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This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings Monitor: TSMC & ASE Premiums Drop Sharply; ChipMOS Extreme Discount
- TSMC: +16.1% Premium, After Sharp Drop, Will Be Interesting to See If Spread Will Remain Within the Recent ~15-25% Range
- ASE: +7.4% Premium; Can Consider Going Long the Spread Given Recent Trading Range
- ChipMOS: -2.4% Discount Repesents Extreme Low of End of Range; Can Consider Going Long the Spread
2. Memory Monitor: Micron’s Shares May Be Falling But Results’ Industry Implications Are Positive
- Data Centers — Traditional Data Center Recovery Starting; In Addition to HBM Demand, SSD Memory Seeing Strength for AI Applications
- PCs — Upcycle to Accelerate “Late CY2024E”, Driven by Windows 12 and End of Windows 10
- Mobile Devices — Moderate Growth in CY2024E; Potential for Smartphone Upgrade Cycle Acceleration
3. Micron Earnings – What to Expect
- Expect Micron to report strength in AI, highlight the company’s HBM efforts, and quote McKinsey’s trillion-dollar forecast in their earnings call tomorrow
- Although Nvidia’s growth has really helped the DRAM market, along with 2023 CapEx cuts, there are important concerns of double-ordering which could lead to a collapse soon
- Semiconductor market revenues have leveled off since December 2023, hinting a return to more normal growth for the rest of the year
4. Taiwan Tech Weekly: Declines With Nvidia; Taiwan’s Vietnam Shift Continues; UMC’s Outlook Improves
- Taiwan Shares Fall With Nvidia… SK Hynix HBM DRAM with Global Unichip? Taiwan’s Vietnam Shift Continues… Broadcom Developing an AI Chip with Bytedance
- TechChain Insights: Call with Elan Micro; AI PC Significant Uptake 4Q24/1H25; Supply Chain Preparing
- UMC (2303.TT; UMC.US): The Outlook for 3Q24 Has Reached a Slightly Upside QoQ.
5. Delta Taiwan Vs. Thailand Monitor: Taiwan’s Nvidia Solutions Show Why TW Better Value Than Thailand
- Delta Taiwan has outperformed Delta Taiwan recently. The parent vs. subsidiary market cap ratio is now trading consistently over 1.0x. and can go higher in our view.
- Nvidia opportunities and other similar cutting edge technologies will first go to Delta Electronics Taiwan (2308 TT) and not to Delta Electronics Thailand (DELTA TB).
- Conclusion — Expect further Delta Taiwan outperformance over the long-term vs. Delta Thailand.
6. IHI (7013 JP): 30% Upside Potential as Aerospace and Defense Rebound
- Japan’s rising defense budget and military collaboration with the US and Europe should support a high level of orders for the foreseeable future.
- Defense is the growth driver, but other divisions should hold up well due to the ongoing rationalization of operations.
- Profits should rebound this year and rise further in FY Mar-26, bringing the P/E down to 9X or less. The weak yen is a large positive.
7. Semiconductor WFE Q124 Revenues, China’s Share & What Are They Doing With All Those Tools?
- Global semiconductor equipment billings amounted to $26.4 billion in Q124, down 6% QoQ and down 2% YoY
- China’s annual WFE spending has roughly doubled between 2020 and 2023 to $36.6 billion
- A combination of China’s WFE customers including new entrants and a high failure rate among semi startups means that spending has not yet translated into corresponding increase in semi output
8. TechChain Insights: Call with TSMC Partner Global Unichip; Potential to Outpace TSMC Revenue Growth?
- We hosted a conference call with Global Unichip (GUC); GUC is 34.8% held by TSMC and a key provider of semiconductor design services to companies aiming to manufacture with TSMC.
- GUC’s Revenue Prospects are Linked to TSMC’s Growth, However the Success of Its Customers’ Chips Also a Factor — Lagged Strong Revenue Growth Likely
- Conclusion: GUC a Second-Derivative Play on TSMC’s Structural Drivers with Potential to Surprise the Market and Catch Up to TSMC’s Share Performance
9. KYEC (2449.TT): AI Highly Growth Potential may exceed Expectation.
- The King Yuan Electronics Co, Ltd. (2449 TT) outlook for 3Q24 could see a 5-10% quarter-on-quarter growth at present.
- NVIDIA Corp (NVDA US) is currently the second-largest client of KYEC, and its business is rapidly expanding.
- STMicroelectronics NV (STM US) and Will Semiconductor Shan (603501 CH) are currently the third and fourth largest clients, respectively.
10. Taiwan Dual-Listings Monitor: TSMC Premium Rangebound; UMC Hits Upper End of Range
- TSMC: +16.7% Premium, Has Remained Rangebound; Watching for Over 20% or Under 15%
- UMC: +2% Premium, Upper End of Trading Range, Can Consider Shorting
- ASE: +9.9% Premium; Spread Could Have Further Room to Bounce Higher
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Mitsui & Co (8031) – ¥100bn Overnight Equity Offering
- Today after the close, Mitsui & Co Ltd (8031 JP) announced that MS&AD Insurance (8725 JP) and Sumitomo Mitsui Financial Group (8316 JP) would sell 14.9mm shares in an offering.
