This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. 2025 High Conviction: AI Chip Spend Slows
- AI spending is fueling today’s semiconductor market, as generative AI demand falls into place
- Hyperscale datacenters are doing the bulk of today’s spending as they invest in advance of demand
- These investments are falling into question, and spending is likely to level off or drop in 2025, leading to a dramatic semiconductor downturn
2. Earnings: ENTG, ALAB, LSCC, SITM, QCOM, MCHP, WOLF, ARM, ACLS, AAOI, ANET, LITE, COHR
- Entegris Inc (ENTG US) – Memory spending is happening next year, but MSI remains weak.
- Astera Labs (ALAB US) – This is now the second way to play a levered Trainium ramp, as they have extensive content with Amazon.com Inc (AMZN US).
- Lattice Semiconductor (LSCC US) – Standard kitchen sink; I like the stock long-term.
3. Silergy (6415.TT): It Will Grow in 4Q24, While Auto Is Expected to Grow to 15% by the End of 2025.
- In the 3rd quarter of 2024, revenue was NT$4,284 million, the gross margin (GM) was 55%, the operating profit margin (OPM) was 24%, and the net margin was 15%.
- The Gen-4 product line is ramping up and is expected to contribute around 4% of total revenue by the end of 2025.
- Chinese current economic stimulus programs may impact demand in the Consumer segment.
4. Silicon Wafers Q324 Area Shipments, Revenue, EBIT, Outlook & More
- Silicon wafer area shipments in Q324 amounted to 3,214 million square inches (MSI), up 5.9% QoQ and up 6.8% YoY,
- Q324 saw the combined revenues from the top four players in the segment reaching $2.5 billion, up 0.5% QoQ and up 6.5% YoY
- Top 4 EBIT amounted to just $337 million, up 1.5% QoQ but down 38.9% YoY.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Kansai Electric (9503 JP) – HUGE Equity Offering To Stuff Retail
- The past few years, large equity offerings have either been IPOs or secondary offerings (without dilution). Today we get a big dilutive secondary offering from Kansai Electric Power (9503 JP).
- This is ~223mm shares or roughly ¥530bn against a current market cap of ¥2.1+trln. A 25% increase in share count. It is quite dilutive, but the stock is not rich.
- Because dilutive, not overly-well-flagged, and mostly retail, this could get hammered. The div is not high enough to make it attractive, so one has to appreciate high earnings yield.
2. Kansai Electric Placement – A US$3.5bn Raising Which Doesn’t Appear Well Flagged
- Kansai Electric Power (9503 JP) plans to raise up to US$3.5bn (including over-allocation) to partly fund its investment plans.
- This will be a large deal for the stock to digest and doesn’t appear to have been particularly well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
3. Kansai Electric Power (9503 JP): A US$3.5 Billion Primary/Secondary Offering
- Kansai Electric Power (9503 JP) has announced primary and secondary offerings of up to 223.1 million shares (including overallotment) and a third-party allotment of 29.1 million shares.
- JPY239.9 billion of proceeds will be used to improve energy efficiency and decarbonisation, while other funds will be used for data centres, renewable energy and overseas investments.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 26 and 29 November (likely 26 November).
4. Swiggy IPO Trading – Decent Anchor but Tepid Overall Demand
- Swiggy Limited raised around US$1.35bn in its India IPO, although the demand wasn’t great.
- Swiggy Limited is a business to commerce (B2C) marketplace company offering users a platform for ordering grocery and household items (Instamart) and food delivery, through its on-demand delivery network.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we will talk about the trading dynamics.
5. SF Holdings A/H Listing – Thoughts on A/H Premium and past A/H Listings
- S.F. Holding (002352 CH) (SFH), China’s largest express delivery company, is now said to be looking to raise around US$1-1.5bn in its H-share listing in Hong Kong.
- SFH is the largest integrated express logistics service provider in China and the fourth largest in the world. It has been listed on the Shenzhen Stock Exchange since 2017.
- We have covered the company and deal background in our previous notes. In this note, we talk about the past A/H listing and possible premium.
6. ECM Weekly (11th Nov 2024)-SF Holdings, Swiggy, ACME, NivaBupa, Sagility, Eternal Beauty, Shuangdeng
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the IPOs front, Indian deals flow seemed to be the only one continuing unbated despite the US elections overhang from the past week.
- On the placements front, there weren’t many large deals but we did look at upcoming lockup expiries.
7. Sagility India IPO Trading – Lackluster Demand
- Sagility India (2058883D IN) raised US$250m in its India IPO.
- Sagility India (Sagility) is a pure-play healthcare focused solutions and services provider to Healthcare Payers and Providers.
- We have looked at the company’s past performance and valuations in our earlier notes. In this note, we talk about the trading dynamics.
8. ISU Petasys Rights Issue: Today’s Wild Price Action Has Opened up a Fresh Trading Angle
- I initially skipped this rights issue due to the tight 15% discount and lack of hedge options, but today’s 20% drop opens up a potential angle worth exploring.
- Today’s selloff stems from pushback on ISU Petasys entering the battery business, not just dilution concerns. This means there’s a high chance we’ll see a lot of leftover, unsold shares.
- The strategy is to grab stock rights cheaply or go for the public offering. The main risk is whether the 15% spread holds until listing, but the case is strong.
