This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Worley Placement – Largest Shareholder Selling at an Attractive Discount
- DAR Group is looking to raise A$1.5bn (US$983m) from selling the majority of its stake in WorleyParsons Ltd (WOR AU).
- DAR had attempted to privatize Worley in late 2016. Failing that attempt, it has been adding to its stake over the years.
- As the deal isn’t a cleanup, there will be an overhang post-deal, although its a relatively small one at just 4.5% of DAR’s remaining stake; locked up for 30 days
2. Endeavour Group Placement – While There Is an Overhang, Selldown Now Appears Well Flagged
- Woolworths Ltd (WOW AU) is looking to raise A$468m (US$305m) from selling its stake in Endeavour Group /Australia (EDV AU).
- Endeavour Group was demerged from Woolworths in Jun 2021 and it runs the drinks and hospitality business of Woolworths.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
3. SHEIN IPO: The Biggest IPO in 2024 in London?
- Although Shein has yet to formally announce the listing destination, there is a growing anticipation that the listing venue could be London, rather than New York.
- It has been reported that the company has more than doubled its net profit to more than US$2 billion in 2023.
- The company is currently seeking a corporate value of nearly US$70 billion to US$90 billion in the Shein IPO which would be one of the biggest IPOs globally in 2024.
4. Super Hi International US ADS – Has Been Doing Well but Doesn’t Really Need the Cash
- Super Hi International Holding (9658 HK) aims to raise around US$100m in its US ADR IPO. MS and Huatai are on the deal.
- Super Hi International (SHI) is a Chinese cuisine restaurant brand, operating Haidilao hot pot restaurants in the international market.
- In this note, we talk about the deal dynamics and the listing impact.
5. Indegene Limited Pre-IPO: Subscribe on Profitable Niche Business Model and Attractive Valuation
- Indegene Limited (1864095D IN) has set IPO price band at INR430–452 per share. The IPO consists of fresh issue as well as OFS by existing shareholders.
- Considering FY24 annualized post-IPO EPS of INR13.48, Indegene seeks a P/E valuation of 31.9–33.5x.
- Considering niche business focus, proven execution capability, marquee clientele, long-standing client relationship, life science focus, and comprehensive offering, Indegene’s valuation seems quite attractive.
6. China Resources Beverage Pre-IPO – The Positives – Strong Position in Its Main Market
- China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- In this note, we talk about the positive aspects of the deal.
7. ECM Weekly (29th Apr 2024) – IDEA, Kokusai, J&T, Krafton, Horizon, Oceana, ChaPanda, 99 Speed, Afcon
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Sichuan Baicha Baidao Industrial (2555 HK) and Mobvoi (2438 HK)‘s listing doesn’t really help the HK sentiment.
- On the placement front, Vodafone Idea (IDEA IN) managed to do well, while Krafton (259960 KS) followed Samsung Electronics (005930 KS) footsteps.
8. Indegene Pre-IPO – RHP Updates – Client Base Continued to Grow, and Margins Have Begun Stabilizing
- Indegene Limited (1864095D IN) is looking to raise about US$220m in its upcoming India IPO.
- Indegene is a “digital-first” commercialisation firm with an exclusive focus on the global life sciences industry.
- We looked at the firm’s past performance in an earlier note. In this note, we look at the RHP updates.
9. Pre-IPO Ximalaya – The Potential Risks and the Outlook
- The key to Ximalaya turning losses into profits is not the outstanding performance in revenue side, but rather the effective cost control. The Company seems to have encountered growth bottleneck.
- To achieve long-term stable profits, it’s necessary to continuously optimize content quality, improve user experience, and expand paying user scale, but Ximalaya has shown “signs of fatigue” in this regard.
- AI technology brings big room for imagination, but the question here is how much would truly translate into a leap in financial performance? Ximalaya’s valuation could be lower than peers.
10. China Resources Beverage Pre-IPO – The Negatives – Remains a Minnow in Other Markets
- China Resources Beverage is looking to raise US$1bn in its upcoming Hong Kong IPO.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- In this note, we talk about the not-so-positive aspects of the deal.
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. Tax-Loss Selling in Australia 2024 – Historical Analysis and A Trade Basket
- I am not a tax advisor and I do not play one on TV but it is a subject of interest in Australia, as an AFR article from June 2022 shows.
- The general gist: retail investors in Australia will take gains on stocks which run up in price, or get taken over, then look for losses to offset.
- Below I present a study using data from 2012-2023 and this year’s portfolio.
2. L’Occitane (973 HK): Geiger’s $34/Share Offer
- After nearly six years of conjecture, rumour – plus the key shareholder (holding 72.63% of shares out) contemplating a takeover – we finally have an Offer for L’Occitane (973 HK).