- This will get priced today or tomorrow, sold to institutional investors. This is ¥107bn, 4 days of ADV and 1% of shares out. It is not dilutive.
- Mitsui & Co has a buyback program with ¥123bn left til end-Sep, when presumably it will reload. Looks easy today, but measuring Mitsui & Co vs Peers is less flattering.
2. Big Aisin (7259) Offering Sets Stage for First Toyota Group Full Unwind
- Today (27 June 2024) after the close, Aisin (7259 JP) announced three Toyota Group companies (Toyota, Toyota Industries, and Denso) would sell shares in Aisin in a ¥180bn offering.
- This is ALL of Denso’s holdings, 63% of Toyota Industries stake, and ~12% of Toyota’s stake. Separately, Aisin announced a 17mm share (6.3%) ¥100bn buyback and a 3:1 split Oct1.
- The recent yuho shows us the progress of Aisin’s promised selldown of crossholdings. There are three large chunks left. One is easy. The climb to capital allocation credibility easier too.
3. Sanil Electric IPO Preview
- Sanil Electric is getting ready to complete its IPO in late July in KOSPI. The IPO price range is from 24,000 won to 30,000 won per share.
- The company is planning is raise between 182.4 billion won and 228 billion won in this IPO. The book building for the institutional investors lasts from 9 to 15 July.
- Sanil Electric is best known for making special transformers used for special purposes in environments with severe weather changes, such as offshore wind power, solar power, and offshore plants.
4. Aisin (7259 JP): A US$1.1 Billion Secondary Offering
- Aisin (7259 JP) has announced a secondary offering of up to 38.9 million shares (including overallotment) and a buyback worth a maximum of JPY100 billion or 17 million shares.
- Denso Corp (6902 JP), Toyota Industries (6201 JP), and Toyota Motor (7203 JP) are the selling shareholders. The offering aims to reconfigure the company’s shareholder mix and reduce cross-shareholdings.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 8 and 10 July (likely 8 July).
5. Timee Pre-IPO – The Positives – Exponential Growth Since Inception
- Timee Inc (215A JP) is looking to raise US$290m from its Japan IPO. The IPO will be a 100% secondary selldown by existing shareholders.
- Timee operates an on-demand staffing platform that connects part-time jobseekers with businesses in Japan.
- In this note, we will talk about the positive aspects of the deal.
6. Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO
- Denso Corp (6902 JP), Toyota Motor (7203 JP) and Toyota Industries (6201 JP) are looking to raise US$1.1bn from selling some of their stakes in Aisin (7259 JP).
- While the deal appears well-flagged, given that it is part of the cross-shareholding unwind theme in Japan, the timing of such a selldown isn’t always certain.
- In this note, we will talk about the placement and run the deal through our ECM framework.
7. Initial Thoughts on LG Electronics India IPO
- According to local media, LG Electronics is reviewing for a potential IPO of LG Electronics India. LG Electronics has approached JP Morgan and Morgan Stanley to be potential IPO underwriters.
- If LG Electronics’ Indian subsidiary is listed, it is expected to be able to raise at least $500 million from the stock market.
- Post IPO, the market value of LG Electronics India is estimated to be between $2.1 billion (3 trillion won) and $4.3 billion (6 trillion won).
8. Hyundai Motor India Pre-IPO – The Positives – Quasi-Local, Riding the SUV Wave
- Hyundai Motor (005387 KS) is looking to raise around US$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 this note, we talk about the positive aspects of the deal.
9. ECM Weekly (24th June 2024)-Webtoon, Guzman, Black Ses, Johor Plant, Bajaj Housing, Infratil, Mizuho
- 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 IPO front, Guzman provided some hope to the Australian market, while Webtoon Entertainment (WBTN US) and Allied Blenders & Distillers will soon test their respective markets.
- There was no dearth of placement this week, with large deals in Hong Kong, New Zealand and India.
10. Local Capital Market Movements Targeting July Implementation of Block Deal Pre-Disclosure Rule
- The new pre-disclosure rule starting July 24th will reshape business practices. Local institutions are now preparing by launching dedicated block deal funds, targeting 40 to 80 deals annually.
- No rule bars short-sellers from block deals post-pre-disclosure. Local institutions are planning to exploit this, anticipating sellers favoring club deals under new July rules, potentially stabilizing prices for hedge strategies.
- Access to club deals will be crucial post-July in Korea’s block deal market. Effective short-selling instruments are also vital with the ban extended until March next year.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What
- On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
- The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal.
- There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).
2. TCM (570 HK): Where’s The Floor?
- Just plain ugly. China Traditional Chinese Medicine (570 HK) (“TCM”) fell 11.7% yesterday. It’s down another 7.9%, on large volume, as I type. The stock is now ~35% below terms
- Depending on who you talk to, the sudden move was triggered by a couple of event pods dumping stock; or the incoming CNPGC chairman is not supportive. Or perhaps both.
