Smartkarma Daily Briefs

The ongoing transformation of Singapore Post (SingPost) from a post and parcel delivery company into a global logistics operator appears to have slipped under the radar of investors and now offers an opportunity for investors to reassess its potential. We believe expansion into the Australian logistics market offers long-term growth and that historical issues surrounding structural weakness in postal volumes may be resolved by growth in replacement volumes from e-commerce and review of postal services in constructive engagement with the regulator. Implementing the March 2024 strategic review recommendations could help unlock value. We believe there is c 50% upside in the share price.

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May 21

Daily Brief United States: Novelis Corporation, GLOBALFOUNDRIES , Bitcoin, Wynn Resorts, Crocs Inc, Datadog , Twilio , Henry Schein, Cocoa Futures, Rockwell Automation and more

By Smartkarma Daily Briefs | Daily Briefs, United States

In today’s briefing:

Novelis Pre-IPO – Leader in Most Categories, Although End Markets’ Aren’t Really Growing Much
GLOBALFOUNDRIES Inc.: Government Funding Partnership & 3 Critical Growth Drivers
Crypto Crisp: Crypto vs. Macro
Wynn Resorts: Macau Operations
Crocs Inc.: Global Expansion and Revenue Growth through New Store Openings! – Major Drivers
Datadog Inc.: How Is The Increase in AI Adoption Impacting Their Future Growth Trajectory? – Major Drivers
Twilio Inc.: Twilio Alpha To Pioneer Early AI Developments & Other Major Drivers
Henry Schein Inc.: A Tale Of An Improving Market Position with New Products – Major Drivers
Fund Managers are Long Commodities and Hate Real Estate // Another Cocoa Update
Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers

Novelis Pre-IPO – Leader in Most Categories, Although End Markets’ Aren’t Really Growing Much

Novelis Corporation (0620365D US) Novelis is looking to raise US$1.2bn in its upcoming US IPO. The firm is owned by Indian-listed Hindalco. The deal will consist of 100% secondary shares.
Novelis is a global provider of aluminum solutions for the beverage packaging, automotive markets, specialties markets and aerospace.
In this note, we look at the firm’s past performance.

GLOBALFOUNDRIES Inc.: Government Funding Partnership & 3 Critical Growth Drivers

GlobalFoundries Inc. has presented its first quarterly financial results for the fiscal year of 2024.
Despite facing some challenges, the outcomes have exceeded the guidance ranges indicated in the firm’s fourth-quarter earnings call.
The industry is showing signs of emerging from a period of inventory correction and uncertainty due to ongoing macroeconomic and geopolitical issues.

Crypto Crisp: Crypto vs. Macro

By Mads Eberhardt

It comes as no surprise that we have been bearish on the crypto market in recent weeks.
However, the market seems indifferent to our stance.
The softer-than-expected US Consumer Price Index (CPI) report last Wednesday boosted risk-on assets, particularly cryptocurrencies, while the prospect of improved liquidity conditions in the economy is also set to benefit the crypto market.

Wynn Resorts: Macau Operations

The first quarter of 2024 marked a period of continued momentum for Wynn Resorts.
The company’s earnings call transcript highlighted several significant developments, representing positive and negative factors that could be relevant for potential investors.
Starting on the bright side, Wynn Resorts reported an all-time record property EBITDAR of $647 million during Q1 2024, owing to the company’s solid team delivering five-star service and unique experiences to their guests.

Crocs Inc.: Global Expansion and Revenue Growth through New Store Openings! – Major Drivers

Crocs, Inc. reported strong first quarter results that exceeded guidance both on revenue and net profit.
Revenue rose by 7% compared to the prior year, driven by a 16% increase in Crocs brand sales.
Adjusted gross margins improved 180 basis points to 56%, and adjusted earnings per share grew 16% to $3.02.

Datadog Inc.: How Is The Increase in AI Adoption Impacting Their Future Growth Trajectory? – Major Drivers

Datadog, during its First Quarter 2024 Earnings, has revealed optimistic outcomes for the quarter.
A 27% year-on-year increase in revenue at $611 million, surpassing the higher end of company expectations, signaled solid financial growth.
Furthermore, the increase in the customer base to approximately 28,000, up from about 25,500 during the same period last year, brings a positive outlook for the company.

