Smartkarma Daily Briefs

After an extension due to a European Foreign Subsidies Review filing, and a small ‘accident’ regarding the earnings release, we have a deal.
The earnings release itself seemed more innocuous than articles and rumour suggested show the causes of impairments and so it seemed like there was little cause to walk/declare MAC.
Now it will be done in 20 days. I still think this is cheeky, opportunistic, and low, and it is up to the float to decide what to do.

Ecopro BM KOSPI Transfer Listing Disclosure

By Sanghyun Park

The schedule includes submitting the transfer listing application post-EGM on March 26th. KRX approval expected in 4-6 weeks due to Ecopro BM’s financial soundness. KOSPI listing follows in 2-3 weeks.
As for KOSDAQ 150 ad-hoc change, it will be replaced with the top reserved issue. The anticipated timing for this ad-hoc change is around mid or late May.
Following Feb 7 disclosure, stock surged over 10% in 2 days. Precedents show rallies pre-shareholder meetings, but KOSPI listing brings corrections. Today’s resolution could boost Ecopro BM short term.

Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms

Outsourcing Inc (2427 JP) announced that the pre-condition was satisfied, and Bain’s tender offer remains unchanged at JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
Shareholders will breathe a sigh of relief as the weak 4Q and significant impairments have raised concerns that Bain would cut its offer or walk away.
The offer attractiveness has increased partly due to lower consensus. At the last close and for a 3 April payment, the gross/annualised spread is 2.0%/22.8%.

Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer

Ecopro BM (247540 KS)‘s Board has approved the delisting of the stock from the KOSDAQ market and to list on the KOSPI market. The shareholder meeting is on 26 March.
Historically, the KRX has taken an average of 64 days from application to approve the listing to transfer from the KOSDAQ market to the KOSPI market.
Ecopro BM (247540 KS) will be deleted from the KOSDAQ 150 Index on its last trading day and inclusion in the KOSPI 200 Index could take place in September.

Ecopro BM: Announces It Will Switch Listing from KOSDAQ to KOSPI

By Douglas Kim

After the market close on 27 February, Ecopro BM (247540 KS) announced that it will switch its listing from KOSDAQ to KOSPI.
Ecopro BM currently has a market cap of 23.1 trillion won. It is the largest stock in KOSDAQ right now and it would be the 17th largest stock in KOSPI.
Lofty valuation is one of the main reasons why we continue to be bearish on Ecopro BM. It is trading at P/E of 203x in 2024 and 71x in 2025.

Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages

By Neil Glynn

We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
We see Cathay’s consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&A.
Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.

MTAR Technologies- Forensic Analysis

By Nitin Mangal

MTAR Technologies (MTARTECH IN) is a precision engineered company that caters to customers in clean energy, Space, Defense sectors, etc.
The company has done well over the last few years in terms of securing business, however there are concerns on the margins end, working capital and cash generation.
There also exists a high business risk in terms of customer concentration since more than 75% of the revenues (F23) come from one single entity.

Comfortdelgro (CD): March on Chinese Tourists

By Henry Soediarko

Comfortdelgro Corp (CD SP) share price has underperformed its tourism related transport operator peers.
Key drivers are still strong, including the expected influx of Chinese tourists from visa-free travel arrangements.
Valuation is still compelling, and it is not too late to own it.

Air China (753 HK): Up Stakes in CX?

By Osbert Tang, CFA

Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX’s ownership is just a matter of time.
CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice.

Illinois Tool Works: A Diversified

By Baptista Research

Generators and machine producer, Illinois Tool Works Inc.
(ITW) has reported a modest growth amidst the unique operational challenges faced in the fourth quarter of 2023.
In particular, the company confronted reduced demand for capital expenditure (CapEx), lean customer inventories and a strike within the automotive industry.

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Feb 28

Daily Brief Financials: BFI Finance Indonesia, Korea Stock Exchange Kospi Index, Banca Popolare Di Sondrio Scar, Inmobiliaria Colonial Sa, China Vanke and more

By Smartkarma Daily Briefs | Daily Briefs, Financials

In today’s briefing:

BFI Finance Indonesia (BFIN IJ) – Visibility Improves
Samsung KoAct Dividend Growth Active ETF: A Look at the First Corporate Value-Up ETF
Quiddity Leaderboard SE600 Mar 24: 12 Changes Possible in the Next Few Days
Core Quality at Unjustified Discount
Morning Views Asia: China Vanke

BFI Finance Indonesia (BFIN IJ) – Visibility Improves

BFI Finance Indonesia saw a marked turnaround in new bookings and a declining NPF ratio in 4Q2023, as its business recovered from the malware attack in May last year.
The company has started to be more aggressive in non-dealer 4W space but remains cautious on 2W. Write-offs peaked in 4Q2023 and will decline in 2024, leading to lower CoC.
BFIN will launch a tripartite collaboration with GoTo and Bank Jago which will help to drive future bookings growth. Valuations remain attractive with BFIN trading in 2.0x PBV

Samsung KoAct Dividend Growth Active ETF: A Look at the First Corporate Value-Up ETF

The Samsung KoAct Dividend Growth Active ETF (476850F.KS) raised around US$7.4m and started trading on 27 February.
There are 45 stocks in the ETF and the aim is to beat the Korea Stock Exchange Kospi Index (KOSPI INDEX) by employing an active management strategy.
Financials, Consumer Discretionary and Industrials stocks make up nearly two-thirds of the ETF, the dividend yield of the underlying basket is 4% and the forward dividend yield is slightly higher.