- Since rumours surfaced early Feb as to an Offer, a basket of TCM’s peers are up 8% on average. The HSI is up 15%. TCM’s downside from here appears limited.
3. MMG (1208 HK) Rights Trading Dynamics
- The MMG (1208 HK) rights, designed to raise US$1.15bn to pay off loans to the parent for the purchase of a large copper asset, start trading 24 June 2024.
- There is some risk up for grabs, and it is likely to trade according to standard Hong Kong Rights Trading Dynamics. Shorts are down somewhat, but covering should be expected.
- There is path-dependency to the Rights Trading, and while they trade for 7 trading days through Tuesday next, one should expect the volume to trade this week.
4. Tax-Loss Selling In Australia 2024 – Time To Reverse The Trade (7.2-8.6% Rtn in Two Months So Far)
- The original trade was discussed at end-April in Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket then updated here and here.
- That has done OK. The LIQUID basket has delta neutral performance of +8.4% over 2mos; LIQUID+LESSLIQUID +7.2%; If one did a mixed basket (3x L+LL + 1x Illiquids) it’s +8.6%.
- Now it is time to reverse the trade, buying the basket you were short, and running it against index for the next 6-8 weeks.
5. Swire Properties (1972 HK): Potential Passive Selling & Trade Ideas
- The steady selloff in Swire Properties (1972 HK) could result in the stock being deleted from global passive portfolios in the next couple of months.
- Swire Properties (1972 HK) trades marginally cheaper than its similar sized peers on forward PE and price to book value.
- Swire Pacific (A) (19 HK) owns 82% of Swire Properties (1972 HK) and a big drop in the stock price could see them step in.
6. T-Gaia (3738 JP) – Possible Premium Takeout Story
- I kind of hate this, but I also can’t ignore it. Apparently, an expensive media service Reporting on Deals or about the Market for Mergers, had an article today.
- Bloomberg carried a small blurb saying there was “speculation on a tender offer…. according to traders”. The stock is untraded, limit up.
- The most informative comment comes from Japanese stock market portal ‘kabutan‘ which suggests “overseas media” thinks Sumitomo Corp will sell its shares. I look at the possibilities below.
7. Brilliance China (1114 HK): Reversing Out of Passive Portfolios
- Brilliance China Automotive (1114 HK) is up 220% on a total return basis since we first published our insight in August 2023.
- The company paid a special dividend in April this year and will pay a large special dividend of HK$4.3/share going ex-div on 3 July.
- The resultant drop in market cap will result in deletion of the stock from large global passive portfolios at the close on 3 July.
8. Sawai Group (4887) – BIGLY Buyback To “Drastically” Change Capital Structure
- Two years ago, generic pharmaceuticals co Sawai Group Holdings (4887 JP) traded at 10x PER, 6% ROE, and far below book. 10mos ago the price got back to 1x PBR.
- By then, their US sub had partly been put into “Current Assets AFS” as it was for sale. By Dec23, it was completely there. In Jan, a “business review” announcement.
- The US business sale led to a loss, but growth this year, and a new MTMP in early June. Monday, we got a HUGE buyback announcement. Today, an 8+% pop.
9. Chronic Insider Trading in the Korean Tender Offer Market & Time Positions for Short-Term Targets
- There is a high likelihood of information leaking through the lead securities firm when the tender offer prospectus is provided to branches about three days before the disclosure.
- With the FSS’s stricter stance, tender offer candidates may act swiftly before new regulations, prompting attention to potential surges in tender offers.
- Our approach is clear: identify short-term tender offer candidates, monitor trading volumes for spikes, and use the three-day pre-disclosure surge to time our positions effectively.
10. Midea Real Estate (3990 HK): An In-Specie Distribution to Unlock Value
- On 25 June, Midea Real Estate Holding (3990 HK) disclosed an in-specie distribution of its PD&S business through a scrip or cash (HK$5.90 per share, 57.33% premium to undisturbed price).
- The key condition will be approval of the distribution by at least 75% of disinterested shareholders (<10% of all disinterested shareholders rejection).
- Midea RE will remain listed with an asset-light retained business, which is estimated to be worth HK$1.93. The Group’s estimated value is HK$7.83, a 17.6% upside to the last close.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. CHINA: When Will Stocks Catch Up With Surging Debt Markets?
- China’s debt markets are experiencing an historic bull cycle as government and companies take advantage by ramping up issuances this year.
- Beijing will use its healthy balance sheet and continued debt issuance to clean up local government debt and simultaneously address the property sector problems.
- China’s healthy external position will provide continued support for its currency and debt markets with equity markets to follow in the coming months.
2. Inflation Watch: What if the Cyclical Prices Are Not Truly Tamed? Lessons from Canada and Sweden
- If you know me, you know I have a thing for charts, especially those showing momentum in the macro cycle.
- Forget nominal levels; it’s the rate of change that really drives asset markets.
- This analysis is chock-full of rate of change charts, just to remind you that we’ve only managed to nudge inflation back to just above target levels—right as the cycle’s rate of change is shifting towards re-acceleration in many places.
3. EM Watch: Western investors are tired of China and Japan “crying wolf”
- Welcome to our weekly EM Watch, with a particular focus on China and metals.