9. Initial Thoughts on the Klarna IPO
- On 12 November, Klarna announced that it confidentially filed public offering paperwork. The company is getting ready for an IPO in 1H 2025.
- Klarna’s valuation reached as high as $45 billion in 2021 which declined to as low as $6.5 billion. Its valuation has recently risen to about $14.6 billion.
- Klarna generated 13.27 billion SEK in revenue (US$1.2 billion) in 1H 2024 (up 27% YoY). Operating margin improved significantly from -18% in 1H 2023 to -2% in 1H 2024.
10. SF Holding Pre-IPO: Three Important Issues for Long-Term Investors to Consider
- SF Holding’s domestic parcel volumes have grown slower than overall market volumes recently; is this strategic, or simply a loss of share?
- SF Holding is not closely aligned with any of the large online retail platforms in China; ultimately, is this independence an advantage or a disadvantage?
- When will SF Holdings’ varied international operations — and there are a few of them — begin to pull their own weight, in terms of profitability and growth?
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Meituan (3690 HK): Big Passive Selling in December
- The announcement of the changes to the Hang Seng indices is on 22 November, the capping will use the close on 3 December and implemented at the close 6 December.
- Meituan (3690 HK)‘s outperformance over the last couple of months will result in capping of the stock weight in all major indices and passives will sell stock.
- We estimate passive trackers will need to sell 35m shares (US$866m; 0.64x ADV) of Meituan (3690 HK) and that number will change over the next 3 weeks depending on performance.
2. 7&I (3382 JP) – An ITO Family MBO? With Itochu? At ¥9trln? Maybe. Information Is Scarce
- Yesterday a news article from Bloomberg suggested 7&i was “considering” an MBO. Seven & I Holdings (3382 JP) later confirmed they had received a non-binding proposal from ITO Junro/family.
- The initial number was ¥9trln. If market cap? High. If EV, too low. That would have implied a price just over the first “grossly inadequate” ACT price.
- There is a lot we don’t know. This changes the landscape. It probably shifts the range trade, but it will shift more when we get more clarity on ITO-san’s price.
3. KEPCO (9503 JP): Index Implications of US$3.5bn Primary + Secondary Offering
- Kansai Electric Power (9503 JP) is looking to raise up to US$3.5bn via a primary offering and a sale of Treasury shares. Pricing date is between 26-29 November.
- Kansai Electric Power (9503 JP) is among the better performing stocks from the Electric Utilities industry and trades at higher valuations compared to its peers.
- There will be a fair bit of passive buying with around 29% of the offering being bought at the time of settlement of the shares.
4. Seven & I Holdings (3382 JP): The Rumoured MBO Price Underscores the Trapped Value
- In response to media reports, Seven & I Holdings (3382 JP) confirmed receiving a non-binding proposal from Junro Ito (founder’s son) and Ito-Kogyo. No terms were disclosed.
- Bloomberg suggests an MBO deal worth up to JPY9 trillion (US$58 billion), which implies an offer of JPY3,467.89, a 39.3% premium to the last close price.
- The “white knight” MBO undermines Alimentation Couche-Tard (ATD CN)’s offer and is a proxy for the restructuring plan’s value. Couche-Tard will likely walk if a binding MBO proposal emerges.
5. Nikkei 225 Index Rebalance Preview (Mar 2025): Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 Index March rebalance ends in January. There could be one outright change and one or two others driven by sector balance.
- Depending on the changes, passive trackers will need to buy between 8.2-20.5x ADV (8.75%-24.5% of real float) and sell between 9-38x ADV on the deletions.
- Fast Retailing‘s PAF could see a double reduction to keep the stock weight capped at 10%. There will be huge passive selling leading to funding inflows for other index constituents.
6. INDIA: Index Changes Due to the 45 New Additions to the F&O Segment
- The National Stock Exchange (NSEIN IN) has announced a list of 45 stocks that will be added to the Futures & Options (F&O) segment of the market from 29 November.
- There will be changes to the NIFTY Index, NSE Nifty Next 50 Index, S&P BSE SENSEX Index and the CNXIT Index over the next couple of rebalances.
- There are some interesting situations out there, including a change to the universe for the NSE Nifty Next 50 Index (NIFTYJR INDEX) that could lead to more changes.
7. STAR Chip Index Rebalance Preview: 3 Potential Changes in December; US$450m Round-Trip Trade
- There could be 3 constituent changes for the STAR Chip Index at the December rebalance. There will also be a couple of capping changes.
- Estimated one-way turnover is 5.05% resulting in a one-way trade of CNY 1.6bn (US$225m). Passives need to trade between 0.6-1x ADV in the potential changes.
- The forecast adds have underperformed the forecast deletes over the last month but there has been a marked improvement in performance in the last week. Watch out for more.
8. NASDAQ 100 Index Rebalance: Lovin’ It as AppLovin (APP) Replaces Dollar Tree (DLTR)
- AppLovin (APP US) will replace Dollar Tree Inc (DLTR US) in the Nasdaq-100 Stock Index (NDX INDEX) after the close of trading on 15 November.
- Passive trackers are expected to buy over US$1.6bn in AppLovin (APP US) while they will sell around US$250m in Dollar Tree Inc (DLTR US).
- AppLovin (APP US) is the biggest tech name outside the S&P 500 INDEX (SPX INDEX) now and is a high probability inclusion to the index at the December rebalance.