- The price? $34/share, a 30.77% premium to undisturbed, and a figure a shade below the HK$35/share flagged by Reuters last August deemed “false and without basis“. The price is final.
- This takeover is a Voluntary General Offer. The key condition is securing 90% of disinterested shareholders holding 27.36%. 9.6% of that number have provided irrevocable undertakings or letters of support.
3. India: Potential Free Float Changes & Passive Flows in May
- Companies in India have disclosed their shareholding pattern as of end-March in April. There are companies with significant float changes from end-September and/or end-December.
- The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
- Depending on the date that the shareholding was published, there could be 14 stocks with passive inflows from global trackers while 7 could see passive outflows in May.
4. L’Occitane (973 HK): Conditional VGO at HK$34
- L’Occitane (973 HK) disclosed a conditional voluntary offer from Reinold Geiger at HK$34.00, a 15.3% premium to the last close and a 30.8% premium to the undisturbed price (5 February).
- The minimum acceptance condition is that the offeror holds at least 90% of the shares held by disinterested shareholders, which enables the offeror to exercise compulsory acquisition rights.
- Irrevocable and letters of support to accept represent 37.96% of disinterested shares. An attractive offer (representing an all-time high) should facilitate the offer being declared unconditional.
5. Carlyle Reportedly To Buy KFC Japan (9873) From MitCorp (8058) – Deal Likely Imminent
- On 28 Feb, the Nikkei reported (an article I missed) Mitsubishi Corp (8058 JP) would seek to unload its 35% stake in Kfc Holdings Japan (9873 JP)
- The stock popped, then continued to rise further. After the close Friday, the Nikkei reported MitCorp was close to a deal with Carlyle. A deal is apparently expected imminently.
- I expect this could be a “Split Price Deal” (like Hitachi Transport and Pasona).
6. ASX200 Index Rebalance Preview: Potential Changes Prior to the June Rebalance
- Seven Group Holdings (SVW AU)‘s holding in Boral Ltd (BLD AU) continues to increase and that could lead to an index change at the June rebalance, if not earlier.
- The Silver Lake Resources (SLR AU)/ Red 5 Ltd (RED AU) merger could lead to an index change early June.
- Cie De Saint-Gobain (SGO FP)‘s acquisition of CSR Ltd (CSR AU) could lead to another index change just ahead of the regular June rebalance.
7. Worley (WOR): Impact of Dar Group’s A$1.4bn Sale
- Dar Al-Handasah has sold 19% of WorleyParsons Ltd (WOR AU) overnight at A$14.35/share, a 12% discount to the last close, to raise A$1.44bn (US$943m).
- This reduces Dar’s stake in WorleyParsons Ltd (WOR AU) to 4.5% and will trigger upweights from index providers in the next few days.
- The stake sale could also lead to a re-rating of the stock with a large blocking stake off the share register.
8. HD Hyundai Marine Solution (443060 KS) IPO: No Passive Buying Near-Term
- HD Hyundai Marine Solution (443060 KS) is looking to raise KRW 742bn (US$540m) in its IPO, valuing the company at KRW 3,707bn (US$2.69bn). Listing is expected to be in early-May.
- Competition for the shares has been fierce with institutional investors indicating demand for 201x the number of shares on offer at prices higher than the top end of the range.
- Barring a doubling of the stock price, the earliest that the stock will be added to major indices is December 2024. So, no passive buying in the short-term.
9. SET50 Index Rebalance Preview: Market Consultation & More Changes in June
- The SET has run a market consultation on relaxing liquidity thresholds for inclusion of stocks in the Stock Exchange of Thailand SET 50 Index (SET50 INDEX) universe.
- The consultation is the result of an increase in Average Daily Trading Values and lower turnover ratios, especially for large cap stocks.
- Berli Jucker (BJC TB) is now a potential index inclusion in June and that could result in four constituent changes at the next rebalance.
10. KOSPI200 Index Rebalance Preview: 5-6 Changes Possible from Now to June
- With the review period complete, there could be up to 5 changes for the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) at the June rebalance.
- Hahn&Co now own over 96% of the shares in Ssangyong Cement Industrial (003410 KS) and there could be another change at or before the June rebalance.
- Passive trackers will need to trade between 0.5-15x ADV on the index changes. There are big shorts in L&F (066970 KS) and Lotte Tour Development Co, Ltd. (032350 KS).
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. Steno Signals #97 – 5 reasons why the CNY will be devalued next week and how to trade it
- I spent last week in Asia and even though I admittedly like to see my research as edgy and contrarian, I quickly realized that most PMs in the region agreed on my take on the imminent risk of a devaluation of the CNY.
