Smartkarma Daily Briefs

There is Japan Post Bank (7182 JP) buyback risk that might cause Japan Post Holdings (6178 JP)/JPB unwinds; though probably a H2 risk.
Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms. Someone appears to be accumulating a stake to block an Exit/Delisting Offer, and force a bump.
L’Occitane (973 HK)‘s scrip pre-condition has been satisfied. But still the Offeror prevaricates.

Dentsu Group – FY24 prospects weighted to H2

By Edison Investment Research

Dentsu’s Q1 results indicate a slow start to the year, with organic net revenue down by 3.7%. However, prospects are improving, buoyed by new business wins and weighted to H2, which leave full year expectations (and our forecasts) unchanged. The One dentsu initiative, bringing together skill sets in consulting, technology, media and creative, is supporting improved pitch win rates, and giving greater coherence and consistency to the group product and service offering. We expect this to be a central element of the new management medium-term strategy, set to be unveiled during H2. The rating remains at a substantial discount to global peers, which we anticipate will narrow as evidence of renewed growth builds.

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May 19

Daily Brief China: ESR Group , Li Auto , Yichang HEC Changjiang Pharma, BYD Electronics, Tencent, KraneShares CSI China Internet ETF, Zijin Mining Group Co Ltd H and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows
A Few Generative AI Takeaways From C1Q24 Earnings
Red Dragon Awakening
HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market

Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows

The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.

A Few Generative AI Takeaways From C1Q24 Earnings

By Eric Wen

The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.

Red Dragon Awakening

By Douglas Busch

China momentum continues with KWEB breaking out above WEEKLY double-bottom base
Stocks REPORTING this week that look technically sound include PDD BZ and EH
In-Depth look at individual leaders in Tencent Holdings, Futu Holdings, and Sony Group

HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd

The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase.
Relatively smaller flows here at 3% one-way with the big flows on the name changes.

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May 19

Daily Brief Industrials: Zen Technologies, Japan Post Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Zen Technologies: Building a Strong Moat in Indian Defence Theme
Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

Zen Technologies: Building a Strong Moat in Indian Defence Theme

By Sudarshan Bhandari

Zen Technologies (ZEN IN) expands product range to drones, anti-drone systems, and medical simulators, enhancing opportunities beyond government contracts.
Strong order book of Rs 1,401 crore, significant R&D investment, and government support for indigenous defence manufacturing drive growth.
Zen Technologies (ZEN IN) diversified product portfolio and strategic government support position it well for significant growth in the defence and simulation markets.

Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

There is Japan Post Bank (7182 JP) buyback risk that might cause Japan Post Holdings (6178 JP)/JPB unwinds; though probably a H2 risk.
Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms. Someone appears to be accumulating a stake to block an Exit/Delisting Offer, and force a bump.
L’Occitane (973 HK)‘s scrip pre-condition has been satisfied. But still the Offeror prevaricates.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Energy/Materials: Zijin Mining Group Co Ltd H and more

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

In today’s briefing:

HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd

HSCEI June 2024 Rebal – Zijin Mining (2899) ADDed, Xinyi Solar (968) DELETEd

The HSCEI is well-known and well-followed but sees less passive tracking than you might expect. Quiddity teammember Janaghan had expected up to two ADDs and two DELETEs.
We got one ADD and one DELETE instead as SenseTime Group (20 HK) was “saved” from deletion by a FFW/FAF increase.
Relatively smaller flows here at 3% one-way with the big flows on the name changes.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief TMT/Internet: BYD Electronics, Tencent and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows
A Few Generative AI Takeaways From C1Q24 Earnings

HSI June 2024 Rebal – BYD Electronics (285) ADDed, Cogard Svcs (6098) DELETEd, and Capping Flows

The Hang Seng Index benchmark has been expected to see an increase in names and flows to Healthcare. We have only one ADD (IT/tech) and one DELETE.
But the headlined DELETE candidate in the most recent Quiddity Leaderboard was chosen to be deleted. And the ADD one of our top two.
Flows are somewhat restrained at capping flows, small name change flows, and then a few FFW/FAF changes to be about 1.9% one-way flows in total.

