Smartkarma Daily Briefs

On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

ECM Weekly (15th Apr 2024) – Hyundai Marine, Bharti, Kayou, Zeekr, ChaPanda, Samsung, WT Micr, Sompo

By Sumeet Singh

Aequitas Research puts out a weekly update on the deals that were covered by the team recently along with updates for upcoming IPOs.
On the IPO front, the focus remained on HD Hyundai Marine Solution (443060 KS), even as Sichuan Baicha Baidao Industrial is gearing up to launch its IPO.
On the placement front, there were deals across India, South Korea and Australia.

Orient Overseas Intl (316 HK): Spotting Initial Signs of Recovery

By Osbert Tang, CFA

Orient Overseas International (316 HK) saw 27.2% QoQ freight rate uptick in 1Q24. This is a positive start and we should not be too concerned about the 12% YoY decline.
Its overall load factor also expanded 0.9pp YoY in the quarter, and this is the first YoY improvement since 2Q22. A better utilisation level is good for unit costs.
At end-FY23, net cash equals 62.4% of the share price, dragging ROE to 7.5% for the next three years. But with such solid financials, its 0.7x P/B is not expensive.

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Apr 15

Daily Brief Consumer: Water Oasis, SHEIN, Guangzhou Automobile Group, Sichuan Baicha Baidao Industrial, Sa Sa International Hldgs and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Water Oasis (1161 HK)
Postage Fraud Case Update: Guilty Plea, Asset Forfeiture, & Restitution Set at a Whopping US$158 Mn!
A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving
Pre-IPO Sichuan Baicha Baidao Industrial (PHIP Updates) – Some Points Worth the Attention
Sa Sa Intl (178 HK): Steady Recovery, but Biased by High Base

Water Oasis (1161 HK)

By Oriental Value

Following the positive response to our article on Perfect Medical , we are keen to introduce our readers to another noteworthy company in the healthcare and beauty industry, Water Oasis.
Despite initial appearances suggesting sluggish revenue growth over the past decade, a deeper examination reveals significant improvements in business quality and consistent shareholder returns through substantial dividends.
This under-the-radar company, we believe, presents an attractive risk-reward profile.

Postage Fraud Case Update: Guilty Plea, Asset Forfeiture, & Restitution Set at a Whopping US$158 Mn!

By Daniel Hellberg

A week ahead of trial, a defendant in massive fraud case copped a plea
Terms of deal include guilty plea, asset forfeiture, restitution of US$158 mn
US investigation continues; are other Chinese companies involved in case?

A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

Pre-IPO Sichuan Baicha Baidao Industrial (PHIP Updates) – Some Points Worth the Attention

By Xinyao (Criss) Wang

Baicha Baidao’s profit model doesn’t rely on tea drink sales, but on continuous expansion of store size.However, rapid expansion brought by the franchise model has led to significant management challenges.
The profitability/market attractiveness of ChaPanda stores are declining, which not only reflects franchisees’ concerns about future profit prospects,but also reflects the market’s re-evaluation of the attractiveness of Baicha Baidao brand.
Although current financial performance of Baicha Baidao seems acceptable, after IPO, its performance could decline year by year, leading to a collapse in stock price/valuation if this is the case.

Sa Sa Intl (178 HK): Steady Recovery, but Biased by High Base

By Osbert Tang, CFA

Masked by a high base, 4Q FY24 sales of Sa Sa International Hldgs (178 HK) edged down by 4.1% YoY. However, sales for mainland China have increased by 18.2%.
Overall sales for FY24 are in line with market projections and there is potential for further margin expansion. Its 6.7x and 5.9x PERs for FY25F and FY26F are inexpensive.
The addition of more mainland cities to the Hong Kong individual visit scheme, promotion of Hong Kong tourism, and weaker USD in the medium term are all positive factors.