- Allow me to reflect on how the Chinese and Japanese investment cases look from the outside and how Western investors perceive the current rhetoric around the suffering local currencies in the region.
- The CNY once again “slow burns” versus the USD this week and we are approaching the 7.30 handle, which has typically been the line in the sand for the PBoC in China.
4. The Week At A Glance: Time to bet against the USD?
- Greetings from Europe! The Week At A Glance replaces our Morning Report each Monday as it allows for a deep dive into the economic releases and major tradeable themes for the week ahead.
- We see a couple of major tradeable themes in the week(s) ahead.
- First, the Euro area data, which is still improving in forward-looking indicators, while spot data remains relatively soft, probably in part due to a plethora of (potential) election risks.
5. Energy Cable: Bullish Oil, Bearish Nat Gas, and Especially Metals! Here’s Why!
- We start with crude oil, where positions in crude oil futures have returned to Covid-19 pandemic levels, which we believe is overly bearish.
- The economy is normalizing with rising travel and growing consumer energy demand.
- Despite this, the futures market’s bearish sentiment seems misaligned with these positive economic indicators.
6. Why the November Election Matters to Gold
- The latest CBO fiscal update raises the odds of upside inflation surprises in the coming years, which would be bullish for gold.
- The intermediate-term outlook for inflation will largely depend on the outcome of the November election.
- We project that a Biden win would be bearish for bond prices and mildly bullish for stock prices. A Trump win would be bond and USD bearish and gold bullish.
7. The Heat Is On: News Flow and Sentiment in HONG KONG
- China ETF flows in June continued to show positive momentum while other categories remained flat. Southbound Connect Flows were positive while Northbound Connect recorded a Net Sell.
- Midea Real Estate Holdings jumped on plans to privatize its property development business
- Shanghai Microport fell after launching a share placement at a 15% discount. The share price is hitting all time lows.
8. Positioning Watch – Markets are buying into US Fixed Income, but fast money don’t agree
- Welcome back to our weekly positioning watch, brought to you today from a sunny Copenhagen.
- The standings at the Euros almost perfectly mirror the current cross-regional uncertainties in equity markets.
- The European election has increased the option-implied volatility premium of European equities compared to US equities, while the FTSE 100 continues to stay “less volatile” in IV terms.
9. Actinver – Macro Daily: Inflation 1h-Jun
- Headline inflation increased by 0.21% bw, pressured by agricultural prices, returning to an annual rate of 4.78%.
- Core inflation rose by 0.17% bw, returning to an annual rate of 4.17%.
- Headline inflation was slightly above our estimate (0.21% vs. 0.19%), because some agricultural products registered higher price increases than estimated.
10. Why the Breadth Divergence May Not Be Bearish
- Anxiety has been increasing among the technical analysis community over the blatant instances of narrow market leadership and negative breadth divergence.
- The bearish consequences of a negative breadth divergence can take over a year to be realized. Instead, they are warnings of bearish conditions than actionable tactical sell signals.
- We interpret current market conditions as highly extended that can pull back at any time, but investors should also recognize that the situation could resolve itself in a benign manner.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Tech Weekly: TSMC’s 3nm Shortage & Upcoming Price Hikes; Samsung Unveils AI Catch-Up Plan
- TSMC’s 3nm Shortage: Capacity Filled Until 2026 Amid Surging Demand; Strategic Price Hikes Coming Soon
- Top Gainers/Losers: Taiwan Tech Rallies Alongside TSMC, Apple, Nvidia, ARM Strength
- Samsung Unveils Pathway to Catch Up With TSMC in the AI Foundry Race
2. Micron’s HBM. Multiple Billions Incoming..
- HBM revenue on track to jump from a few hundred million in 2024 to “multiple” billions in 2025
- Micron expects to become FCF positive in the second half of their fiscal 2024 and to have a record revenue year in their fiscal 2025.
- Micron’s is doing custom work on their HBM solutions. Customers are signing LTAs with defined pricing. This could easily spread to Micron’s non-HBM products also.
3. Memory Monitor: Computex Showed Micron Leapfrog SK Hynix and Samsung; ‘Boring’ DRAM Could Now Hot Up
- Computex showed how Micron has successfully leap-frogged SK Hynix and Samsung in HBM DRAM for AI Servers.
- Now, older ‘boring’ DRAM prices could surge as HBM DRAM production is voraciously consuming memory fab capacity.
- Why Nanya Tech shares could surge higher — A DRAM memory trade for those who don’t want to chase steep 52-week highs in Micron and SK Hynix.
4. Silergy (6147.TT): The Wafer Demand Is Projected to Increase by 30-40% QoQ from 2Q24 Onwards.
- We presume Silergy is likely to see demand recovery or inventory rebuilding starting from 2Q24.
- Silergy’s wafer demand is projected to increase by 30-40% QoQ from 2Q24 onwards.
- Silergy’s primary focus remains on China, Taiwan, and Korea, but the US market is promising for potential growth.
