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 Foundry 2.0: Strategic Shift Or Brand Tinkering?
- TSMC Foundry 2.0 more than doubles its addressable market and resets its market share to 28%, down from the ~60% share it has long enjoyed in the “traditional” foundry market
- The lion’s share of this new market will come from IDM, a combination of increased outsourcing (e.g. Intel) and new JV deals (e.g. Germany and Japan)
- Foundry 2.0 reflects the reality of how the semi industry is evolving and it’s the polar opposite of Intel’s IDM 2.0
2. Taiwan Tech Weekly: Taiwan Rebound Lagging Nvidia; Why TSMC’s ‘Foundry 2.0’ Is Significant
- Taiwan Tech Stocks Rally, But Lag Nvidia’s Massive Rally; Prepare for Nvidia, Dell, HP Results Next Week
- Hon Hai & Zhen Ding Show No Major AI Slowdown; Taiwan AI Supply Chain Names Lag Nvidia’s Rebound
- TSMC Foundry 2.0: Strategic Shift Or Brand Tinkering? Why It Is Significant
3. Q224 DRAM, NAND Revenues Grow For The Fifth Quarter In a Row
- DRAM revenues amounted to $23.3 billion in Q224, representing increases of 28.3% QoQ and 110.5% YoY.
- In the case of NAND, Q224 revenues amounted to $16.5 billion, representing increases of 17% QoQ and 83% YoY.
- Unprecedented demand for HBM & DDR5, robustly increasing content per box for both PC & Smartphone, looming capacity constraints, more/better LTA coverage are all mounting tailwinds for the memory segment
4. AMD Scales Up Just As Intel Scales Down
- AMD announced their intention to acquire hyperscale solutions Provider ZT Systems in a cash and stock transaction valued at $4.9 billion
- The real target of the deal is the 1,000 Data Center design engineers all of who will transfer directly to AMD’s engineering team with an annual OpEx of $150 million
- This is AMD scaling up to grab a larger share of the ~$400 billion by 2027 AI Data Center TAM just as Intel is scaling down its workforce by 15,000
5. Hon Hai & Zhen Ding Show No Major AI Slowdown; Taiwan AI Supply Chain Names Lag Nvidia’s Rebound
- Hon Hai’s Latest Key Take Aways — No Slowdown for AI Server or Mobile Demand Indicated
- Zhen Ding — Delivers Higher Than Expected 2Q24 Growth; No Indication of AI Server or Mobile Slowdown
- Taiwan AI Supply Chain Names Have Lagged Nvidia’s Massive Rebound Since August 9th
6. Could a Japan “Megaquake” Disrupt Semis?
- Japan’s Meteorological Agency has issued a warning of an upcoming serious 8-9-point earthquake
- The expected epicenter is home to at least one dozen semiconductor wafer fabrication plants: “Fabs”
- While it’s hard to predict earthquakes, this news should be considered when investing in the area.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. COLOWIDE (7616) – UGLY Register On Expensive Co Needs a Capital Construct Upgrade, Won’t Get It Here
- Colowide Co Ltd (7616 JP) is an industrial fastish-food operator in Japan. They sell several dozen kinds of cuisine under several dozen brands, owned and franchised in Japan and overseas.
- The company “philosophy” is “Everything we do is for our customers and employees.” The stock is up 30% in 10yrs. It pays no dividend, but it pays a big yutairimawari.
- This means Real World Float is 100% owned by retail who want restaurant coupons. This offering will be bought by index, short covers, and another 20-30k coupon holders.
2. Colowide Placement – Needs a Very Large Correction
- Colowide Co Ltd (7616 JP) aims to raise around US$230m in order to fund its prospective M&A transactions over the next few years
- While the company has undertaken a number of M&A transactions in the past, it hasn’t clearly stated its intended targets for this round.
- In this note, we will talk about the deal dynamics and run the deal through our ECM framework.
3. Peptron Rights Issue: The 25% Discount Is an Attractive Outright Position Opportunity
- Peptron’s lack of single-stock futures means no risk-free arbitrage but also less speculative selling, making the 25% discount an attractive outright position opportunity.
- The low capital increase rate may stabilize the stock price, and more forfeited shares could lower the cost of securing subscription rights during the trading window.
- Consider buying rights during the trading period or targeting forfeited shares. Conservatively estimate the final offering price range to set a profitable cost for securing rights.
4. Lumir IPO Preview
- Lumir is getting ready to complete its IPO on KOSDAQ in September. The IPO which is expected to raise between 49.5 billion won to 61.5 billion won.
- Lumir specializes in the development of observation satellite technology including image data processing devices and onboard computers for a number of government satellite series.
- Lumir had sales of 12.1 billion won (up 90.5% YoY) in 2023. Its sales surged by 477% YoY to reach 8.2 billion won in 1H24.
5. Bajaj Housing Finance Pre-IPO – Peer Comparison – Bigger and Faster
- Bajaj Housing Finance (BHF IN) is looking to raise around US$830m in its upcoming India IPO.
- BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
- We have looked at the company’s past performance in our earlier notes. In this note we will undertake a peer comparison.
6. Hyosung Siblings’ Cross-Transfers Are Done: The 10%+ Hyosung Corp Stake Block Deal Remains
- The Hyosung siblings swapped ₩60B in shares over August 13-14, raising the elder brother’s Hyosung Corp stake to 40.9% and lowering HS Hyosung below 3%.
