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. NVIDIA’s Conundrum…
- NVIDIA’s data center revenues tripled YoY in CY 2023 and are on track to more than double in CY 2024
- When Intel dominated the data centre and minted tens of billions annually, its customers benefited even more, minting hundreds of billions.
- If NVIDIA’s business model succeeds, its customers will succeed even more. This will make it extremely difficult for NVIDIA to remain the #1 global market cap stock.
2. Taiwan Tech Weekly: Apple Hikes TSMC Orders on Strong IPhone 16 Hopes; Google Shifts AI Chip to TSMC
- Apple Increasing Chip Orders with TSMC — Expecting iPhone 16 Sales to be Much Stronger Than iPhone 15 Thanks to AI
- Google Said to be Shifting to TSMC from Samsung for Next Generation AI Mobile Phone Chips
- This June 28th piece appears to be timely — Memory Monitor: Micron’s Shares May Be Falling But Results’ Industry Implications Are Positive
3. PC Monitor: Growth Expectations Have Increased Recently; HPE Signals Enterprise AI Acceleration
- PC & Server solutions names have fallen moderately from highs in June, however enterprise server company HPE soared 20% on AI strength.
- Despite the market pullback from highs, we note that 2025E forward growth expectations have generally increased for the universe over the last month.
- Latest Taiwan PC company revenues indicate healthy growth and HPE’s management guided for Enterprise AI orders to accelerate.
4. Fabricated Knowledge Q2 2024 Quarterly Review
This is my quarterly piece, where I round up all of my favorite ideas (more explicitly) and explain some semiconductor jargon. This is a meta piece of content.
- First and foremost, I’ll start with performance. SMH returned 14% this quarter, among the best quarters in history for the semiconductor universe (again).
- This quarter’s leader was AOSL, who is rumored to have won a socket at Nvidia.
5. Micron Earnings, SiTime, Consumer, and Applied Materials Insider Sale
- Micron’s earnings were… acceptable.
The market didn’t like the guide, but I think it is more of a function of expectations management.
Micron is clearly on the upswing, and the stock needs healthy revenue and profit beats.
6. Apple Intelligence, Powered By ChatGPT. Genius Move Or Desperate Gamble?
- Since Microsoft’s association with ChatGPT has become common knowledge, it’s share price has doubled
- Since rumours of an impending partnership with OpenAI first emerged, Apple share price is up 37%
- The extraordinary valuations of Microsoft & Apple were driven by association with ChatGPT. Revenue growth to justify those valuations must now depend on ChatGPT. Let’s see how that works out.
7. Silergy (6415.TT): Trial-Run with Vanguard, and Recent Stock Drops Represent an Entry Opportunity.
- We are surprised that Silergy Corp (6415 TT) is using Vanguard Intl Semiconductor (5347 TT) to trial-run products.
- The outlook for 2024 remains unchanged at over 20% YoY, and we still see a path to recovery ahead.
- We consider the recent drop from NTD$526 on June 14th to NTD$429 on July 5th as an opportunity to consider entering the stock.
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. Big ¥500bn Honda (7267) Offering Is Small
- Just pre-close on 2 July, Reuters carried an article suggesting a ¥500bn secondary offering in Honda Motor (7267 JP) as insurers sold. The stock fell 4% in minutes.
- Honda semi-confirmed but it took two days to get to the details, now out. The stock climbed in the meantime.
- At launch, this deal is two-thirds covered by buyback + passive demand but the supply is heavily-weighted to retail. Cheaper than it looks, lots of moving parts. Read the details!
2. Timee (215A JP) IPO: The Bull Case
- Timee Inc (215A JP), a leading part-time job platform in Japan, is seeking to raise up to US$286 million. Book-building runs from 9 to 23 July.
- Timee’s app allows users to work shifts as short as one hour at restaurants, convenience stores, and hotels, with quick payment for their work.
- The bull case rests on favourable market trends, best-in-class revenue growth, good retention rates, credible growth drivers, and top-quartile EBITDA margins.
3. Shift Up IPO Book Building Results Analysis
- Shift Up reported solid IPO book building results. Shift Up’s IPO price has been determined at 60,000 won won, which is at the high end of the IPO price range.
- According to Hankyung Business Daily, the demand ratio was 223 to 1. Shift Up will start trading on 11 July.
