In today’s briefing:
- Canvest (1381 HK): Get Involved
- Hunting for Outsized Moves in Off-The-Radar Korean Sector ETFs: SOL Shipbuilding & PLUS K-Defense
- Asian Equities: Keep an Eye on These Earnings Inflections
- DN Solutions IPO Valuation Analysis
- DN Solutions Pre-IPO – The Positives – Growing Market Share
Canvest (1381 HK): Get Involved
- After SAFE gave the green light on the 19th Feb, I estimated only a week was required to secure the (strangely) outstanding internal guarantees. It took a frustrating three-and-a-half weeks.
- Nevertheless, all pre-cons are now done. Canvest Environmental (1381 HK)‘s Scheme Document is expected to be dispatched or before the 25th April.
- Assuming the Scheme gets up – and it will – expect payment around the 20th June. This is done.
Hunting for Outsized Moves in Off-The-Radar Korean Sector ETFs: SOL Shipbuilding & PLUS K-Defense
- March 5 price action overshot passive impact. Theme-trade momentum, one-way institutional flows, and ETF rebalancing (~10% turnover) juiced the move—Hanwha Ocean -5.41%, Samsung Heavy +5.34%, HD KSOE +6.58%.
- June’s rebalance gets spicier—another ETF, ARIRANG K-Defense ETF (449450 KS), also runs the same 20% reversion on June 13, doubling the flow impact and setting up amplified price action.
- Key 20% reversion hits: Hanwha Ocean (SOL Shipbuilding) & Hanwha Aerospace (PLUS K-Defense). ~5%p passive outflows (~0.1x DTV) expected, with Hanwha Ocean facing double impact from both ETFs.
Asian Equities: Keep an Eye on These Earnings Inflections
- Change in earnings estimate directions, especially when estimates start increasing after a long period of decline, are what we call “inflections”. These, we believe, are the strongest share price catalysts.
- We identify nine market-sectors across Asia ex Japan exhibiting upward earnings inflections. Four are from financials, two from telecoms and one each from utilities, consumer durables and industrials.
- These market-sectors are from HK/China (3), Korea (1), ASEAN (5). Financials’ domination indicates that a broader Asian macroeconomic recovery could be under way. Eight companies are primarily driving the upgrades.
DN Solutions IPO Valuation Analysis
- Our base case valuation of DN Solutions suggests target price of 90,167 won per share, which is 1% higher than the high end of the IPO price range.
- Our base case valuation is based on 17.9x P/E using our estimated net profit of 317.9 billion won for DN Solutions in 2025.
- Given the lack of upside, we have a Negative View of this IPO. DN Solutions has higher operating margin and ROE but lower revenue growth than its comps.
DN Solutions Pre-IPO – The Positives – Growing Market Share
- DN Solutions (298440 KS) (DNS) aims to raise around US$1.1bn in its Korea IPO via selling a mix of primary and secondary shares.
- DNS is engaged in the manufacture and sale of machine tools and the business of automation solutions and services related thereto.
- In this note, we talk about the company’s past performance.
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