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Apr 15

Most Read: Deep Yellow Ltd, Pasona Group, CGN New Energy Holdings, Roland DG Corp, CSPC Innovation Pharmaceutical-A, Azure Minerals, Guangzhou Automobile Group, Tietto Minerals Ltd and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

Get Your Pasona (2168 JP) Rump For Free
S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
Pasona (2168 JP) Special Div – Too Small to Matter
CGN New Energy (1811 HK): Takeover Rumours
Roland DG (6789) – Brother Still Not Making Friends
Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again
Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG
Ohayo Japan | Expect Weak Open
A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving
Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps

Get Your Pasona (2168 JP) Rump For Free

Dai Ichi (8750 JP) agreed with Pasona (2168 JP) for Pasona to sell its shares back to Benefit One (2412 JP) in a buyback after Dai-Ichi’s Tender Offer for Benefit.
This process gives Pasona a tax advantage versus selling into a Tender Offer at the same price.
What does Pasona take home? ~¥2,822/share versus its last price of ¥2,733/share. Then you have stubs ops (conservatively worth up to ~¥1,960/share) and Pasona’s stake in Bewith (9216 JP) (~¥360/share).

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June

By Brian Freitas

With three-quarters of the review period complete, there could be a bunch of changes across the S&P/ASX family of indices in June.
The Red 5 Ltd (RED AU) / Silver Lake Resources (SLR AU) merger could lead to an ad hoc change prior to the implementation of the June rebalance.
There will be 1.6-25 days of ADV to buy from passives in the inclusions while the impact on the deletions will range between 0.8-11 days of ADV.

Pasona (2168 JP) Special Div – Too Small to Matter

On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and “strengthening the operating platform.”
The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

CGN New Energy (1811 HK): Takeover Rumours

Another week, another rumoured (from Bloomberg) takeover. This time it’s for clean energy play CGN New Energy Holdings (1811 HK).
Back in 2020, CGN was subject to a potential privatisation from its SOE-parent – see CGN New Energy: The Latest SOE Clean Energy Play – but it failed to materialise.
A couple of years back, a “valuation system with Chinese characteristics” had the media discussing whether this implied a premium for SOEs and companies aligned with national goals.

Roland DG (6789) – Brother Still Not Making Friends

Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days.
Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

Quiddity Leaderboard ChiNext & ChiNext 50 Jun 24: Bullish Names Outperform Bearish Names Again

By Janaghan Jeyakumar, CFA

The ChiNext Index represents the performance of the 100 largest and most liquid A-share stocks listed on the ChiNext Market of the Shenzhen Stock Exchange.
The ChiNext 50 index is a subset of the ChiNext Index and it consists of the top 50 names in the ChiNext index with the highest daily average turnover.
In this insight, we take a look at the names leading the race to become ADDs and DELs in the June 2024 index rebal event.

Merger Arb Mondays (15 Apr) – Azure, Silver Lake, Genex, Boral, China TCM, C&F Logistics, Roland DG

We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
Highest spreads: Qantm Intellectual Property (QIP AU), Southern Cross Media (SXL AU), QV Equities Ltd (QVE AU), Silver Lake Resources (SLR AU), Azure Minerals (AZS AU), China TCM.
Lowest spreads: Tietto Minerals Ltd (TIE AU), Chilled & Frozen Logistics Holdings (9099 JP), Roland DG Corp (6789 JP), Mma Offshore (MRM AU), Pact Group Holdings (PGH AU).

Ohayo Japan | Expect Weak Open

By Mark Chadwick

Global markets are likely to react cautiously following Israel’s interception of over 200 Iranian drones and missile. Bitcoin saw sharp 5%+ decline
Japan’s greenhouse gas emissions hit a record low in fiscal 2022 at 1.14 billion tons of CO2 equivalent, down 2.5% from fiscal 2021
US Steel shareholders have greenlit Nippon Steel’s proposed acquisition, which offers a 40% premium on the trading price at the time of announcement

A/H Premium Tracker (To 12 Apr 2024): Liquid AH Premia Still Very Wide, The Right Spreads Behaving