5. Samsung, Nanya, Winbond. Watch This Space…
- Greatly reduced growth-related WFE CapEx, cannibalisation of legacy node WFE for leading edge transitions and surging demand for HBM will likely trigger mainstream memory shortages by EOY 2024
- Both Nanya and Winbond are well positioned to benefit from any industry-wide shortages
- If Samsung can sort out its HBM woes, it will be line for a re-rating
6. MediaTek (2454.TT): 2Q24 Guidance Is Achievable; to Take Advantage of the AI PC Replacement Trend.
- Mediatek Inc (2454 TT)’s 3Q24 is expected to experience a quarter-on-quarter increase of about 5%.
- MediaTek is currently developing new processors based on Arm architecture and natively supporting the Microsoft Windows operating system.
- It is believed that MediaTek will tape out with TSMC 3nm technology, targeting the 1H25 market.
7. UMC (2303.TT; UMC.US): The Outlook for 3Q24 Has Reached a Slightly Upside QoQ.
- United Microelectron Sp Adr (UMC US) 3Q24 outlook could be showing a slightly upside quarter over quarter and the gross margin is approaching to ~30%.
- We estimate that UMC’s overall utilization in 3Q24 will be around 65-70%, with 12” at 70-75% and 8” at 60%.
- UMC is benefiting from Novatek shipping OLED DDIC to Apple (AAPL US) in 3Q24.
8. TechChain Insights: Call with Elan Micro; AI PC Significant Uptake 4Q24/1H25; Supply Chain Preparing
- We hosted a conference call with Elan Microelectronics management; We view the company as a Structural Long position for the AI PC upgrade cycle.
- From the company’s perspective, significant impact from AI PC demand will come but not until 4Q24E or 1H25E. However, supply chain excess inventory improved and prepping for upcycle.
- An estimated 90% of AI PC models launched at CES 2024 use Elan’s products in their design; Elan well positioned for the upcycle and entrenching its position. Maintain Structural Long.
9. Novatek (3034.TT): To Achieve a ~5% QoQ Growth in Revenue and Relatively Flat GM QoQ in 3Q24
- We expect Novatek Microelectronics Corp (3034 TT) to achieve approximately a 5% QoQ growth in revenue and relatively flat gross margin (GM) QoQ in 3Q24.
- Semiconductor Manufacturing International Corp (SMIC) (981 HK) and HLMC are capable of producing DDICs at 40nm and below.
- Novatek is experiencing a decline in demand for 55nm Touch with Display Driver (TDDI) in 3Q24.
10. TechChain Insights: Q&A with TSMC Supplier Kinik; Diamond Capex Implies Industry Strength Visibility
- We conducted a Q&A with Kinik, who is a key supplier to companies including TSMC, UMC, and Micron.
- Kinik is dramatically expanding its diamond disk capacity; these products are critical to the production of wafers for advanced semiconductor nodes.
- We believe Kinik has high visibility into future industry demand. Gross margins are likely to expand in the coming years as advanced diamond products become increasingly important to wafer production.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Hyundai Motor India IPO Preview
- Hyundai Motor India is getting ready to complete its IPO in 2H 2024. Hyundai Motor India plans to offer up to 142.2 million shares (17.5% stake) to investors.
- Hyundai Motor (005380 KS) currently owns a 100% stake in Hyundai Motor India. The IPO of Hyundai Motor India could raise as much as US$3 billion.
- If Hyundai Motor India (HMI) is valued at US$25 billion and HMC sells a 17.5% stake in the company, HMC’s remaining stake in HMI would be worth nearly US$21 billion.
2. Kagome (2811) – Well-Flagged Slightly Dilutive Equity Financing for High ROIC Purchase
- In January, Kagome Co Ltd (2811 JP) announced an acquisition of an additional 50% stake in a US equity affiliate. It is transformational. Incremental ROIC is truly excellent.
- At the time, they said they’d finance the purchase with a bridge loan but would sell treasury shares for ¥25bn or less to cover it. They announced the shelf then.
- Friday they announced the Offering. Today shares fell 8+%. This is now cheap.
3. Hyundai Motor India IPO: Key Facts and Financials at a Glance
- Hyundai Motor India’s proposed IPO is an offer for sale by its parent, Hyundai Motor Company, Korea, and reported to raise USD3 billion, potentially making it India’s largest IPO ever.
- Hyundai Motor India’s sales growth has been driven by strong domestic and export sales, both in volume and unit realisation.
- With SUVs now making up 62% of Hyundai Motor India’s domestic volumes, up from 45% in FY2021, the shift towards premium models has boosted profit margins.
4. Webtoon Entertainment (WBTN US) IPO: Valuation Insights
- Webtoon Entertainment (WBTN US) is a global storytelling platform. Webtoon has launched a Nasdaq IPO to raise US$270-315 million at a US$18.00 to US$21.00 price range.
- We previously discussed the IPO in Webtoon Entertainment IPO: The Bull Case and Webtoon Entertainment (WBTN US) IPO: The Bear Case.
- In this note, we outline our forecasts and valuation. Our valuation analysis suggests that Webtoon is attractively valued at the IPO price range.
