi-Monopoly Status
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.3bn in its upcoming Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- In this note, we talk about the positive aspects of the deal.
3. New Fast Entry Rule for KOSPI 200 & KOSDAQ 150: Post-IPO Price Swings Ramping Up
- Besides ranking in the top 50 by market cap, it must also meet a minimum float-adjusted cap for K200 fast entry: at least 50% of the 50th-ranked stock’s market cap.
- Even if new stocks meet KRX’s float cap, their actual float share volume may still be low, risking inflation from local pension funds’ preemptive passive inflows post-listing.
- This could reduce predictability for KOSPI 200 fast entry, increasing price swings post-listing and forcing traders to develop new volatility strategies after IPOs.
4. K Bank IPO – Peer Comparison – Lags Its Main Peer on Most Fronts
- K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
- K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
- In our previous note, we have looked at the company’s past performance. In this note, we will undertake a peer comparison.
5. Sino-American Silicon GDR Offering – Relatively Large One to Digest, Although Discount Is Attractive
- Sino American Silicon Products (5483 TT) is looking to raise US$287m in its GDRs offering. Proceeds will be used to purchase overseas raw materials, repay bank loans and purchase machinery.
- Similar to previous GDR listings, the deal has had a long drawn out approval process. Thus, the deal is a very well flagged one.
- The deal is a relatively large one to digest at 15.7 days of the stock’s three month ADV.
6. ECM Weekly (23rd Sep 2024) – Tokyo Metro, Midea, Intermestic, Sagility, Belstar, Kuaishou, Bajaj HF
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPO front, Midea Group Co Ltd A (000333 CH) and Bajaj Housing Finance (BHF IN) hogged much of the limelight this week as well.
- On the placements front, there were a few large US$400m+ placements across the region this week.
7. Tokyo Metro (9023 JP) IPO: The Bear Case
- Tokyo Metro (9023 JP), a mass transit operator, is seeking to raise up to US$2.3 billion. Pricing is on 15 October, and the listing is on 23 October.
- In Tokyo Metro (9023 JP) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on mid-tier revenue growth, low revenue diversification, the highest leverage among peers and a sizeable post-IPO share overhang.
8. Rigaku IPO – The Positives – Catering to a Range of End Industries, and Track Record Has Been Strong
- Rigaku Holdings (268A JP) is looking to raise US$762m in its Japan IPO.
- Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
- In this note, we will talk about the positive aspects of the deal.
9. Rigaku Holdings IPO: Initial Thoughts
- Rigaku Holdings (268A JP) provides cutting-edge analytical solutions centered on X-ray technology globally. The company is one of the largest players globally in X-ray diffraction instrument market.
- The company has filed for an IPO on the Tokyo Stock Exchange and plans to raise proceeds of around US$900m from the IPO at a potential valuation of US$2bn.
- In this insight, we discuss Rigaku’s business model, key drivers, financials and outlook for the company.
10. K Bank IPO: Valuation Insights
- K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
- We previously discussed the IPO in K Bank IPO: The Bear Case and K Bank IPO: The Bull Case.
- We examine the syndicate’s valuation methodology. Our analysis suggests that K Bank is unattractively valued in the IPO price range. We would pass on the IPO.