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.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. ECM Weekly (10th June 2024) – Webtoon, Shift Up, QuantumPharm, Guzman, Kakaopay, Telix, Yankuang
- 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, we looked at Guzman Y Gomez (0817833D AU), QuantumPharm (QUP HK) and Webtoon Entertainment (WBTN US) this week.
- On the placement front, there were a few deals across Hong Kong, Australia and Japan.
2. Lalatech IPO: Using YMM:US as Main Comp, Equity Valuation of US$11-12 Bn (Or More) Justifiable
- Based on returns and margins, US-listed Full Truck Alliance is best comp
- Lalatech probably deserves premium valuation multiples vs Full Truck Alliance
- An equity valuation of US$11bn+ justifiable; will investors look at recent flops?
3. Atour Lifestyle Holdings Placement – Well Flagged Deal, past Selldowns Have Done Well
- Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$168m through a secondary selldown.
- This will be the third selldown by Legend Capital in just over a year’s time. Hence, the deal is well flagged.
- In this note, we will talk about the placement and run the deal through our ECM framework.
4. Guzman Y Gomez IPO – Peer Comp and Thoughts on Valuations
- Guzman Y Gomez (GYG) now plans to raise US$221m, an increase from its earlier target of US$160m, in its 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 in our past notes. In this note, we talk about valuations.
5. Shift Up IPO – Refiling and Other Updates, Not Ranked at the Top Anymore
- Shift Up (462870 KS) plans to raise up to US$320m in its South Korean IPO.
- Shift Up is a South Korean games developer, which as released three games so far for the global markets.
- We have looked at the company’s performance, undertaken a peer comparison and talked about valuations in our past notes. In this note, we talk about the refiling and other updates.
6. Mao Geping Cosmetics Pre-IPO – Riding on the Founder’s Reputation
- Mao Geping Cosmetics is looking to raise around US$300m in its upcoming Hong Kong IPO.
- Mao Geping Cosmetics (MGC) operates in the premium beauty segment. Operating via its two brands, MAOGEPING and Love Keeps, MGC offers a wide range of color cosmetics and skincare products.
- In this note, we look at the company’s past performance.
7. Clarifying BRV’s Post-Block Deal Lockup Conditions Involving Ecopro Materials
- In Korea, the lockup period for block deals is set by the seller and underwriters, not by law, and can be adjusted if both parties agree.
- BRV obtained consent from Goldman, UBS, and KB for a second block deal after assessing that many initial buyers had sold their shares.
- Understanding this lockup structure provides key insights into predicting when the next block deal might occur.
8. Webtoon Entertainment IPO: The Bull Case
- Webtoon Entertainment (WBTN US), a global storytelling platform, seeks to raise up to US$500 million through a Nasdaq IPO.
- Webtoon is the leading web-comic player in all its major geographies, including Korea, the US and Japan. Naver Corp (035420 KS) and LY (4689 JP) are the primary shareholders.
- The bull case rests on a large TAM, rising monthly active users, strong constant currency growth supported by monetisation initiatives, a shift to profitability, and cash generation.
9. Webtoon Entertainment Pre-IPO – Peer Comparison – Relatively Small in Operating Scale as a Platform
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In our previous note, we talked about the company’s historical performance. In this note, we undertake a peer comparison.
10. QuantumPharm IPO Trading – Lukewarm Insti Demand Combined with a Tight Float at Listing
- QuantumPharm (QUP HK) raised US$126m from its Hong Kong IPO.
- QuantumPharm is a R&D platform, utilizing quantum physics-based first-principles calculation, advanced AI, high-performance cloud computing, and scalable and standardized robotic automation to provide drug and material science R&D solutions.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and 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. Unsolicited Partial Offer for 19% of Sun Corp (6736 JP) – Play on Cellebrite from SPAC Sponsor
- Sun Corp (6736 JP) for years has been a play on its investment holding in Cellebrite DI (CLBT US), brought to market in a $2.4bn SPAC deal announced 30Aug2021.
- The SPAC entity was an entity called TWC Tech Holdings II Corp (TWC = “True Wind Capital”). The next day, Cellebrite DI (CLBT US) was born, trading up to US$11.00+.
- Sun Corp (6736 JP)‘s value realisation path had begun. Today, a True Winds entity announced a Partial Tender Offer – unsolicited, unannounced previously – on Sun Corp, for 19.0%.