Twilio Inc.: Twilio Alpha To Pioneer Early AI Developments & Other Major Drivers

Twilio Inc., a cloud communications platform, had a strong start to the year, exceeding its first quarter guide and reporting $1.04 billion in revenue and $160 million in non-GAAP income from operations.
The company’s revenue represents a significant year-over-year increase, driven by a record quarter of non GAAP gross profit of $566 million and strong free cash flow of $177 million.
Twilio has demonstrated disciplined execution across the board, leading to year-over-year growth and profitability.

Henry Schein Inc.: A Tale Of An Improving Market Position with New Products – Major Drivers

Henry Schein Inc, the leading global healthcare solutions provider, recently reported its results for the first quarter of 2024.
The company reported solid earnings driven by gross profit and gross margin expansion as it recovers from last quarter’s cyber-incident.
It’s worth noting that even with the cyber incident, Henry Schein marked an improvement in its merchandise sales growth.

Fund Managers are Long Commodities and Hate Real Estate // Another Cocoa Update

By The Commodity Report

Fund Managers are Long Commodities and Hate Real Estate Fund managers positioning in commodities and energy was virtually unchanged compared to last month, according to the latest BofA survey.
Compared to the longer term z-score fund managers remain quite long commodities and slightly short energy.
While the amount of fund managers that are overweight commodities has risen, it’s still nothing compared to April 2022 – right after Russia invaded Ukraine.

Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers

Rockwell Automation closed the second quarter of fiscal 2024 on a rather unsteady footing as a result of high inventory levels held by machine builders and slower ramp ups that are impacting shipments for the second half.
The company has also had to reduce its guidance for the full fiscal year which is proving to be larger than initially expected.
However, despite what looks like a rocky start to the fiscal year, Rockwell Automation has already set in motion a comprehensive program aimed at expanding margins as the company accelerates actions to align costs with the updated outlook on current year orders.

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May 21

Daily Brief China: L’Occitane, Li Auto , China Resources Beverage, Shulan Health Management, Health And Happiness (H&H) and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

L’Occitane (973 HK): Who Owns What, And When
Li Auto (LI US): 1Q24, A List of Bad News
Pre-IPO China Resources Beverage – Here Are the Concerns and the Risks Behind
Shulan Health Management Pre-IPO – Still Ramping up but Only a Small Player
Morning Views Asia:

L’Occitane (973 HK): Who Owns What, And When

By David Blennerhassett

A fortnight ago, I sought access to L’Occitane (973 HK)‘s lesser-known shareholder register, a byproduct of investigative disclosure reports under Chapter 571, s329 of the Securities and Futures Ordinance.
This is the same register I discussed in Giordano (709 HK): A Closer Look At The Shareholder Register Ahead Of The SGM; and one also used by proxy solicitors.
The register confirms what has been long rumoured about a certain shareholder activist. It is also informative for what isn’t present.

Li Auto (LI US): 1Q24, A List of Bad News

By Ming Lu

Operating profit turned negative in 1Q24 compared to 1Q23 due to the price war and the failure of new model.
The company disappeared from the industry top-10 list of sales volume and revenue growth slowed down to zero in April.
All cross-sectional comparisons suggest a Sell rating for the stock.

Pre-IPO China Resources Beverage – Here Are the Concerns and the Risks Behind

By Xinyao (Criss) Wang

Over 92% of CR Beverage’s revenue is from packaged drinking water products, but YoY growth this business is already below industry CAGR, raising concerns about whether future growth will stall.
The revenue scale/profitability of CR Beverage are far inferior to Nongfu Spring. In terms of cost control, operational efficiency and the strength of supply chain, CR Beverage is lagging behind.
For low-priced packaging water, the nationwide expansion is not a simple task, which will lead to significant cash outflow. Valuation of CR Beverage should be lower than that of peers.