- USD/CNH call options are popular/consensus in the Asian Macro PM space, but interestingly there is no consensus around the contagion from a devaluation of the USDCNY.
- The discussions I had pointed in all directions, meaning that a CNY devaluation holds the potential to turn into a macro earthquake, despite it already being a consensus position.
2. April Themes and Thematic Portfolio Review
- A monthly review of how the markets and our themes are currently performing
- Analysing what went wrong and what went right in stocks and sectors
- Highlighting positions added or removed from the thematic investment portfolio
3. Corporate Value Up Program Guidelines Proposed by the FSC – Disappointing & Needs Improvement
- Some of the Corporate Value Up program’s initial guidelines proposed by the Financial Services Commission (FSC) were announced today.
- Overall, the initial guidelines were disappointing mainly because they lacked concrete figures with regards to tax incentives for companies that make significant improvements to their corporate governance.
- More concrete measures announced today included recommendations for overlapping parent company listing (split listing) and disclosure recommendations for the majority shareholder’s profit transfer to an unlisted private company (tunneling).
4. Portfolio Watch: No respite for Asian FX.. How to deal with it?
- Welcome to our weekly Portfolio Watch! We have had a strong week in our portfolio with a USD-reflationary lean, but we are starting to contemplate how to deal with contagion from a continued rise in USD versus Asian FX pairs, especially if the increasing latent risk of a major devaluation of the CNY comes into fruition.
- There is currently no respite for the Asian FX pairs as all major forward looking models point to a reacceleration of US inflation trends from the current plateau around 3.5% YoY.
- We will look at the devaluation risks in detail tomorrow in our weekly “Steno Signals”, but will pinpoint value pockets in markets already today in our Portfolio Watch.
5. NPS Changes Its Core Asset Allocation Method – First Time in 18 Years
- NPS announced today that it will change its core asset allocation method, which aims to increase its purchase of risky assets including stocks and alternative assets.
- Under the new system, the proportion of risky assets will increase to 65% of the NPS’ entire fund assets and the remaining 35% will be allocated to the safe assets.
- There is an increasing probability that a portion of the 24.6 trillion won (2.3% of AUM) could get allocated to risky assets including domestic equities.
6. Positioning Watch – Prepare for further action in JPY pairs
- Hello everyone, and welcome back to our weekly positioning/sentiment overview!Equity sentiment has soured a bit since we last spoke, with broad US traded ETF fund flows sent back into solid negative territory after a stunning start to the year.
- While most of it is due to the tax-season in April, the hawkish repricing of global central banks has also played its part in normalizing the über-bullish sentiment in US equities, with markets now also biting their nails as an ECB June cut is no longer a certainty.
- Chart 1: Rolling monthly US ETF fund flowsAfter a couple of weeks of outflows from XLE, the reflation bet is back on track with around 500 mn.
7. China Ups the Ante with Relaxation of Property Curbs
- Property restrictions removed in major cities, continuing the gradual process from the last 6-8 months
- A BIG signal to the market and the public with the relaxation of curbs in Beijing
- China’s factory output continues expansion and travel data positive for consumption
8. The Week At A Glance: ISMs, NFP, FOMC & QRA to put even more pressure on USD rates?
- The QRA announcement will be released in a few hours (on Monday) while the issuance details will be released on Wednesday.
- We generally don’t see any reasons to fear the Q2 issuance as a strong tax-season has been confirmed with the TGA standing at 941bn dollars, which is almost 200bn above the target range.
The TGA also printed above the target range going into Q2, making it unlikely that the US Treasury turns the heat on in the issuance pace. We see a small downgrade of the Q2 number (202bn) as the most likely.
9. Energy Cable: The recipe for another summer of exploding energy prices (in Europe)
- Energy markets in Europe still fragile. A hot summer and manufacturing rebound could set prices going.
- Manufacturing cycle is improving everywhere but in Germany. Cost-push inflation showing up in drilling now
- This week we want to talk about the ingredients needed for another summer of exploding electricity and gas prices.
10. Great Game – Could Biden Have Even More to Fear from Trump’s Trial?
- Welcome to this week’s Great Game where we will catch up on events in the Middle East and also cover the Trump trial that’s currently taking all the attention in the US Election race.
- Situation:Israel responded very lightly to the massive Iranian attack on April 13th and we haven’t heard any more from that conflict over the past week.
- As we predicted, Israel’s response was “next to nothing” and clearly acknowledged the de-escalatory nature of Iran’s strike. I know some took offense to that analysis, but it is genuinely our assessment and I think events since has reinforced that view.
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.
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1. Why Tesla Shows Post Results Rebound of over 10%?