2. Mandatory Block Deal Pre-Announcement Requirement in Korea Starting 24 July: Impact on Block Deals
- Starting 24 July, there will be a mandatory pre-announcement requirement for block deal sales in Korea.
- In other words, the major shareholders of the Korean companies need to report publicly prior to their actual sales of their stakes in these companies through block deal sales.
- The potential block deal sales candidates could continue to underperform on average the companies that are selling these stocks in potential block deal sales in the next several weeks.
3. Yuanta/P-Shares Taiwan Div+ ETF Rebalance: One Surprise as Round-Trip Trade Hits US$2.3bn
- There are 5 adds and 5 deletes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June with implementation taking place from 21-27 June.
- The constituent changes and capping changes result in an estimated one-way turnover of 12.8% and in a one-way trade of TWD 37.2bn (US$1.15bn).
- The changes are in line with our forecasts with one exception. Uni President Enterprises (1216 TT) was not added and Yulon Finance (9941 TT) was added instead.
4. [JAPAN ACTIVISM] Palliser Gets ISS/GL Nods for Keisei AGM Proposals – How Will The Swing Vote Swing?
- In Oct2023, activist Palliser Capital launched a campaign on well-known “stub trade” Keisei Electric Railway Co (9009 JP) (1.6% stake). The proposal? Monetise OLC, invest for growth, be shareholder friendly.
- Keisei responded 3+mos ago: buyback and 1% OLC stake sale but said OLC would remain an equity affiliate. Palliser re-engaged in late April (Japanese/English and two AGM agenda items). Keisei objected.
- Palliser made their case, Glass Lewis and ISS support Palliser. Palliser likely cannot win. The goal here isn’t to win though. It is to get enough to raise management consciousness.
5. Helios Techno Holding (6927) TOB – Today Could Be The Day
- Rs Technologies (3445 JP) announced a TOB on Helios Techno Holding (6927 JP) 12 days ago. At a 74% premium, but that was too cheap. I discussed it here.
- Shares went limit up for two days then traded huge volume the first full day last Wednesday. The lowest trade so far in open trading is 3% through terms.
- 57% of Shares Out Ex-Treasury have traded in five days. Anyone who bought 5% on Day 1 has to file a Large Shareholder Report today.
6. Technology Select Sector Index (XLK US): NVIDIA Could Flip Places with Apple; HUGE Flows
- The Technology Select Sector SPDR (XLK US) ETF tracks the Technology Select Sector Index and has an AUM of over US$70bn.
- NVIDIA Corp (NVDA US) has broken through the US$3tn market cap barrier and is very close to Apple (AAPL US) in terms of free float market cap.
- If NVIDIA ranks higher than Apple on free float market cap at the close on Friday, there could be huge inflows to NVIDIA and outflows from Apple a week later.
7. Fancl (4921) TOB – Kirin (2503) Does the Inevitable and Takes Out Minorities. Lightish But…
- Kirin Holdings (2503 JP) bought a 33% stake from the founder and several others in August 2019. Five years later, they are coming back for the rest.
- The price here is ¥2,690/share which is a 42.7% premium from yesterday’s close. Kirin paid 20+% more in 2019. Earnings fell, but they paid 37x NTM. This is 32x.
- This is lightish… but… this should get done. Activism would be difficult. There are enough shareholders who should be OK getting out. This should trade tight.
8. Sciclone Pharmaceuticals (6600.HK) Privatization Update – Some “Unstable Factors” During Voting
- Some shareholders have confirmed to be acting in concert at the Court Meeting, but long-term investors may vote against the privatization because they are not satisfied with the Cancellation Price.
- The success rate of SciClone’s privatization is lower than that of China TCM and L’Occitane. If fails, there’s a high probability that the share price will fall back to HK$14/share.
- The current share price cannot provide decent returns. Together with exchange rate risk, potential failure risks, etc., there’s no need for investors to take risks at this share price level.
9. Sun Corporation (6736 JP): True Wind’s Hostile Partial Offer
- True Wind has launched a hostile partial tender offer for Sun Corp (6736 JP) for a minimum (3.8m) and maximum (4.2m) shares at JPY4,400, 19.2% premium to the undisturbed price.
- The offer was prompted by frustration with the Board’s lack of urgency in closing the disparity between Sun Corp’s market cap and the value of its Cellebrite DI (CLBT US) stake.