Shulan Health Management Pre-IPO – Still Ramping up but Only a Small Player

By Ethan Aw

Shulan Health Management (1807987D CH) is looking to raise around US$150m in its Hong Kong IPO.
Shulan Health Management (SHM) is a technology-driven healthcare group in China that integrates healthcare services and medical research and education.
In this note, we talk about the firm’s historical performance.

Morning Views Asia:

By Leonard Law, CFA

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May 21

Daily Brief Japan: Renesas Electronics, Kfc Holdings Japan, Mitsui Matsushima, Sumitomo Metal Mining, Asahi Intecc, Mitsubishi UFJ Financial (MUFG) and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)
Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction
Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well
JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm
KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500
Sumitomo Metal Mining – A Shiny Mix of Gold, Copper and Nickel
2024 High Conviction Update: Asahi Intecc (7747 JP)- Q3FY24 Margins Take Hit; Tepid Q4 Expected
MUFG Cross-Shareholding – At Least US$20bn of Cross-Shareholding to Sell, Taking It Slow

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)

Today post-close, Denso Corp (6902 JP) (via BofA) announced a selldown of 78,127,800 shares of Renesas Electronics (6723 JP). This is the latest in a line of block exits.
There was the 130mm offering in November last year by INCJ. There was 123mm shares in Jan 2024 by NEC and Hitachi. A month later, 50mm shares from Mitsubishi Electric.
In general, they have been absorbed, but one hasn’t needed to buy in the market. Some have broken price. Here, the pricing range is aggressive.

Carlyle To Take KFC Japan (9873) Private at ¥6,500/Share – Big Win For All, a Model Transaction

Carlyle has a deal to buy Kfc Holdings Japan (9873 JP). ¥6,500/share is a 78% premium to undisturbed as a professional holder sells in an auction to the highest bidder.
That’s a great format for achieving a great price. And we got one. This should get done easily.
Importantly, the Bidco is named Crispy KK. It is 100% owned by Juicy KK. Juicy KK itself is 100% owned by Crispy Holdings L.P. Someone had some fun.

Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well

Denso Corp (6902 JP) is looking to raise US$1.39bn from selling a portion of its stake in Renesas Electronics (6723 JP).
DENSO’s selldown is a small one at just 4.3 days of ADV. While there is an overhang of around 4% of TSO, DENSO will be locked up for 270 days.
In this note, we will talk about the placement and run the deal through our ECM framework.

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm

Mitsui Matsushima (1518 JP) was a coal company starting over 100yrs ago. A bunch of years ago it started a solar energy business and then started M&A to diversify.
Coal closed last year and since, MMH has become an investment holdco for “basic businesses” (drinking straws, conveyor system chains, document shredders, weighing machines, crystal measuring devices, mask blanks, etc).
Murakami Group accumulated 4.98% in five weeks, then the next 14.9% in five days. Pump & Dump like Pacific Metals? Activism like JAFCO? Or something else more interesting?

KFC Holdings Japan (9873 JP): Carlyle Finger Lickin’ Tender Offer at JPY6,500

By Arun George

Kfc Holdings Japan (9873 JP) has recommended a tender offer from Carlyle Group / (CG US) at JPY6,500 per share, a 20.4% premium to the last close.
The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 31.54% ownership ratio.
Due to the Mitsubishi Corp (8058 JP) irrevocable, the minimum acceptance condition requires a 48.6% minority acceptance rate. The acceptance condition is achievable as the offer is a knockout bid.

Sumitomo Metal Mining – A Shiny Mix of Gold, Copper and Nickel

By Rikki Malik

Company Forecasts extremely conservative at current and expected metal prices
Scarcity Value for a liquid, large-cap gold miner in Japan
Balance Sheet will allow future share buybacks and dividend in the harvesting phase

2024 High Conviction Update: Asahi Intecc (7747 JP)- Q3FY24 Margins Take Hit; Tepid Q4 Expected

By Tina Banerjee

In Q3FY24, Asahi Intecc (7747 JP) reported 8% YoY increase in revenue to ¥26B, ahead of estimate of ¥24B, mainly driven by the exchange rate impact of higher foreign currencies.
Higher SG&A expenses impacted the profitability. Q3FY24 operating profit margin declined to 23.3% from 26.6% in Q3FY23, while net profit margin decreased to 16.0% from 18.5% during the same time.
In Q4FY24, revenue is expected to decline 3% YoY to ¥19.6B. Operating and net profits are anticipated to plunge 74% and 26%, YoY to ¥417M and ¥832M, respectively.