- The younger brother must sell additionally at least 11.2% of his 14.2% Hyosung Corp stake. The elder brother may buy, but his cash position and 40% stake limit his need.
- This block deal will be the first to apply the new pre-disclosure rule. So, we should use it to test how the rule affects price movements for better entry timing.
7. Ecom Express Pre-IPO Tearsheet
- Ecom Express Limited (1062300D IN) is looking to raise about US$310m in its upcoming India IPO. The deal will be run by Axis, IIFL Securities, Kotak and UBS.
- Ecom Express operates a pan-India express logistics network covering first-mile pick-up, mid-mile transportation and last-mile delivery as well as reverse logistics (returns) and fulfilment services (warehousing).
- According to Redseer, the company had the widest pan-India coverage and in Tier 2+ regions compared to its peers, covering over 27,000 PIN codes, as of March 31, 2024.
8. Hero Fincorp Pre-IPO – The Positives – Riding on the Parent’s Brand
- Hero FinCorp (HF) is looking to raise around US$438m in its upcoming India IPO.
- HF is a non-deposit taking NBFC. It offers a suite of financial products catering primarily to the retail segment and the MSME customer segment in India.
- In this note, we talk about the positive aspets of the deal.
9. Zomato Placement – Momentum Is Very Strong, past Ant Related Deals Have Been Mixed
- AntFin is looking to raise around US$400m by selling around 2% of Zomato (ZOMATO IN).
- Ant Group had earlier sold some of its stake in Nov 2023 and Mar 2024, with the deals producing a mixed bag result.
- In this note, we talk about the deal dynamics and run the deal through our ECM framework.
10. 99 Speedmart Holdings IPO – Digestible Valuation
- 99 Speed Mart Retail Holdings (99SPD MK) is looking to raise US$530m in its Malaysia IPO. The IPO will be a mix of primary and secondary shares.
- 99 Speed Mart Retail Holdings (99 Speedmart) operates the “99 Speedmart” chain of mini-market outlets, retailing daily necessities across Malaysia.
- In our previous notes, we looked at the firm’s past performance. In this note, we undertake a peer comparison and discuss our thoughts on valuation.
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. MEGA M&A! 7&I (3382 JP) Gets Non-Binding Bid from Alimentation Couche-Tard (ATD CN)
- Today, part-way through the day, the Nikkei ran an article saying that Alimentation Couche-Tard (ATD CN) had made a confidential non-binding proposal to buy Seven & I Holdings (3382 JP).
- 7&i shares obviously went up (limit up in a hurry, staying there, large size traded limit up at close).
- Now things get complicated. 7&i has said they received a non-binding proposal for all the shares. There will be a Special Committee of all Independent Directors. All stakeholders will matter.
2. JD.com (9618 HK): Index Implications of Walmart Placement
- Media reports indicate that Walmart (WMT US) is looking to sell 144.5m shares of JD.com (JD US) to raise up to US$3.74bn. That would be substantially all of its stake.
- There will be passive buying from global index trackers at the time of settlement of the placement shares and could absorb around 12% of the placement shares.
- There will be no passive buying from HSI, HSCEI, HSTECH and HSIII trackers in the short-term. An increase in CCASS holdings should result in passive buying in December.
3. Couche-Tard Bid for 7&I (3382) – FEFTA and Economic Security
- The largest potential inbound cross-border M&A in years – for a national champion no less – gets a lot of press coverage.
- This morning, a Nikkei article noted Alimentation Couche-Tard (ATD CN) was likely to need “prior approval” from Japanese regulatory authorities for its takeover “the Nikkei has learned.”
- It wasn’t difficult for the Nikkei to learn that. METI publishes a FEFTA List. 7&i has been on it for years as Type II Designated Business, requiring prior approval.
4. Seven & I Holdings (3382 JP): Couche-Tard “friendly” Proposal Likely to Go Nowhere
- Seven & I Holdings (3382 JP) shares rose 22.7% as it confirmed media reports that it had received a confidential, non-binding preliminary proposal from Alimentation Couche-Tard (ATD CN).
- The interest is unsurprising due to the weak share price performance. Since ValueAct’s open letter on 25 January 2022, the shares are up 5.2% vs. the Nikkei 225 up 38.0%.
- Couche-Tard aims for a friendly offer, which is challenging as it requires support from the founder’s family and the Japanese government. Therefore, the probability of a binding proposal is low.
5. Hang Seng Internet & IT Index Rebalance: Three Changes & A Few Surprises
- There will be 3 changes for the Hang Seng Internet & Information Technology Index (HSIII) at the September rebalance. There are some surprises.
- Estimated one-way turnover at the rebalance is 3.4% resulting in a round-trip trade of HK$2.04bn (US$262m). 7 stocks will have over 1x ADV to trade.
- Weimob Inc. (2013 HK) is a surprise add. There is 6x ADV to buy from passive trackers and shorts are 12% of shares out and 24x ADV to cover.
6. Apple Inc (AAPL US): $43bn Passive Buying Driven by Berkshire Selling & Market Consultation
- Berkshire Hathaway Inc Cl B (BRK/B US) held over 5% of Apple (AAPL US). Nearly half of that was sold in the June quarter to take the holding to 2.63%.
- Berkshire’s selling should result in an increase in Apple (AAPL US)‘s free float in the S&P 500 INDEX (SPX INDEX) and other related indices.
- There will also be large buying in Apple (AAPL US) from the Technology Select Sector SPDR (XLK US) ETF if the proposals in the market consultation are implemented.
