Smartkarma Daily Briefs

STAR 50 Index is a tech-focused, blue-chip index in Mainland China which tracks the top 50 largest and most liquid names in the STAR market of the Shanghai Stock Exchange.
In this insight, we take a look at our expectations for potential ADDs and DELs for the STAR 50 index during the June 2024 index rebal event.
I currently expect three changes resulting in a one-way flow of around US$531mn but there is still room for the expectations to change.

Chilled & Frozen Logistics (9099 JP): Pass The🍿as the Board Responds to AZ-COM Maruwa (9090 JP)

By Arun George

The Chilled & Frozen Logistics Holdings (9099 JP) Board has responded with several questions regarding AZ-Com Maruwa Holdings (9090 JP)’s pre-conditional hostile offer of JPY3,000 per share.
The Board questions the transaction’s schedule, terms and potential synergies. The Board has also used the ruse that due diligence access would justify a higher offer price.
Expect several rounds of Q&A and a delay to the tender start. If shares continue trading through terms ahead of the tender start, AZ-COM Maruwa will likely have to bump.

SSE50 Index Rebalance Preview: 5 Changes and US$2.7bn Round-Trip Trade

By Brian Freitas

With the review period nearing completion, 6 stocks are in inclusion zone and 8 are in deletion zone. However, there can be a maximum of 5 changes at a review.
We estimate a one-way turnover of 7% at the June rebalance leading to a one-way trade of CNY 9.7bn (US$1.34bn). Index arb balances could increase the impact on the stocks.
The inflows into mainland China ETFs have further increased the flow and impact on the potential changes. The potential adds have continued to outperform the potential deletes.

Bharti Hexacom IPO: Index Inclusion Timeline

By Brian Freitas

Telecommunications Consultants India Limited (TCIL) raised US$513m by selling 15% of the shares outstanding in Bharti Hexacom (6597372Z IN). Post the sale, they still hold 15% of the company.
Bharti Hexacom (6597372Z IN) will start trading on 12 April and the grey market indicates the stock will open at INR 664/share, 16.5% higher than the IPO price.
Bharti Hexacom should be added to one smallcap index in August and another smallcap index in December. A move above INR 700/share could result in midcap inclusion in December.

Sompo Holdings Cross-Shareholding – At Least US$8bn of Cross-Shareholding to Sell

By Sumeet Singh

The Japanese Financial Services Agency has asked the general insurers to reduce/eliminate their cross-shareholdings.
Sompo Holdings (8630 JP) had a stake over US$100m in at least 16 listed Japanese stocks, amounting to a total of around US$6bn.
In this note, we take a look at its stakes in various companies to see which ones could possibly be candidates for further selldowns.

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

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.

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Apr 11

Daily Brief Macro: Will Copper Shine Brighter than Gold? and more

By Smartkarma Daily Briefs | Daily Briefs, Macro

In today’s briefing:

Will Copper Shine Brighter than Gold?
Despite Record Crushing Ascent, Japanese Stocks Remain Bullish
EM Watch: China is preparing something BIG!
US CPI Review: Inflation is accelerating, no return to 2% in sight
[US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation
US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24
5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China
New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24
Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24
Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24

Will Copper Shine Brighter than Gold?

By Pranay Yadav

Copper supply facing headwinds with a shortage of copper ore which has led to spiraling copper refining margins.
Copper futures trading sharply higher than cash prices and term structure for copper futures has steepened.
Gold to copper ratio can be used to express a bullish view on copper prices with relatively lower risk compared to a straightforward long copper position.

Despite Record Crushing Ascent, Japanese Stocks Remain Bullish

By Pranay Yadav

TSE market reforms are helping underperforming Japanese firms improve profitability.
Japanese equities remain undervalued relative to the US with lower P/E and PEG ratios. While Japanese firms still lag on CAPEX growth, dividend growth has been higher than the US.
Nikkei faces headwinds from the potential strengthening of the Yen as BoJ shifts towards less accommodative policy. For now, the impact is minimal.

EM Watch: China is preparing something BIG!

By Andreas Steno

The below chart of ours have made the rounds in recent days and weeks as China seems to be preparing for something big given the heavy restocking efforts in Copper space.
As the price trends are diverging in copper versus steel and iron ore, the strategic initiatives of China are becoming increasingly evident in price action across the commodity complex, but we are yet to fully understand and accept the ramifications for global rates.
We have read plenty of bad takes on why China is building up copper reserves and the most obvious reason seems to be neglected by many.

