Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

Equity Bottom-Up

<p><strong>It was reported today after the market close that the<a href="http://www.fnnews.com/news/201911182035587026" target="_blank" rel="noopener"> Korean Fair Trade Commission (FTC)</a> decided <a href="https://www.smartkarma.com/entities/naver-corp" target="_blank" data-smartkarma-citation="entities:16029:1" rel="noopener">Naver Corp (035420 KS)</a> abused its monopoly position in its business practices. As such, the FTC may announce some sanctions against Naver in the coming weeks.</strong></p><p>The timing of this announcement by the Korean FTC is very odd since it comes a few days after the announcement of the mega tech JV between Naver's affiliate <a href="https://www.smartkarma.com/entities/line-corp" target="_blank" data-smartkarma-citation="entities:22772:1" rel="noopener">LINE Corp (3938 JP)</a> and Yahoo Japan (Z Holdings). While Softbank's Masayoshi Son and Naver's Lee Hae-Jin are working very hard to boost shareholder values of their respective companies, the Korean government is not helping since they are taking concrete steps to propose potential monopoly problems facing Naver in Korea. </p><div class="content-highlight"><p><strong>Near Term Arb Trade</strong> - In the next few days the arbs should be all over this trade (Long Z Holdings and maybe LINE Corp and Short Naver) as the Korean government's negative pressure will be most felt immediately by Naver first while there should be continued positive momentum on the huge merger deal between LINE Corp and Yahoo Japan. </p></div>

It was reported today after the market close that the Korean Fair Trade Commission (FTC) decided Naver Corp (035420 KS) abused its monopoly position in its business practices. As such, the FTC may announce some sanctions against Naver in the coming weeks.The timing of this announcement by the Korean FTC is very odd since it comes a few days after the announcement of the mega tech JV between Naver's affiliate LINE Corp (3938 JP) and Yahoo Japan (Z Holdings). While Softbank's Masayoshi Son and Naver's Lee Hae-Jin are working very hard to boost shareholder values of their respective companies, the Korean government is not helping since they are taking concrete steps to propose potential monopoly problems facing Naver in Korea. Near Term Arb Trade - In the next few days the arbs should be all over this trade (Long Z Holdings and maybe LINE Corp and Short Naver) as the Korean government's negative pressure will be most felt immediately by Naver first while there should be continued positive momentum on the huge merger deal between LINE Corp and Yahoo Japan. 

Korea / Special Sits, Pairs, Index Rebalancing, Clepsydra Capital

Sanghyun Park

Korea / Special Sits, Pairs, Index Rebalancing

Event-Driven

<p>NAVER just put out a regulatory filing at the KRX on the LINE/Z Holdings merger. This post is a translated summary of the regulatory filing. I did the translation.</p><p><a href="http://kind.krx.co.kr/common/disclsviewer.do?method=search&amp;acptno=20191118000003&amp;docno=&amp;viewerhost=&amp;viewerport=" target="_blank" rel="noopener">The link to the regulatory filing is here. (Source: KRX KIND)</a></p>

NAVER just put out a regulatory filing at the KRX on the LINE/Z Holdings merger. This post is a translated summary of the regulatory filing. I did the translation.The link to the regulatory filing is here. (Source: KRX KIND)

LINE & Z Holdings Merger: Translated Summary of Regulatory Filing by NAVER

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

<p>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.</p><ul><li><a href='#lucror-entity-28320'>Azure Power Global Ltd</a></li><li><a href='#lucror-entity-27445'>Softbank Corp</a></li><li><a href='#lucror-entity-20934'>Tata Steel Ltd</a></li><li><a href='#lucror-entity-14152'>Yanlord Land</a></li></ul>

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.Azure Power Global LtdSoftbank CorpTata Steel LtdYanlord Land

Morning Views Asia: Azure Power Global Ltd, Softbank Corp, Tata Steel Ltd, Yanlord Land

'Quantamental' Japan Specialist, LightStream Research

Campbell Gunn

'Quantamental' Japan Specialist

ja research

ja research is an independent research platform focused exclusively on Japanese equities. Leveraging data and graphic analysis provided by Japan Analytics, we provide insights on small and medium-sized companies that have been ignored by the sell-side as well as challenging conventional wisdom on larger companies. We also offer analyst and corporate access, the latter with translation if required. 