The New/Better A-H Premium Tracker has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning/volatility in pairs over time, etc.
SOUTHBOUND’s consecutive buying streak ended on Monday 25-March, then started again. NORTHBOUND has started selling (but buying semi tech).
Hs rebounded vs As. AH Premia still wide. Fabulous two-week performance by the Quiddity Portfolio (+2.09% over the two weeks) on a delta 3:1 long H/short A

Tietto Minerals (TIE AU): Zhaojin Mining Secures Reg Approvals. Then Bumps

On the 30 October 2023, Chinese gold producer Zhaojin Mining Industry (1818 HK) pitched a non-binding off-market Offer for Aussie-listed West African gold miner Tietto Minerals (TIE AU).
Zhaojin held 7.02% of shares out, and sought 50.1%. Tietto subsequently rejected the A$0.58/share cash proposal. The IE backed out a fair value range of A$0.793-A$0.927/share.
Zhaojin has now announced it has secured all Chinese regulatory approvals; and that Côte d’Ivoire government approval is not required. Plus Zhaojin bumped terms to A$0.68/share – best and final.

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Apr 14

Daily Brief Australia: Genex Power Ltd, Ansarada Group Ltd and more

By Smartkarma Daily Briefs | Australia, Daily Briefs

In today’s briefing:

Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown
Ansarada (AND AU): Scheme Vote on 14 June
Genex (GNX AU) & J-Power (Finally) Firm Terms

Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown

Genex Power Ltd (GNX AU) has entered a transaction implementation deed with Electric Power Development C (9513 JP) for a scheme (A$0.275) and an off-market takeover offer (A$0.270).
Skip could vote against the scheme due to the low 10% premium to its 2022 offer and Genex’s operational capacity rising by 2.7x by the end of 2024.
The likely scenario is that J-POWER succeeds with its takeover offer. At the last close, the gross spread of the scheme and takeover offer was 3.8% and 1.9%, respectively.

Ansarada (AND AU): Scheme Vote on 14 June

The Ansarada Group Ltd (AND AU) IE considers Datasite’s A$2.50 scheme offer fair and reasonable. However, the inter-conditional carve-out transaction is NOT fair but reasonable.
ACCC clearance (findings on 6 June) is a prerequisite for FIRB approval (scheme condition). As Datasite has a limited Australian presence, ACCC approval should be forthcoming.
The offer is attractive, with no vocal shareholder opposition. At the last close and for the 1 July payment, the gross/annualised spread was 2.5%/12.2%.

Genex (GNX AU) & J-Power (Finally) Firm Terms

On the 4 March, Genex Power (GNX AU) announced an A$0.275/share NBIO from Electric Power (9513 JP) (J-Power), by way of a Scheme, in tandem with an off-market A$0.27/share Offer.
Due diligence was afforded. Exclusivity was extended twice, before a firm offer was inked at the same terms on the 12th April. The Scheme meeting is expected mid-July; implementation late-July.
And Scott Farquhar’s Skip Enterprises, which holds 19.9% in Genex, and who had previously pitched a A$0.25/share NBIO in 2022? No word. And no irrevocable.

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Apr 14

Daily Brief South Korea: ESR Group and more

By Smartkarma Daily Briefs | Daily Briefs, South Korea

In today’s briefing:

ESR: A Diversified Fund Manager and Good Alternative Stock to Own in This Chaotic Time

ESR: A Diversified Fund Manager and Good Alternative Stock to Own in This Chaotic Time

By Jacob Cheng

While most HK/China stocks continue to be traded at depressed valuation, we view ESR as an interesting play among most real estate stocks
The investment highlights of ESR are: 1) as a leading fund manager with growing AUM and fee income 2) leader in new economy sector, and 3) APAC focused
ESR’s EBIT mainly comes from 3 segments: investment, fund management and new economy development. ESR is now trading at deep discount to NAV

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Apr 14

Daily Brief Japan: Roland DG Corp, Lawson Inc, Mitsui Fudosan, TSE Tokyo Price Index TOPIX and more

By Smartkarma Daily Briefs | Daily Briefs, Japan

In today’s briefing:

Roland DG (6789) – Brother Still Not Making Friends
(Mostly) Asia-Pac M&A: APM Human Services, Jastec, Genex, JSR Corp, Chilled & Frozen, Lawson
Last Week in Event SPACE: Mitsui Fudosan, Melco, Aozora Bank, CGN New Energy
Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?