9. NEC Network (1973 JP) Tender Offer – The Landscape Has Fully Changed
- On 29-October, NEC Corp (6701 JP) announced a low-ball TOB to buy out subsidiary Nec Networks & System Integr (1973 JP). It deserved activism, but finding an activist was tough.
- On 7 November, it got an activist, and I wrote on 8-November the Landscape Had Changed that they might have bought 6mm shares more in 5 days. They bought 8.4mm.
- The Landscape Has FULLY Changed. The details now matter quite a bit. NEC has two basic choices. Neither are that palatable. But Target Advisor DCF was ¥3,073-4,688 without synergies.
10. CES China Semiconductor Chips Index Rebalance Preview: Three Changes in December
- There could be three changes for the CES China Semiconductor Chips Index at the close of trading on 13 December.
- Based on the assets tracking the index, passive trackers will need to trade between 0.1-0.3x ADV in the stocks.
- There will be selling in Semiconductor Manufacturing International Corporation (SMIC) (688981 CH) to cap the stock at 10% of the index weight.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Steno Signals #125: EUR Liquidity Overtakes USD Liquidity – A Historic Shift
- Happy Sunday from Copenhagen.
- Bear with me this week through this long read as we approach an extremely interesting crossroads in sovereign bond markets, impacted by very tight liquidity.
- This story has been somewhat masked by policy events in the US and Germany, but it may nonetheless be the most important narrative for Q4, which is why you need to pay attention to it.
2. New Tariffs and China: THE BARK IS WORSE THAN THE BITE
- Trump’s approach to China will be more transactional based on trade and technology.
- China’s dependence on the US for its exports has declined over the last 6 years. ASEAN and other emerging markets are the engines for China’s export growth.
- The average tariff on China’s exports to the US will increase from its current level of 20% but may be tempered by a reciprocal import agreement with the US.
3. Flash Macro Watch: The Fed has abandoned its 2% target
- Following another reasonably hot U.S. CPI report yesterday, it’s time to dust off the old sell-side charlatan chart comparing today’s inflation to the 1970s.
- Honestly, I find this comparison absurd in many ways, as the drivers of inflation are different now.
- Still, there is an interesting resemblance, which got me thinking…Inflation in the U.S. is trending around 3-3.5%, and the Fed has made no progress over the past 3-4 months toward the 2% target.
4. US Politics: Promises, Promises
- Donald Trump has consistently advocated for the use of tariffs to address what he perceives as ‘unfair’ trade practices causing US trade deficits.
- His stance, whether used as a bargaining chip or not, is based on a Hobbesian view.
- This viewpoint poses a significant threat to the global economy.
5. Second Trump Presidency: Growth Focus Will Support Equities, but Challenge the Fed
- The decisive outcome of the US presidential election has significantly reduced the uncertainty facing financial markets due to their familiarity with President-elect Trump’s policies during his first term.
- President-Elect Trump has a complex past relationship with the Fed. There are fears that pressure will be exerted on the Fed to boost growth at the cost of higher inflation.
- US fiscal policy conduct will be closely monitored by the Treasury market which is discounting fewer policy rate reductions by the Fed in 2025. Fed policy conduct will remain data-dependent.
6. How to Trade the Trump Euphoria Rally
- We expect the stock market to rally into January, driven by corporate tax cut expectations, FOMO performance chasing and buybacks as the post-earnings season window re-opens.
- Expect stock prices to consolidate or pull back just before Inauguration Day.
- That’s when many of the unknowns of the Trump Administration’s initiatives will be better defined.
7. The Drill: A Look at Trump’s Policy and Their Impacts
- Before we get to Trump, we need to quickly discuss OPEC and their recent cut in demand forecasts.
- This reduction hints at an unwillingness to increase production in the near future.
- Saudi Arabia is key here, as it holds the largest excess capacity, and a production hike from them could swing the market and send prices below $50 USD in the blink of an eye.
8. Asia Geopolitics: Dealing with a More Trumpian World
- Asia Pacific economies benefit from a global order which preserves their sovereignty and allows them to prosper. Trump’s return puts some of these benefits at risk.
- Washington under Trump will continue to pursue its rivalry with Beijing, but Trump’s responses to crises in Ukraine and the Middle East could leave instability in its wake. =
- Washington’s allies in Asia will start “Trump-proofing” their defence strategies. Countries will hedge between the US and China while ramping up military spending.
9. Steno Signals #126: Disentangling the ECB Schnabel Speech – How Will QT Develop from Here?
- We’re at a critical juncture in sovereign bond markets, with liquidity running razor-thin and the game changing fast.
- German Bunds, traditionally rock-solid, are now trading through swaps and nearing zero on cross-currency swaps (ESTRON/SOFR) – a first in modern market history.
- The takeaway? Major central banks, especially the ECB, are pressing too hard on QT, and the markets are about to hit back hard if they don’t ease up soon.
10. Overview #12 – Not Another Trump Trade!Time to Fade?
- A review of recent events/data impacting our investment themes or outlook
- In the markets we follow, China, Gold and the JPY most impacted
- Which ones should we fade and where has the trend changed?