5. Webtoon Entertainment (WBTN US) IPO: The Bear Case
- Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
- In Webtoon Entertainment IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on declining organic revenue, declining Korean paying ratio, a peaking Japan growth driver, optimistic market sizing, and unsustainable low marketing spending.
6. Kagome Placement – Very Well Flagged Deal but Liquidity Might Be a Concern
- Kagome Co Ltd (2811 JP) aims to raise around US$140m to repay debt used to fund the acquisition of Ingomar in Jan 2024.
- At the time of the acquisition, the company has stated its intention to part finance the acquisition via issuance of treasury shares
- In this note, we will talk about the placement and run the deal through our ECM framework.
7. Webtoon Entertainment IPO – Further Thoughts on Valuation – Acquisitions, Buyouts
- Webtoon Entertainment (WBTN US) is looking to raise up to US$315m in its US IPO, down from an earlier reported float of US$500m.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In our previous notes, we talked about the company’s historical performance, undertook a peer comparison and shared our thoughts on valuation. In this note, we share additional thoughts on valuation.
8. Sensetime Placement – Seems Highly Opportunistic
- SenseTime Group (20 HK) aims to raise up to US$263m via selling around 4.5% stake.
- Sensetime hasn’t had the best of times since listing, however, the shares have rebounded recently on generative AI buzz around the stock.
- In this note, we will talk about the placement and run the deal through our ECM framework.
9. ECM Weekly (17th June 2024)-Shift Up, Webtoon, Quantum, Guzman, MaoGeping, Johor Plant, Telix, Atour
- 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 IPO front, we continued to look at Shift Up (462870 KS), Guzman Y Gomez and Webtoon Entertainment (WBTN US), along with Mao Geping Cosmetics.
- On the placement front, there were quite a few deals in India, while Atour Lifestyle Holdings (ATAT US) was the major Asia linked offerings.
10. Guzman Y Gomez IPO Trading – Strong Demand, Not All Shares in Escrow
- Guzman Y Gomez raised around US$221m in its upsized Australian IPO.
- GYG is a quick service restaurant business with more than 200 restaurants globally. It mainly focuses on fresh, made-to-order, Mexican-inspired food.
- We have looked at the company’s performance and valuation in our past notes. In this note, we talk about the trading dynamics.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Event-Driven and Index Rebalance on Smartkarma.
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1. JPX Proposes BIG Changes To TOPIX Rules, Affects IPOs More Than Market
- In 2021 the JPX established new Listing Rules, and in April 2022 introduced new market segments (Prime/Standard/Growth) to much fanfare. Today, the TSE basically said those changes were meaningless.
- Today, the TSE announced proposed new rules for TOPIX constituent selection. There is a 2-month consultation period, then rules come out end-Sep 2024. Expect few changes from the Proposal.
- NextGen TOPIX will be created October 2026. 3-4 dozen ADDs, 500-600 DELETEs to create an index of 1,100-1,200 names. Some obvious large impacts 2+yrs from now, but this changes IPOs.
2. [JAPAN ACTIVISM] – Murakami Group Goes Activisting on Exedy (7278) – Room To Run
- Late May, Aisin (7259 JP) announced a sell-down of its 34% stake in Exedy Corp (7278 JP) – a big non-dilutive offering, pricing 11% below undisturbed. Exedy announced a buyback.
- Announced on the 27th of May, shares fell sharply the next day, it priced on the 3rd, and offering shares traded on the 10th. Then the price started climbing back.
- My first and second pieces argued that buyback accretion, index impact, and change in register shape all meant it was a buy. Activist Murakami agreed, now he has 6.5%.
3. Blackstone Does a BIG Deal for Infocom (4348) – Minorities Get ¥6,060/Share
- 15 weeks ago, a specialised media outlet suggested Teijin Ltd (3401 JP) was in process to sell its stake in Infocom Corp (4348 JP).
- I caught up later, after the stock had run up significantly, but writing bullishly here and here. Since then, the stock is up another 33-35%.
- Today we finally got the announced deal. Blackstone will buy the stock at a valuation of ¥280bn, paying ¥6,060/share for the minority stake, and buying back Teijin’s stake at ¥4,340/share.
4. Great Eastern (GE SP): Inching Towards Suspension
- Back on the 10th May, OCBC (OCBC SP) made a voluntary unconditional general Offer for the 11.56% in life/non-life insurer Great Eastern Holdings (GE SP) not held.
- At a 36.9% premium to last close, the S$25.60/share Offer Price appeared fair. Yet GE has consistently traded through terms, potentially as someone seeks to block delisting, and negotiate terms.
- OCBC has now declared terms final. The IFA says “not fair, but reasonable” – and recommends shareholders accept the Offer. GE will be suspended at the close of the Offer.
5. Guzman Y Gomez IPO: Listing & Index Inclusion Timeline
- Guzman Y Gomez (0817833D AU) has raised A$335.1m in a primary + secondary offering, valuing the company at A$2.23bn. The stock starts trading on the ASX Ltd (ASX AU) today.
- Just over 54% of the shares are escrowed which means there is a lot of stock that will be available for sale on listing day.
