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.

Equity Bottom-Up

<ul>
<li>The top line of <a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> is down 7% YoY, the next major income line is down 3% YoY while operating costs are up 8% YoY, in 1Q24.</li>
<li>Average daily turnover is down 22% YoY, and to us this is the main story, a marginalization of the Hong Kong Exchange. </li>
<li>Geopolitical risks remain high, the historical positioning of Hong Kong is less relevant today, with worsening economic concerns in China, in close proximity. </li>
</ul>


The top line of HKEX (388 HK) is down 7% YoY, the next major income line is down 3% YoY while operating costs are up 8% YoY, in 1Q24.
Average daily turnover is down 22% YoY, and to us this is the main story, a marginalization of the Hong Kong Exchange. 
Geopolitical risks remain high, the historical positioning of Hong Kong is less relevant today, with worsening economic concerns in China, in close proximity. 


HKEX - Revenue Down, Investment Income Down, Operating Costs Up, Will It All Reverse?

<ul>
<li>
<a href="https://www.smartkarma.com/entities/hong-kong-exchanges-clearing" target="_blank" data-smartkarma-citation="entities:490:1" rel="noopener">HKEX (388 HK)</a> outlook has been withering for some time, and new data on property transactions, shows that this remains weak.</li>
<li>
<a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">SGX (SGX SP)</a> in a less volatile geopolitical financial center, has a much lower market capitalization while its earnings outlook is far stronger.</li>
<li>Two major differences between these two entities is their ROE and ROA, although the former may be more relevant. <a href="https://www.smartkarma.com/entities/singapore-exchange-ltd" target="_blank" data-smartkarma-citation="entities:1047:1" rel="noopener">SGX (SGX SP)</a> has an ROE that is nearly 50% higher. </li>
</ul>



HKEX (388 HK) outlook has been withering for some time, and new data on property transactions, shows that this remains weak.

SGX (SGX SP) in a less volatile geopolitical financial center, has a much lower market capitalization while its earnings outlook is far stronger.
Two major differences between these two entities is their ROE and ROA, although the former may be more relevant. SGX (SGX SP) has an ROE that is nearly 50% higher. 


HKEX - Worsening Property Transactions, Underscores Ailments for Hong Kong

Commonwealth Bank of Australia / Equity Bottom-Up

<ul>
<li>It is not only NPLs that we must worry about for banks, but also loans that can turn NPL amidst a worsening economic backdrop</li>
<li>CBA's past due loans but not impaired are up 43% in past two years and this bucket of loans is now 2.6x NPLs compared with 1.9x NPLs recently</li>
<li>Australia shows surging insolvencies across many sectors through 17 March 2024 and this can mean past due loans are more prone to migrating to turn NPL</li>
</ul>


It is not only NPLs that we must worry about for banks, but also loans that can turn NPL amidst a worsening economic backdrop
CBA's past due loans but not impaired are up 43% in past two years and this bucket of loans is now 2.6x NPLs compared with 1.9x NPLs recently
Australia shows surging insolvencies across many sectors through 17 March 2024 and this can mean past due loans are more prone to migrating to turn NPL


CBA - Sharply Higher Past Due Loans, but Not Impaired, Alongside Surge of Australia Insolvencies

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.

Event-Driven

<ul>
<li>The <a href="https://www.smartkarma.com/entities/link-administration-holdings-ltd" target="_blank" data-smartkarma-citation="entities:970:1" rel="noopener">Link Administration (LNK AU)</a> IE considers <a href="https://www.smartkarma.com/entities/mitsubishi-ufj-financial-group" target="_blank" data-smartkarma-citation="entities:218:1" rel="noopener">Mitsubishi UFJ Financial (MUFG) (8306 JP)</a>’s A$2.26 offer fair and reasonable as it is within its A$2.11-2.70 per share valuation range.</li>
<li>The scheme remains conditional on several regulatory approvals - FIRB, Central Bank of Ireland, Isle of Man Financial Services Authority, India SEBI, and Financial Services Agency of Japan.</li>
<li>Several substantial shareholders have sold or exited, lowering the scheme's risk. At the last close and for the 16 May payment, the gross/annualised spread was 1.3%/9.7%.</li>
</ul>