- Again, Tesla reports a 1Q24 sales with 4% miss but post market share price up more than 10% for 6 reasons. 1. Gross margin was stable on 15% sales drop;
- 2. ASP was stable; 3. Affordable EV on track for 2025; 4. Factory expansion to slow; 5. Optimus to sell end of 2025; 6. 2024 EV shipment higher than 2023.
- Near term risks to remain: 1. When will margin trough? 2. Why bother to buy EV if 2nd hand market collapsing? 3. Will Robotaxi/FSD bring in meaningful sales/profits soon?
2. TSMC Just Provided Substantial Visibility into Their Long-Term Growth Estimate; ASML Adds Color
- TSMC and ASML reported 1Q24 results last week; both stocks have fallen post results, impacted by global concerns despite a strong outlook for these two leaders into 2025E.
- TSMC guided for strong growth not just in 2024E, but if one digs into management’s comments, they actually provided strong visibility into their 2028E internal revenue expectations.
- For ASML, its EUV product business is the key indicator to watch. We believe TSMC shares will continue to re-rate even through a period of global economic softness.
3. TSMC, ASML, VAT Group, and Alphawave Earnings
- It’s time for the main event: earnings are upon us. As is customary, let’s start with TSMC, move to ASML and Alphawave, and then discuss VAT Group.
- TSM revenue is above guidance, gross margins are a bit ahead of the midpoint, and operating margins are at the high end of guidance.
- First, while this is a good result, semiconductors are due for a correction. I wrote about this in March, and SOXX has quietly crept downwards since then.
4. Taiwan Dual-Listings Monitor: TSMC Breaks Down From Extreme, UMC Discount Near Historical Low
- TSMC: +9.2% Premium, Major Breakdown From Previous Historically Extreme High
- UMC: -1.9% Discount, Is Near Low End of Historical Range
- ASE: +10.4%; ADR Short Interest Jumps to Very High Level vs. History
5. Intel Is Shifting Focus to Products, Away from Manufacturing/Foundry; Worth to Follow?
- Intel misses 1H24 market consensus again, post market correction of over 7%. Can shifting focus away from foundry/manufacturing help?
- Is the breakdown change for future spin off/IPO of foundry/manufacturing, and non focus businesses like Altera and Mobileye positive?
- We disagree Intel foundry to breakeven in two years; we see AI product lagging behind competitors and non AI server CPU being squeezed by AI server GPU and GPU/CPU integration.
6. Lasertec (6920 JP): Further to Fall
- Lasertec has dropped more than 20% in the past week and a half, but is still selling at more than 60x EPS guidance for FY Jun-24.
- Weak orders at ASML, disappointing guidance from TSMC and doubts about Intel’s equipment purchases cast doubt on Lasertec’s growth potential.
- Between December 2021 and June 2022, Lasertec’s share price dropped by more than 50%. Wait for Q3 results before reaching for a falling knife.
7. Q124 Tesla & Meta: Compare & Contrast
- Tesla had a dismal quarter but Musk told a fairy tale about RoboTaxis and Robots and the markets rejoiced
- Meta had a beat & raise quarter but Zuckerberg told the truth about the fact that it would take time to monetise their AI investments and the markets recoiled
- Markets are on edge and big moves either way can be expected post earnings
8. SK Hynix: AI Is Still the Main Driver
- SK hynix earnings were announced, with a 10% Q/Q revenue increase driving a 734% increase in operating profit
- Although the company cited AI demand as the basis for this, its DRAM revenues, which are very AI dependent, increase very little
- NAND SSD demand increased significantly, with a 30% increase in revenues, largely attributable to price increases
9. Taiwan Tech Weekly: Semi/AI Darlings Slammed; TSMC Supply Chain Insights; ASE Wins Key IPhone Order
- Taiwan Tech Shares Fell Sharply Along With Global Selling — Semiconductor and AI Names Most Exposed
- What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?
- ASE Technology Holding (3711 TT) Wins iPhone 16 System-in-Package Order from Apple (AAPL US)
10. Memory Monitor: What SK Hynix Sees For PC and Server Markets Ahead; TSMC’s Strength Vs. Samsung
- SK Reports Massive Margin Rebound; Nanya Tech’s Financial Performance Appears Relatively Weak in Perspective
- AI Applications Now Translating Into Rising Solid-State Memory (SSD) Demand
- SK Povided Positive Color for Taiwan PC Names; New TSMC Collaboration Highlights TSMC Strength vs. Samsung
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. HD Hyundai Marine Solution: IPO Book Building Results Analysis
- HD Hyundai Marine Solution’s IPO price has been determined at 83,400 won per share, which is at the high end of the IPO price range.
- A total of 2,021 institutional investors participated in this IPO book building. The demand ratio was 201 to 1. HD Hyundai Marine Solution will start trading on 8 May 2024.
- Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, which represents an upside of 18% from the IPO price.