- The Board has three options: do nothing (low probability), find a white knight bidder (high probability), or commit to selling/distributing its Cellebrite stake (medium probability).
10. Specifics of Korea’s Official Short-Selling Regulations, Announced This Morning
- Limiting extensions to four times after a 90-day repayment and mandating repayment after 12 months increases short-selling costs. The revision omits limits on position-holding cycles, disappointing retail investors.
- Today’s release did not set a timeline for short-selling resumption. The ruling party has requested it after March 2025, with key officials present suggesting next year March resumption.
- Regarding the electronic system implementation, core content aligns with the draft, but newly revealed institution numbers add a new perspective. Uncertainties remain on integrating overseas stock borrowing into the system.
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. Ban on Short Selling Stocks in Korea Extended Until March 2025
- On 13 June, the Korean government announced that it will extend a ban on short selling stocks in Korea until end of March 2025.
- For now, the government has not given a 100% go-ahead on the end of the ban on short selling stocks starting 1 April 2025.
- However, in our view, the government is likely to allow short selling stocks in Korea once again, sometime in 2Q 2025.
2. Steno Signals #103: A blood-bath in metals in July!?
- Happy Sunday from a windy Copenhagen!We’ve been yammering about the copper buildup on Chinese exchanges for months.
- Was it a strategic decision to hoard copper reserves?
- Were the Chinese waiting to offload this copper until the CNY devalued, or a result of the physical demand in the Chinese economy nosedived off a cliff?
3. EM Watch: Is China making a fool out of Western metals speculants?
- Hot on the heels of watching Powell’s press conference, which pushed back slightly against renewed rate-cut optimism, it’s clear that the Fed is playing a cautious game.
- Despite the soft inflation data this morning, they significantly changed the dot plot.
- They likely believe the CPI report was noisy due to a sudden deflation in transportation.
4. Malaysia Economics: Is “Digital Tiger” Malaysia About to Roar Again?
- After a period of economic and political turbulence, Malaysia is now re-entering the spotlight, performing admirably in attracting technology-focused investments.
- The success in luring semiconductor and data centre investments is not down to pure luck; policymakers have worked hard to ensure that the country friendly to global tech business.
- If momentum on business investments and policy reform can be maintained, the country may be on the verge of a virtuous cycle that helps it escape the middle-income trap.
5. The Week at A Glance: Everything you need to know ahead of the FOMC and CPI
- Welcome to our concise weekly overview of key events, expectations, and positioning strategies.
- This week, we focus on the Federal Reserve meeting, US inflation data, and the crucial Bank of Japan meeting.
- As usual, the most crucial forward-looking inflation evidence is found in the NFIB report released ahead of the CPI report.
6. US CPI Review – Admittedly a soft report, but NOT the new normal
- The CPI report today was admittedly softer than our initial hawkish forecasts, with headline coming in unchanged at 0.0% MoM vs 0.1% expected while core came in to the soft side of 0.2% MoM vs 0.3% expected.
- Our anticipation of rising goods-flation didn’t play out fully, and while shelter re-accelerated as we forecasted, core services disinflated heavily in May due to auto insurance costs declining.
- The main culprit behind the dovish CPI report was the sudden drop in Motor Vehicle Insurance (chart 2.b), which has so far been printing at trend MoM levels around 1-1.5%, lifting headline inflation by 0.03-0.05% consecutively.
7. Portfolio Watch: Good news = no cuts = bad news (for metals)
- The latest job report just dropped, and it’s music to our ears—solidifying our thesis once again.
- A few highlights:Construction Hiring: Markedly up again.
- This is a strong cycle signal, indicating robust economic activity.
8. “Wham, Bam, Thank You Ma’am” – Commodities Get Slammed
- “Strong” non-farm payrolls number a catalyst for another hit to commodities
- Oil positioning is now very supportive for prices with non-commercial buying levels close to five-year lows.
- Copper may have more short-term downside with speculative interest still high
9. Macro Regime Indicator: Up, Up, Up still!
- In May we concluded that: “In May, our models hint of an “Up,Up,Up” environment in inflation, growth and liquidity, which is a decently positive indicator for risk assets, but also for broader reflationary trades returning through the month and into June.” The above conclusion has held true to a large extent and we went against the prevailing consensus driven by the “slowdonistas” when needed during the latter parts of April.