A Few Generative AI Takeaways From C1Q24 Earnings

By Eric Wen

The key takeaway from this earning season on the topic of generative AI (GAI) is that in-house generated content has the greatest potential for cost savings;
Taking a step further, mid-sized video platforms can also use AI to skip the curator layer, similar to Pinduoduo using algorithm to bypass small merchants to connect directly to factories;
We also notice that general media platforms with ample advertising inventories tend to perform better with AI’s help, which is why ads of Tencent’s advertising performed better than Baidu’s.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

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✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Most Read: China Merchants Expressway Net, JD.com , Alibaba Group Holding , APT Medical , Shinva Medical Instrument A, Shenyang Xingqi Pharmaceutical, Eoflow, ESR Group , Li Auto , Yichang HEC Changjiang Pharma and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived
HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June
Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows
CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes
CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains
ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues
Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps
(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way
Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

CSI300 Index Rebalance Preview: Bounce in the Potential Deletes Could Be Short Lived

The review period for the June rebalance is complete and we expect 11 changes to the Shanghai Shenzhen CSI 300 Inde (SHSZ300 INDEX).
We estimate one-way turnover of 1.4% at the rebalance leading to a one-way trade of CNY 8.82bn (US$1.22bn). There are a lot of stocks with multiple days ADV to trade.
The potential deletes have bounced off their lows as the market has recovered. But the potential passive selling could see them underperform over the next month.

HSTECH Index Rebalance Preview: Round-Trip Trade of US$2.4bn in June

We do not forecast any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June but there could be capping changes for 7 stocks.
Capping changes will result in a one-way turnover of 7.6% leading to a round-trip trade of US$2.4bn. 17 stocks will have over 0.5x ADV to trade from passive trackers.
Li Auto (2015 HK) will have the largest inflow while there will be big outflows from Meituan (3690 HK), Xiaomi Corp (1810 HK), JD.com (9618 HK) and Tencent (700 HK).

Alibaba (9988 HK): Dual Primary Listing & Potential Southbound Flows

Along with its fiscal 2024 results, Alibaba (9988 HK) announced that they were preparing for their primary listing in Hong Kong and the conversion was expected to complete by August.
If the conversion is completed by the end of August, Alibaba (9988 HK) could be added to Southbound Stock Connect in September and that could bring in significant flows.
We do not forecast any passive inflows due to the change with Alibaba Group Holding (9988 HK) capped at 8% of the HSI, HSCEI and HSTECH indices.

CSI500 Index Rebalance Preview: Potential Adds Rally and Outperform the Potential Deletes

With the review period now complete, we forecast 50 changes (the maximum permitted) for the CSI Smallcap 500 Index – Shang (SH000905 INDEX) at the close on 14 June.
We estimate a one-way turnover of 9.3% at the rebalance resulting in a one-way trade of CNY10.88bn (US$1.5bn). The Industrials and Information Technology sectors gain at the expense of Materials.
The potential adds have outperformed the potential deletes by 8% over the last 3 months. There could be further outperformance over the next few weeks.

CSI Medical Service Index Rebalance Preview: Repeat of the December Rebal Could See Big Gains

The review period ended on 30 April, there are just over 2 weeks to announcement of the changes, and implementation will be done at the close on 14 June.
We forecast 5 potential changes for the index in June where there could be buying of 1.6-2.6x ADV on the adds and selling of 0.7-2.6x ADV on the deletes.
At the December 2023 rebalance, the adds outperformed the deletes in the weeks prior to announcement of the changes and then spiked post-announcement. Repeat this time?

ChiNext/ChiNext50 Index Rebalance Preview: Outperformance Continues

With the review period now complete, we forecast 7 changes for the ChiNext Index (SZ399006 INDEX) and 5 changes for the ChiNext 50 Index in June.
There are 4 stocks that could be added to both indices while some stocks will also have same way flows from CSI Smallcap 500 Index (SH000905 INDEX) trackers.
The potential adds have outperformed the potential deletes over the last 6 months. There has been a big move higher in the potential adds over the last few weeks.

Eoflow: Financing Requirements, Changing Shareholding Structure, and the Next Steps

By Douglas Kim

In this insight, we discuss the additional financing requirements, changed shareholding structure, and the next steps for Eoflow.
Eoflow is one of the best performing stocks in the Korean stock market in the past one month as its shares have soared 249% in this period.
The details of the oral argument (Insulet vs Eoflow) at the U.S. Appellate Court suggest that the U.S. Appellate Court may rule in favor of Eoflow.

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market

Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

HSTECH June 2024 Rebal – No Changes But Big Capping Flows, As Expected; 8% US$1.6bn One-Way

The Hang Seng Tech Index is more widely-followed than many think, and it is reasonably concentrated, so outperformance and underperformance by big names means capping and re-capping.
This time, those flows are worth about 8% of the index in terms of one-way flows. Meituan, Xiaomi, JD.com, Tencent and Kuaishou Tech DOWN. Li Auto back up.
Those who have pre-positioned on the big buy have recently gotten hurt. There are some FAF changes which are less predictable and may be interesting.