The Link Administration (LNK AU) IE considers Mitsubishi UFJ Financial (MUFG) (8306 JP)’s A$2.26 offer fair and reasonable as it is within its A$2.11-2.70 per share valuation range.
The scheme remains conditional on several regulatory approvals - FIRB, Central Bank of Ireland, Isle of Man Financial Services Authority, India SEBI, and Financial Services Agency of Japan.
Several substantial shareholders have sold or exited, lowering the scheme's risk. At the last close and for the 16 May payment, the gross/annualised spread was 1.3%/9.7%.


Link Admin (LNK AU): Scheme Vote on 24 April

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

<ul>
<li>
<a href="https://www.smartkarma.com/entities/cie-de-saint-gobain" target="_blank" data-smartkarma-citation="entities:21547:1" rel="noopener">Cie De Saint-Gobain (SGO FP)</a> has approached <a href="https://www.smartkarma.com/entities/csr-ltd" target="_blank" data-smartkarma-citation="entities:17380:1" rel="noopener">CSR Ltd (CSR AU)</a> with a non-binding indicative offer to acquire all of CSR's shares at A$9/share via a scheme of arrangement.</li>
<li>At the last close of CSR (pre-trading halt) the gross spread to the offer price is 13.21%. That will close significantly once the stock resumes trading.</li>
<li>Given the large premium to the last close, at a price higher than the highest high, and support from the CSR Board, the deal should go through.</li>
</ul>



Cie De Saint-Gobain (SGO FP) has approached CSR Ltd (CSR AU) with a non-binding indicative offer to acquire all of CSR's shares at A$9/share via a scheme of arrangement.
At the last close of CSR (pre-trading halt) the gross spread to the offer price is 13.21%. That will close significantly once the stock resumes trading.
Given the large premium to the last close, at a price higher than the highest high, and support from the CSR Board, the deal should go through.


CSR Ltd (CSR AU): Saint-Gobain's A$9/Share Offer

Australia

Netwealth Group Limited provides investment management services. The Company offers portfolio management, insurance, advisory, and investment solutions. Netwealth Group focuses on funds, deposits, accounts, cash, and securities. Netwealth Group serves customers in Australia.

HUB24 Limited is a financial services company.  The Company focuses on the delivery of a platform which supports investors.  The platform is a next-generation service with state-of-the-art portfolio management, transaction, and reporting solutions for licensees, financial advisers, accountants, stockbrokers, and institutions.

Pinnacle Investment Management Group Limited provides investment management services. The Company offers operational support, insurance, business management, compliance, financial reporting, and accounting services. Pinnacle Investment Management Group conducts its business in Australia.

Perpetual Limited is a financial services company that has two primary activities, wealth management services and corporate trust services. The Company provides funds management, responsible entity services, trustee services, executor services, financial planning, investment administration, superannuation, custody and registry services.

IOOF Holdings Limited is a financial services company operating in Australia. The Company's services include personal superannuation, allocated pension services, employee superannuation retirement services and investment services.

Centuria Capital Group manages a diversified portfolio of investment funds and offers financial  services.  The Company manages funds of unlisted property investments; and offers investment  bonds, education plans, insurance and home loans.

Magellan Financial Group Ltd operates as an investment management company. The Company invests in global equities and listed infrastructure. Magellan Financial Group serves customers worldwide.

Equity Holdings Limited provides personal trust and financial services to customers in Australia.   Services include will and estate planning, trustee for settlements, financial guardian, investment and property management and fund investments. Other services provided by the company  include income tax services, short term share trading and mortgage loans and investments.

Platinum Asset Management Limited is a fund management company. The Company specializes in global equities.

Pacific Current Group Limited operates as an asset management firm. The Company offers investment management, strategic planning, compensation structuring, and trading services. Pacific Current Group serves institutional and individual clients worldwide.

Huatai Securities Co., Ltd. provides financial company. The Company provides securities brokerage services, research consulting services, investment banking and direct investment services, fixed-income services and asset management services.