US CPI Review: Inflation is accelerating, no return to 2% in sight

By Andreas Steno

US inflation printed at 0.4% in both headline- and core terms, which was in line with our nowcasts and substantially above embedded market expectations.
In full transparency, we didn’t get everything right, but the broadness of the continued inflation in services and the early signs of a re-acceleration in goods prices outside of cars rhyme with our predictions.
Especially transportation services keep printing at levels that are way too hot for the Fed to take comfort in and it is likely a hint of a re-increasing momentum in wage expectations and wage growth.

[US CPI Preview] Rising Gasoline Prices & Shelter Costs to Result in Hot US Inflation

By Pranay Yadav

US CPI remains well above Fed’s 2% target range. Rising gasoline and shelter costs will push March CPI number upwards.
Consensus is for March CPI to print at 3.4% YoY in March from 3.2% in Feb. Core CPI is expected to clock 3.7% YoY.
Rising CPI will dent the likelihood of rate cut in the near term. Fed has reiterated its data dependence. Hot CPI data will vindicate Fed’s hawkish stance.

US CPI Inflation 3.48% y-o-y (consensus 3.4%) in Mar-24

US CPI inflation in March 2024 rose to 3.48% year-on-year, surpassing consensus forecasts and indicating a more persistent inflation issue.
Core CPI inflation also unexpectedly remained at 3.8% year-on-year in March 2024.
This was due to a 0.4% month-on-month increase in March 2024.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

5 Things We Watch – Rates Pricing, Liquidity turning, Labor Market, Commodities & China

By Andreas Steno

Hello everyone, and welcome back to our weekly ‘5 Things We Watch’, where we provide 5 of the things we keep an eye out for in global macro in a short and concise format.
This week we are watching out for the following 5 topics within global macro: Rates Pricing, Liquidity Turning, Labor Market, Commodities, China.
The market went into the year expecting 7 cuts in total from the Fed, which has now been narrowed down to less than two, all while equity markets have continued their drift higher as the economy is doing better than expected paired with benign liquidity conditions.

New Zealand Policy Rate 5.5% (consensus 5.5%) in Apr-24

The Reserve Bank of New Zealand’s decision to maintain the OCR at 5.50% reflects a strategic intent to manage inflationary pressures influenced by domestic and global economic conditions.
Persistent inflationary pressures, amid weak economic growth and the nuanced impact of net migration on the labour market and consumer spending, underscore the complexities of returning consumer price inflation to the target range.
Future policy decisions will hinge on the balance between restrictive monetary policy measures and their impact on economic stability, with a keen eye on global economic trends, labour market dynamics, and inflationary trends.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

Thailand Policy Rate 2.5% (consensus 2.5%) in Apr-24

The Bank of Thailand’s decision to keep the Policy Rate unchanged at 2.5%, despite some members advocating for a reduction, demonstrates a cautious optimism about economic growth and structural impediments, alongside a commitment to macro-financial stability.
Growth projections for 2024 and 2025 are supported by private consumption, tourism, and public expenditure, albeit tempered by structural challenges in exports and manufacturing, underscoring the need for comprehensive structural reforms.
The inflation outlook remains subdued, with expectations of a gradual increase towards the target range, necessitating vigilant monitoring of external shocks and the efficacy of monetary policy in fostering an environment conducive to sustainable economic growth amid financial stability concerns.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

Norway CPI Inflation 3.9% y-o-y (consensus 4.2%) in Mar-24

Norway’s CPI inflation rate decreased by 0.6 percentage points to 3.9% year-on-year in March 2024, which is lower than the predicted 4.2%.
This is the lowest growth rate since September 2023.
The CPI-ATE inflation rate, which excludes volatile components, was a contributing factor to this decrease but still remained at a higher 4.5% year-on-year.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only.