7. TCM (570 HK): Profit Warning Is No Biggie
- China Traditional Chinese Medicine (570 HK) flagged a 60-70% drop in its 1H24E net profit versus 1H23, due to reduced sales/profit of TCM concentrate, bad debt provisions, and remedial taxes.
- MAC triggers? No – Sinopharm won’t exercise such right, even if one was ostensibly triggered. I’d be surprised if Sinopharm wasn’t fully aware of TCM’s underlying operations.
- Get involved on any dips today. Trading wide at a 11.7%/38.7% gross/annualised spread, assuming Dec-end payment.
8. HSTECH Index Rebalance: ASMPT (522 HK) Replaces Ping An Healthcare (1833 HK)
- As expected, ASM Pacific Technology (522 HK) will replace Ping An Healthcare and Technol (1833 HK) in the Hang Seng TECH Index (HSTECH INDEX) at the close on 6 September.
- Estimated one-way turnover at the rebalance is 3.2% resulting in a round-trip trade of HK$6.5bn. Passives need to buy over 7x ADV in ASM Pacific Technology (522 HK).
- Positioning appears light in both stocks. Expect ASM Pacific Technology (522 HK) to move up and Ping An Healthcare and Technol (1833 HK) to move lower near-term.
9. China Traditional Chinese Medicine (570 HK): Never a Dull Moment as Profit Warning Lands
- China Traditional Chinese Medicine (570 HK) profit warning notes that the 1H24 net profit would decrease by 60%-70% YoY due to pricing pressure, higher impairment losses and remedial taxes.
- The profit warning could pose a risk to the scheme, as the consortium can withdraw if there is an adverse material change in China TCM’s profits or prospects.
- If there were a danger of triggering the MAC clause, the consortium would not have made the regulatory submissions. The flip side is that the warning helps the shareholders vote.
10. Guzman Y Gomez (GYG AU): Free Float to Determine Index Inclusion
- Guzman Y Gomez (GYG AU) listed on 20 June and is eligible for inclusion in the S&P/ASX family of indices at the September rebalance.
- Whether the stock is included in indices depends on the index providers estimate of free float. We expect index providers to assign floats of between 25-35% for the stock.
- Inclusion in one global index could come in November and another in December. Inclusion in the S&P/ASX indices will depend on whether float is higher than 30% or 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. Four Reasons To Be Tactically Bullish
- The U.S. stock market is poised for a period of continued strength.
- Four reasons to be tactically bullish on stocks: price momentum; a sentiment reset from bullish to caution; the historical bullish record of VIX spikes; and positive internals.
- We continue to favour non-Magnificent Seven leadership for the next bull phase.
2. Energy Cable: China is killing the commodity super cycle
- Take aways: Low margins and high stock levels mean that China will export its excess metal capacity. Other commodities like crude and its derivatives look weak as well. Gold only strong performing commodity in China due to domestic economic weakness .
- Welcome to this week’s energy cable with a focus on the economic troubles in China and its impact on commodity prices.
- This week’s piece will have a lot of charts, therefore we’ll keep the text short.
3. The Week at a Glance: The USD in the (Jackson) Hole amidst Over 1 Million Jobs Disappearing?
- Welcome to our weekly “The Week At A Glance” publication, where we explore the most important key figure releases and tradeable themes for the upcoming week.
- We remain almost exclusively long on USD fixed income, and therefore, our attention is particularly focused on two key developments this week:
- The Jackson Hole Conference and Ueda’s Appearance in the Japanese Parliament. Revisions to U.S. Employment Data: The Bureau of Labor Statistics (BLS) will release first-quarter 2024 data from the QCEW on August 21, 2024, at 10:00 a.m. (ET).
4. VIX Went Cray Cray
- Recent market disruptions, including a dramatic rally in the yen and a significant increase in the VIX, have raised concerns
- The convergence of US and Japan CPI rates may have contributed to the narrowing of Fed BoJ policy spread
- The VIX’s large move on August 5, 2019, has sparked concerns about the stability of the S&P options market and the potential impact on global risk levels
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
5. Emerging Markets: Structural Shifts as Allocations Stabilise Among Global Funds.
- Emerging Market allocations are stabilizing among active Global equity funds.
- Country-Level shifts show China & HK allocations more than halving since 2022, while Taiwan has seen strong gains. India becomes the top country underweight.
- Alibaba has declined to record lows, Tencent ownership is stabilizing, and TSMC has reached new highs.
6. BUY/SELL/HOLD: Hong Kong Stock Updates (August 21)
- Hong Kong market showed defensiveness during early August selloff and the overall breadth of the market continues to improve.
- J&T Global Express (1519 HK) received upgrades after reporting strong 2Q24 results. Its SEA and China business showed growth in revenue and profitability.
- Galaxy Entertainment Group (27 HK) received an upgrade after revenue and EBITDA approached pre-COVID levels. FIT Hon Teng (6088 HK) is seeing improvement in AI server, AirPod, and EV segments.
7. China Is One Step Closer to Its ‘Event Horizon” in the Property Market
- The latest policy proposal is one step closer but still incremental
- Incremental steps taken so far have been ineffective in the short-term
- The ideal solution would be full intervention by the Central Government
8. US Rates Strategy: July CPI, Jackson Hole, and Jittery markets
- Inflation rates are gradually slowing, with both headline and core inflation in line with expectations and at multi-year lows
- Housing prices showed more firming than expected, particularly in rental markets
- Markets are pricing in very soft core CPI inflation over the coming months, with expectations for gradual disinflation and a focus on wage growth by the Fed
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
9. Macro/Rates Watch: When the entire foundation rests on liquidity
- What a July we’ve had.