- For June/July, we see an increasing liquidity trend from right about now, while the growth- and inflation cycle cyclically heats up still, while some lagged effects pull in the opposite direction.
- From a market perspective, the overwhelming conclusion is that we will continue in an up, up, up macro regime referring to the liquidity cycle, growth cycle and cyclical price/inflation cycle.
10. Quant Signals: USDMXN
- The case for a stronger MXNMXN sold off massively following the Mexican election last week but we still view the MXN as a clear-cut ‘trade balance’ play.
- As long as the trade ties between China and the US increasingly necessitate a ‘value-add middleman,’ Mexico remains in an advantageous position, regardless of whether the president is Sheinbaum or Obrador.
- Our PCA model reveals that USDMXN is trading very rich compared to macro factors.
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. Lasertec. Colossal Fraud Or Multi-Award Winning Mask Inspection Supplier?
- Activist short seller Scorpion alleges Lasertec is a “colossal fraud” and “ticking time bomb”
- Most of their allegations relate to problems with Lasertec’s EUV mask inspection tools
- Lasertec achieved Intel’s distinguished supplier ward for the past six years and last December landed an award from TSMC for “Distinguished EUV Mask Inspection and Metrology Collaboration”. What gives?
2. TSMC (2330.TT; TSM.US): ASML’s High-NA EUV Machine Will Not Be Required Until 2027 at TSMC.
- Taiwan Semiconductor (TSMC) – ADR (TSM US) is planning to launch its 2nm in 2025.
- TSMC is expected to acquire one High-NA EUV machine this year for R&D purposes, but it will not be used for commercial production.
- TSMC is expected to increase the cost of its Chip-on-Wafer-on-Substrate (CoWoS) package by around 15% in 2H24.
3. The Internet as You Know It Is Dying
If you pay attention, the Internet has been a bit different lately. Many of the attributes and ways we once interacted with the internet is changing.
I probably noticed it the most when one of my favorite websites, subredditstats.com showed me this image the other day.
Reddit’s free API is closing. But so is X (formerly Twitter), and other properties all around the internet are slowly adding limits and closing their doors.
4. Vanguard (5347.TT): Setup 12″ Fab in Singapore With 60% Stake, with NXP Investing Remaining 40%.
- Vanguard announce the establishment of a 12” Fab in Singapore with 60% stake, with Nxp Semiconductors Nv (NXPI US) will invest remaining 40%.
- The nodes produced will span from 40nm to 130nm, encompassing mixed-signal, PMIC, and analog ICs to support automotive, industrial, consumer, and mobile applications.
- Vanguard will uphold a healthy cash balance, along with large debt and a follow-up cash offering.
5. Marvell Earnings
Marvell had a pretty solid result and guided to sequentially better revenue.
The market didn’t like this, but I thought, looking through the result, I liked this result quite a bit. Shares did not.
- Marvell Technology reports Q1 EPS $0.24 ex-items vs FactSet $0.24.
6. Intel’s Latest SCIP With Apollo. Yikes!
- Apollo-Managed funds and affiliates will lead an investment of $11 billion to acquire from Intel a 49% equity interest in a joint venture entity related to Intel’s Fab 34
- This deal follows a similar mid-2022 deal with Brookfield to co-invest in two new leading edge fabs in Arizona at a cost of up to $30 billion
- Why make the deal with Fab 34 in Ireland instead of the Ohio fab under construction?
7. Silicon Box Or Silicon Black Box?
- Silicon Box January series B funding round in January 2024 pushed the advanced packaging startup into Unicorn status with a >$1 billion valuation
- In addition to their Singapore based 70,000 sq metre facility, they announced a second, $3.6 billion investment in Italy in March 2024
- Despite their unicorn status and being in business for nigh on three years, we still have no specifics on the precise nature of the advanced packaging technology they are offering
8. Rohm (6963 JP): Negative Scenario Discounted
- Japanese semiconductor equipment stocks have started to drop back, but device maker Rohm is already down 25% year-to-date and down 43% from its 52-week high.
- Rohm’s operating profit fell 53% last fiscal year and management is guiding for a 68% decline in in FY Mar-25. Investment in power devices remains strong despite weak sales.