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Apr 10

Daily Brief Energy/Materials: Deep Yellow Ltd, Iron Ore, OceanaGold Philippines, Alpha Metallurgical Resources, West Fraser Timber , ICL Group , Eagle Materials, Kinross Gold Corp, Newmarket Corp, Axalta Coating Systems and more

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

In today’s briefing:

S&P/ASX Index Rebalance Preview: Potential Changes from Now to June
Introduction: Initiation of Coverage in the Materials Sector
OceanaGold Philippines IPO – Small yet Asking for a Lot
Alpha Metallurgical Resources Inc.: Initiation Of Coverage – What Are The Geopolitical Factors Influencing Coal Markets? – Major Drivers
West Fraser Timber: Initiation Of Coverage – Stability in Remodel and Repair Activity!
ICL Group Ltd: Continuing Operational Challenges Due to Geopolitical War! – Major Drivers
Eagle Materials: Initiation Of Coverage – A Robust Wallboard Volume Performance and Future Prospects! – Major Drivers
Kinross Gold Corporation: Initiation Of Coverage – What Is Its Core Business Strategy? – Major Drivers
NewMarket Corporation: Initiation Of Coverage – The Impact Of The Acquisition of AMPAC and Its Integration! – Major Drivers
Axalta Coating Systems Ltd.: Initiation Of Coverage – Increased focus on efficiency and productivity paying off? – Major Drivers

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.

Introduction: Initiation of Coverage in the Materials Sector

By Sameer Taneja

Investics Research will initiate coverage of the materials sector in April 2024, starting with iron ore and then gold, coal, and steel in subsequent months (in that order).
The areas of coverage on asset classes will encompass the underlying commodity and the associated equities.
Areas of differentiation would include in-depth coverage of all equities (small/mid and large cap) and actionable tactical ideas on the commodity.

OceanaGold Philippines IPO – Small yet Asking for a Lot

By Ethan Aw

OceanaGold Philippines (OGCP000D PM) is looking to raise up to US$140m in its Philippines IPO.
OceanaGold Philippines (OGPI) is a producer of gold and copper in the Philippines, and a subsidiary of OceanaGold Corporation, a Toronto Stock Exchange (TSX) listed gold mining and exploration company.
In this note, we talk about the company’s historical performance and share our quick thoughts on valuation.

Alpha Metallurgical Resources Inc.: Initiation Of Coverage – What Are The Geopolitical Factors Influencing Coal Markets? – Major Drivers

Alpha Metallurgical Resources, a supplier of metallurgical products for the steel industry, closed its fourth quarter with adjusted EBITDA of $266 million and achieved over $1 billion in adjusted EBITDA for the year.
This is the second consecutive year in which the company attained such a milestone despite facing considerable challenges during the year.
Alpha highlighted the robustness of its management approach which included proactive identification of issues and proactive response plans that ensured minimal impact on performance.

West Fraser Timber: Initiation Of Coverage – Stability in Remodel and Repair Activity!

West Fraser produces lumber for the construction industry and also manufactures wood-based products such as engineered wood, panel products, and pulp and paper products.
In the fourth quarter of 2023, the company posted mixed results across its business segments.
Its North American engineered wood business segment displayed strength while soft demand affected its North American lumber products.

ICL Group Ltd: Continuing Operational Challenges Due to Geopolitical War! – Major Drivers

Israel Chemicals Ltd.
(ICL) had faced various operational challenges during the fourth quarter mostly due to the war in Israel.
Despite these obstacles, they successfully maintained good production levels.

Eagle Materials: Initiation Of Coverage – A Robust Wallboard Volume Performance and Future Prospects! – Major Drivers

This is our first report on Eagle Materials, a U.S.-based producer and distributor of building materials.
The company reported record revenues in its third quarter for the fiscal year 2024, marking its robust financial performance and continuing to maintain and widen its low-cost producer strategy.
With revenues reaching $559 million, up 9%, and adjustable earnings per share (EPS) rising 16% to $3.72, Eagle Materials marked another successful quarter.

Kinross Gold Corporation: Initiation Of Coverage – What Is Its Core Business Strategy? – Major Drivers

Kinross Gold reported a robust fiscal year 2023, where the company met its targets and is well-positioned for the year ahead.
Kinross Gold’s operations are performing well, as are its projects, which are aligning with budget and timing.
The company is generating substantial free cash flow and is successfully de-levering its balance sheet.