- Guzman Y Gomez (0817833D AU) could be added to the S&P/ASX 300 Index in September and there could be global index inclusions in November and December.
6. TOPIX Market Consultation: Wider Next-Gen Universe in a Couple of Years; But Stocks Moving Already
- JPX has commenced a market consultation on changes to the TSE Tokyo Price Index TOPIX (TPX INDEX) including expansion of the universe and periodic stock selection.
- Based on current market cap/ liquidity, there could be 38 adds and 447 deletions for the TSE Tokyo Price Index TOPIX, though the changes only start in October 2026.
- The deletions will be phased out of the index in 8 steps that will end in July 2028 and most of the stocks will move to the TOPIX Next-tier.
7. Shin-Etsu Chem TOB for Rest of Mimasu Semi (8155) – Far Too Cheap, But No Squeaky Wheel No Grease
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), will launch the TOB to buy out Mimasu minority holders, as pre-announced 2mos ago.
- Not surprising. They bought in 19yrs ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. It’s too cheap but in 18yrs, I recall zero activism here.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 53%. Then they need a bit to get them to 67% but it should be straightforward.
8. Merger Arb Mondays (17 Jun) – Fancl, Tatsuta, A8, China TCM, GAPack, CPMC, Malaysia Airports, Bapcor
- 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: Yichang HEC Changjiang Pharma (1558 HK), Hollysys Automation Technologies (HOLI US), Fancl Corp (4921 JP), Asia Cement China (743 HK), Ansarada Group Ltd (AND AU).
- Lowest spreads: Tatsuta Electric Wire & Cable (5809 JP), Mma Offshore (MRM AU), Great Eastern Holdings (GE SP), Alumina Ltd (AWC AU), Nagatanien Holdings (2899 JP).
9. Pref-Centred Dividend Plays with Expanded ISA Tax Benefits in Value-Up Context
- Local stock market focuses on ISA tax benefits expansion; political push for higher tax-exempt limits seen as pivotal event.
- Investors expect dividend stocks to outperform due to ISA tax advantages: tax exemptions within limits and lower 9.9% taxation on excess amounts, boosting ISA-based equity investments.
- ETF influence declining; ISA tax benefits may boost dividend plays, heightening interest in preferred stocks tied to efforts to redeem them, impacting equity costs.
10. Sep24 Nikkei 225 Rebal – Still 1 ADD, 1 DELETE, 1 Dark Horse, But #2-Ranked ADD Is Close
- The Sep 2024 Nikkei 225 Review base date is six weeks away. One can no extrapolate results quite accurately. It still gives us one ADD, one DELETE, and capping fun.
- Recently, Yanai-san sold more Fast Retailing (9983 JP). More active holders own more stock (which may mean less interest to buy later), and only 1% to go to avoid capping.
- There should be one DELETE, one ADD. There is a low-probability Dark Horse ADD but I expect Kokusai Electric (6525) to be added in March 2025.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Macro and Cross Asset Strategy on Smartkarma.
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1. Korean Government Is Pushing for a Comprehensive Inheritance Reforms – Will They Pass or Fail?
- In the past several days, the South Korean Presidential Office has announced that it is pushing for a comprehensive inheritance tax reforms.
- Although the Presidential Office mentioned it is pushing to reduce highest inheritance tax rates from 60% to 30%, the more likely scenario is to reduce this rate to about 50%.
- The lump sum personal deduction of 500 million won or inheritance tax which has been maintained for nearly 27 years could be doubled to about 1 billion won or more.
2. Where Now for the Hong Kong Market?
- Minimum correction targets have been hit for the Hang Seng Index
- Some potential catalysts for the resumption of the bull market
- We highlight some suggested sector allocations for the next phase
3. EM Watch: Is the Chinese copper demand down 40%?
- Welcome to our weekly EM and Metals editorial.
- It’s hard not to talk about China again this week, given the importance of the metals trade for global inflation expectations.
- Our live assessment of the Chinese recovery continues to paint a stalling picture in Real Estate, exemplified by the physical copper demand being on the edge of a precipice, while the pollution based metrics hint of a continued surge in industrial production into June.
4. Steno Signals #104 – Get ready for a WAVE of liquidity in July!
- Happy Sunday from Copenhagen! Risk asset investing is typically seen as a winter-sport for good reasons, but July is often up there among the best return months.
- It’s as if July heard winter bragging about its stock market prowess and decided to show up in flip-flops, a Hawaiian shirt, and a cocktail in hand, just to prove that even in the heat, it can keep up with the icy competition.
- This year is unlikely to be an exception as we will see improving liquidity trends into July, while the bond market seasonality is typically also a lot more favorable due to more benign issuance trends (especially in Europe).
5. The Market Gods Present Patient Investors With Three Gifts
- Market conditions are setting up for buying opportunities in three markets. U.S. equities will probably weaken on disappointment over the timing of rate cuts.
- European stocks corrected over political turmoil in France that’s likely to be temporary.
- China’s announcement that its central bank had suspended gold buying looks like an entry point in the near future.
6. Positioning Watch – Increasing the BETA risk?
- Hello everyone, and welcome back to our weekly positioning watch.
