Quantitative Equity Analyst, DMA

Charlotte van Tiddens, CFA

Quantitative Equity Analyst

Technology-First Company

DMA is a technology-first company that provides an end-to-end SaaS solution to institutional investors. DMA enables regulated entities like asset managers, wealth managers, investment managers and financial advisors to connect their front and back office, break silos and reduce headcount.

Quantitative Analysis

<ul>
<li>The first phase of the JSE's index harmonisation project will take place at the March rebalance. The vanilla/non-swix index series will be replaced with SWIX exposures.</li>
<li>The SWIX methodology weights all foreign entities by the local/STRATE float (shares sitting on the South African register).</li>
<li>Due to legacy issues, the vanilla/non-swix series (eg. Top 40) weights the Grandfathered group of constituents by their global free floats, upweighting AGL, INP and MNP.</li>
</ul>


The first phase of the JSE's index harmonisation project will take place at the March rebalance. The vanilla/non-swix index series will be replaced with SWIX exposures.
The SWIX methodology weights all foreign entities by the local/STRATE float (shares sitting on the South African register).
Due to legacy issues, the vanilla/non-swix series (eg. Top 40) weights the Grandfathered group of constituents by their global free floats, upweighting AGL, INP and MNP.


JSE Mar '24 Rebalance (Part 1): Index Series to Converge, Passives to Sell AGL, INP, MNP

European Event-Driven Analyst

Jesus Rodriguez Aguilar

Event-Driven

Bloomberg reported on 24 February that <a href="https://www.smartkarma.com/entities/mondi-plc" target="_blank" data-smartkarma-citation="entities:22048:1" rel="noopener">Mondi PLC (MNDI LN)</a> had been "speaking with advisers" about a potential takeover offer for <a href="https://www.smartkarma.com/entities/ds-smith-plc" target="_blank" data-smartkarma-citation="entities:22150:1" rel="noopener">DS Smith PLC (SMDS LN)</a>. Bloomberg added that "deliberations are at an early stage and there is no certainty they will lead to a transaction".
<ul>
<li>DS Smith shares rose on 25 February by 5.7%, the top performer on the FTSE100, having also risen by 3.2% on the previous trading session. Mondi shares fell by 0.1% on 25 February.</li>
<li>Both DS Smith and Mondi declined to comment.</li>
<li>Mondi has a market cap of £8,726 mn vs. £5,568 for DS Smith.</li>
</ul>
The attraction of DS Smith lies in its scale and market share in Europe, exposure to relatively stable end-markets (which has limited the impact of the pandemic), integration between recycling and paper production and geographic diversification.
<ul>
<li>A combined Mondi-DS Smith would help European container board and corrugated box consolidation (price discipline) and would enhance the competitive positioning of the resulting company (c. 16.4% of of European container board capacity).</li>
<li>It would also benefit from the increased demand from e-commerce sales and plastic containers reduction (substitution of plastics by paper and board).</li>
<li>Mondi would also be less exposed to fine paper, which is declining.</li>
<li>
Synergies would not be that relevant, in my view.</li>
<li>
Production optimisation: DS Smith needs more cardboard, so merging would help find a destination for Mondi's capacity, i.e. Mondi supplying virgin fibre to DS Smith for its container board needs. Whilst DS Smith prioritises the use of recycled fibres through its circular business model, a small amount of virgin fibres is required.</li>
</ul>
Both historical and projected EBITDA margins for DS Smith are lower than Mondi's. For the last five FY an average of 20.6% for Mondi vs. 12.8% for DS Smith. Equally, last five FYs average ROCE for Mondi is 15.5% vs. 11.4% for DS Smith. Mondi is also financially more sound, as it is rated BBB+ whilst DS Smith is rated BBB-.
On an EV/Fwd EBITDA (Capital IQ consensus) basis, Mondi is trading at 9.2x while DS Smith is trading at 9.0x.
Based on comparables, the implied median EV/Fwd EBITDA valuation of DS Smith is 419p (vs. a Capital IQ consensus median TP of 405p).
On the back of strong momentum for DS Smith and comparables valuation, I would be long SMDS LN. Theremay be further upside from a potential offer for the company.