NewMarket Corporation: Initiation Of Coverage – The Impact Of The Acquisition of AMPAC and Its Integration! – Major Drivers

NewMarket Corporation, a petroleum additives company, recently reported their full-year and fourth-quarter results for 2023.
The company’s net income for the fourth quarter of 2023 was $80 million, a decrease from the previous year’s fourth quarter net income of $91 million.
This decrease in operating profit was primarily due to higher operating costs and lower shipments partially offset by lower raw material costs.

Axalta Coating Systems Ltd.: Initiation Of Coverage – Increased focus on efficiency and productivity paying off? – Major Drivers

Axalta Coating Systems Ltd.
reported Q4 net sales increasing by 5% year-over-year, amounting to $1.3 billion with contributions from both of its key business segments – Mobility Coatings and Performance Coatings.
This increase is further evidence of the impressive quarterly performance that Axalta has had, which includes a seventh consecutive quarter of mobility volumes growth, indicating the recovery of the automotive industry and successful reshaping of the company’s portfolio.

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Apr 10

Daily Brief Industrials: Shanghai Electric Group Company, HD Hyundai Marine Solution , ZEEKR, Air China Ltd (H), TAL Education, Base Carbon , Afcons Infrastructure Limited, UFP Industries , Ads-Tec Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
HD Hyundai Marine Solution IPO Valuation Analysis
ZEEKR IPO: Latest Updates as the IPO Process Restarts
China Pair Trade Idea: Long Air China (753 HK), Short CSA (1055 HK)
TAL Education Group: Initiation Of Coverage – What Is Its Real Business Strategy And What Is The Impact Of AI On Its Business? – Major Drivers
Base Carbon, Inc. – 2023 Results Show Leverage of Business Model
Afcons Infrastructure Limited Pre-IPO Tearsheet
UFP Industries Inc. posted robust financial results for its Q4 2023
ADS-TEC Energy – Serving the energy transition

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge

CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500.
Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.

HD Hyundai Marine Solution IPO Valuation Analysis

By Douglas Kim

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

ZEEKR IPO: Latest Updates as the IPO Process Restarts

By Arun George

ZEEKR (ZK US), a premium Chinese BEV manufacturer and a subsidiary of Geely Auto (175 HK), has restarted its IPO process to raise US$500 million by listing on the NYSE.
We previously discussed the IPO in ZEEKR IPO: The Bull Case and ZEEKR IPO: The Bear Case.
The latest SEC filings reinforce the bear case due to weak industry sentiment, rapidly slowing growth, ongoing operating losses and volatile FCF.

China Pair Trade Idea: Long Air China (753 HK), Short CSA (1055 HK)

By Osbert Tang, CFA

Air China Ltd (H) (753 HK) had 15.4% interest-bearing debt denominated in USD, vs. 21.3% for China Southern Airlines (1055 HK), making it less exposed to Rmb depreciation.
Recovery of international traffic and routes will help to lower unit costs. Air China’s unit costs for FY23 were Rmb4.0445, whereas CSA’s were only Rmb3.2000.
There is more upside for Air China’s load factor which was down 7.8pp YoY in FY23, compared with -4.7pp for CSA.

TAL Education Group: Initiation Of Coverage – What Is Its Real Business Strategy And What Is The Impact Of AI On Its Business? – Major Drivers

TAL Education Group (TAL) reported net revenues of USD 373.5 million for its third quarter fiscal year 2024, exhibiting an increase of 60.5% and 63.7% in U.S. dollar and RMB terms.
Despite the impressive revenue growth, profitability remained a concern with non-GAAP loss from operations and non-GAAP net loss attributable to TAL amounting to USD 10.2 million and USD 1.9 million, respectively.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Base Carbon, Inc. – 2023 Results Show Leverage of Business Model

By Water Tower Research

Base Carbon reported 2023 results that highlight the milestone year for the company, which saw the first issuance of carbon credits from one of its projects, cash received from the sale of its credits to a third party, and the diversification into carbon removal projects.
Net profit was $98.3 million, driven by $6.4 million realized and $104.7 million in unrealized gains in its carbon credit projects portfolio.
Vietnam project expected to deliver ~$29.1 million in cash flow in 2024.

Afcons Infrastructure Limited Pre-IPO Tearsheet

By Clarence Chu

Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO. The bookrunners are Jefferies, Nomura, ICICI Securities, SBI Capital, DAM Capital, and Nuvama Wealth.
Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
As per the Fitch report, the firm was one of India’s largest international infrastructure companies as per the 2023 ENR top international contractors ranking, based on FY23 international revenue.