- The G3 central banks have now received plenty of labor market data that justifies cutting rates fairly aggressively.
- In our opinion, this is a tricky trend to resist, even if market pricing does admittedly seem aggressive.
10. Steno Signals #113 – Neither Inflation, Growth, Nor Liquidity is rising right now
- As most of you know, we remained upbeat on the cycle until around mid-July, as growth parameters continued to perform solidly in real-time, while inflation also posed a risk of re-acceleration.
- Our real-time tracking of the three main macro parameters is the cornerstone of our macro thinking, and through July and August, we have begun to observe a significant shift.
- The risk of rising inflation has collapsed, while growth momentum has also weakened substantially.
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 Strong Spread Rebound Into Short Zone; ASE Remains Broken Down
- TSMC: +16.1% Premium; Strong Spread Rebound, Potential Opportunity to Short the Spread
- UMC: +1.6% Premium; Consider Shorting the Spread at This Level
- ASE: +3.8% Premium; Uncertainty Remains on the Sustainability of the Recent Breakdown
2. Taiwan Tech Weekly: Watch Hon Hai & Zhen Ding Guidance for Servers, AI PCs/Mobiles, and IPhone 16
- Last Week — TSMC’s July Revenue Soared, Asustek Guided for PC Growth Acceleration, While KYEC, Mediatek, and UMC Rebounded
- Key Events — This Week Look to Hon Hai & Zhen Ding Earnings and Guidance for Servers, AI PCs/Mobiles, iPhone 16
- PC Monitor: Promising Uptake of Microsoft Copilot and AI Services; Remain Structurally Long
3. Screen Holdings (7735 JP): Still a Buy for the Bounce
- Screen has rebounded from its recent low, but strong 1H results, the recent weakening of the Yen and reasonable valuation point to further short-term upside.
- However, management is guiding for slightly lower operating profit in 2H, and Intel’s capex cuts also support a cautious outlook.
- Screen expects slower growth in 2025 wafer fab equipment demand than SEMI, and neither appear to have factored in concern over insufficient return on investment in AI.
4. Taiwan Dual-Listings Monitor: History Implies TSMC Spread to Trade Down; ASE Still Broken Down
- TSMC: +16.3% Premium; Can Continue to Consider Shorting the Spread Here
- UMC: +0.7% Premium; Wait for Higher Levels Again Before a Fresh Short
- ASE: +4.6% Premium; Breakdown of Spread Could Persist Since History Indicates It’s Now a Normal Level
5. Earnings: ALGM, LRCX, TOLEY, NVMI, ONTO
- Some more minor data points and highlights: KLIC (ball bonders) says that utilization is 75-80%, which is a good read on China despite the negative industrial headwind.
- Allegro Microsystems is definitely scraping the bottom, and while Sanken (its distributor) is still increasing its inventory, I like the setup there.
- Arrow Electronics (Distributor) says things are improving, which is a big counterpoint to everything else.
6. ASPEED’s 159% July Revenue YoY Growth Bodes Well For H224 AI Server Shipments
- ASPEED’s July revenue amounted to NTD 601 million, up 159% YoY
- ASPEED’s YTD revenue of NTD 2,970 million, is up 88% YoY
- This bodes well for H224 server shipments, both general purpose and AI accelerated and should be reflected in NVIDIA’s earnings/outlook scheduled for August 28
7. Himax Sees China Automotive Market Softening; AI Sensing and AI/HPC Optics Opportunities Expanding
- Himax 2Q24 Results Showed Continued Margin Strength But Management Provided Cautious Outlook for 3Q24E Amidst Chinese Market Weakness
- Himax’s AI Sensing and AI/HPC Optical Data Transfer Growth Opportunity for 2025E — Investments into Obsidian Sensors & FOCI
- Himax — Maintain as a Structural Long; Market Sell-Off Opens Accumulation Opportunity
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. WeRide IPO: High-Risk Venture Investment and Unproven Business Model
- WeRide, a pure-play autonomous driving company with operations in 7 countries, may raise up to $120M in upcoming IPO in the United States.
- WeRide is expected to IPO this week. The company’s amended prospectus puts the price range per ADS at $15.50 to $18.50, implying a market cap of ~$4.6B at the midpoint.
- The company has raised ~$1.4B in equity financing to date and was backed by Qiming Venture Partners and the venture capital fund of the Renault Nissan Mitsubishi Alliance, among others.
2. Brainbees (FirstCry) IPO Trading – Decent Subscription and Valuation
- BrainBees Solutions (FirstCry) raised around US$500m in its India IPO.
- FirstCry is India’s largest multi-channel retailing platform for Mothers’, Babies’ and Kids’ products in terms of GMV, for the year ending Dec 2022 (9M23), according to RedSeer.
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.
3. WeRide IPO – Stiff Competition and Bleak Sentiment. Premium Valuation Doesn’t Help
- WeRide (WRD US) is looking to raise US$119m in its US IPO.
- WeRide provides autonomous driving products and services from L2 to L4 of driving automation.
- We had looked at the firm’s past performance in our earlier notes. In this note, we discuss our thoughts on valuation.
4. China Resources Beverage Pre-IPO – Thoughts on Valuation
- 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 our earlier notes, we talked about the company’s past performance and undertook a peer comparison. In this note, we will look at valuations.