Pershing Square Holdings Ltd is a closed-ended hedge fund vehicle incorporated in Guernsey.

Singapore Exchange Limited owns and operates Singapore's Securities and derivatives exchange and their related clearing houses.  The Company also provides ancillary securities processing and information technology services to participants in the financial sector.

Houlihan Lokey, Inc. operates as an investment bank. The Company offers mergers and acquisitions, financial restructuring, capital markets, strategic consulting, and financial advisory services. Houlihan Lokey serves customers worldwide.

Founder Securities Company Limited's major business includes securities brokerage, securities investment consulting, securities trading, financial advisory on securities investment and trading activities, proprietary trading, securities asset management, investment fund distribution, margin business, and provide intermediate agency services for Founder Futures Limited.

MarketAxess Holdings, Inc. operates an electronic, multi-dealer to client platform for U.S. and European high-grade corporate and emerging markets bond trading.  The Company's technology delivers price discovery and trade execution services to institutional and broker-dealer clients.

SBI Holdings, Inc. manages venture capital fund which mainly invest in Internet related venture companies.  The Company also provides brokerage, investment banking, and financial services.

China Merchants Securities Co., Ltd. provides securities services. The Company offers securities brokerage, securities investment consulting, securities underwriting, and other services. China Merchants Securities also operates investment management.

China Merchants Securities Co Ltd (A) (600999 CH)

Evercore Partners Inc. is an investment banking boutique. The firm provides advisory services to multinational corporations on mergers, acquisitions, divestitures, restructurings and other corporate transactions. Evercore also manages private equity funds for institutional investors.

Stifel Financial Corp. is a financial services holding company whose subsidiaries serve individual and institutional clients in the U.S. and Europe. The Company's broker-dealer affiliates provide wealth management, investment banking, independent research, trading, investment advisory, and related financial services.

ASX Ltd is a demutualized company which operates Australia's primary national stock exchange and equity derivatives market. The ASX operates markets for equities, derivatives, fixed-interest securities and capital-raising for unlisted companies using advanced computer systems for both trading and settlement.

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ASX Ltd (ASX AU)

HKEX - Revenue Down, Investment Income Down, Operating Costs Up, Will It All Reverse?

The direction of most line items are poor and this is not likely to reverse. The top line decline is especially severe as is average daily...

Daniel Tabbush

HKEX - Worsening Property Transactions, Underscores Ailments for Hong Kong

Results for HKEX are just out and there are not good at all, across many key line items, and with average daily trading volume with EBITDA at -20% YoY

Daniel Tabbush

CBA - Sharply Higher Past Due Loans, but Not Impaired, Alongside Surge of Australia Insolvencies

CBA shows sharply high past due loans that are not impaired, alongside worsening insolvencies in Australia. There are implications for its...

Daniel Tabbush

Link Admin (LNK AU): Scheme Vote on 24 April

Several substantial shareholders have sold or exited, lowering the scheme's risk. At the last close and for the 16 May payment, the gross...

Arun George

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

HKEX - Revenue Down, Investment Income Down, Operating Costs Up, Will It All Reverse?

The direction of most line items are poor and this is not likely to reverse. The top line decline is especially severe as is average daily...

Daniel Tabbush

HKEX - Worsening Property Transactions, Underscores Ailments for Hong Kong

Results for HKEX are just out and there are not good at all, across many key line items, and with average daily trading volume with EBITDA at -20% YoY

Daniel Tabbush

CBA - Sharply Higher Past Due Loans, but Not Impaired, Alongside Surge of Australia Insolvencies

CBA shows sharply high past due loans that are not impaired, alongside worsening insolvencies in Australia. There are implications for its...

Daniel Tabbush

Link Admin (LNK AU): Scheme Vote on 24 April

Several substantial shareholders have sold or exited, lowering the scheme's risk. At the last close and for the 16 May payment, the gross...

Arun George

CSR Ltd (CSR AU): Saint-Gobain's A$9/Share Offer

Saint-Gobain has approached CSR with a non-binding indicative offer to acquire all CSR shares at A$9/share. The trend of Construction Materials...

Brian Freitas