- Our newly invented high-frequency hedge fund positioning data was well received, and we’re working on expanding it to more assets on a running basis.
- It’s worth revisiting the points we raised about concentration in broader equity indices.
7. CHINA: Do You Like AI? BUY Utilities!
- AI is poised to drive a large increase in power consumption on the mainland. Data demand from generative AI necessitates more data centers and consequently more power.
- China energy consumption is at the beginning of a super cycle as AI becomes integral to everyday corporate and eventually personal lives.
- China’s clean energy names will benefit from the China’s energy strategy as its power needs from data centers surge.
8. Great Game – Why Tesla is winning the EU-China trade war
- Welcome to this weeks Great Game, in which we will cover 3 major stories right now – European EV tariffs, the upcoming election in France and the turmoil in Brazil.
- EU Tariffs on Chinese Electric Vehicles Situation: The European Commission is expected to disclose this week the tariffs it plans to impose on Chinese electric vehicles (EVs) due to what it says are excessive subsidies.
- This move follows Washington’s recent decision to quadruple duties for Chinese EVs to 100%, although Brussels is expected to set significantly lower tariffs.
9. Energy Cable: Short shipping companies?
- Hello from a sunny Copenhagen where the Euro 24 fever is upon us all.
- This week we’ll do a chart heavy analysis on shipping and nat gas.
- We were stopped out of our long position in shipping in February due to false reports on a deal with the Houthis that sent the market tanking.
10. China Debt Hangover and Policy Limits
- China has seen a very large increase in total public and private non-financial sector debt/GDP since 2008, which is unlikely to be repeated in the coming decade.
- This is curtailing Chinese policymakers’ actions on monetary, credit and fiscal policy to support the economy, and actions risk being less than recent promises.
- Thus we remain of the view that China will struggle to meet growth targets and we look for 4.5% growth in 2024.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Tech Hardware and Semiconductor on Smartkarma.
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1. Taiwan Dual-Listings Monitor: TSMC Historically Extreme Premium Continues; CHT at Short Level Again
- TSMC: +21.3% Premium; Trading at New +15-25% Range This Year
- ASE: +12.7% Premium; We Continue to View 14%+ as Fresh Short Level
- CHT: +1.2% Premium; Good Level to Short Relative to History
2. Crypto Datacenters NAV
- There’s a gold rush in the world of AI for not just GPUs, but for datacenters and the power connections that supply them.
- Imagine this, you just bought 100,000 GPUs from Nvidia and you don’t have a place to put them or the power to feed them.
- Not being first to market is a huge cost, as the GPU pay back times are very quick right now even for the H100.
3. Global Semi Sales YTD 2024 & Outlook: The Good & The Not So Good
- Global semi sales for April ’24 were $46.4 billion, +15.8% YoY & +1.1% MoM
- WSTS now forecasts a 16.1% increase in 2024 semi sales, up from 13.1% in their previous forecast
- We think the WSTS forecast for Memory is too high & their forecast for Logic is too low. Excluding memory, the WSTS forecast reflects just 3.1% growth in 2024.
4. Computex 2024 & The Drama Of The CoPilot+ PC Launch
- Intel, AMD & Qualcomm all lined up in support of Microsoft’s CoPilot+ PC program during the Computex 2024 keynotes last week.
- While Qualcomm is all in and AMD mostly too, Intel’s support is more passive agressive in nature. We outline how & why this is the case
- On Friday June 7, reacting to customer feedback, Microsoft announced that their CoPilot+ Recall feature will now become disabled out of the box by default. Ouch!
5. Taiwan Semis May ’24 Revenue Roundup. Looking Good Across The Board
- ASPEED blazing a trail with 92.9% YoY revenue growth in May
- Quanta, WiWynn, TSMC and Nanya all > 30% YoY revenue growth in May
- TSMC looking likely to exceed 30% YoY revenue growth in 2024
6. Intel Warns That Its Foundry Strategy Is “Highly Risky” & Its Success Is “Highly Uncertain”
- Intel’s 2023 10K includes two new risk sections relating to its foundry plans and Smart Capital approach to funding them.
- It labels its foundry plan as “Highly Risky” and rates its chances of success as “highly uncertain”
- They also helpfully warn that they have “limited experience” with the third party foundry business, just FYI
7. Taiwan Tech Weekly: Apple Unveils New AI Capabilities at WDC; PC Makers Feel the Love from Chip CEOs
- Apple Announces New AI Features at WDC; Shares Surge to New All-Time Highs
- Top Movers: Major Computex Exhibitors See Share Prices Fall Despite Strong Presence
- Computex 2024: Chip Companies Notably Competing to Win PC Makers
8. TSMC (2330.TT; TSM.US): CoWoS Demand Continues to Increase in 2024.
- The yearly growth target could approach 25% YoY in 2024.
- TSMC’s CoWoS demand continues to rise, with capacity expected to increase by approximately another 5% in 2024.
- TSMC’s stock price has risen by 55% in Taiwan and by 66.3% in US markets this year. We believe it has the potential to continue increasing further.