5. Hindustan Zinc OFS Early Look – Due for a Correction, Large Selling Pressure Looming
- Vedanta Ltd (VEDL IN) is looking to raise US$760m from selling some stake in Hindustan Zinc (HZ IN).
- Overall, while the deal would represent just 2.6% of the firm’s outstanding shares, the deal is a large one to digest at 41 days of the stock’s three month ADV.
- In this note, we take an early look at the deal, and comment on the deal dynamics.
6. ECM Weekly (12th Aug 2024) – Ola Electric, Brainbees, WeRide, Akum, CR Beverages, Eternal Beauty
- 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, the prior week witnessed a number of listings with divergent results.
- Given the market volatility, there was only one large placements in the prior week.
7. WeRide (WRD US) IPO: The Bear Case
- WeRide (WRD US), a provider of autonomous driving products and services, seeks to raise up to US$119 million through a Nasdaq IPO and US$321 million through a concurrent private placement.
- In WeRide (WRD US) IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The bear case rests on a volatile revenue profile, high customer concentration risk, widening losses that raise doubts on the path to profitability, elongated cash collection cycles and cash burn.
8. P N Gadgil Jewellers Pre-IPO – Strong Revenue Growth but Margin Worry Persists
- P N Gadgil Jewellers (1742652D IN) looking to raise up to US$132m in its upcoming India IPO.
- P N Gadgil Jewellers (PNGJ) is an Indian organized jewellery player. Its product offerings include traditional as well as modern and functional jewellery designs, in gold, diamond, silver and platinum.
- In this note, we look at the company’s historical performance.
9. Ola Electric (OLAELEC IN) : Soaring High – How Much Higher Can It Go?
- Ola Electric’s stock has surged since its Friday listing, despite a lukewarm IPO response. We look at a possible base-to-bullish case valuation range for Ola Electric’s stock price.
- With the e2W market up 96% YoY in July and Ola Electric’s sales soaring 114%, the momentum is strong. Likely catalyst on the horizon adds to investor optimism.
- Currently, on FY2026E EV/Revenue, Ola Electric trades on par with its closest Indian e2W peer.
10. ACME Solar Holdings – Strong Sector Tailwinds but Need to Keep an Eye on Profitability
- ACME Solar Holdings (1700918D IN) is looking to raise US$360m in its upcoming India IPO.
- ACME Solar (ACME) is a renewable energy firm with a portfolio of solar, wind, hybrid and firm and dispatchable renewable energy (FDRE) projects.
- In this note, we talk about the company’s historical 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. HSCEI/HSTECH/HSIII Index Rebalance Preview: Potential Changes, Flow & Positioning
- The constituent changes for the Hang Seng China Enterprises Index (HSCEI INDEX), Hang Seng TECH Index (HSTECH INDEX) and HSIII Index will be announced after market close on Friday.
- We forecast 2 changes for the Hang Seng China Enterprises Index (HSCEI INDEX), 1 change for the Hang Seng TECH Index (HSTECH INDEX) and 3 changes for the HSIII Index.
- With same-way and opposing flow on stocks from different passive trackers, the one-way trade is currently estimated at HK$5.2bn (US$672m). That will change with final capping done on 3 September.
2. Select Sector Indices – HUGE Impact of Proposed Constituent Weighting Changes
- S&P DJI have started a market consultation to change the index weighting methodology for the Select Sector Indices to reduce concentration and avoid reverse turnover.
- There is US$281bn tracking the Select Sector Indices from the SPDR ETFs. The market consultation will have a larger impact on indices where there is a high degree of concentration.
- The largest inflows are expected in Apple, Conocophillips, Amazon.com and Netflix while the largest outflows will be from Microsoft, NVIDIA, Chevron, Procter & Gamble, Exxon Mobil, Costco Wholesale and Meta Platforms.
3. To Tender Or Not – Gauging The Future of Sun Corp (6736)
- The revised/final True Wind Tender Offer for up to 19% of Sun Corp (6736 JP) ends this week. With the “excitement” the last two weeks, the SunCorp/CLBT ratio is higher.
- The minimum threshold is relatively low. The Tender will most likely succeed with very high pro-ration.
- For those on the edge, I discuss possibilities on the back end. It will be less liquid, but that may not be bad.
4. TCM (570 HK): A Spoonful Of Sugar …
- A 14.8% gain month-to-date, including this past Monday’s 6.5% pop – you just knew something positive was taking place behind closed doors. And leaking its way into the public.
- So it was no real surprise to read in the latest monthly update announcement on the HKEx that various regulatory approvals are almost, but not quite, satisfied.
- The wording in the announcement strikes a positive tone. Even remaining conservative on the timeline, this could be wrapped up before year-end.
5. J Tower (4485) – Once Ambitious, Still High Growth, Sells Itself Low/Cheapish.
- JTower (4485 JP) IPOed itself Dec-2019 at ¥1,600/share. An 8-bagger in a year, fell by half, doubled, fell 70%, then doubled, fell 35%, up 50%. That’s the first 3yrs.
- Since then, the trend has been lower. The stock is down 80+% in 2 years, especially painful after an equity raise at just under ¥5,000 6 months ago.
- But the stock today closed at ¥1,430, and the Tender Offer is at ¥3,600. A 150% premium. That’s big, but it may be “too low.” An interesting case.
6. China Traditional Chinese Medicine (570 HK): Relief as Update Favours the Bulls
- China Traditional Chinese Medicine (570 HK)’s monthly update reinforces the bull case. The gross spread has remained uncomfortably high since falling on no news on 26 June.