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Taiwan Dual-Listings Monitor: TSMC Premium Holding Up; ASE & CHT See Sharp Drops
- TSMC: +15.6% Premium; Relatively Aggressive Trade is to Long Premium
- ASE: -3.0% Discount; Good Level to Go Long the Premium
- CHT: -2.8% Discount; Good Level to Go Long the Premium
2. TSMC Q324 Earnings Key Takeaways
- Q424 revenue forecast of $26.5 billion, up 13% QoQ and the highest Q3 to Q4 revenue jump since Q4 2017
- Demand for AI acceleration is real and just beginning. According to a key customer of theirs, “demand right now is just insane”
- Overseas fabs progressing well with Arizona yielding well and on track for high volume production in early 2025
3. ASML Tanks Semis On Tepid 2025 Outlook
- ASML reported revenues of €7.5 billion, +19% QoQ and +11.9% YoY. This was €200 million above the high end of the guided range. Q424 guided to €9 billion
- Logic Fab delays and a collapse in sales to China caused ASML to reduce their 2025 forecast to the low end of the €30 -€40 billion guided in November 2022
- Despite these challenges, ASML’s latest forecast still implies 16% YoY growth in 2025
4. TSMC 3Q24: Capex & Margin Guidance Remains Strong; Explains Why AI Demand Not Overhyped; Stay Long
- TSMC Delivers Strong 3Q24 Revenue and Margin Growth; Margin Guidance Climbs
- Management Says Believes AI Demand is Not Hyped… Companies Extracting ROIs
- TSMC – Structural Long Rating Maintained; NT$1,515 Price Target Suggests 46% Upside
5. Semis Just Broke a Record. Why Did Nobody Notice?
- August’s WSTS semiconductor revenues registered a record high of more than $53 billion
- Nobody seemed to notice, including the organization making the announcement
- There’s valid concern that the market is on the verge of a collapse, and this may be overshadowing record sales
6. TSMC (2330.TT; TSM.US): 4Q24 Outgrowth; Co-Work with Almost AI Innovators.
- 4Q24 Guidance: Sales will be US$26.1-26.9bn, up 13%; GM outlook will be 57-59%; and OPM outlook is 46.5-48.5%
- AI revenue contribution will triple and reach mid-teens sales contribution this year. Almost every AI innovator cooperates with TSMC.
- APT will grow above the corporate average in the next five years.GM is approaching the corporate average, but it’s not the same currently.
7. KYEC (2449.TT): 4Q24 Outlook Brightening; NVDA Will Become #1 Client in 2025
- We expect King Yuan Electronics Co, Ltd. (2449 TT)‘s 4Q24 outlook to be a seasonal uptrend with a slight increase quarter-over-quarter.
- NVIDIA Corp (NVDA US) will become the top client at KYEC, and Mediatek Inc (2454 TT) is expected to become the second-largest client in the outlook for 2025.
- The focus will primarily be on currently available sources, particularly KYEC for production.
8. Taiwan Tech Weekly: IPhone 16 Sales Surge in China; Samsung’s Strength Diluted Against TSMC’s Focus
- Hua-Where? Hua-Who? Report: Apple’s iPhone 16 Pro & Pro Max Sales Surge 44% in China; A Strong Start Amidst Competition
- Samsung Under Siege: Facing Major Challenges Across Verticals as TSMC Tightens Foundry Grip
- TSMC 3Q24: Guidance Remains Strong; Explains Why AI Demand Not Overhyped; Stay Long… TSMC is Working with All AI Innovators
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Hyundai Motor India IPO: Valuation Insights
- Hyundai Motor India (1342Z IN), a subsidiary of Hyundai Motor (005385 KS), aims to raise up to US$3.3 billion at a valuation of US$19 billion.
- We previously discussed the IPO in Hyundai Motor India IPO: The Bull Case, Hyundai Motor India IPO: The Bear Case and Hyundai Motor India IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs1,865-1,960 per share is attractive. Therefore, we would participate in the IPO.
2. Horizon Robotics Pre-IPO – PHIP Updates – More of the Same, Lots to Watch Out For
- Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO.
- Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
- In this note, we talk about the recent updates from its filings.
3. ECM Weekly (14th Oct 2024) – Tokyo Metro, Rigaku, Hyundai, China Res, Swiggy, USS, Akeso, Shiyue
- Aequitas Research’s weekly update on the IPOs, placements, lockup expiry and other ECM linked events that were covered by the team over the past week.
- On the live IPOs front, the two Japanese IPOs, Tokyo Metro (9023 JP) and Rigaku Holdings (268A JP) appeared attractively priced. The same couldn’t be said about Hyundai Motor India.
- On the placements front, there were deals in Hong Kong, Japan and India.
4. China Resources Beverage IPO – Volatility Makes Pricing a Bit Tricky
- China Resources Beverage (CRB HK) is looking to raise up to US$650m in its Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
5. Akeso Biopharma Placement – The Placing Price Is Not Cheap Despite Positive Business Progress
- HARMONi-2 results are impressive and the overall data is solid and reliable. The NMPA has approved NDA of ebronucimab and sNDA of cadonilimab. Akeso’s fundamentals have indeed undergone positive changes.
- Akeso’s current market capitalization already partially reflects the positive expectation about the future successful FDA approval of AK112. In our view, the Placing Price is not cheap.
- When the market value falls back to below RMB45 billion is a more comfortable valuation to buy Akeso, and below RMB35 billion market value provides a golden opportunity.