- 1H guidance is for an 80% year-on-year decline in operating profit on a 6% decline in sales. Buy into this weakness. Recovery should start in 2H.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. MMG (1208 HK) – $1.1bn+ Rights Offering – Expect Regular Rights Trading Dynamics
- Mmg Ltd (1208 HK) today announced a 2:5 Rights Offering to raise US$1.15bn at HK$2.62/share in order to pay down debt from their recent Botswanan copper mine acquisition.
- It was a sizeable acquisition, and the near-term EV/EBITDA of the acquisition is 10x or above. The longer-term EV/EBITDA is in the 3s based on expansion later this decade.
- The Rights Offering is underwritten, supported by its 67.5% owner. SOUTHBOUND holds 10+%. There are short dynamics, arb dynamics, “don’t wanna spend more” dynamics. There’s a path here.
2. Shift Up Delays the IPO and Stellar Blade Tops Number One Game in the US in April
- On 5 June, Shift Up announced that it will be postponing its IPO to July. The original book building period for the institutional investors was from 3 to 13 June.
- The final book building date has been postponed to 27 June. The subsequent public offering subscription for general investors was also postponed to 2 to 3 July.
- A major investment positive of Shift Up is enormous initial success of Stellar Blade which was the best selling game in the U.S. and numerous other countries in April 2024.
3. Webtoon Entertainment IPO Preview
- Webtoon Entertainment is getting ready to complete its IPO on the NASDAQ exchange in 2H 2024. Webtoon Entertainment is a subsidiary of Naver Corp (035420 KS).
- Webtoon is seeking to raise as much of US$500 million at a valuation of US$3 billion to US$4 billion.
- Webtoon Entertainment is one of the largest Korean company related IPOs in 2024.
4. What Did FSS Point Out to Shift Up? & What Impact Would It Have on Bookbuilding Sentiment?
- FSS wants Nikke’s MAU data to address revenue concerns. They also seek April and May sales data for Stellar Blade to address valuation concerns despite its recent launch.
- Shift Up updated the prospectus with Nikke’s increasing MAU data but didn’t include Stellar Blade sales data. FSS may request further revisions, possibly delaying the IPO again.
- Nikke’s MAU has risen but plateaued versus the previous quarter, and uncertainty surrounds Stellar Blade’s April-May sales, potentially impacting IPO pricing.
5. Yankuang Energy Placement – Doesn’t Appear Well Flagged Although Deal Size Is Large
- Yankuang Energy Group (1171 HK) is looking to raise up to US$608m through a primary follow-on, via selling 270m H-shares.
- The deal is a somewhat large one to digest, at 10.6 days of three month ADV and 2.7% of current mcap.
- In this note, we will talk about the placement and run the deal through our ECM framework.
6. Sakura Internet Placement – Beneficiary of the AI-Wave Looking to Double Down
- Sakura internet (3778 JP) is looking to raise US$127m from its primary follow-on. Proceeds will be used towards purchasing GPU servers, and constructing new data center facilities.
- While 11% of total shares outstanding are offered here, the deal would be easily digested by the market, representing just 0.8 days of its three month ADV.
- In this note, we run the deal through our ECM framework and comment on deal dynamics.
7. MMG (1208 HK): US$1.2bn Highly Dilutive Rights Issue
- Mmg Ltd (1208 HK) will raise HK$9.1bn (US$1.2bn) through 2 rights shares for every 5 existing shares rights offering. The rights price is HK$2.62, a 24.7% discount to the TERP.
- The rights proceeds will be used to repay existing debt, which will allow it to use other funds to better support the ongoing development of the operating mines.
- MMG shares should continue to decline heading into the ex-rights date. The shares go ex-rights on 11 June, and the rights start trading from 24 June to 2 July (inclusive).
8. Webtoon Entertainment Pre-IPO – The Positives – Just Turned Profitable
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the positive aspects of the deal.
9. Webtoon Entertainment Pre-IPO – The Negatives – Korea Revenue Declined, JP Acquisition to the Rescue
- Webtoon Entertainment (WBTN US) is looking to raise up to US$500m in its US IPO.
- Webtoon Entertainment is a global storytelling platform where a community of creators and users discover, create and share new content.
- In this note, we talk about the not-so-positive aspects of the deal.
10. Raspberry Pi IPO Valuation Analysis
- Raspberry Pi is expected to raise about £157 million in this IPO. The conditional trading for this IPO is expected to be take place on 11 June.
- We estimate Raspberry Pi to generate sales of US$342.1 million (up 28.7% YoY) and operating profit of US$48.5 million (up 29.3% YoY) in 2024.