- The monthly update will relieve the bulls, as the consortium has finally made the regulatory submissions. The update stresses that the filing delay is due to an unwieldy consortium.
- Potential stumbling blocks remain, which should not be an issue. Nevertheless, the risk (17.7% downside to the undisturbed price)/reward (21.4% gross spread) remains attractive.
7. CPMC (906 HK) Responds To Champion’s Offer
- On the 30th July 2024, packaging play CPMC Holdings (906 HK) dispatched the Composite Document for the HK$6.87/share, in cash, Offer from SASAC/NCSSF-backed Champion.
- The Response Document, including the IFA opinion (with a fair & reasonable conclusion) has now been dispatched.
- However, the focus remains on ORG Technology Co., Ltd. A (002701 CH)‘s superior HK$7.21/share Offer, which is currently negotiating the necessary regulatory approvals.
8. Greatview Aseptic Packaging (468.HK) – The Story Behind The “Hostile Offer”
- The connection between Newjf and Greatview is deep. Newjf expressed an interest in acquiring Greatview early on, but the two parties didn’t reach an agreement. Greatview is not entirely “innocent”.
- Newjf’s decision to forcibly acquire Greatview at this moment should be made after careful consideration. Mengniu may not necessarily oppose this merger. Mengniu is likely to take a neutral stance.
- Newjf’s Offer is attractive. In the absence of a more realistic action by Greatview to make a higher Offer, we advise investors not to walk away from Newjf’s Offer easily.
9. Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for September
- Post market close on Friday, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 6 September.
- With no constituent changes in March and 1 add/1 delete in June, there could be more changes in September with Health Care stocks among the potential inclusions.
- Changes to the Hang Seng Industry Classification System (HSICS) will be implemented from the September rebalance and that will alter industry coverage.
10. Merger Arb Mondays (12 Aug) – China TCM, Canvest, GA Pack, Fuji Soft, Fancl, Descente, Takiron
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Canvest Environmental Protection Group (1381 HK), Malaysia Airports Holdings (MAHB MK), Asia Cement China (743 HK).
- Lowest spreads: Fuji Soft Inc (9749 JP), Second Chance Properties (SCE SP), Descente Ltd (8114 JP), C.I. TAKIRON Corporation (4215 JP), Fancl Corp (4921 JP).
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. Portfolio Watch: We Dare to Say the Bottom Is In for Risk Assets
- We have successfully navigated our macro portfolio through yet another week of high volatility, especially following Monday’s (in hindsight) outlier event.
- Risk sentiment has turned, and recession fears are muted for now.
- With position squaring largely completed, equities have regained momentum.
2. Positioning Watch – Positioning Squaring in JPY is Complete
- This week likely marks the end of the positioning squaring phase, as multiple positioning gauges now signal that trades are no longer as extended as they were 2-3 weeks ago across various assets.
- This shift provides an opportunity to revisit our strategies and assess where macroeconomic trends might be steering global assets next, now that the worst of speculative activity has subsided.
- As we all know, the CFTC report is always a week behind in updating markets on positioning, making last Friday’s report particularly interesting.
3. Global FX: Weeks where decades happen
- Carry strategies experiencing drawdowns, wiping out YTD gains
- Market expected to stabilize after recent shocks, carry strategy appeal diminished
- Yen likely to take a breather, BOJ stance unchanged, market normalization ongoing.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
4. Modern Monetary Theory (MMT) Revisited
- The inflationary implications of Modern Monetary theory have finally been exposed in the aftermath of the COVID-19 pandemic after 2022
- The risks of inflation were underplayed due to prolonged disinflationary impulses stemming from decades of globalisation. Recent US practice of MMT could force the Fed to raise its inflation target.
- Japan pursued an MMT framework since 2013, but the continuation of quantitative easing and arrival of rising inflation is undermining the yen. The Eurozone faces the same predicament as Japan.
5. US Rates: July Morning turns into Cruel Summer
- Weak employment data led to a shift in Fed forecast, with projected rate cuts in September and November
- Rates have backed off from lows, with markets pricing in a less dovish path
- Treasury market in transition, with dealer balance sheets at bloated levels and auctions showing poor results due to lack of demand from traditional investors.
This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.
6. Can Ukraine drive to Moscow?
- Welcome to this week’s Great Game! Once again, we’re focused on the two big wars going on – Ukraine and Gaza.
- What are the risks, what will hit markets and what’s the outlook?
- Last Tuesday, Ukraine launched an offensive into Russian territory in the Kursk and Belgorod Oblasts.
7. Steno Signals #112 – Liquidity is BOTTOMING
- Happy Sunday, folks!I hope you’ve enjoyed the weekend.
- After a bizarre week, starting with the rug-pulling in Japan on Monday morning, it was time for a well-deserved break over the past two days.
- We’ve encountered tons of questions about the size of the USDJPY carry trade, and here’s what we’ll say on the topic: Those claiming that the carry trade is 10-20 trillion USD have very little understanding of the netting of derivatives and/or the FX hedging policies of international investors.
8. EM Watch: The Chinese race towards 0% interest rates
- Welcome to our Weekly EM Watch, where we look at China and other large EM countries through the lens of Western macro investors.
- Over the past week, we received the latest quarterly update on Chinese foreign direct investments and the situation went from dire to abysmal.