2. A Review of Post IPO Price Performance of Top 13 IPOs in Korea Past 8 Months
- In this insight, we review the share price performances of the top 13 IPOs (in terms of market cap) in Korea in the past 8 months.
- We review the the share price performances over different time periods (1 day, 1 week, and 1 month). We also analyze the demand ratios and lock-up periods of the IPOs.
- On average, 12.7% of the IPO shares are under lockup periods for the 13 companies listed below. HD Hyundai Marine Solution IPO has 45.8% of shares under lock-up.
3. Krafton Placement – Stock Has Been Doing Well, Momentum Remains Strong
- SK Square is looking to raise around US$198m via selling 2.1% of Krafton (259960 KS).
- The stock has been doing well over the past few months and its earnings and price momentum remain strong.
- In this note, we will run the deal through our ECM framework and talk about the recent updates.
4. ECM Weekly (22nd Apr 2024) – Kokusai, J&T, Voda IDEA, ChaPanda, Cloudchain, Johor Plant, Aadhar
- Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
- On the IPO front, Sichuan Baicha Baidao Industrial (2555 HK)‘s deal launch made it the first large HK IPO for this year.
- On the placement front, Vodafone Idea (IDEA IN) deal was live. Also there are lockup expiries in Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) coming up.
5. Sichuan Baicha Baidao IPO Trading – Tepid Demand, While Peers Have Corrected
- Sichuan Baicha Baidao Industrial (2555 HK) (SBBI) raised around US$330m in its HK IPO.
- SBBI sells new-style tea drinks through its ChaPanda stores. According to F&S, SBBI ranked third in China’s new-style tea shop market with a market share of 6.8% in FY23.
- We have looked at the company’s performance and valuations in our past note. In this note, we talk about the trading dynamics.
6. Horizon Robotics Pre-IPO – The Negatives – Large Part of the Growth Stems from Its JV
- Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
- 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 not-so-positive aspects of the deal.
7. Horizon Robotics Pre-IPO – The Positives – Rapid Revenue Growth
- Horizon Robotics is looking to raise US$500m in its upcoming Hong Kong IPO. The bookrunners on the deal are GS, MS and China Securities.
- 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 positive aspects of the deal.
8. China Resources Beverage (Holdings) Pre-IPO Tearsheet
- China Resources Beverage (Holdings) Company Limited is looking to raise US$1bn in its upcoming Hong Kong IPO. The bookrunners on the deal are BofA, BOCI, Citic, and UBS.
- China Resources Beverage manufactures and sells packaged drinking water and RTD soft beverages in China.
- According CIC, it was the second largest company in the packaged drinking water market in China and the largest company in the purified drinking water market in 2023.
9. OceanaGold Philippines IPO – Updated Thoughts on Valuation – Too Expensive Even at This Price
- OceanaGold Philippines (OGP PM) is looking to raise up to US$106m in its Philippines IPO.
- OceanaGold Philippines (OGPI) is a producer of gold and copper in the Philippines, and a subsidiary of OceanaGold Corporation, a Toronto Stock Exchange (TSX) listed gold mining and exploration company.
- In our previous note, we talked about the company’s historical performance and shared our quick thoughts on valuation. In this note, we share our updated thoughts on valuation.
10. 99 Speedmart Holding Pre-IPO – Consistent Network Expansion, Although Margins Remain Well Below Peak
- 99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$300m in its upcoming Malaysia IPO.
- 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
- In this note, we look at the firm’s past performance.
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. RMB Dual Counter Trading Is Coming – This Changes AH Relationships
- A week after the State Council issued “Several Opinions” (关于加强监管防范风险推动资本市场高质量发展的若干意见》), the CSRC announced Friday five capital market cooperation measures with HK Connect. The goals are to increase cross-border investor flows.
- They include: a broader range of ETFs in Connect, including REITs in both directions, include RMB counters in Southbound, improve mutual recognition of funds, increasing China IPOs in Hong Kong.
- RMB Dual Counters Southbound-eligible will take time. They have some homework, but it is on the “To Do” list “as soon as possible and smoothly.” Watch impact on H/A Pairs.
2. Significant Developments Emerged Today for Korea’s Value-Up
- Deputy PM Choi Sang-mok commits to aggressively pursue separate taxation of dividend income, marking a shift towards concrete action for value-up policies.
- Ever since the introduction of the Value-up policy earlier this year, the primary incentive championed by the local capital market has been the separate taxation of dividend income.
- Hence, the government’s official commitment to this marks a crucial step in reshaping the Value-up momentum.
3. Merger Arb Mondays (22 Apr) – Shinko, Inageya, C&F Logistics, Hollysys, Azure, Qantm IP, Tietto
- 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: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), Azure Minerals (AZS AU), QV Equities Ltd (QVE AU), Hollysys Automation Technologies (HOLI US), Shinko Electric.