- Our base case valuation of Raspberry Pi is market cap of £772 million or £4 per share (43% higher than the high end of the initial IPO price range).
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. TIP Customized Taiwan Select High Dividend Index Rebalance: 13 Changes & US$5.2bn Round-Trip Trade
- There are 13 changes for the TIP Customized Taiwan Select High Dividend Index in June. The TIP Taiwan Select High Dividend ETF (00919 TW) has an AUM of US$6.4bn.
- One-Way turnover is estimated at 41% and that will result in a round-trip trade of TWD 168.8bn (US$5.2bn). There are 16 stocks that could have over 4x ADV to trade.
- The rebalance will be implemented over 8 trading days and the ETF has started trading the stocks last week.
2. HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (June 2024)
- The June rebalance of the HSI, HSCEI INDEX, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
- The round-trip trade across all stocks across the four indices is estimated at HK$32bn (US$4.1bn).
- Li Auto, Alibaba, NetEase, Zijin Mining, SenseTime and BYD Electronics are the largest buys while Tencent, Meituan, JD.com, Kuaishou Technology, Xiaomi and HSBC Holdings are the largest sells.
3. Shinko Electric (6967) – Break/Gap Risk Early June 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 5mos 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 12wks ago, recommended taking profits.
- Shinko had outperformed Ibiden, gross spreads had narrowed 5+% on JSR approval. Spreads are now 2.6% wider than at narrowest. In May, gap risk narrowed as Shinko underperformed Ibiden.
4. Teijin (3401 JP): Alternative Play on the Potential Infocom Tender
- Blackstone (BX US) is widely reported to have agreed to acquire Teijin Ltd (3401 JP)’s 55% stake in Infocom Corp (4348 JP) at a valuation of JPY260 billion.
- If the valuation refers to market cap and Teijin shares its tax benefits, Teijin’s sale proceeds are around JPY128 billion, which is 42% of its market cap.
- However, since 9 May, Teijin shares have been flat vs. Infocom shares are up 63%. Teijin’s medium-term plan suggests that the Infocom proceeds could result in substantial share buybacks.
5. STAR50/STAR100 Index Rebalance: Index Committee Flip-Flops on Profitability
- There are 3 changes for the SSE STAR50 (STAR50 INDEX) and 9 changes for the STAR100 Index. Implementation will take place at the close on 14 June.
- United Nova Technology (688469 CH) and Biwin Storage Technology (688525 CH) were not added at the March rebalance since they were consistently loss-making. But they have been added this time.
- United Nova Technology (688469 CH) had been trading poorly and then the stock dropped further after non-inclusion in March. That could change now with inclusion confirmed.
6. Asia Cement (743 HK): $3.22/Share Offer – Really?
- After Chinese cement play Asia Cement China (743 HK) (ACC) was suspended on the 28th May, a punchy Offer from its parent Asia Cement (1102 TT) was expected.
- Not to be. Asia Cement is offering $3.22/share, best & final. A 3.01% discount to last close, ~ 45% premium to undisturbed, and a whopping 37% discount to net cash.
- Asia Cement plus concert parties hold 73.38%, so a blocking stake at the Court Meeting is 2.662%. One (possible) aspect in Asia Cement’s favour is that ACC is not shortable.
7. SMFG Cross-Shareholding – At Least US$17bn of Cross-Shareholding to Sell, Planning to Speed It Up
- Following up on our earlier cross-shareholding notes, in this note we look at Sumitomo Mitsui Financial Group (8316 JP) cross-shareholding.
- SMFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$17bn.
- In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.
8. China TCM (570.HK) Privatization Update – Investors May Need to Prepare for a Longer Wait
- The approval/filing process of China TCM’s privatization is complicated and would take some time, but there’re almost no cases of disapproval. It also depends on the adequacy of materials submitted.
- Due to the extension of time for the despatch of Scheme Document, this process would be delayed for more months.But we should receive clear information by October at the latest.
- For arbitrageurs, China TCM is an investment opportunity of high success rate, which becomes more attractive if HK stock market is depressed.It’s better suited to idle funds considering potential risks/returns.