- There is a net negative inward FDI flow, and despite a significant $190 billion surplus in customs goods and services, the basic balance, which comprises both the current account and FDI, recorded a substantial deficit of $30 billion for the first time.
9. Walker’s Weekly: Dr. Jim’s Summary of Key Global Macro Developments – 16 Aug 2024
- Japan’s Q2 economic rebound may be misleading due to annualized reporting; future slowdown is a concern.
- Political instability in Japan and Thailand, with both countries’ leaders stepping down amid economic challenges.
- We maintain a cautious market outlook, especially on Thailand’s struggling economy and currency.
10. Assessing the Damage: It’s Not Just the Carry Trade
- The recent disorderly risk-off episode can be attributed to the unwind of a series of trades that depend on a low-volatility and complacent environment.
- Historically, such unwinds have resolved in volatility spikes and higher equity returns soon afterwards
- The current environment is supportive of a quick market recovery, though the risk of a LTCM-style blowup could see a longer and more complex market bottom.
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. MARKETS AND SEMICONDUCTORS
- Hello! I went on a short hike this weekend, which always seems to cause something to change.
- What changed was that we are seeing a very large leveraged unwind in the market, driven by the BOJ’s hike in interest rates.
- Let me write out the series of events. First and foremost, last week, we saw some of the first macro jitters. The CPI came to light, which was viewed as positive. But then NFP showed a bit of weakness.
2. Taiwan Dual-Listings Monitor: TSMC and ASE Premiums Break Down Again; ASE Spread Near 1-Year Lows
- TSMC: Premium Breaks Back Down to +8.3%; 5-15% Could Now Be the Key Range
- UMC: -2.2% Discount; Good Level to Go Long the Premium
- ASE: Premium Breaks Down Again, Now Only +1.5%; Consider Going Long
3. Taiwan Tech Weekly: Tough Start for Nvidia and Apple Supply Chains; Asustek, Novatek Results Ahead
- Tough Start to the Week — Negative News for Nvidia and Apple Supply Chains
- Key Events: Asustek & Novatek Results; Mediatek & TSMC July Sales Data
- UMC Signals Non-AI Industry Inventory Correction Through 2024E; Why Intel Is Increasingly Important
4. PC Monitor: Promising Uptake of Microsoft Copilot and AI Services; Remain Structurally Long
- Given market concerns that AI is overhyped and not yet delivering sufficient value, we analyze Microsoft’s Copilot disclosures and examine signs of AI services traction among corporate clients.
- Signs indicate that Copilot is gaining substantial traction with corporate clients, adding value to software development, business operations, and healthcare documentation functions.
- The number of organizations paying for MSFT’s AI services is expanding rapidly. We view this as a promising indicator of increased AI adoption and substantial value creation.
5. GlobalWafers (6488.TT): Semi Industry Expected to Recover in 2H24, Holding an Bright Outlook in 2025
- The 2Q24 revenue was NT$15.3bn, 1.6% QoQ and -14.4% YoY. GM in 2Q24 was 32.3%, -5.8% QQ and -14.3% YoY. OPM in 2Q24 was 22.0%, -16.3% QoQ and -24.1% YoY.
- The widespread adoption of AI-driven electronic devices, along with the onset of the AI-powered device replacement cycle, is likely driving increased demand for peripheral ICs and sensors.
- With inventory levels gradually depleting and downstream customers ramping up production capacity in 2025, the semiconductor industry is expected to recover in 2H24 and maintain an optimistic outlook for 2025.
6. Asustek & Acer Key Takeaways: Strong July Revenue Growth and ‘New Product Life Cycle’ Starting 3Q24
- Strong Revenue Growth Signals Robust Demand in PC and Server Markets for Asustek and Acer
- Asus Management Continues to Describe Multi-Year PC Growth Cycle Ahead; 3Q24 Will Be Start of ‘New Product Lifecycle’
- Visit to Guang Hua Digital Plaza to Review New PC Models First-Hand. Remain Structurally Long PC Makers; Acer, Asus, Dell.
7. Silicon Motion 2Q24 Results Take-Aways: Strong Growth & NAND Flash Market Share Gains Expected
- Silicon Motion reported 2Q24 results on Friday, describing strong demand for NAND flash controllers driven by the PC industry and improving demand from the smartphone industry.
- The company expects industry NAND flash pricing to continue improving into 2025E. Moreover, SIMO expects to expand its market share for NAND flash controllers by year-end.
- Maintain Structural Long rating for SIMO. The recent share price decline is painful for holders however share weakness is an accumulation opportunity with an investment view to mid-2025E.
8. TSMC July Revenue Surges 44.7% YoY, Sets A New Record Monthly High
- TSMC July revenues of NT$256.95 billion, +23.6% MoM & + a whopping 44.7% YoY
- Q224 silicon area wafer shipments amounted to 3,035 MSI, up 7.1% QoQ but down 8.9% YoY
- Q224 semiconductor sales reached $149.9 billion, +6.5% QoQ and +18.3% YoY.
9. Novatek (3034.TT): 3Q24 Guidance Slightly Weak in GM
- The 3Q24 revenue is expected 10.5% higher than 2Q24, but the GM/OPG outlook will be 5.1%/3.6% lower because of pricing adjustments and limited NRE sales .
- Smartphone’s demand will enter peak season with expected stockpiling for new models. Automotive inventory adjustment is needed due to muted demand.
- Dividend payout ratio has remained at 80-85% in recent years, with no major changes expected.