Roland DG (6789) – Brother Still Not Making Friends

Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days.
Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

(Mostly) Asia-Pac M&A: APM Human Services, Jastec, Genex, JSR Corp, Chilled & Frozen, Lawson

I 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.
Two new deals discussed on Smartkarma this week: Madison Dearborn’s low-balled Offer for APM Human Services (APM AU); and NTT Data Corp (9613 JP)‘s Offer for Jastec (9717 JP).
Key updates took place on: Boral Ltd (BLD AU), Azure Minerals (AZS AU), Genex Power (GNX AU), JSR Corp (4185 JP), Chilled & Frozen Logistics Holdings (9099 JP), & Lawson (2651 JP).

Last Week in Event SPACE: Mitsui Fudosan, Melco, Aozora Bank, CGN New Energy

9 weeks ago, the FT reported Elliott Management had a stake in Mitsui Fudosan (8801 JP) and had asked them to sell cross-holdings and do a ¥1trln buyback. Mitsui responds.
Lawrence Ho is buying Melco(200 HK). While it often pays to follows where the family invests, Melco is trading too tight for what is a simple holding company structure.
Avoid being long Aozora Bank Ltd (8304 JP) vs the Banks Index, a portfolio of other cheaper banks, etc. Minimal/negligible upside in following Murakami-san here. And Activism on Banks is difficult.

Isn’t It Not Strong Enough to Raise ROE by Higher Profit Margin Due to Escape from Deflation?

By Aki Matsumoto

Since 2020, there has been a divergence between P/B and TOPIX movements, complicating matters for listed companies that have been asked to raise their P/Bs.
Expectations are high for a rise in ROE, which has a certain correlation with nominal GDP, which is also increasingly correlated with TOPIX, as deflation exits.
If price pass-through fails, escaping deflation may not lead directly to higher profit margins. If profit margin increase is insufficient, reducing cash on hand is essential to increase ROE.

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Apr 14

Daily Brief China: Golden Throat Holdings, L’Occitane and more

By Smartkarma Daily Briefs | China, Daily Briefs

In today’s briefing:

Asian Dividend Gems: Golden Throat Holdings
Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

Asian Dividend Gems: Golden Throat Holdings

By Douglas Kim

Golden Throat Holdings is a gem. It has excellent fundamentals including an eye-catching dividend yield (17.9% in 2023) and a blistering DPS growth (10x from 2020 to 2023).
It also benefits from a compelling long-term theme (relieving sore throats caused by worsening air quality/smog/fine dust problems along with recurrent regular cold/flu symptoms among millions of people in China).
Golden Throat Holdings is one of the leading throat lozenges manufacturers in China. Its net margin averaged 24% from 2019 to 2023.

Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
ECM developments: Kokusai Electric (6525 JP) and J&T Global Express (1519 HK) lock-ups. HD Hyundai Marine Solution (443060 KS), ZEEKR (ZK US)and Sichuan Baicha Baidao Industrial (SCBCBDID CH) IPOs.
Event-Driven developments L’Occitane (973 HK), CGN New Energy Holdings (1811 HK), Azure Minerals (AZS AU), Genex Power Ltd (GNX AU), Riso Kyoiku (4714 JP), Chilled & Frozen Logistics Holdings (9099 JP).