UFP Industries Inc. posted robust financial results for its Q4 2023

UFP Industries Inc. posted robust financial results for its Q4 2023, despite falling slightly short of its annual target.
The company’s sales and profit ranked as the third best in its nearly seven decades of operation.
CEO Matt Missad and CFO Mike Cole laid out UFP’s achievements, plans for 2024, and long-term objectives in their earnings call.

ADS-TEC Energy – Serving the energy transition

By Edison Investment Research

ADS-TEC Energy operates in an emerging market serving the changing grid and power management requirements of an electrifying world. Its key market at present is for battery-buffered ultra-fast charging systems for electric vehicles (EVs). This is starting to produce tangible positive results, with the business EBITDA positive in Q423. Hence, ADS-TEC offers a de-risking investment into the electrification of the energy system, including the growth of EVs through the associated charging infrastructure.

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Apr 10

Daily Brief TMT/Internet: WT Microelectronics, KT Corp, Taiwan Semiconductor (TSMC) – ADR, Microstrategy Inc Cl A and more

By Smartkarma Daily Briefs | Daily Briefs, TMT/Internet

In today’s briefing:

WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest
KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow
Taiwan Tech Weekly: TSMC Wins Major U.S. Support; Nanya Results; UMC Rush Orders
Microstrategy Inc (MSTR) – Tuesday, Jan 9, 2024

WT Micro Placement – Another Well-Flagged Taiwan GDR Offering, This One Is Easier to Digest

By Clarence Chu

WT Microelectronics (3036 TT) is looking to raise US$341m in its GDR offering. The proceeds will be used to purchase raw materials overseas.
The deal is a very well flagged one, and will be a relatively small one to digest at just 4.8 days of the stock’s three month ADV.
In this note, we run the deal through our ECM framework and comment on the deal dynamics.

KT’s Foreign Room Below 7.5%, Weight Down-Adjustment Expected in May, Resulting in 3x ADTV Outflow

By Sanghyun Park

KT’s foreign ownership declined since January, below 7.5% by last month. If it remains, the adjustment factor halves to 0.25, impacting KT’s Global Index weight.
With the May review screening date estimated for April 17th, swift reversal of foreign inflows seems improbable. Thus, KT’s adjustment factor dropping to 0.25 is likely.
This could lead to an outflow of 1.6M shares, approximately 3x ADTV. Given the prolonged price impact on telcos, exploring a long-short setup with SKT might be prudent.

Taiwan Tech Weekly: TSMC Wins Major U.S. Support; Nanya Results; UMC Rush Orders

By Vincent Fernando, CFA

TSMC (2330.TT; TSM.US): US$6.6bn from US CHIPS Act; the Earthquake Impact and the 2nd Japanese Fab.
Memory Monitor: Nanya’s Results to Provide Latest Color on DRAM Post Earthquake; Short Int Rising
UMC (2303.TT; UMC.US): Some Rush Orders Coming in and 2Q24F Could Post Positive QoQ.

Microstrategy Inc (MSTR) – Tuesday, Jan 9, 2024

By Value Investors Club

Approval of bitcoin ETFs by the SEC causing volatility in MSTR shares and bitcoin prices
Opportunity for a trade pairing short sale of MSTR shares with purchase of bitcoin ETF
Fluctuating premium of MSTR’s enterprise value over SOTP value, expected to dissipate with approval of bitcoin ETFs

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.

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Apr 10

Daily Brief Industrials: Shanghai Electric Group Company, HD Hyundai Marine Solution , ZEEKR, Air China Ltd (H), TAL Education, Base Carbon , Afcons Infrastructure Limited, UFP Industries , Ads-Tec Energy and more

By Smartkarma Daily Briefs | Daily Briefs, Industrials

In today’s briefing:

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge
HD Hyundai Marine Solution IPO Valuation Analysis
ZEEKR IPO: Latest Updates as the IPO Process Restarts
China Pair Trade Idea: Long Air China (753 HK), Short CSA (1055 HK)
TAL Education Group: Initiation Of Coverage – What Is Its Real Business Strategy And What Is The Impact Of AI On Its Business? – Major Drivers
Base Carbon, Inc. – 2023 Results Show Leverage of Business Model
Afcons Infrastructure Limited Pre-IPO Tearsheet
UFP Industries Inc. posted robust financial results for its Q4 2023
ADS-TEC Energy – Serving the energy transition