10. SMIC (981.HK): Revenue and GM Continued to Trend Up in 3Q24
- Expected sequential revenue growth of 13% to 15%, gross margin expected between 18% and 20%.
- The company has not increased capacity utilization through price cuts but supports customers in facing competition to maintain market share.
- Inventory replenishment behavior will end in the third quarter, and fourth-quarter orders will more accurately reflect actual demand rather than the impact of restocking.
This weekly newsletter pulls together summaries of the top ten most-read Insights across Equity Capital Markets on Smartkarma.
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1. Ola Electric IPO Trading – Decent Anchor, Tepid Overall Demand
- Ola Electric managed to raise around US$734m in its India IPO.
- Ola Electric Mobility is a vertically integrated pure EV player in India with manufacturing capabilities for EVs and EV components, including cells
- In our previous notes, we looked at the company’s past performance and valuations. In this note, we talk about the trading dynamics.
2. BrainBees Solutions IPO: Five Facts Why FirstCry Is Not a First Class Company
- We highlight several red flags with regard to BrainBees Solutions (0172540D IN) operations, business strategy and governance for investors’ careful consideration.
- At the announced IPO price band of Rs440 – Rs465, Brainbees implied EV/Revenues (FY24) works out to 3.5X – 3.7X – a significant discount to India listed online retail verticals.
- Despite seemingly inexpensive relative valuations, we do not see a compelling reason to invest in the company, specially given the several red flags discussed below.
3. ECM Weekly (5th Aug 2024) – Ola Electric, Brainbees, WeRide, Sanil, CR Beverages, Carote, Fortescue
- 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, the coming week will see see the listing of Akums Drugs while books will be open for Ola Electric, BrainBees Solutions and Black Sesame Technologies.
- On the placement front, there were two large deals in Fortescue Metals (FMG AU) and Adani Transmission (ADANIT IN).
4. Eternal Beauty Pre-IPO Tearsheet
- Eternal Beauty Holdings Limited (EBHL12 HK) is looking to raise about US$200m in its upcoming Hong Kong IPO. The deal will be run by BNP Paribas, Citic, CMBI and DBS.
- Eternal Beauty is the largest brand management company of perfumes in the combined markets of Mainland China, Hong Kong and Macau, in terms of retail sales in 2023.
- The company has a diverse portfolio of iconic brands of not only perfumes, but also color cosmetics, skincare products, personal care products, eyewear and home fragrances under management.
5. Brainbees Solutions (FirstCry) IPO: Key Facts, Financials and Valuations
- BrainBees Solutions (0172540D IN) that operates FirstCry, India’s leading Online Mom and Child vertical, has launched a USD500 mn IPO that closes on August 8th.
- The IPO pricing suggest a post-money equity valuation of around USD 2.8 billion and an EV/Revenue multiple in the range of 3.5X-3.7X.
- Brainbees operates in an attractive online vertical noted for its high frequency purchases and long term customer relationship. However it has not built significant competitive advantages versus leading horizontal platforms.
6. Ola Electric IPO: Forecasts and Valuation
- Ola Electric (1700674D IN) plans to raise INR55bn through fresh issue of shares while existing shareholders will offer 84.9m shares at an indicative IPO price band of INR72-76 per share.
- We expect the company’s revenues to continue to expand and grow at much higher rates during the next few years compared to competitors in the Indian two-wheeler market.
- Our valuation analysis suggests that Ola Electric’s IPO is attractively priced compared to peers and we would suggest subscribing for the company’s IPO.
7. Black Sesame IPO Trading – Lackluster Demand, Combined with Bad Timing
- Black Sesame Technologies (BLACKSES HK) raised around US$133m in its Hong Kong IPO, after pricing its IPO at the low-end.
- Black Sesame International Holdings (BSIH) is an automotive-grade computing SoC and SoC-based intelligent vehicle solution provider.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
8. Paras Healthcare Pre-IPO Tearsheet
- Paras Healthcare Limited (0490145D IN) is looking to raise about US$180m in its upcoming India IPO. The deal will be run by ICICI, IIFL and Motilal Oswal.
- Paras Healthcare is the fifth largest healthcare provider, in terms of bed capacity in North India, Bihar and Jharkhand, with an aggregate of 2,135 beds, as of March 31, 2024.
- The company offers several clinical specialties across its hospitals including cardiac sciences, oncology, neuro sciences, gastro sciences and orthopedics and joint replacement.
9. Brainbees Solutions (FirstCry) IPO: Valuation Insights
- BrainBees Solutions (0172540D IN), India’s largest multi-channel retailing platform for mothers’, babies’ and kids’ products, will launch an IPO to raise up to US$500 million.
- We previously discussed the IPO in Brainbees Solutions (FirstCry) IPO: The Bull Case, Brainbees Solutions (FirstCry) IPO: The Bear Case and Brainbees Solutions (FirstCry) IPO: The Investment Case.
- Our valuation analysis suggests that the IPO price range of Rs440-465 per share is attractive. Therefore, we would participate in the IPO.
10. Initial Thoughts on the K Bank IPO
- In this insight, we provide an update on the K Bank IPO, which is more likely in 1H 2025. K Bank is one of the largest Internet-only banks in Korea.
- A successful IPO of K Bank could have a positive impact on KT Corp (030200 KS) which is the indirectly the largest shareholder of K Bank.
- K Bank had total operating income of 51.5 billion won (up 328% YoY) in 1Q 2024. Operating margin improved materially from 5.7% in 1Q 2023 to 19.5% in 1Q 2024.