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid

A “Privatisation via a Merger by Absorption” is nothing new in Hong Kong. But the Offer consideration for Yichang HEC (1558 HK)‘s minorities is in unlisted scrip – that’s new.
The Offeror holds 51.41% in Yichang HEC. Founder Guo Meilan and her son Zhang Yushuai control 62.12% of the Offeror. Yichang HEC shareholders are being offered 0.263614 “Offeror H shares”.
These consideration shares are unlisted. An independent valuer backs out an implied scrip value of HK$18.12-HK$20.60/share. This is a super complicated, overwrought deal. With numerous unknowns. I’d vote this down.

💡 Before it’s here, it’s on Smartkarma

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May 19

Daily Brief Financials: ESR Group , Brightcom Group, KakaoBank and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market
Indian Forensic Playbook: Guidelines to Identify and Avoid Storified Stocks
EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

(Mostly) Asia-Pac M&A: ESR Group, I’Rom Group, S Line, Huafa Property Services, Kansai Super Market

Tally 51 – mostly firm, mostly Asia-Pac – transactions currently being discussed and analysed on Smartkarma. Inside is a timetable of upcoming key events for each deal.
Three new deals was discussed on Smartkarma this week: Malaysia Airports (MAHB MK), I’Rom Group (2372 JP) and S Line (9078 JP). ESR Group (1821 HK) also in the crosshairs.
Key updates took place on: Huafa Property Services Group (982 HK), Kansai Super Market (9919 JP) , Great Eastern Holdings (GE SP) and L’Occitane (973 HK).

Indian Forensic Playbook: Guidelines to Identify and Avoid Storified Stocks

By Nimish Maheshwari

Indian SMEs are new hot investment avenues selling stories to investors which might end to a case of pump and dump.
SEBI in last few months have identified such cases in SMEs and microcaps.
We delved into key guidelines on Indian Forensics to Identify and Avoid Storified Stocks

EM Digital Banks – We Turn Positive on KakaoBank and Inter, Cautious on Nubank and Neutral on PAN

By Victor Galliano

We turn positive on KakaoBank, for its increasingly secure competitive positioning in Korea, its attractive digital efficiency ratio, its low customer acquisition cost and for its high activity rate
We switch our buy rating from PAN to Inter as the latter has improved operationally, it is sound on capital and attractive on valuations
Nubank is executing well, but we remain cautious on Nubank shares as we continue to see potential capital constraints as a key risk, along with its stretched valuations

💡 Before it’s here, it’s on Smartkarma

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✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Industrials: Zen Technologies, Japan Post Holdings and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Zen Technologies: Building a Strong Moat in Indian Defence Theme
Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

Zen Technologies: Building a Strong Moat in Indian Defence Theme

By Sudarshan Bhandari

Zen Technologies (ZEN IN) expands product range to drones, anti-drone systems, and medical simulators, enhancing opportunities beyond government contracts.
Strong order book of Rs 1,401 crore, significant R&D investment, and government support for indigenous defence manufacturing drive growth.
Zen Technologies (ZEN IN) diversified product portfolio and strategic government support position it well for significant growth in the defence and simulation markets.

Last Week in Event SPACE: Japan Post, Great Eastern, Malaysia Airports, L’Occitane

There is Japan Post Bank (7182 JP) buyback risk that might cause Japan Post Holdings (6178 JP)/JPB unwinds; though probably a H2 risk.
Great Eastern Holdings (GE SP) has consistently traded through OCBC (OCBC SP)‘s Offer terms. Someone appears to be accumulating a stake to block an Exit/Delisting Offer, and force a bump.
L’Occitane (973 HK)‘s scrip pre-condition has been satisfied. But still the Offeror prevaricates.

💡 Before it’s here, it’s on Smartkarma

The Smartkarma Preview Pass is your entry to the Independent Investment Research Network

✓ Unlimited Research Summaries
✓ Personalised Alerts
✓ Custom Watchlists
✓ Company Data and News
✓ Events & Webinars

May 19

Daily Brief Health Care: Yichang HEC Changjiang Pharma, Basilea Pharmaceutica Ag and more

By Smartkarma Daily Briefs | Daily Briefs, Healthcare

In today’s briefing:

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid
Basilea Pharmaceutica – Cresemba milestone payments continue to roll in

Yichang HEC (1558 HK): Absorption Via Speculative Scrip. Avoid