9. Softbank (9984 JP): This Time, It’s Different
- Elliott Management has emerged as a 2%+ shareholder in SoftBank group and is driving for share buybacks of upto USD15bn; we see this as a game changer for minority shareholders
- Recent moves to enhance corporate governance in Japan have taken root, yet we see Softbank group as a laggard on corporate governance which been targeted by an experienced activist
- Softbank shares trade at a 54% discount to the estimated NAV; an activist like Elliott on board could meaningfully drive shareholder value creation and a narrowing of the NAV discount
10. CK Asset Holdings (1113 HK): First Down, Then Up?
- CK Asset Holdings (1113 HK) has traded lower recently and shorts have exploded in the stock in the last few months.
- CK Asset Holdings (1113 HK) has underperformed its peers in the last 6 months and trades cheaper on forward PE and price to book.
- There will be passive selling in the stock in just over two weeks. There will be positioning, but not enough to meet passive supply. Expect a further move lower.
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. Positioning Watch – Turmoil in Markets Is Returning
- Hello everyone, and welcome back to our weekly positioning watch.
- The divergence between market-cap weighted and and non market-cap weighted indices is slowly normalizing, but the impact that NVIDIA (and some of the other big tech firms) has on both broad equity returns is notable with the 5 largest companies in the S&P 500 accounting for roughly 30% of the index by now.
- This does not only have implications for the distribution of returns between bigger indices (Nasdaq vs Dow Jones for instance), but also on indices option volatility, with the VIX ex NVIDIA hitting lows of around 9 in May (2017/2018 lows).
2. EM Watch: The China bet and the copper story are both old hat by now
- Welcome to our weekly EM editorial where we travel across the liquid EM markets in the context of recent developments in USD markets.
- ISM Services jumped back to 53.8—time to put that recession chatter to bed for a few months again?
- Bloomberg’s latest alarmist piece on “business employment dynamics” showing a net job loss in Q3 of last year is probably the worst analysis I have read in a while.
3. Steno Signals #102 – Bad inflation news everywhere
- Happy Sunday and welcome to our weekly flagship editorial.
- The inflation progress has stalled, and it is not just a US phenomenon.
- It is spread to Europe and with freight rates rapidly on the rise, we are likely no longer getting any help from goods inflation in coming quarters.
4. The Week at A Glance: The comeback of the (growth and inflation) cycle
- Welcome to our short and sweet weekly overview of key events, our expectations and how we position for them.
- On ISM Manufacturing (Monday). Our forecast at Steno Research is 50.2 for the ISM Manufacturing Index, slightly above the consensus of 49.9.
- April’s activity was notably weak due to several factors: tax seasonality which withdrew liquidity, a hawkish build-up of expectations ahead of the early May FOMC press conference, and weak international impulses.
5. Is that It? Commodity Bull Market Over?
- Recent signs of economic weakness in the US is a believable narrative for the current weakness
- OPEC + announcement on increasing production adds to the noise
- Weakness spreads from the energy sector to other commodity sectors
6. Market Trends and Strategy: Hong Kong Bull Market Broadens
- High dividend yield names continue to outperform the broader market. Energy and Materials sectors are best performers over the last year.
- Mainland buying has continued to buoy the Hong Kong market even through the pullback in May.
- Short selling is declining and market breadth is increasing supporting rotational buying between sectors.
7. ETFs Are Reaching Way Beyond Passive Investing
- ETFs are synonymous with passive investing. It passive investing and beyond. ETFs have been stealing breakfast, lunch and dinner away from mutual funds.
- Active ETFs have jumped from obscurity to ubiquity. >70% of new ETF launches in the US over the last seven years have been active ETFs.
- Active ETFs in the cheapest quintile command AUM of USD 325 billion while those in the most expensive quintile hold merely USD 35 billion.
8. May 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
9. Impact of China’s Economic Deceleration on EM Economies
- China’s economic growth is expected to decelerate from the previous high-growth period in the 2000s and early 2010s. This will have an impact on other EMs.
- We track the impact from the angles of China’s commodity imports, supply-chain position, and foreign investment.
- Commodity producer countries can be more heavily impacted. The impact on Asia will be mixed, suffering from regional trade, but some supply chains could be diverted away from China.
10. India Politics: Setback for Modi Heralds Era of Uncertain Coalition Politics
- The ruling BJP suffered major losses in the recent elections. It fell short of an overall majority and will have to rely on regional partners to form the next government.
- Consolidation of the anti-BJP vote under the aegis of the INDIA coalition delivered dividends, but voters also were not enthused by Modi’s economic and social campaign rhetoric.