MUFG Cross-Shareholding – At Least US$20bn of Cross-Shareholding to Sell, Taking It Slow

By Sumeet Singh

Following up on our earlier cross-shareholding notes, in this note we look at Mitsubishi UFJ Financial (MUFG) (8306 JP)’s cross-shareholding.
MUFG had a stake over US$100m in at least 47 listed Japanese stocks, amounting to a total of around US$19bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

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May 21

Daily Brief Utilities: Citicore Renewable Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Utilities Sector

In today’s briefing:

Citicore Renewable Energy IPO – Needs a Wider Discount to Be Attractive

Citicore Renewable Energy IPO – Needs a Wider Discount to Be Attractive

Citicore Renewable Energy (CREC PM) is looking to raise around US$120m in its Philippines IPO.
Citicore Renewable Energy (CREC) is a pure-play renewable energy platform focused on developing and operating renewable energy projects in the Philippines.
We looked at the firm’s past performance in an earlier note. In this note, we will share our thoughts on valuation.

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May 21

Daily Brief Energy/Materials: EcoPro Materials, Sumitomo Metal Mining, Novelis Corporation, Iron Ore, Chariot Limited, Kolibri Global Energy , Geopark Ltd, Intl Flavors & Fragrances, Pan African Resources, Alkane Resources and more

By Smartkarma Daily Briefs | Daily Briefs, Energy & Materials Sector

In today’s briefing:

Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital
Sumitomo Metal Mining – A Shiny Mix of Gold, Copper and Nickel
Novelis Pre-IPO – Leader in Most Categories, Although End Markets’ Aren’t Really Growing Much
Champion Iron (CIA CN): Another Expansion Iron Ore Pure Play on High-Grade Ore
Chariot Limited (AIM: CHAR): Drilling at the second well onshore Morocco has commenced
Kolibri Global Energy – Record quarterly production
GeoPark Limited (NYSE: GPRK): Dividend Distribution Boosted by Share Buyback.
Intl Flavors &Amp; Fragrances (IFF) – Monday, Feb 19, 2024
Pan African Resources – Upgraded FY24 production guidance
Alkane Resources – Kaiser takes on the World

Block Deal Sales of 200 Billion Won Worth of Ecopro Materials by BRV Capital

After the market close on 20 May, it was reported that Blue Run Ventures (BRV) sold 204.1 billion won (US$150 million) worth of EcoPro Materials in a block deal sale.
The block deal sale price was 93,000 won, a 9.7% discount to the closing price on 20 May (103,000 won).
This block deal sale at a big discount is likely to raise overhang concerns about further block deal sales by BRV Capital in the coming years.

Sumitomo Metal Mining – A Shiny Mix of Gold, Copper and Nickel

By Rikki Malik

Company Forecasts extremely conservative at current and expected metal prices
Scarcity Value for a liquid, large-cap gold miner in Japan
Balance Sheet will allow future share buybacks and dividend in the harvesting phase

Novelis Pre-IPO – Leader in Most Categories, Although End Markets’ Aren’t Really Growing Much

Novelis Corporation (0620365D US) Novelis is looking to raise US$1.2bn in its upcoming US IPO. The firm is owned by Indian-listed Hindalco. The deal will consist of 100% secondary shares.
Novelis is a global provider of aluminum solutions for the beverage packaging, automotive markets, specialties markets and aerospace.
In this note, we look at the firm’s past performance.

Champion Iron (CIA CN): Another Expansion Iron Ore Pure Play on High-Grade Ore

By Sameer Taneja

Following our initiation on Mount Gibson Iron (MGX AU) and Kumba Iron Ore (KIO SJ), recently we initiate coverage on Champion Iron (CIA AU), a pure play with Canadian assets.
Although it is more richly priced than the other two names, it offers a 50% volume expansion opportunity in FY25/26, subject to financing availability.
Trading at 8.6x FY25 (March-end) PE, 4.6x EV-EBITDA, and a 6% dividend yield (subject to capex), this is not our favorite name at the current price due to production uncertainty.