- Lowest spreads: Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU), Newmark Property REIT (NPR AU), Lawson.
4. IDX30/LQ45/IDX80 Index Rebalance: BIG Flows for Some Stocks
- There are 2 constituent changes for the LQ45 Index and 6 constituent changes for the IDX80 Index at the rebalance to be implemented at the close on 30 April.
- The largest passive inflows are expected in Amman Mineral Internasional (AMMN IJ), Indosat Tbk PT (ISAT IJ), Bank Rakyat Indonesia (BBRI IJ) and Merdeka Copper Gold Tbk PT (MDKA IJ).
- With only 4 days to implementation, there could be relatively big moves on stocks that have large flow/impact from passive fund trading.
5. Activist Palliser Re-Engages on Keisei Electric (9009) But The Oppty Remains Unconvincing
- Last October, activist Palliser Capital launched a campaign (presentation) on well-known “stub trade” Keisei Electric Railway Co (9009 JP) with a stake of about 1.6%.
- The proposal? Monetise a decent stake in Oriental Land (4661 JP), repurchase shares, and invest for growth. Keisei responded 6-8 weeks ago with a buyback and 1% OLC stake sale.
- I thought that was time to bail. That was it. But now, Palliser has re-engaged. Today a press release (Japanese/English) and a Letter to the Board.
6. Jardine Cycle & Carriage Is A Short
- Jardine Cycle & Carriage (JCNC SP)‘s current implied stub value is around its highest-ever level.
- The simple ratio of JCNC/Astra International (ASII IJ) is around its highest level outside the 2008 GFC.
- A weak Indonesian rupiah is likely a factor. Still, JCNC is trading rich to its NAV. A takeover from parent Jardine Matheson Holdings (JM SP) is idealistic.
7. Japan – Increase in Shorts & Potential Passive Selling in May
- There are a bunch of stocks that have underperformed the Nikkei 225 (NKY INDEX) and their peers and could be deleted from global passive portfolios in May.
- The deletion from passive portfolios will lead to a liquidity event at the end of May where passive trackers will need to sell multiple days of ADV.
- Shorts have been built up on all the stocks over the last few months and the extent of the positioning varies across stocks.
8. 18yrs Later, Shin-Etsu Chem Takes Out Sub Mimasu Semi (8155) – Cheap But Whatchagonnado?
- Shin Etsu Chemical (4063 JP), owner of a 44% stake in Mimasu Semiconductor Industry (8155 JP), has announced a Tender Offer to take out minorities in Mimasu.
- This is not surprising. They bought in 19 years ago, raised to 40+% 18yrs ago, then waited. Finally, we have a deal. But it’s too cheap.
- Shin-Etsu starts with ~45%, and crossholders and the chairman get it to 52%. Then they need a bit to get them to 67% but it should be straightforward.
9. HSCI Index Rebalance Preview: Robosense (2498 HK) Could Be Added in June
- There were only 12 new listings on the Main Board of the HKEX (388 HK) in the first quarter of the year. More than half the listings were in March.
- Of those stocks, we only see Robosense Technology (2498 HK) having a chance of being added to the HSCI in June and then into Southbound Stock Connect.
- There is a big lock-up expiry for Robosense Technology (2498 HK) in July and that should keep the stock under pressure.
10. BHP/Anglo American: A Decarbonising Solution
- BHP (BHP AU)‘s all-scrip unsolicited Offer for Anglo American (AAL LN), zeroes in on AAL’s copper assets as demand for the metal increases for use in EVs and renewable power.
- The proposal has been labelled highly opportunistic by some shareholders and South African politicians. And that the value of AAL’s Chilian/Peruvian copper mines are obscured by its sprawling business interests.
- The Offer remains conditional and non-binding. A transaction hinges off AAL spinning off its South African iron ore and platinum businesses. Expect AAL to reject terms, but remain engaged.
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. Steno Signals #96 – A major devaluation of the CNY could be imminent
- China is preparing something BIG. That seems more and more obvious to me by the week now. The question is what that BIG thing is.
- China reported a strong 5.2% YoY Q1 despite troubles on the ground, local financial institutions are hoarding bonds because of a weak credit demand growth picture and the Chinese authorities seem to be stockpiling like crazy.
- We have seen plenty of tin-foil theories speculating in the reasons behind those Chinese actions, but maybe China is just preparing a major one-off devaluation of the CNY?