- Expect short-term uncertainty as the major blocs attempt to cobble together parliamentary majorities. But more political checks and balances would be good for India.
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. Nvidia Earnings Overview: Networking in Focus
Nvidia reported earnings, and as expected, they beat earnings. Did you think that Jensen would fail us now?
On a more serious note, the guide was a bit light regarding buy-side bogeys, but there is almost nothing to complain about this result.
Below is the StreetAccount summary, and you can see it’s a clean beat by every metric.
2. Qualcomm Leapfrogs Intel & AMD To Power The First Microsoft CoPilot + PCs
- Microsoft last week launched their CoPilot+ PC category which enables their CoPilot to run locally on your PC, as long as it has an NPU with >40 TOPS
- With Qualcomm being the only one currently offering such an NPU, their Snapdragon processors will be powering the first wave of CoPilot+ PC’s
- It’s an extraordinary accomplishment for Qualcomm & likely an inflection point for Arm powered PCs. It’s also really bad news for Intel and not great for AMD
3. Taiwan Tech Weekly: TSMC’s Latest Sub-Industry Guidance; PC Names Strong; Computex & Apple WDC Ahead
- TSMC’s Latest 2024E Industry Guidance Provided at Symposium in Taiwan
- More Potential Details on Nvidia & Mediatek’s AI PC Chip to Compete with Qualcomm & Intel
- Samsung’s HBM DRAM Chips Face Challenges in Meeting Nvidia’s AI Requirements
4. TechChain Insights: Call with Himax, How New In-Car Displays Can Quadruple Chip Content Per Vehicle
- We hosted a conference call recently with Himax management, the global leader in automotive touch display controllers; the company is experiencing a uniquely stronger automotive supply/demand environment than some peers.
- Discussed in detail how larger or more sophisticated interior displays can drive higher dollar content of display controllers per vehicle. We examine trending new car designs with much larger displays.
- We forecast an exponential jump-up in display controller content value per vehicle as beautiful display designs are becoming key USP for auto brands; Maintain our Structural Long rating for Himax.
5. UMC (2303.TT; UMC.US): The Outlook for 2024 Could Show Flat to Low Single-Digit Growth.
- UMC is currently forecasting a flat to low single digit growth QoQ for 3Q24, which is slight lower than consensus.
- UMC has received orders from domestic and international clients. However, we believe it couldn’t be able to compensate for the loss of Samsung’s 28nm orders so far this year.
- With accelerated construction in Singapore in 2024, the full-year capital expenditure has slightly risen to $3.3 billion.
6. Qualcomm. Watch This Space…
- Automotive revenues for Q1CY24 amounted to $603 million, up 35% YoY. This compares to MobilEye’s revenue of $239 million, down 48% YoY
- Automotive design-win pipeline is now $45 billion, up from $30 billion less than two years ago
- CEO Amon said “Every time we enter a new market, we end up building a very strong position”. That’s a shot across the bows for Intel and AMD…
7. Tech Chain Insights: Call with ChipMOS, Memory and Display Markets Color
- We hosted a conference call recently with ChipMOS management; the company continues to view 1Q24 as having been the bottom for the memory and display markets.
- Memory customers are increasing utilization further. Since ChipMOS does not significantly serve the HBM DRAM market, this indicates that previously softer non-HBM memory segments are now showing improvement.
- Display industry increasing utilization on expectation for 2H24 large display demand strength driven by sporting events such as the Paris Olympics. ChipMOS remains well below March highs, rate as Outperform.
8. An Interview with Dan Kim and Hassan Khan of the CHIPS Program Office
- I had the opportunity to talk about the CHIPS Act’s progress with two people at the program office.
- I really think this is a great step in the right direction, and we talk about some of the misconceptions of the CHIPS program, and more.
- Today will be a pretty special interview podcast, and I have Dan Kim and Hassan Khan from the CHIPS program.
9. Taiwan Tech Weekly: Computex & Apple WDC Imminent; Apple Releasing New AI Voice Interface for IPhone
- Market Largely Influenced by Macro Trends and Nvidia Movements This Past Week
- Key Events: Computex, Apple WDC, Key Taiwan May Revenue Releases
- Apple (AAPL US) Is Overhauling Siri In Order to Create a Beautiful Voice-based AI Interface for the iPhone