Daily Brief Financials: China Merchants Bank H, NIFTY Index, Banco BPM SpA, Information Services, Longfor Properties and more

• AH Premia bounce higher. Spread curve torsion was as expected. Narrow spreads saw Hs suffer more. Wide spreads saw H outperformance. 
• The last few weeks I said warning signs were flashing and spreads could widen. This week they widened despite big SOUTHBOUND buying.
• I expect the right thing to do is hunker down and be flat H/A risk.

• SEBI intervenes on constantly changing Option contract specifications. NSE halts expiry day shift indefinitely & awaits clarity from regulator. 
• IVs slid lower to 11% levels – extended weekend being a primary factor. Risk premia is nearing historically low extremes. “Low & Down” state persists for the Vol-Regime model.
• Tactical Implications: (1) Scale back Vol harvesting structures as “Low & Down” Vol-state persists. (2) Reverse Calendars for long gamma exposure to upcoming events. Utilize Low IVs & curve Contango.

• Despite losing access to favorable capital treatment under the Danish Compromise, Banco BPM is proceeding with its Anima acquisition, leveraging mitigation measures to maintain a CET1 ratio above 13%.
• UniCredit’s €14B all-share offer for Banco BPM moves forward despite ECB rejecting the Danish Compromise, with capital strength and shareholder backing keeping the deal on a strong trajectory.
• CEO Andrea Orcel’s dealmaking expertise and UniCredit’s 42.9% share price rise since the bid increase confidence in the bank’s ability to complete the acquisition and extract long-term value.

Information Services Corporation (ISC) has completed its first full year post the announcement of its ambitious goal to double its size in terms of revenue and adjusted EBITDA (on an FY23 basis) by 2028. ISC reported strong organic growth in FY24, with both record-high revenue (up 15% y-o-y to C$247.4m) and adjusted EBITDA (up 24% y-o-y to C$90.3m). Management reiterated FY25 guidance for revenue of C$257–267m (Edison FY25e: C$262.2) and adjusted EBITDA of C$89–97m (Edison FY25e: C$94.1m). Our discounted cash flow (DCF) valuation yields C$39 per share ( C$40/share previously), representing c 60% upside to the current share price.

Information Services Corporation (ISC) has completed its first full year post the announcement of its ambitious goal to double its size in terms of revenue and adjusted EBITDA (on an FY23 basis) by 2028. ISC reported strong organic growth in FY24, with both record-high revenue (up 15% y-o-y to C$247.4m) and adjusted EBITDA (up 24% y-o-y to C$90.3m). Management reiterated FY25 guidance for revenue of C$257–267m (Edison FY25e: C$262.2) and adjusted EBITDA of C$89–97m (Edison FY25e: C$94.1m). Our discounted cash flow (DCF) valuation yields C$39 per share ( C$40/share previously), representing c 60% upside to the current share price.

• Longfor Group’s FY 2024 results were acceptable.
• The earnings decline was in line with expectations, driven by lower revenues and margins from the property development segment.
• We project that Longfor’s contracted sales will continue declining in FY 2025, given the company’s slowdown in land bank replenishment.