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Apr 14

Most Read: Li Auto , Zijin Mining Group Co Ltd H, Amvis Holdings Inc, Cosco Shipping Energy Transportation Co. Ltd. (H), Genex Power Ltd, Roland DG Corp, Nikkei 225, Ansarada Group Ltd, L’Occitane and more

By Smartkarma Daily Briefs | Daily Briefs, Most Read

In today’s briefing:

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June
HSCEI Index Rebalance Preview: One Change or Two in June?
Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side
COSCO Shipping Energy (1138 HK): Surfing the High Tide
Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown
Roland DG (6789) – Brother Still Not Making Friends
EQD | Nikkei 225 What’s Up Next: Up or Down?
Ansarada (AND AU): Scheme Vote on 14 June
GEMWeekly (12 Apr 2024): South Korea, China Macro; Wipro, TSMC, Samsung Electronics, NetEase
Weekly Deals Digest (14 Apr) – L’Occitane, CGN New Energy, Azure, Genex, C&F Logistics, Riso Kyoiku

HSTECH Index Rebalance Preview: Round-Trip Trade of US$1.5bn in June

By Brian Freitas

With no stocks in outright inclusion or deletion zone, we do not expect any constituent changes for the Hang Seng TECH Index (HSTECH INDEX) in June.
Capping changes will result in a one-way turnover of 5.3% leading to a round-trip trade of US$1.51bn.
Li Auto (2015 HK) is expected to be the largest buy in June following the stock being the largest sell at the March rebalance (also due to capping).

HSCEI Index Rebalance Preview: One Change or Two in June?

By Brian Freitas

SenseTime Group (20 HK) is a potential deletion in June while Zijin Mining Group Co Ltd H (2899 HK) is a potential inclusion.
For yet another review, BeiGene (6160 HK) is a close add with the Velocity Test determining if the stock will be added to the index or not.
Estimated one-way turnover at the rebalance is 2.95% resulting in a one-way trade of HK$1.6bn. Official capping will be based off the close of trading on 4 June.

Updated TOPIX Big April Basket Flows; More Big Flows and ¥270bn a Side

Several days ago I published a piece showing the data for TOPIX flows for April month-end.
This is an update reflecting new data companies have reported to regulators, one large correction to a data provider’s data, and one Very Large Flow.
I believe that the revised data is more accurate. And there is more flow. With a spreadsheet attached.

COSCO Shipping Energy (1138 HK): Surfing the High Tide

By Osbert Tang, CFA

Despite YTD strengths in share price, Cosco Shipping Energy Transportation Co. Ltd. (H) (1138 HK) is still cheap at 5.7x PER and 0.9x P/B.
VLCC is forecast to stay undersupplied in FY24 and FY25, supporting the rates and CSET’s profitability. YTD, the VLCC rates have recovered by 19.5%.
LNG transportation generated 19% of FY23 earnings. With 40 more vessels on order, compared with a current fleet of 43, there is immense upside from this segment.

Genex Power (GNX AU): J-Power’s Binding Proposal as Skip’s Intentions Remain Unknown

Genex Power Ltd (GNX AU) has entered a transaction implementation deed with Electric Power Development C (9513 JP) for a scheme (A$0.275) and an off-market takeover offer (A$0.270).
Skip could vote against the scheme due to the low 10% premium to its 2022 offer and Genex’s operational capacity rising by 2.7x by the end of 2024.
The likely scenario is that J-POWER succeeds with its takeover offer. At the last close, the gross spread of the scheme and takeover offer was 3.8% and 1.9%, respectively.

Roland DG (6789) – Brother Still Not Making Friends

Taiyo Pacific’s Tender Offer for Roland DG Corp (6789 JP) was to end Friday, but it was extended 10 days.
Roland DG provided an update regarding the status of the Brother overbid. It did not show as much strategic-mindedness as it might have.
Shares are now trading at a post-overbid high. Strategic missteps up the risk but Brother can pay more.

EQD | Nikkei 225 What’s Up Next: Up or Down?

By Nico Rosti

The Nikkei 225 Index last week bounced back, after a 2-weeks down pullback.
The index is at a fork in our view: it could go higher from here, but we would like to see a sustained, multi-week rally to be convinced.
If doubt about this potential rally continuation is strong, target the 40500-40800 price area to place SHORT trades against the index.

Ansarada (AND AU): Scheme Vote on 14 June