Bloomberg reported on 24 February that Mondi PLC (MNDI LN) had been "speaking with advisers" about a potential takeover offer for DS Smith PLC (SMDS LN). Bloomberg added that "deliberations are at an early stage and there is no certainty they will lead to a transaction".

DS Smith shares rose on 25 February by 5.7%, the top performer on the FTSE100, having also risen by 3.2% on the previous trading session. Mondi shares fell by 0.1% on 25 February.
Both DS Smith and Mondi declined to comment.
Mondi has a market cap of £8,726 mn vs. £5,568 for DS Smith.

The attraction of DS Smith lies in its scale and market share in Europe, exposure to relatively stable end-markets (which has limited the impact of the pandemic), integration between recycling and paper production and geographic diversification.

A combined Mondi-DS Smith would help European container board and corrugated box consolidation (price discipline) and would enhance the competitive positioning of the resulting company (c. 16.4% of of European container board capacity).
It would also benefit from the increased demand from e-commerce sales and plastic containers reduction (substitution of plastics by paper and board).
Mondi would also be less exposed to fine paper, which is declining.

Synergies would not be that relevant, in my view.

Production optimisation: DS Smith needs more cardboard, so merging would help find a destination for Mondi's capacity, i.e. Mondi supplying virgin fibre to DS Smith for its container board needs. Whilst DS Smith prioritises the use of recycled fibres through its circular business model, a small amount of virgin fibres is required.

Both historical and projected EBITDA margins for DS Smith are lower than Mondi's. For the last five FY an average of 20.6% for Mondi vs. 12.8% for DS Smith. Equally, last five FYs average ROCE for Mondi is 15.5% vs. 11.4% for DS Smith. Mondi is also financially more sound, as it is rated BBB+ whilst DS Smith is rated BBB-.
On an EV/Fwd EBITDA (Capital IQ consensus) basis, Mondi is trading at 9.2x while DS Smith is trading at 9.0x.
Based on comparables, the implied median EV/Fwd EBITDA valuation of DS Smith is 419p (vs. a Capital IQ consensus median TP of 405p).
On the back of strong momentum for DS Smith and comparables valuation, I would be long SMDS LN. Theremay be further upside from a potential offer for the company.

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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/scg-packaging-public-company-limited" target="_blank" data-smartkarma-citation="entities:28684:1" rel="noopener">SCG Packaging (SCGP TB)</a> aims to raise around US$1.2bn in its Thailand IPO. It is a part of the <a href="https://www.smartkarma.com/entities/siam-cement-pcl-the" target="_blank" data-smartkarma-citation="entities:2589:1" rel="noopener">Siam Cement (SCC TB)</a> group.SCGP is a packaging solutions provider in ASEAN offering fiber-based packaging, performance and polymer packaging, food service products, design, printing and other solutions. SCGP is the largest packaging paper and corrugated containers producer in ASEAN, as per Frost &amp; Sullivan. SCGP has been steadily increasing its exposure to the packaging segment via acquiring smaller competitors across ASEAN. Its efforts appear to be paying off as EBITDA and PATMI margins bottomed in 2016 and have been improving since. However, its asset growth has been running ahead of earnings growth for most of the prior years. Since its operating cash flows haven’t been enough to cover its capex needs and acquisition expenses in most of the past few years, this has led to a rise in leverage. Furthermore, a look at its recent financials indicate that most of the growth has been owing to its recent Indonesian acquisition.Our previous coverage of the IPO: <a href="https://www.smartkarma.com/insights/scg-packaging-pre-ipo-shift-to-packaging-has-been-aiding-margins-but-acquisition-drove-up-leverage" target="_blank" rel="noopener">SCG Packaging Pre-IPO - Shift to packaging has been aiding margins but acquisitions have driven up leverage</a>

