Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

In last Tuesday’s Compass (10/27/20) we noted the S&amp;P 500’s break below 3425 short-term support opened the door for potential visits to 3325 and 3200. Support at 3325 was violated by Wednesday, however the 3200-3230 level has held and remains important support moving forward.  In today’s report we highlight attractive Groups and stocks within Financials: Asian Banks, Puerto Rican Banks, Banks, Southwest, and Investment Banking &amp; Brokerage, Mid-Cap

In last Tuesday’s Compass (10/27/20) we noted the S&amp;P 500’s break below 3425 short-term support opened the door for potential visits to 3325 and 3200. Support at 3325 was violated by Wednesday, however the 3200-3230 level has held and remains important support moving forward.  In today’s report we highlight attractive Groups and stocks within Financials: Asian Banks, Puerto Rican Banks, Banks, Southwest, and Investment Banking &amp; Brokerage, Mid-Cap

U.S. Equity Strategy: Markets Bouncing off Key Support

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Strong APT FY 1Q21 Results: Afterpay released a strong quarterly update with momentum across the entire business with further integrations with large retailer contracts ahead of the holiday shopping season. GMV of AUD 4.1 bn during the quarter; active customers are 11.2 mn, up from 9.9m at end of June – ahead of our expectations; and Australia in-store sales are recovering, representing close to 20% of total sales;*Earning Their Stripe: Afterpay had also announced that it had entered into a strategic partnership with Stripe Payments,  a major global payments company with over 100,000 SMBs, to allow its users to offer Afterpay their customers which should allow it to expand its reach among online shoppers; and  *Sprinkling More Fairy Dust: Tencent Holdings (700.HK) [Tencent] continues to hit it out of the park with its Afterpay Touch (APT.AU) [Afterpay] stake. In addition to a superb return on investment of 358% over the past five months since the stake announcement, this alliance with Australia’s premier financial technology buy-now, pay later (BNPL) company is paying dividends to Tencent in numerous other ways.

*Strong APT FY 1Q21 Results: Afterpay released a strong quarterly update with momentum across the entire business with further integrations with large retailer contracts ahead of the holiday shopping season. GMV of AUD 4.1 bn during the quarter; active customers are 11.2 mn, up from 9.9m at end of June – ahead of our expectations; and Australia in-store sales are recovering, representing close to 20% of total sales;*Earning Their Stripe: Afterpay had also announced that it had entered into a strategic partnership with Stripe Payments,  a major global payments company with over 100,000 SMBs, to allow its users to offer Afterpay their customers which should allow it to expand its reach among online shoppers; and  *Sprinkling More Fairy Dust: Tencent Holdings (700.HK) [Tencent] continues to hit it out of the park with its Afterpay Touch (APT.AU) [Afterpay] stake. In addition to a superb return on investment of 358% over the past five months since the stake announcement, this alliance with Australia’s premier financial technology buy-now, pay later (BNPL) company is paying dividends to Tencent in numerous other ways.

Tencent Holdings - It Keeps Getting Better

APAC IPOs & Placements

Zhen Zhou, Toh

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<a href="https://www.smartkarma.com/entities/westpac-banking-corp" target="_blank" data-smartkarma-citation="entities:444:1" rel="noopener">Westpac Banking (WBC AU)</a> is looking to raise US$260m by selling its entire shareholding in <a href="https://www.smartkarma.com/entities/zip-co-ltd-3708706d-4978-4e29-acbc-d9702b971da9" target="_blank" data-smartkarma-citation="entities:29126:1" rel="noopener">Zip Co Ltd (Z1P AU)</a> a day after it announced its partnership with <a href="https://www.smartkarma.com/entities/afterpay-limited" target="_blank" data-smartkarma-citation="entities:26940:1" rel="noopener">Afterpay Touch (APT AU)</a>. This is a clean up trade.The deal scored well on our framework owing to strong share price momentum and decent track record. Past deals have done well over the longer time horizon and rhe selldown can also be easily absorbed by the market as it only accounted for 4 days ADV.

Westpac Banking (WBC AU) is looking to raise US$260m by selling its entire shareholding in Zip Co Ltd (Z1P AU) a day after it announced its partnership with Afterpay Touch (APT AU). This is a clean up trade.The deal scored well on our framework owing to strong share price momentum and decent track record. Past deals have done well over the longer time horizon and rhe selldown can also be easily absorbed by the market as it only accounted for 4 days ADV.

Zip Placement - Sorry, It's Not You. It's Me

*Whoops They Did It Again..: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest update, it was announced that Afterpay will allow Westpac Banking (WBC.AU) to offer its Banking-as-a-Service to Afterpay’s approximate 3.3 mn, which include deposit accounts and cash-flow management tools, as early as FY 2Q21. If successful, this partnership could transform the sleepy Australian banking market as we know it;  *Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 354% on this stake. Afterpay has already reached many of its key milestones, and we look forward to its quarterly update in a few weeks.

*Whoops They Did It Again..: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest update, it was announced that Afterpay will allow Westpac Banking (WBC.AU) to offer its Banking-as-a-Service to Afterpay’s approximate 3.3 mn, which include deposit accounts and cash-flow management tools, as early as FY 2Q21. If successful, this partnership could transform the sleepy Australian banking market as we know it;  *Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 354% on this stake. Afterpay has already reached many of its key milestones, and we look forward to its quarterly update in a few weeks. 

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

Thematic (Sector/Industry)

There are many banks globally that have restricted dividends. This is less apparent in Asia. Even so, we are less concerned with temporary deferment or postponement on dividends, as economies reopen and recover.  Their reinstatement will only be an additional positive delta alongside likely lower credit costs. In Asia, there are many banks where yields are over 9% and where capital levels are high, suggesting dividends can remain in place and where many banks, have not deferred, or postponed dividends. When we remember that dividend restrictions were imposed in the more dire days of shutdown, well before the sharp recovery seen in many economies, it makes it even less likely that these restrictions will remain in place for long. And many banks in Asia, continue to pay dividends as normal.

There are many banks globally that have restricted dividends. This is less apparent in Asia. Even so, we are less concerned with temporary deferment or postponement on dividends, as economies reopen and recover.  Their reinstatement will only be an additional positive delta alongside likely lower credit costs. In Asia, there are many banks where yields are over 9% and where capital levels are high, suggesting dividends can remain in place and where many banks, have not deferred, or postponed dividends. When we remember that dividend restrictions were imposed in the more dire days of shutdown, well before the sharp recovery seen in many economies, it makes it even less likely that these restrictions will remain in place for long. And many banks in Asia, continue to pay dividends as normal.  

Australia

Westpac Banking Corporation offers general and savings banking services.  The Company provides investment portfolio management and advice, insurance services,  consumer finance, and money market services among other services.  Westpac Banking Corp. serves individuals, businesses, and corporations worldwide.

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Westpac Banking (WBC AU)

U.S. Equity Strategy: Markets Bouncing off Key Support

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Vermilion Research

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Zip Placement - Sorry, It's Not You. It's Me

Westpac Banking is selling its entire shareholding in Zip a day after it announced its partnership with Afterpay. The deal scored well on our...

Zhen Zhou, Toh

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Tencent Holdings: AfterPay Is Like The Greatest Thing Since Sliced Bread For Tencent. Not Only Has Tencent Earned 354% On Its Stake But AfterPay...

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Asia Banks – Oversized Dividends

There are many banks globally that have restricted dividends. This is less apparent in Asia. Even so, we are less concerned with temporary...

Daniel Tabbush

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