6. Hyundai Motor India IPO: The Good, The Bad and The Valuation. Not for Quick Gain Seekers
- Hyundai Motor India (HMIL) ‘s USD 3 billion+ IPO opens today, 15th October, at 10:00 am IST. The bidding will remain open until 4:30 pm IST on 17th October.
- Near-Term Outlook: Limited Short-Term Gain Potential. While Hyundai is likely to outperform Maruti Suzuki given the valuation discount, it may underperform the broader sector in the near term.
- Long-Term Opportunity: For investors with a longer-term horizon, Hyundai presents a relatively low-risk opportunity. Its established brand and world-class manufacturing facilities offer the potential for steady, long-term growth.
7. FCP Capital Sends a Proposal to KT&G to Buy Korea Ginseng Corp for 1.9 Trillion Won
- On 14 October, FCP Capital sent a proposal to KT&G to purchase Korea Ginseng Corp for 1.9 trillion won.
- Although KT&G stated that it has no intentions to sell Korea Ginseng Corp, this proposal highlights the ongoing pressure by FCP Capital to improve further value in KT&G.
- The 1.9 trillion won in proposed purchase price is higher than the 1.2 trillion won to 1.3 trillion won that KT&G revealed as the intrinsic value of Korea Ginseng Corp.
8. CR Beverage (2460 HK) IPO: Valuation Insights
- China Resources Beverage (CRB HK), China’s largest purified drinking water company, has launched its HKEx IPO to raise up to US$650 million.
- We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
- Our valuation analysis suggests that CR Beverage is attractively valued at the IPO price range. Therefore, we would participate in the IPO.
9. Horizon Robotics IPO – Peers Are Down a Lot, Its Valuation Isn’t
- Horizon Robotics is looking to raise up to US$696m in its Hong Kong IPO.
- Horizon Robotics (HR) is a provider of advanced driver assistance systems (ADAS) and autonomous driving (AD) solutions for passenger vehicles, empowered by its proprietary software and hardware technologies.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
10. Horizon Robotics (9660 HK) IPO: The Bull Case
- Horizon Robotics (9660 HK), a provider of autonomous driving products and services, is seeking to raise up to US$696 million through a HKEx IPO.
- Horizon ranked fourth among all global ADAS and AD solution providers in China by solution installation volume in 2023 and 1H24, with a market share of 9.3% and 15.4%, respectively.
- The bull case rests on a large TAM, a blue-chip customer base, a robust backlog, a core business in good health, a high gross margin, and a strong balance sheet.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Bain Bids Bigger, Goes Hard on Fuji Soft (9749); I’ve Got 🍿🍿🍿
- As they had announced was their intention, Bain has made a binding offer for Fuji Soft Inc (9749 JP), bidding ¥9,450 against KKR’s ¥8,800. They aim to launch late October.
- There is no minimum and no maximum. The Founding Nozawa family had thrown their lot in with Bain not KKR and that 18.5% is tied up.
- There are conditions, and those are ALL-important. And I expect we see in the next week or so how coercive KKR’s “non-coercive” scheme change was. I’ve got 🍿🍿🍿.
2. MBK’s Korea Zinc & Young Poong Precision Tender Results Officially Out
- MBK officially disclosed that they scooped up 5.34% of the Korea Zinc (010130 KS) shares in the tender that wrapped up today.
- MBK scored a partial win by securing more voting rights than Choi, with unexpected backing from foreign and local institutions, likely due to proration risk over legal issues.
- Still, securing just 5.34% puts MBK in a tough position, requiring them to navigate minority shareholder votes while pushing hard on the legal front to block the buyback.
3. China ETF Inflows & Implications: YTD Inflows Nearing US$150bn
- Nearly US$140bn has flowed into mainland China listed ETFs year to date and there have been big creations in the last few weeks as stocks have surged.
- 97% of all inflows are in ETFs benchmarked to the CSI300, CSI1000, CSI500, SSE50, ChiNext and STAR50 indices. But over US$4bn has gone into other ETFs in the last week.
- The large ETF inflows over the last few weeks has led to index rebalance strategies underperforming in China. But that should reverse from now to rebalance implementation.
4. S&P/ASX Index Rebalance Preview (Dec 2024): Big Impact as Shorts Ramp Up
- With three quarters of the review period complete, there could be one change for the S&P/ASX 50 Index and two changes for the S&P/ASX 200 (AS51 INDEX) in December.
- There are two stocks that could be deleted from global indexes in November and that could keep those names under pressure for the next few weeks.
- Passive trackers will need to buy between 4-5x ADV in the forecast adds and sell between 2-8x ADV in the forecast deletes. Shorts have been building up in some names.
5. Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: Big Impact and US$3bn Round-Trip Trade
- Using data from the close on 11 October, there could be 6 adds and 5 deletes for the Yuanta/P-Shares Taiwan Dividend Plus ETF in December.
- There will also be capping and funding flows that will lead to a one-way turnover of 15% and a one-way trade of TWD 49bn (US$1.52bn)
- Shorts have been building up in some of the forecast deletes and in a couple of the forecast adds as well.