Chariot Limited (AIM: CHAR): Drilling at the second well onshore Morocco has commenced

By Auctus Advisors

Chariot has started to drill the Dartois prospect onshore Morocco.
The well is targeting a different reservoir system and trapping style than the Gaufrette prospect.
The main target at Dartois is estimated to hold 12 bcf of gross prospective resources.

Kolibri Global Energy – Record quarterly production

Kolibri Global Energy (KEI) has reported Q124 results that saw flat EBITDA quarter-on-quarter as double-digit growth in average production to a record 3,305boepd was offset by lower commodity prices and a one-off increase in operating costs. We have updated our estimates to reflect the results and the recent well reworks, lowering our FY24 EBITDA estimate by 9%. As a result, our valuation of KEI falls from US$7.1 to US$6.9/share. The stock continues to trade at undemanding valuation multiples and, despite the increased volatility, the oil price remains generally supportive of the share price.

GeoPark Limited (NYSE: GPRK): Dividend Distribution Boosted by Share Buyback.

By Auctus Advisors

1Q24 production had been reported previously.
GeoPark held US$151 mm in cash at the end of March.
Adjusting for a negative working capital movement of ~US$20 mm in 1Q24, this would have been in line with our forecast.

Intl Flavors &Amp; Fragrances (IFF) – Monday, Feb 19, 2024

By Value Investors Club

IFF is a major supplier to various end markets such as food and beverage, fragrance, home care, and health and wellness
The company sources natural ingredients from sources like flowers, fruits, and marine products
IFF is expected to meet expectations in its Q4 ’23 earnings report, with a new CEO expected to bring improvements in operating performance and stock price

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Pan African Resources – Upgraded FY24 production guidance

On 9 May, Pan African announced that it was narrowing its production guidance for the year ending 30 June 2024 to 186–190koz (cf 180–190koz previously), notwithstanding the cessation of production from surface sources at Evander in H2. Group AISC guidance was maintained at US$1,325–1,350/oz (at ZAR18.50/US$) however. Consequently, we have increased our H2 production forecast by 2.5% as well as increasing our H224 gold price by 9.2% to result in a US$20.6m positive variance in H224e revenue, only partially offset by incidental higher costs, to result in a 41.7% increase in H224e normalised EPS and a 19.1% increase in FY24e normalised EPS. Production guidance was also provided for FY25 of 215–225koz, which compares with Edison’s prior (and unchanged – and, in the event, relatively conservative) forecast of 216.6koz.

Alkane Resources – Kaiser takes on the World

As with Boda before it, April’s resource update at Kaiser saw substantially all of its resource promoted from the inferred to the indicated category at a materially higher grade of both gold and copper. The close-spaced nature of the drilling required to achieve this will now allow these resources to be quickly and easily promoted to reserve status for the purpose of Alkane’s scoping study – or preliminary economic assessment – to be announced later this quarter.

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May 21

Daily Brief Industrials: Mitsui Matsushima, Evergreen Marine Corp, Hansol Logistics, International Distributions Services, Deutsche Lufthansa , Rockwell Automation, Singapore Post and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade
Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics
EP Group/IDS (Royal Mail): Politically Sensitive
European Airlines – The Ravages of Increased Earnings Seasonality
Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers
Singapore Post – Transformation to global logistics player unnoticed

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm

Mitsui Matsushima (1518 JP) was a coal company starting over 100yrs ago. A bunch of years ago it started a solar energy business and then started M&A to diversify.
Coal closed last year and since, MMH has become an investment holdco for “basic businesses” (drinking straws, conveyor system chains, document shredders, weighing machines, crystal measuring devices, mask blanks, etc).
Murakami Group accumulated 4.98% in five weeks, then the next 14.9% in five days. Pump & Dump like Pacific Metals? Activism like JAFCO? Or something else more interesting?