- Our base case valuation of Shift Up is market cap of 5.7 trillion won or target price of 95,510 won (59% higher than the IPO price of 60,000 won).
4. Honda (7267 JP): A US$3.3 Billion Secondary Offering
- Honda Motor (7267 JP) has announced a secondary offering of up to 298.9 million shares (including overallotment). At the close, the offer, including overallotment, is worth JPY535 billion (US$3.3 million).
- The offering is another sign that the unwinding of cross-shareholdings is catching pace as part of Japan’s corporate governance reforms.
- Looking at recent large Japanese placements is instructive for understanding the potential offer price. The pricing date will fall between 17 and 22 July (likely 17 July).
5. Aisin (7259 JP): The Current Playbook
- Since the US$1.1 billion secondary placement announcement, Aisin (7259 JP)’s shares are up 2.5% from the undisturbed price of JPY5,243 per share (27 June).
- Looking at recent large Japanese placements is instructive to understand the potential trading pattern. So far, Aisin’s shares have deviated from the pattern of previous large placements.
- The offering will likely be priced on 8 July. Investors who have participated in previous large Japanese placements tend to secure positive returns.
6. Timee Pre-IPO – Peer Comparison – Stronger Growth Has Allowed It to Close the Margin Gap
- 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 an earlier note, we looked at the firm’s past performance. In this note, we undertake a peer comparison.
7. ECM Weekly (1st July 2024)-Aisin, Mitsui, Japan Hotel, Allied Blenders, Webtoon, Hyundai India
- 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 looked at the upcoming mega-listing for Hyundai Motor India.
- On the placement front, the week was dominated by the cross-shareholding unwinds in Aisin (7259 JP) and Mitsui & Co Ltd (8031 JP).
8. Aisin Corp Placement – Follow Up – Could Fall into a Similar Fate as past Large JP Secondary Deals
- 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).
- We have covered the background of the deal in our earlier note, Aisin Corp Placement – US$1.1bn Selldown by Toyota and DENSO.
- In this note, we talk about the updates since and look at the performance of some of the past large Japan deals.
9. Honda Motor Placement – Large in Size, Relatively Small in Other Terms
- A group of shareholders aims to raise up to US$3.2bn via selling around 5% of Honda Motor (7267 JP) .
- The possibility of such a selldown was flagged earlier in the week by Reuters. Thus, the deal is well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
10. Toenec (1946 JP) Offering – Nearly $50mm on SmallCap Utility Infra Co as Chubu EPCO Sells Down
- Today, Toenec Corp (1946 JP) – an integrated facilities company 50+% owned by Chubu Electric Power Co (9502 JP) announced Chubu EPCO would sell down 7.7% to go to 43%+.
- This is surprising. It suggests there are more selldowns to come. It’s also “big” at 88 days of ADV and about 26% of Max Real World Float (85% retail).
- This is an odd sell-down. Chubu EPCO obviously doesn’t want to buy it in. That means overhang for years.
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. China TCM (570.HK) Update – Behind The Share Price Plunge and Prospects for Privatization Progress
- The slow progress of privatization is related to recent high-level changes in CNPGC. Decisions on SOE deals with “strategic purpose” require careful considerations, not based on “one leader’s personal preferences”.
- Based on public information, we cannot find convincing reason to prove that CNPGC has changed its mind.There’re rumors that China TCM’s privatization is still considered important project on the agenda.
- China TCM’s has strong fundamentals to support valuation. If there is no announcement, the privatization process is expected to proceed as usual, and we continue to wait for the voting.
2. BIG ¥500bn Honda (7267) Offering Coming?
- Today just before the close, Reuters came out with an article saying Japan’s four major insurers and some financial institutions would offer ¥500bn of shares in a secondary offering.
- That implies about 275-280mm shares (insurers hold ~195mm). In May, Honda announced a ¥300bn buyback with earnings, with nothing done so far.
- The supply/demand dynamics here are key. There are a lot of moving parts over time. Honda is cheaper than it looks but there are moving parts there too.
3. HDFC Bank (HDFCB IN): Foreign Room Crosses 25%; Index Implications & Positioning for US$5bn+ Buying
- Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 54.83% and that results in foreign room crossing the ‘magical’ 25% mark.
- The increase in foreign room could lead to passive trackers of a global index needing to buy 256m shares (US$5.3bn; 11.5x ADV) at the end of August.