6. China Resources Beverage (2460 HK) IPO: Index Inclusions & Stock Connect in 2025
- China Resources Beverage (CRB HK) is offering 347.8m shares in its IPO at a price range of HK$13.5-14.5/share. With the overallotment option, the IPO could raise up to HK$5.8bn (US$474m).
- Cornerstone investors will take up nearly half the offer. Those shares will be locked up for 6 months and will significantly reduce the free float of the stock.
- Index inclusions will commence with the HSCI in March 2025 – that will also result in Stock Connect inclusion. The next index inclusion will take place in June.
7. Korea Value-Up ETFs: Latest Market Info on Initial AUM Setup & Resulting Passive Impacts
- KRX will launch 12 ETFs tracking the Korea Value-Up Index on November 4—9 passive and 3 active—aiming for an initial AUM exceeding 1 trillion KRW.
- KRX is pressuring ETF operators to reveal initial capital by November 4, with expectations to exceed 1 trillion KRW due to government pressure.
- Early signs of position buildup are emerging, so it’s essential to monitor stocks with significant passive impact closely moving forward.
8. Fuji Soft (9749 JP): Bain’s Better Late than Never Competing Offer
- Bain’s pre-conditional tender offer for Fuji Soft Inc (9749 JP) is JPY9,450, a 7.4% premium to KKR’s JPY8,800 offer. There is no minimum or maximum acceptance condition.
- The preconditions relate to regulatory approval (Vietnam) and Board recommendation. Bain’s offer is designed to bring KKR to the negotiating table to find a solution to privatisation.
- KKR can 1) do nothing, 2) work with Bain on a solution, or 3) engage in a price war to prevent the satisfaction of Bain’s Board recommendation precondition.
9. Merger Arb Mondays (14 Oct) – Haitong/GJTA, GA Pack, Henlius, Canvest, Seven & I, Arcadium Lithium
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
- Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP).
10. Quiddity Leaderboard ChiNext Dec 24: US$400mn Expected Inflow for Jiangsu Hoperun
- The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
- The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
- In this insight, we have presented our updated rankings for Potential ADDs and DELs for the upcoming index rebal event in December 2024.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. OVER THE HORIZON: Thematic Review Year-To-Date
- Our most prominent theme this year has been to BUY HK/China markets. We are still very bullish on these SECULAR BULL markets.
- We have been Bullish on gold and discussed the asymmetry of its price movements given the global tightening starting in 2021/22. Gold will continues to benefit from negative real rates.
- We have been Bearish on Japan since publishing Technically Speaking: Japan Meets Resistance and Hong Kong Finally Breaks Downtrend on April 2nd. Japan’s market is facing significant headwinds going forward.
2. Technically Speaking, Breakouts and Breakdowns: HONG KONG (OCTOBER 14)
- Hong Kong Dollar continues to trade at the strong end of its band resulting in upward pressure on HIBOR in turn causing a further unwind of the HKD carry trade.
- HSI shows the strongest market breadth in 15 years as nearly all members trade above 200 DMA.
- Xtep International (1368 HK) , Xiaomi Corp (1810 HK) and China Education Group (839 HK) all had breakouts to form uptrends. All are part of the consumption sector in China
3. GEM Funds Underperform in Q3.
- Active EM Funds delivered an average return of +6.85% in Q3, underperforming the iShares MSCI Emerging Markets ETF by 0.83%, with 38.8% of funds beating the index.
- Morgan Stanley Developing Opportunity and Aikya Emerging Markets topped the performance charts for the quarter.
- Underweights in Alibaba Group Holding and Meituan, and overweights in SK Hynix and cash holdings hurt performance.
4. HK/China: DOOM AND GLOOM? DON’T GET FOOLED AGAIN
- As HK/China markets complete their retracements after the best rally in more than a decade, the exaggerated pessimism from the media and analysts returns.
- The government continues to roll out measures to relieve the pressure on the property market in what is a multi-year process with no quick fix.
- Even after a historic rally, the HSI still trades at a significant valuation discount which will narrow in the coming months.
5. China Watch: Time to play briefing bingo again..
- Welcome to our China Watch series, where we look at the Chinese case through the lens of Western investors.
- Tomorrow, we will have another briefing aimed at boosting the property market, which is one of those tricky conundrums to deal with.
- Housing starts have already dropped back 20 years, and the value of unsold homes and projects is sky-high.
6. Steno Signals #121: Whatever It Takes—In the US, but NOT in China
- Happy Sunday from Copenhagen!I spent most of Saturday morning discussing the fiscal briefing with clients.
- Even though I’m admittedly not as actively involved in business with China as I was a few years ago, I still feel relatively comfortable assessing the ramifications of the briefing.
- It was exactly what I feared: a big nothing burger.
7. Portfolio Watch: China needs to deliver, or it could end in tears
- The fiscal briefing in China tomorrow will be crucial, as inflows into the country have significantly diminished in recent days.
- This highlights the need for a constant stream of positive news to sustain the rally.
- Given the expectations building around the message from Chinese authorities, we don’t have high hopes that they will exceed market consensus.
8. The Week at a Glance: No Bazooka from China (Yet) – Over to You, ECB
- The recent Chinese fiscal briefing was underwhelming, as expected.
- China continues to focus on supply-side measures, which remain ineffective in addressing the pressing need for increased demand.
- Instead of stimulating consumption across the economy, China is attempting to incentivize asset demand and reshuffle credit profiles—approaches unlikely to produce meaningful results.