2. Hong Kong: The Glass Is Half Full, Time to BUY Beta
- HSI has now closed above its 3 year downtrend and is poised to advance to its next resistance level
- International brokers finally turning more bullish on the market as the US, Europe and Japan markets turn down
- High beta sectors are set to outperform as global investors reallocate to the cheapest AND 2nd largest tech sector in the world
3. Back Testing the End of Mandatory Lock-Up Periods Monthly Data in Korea
- In this analysis, we provide a back testing analysis of the end of mandatory lock-up periods monthly data in Korea in the past six months.
- All in all, this end of mandatory lock-up period monthly data continues to provide some alpha generating results.
- In the past six months, they have tended to work better in periods when KOSPI declines rather than in periods when KOSPI rises.
4. Will the Ban on Short Selling Stocks in Korea Extended Beyond End of June 2024?
- On 6 November 2023, the Korean government announced that it will temporarily ban short selling stocks until end of June 2024.
- On 25 April 2024, the FSS unveiled for the first time its plan to build a computer system to prevent naked short selling called NSDS (Naked Short Selling Detection System).
- There is a high probability that the the temporary ban on short selling which currently lasts until end of June 2024, could be extended further to 2Q 2025.
5. Great Game: Despite New Aid, Ukraine will lose within 12 months. Plan Accordingly!
- With all eyes on the Middle East for the past weeks and months, we haven’t focused as much on the ongoing war in Ukraine.
- In the big picture, not much has changes on the frontline despite continued heavy losses and a Russian election.
- But now I think it’s time for investors to re-adjust their assessment of the war and consider contingencies for the path ahead.
6. HSCEI Outperformance Is Asia’s Best Kept Secret
- China Enterprise Index (HSCEI) is now the top performing index in Asia on a USD basis
- HSCEI also trades at the lowest P/E multiple in the Asia
- High probability of divergence as US and Europe markets turn down
7. Shipping Watch: No news is bad news (for inflation)
- Headlines in the beginning of 2024 were dominated by shipping and logistic troubles but over the last months that has almost died completely down.
- With “no news” we continue to see spill-overs to goods inflation in coming months.
- In general freight rates have been falling since Jan high but still remain some 50% above 2023 levels
8. Active GEM Funds: Extremes in Positioning & Momentum
- This report identifies stocks at the extremes of their positioning or momentum ranges within our active Global EM fund universe.
- We have pinpointed eight stocks either at their historical positioning extremes or undergoing significant changes in fund ownership, providing detailed ownership profiles for each.
- HDFC Bank loses steam after merger, Nu Holdings surges to new highs, POSCO plunges to new fund ownership lows.
9. The week at a glance: Time for the BoJ to step up, while soft PCE numbers may fool some..
- Welcome to our weekly “the week at a glance” publication where we dissect the most important central bank meetings and key figure releases in a short and sweet format.
- This week we focus on PCE prices, European PMIs and the Bank of Japan.
- Event 1: European PMIs (Tues): A lukewarm, but positive, surprise.
10. Bollinger Bonds
- In our April monthly, we highlighted the combination of fading impulse for momentum stocks (principally tech) and the need for tax related selling in the trading/retail space coming against a background of a correction in the short term bull phase within the longer term bond bear market.
Since the beginning of March, US 10 year yields have gone from 4% to around 4.6%, unwinding the Fed Pivot language that emerged to ‘explain’ the earlier rally.
In our view that was an unlikely ex-post narrative, as is the one emerging now that the Fed will not cut at all.
SINGAPORE, 22 April 2024: Smartkarma, the independent investment research network, is pleased to announce significant additions to its roster of Insight Providers.
The following additions further enhance the breadth and depth of global coverage available on Smartkarma, providing subscribers with actionable and data-backed insights, and offering a more comprehensive view of the global economy.
- Sankalp Singh, Founder, AceGama Advisors
Starting as a buy-side analyst in 2004, Sankalp Singh advanced to senior roles in investment research and options trading at FX Concepts in New York. In 2012, he founded AceGama Advisors in India, focusing on derivative strategies in multiple asset classes. Their approach combines proprietary analytics and data systems to inform their trading decisions and strategies and have started developing a research product on the NSE uniquely for Smartkarma. - David Mudd, Asian Hedge Fund Manager, L/S Equity, Macro
David Mudd, a veteran hedge fund manager based in Hong Kong, brings over 20 years of experience managing Asian Long/Short Equity funds. His approach blends macroeconomic analysis with detailed, bottom-up analysis, augmented by advanced technical analysis to identify thematic investment opportunities across Asia-Pacific. - Mark Jolley, Lead Analyst, Transparently.AI
With nearly four decades of experience, Mark Jolley has a storied career in investment strategy, advising major global funds and accurately predicting significant economic downturns. At Transparently.AI, he now leads efforts to employ AI to detect early signs of accounting manipulation and fraud. Their system focuses on uncovering potential corporate failures early, showcasing high accuracy in predicting high-profile fraud cases akin to Enron or Wirecard. - Rikki Malik, Analyst/PM in Asia-focused, long-short, equity hedge fund
With a 12-year background in Long/Short Equity and as a Chartered Accountant, Rikki Malik is a seasoned professional with a comprehensive top-down macro analysis approach. His expertise allows him to seamlessly transition into selecting investment themes and stocks that promise value. This method helps him navigate the complexities of the Asian financial landscape, developing strategic investment insights. - Mohshin Aziz, Global Mobility/Transport, L/S Equity
Specializing in aviation, Mohshin Aziz has extensive experience across continents and a deep focus on the aviation industry, covering airlines, travel tours, airports, airport retail & services, OEMs, online travel agents, aircraft lessors, air cargo/logistics in the APAC region. He leverages an active watchlist of 190 companies across 41 countries to identify compelling investment opportunities in the cyclical aviation sector.