Quiddity Leaderboard CSI 300/500 Jun 24: SHORTs Down 11% Vs Index Since Mid-Feb; Change the Hedge

CSI 300 represents the 300 largest stocks by marketcap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500. There is subjectivity.
Here we look at potential ADDs/DELs for the CSI 300/500 rebalance in June 2024. With 93% of time passed, I expect 11 changes for CSI300, 50 for CSI 500.
Some names have changed since my last insight, but the long/short trades recommended eight weeks ago gained 11.26% since. We make small changes this time.

HD Hyundai Marine Solution IPO Valuation Analysis

By Douglas Kim

Our base case valuation of HD Hyundai Marine Solution is target price of 98,254 won per share, representing an 18% upside from the high end of the IPO price range.
The company’s ROE averaged 67% in 2022 and 2023. In comparison, the comps’ ROE averaged 10.6% in the same period. [HD Hyundai Marine Solution > Comps]
Our base case valuation is based on 24.7x P/E (comps’ average) using our estimated net profit of 178.7 billion won for the company in 2024.

ZEEKR IPO: Latest Updates as the IPO Process Restarts

By Arun George

ZEEKR (ZK US), a premium Chinese BEV manufacturer and a subsidiary of Geely Auto (175 HK), has restarted its IPO process to raise US$500 million by listing on the NYSE.
We previously discussed the IPO in ZEEKR IPO: The Bull Case and ZEEKR IPO: The Bear Case.
The latest SEC filings reinforce the bear case due to weak industry sentiment, rapidly slowing growth, ongoing operating losses and volatile FCF.

China Pair Trade Idea: Long Air China (753 HK), Short CSA (1055 HK)

By Osbert Tang, CFA

Air China Ltd (H) (753 HK) had 15.4% interest-bearing debt denominated in USD, vs. 21.3% for China Southern Airlines (1055 HK), making it less exposed to Rmb depreciation.
Recovery of international traffic and routes will help to lower unit costs. Air China’s unit costs for FY23 were Rmb4.0445, whereas CSA’s were only Rmb3.2000.
There is more upside for Air China’s load factor which was down 7.8pp YoY in FY23, compared with -4.7pp for CSA.

TAL Education Group: Initiation Of Coverage – What Is Its Real Business Strategy And What Is The Impact Of AI On Its Business? – Major Drivers

TAL Education Group (TAL) reported net revenues of USD 373.5 million for its third quarter fiscal year 2024, exhibiting an increase of 60.5% and 63.7% in U.S. dollar and RMB terms.
Despite the impressive revenue growth, profitability remained a concern with non-GAAP loss from operations and non-GAAP net loss attributable to TAL amounting to USD 10.2 million and USD 1.9 million, respectively.
Baptista Research looks to evaluate the different factors that could influence the company’s price in the near future and attempts to carry out an independent valuation of the company using a Discounted Cash Flow (DCF) methodology.

Base Carbon, Inc. – 2023 Results Show Leverage of Business Model

By Water Tower Research

Base Carbon reported 2023 results that highlight the milestone year for the company, which saw the first issuance of carbon credits from one of its projects, cash received from the sale of its credits to a third party, and the diversification into carbon removal projects.
Net profit was $98.3 million, driven by $6.4 million realized and $104.7 million in unrealized gains in its carbon credit projects portfolio.
Vietnam project expected to deliver ~$29.1 million in cash flow in 2024.

Afcons Infrastructure Limited Pre-IPO Tearsheet

By Clarence Chu

Afcons Infrastructure Limited (6595396Z IN) is looking to raise US$840m in its upcoming India IPO. The bookrunners are Jefferies, Nomura, ICICI Securities, SBI Capital, DAM Capital, and Nuvama Wealth.
Afcons Infrastructure Limited (Afcons) is the flagship infrastructure engineering and construction company of the Shapoorji Pallonji group.
As per the Fitch report, the firm was one of India’s largest international infrastructure companies as per the 2023 ENR top international contractors ranking, based on FY23 international revenue.

UFP Industries Inc. posted robust financial results for its Q4 2023