9. Comparison Between China and Japan Debts
- China housing crisis will likely mean that household debt/GDP flat lines in the coming years like Japan after 1990 and be a headwind for consumption.
- Meanwhile, the downturn in residential construction is already greater than that experienced by Japan after 1990 and in itself will be remain a structural headwind for China GDP.
- Though China corporate debt/GDP ratio is higher than Japan in 1990, China LGFV debt is 50% of GDP and will be swapped for local and central government debt.
10. CrossASEAN Ground Zero – Bukalapak, Astra International, OhHaju, and Sea Ltd
- This week we look at Bukalapak, as Emtek increases its direct stake, Astra‘s latest healthcare push into cardiology, and Ohhaju (OKJ TB), Thailand’s latest organic food IPO.
- We also look at Sea Ltd (SE US)‘s latest move to apply for a digital banking licence in Thailand, which will help to further increase the platform’s regional footprint.
- CrossASEAN Ground Zero is a thematic weekly product that focuses on key Southeast Asian themes and technology trends with a core focus on Indonesia.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Taiwan Tech Weekly: TSMC Taking More Samsung Customers; Hon Hai Unveils Major AI Projects
- Samsung’s foundry business is losing more customers to TSMC, who is perceived as lower risk.
- TSMC, UMC Monthly Sales: TSMC up strong but plateauing, UMC lackluster, confirming 2 big trends.
- Memory Monitor: Nanya results miss; highlights weakness in non-AI demand.
2. TSMC (2330.TT; TSM.US): The Productivity and Profitability Are the Essential Competitiveness.
- For 2nm technology, Taiwan Semiconductor (TSMC) (2330 TT) should start Apple (AAPL US) iPhone 17 production in the middle of 2025, most likely.
- TSMC’s competitors, Samsung Electronics (005930 KS) and Intel Corp (INTC US) are running foundry business and keeping owning manufacturing business at the same time, which is contradictory to purely foundry business.
- To making the advanced chip in the US, we consider the main main concern still the cost.
3. TSMC Q324 Earnings Preview
- September 2024 revenues of NT$251.87 billion, an increase of 0.4% MoM and an increase of 39.6% YoY.
- Year to date revenue through September 2024 now totals NT$2,025.85 billion, an increase of 31.9% YoY.
- Anticipating Q4 revenue forecast of $25.7 billion, up 10% QoQ. This would mean full year 2024 revenues of $88.8 billion, a 28.3% YoY increase
4. Cerebras Files Intent To IPO. This Will Be Interesting
- Cerebras presently derives up to 87% of its revenue from G42
- Microsoft gatecrashed Cerebras party with a $1.5 billion investment in G42 to “accelerate AI development and global expansion”
- G42 “severed its ties” with China in advance of the Microsoft investment
5. Graphene. Wonder Material Or Hype Magnet?
- Two decades ago, graphene hit the headlines after two professors at University of Manchester managed to isolate a slice of the just one-atom thick substance using scotch tape
- Marketed as being 200 times stronger than steel, graphene rapidly gained “wonder material” status and spawned a tidal wave of graphene based products, companies and investment opportunities
- At least four “Graphene” companies listed on London’s AIM, collectively once worth north of $1 billion, have either delisted or been reduced to penny stock status.
6. UMC (2303.TT; UMC.US): 4Q24 Outlook Blurred; QCOM Opens up a New Chance; Considering Selling Fab 8S.
- United Microelectron Sp Adr (UMC US)’s outlook for 4Q24 is expected to show a decrease of around -5% QoQ, with a minimum gross margin of 30%.
- Qualcomm Inc (QCOM US) moving out of Semiconductor Manufacturing International Corp (SMIC) (981 HK) and has opened up opportunities for UMC.
- UMC is considering selling its 8″ Fab, known as 8S, due to its consistently poor performance.
7. Nuclear Zeitgeist Part 1: A Reactor Primer
- Last month, the DOE published a paper about the commercial liftoff of Advanced Nuclear.
- Larry Ellison mentioned that SMRs (Small modular reactors) will power data centers in the future, and Microsoft will unshutter 3 Mile Island for one last puff of a half-smoked cigarette. Just a few years ago, it was closed for economic reasons.
- This is going to be the first in a series about Nuclear Power. Today, I’ll talk about Nuclear Reactors and the basics.
8. Taiwan Semi Monthly Tracker Red Flags Double MoM In September 2024
- Seven Taiwan semi companies from our list of sixteen are now showing negative YoY monthly growth as of September 2024, up from just three a month earlier
- Companies with a strong exposure to the AI Acceleration market are on track for strong revenue growth YoY in 2024. ASPEED is on track to double revenues this year.
- For many of the remainder, what tepid growth they had been experiencing may be starting to stall. Watch this space.
9. Taiwan Dual-Listings Monitor: TSMC Spread Back to Elevated Range; ASE Short Interest Spikes Higher
- TSMC: +18.6% Premium; Spread Has Returned to Previous Elevated Trading Range
- UMC: +1.5% Premium; Wait for Higher Level Before Shorting the Spread
- ASE: +4.2% Premium; Can Consider Going Long the Spread at Current Level
10. Memory Monitor: Nanya Results Miss; Highlights Weakness in Non-AI Demand
- Nanya Tech’s 3Q24 results missed expecations by a wide margin, coming in with a net loss instead of the consensus expectation for a profit.