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About Smartkarma
Smartkarma is the independent investment research network that provides differentiated, independent analysis on companies, markets, and industries across the world. Smartkarma’s online platform empowers asset managers and private accredited investors who want to access market-moving, differentiated intelligence; corporates who need to maximise their outreach; and analysts who wish to reach global investors with their written reports and bespoke services. In 2021, Smartkarma received the Knowledge Enterprise Award at the Singapore FinTech Festival Global FinTech Awards. Smartkarma is backed by notable investors such as Sequoia Capital, SGX, Wavemaker Partners, Jungle Ventures, and Enterprise Singapore. Learn more at smartkarma.com
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. TSMC. How To Turn Chicken Salad Into Chicken Sh*t
- Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ. Maintained full year 2024 outlook
- Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
- SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!
2. What Is TSMC Telling Us About Semi Supply Chain Stories at Its Investor Conference?
- TSMC reiterates 2024 sales y/y growth of 20-25% but revises down 2024 global semiconductor y/y sales from over 10% to 10% and global foundry sales growth from 20% to 15-19%.
- No more Moore’s Law: After 3 years ramp up gap between N5-N3, TSMC confirms 10-11 quarters of ramp up gap between N3 and N2 due to longer production cycle.
- Driven by stronger digital consumer (33% q/q), HPC (3% q/q), IoT (5% q/q) sales but weaker smartphone IC (-16% q/q), TSMC reports 1Q24 sales decline of only 5% q/q.
3. Multiple Positive Catalysts Ahead Of Q124 Earnings Season
- PC, Smartphone Unit shipments both registering YoY growth in Q124
- TSMC will beat guidance & likely guide Q224 up ~5% QoQ. Samsung’s pre earnings showed strong recovery in operating profit
- Server unit shipments are on a ~17% YoY growth run rate
4. Taiwan Tech Weekly: Apple Suppliers Slump on IPhone; PC Volumes Back to Growth; TSMC & ASML Results
- Apple supply chain names are falling due concerns about weak iPhone shipments. Global PC shipments returned to growth as per IDC data.
- TSMC and ASML results this week and will be cruical for the market. Can TSMC rally again to achieve new highs or will it continue trading lower?
- Nanya Technology sees DRAM Industry pricing rising through 2024E; but is underperforming financially.
5. TSMC (2330.TT; TSM.US): 2Q24F Sales in Line, 2024F Is Lowering the Growth Target Below 25% YoY
- Declaring a slower recovery for mature nodes was an outlier, indicating that Vanguard’s recovery progress might be slower.
- Apple’s iPhone is expected to be the focus for N2 production in 4Q15F.
- TSMC’s long-term gross margin is set at 53%, signifying a few key points.
6. ASML. Maintaining 2024 Guidance Despite Sharp Decline In New Bookings
- ASML reported Q124 revenues of €5.3 billion, in line with expectations, down 27% QoQ and down 21% YoY.
- Guided Q224 for €5.95 billion, down ~23% YoY. This implies H224 will have to be much stronger than H124 in order to maintain full year 2024 guidance of flat YoY
- New order intake was €3.6 billion, down significantly from the €9.2 billion in the prior quarter, and challenging the narrative of a strong growth year in 2025
7. Novatek (3034.TT): 2Q24F Keeps Growing, and 3Q24F Shall Grow Significantly.
- Novatek Microelectronics Corp (3034 TT)‘s sales in 1Q24 showed a 6.2% YoY growth, implying a positive growth outlook for 2024F compared to 2023.
- Looking ahead to 2Q24F forecasts, the anticipated orders from United Microelectronics Corp (2303 TT) could have a positive impact on Novatek’s 1Q24 sales.
- A significant growth is expected after 2Q24, particularly following Novatek’s qualification for the Apple (AAPL US) iPhone 16.