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade

By Brian Freitas

Using data from the close on 17 May, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 12.6% and a one-way trade of US$1.13bn.
Shorts have increased on the potential adds and potential deletes and covering will lead to rally in some stocks while providing support in others at rebalance implementation.

Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics

After the market close on 20 May, Hansol Holdings announced that it is pursuing a tender offer for an additional 18.53% stake in its affiliate Hansol Logistics.
The tender offer price is 3,000 won, which is 22% higher than the close price on 20 May. The tender offer period is from 21 May to 10 June.
We have a positive view of this tender offer. Hansol Logistics trades at EV/EBITDA of 1.8x, P/E of 3.7x, and P/B of 0.6x based on 2023 figures.

EP Group/IDS (Royal Mail): Politically Sensitive

By Jesus Rodriguez Aguilar

The UK Chancellor stated that any bid for International Distributions Services (IDS LN) (Royal Mail owner) would be thoroughly evaluated for national security considerations to prevent any risks to essential infrastructure.
The Board is “minded to accept” the improved 370p takeover proposal (4.8x EV/Fwd NTM EBITDA) from Czech billionaire Daniel Kretinsky’s EP Group, should a formal bid is made.
The improved proposal seems fair. GLS is profitable, while Royal Mail aims break-even by March2025e. Concerns about potential developments post-offer pose a potential political issue. Gross spread is 13.5%.

European Airlines – The Ravages of Increased Earnings Seasonality

By Neil Glynn

We update forecasts for the European airline sector, highlighting it will be difficult for most carriers to grow earnings in 2023.
We publish detailed earnings bridges highlighting the damage to full year earnings from structural damage to 1Q results due to inflationary pressure and the loss of corporate traffic
This also suggests opportunities for the sector to address winter woes to supplement strong summer performances.

Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers

Rockwell Automation closed the second quarter of fiscal 2024 on a rather unsteady footing as a result of high inventory levels held by machine builders and slower ramp ups that are impacting shipments for the second half.
The company has also had to reduce its guidance for the full fiscal year which is proving to be larger than initially expected.
However, despite what looks like a rocky start to the fiscal year, Rockwell Automation has already set in motion a comprehensive program aimed at expanding margins as the company accelerates actions to align costs with the updated outlook on current year orders.

Singapore Post – Transformation to global logistics player unnoticed

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May 21

Daily Brief TMT/Internet: Renesas Electronics, Shift Up, Taiwan Semiconductor (TSMC), GLOBALFOUNDRIES , Twilio , Keywords Studios, Datadog , Electronic Arts, Match Group and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)
Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well
Shift Up IPO Preview
Tech Supply Chain Tracker (21-May-2024): EVs and smart driving tech hit by Chinese car market price war.
GLOBALFOUNDRIES Inc.: Government Funding Partnership & 3 Critical Growth Drivers
Twilio Inc.: Twilio Alpha To Pioneer Early AI Developments & Other Major Drivers
EQT/Keywords Studios: An Offer You Can’t Refuse
Datadog Inc.: How Is The Increase in AI Adoption Impacting Their Future Growth Trajectory? – Major Drivers
Electronic Arts Inc.: Are The AI Investments Speeding Up Their Game Creation? – Major Drivers
Match Group: Will Its Investments In AI For Enhancing Their Algorithms Pay Off? – Major Drivers

Renesas (6723) – Denso Selldown Starts; Fourth Large Renesas Block in 6mos (Two More To Come)

Today post-close, Denso Corp (6902 JP) (via BofA) announced a selldown of 78,127,800 shares of Renesas Electronics (6723 JP). This is the latest in a line of block exits.
There was the 130mm offering in November last year by INCJ. There was 123mm shares in Jan 2024 by NEC and Hitachi. A month later, 50mm shares from Mitsubishi Electric.
In general, they have been absorbed, but one hasn’t needed to buy in the market. Some have broken price. Here, the pricing range is aggressive.