- There will definitely be positioning in the stock but there should still be upside in the stock. The HDFC Bank (ADR) (HDB US) line was up 4.5% overnight.
4. TIP Taiwan Technology Dividend Highlight Index Rebalance: 12 Changes & US$4bn Round-Trip Trade
- There are 12 changes for the TIP Taiwan Technology Dividend Highlight Index in June/July. The Fuh Hwa Taiwan Technology Dividend Highlight ETF (00929 TW) has an AUM of US$7.16bn.
- One-Way turnover is estimated at 35% and that will result in a round-trip trade of TWD 134.7bn (US$4.1bn). There are 8 stocks that could have over 5x ADV to trade.
- The ETF started rebalancing their portfolio on Friday and will continue to trade the stock over the next 7 trading days.
5. JAPAN ACTIVISM: Strategic Capital Target Daido (3205) Now A Murakami Target Too
- Small cap Japanese manufacturer and purveyor of apparel Daidoh Ltd (3205 JP) has consistently been a target for value investors. In late 2022, Strategic Capital went over 5%.
- They have bought more, and as of end-March, they declared 24.85% of TSO (28% of voting rights), but they have 33%. They made proposals for the AGM. They won one.
- Now Murakami-san has bought in, going over 5%. This gets interesting. Together they have 39.4% as of last week, and probably more now. That should get them 50+% next AGM/EGM.
6. HSCI Index Rebalance Preview and Stock Connect: Potential Changes in September
- We see 37 potential adds (including plenty of new listings) and 25 potential deletes (on market cap and liquidity) for the Hang Seng Composite Index in September.
- We expect 32 stocks to be added to Southbound Stock Connect following the rebalance while 24 stocks could be deleted from the trading link and become Sell-only.
- There are stocks that have a very high percentage of holdings via Stock Connect and there could be some unwinding prior to the stocks becoming Sell-only.
7. ESR Group (1821 HK): Consortium’s Expansion Talks Suggest Progress
- Bloomberg reports that the bidding consortium is in talks to bring in other partners, such as QIA, PIF, and CPP Investment Board, to aid in privatising ESR Group (1821 HK).
- Warburg Pincus and OMERS have blocking stakes for a Cayman scheme. Warburg Pincus is seemingly supportive, and the consortium’s expansion talks suggest confidence in meeting OMERS’ price expectations.
- Our best guess is that an offer is around HK$14.00. ESR’s current valuation is undemanding, with its forward EV/EBITDA multiple at a 40% discount compared to the median peers’ multiple.
8. Shinko Electric (6967) – Break/Gap Risk Early July 2024 Update
- When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.
- Nearly 6mos ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco’d a buy. Then 16+wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Gross spread is now 4.6% but time is shorter so annualised is 10+% even out to December launch.
9. HSCEI Index Rebalance Preview: Two Changes Likely in September
- SenseTime Group (20 HK) and JD Logistics (2618 HK) are potential deletions while PICC Property & Casualty (2328 HK) and New Oriental Education & Techn (9901 HK) are potential adds.
- Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of HK$950m. Official capping will be based off the close of trading on 3 September.
- There will be 1-2x ADV to buy on the adds and over 2x ADV to sell in JD Logistics. The impact on SenseTime is lower given the recent surge in volume.
10. Japan CorpGovReport Details: TSE “Mgmt Conscious of Capital Cost/Stock Price” Details (Jul24)
- This month (June) saw 1,673 Corporate Governance Reports filed and 5 new “Mgmt Conscious of Capital Cost/Stock Price” policies filed.
- We created a tool show every report, provide links to every document, and now a new diff file tool. Put in a name, see the difference between the Old/New Reports.
- We hope this took will help. It is designed to be a shelf reference. We update the tool once a month, a couple of weeks ahead of the TSE.
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. Korean Government Announces Corporate and Dividend Tax Incentives Under Corporate Value Up Program
- The Korean government announced corporate tax incentives for companies that actively increase capital returns to shareholders and also dividend tax incentives and as part of the Corporate Value Up program.
- For companies that provide shareholder returns, a 5% corporate tax amount on the increase will be deducted and the tax burden on increased dividends of the company will be reduced.
- For dividends under 20mn won, the tax rate will be reduced from 14% to 9%. Investor can choose lower rate (25% or comprehensive tax rate) for dividends exceeding 20mn won.