Thematic (Sector/Industry)

<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/452/original/2019-11-17_11-54-09.png?1573959284" class="editor-image img-responsive" data-smartkarma-image-id="106452"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>4TH DOWN AND A FEW MORE TO GO</strong> - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.</p><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/458/original/2019-11-17_12-49-55.png?1573962614" class="editor-image img-responsive" data-smartkarma-image-id="106458"></figure><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/106/459/original/2019-11-17_13-10-47.png?1573963867" class="editor-image img-responsive" data-smartkarma-image-id="106459"></figure><div class="content-caption">Source: Japan Analytics</div><p><strong>THE EARNINGS CYCLE HAS YET TO BOTTOM</strong> -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.</p><div class="content-highlight"><p><strong>WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.</strong></p></div><p><strong>In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.</strong></p>

Source: Japan Analytics4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the market and, to loosely paraphrase the under-rated Jesse Winchester's second album title, this is the fourth straight 'down' quarter with the prospect a few more to come. Operating Income has declined by 7.8% and Net Income by 18.8%, taking margins to 6.9% and 4.6%, respectively - declines of 84bps and 122bps. The market has celebrated these new two-year lows by rising to new two-year highs, leaving some to wonder what they are missing, other than yet more central bank liquidity. The trailing-twelve-month (TTM) price-earnings ratio is now 17 times, the highest since 5th February 2018, ten trading days after the long-term market peak.Source: Japan AnalyticsTHE EARNINGS CYCLE HAS YET TO BOTTOM -  Our Results &amp; Forecast/Revision Score data series cover the last sixteen years of quarterly earnings and eleven years of forecasts and revisions and measure both results and forecasts but also their momentum, providing a better correlation with the market direction than past earnings.   The Forecast/Revision Score leads the Results Score by several months, and the market leads or lags depending on monetary and liquidity conditions. Although both Scores recovered in the last five days of results announcements, the Forecast/Revision Score of 0.45 reached on 8th November is the lowest such score in ten years and is suggesting that earnings have yet to bottom.WISHFUL THINKING? - The 'gap' between market expectations and actual and forecast earnings momentum is now wider than at any time since late 2014, shortly before the market peak of May 2015. Is this foresight or just wishful thinking? We tend to the latter interpretation.In the DETAIL section below, we shall provide a full breakdown of the results and revisions announcements by Sector, Peer Group and company and offer brief comments on several recommended buys and sells.

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Capital Markets

OneConnect Financial Technology / Equity Capital Markets

<p><a href="https://www.smartkarma.com/entities/oneconnect-financial-technology" target="_blank" data-smartkarma-citation="entities:28432:1" rel="noopener">OneConnect Financial Technology (OCFT US)</a> is the largest technology-as-a-service platform for financial institutions in China, as measured by the number of customers. It is backed by <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a> (39.8% shareholder). SBI Holdings (6.1% shareholder) and <a href="https://www.smartkarma.com/entities/softbank-group-corp" target="_blank" data-smartkarma-citation="entities:315:1" rel="noopener">Softbank Group (9984 JP)</a>'s Vision Fund (invested $100 million in April 2018). OneConnect has filed for a US IPO to raise $100 million. However, the deal size is likely a placeholder for an IPO that could raise $500 million, according to press reports.</p><div class="content-highlight"><p>We believe that OneConnect sits squarely in the growth-at-all-costs, highly-valued private companies category. We believe that OneConnect's fundamentals struggle to establish a clear path to profitability and we would be inclined to sit out this IPO.</p></div>

OneConnect Financial Technology (OCFT US) is the largest technology-as-a-service platform for financial institutions in China, as measured by the number of customers. It is backed by Ping An Insurance (H) (2318 HK) (39.8% shareholder). SBI Holdings (6.1% shareholder) and Softbank Group (9984 JP)'s Vision Fund (invested $100 million in April 2018). OneConnect has filed for a US IPO to raise $100 million. However, the deal size is likely a placeholder for an IPO that could raise $500 million, according to press reports.We believe that OneConnect sits squarely in the growth-at-all-costs, highly-valued private companies category. We believe that OneConnect's fundamentals struggle to establish a clear path to profitability and we would be inclined to sit out this IPO.

OneConnect IPO Initiation: Missed Connection

Japan

SoftBank Group Corp. provides telecommunication services. The Company also operates ADSL (Asymmetric Digital Subscriber Line) and fiber optic high-speed Internet connection, e-Commerce businesses, and Internet based advertising and auction businesses.

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Softbank Group (9984 JP)

Korean Government (FTC) Goes After Naver

It was reported today after the market close that the Korean Fair Trade Commission (FTC) decided Naver Corp (035420 KS) abused its monopoly...

Douglas Kim

LINE & Z Holdings Merger: Translated Summary of Regulatory Filing by NAVER

NAVER just put out a regulatory filing at the KRX on the LINE/Z Holdings merger. This post is a translated summary of the regulatory filing. I did...

Sanghyun Park

Morning Views Asia: Azure Power Global Ltd, Softbank Corp, Tata Steel Ltd, Yanlord Land

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region,...

Lucror Analytics

🇯🇵 Japan • Results & Revisions Review - Wishful Thinking

4TH DOWN AND A FEW MORE TO GO - The latest quarterly results are now, with the exception of three large insurance companies are currently in the...

Campbell Gunn

OneConnect IPO Initiation: Missed Connection

OneConnect Financial Technology (OCFT US) is the largest technology-as-a-service platform for financial institutions in China, as measured by the...

Arun George

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