Renesas Block – While Not Particularly Well Flagged, Recent Selldowns in the Stock Have Done Well

Denso Corp (6902 JP) is looking to raise US$1.39bn from selling a portion of its stake in Renesas Electronics (6723 JP).
DENSO’s selldown is a small one at just 4.3 days of ADV. While there is an overhang of around 4% of TSO, DENSO will be locked up for 270 days.
In this note, we will talk about the placement and run the deal through our ECM framework.

Shift Up IPO Preview

Shift Up (462870 KS) is getting ready to complete its IPO in KOSPI in June 2024. Established in 2013, Shift Up is one of the leading game developers in Korea.
The IPO price range is 47,000 won to 60,000 won. The IPO offering amount is 340.8 billion won to 435 billion won.
According to the bankers’ valuation, the market capitalization range of the company ranges from 2.73 trillion won to 3.4 trillion won. This is the second largest IPO in Korea YTD.

Tech Supply Chain Tracker (21-May-2024): EVs and smart driving tech hit by Chinese car market price war.

By Tech Supply Chain Tracker

EVs and smart driving systems in China’s car market impacted by price competition, leading to changes in industry dynamics.
Blue carbon uncertainties could hinder progress towards achieving net-zero goals, says scientist, highlighting need for further research.
Indian solar firm reducing dependence on Chinese imports for solar components to enhance self-sufficiency, aiming for greater control over supply chain.

GLOBALFOUNDRIES Inc.: Government Funding Partnership & 3 Critical Growth Drivers

GlobalFoundries Inc. has presented its first quarterly financial results for the fiscal year of 2024.
Despite facing some challenges, the outcomes have exceeded the guidance ranges indicated in the firm’s fourth-quarter earnings call.
The industry is showing signs of emerging from a period of inventory correction and uncertainty due to ongoing macroeconomic and geopolitical issues.

Twilio Inc.: Twilio Alpha To Pioneer Early AI Developments & Other Major Drivers

Twilio Inc., a cloud communications platform, had a strong start to the year, exceeding its first quarter guide and reporting $1.04 billion in revenue and $160 million in non-GAAP income from operations.
The company’s revenue represents a significant year-over-year increase, driven by a record quarter of non GAAP gross profit of $566 million and strong free cash flow of $177 million.
Twilio has demonstrated disciplined execution across the board, leading to year-over-year growth and profitability.

EQT/Keywords Studios: An Offer You Can’t Refuse

By Jesus Rodriguez Aguilar

Keywords Studios (KWS LN) is in advanced discussions with EQT regarding a 2,550p/share possible cash offer (+1.76p final dividend), which the Board is minded to recommend. PUSU deadline is 15 June.
Premium (including divi) is c.74%; the implied equity value is c. €2,363 million and the implied EV is c. €2,477 million. The offer seems fair vs. the median of comparables.
The offer is pitched at a level that cannot be refused, even considering that Keywords Studios seemed grossly mispriced before the offer from EQT. Gross spread is 11.7%. Long.

Datadog Inc.: How Is The Increase in AI Adoption Impacting Their Future Growth Trajectory? – Major Drivers

Datadog, during its First Quarter 2024 Earnings, has revealed optimistic outcomes for the quarter.
A 27% year-on-year increase in revenue at $611 million, surpassing the higher end of company expectations, signaled solid financial growth.
Furthermore, the increase in the customer base to approximately 28,000, up from about 25,500 during the same period last year, brings a positive outlook for the company.

Electronic Arts Inc.: Are The AI Investments Speeding Up Their Game Creation? – Major Drivers

The past fiscal year and the final quarter of Electronic Arts (EA) have seen an unexpected increase in growth, bringing more entertainment and deeper experiences to consumers.
During this timeframe, live services significantly contributed to revenue streams by providing fresh content which translated into long term consumer loyalty and increased spending.
The past year witnessed the successful launch of EA SPORTS FC, a multi-platform experience which drove strong engagement across experiences due to its ability to connect and engage players globally.

Match Group: Will Its Investments In AI For Enhancing Their Algorithms Pay Off? – Major Drivers

Match Group’s latest earnings revealed a challenging environment, but also highlighted several growth opportunities for the company in the long-term.
While acknowledging some headwinds, Bernard Kim, the CEO, emphasized the enduring power of their dating applications, and how they have transformed the way people meet and connect.
The transcript suggested that despite some users still harbouring a nostalgic preference for organic encounters, dating apps like those created by Match Group have become indispensable tools in today’s dating scene.