2. Steno Signals #106 – The cycle is improving. Not weakening.
- We spent most of last week examining cycle leads and lags as we continue to observe solid signs of re-acceleration in economies with low duration profiles and high sensitivities to interest rates and exports.
- The Riksbank in Sweden, the BoC in Canada, and partially the ECB in Europe have all cut interest rates amidst an already improving cyclical environment.
- We are already starting to see the positive ripple effects.
3. Union Budget 2024- What to Expect?
- All eyes will be on the upcoming Union Budget 2024 in July, marking the first of Modi Government 3.0.
- Job creation, tackling agriculture woes including farmers income and sustaining expenditure on infra are expected to be the core deliverables.
- Moreover, fiscal deficit is expected to continue its improvement run. Capital gains tax would not be touched but GST network could broaden.
4. Three Risk-Off Signals Offset by One Risk-On Signal?
- The three risk-off signals include the decline in the Bitcoin price, decline in the copper price, and the first day share price performances of recent Korean IPOs.
- These three risk-off signals are offset by one major risk-on signal which includes the U.S. Junk Bond-Treasury Yield spread.
- An important risk-off signal is the first day share price performances of major Korean IPOs after listing. We have started to see some weakness on this signal in July.
5. Japan Watch – Why BoJ Will NOT Intervene Anytime Soon
- Recently, numerous JPY pairs have breached the levels where the BoJ / MoF intervened in April/May, prompting markets to wonder if (and when) authorities might step in again to support the Yen.
- The reaction in USDJPY post key events/meetings has been consistently uniform for the past 12-18 months.
- Markets build up a hawkish narrative prior to the event, only to unwind positions when the news turns out to be less hawkish than anticipated.
6. QE With Chinese Characteristics: What It Will Look Like.
- PBOC announced that it will borrow and trade treasury bonds from primary markets.
- The central bank will use Open Market Operations to not only control and steepen the yield curve, but also improve market liquidity.
- Last week the 50-year bond dropped below the 2.5% yield which was the minimal threshold the PBOC indicated before defense.
7. Preview to the 3rd Plenum of Chinese Communist Party
- The 3 plenum July 15-18 will likely see some additional measures that will support or stimulate China economy. However, they are unlikely to be game changers.
- Major points to observe include unemployment and healthcare benefit boost, Hukou fine tuning, discussion about inheritance tax, and the 2-4 trillion Yuan of buying most unsold homes.
- Deepening of reform especially in boosting innovation and upgrading consumption will also be touched on, but there will seem no short-term effective measures.
8. Hong Kong: How Much GDP Is Deduced from the Northern Spending of Hong Kong Residents
- It is estimated that 0.8 million Hong Kong residents spend weekends at other Bay Areas
- These residents spend an average of HKD730 on a weekend in Shenzhen
- The value-added factor for food, alcoholic drinks, and tobacco as well as retail trade are both 0.12, which gives 3.64 billion HKD, or 3.5% in annual GDP
9. Non-Consensus Forecast: No Fed Rate Cut This Year
- We are against the majority opinion that Fed will cut rate in September meeting. Also majority forecast there will be 1-2 rate cuts this year but we forecast none.
- CORE PCE Price Index has been treading above 2% target, though it is on a decreasing trend two streaks on a roll and since Jan 2023.
- We believe instead of targeting at the static CORE PCE Index for one data point, the Fed will consider a dynamic series of data points, known as cumulative inflation targeting.
10. Response to Premier Li: Post COVID Chinese Economy
- In a recent forum, Chinese Premier Li Qiang is confident that Chinese economy was stagnant simply because of COVID. Now that COVID has gone, Chinese economy will eventually heal itself.
- We believe rather Chinese economy will still be bumpy after COVID, with three major arrows against Chinese Economy, namely property sector slump, local government debt, and weak private sector.
- Instead of the “self recovery” view of the economy proposed by Li, we believe government should more actively roll out fiscal and monetary stimulus.
Entity | Insights | Analytics | News | Discussion | Filings | Reports |
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 & 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.
Receive this weekly newsletter keeping 45k+ investors in the loop
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.
Receive this weekly newsletter keeping 45k+ investors in the loop
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.
Receive this weekly newsletter keeping 45k+ investors in the loop
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.
Receive this weekly newsletter keeping 45k+ investors in the loop
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.