In today’s briefing:
- FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
- Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over
- KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final
- Balrampur Chini Mills Ltd- Forensic Analysis
- Mahindra & Mahindra (MM IN) | Wake up and Smell the Coffee
- Lava International IPO: Forensic Analysis
- Berli Jucker (BJC TB) – Back on the Boil
- BGF & BGF Retail Pair Trade: Two Sons of BGF Chairman Hong Receive a Combined 20.9% Stake in BGF
- Sky Perfect JSAT (Buy) – Q2 Follow up Plus Amazon Proof of Concept for Space Compass
- Weilong Delicious Global Pre-IPO – Updated Peer Comp and Valuation
FTSE China 50 Index Rebalance: JD Health, Yum China IN; Longfor, Xpeng OUT
- JD Health (6618 HK) and Yum China Holdings Inc (9987 HK) will replace Longfor Properties (960 HK) and XPeng (9868 HK) in the FTSE China 50 Index on 16 December.
- The largest flow and impact of passive trading will be on Yum China Holdings Inc (9987 HK). There could be buying on Yum China Holdings, Inc (YUMC US) overnight.
- Short interest on the deletes is over 7% of float and there could be short covering against the passive selling at the close on 16 December.
Rakuten (Neutral) – Follow up After Results: Mobile Issues Far from Over
- Rakuten’s successful junk bond sale means the Rakuten Bank IPO will happen next year and not in December as some had feared
- More detail on mobile shows that network costs including D&A are 4x that of service revenue and slightly higher QoQ. Roaming alone is higher than service revenue
- And that means Rakuten can’t aggressively go after new subscribers unless it wants operating losses to accelerate. Bad for Rakuten but good news for incumbents KDDI, NTT and Softbank.
KLCI Index Rebalance: Preliminary Changes Announced; Should Be Same as Final
- Post market close yesterday, FTSE announced the preliminary changes to the Kuala Lumpur Composite Index (KLCI) (FBMKLCI INDEX) for the December rebalance. The final changes will be announced today.
- As expected, AMMB Holdings (AMM MK) and Ql Resources (QLG MK) will replace Hartalega Holdings (HART MK) and Top Glove Corp (TOPG MK) in the index.
- From a near 20% index weight in 2020, Malaysian glovemakers will have no representation in the index once these changes are implemented.
Balrampur Chini Mills Ltd- Forensic Analysis
- Balrampur Chini Mills (BRCM IN) is one of the major integrated sugar manufacturing companies in India. Besides sugar, the company also engages in the business of ethanol and power generation.
- Balrampur has managed to turnaround its free cash flows and earnings quality. Additionally, it has also stabilized working capital on the back of declining debt.
- While there are not many red flags, care must be given to inventory reconciliation with bank statement.
Mahindra & Mahindra (MM IN) | Wake up and Smell the Coffee
- Mahindra & Mahindra (MM IN) ‘s production data provides more questions than answers.
- The drop in production for Thar and XUV 700 in October in spite of the high order backlog is surprising.
- Considering the industry outlook and the existing sales and production for these two models, we believe this demand forecast may not materialise
Lava International IPO: Forensic Analysis
- Lava International (9263793Z IN) is one of the leading end-to-end focused mobile handset and mobile handset Solutions Company based in India, with operations in a number of countries.
- Major business risk arises from external environment, as Lava is one of the prominent leaders in feature phone segment, where the market is dying.
- Key forensic takeaways pertain to ECL provisioning and some absurd trend in line items. There are several discomforts on the governance end as well which must not be ignored.
Berli Jucker (BJC TB) – Back on the Boil
- Berli Jucker (BJC TB) is seeing a recovery underway although it has been masked by YoY comparisons and some pressure from higher raw material costs for its packaging business.
- The company is back into expansion mode in retail with 200 new Mini BIGC stores planned for 2023 plus it will increase its aluminium can capacity in Thailand by 10%.
- Berli Jucker (BJC TB) continues to be an interesting recovery play as an indirect play on tourism and consumption recovery as well as now declining commodity prices.
BGF & BGF Retail Pair Trade: Two Sons of BGF Chairman Hong Receive a Combined 20.9% Stake in BGF
- It was announced today that Hong Jung-Guk (eldest son) received a 10.5% stake in BGF Co. (10 million shares) from his father Hong Suk-Jo.
- Hong Jung-Hyeok’s (second son) stake in BGF also increased from 0.03% to 10.5%.
- We like a pair trade between BGF Co (go long) and BGF Retail (go short). The combination of price momentum and valuation favor BGF vs BGF Retail.
Sky Perfect JSAT (Buy) – Q2 Follow up Plus Amazon Proof of Concept for Space Compass
- We are publishing updated forecasts and commentary for Sky Perfect after meeting the company post-results
- Media results were predictably weak but the company hopes to make up ground in H2 as it ramps up marketing spend to support sport packages that launch in Spring
- Amazon’s reveal that it has tested LEO-based satellite software highlights cloud platform interest in space ICT infrastructure like that being pursued by Sky Perfect JSAT and NTT
Weilong Delicious Global Pre-IPO – Updated Peer Comp and Valuation
- Weilong Delicious Global (WDG HK), a spicy snack food company in China, aims to raise around US$200m in its Hong Kong IPO.
- According to F&S, WDG ranked first among spicy snack food enterprises in China, with a market share of 6.2%, and in the seasoned flour product and spicy vegetable snacks categories.
- In this note, we provide an update to our earlier peer comparison and valuations.
💡 Before it’s here, it’s on Smartkarma
Sign Up for Free
The Smartkarma Preview Pass is your entry to the Independent Investment Research Network
- ✓ Unlimited Research Summaries
- ✓ Personalised Alerts
- ✓ Custom Watchlists
- ✓ Company Data and News
- ✓ Events & Webinars