SCG Packaging (SCGP TB) aims to raise around US$1.2bn in its Thailand IPO. It is a part of the Siam Cement (SCC TB) group.SCGP is a packaging solutions provider in ASEAN offering fiber-based packaging, performance and polymer packaging, food service products, design, printing and other solutions. SCGP is the largest packaging paper and corrugated containers producer in ASEAN, as per Frost &amp; Sullivan. SCGP has been steadily increasing its exposure to the packaging segment via acquiring smaller competitors across ASEAN. Its efforts appear to be paying off as EBITDA and PATMI margins bottomed in 2016 and have been improving since. However, its asset growth has been running ahead of earnings growth for most of the prior years. Since its operating cash flows haven’t been enough to cover its capex needs and acquisition expenses in most of the past few years, this has led to a rise in leverage. Furthermore, a look at its recent financials indicate that most of the growth has been owing to its recent Indonesian acquisition.Our previous coverage of the IPO: SCG Packaging Pre-IPO - Shift to packaging has been aiding margins but acquisitions have driven up leverage

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

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Communications, Health Care, Manufacturing, Materials, Technology, Transportation, and Utilities Sectors

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index.  In today’s report we take a bottoms-up view on developed ex-U.S. equities, highlighting stocks that present attractive buy opportunities within the Communications, Health Care, Manufacturing, Materials, Technology, Transportation, and Utilities Sectors

Bottoms-Up View on Developed Markets: Actionable Stocks, Part 2

Information Technology Consultant

Ishita Jain

Thematic (Sector/Industry)

As per the Financial Times ("FT") <a href="https://www.ft.com/content/4f88cb60-f8f7-11e6-bd4e-68d53499ed71" target="_blank">article</a> dated 24th Feb 2017, electric vehicle ("EVs") manufacturers and battery producers have been scrambling to secure supplies of Cobalt. This has been driven by the fact the a handful of hedge funds have purchased and stored Cobalt on expectations that the demand for EVs will pick up. Battery producers such as Panasonic, who supply Lithium Ion ("Li-ion") batteries to the likes of Tesla are hard pressed for supplies. As FT reported, prices have risen by more…

As per the Financial Times ("FT") article dated 24th Feb 2017, electric vehicle ("EVs") manufacturers and battery producers have been scrambling to secure supplies of Cobalt.   This has been driven by the fact the a handful of hedge funds have purchased and stored Cobalt on expectations that the demand for EVs will pick up. Battery producers such as Panasonic, who supply Lithium Ion ("Li-ion") batteries to the likes of Tesla are hard pressed for supplies.  As FT reported, prices have risen by more…

United Kingdom

Mondi PLC is an international packaging and paper group, with key operations in central Europe, Russia and South Africa. The Company is integrated across the paper and packaging process and is principally involved in the manufacture of packaging paper, converted packaging products and uncoated fine paper. Dually-listed company with MND SJ.

Price Gauge
52-week Range	0.00 - 0.00
Market Cap (USDm)	0.00
P/E	0.00
Dividend (Yield)	0.00

Mondi PLC (MNDI LN)

JSE Mar '24 Rebalance (Part 1): Index Series to Converge, Passives to Sell AGL, INP, MNP

Understanding why AGL will be sold down at the JSE March rebalance. The vanilla and SWIX indices will converge reducing the number of JSE equity...

DMA

DS Smith - Mondi: Potential Combination

Mondi-DS Smith would be + for Euro container board & corrugated box consolidation. Synergies not that relevant. LONG SMDS LN on strong momentum,...

Jesus Rodriguez Aguilar

SCG Packaging IPO - Unexciting

SCG Packaging (SCGP TB) aims to raise around US$1.2bn in its Thailand IPO. It is a part of the Siam Cement (SCC TB) group, which aims to hold at...

Sumeet Singh

Bottoms-Up View on Developed Markets: Actionable Stocks, Part 2

Our outlook remains neutral for global ex-U.S. markets while horizontal consolidation continues on the MSCI ACWI ex-U.S. index. In today’s report...

Vermilion Research

Future of Cobalt Vis-A-Vis EVs

As per the Financial Times ("FT") article dated 24th Feb 2017, electric vehicle ("EVs") manufacturers and battery producers have been scrambling to...

Ishita Jain

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)