- Nanya highlighed weakness in non-AI end applications for memory and cut its 2024E Capex guidance by nearly 25%, signaling caution towards the current market cycle.
- While the company’s new DDR5 capacity ramp-up should support stronger margins into 2025E, Nanya has yet to show a signifcant margin upturn in the cycle.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
Receive this weekly newsletter keeping 45k+ investors in the loop
1. Rigaku Holdings IPO – Upside Remains Attractive
- Rigaku Holdings (268A JP) is looking to raise up to US$756m in its Japan IPO.
- Rigaku engages in developing, manufacturing, sales and servicing scientific instruments specializing in X-ray technologies.
- In our earlier notes, we looked at the firm’s past performance and discussed our thoughts on valuation. In this note, we look at Rigaku’s valuation at the final indicative range.
2. Tokyo Metro IPO Valuation Analysis
- Tokyo Metro set the IPO price range at 1,100 to 1,200 Yen per share. At the top end of the range, Tokyo Metro would raise 349 billion yen ($2.35 billion).
- Our base case valuation of Tokyo Metro is implied target price of 1,178 yen per share. This is within the top end of the IPO price range (1,200 yen).
- Given the lack of upside relative to the IPO price range, we have a Negative view of this IPO.
3. Hyundai Motor India Sets IPO Price Range
- Hyundai Motor India (1342Z IN) has set an IPO price range of 1,865 to 1,960 rupees per share, aiming for a valuation as high as US$19 billion.
- Hyundai Motor (005380 KS) is selling a 17.5% stake in Hyundai Motor India in this public offering. Hyundai Motor India IPO is scheduled to trade starting 22 October.
- Our updated base case valuation of Hyundai Motor India is market cap of US$19.7 billion based on P/E of 25.9x our estimated net profit of 64.1 billion INR.
4. USS (4732 JP) – Small Offering on ‘Growth Darling’ – Buyback Offsets 50%
- Ubiquitous used car auction house USS Co Ltd (4732 JP) today announced MUFJ Bank’s Retirement Benefit Trust account would sell its 3.5% stake in an offering.
- Given how much cash the company has and how little cross-holding there is, this seems a bit odd, but they are doing a buyback for half the offer.
- Small offer. Low ADV count. Well-liked by numerous foreign active holders. This should get taken easily.
5. Hyundai Motor India IPO – RHP Updates, Valuation Getting Tricky
- Hyundai Motor (005387 KS) is looking to raise around US$3.3bn via listing its India unit, Hyundai Motor India. HMI is a wholly owned subsidiary of the Hyundai Motor Group.
- HMI primarily manufactures and sells four-wheeler passenger vehicles and parts. Currently its vehicle portfolio includes 13 passenger vehicle models across sedans, hatchbacks, SUVs and battery EVs.
- In our previous notes, we looked at the company’s past performance. In this note, we will talk about its RHP updates and valuations.
6. Hyundai Motor India IPO: Analysis of Latest Financials Signal Challenging Year Ahead
- After 3 years of strong revenue and profits growth, Hyundai Motor India is likely to face a challenging year ahead based on the analysis of 1QFY2025 financials provided in RHP.
- Hyundai Motor India (1342Z IN)‘s strong exports growth in FY2025 will not offset the weakness in domestic sales. This could result in low single-digit revenue growth for the year.
- Increased royalty costs starting in FY2025, coupled with impact of lower cash reserves after special dividend paid out to parent will likely compress profit margins compared to the previous year.
7. Tokyo Metro IPO – Will Price at the Top, but Isn’t Particularly Cheap
- Tokyo Metro (9023 JP)‘s shareholders aim to raise up to US$2.4bn in its Japan IPO.
- Tokyo Metro (TKM) is one of the two metro network operators in the Tokyo region. It operates nine subway lines with a total of 180 stations.
- We have looked at the company’s past performance in our previous notes. In this note, we will talk about the IPO valuations.
8. Akeso Placement – Opportunistic Raise, past Deal Record Has Been Mixed but Relative Size Is Small
- Akeso Biopharma Inc (9926 HK) is looking to raise around US$200m from its primary placement. Proceeds from the placement will be used for R&D.
- Past deals in the name haven’t done well recently but the shares have been doing well and the deal size remains small.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
9. CR Beverage IPO: Valuation First-Look
- China Resources Beverage (CRB HK), China’s largest purified drinking water company, is premarketing an HKEx to raise US$0.5-1 billion.
- We previously discussed the IPO in CR Beverage IPO: The Bull Case, CR Beverage IPO: The Bear Case and CR Beverage IPO: The Investment Case.
- In this note, we present our forecasts and examine CR Beverage’s potential valuation range for the first time.
10. Rigaku Holdings (268A JP) IPO: Valuation Insights
- Rigaku Holdings (268A JP) is Japan’s leading manufacturer of X-ray analysis, measurement, and testing instruments. It is seeking to raise up to US$737 million.
- We previously discussed the IPO in Rigaku Holdings (268A JP) IPO: The Bull Case and Rigaku Holdings (268A JP) IPO: The Bear Case.
- In this note, we discuss valuation. Our analysis suggests that Rigaku is attractively valued at the IPO price compared to peer multiples.