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May 21

Daily Brief Industrials: Mitsui Matsushima, Evergreen Marine Corp, Hansol Logistics, International Distributions Services, Deutsche Lufthansa , Rockwell Automation, Singapore Post and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm
Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade
Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics
EP Group/IDS (Royal Mail): Politically Sensitive
European Airlines – The Ravages of Increased Earnings Seasonality
Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers
Singapore Post – Transformation to global logistics player unnoticed

JAPAN ACTIVISM: Murakami-Related Buyers Go from 5% to 20% of Mitsui Matsushima (1518) In 5 Days. Hmm

Mitsui Matsushima (1518 JP) was a coal company starting over 100yrs ago. A bunch of years ago it started a solar energy business and then started M&A to diversify.
Coal closed last year and since, MMH has become an investment holdco for “basic businesses” (drinking straws, conveyor system chains, document shredders, weighing machines, crystal measuring devices, mask blanks, etc).
Murakami Group accumulated 4.98% in five weeks, then the next 14.9% in five days. Pump & Dump like Pacific Metals? Activism like JAFCO? Or something else more interesting?

Yuanta/P-Shares Taiwan Div+ ETF Rebalance Preview: 13% One-Way Turnover & US$2.27bn Trade

By Brian Freitas

Using data from the close on 17 May, there could be 5 changes to the Yuanta/P-Shares Taiwan Dividend Plus ETF in June.
There will also be capping and funding flows that will lead to a one-way turnover of 12.6% and a one-way trade of US$1.13bn.
Shorts have increased on the potential adds and potential deletes and covering will lead to rally in some stocks while providing support in others at rebalance implementation.

Hansol Holdings Announces a Tender Offer of 18.53% Stake in Hansol Logistics

After the market close on 20 May, Hansol Holdings announced that it is pursuing a tender offer for an additional 18.53% stake in its affiliate Hansol Logistics.
The tender offer price is 3,000 won, which is 22% higher than the close price on 20 May. The tender offer period is from 21 May to 10 June.
We have a positive view of this tender offer. Hansol Logistics trades at EV/EBITDA of 1.8x, P/E of 3.7x, and P/B of 0.6x based on 2023 figures.

EP Group/IDS (Royal Mail): Politically Sensitive

By Jesus Rodriguez Aguilar

The UK Chancellor stated that any bid for International Distributions Services (IDS LN) (Royal Mail owner) would be thoroughly evaluated for national security considerations to prevent any risks to essential infrastructure.
The Board is “minded to accept” the improved 370p takeover proposal (4.8x EV/Fwd NTM EBITDA) from Czech billionaire Daniel Kretinsky’s EP Group, should a formal bid is made.
The improved proposal seems fair. GLS is profitable, while Royal Mail aims break-even by March2025e. Concerns about potential developments post-offer pose a potential political issue. Gross spread is 13.5%.

European Airlines – The Ravages of Increased Earnings Seasonality

By Neil Glynn

We update forecasts for the European airline sector, highlighting it will be difficult for most carriers to grow earnings in 2023.
We publish detailed earnings bridges highlighting the damage to full year earnings from structural damage to 1Q results due to inflationary pressure and the loss of corporate traffic
This also suggests opportunities for the sector to address winter woes to supplement strong summer performances.

Rockwell Automation: Does Its Improved Industrial Automation Adoption Warrant A Bullish Rating? – Major Drivers

Rockwell Automation closed the second quarter of fiscal 2024 on a rather unsteady footing as a result of high inventory levels held by machine builders and slower ramp ups that are impacting shipments for the second half.
The company has also had to reduce its guidance for the full fiscal year which is proving to be larger than initially expected.
However, despite what looks like a rocky start to the fiscal year, Rockwell Automation has already set in motion a comprehensive program aimed at expanding margins as the company accelerates actions to align costs with the updated outlook on current year orders.

Singapore Post – Transformation to global logistics player unnoticed