Quiddity Leaderboard SE600 Mar 24: 12 Changes Possible in the Next Few Days

By Janaghan Jeyakumar, CFA

The SE600 index is one of the most widely followed benchmark indices in Europe. This index is rebalanced on a quarterly basis.
In this insight, we take a look at the potential index changes that could take place between now and the end of the March 2024 index rebal event.
Based on the latest available data, I expect up to 12 index changes over the next few days including an intra-review change!

Core Quality at Unjustified Discount

By Jesus Rodriguez Aguilar

Inmobiliaria Colonial Sa (COL SM), with a quality portfolio, trades at 55% discount to NAV. Lacking short-term catalysts, buy on improving earnings guidance, rate cuts and favorable market conditions.
Colonial probably has one of the best-quality office portfolio in Europe, with the great majority of its assets are situated in core areas of Paris, Madrid, and Barcelona.
Colonial offers a 24.5% upside, which implies a 40% discount/NAV. The shares offer a 5.26% 2024e dividend yield (source: IBES), which I consider sustainable over time.

Morning Views Asia: China Vanke

By Leonard Law, CFA

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

China Vanke

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Feb 28

Daily Brief Consumer: Toei Animation, Tongcheng Travel Holdings , Rakuten Group , Li Auto , Samsonite, Matahari Department Store, Luckin Coffee, Dollar Index and more

By Smartkarma Daily Briefs | Consumer, Daily Briefs

In today’s briefing:

Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
Samsonite (1910 HK): Evaluating a Potential Privatisation
Samsonite (1910 HK): Leader Of The Pack
Samsonite (1910 HK) Takeover Interest: Hold on to These Shares
Matahari Department Store (LPPF IJ) – Primed for Recovery
[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY
U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.

Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting

On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.

Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal

The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
…deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK).
No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.

Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz

Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?
The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)

The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK), HSBC (5 HK) are the biggest sells.
The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).

Samsonite (1910 HK): Evaluating a Potential Privatisation

Bloomberg reports that Samsonite (1910 HK) is drawing takeover interest from several PE firms which aim to relist Samsonite in the US to draw a higher valuation.
A standard takeover premium (around 30%) should be sufficient due to the shareholder register. There is no single large shareholder(s) to pose an issue to an offer.
The probability of an offer is medium, with an offer price likely around HK$30.00. Irrespective of a binding offer, the upside remains as Samsonite trades at an undemanding valuation.

Samsonite (1910 HK): Leader Of The Pack

By David Blennerhassett

Luggage maker Samsonite (1910 HK) is up 11.8% today, as I type, after Bloomberg reported it is working with advisers as it studies possibilities, including going private.
With the reopening of China and the ongoing recovery in travel globally, Samsonite’s net sales improved markedly across all regions. 1H23 profit gained 185.3% versus 1H22.
FY23 figures should be out in the middle of next month.

Samsonite (1910 HK) Takeover Interest: Hold on to These Shares

By Mohshin Aziz

Bloomberg reported that Samsonite (1910 HK) is considering several options, including going private, and there are several suitors including from buyout firms
Share price has surged by 14% in the morning session. Stock is still very cheap, at 10.5x PE, 7.5x EV/EBITDA with an impressive ROE of 30%
Our quick take values Samsonite at HKD34/share, based on its forecasted +1 year earnings multiplied to its average long-term PE of 15.5x

Matahari Department Store (LPPF IJ) – Primed for Recovery

Matahari Department Store (LPPF IJ) reported another slow set of results in 4Q2023, as it saw slower demand and continues to clear aged inventory.
The company is well-prepared for the upcoming Lebaran season with more conservative inventory levels. It will also see the benefits of new brands coming on stream this year.
Matahari Department Store will open 4-6 new stores in 2024 but close 10 underperforming stores, with a continued focus on new DP brands like SUKO. Valuations remain attractive.

[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY

By Eric Wen

Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.

U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.

By Joe Jasper

Large-Cap indexes (S&P 500, Nasdaq 100, and DJI) remain bullish, all hitting new all-time highs last week while continuing to find short-term support at their respective 20-day MAs.
Mid-Caps (S&P 400, Russell Mid-Cap) starting another leg higher following breakouts from 2-month consolidations. Small-caps (S&P 600, Russell 2000) are likely to follow in the footsteps of large- and mid-caps.
Small-Cap indexes have been consolidating for 2.5 months following the historic rally from late-October to late-December 2023, a healthy sign. We expect they are gearing-up for another similar move higher.

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Feb 28

Daily Brief Quantitative Analysis: Parade Technologies: Negative Technical Analysis Signals and more

By Smartkarma Daily Briefs | Daily Briefs, Quantitative Analysis

In today’s briefing:

Parade Technologies: Negative Technical Analysis Signals
EQD / NSE Volatility Update / 19-Feb-24 to 23-Feb-24
KRX Short Interest Weekly (Feb 23rd): Posco Holdings, Rotem

Parade Technologies: Negative Technical Analysis Signals

By Wium Malan, CFA

Following disappointing near-term guidance, Parade Technologies (4966 TT) remains firmly amid an earnings downgrade cycle.
With Parade Technologies breaching overbought territory, near-term momentum indicators are displaying bearish signals.
Parade Technologies currently trades on a 24.6x NTM PE ratio, above its rolling 5-year historic average trading range.

EQD / NSE Volatility Update / 19-Feb-24 to 23-Feb-24

By Sankalp Singh

IVs fail to move higher in spite of new highs in NIFTY50 Index
New banking regulations from the RBI causing frothiness in BankNifty options market
Regime Switching Model is in the process of switching from “High & Up” to “High & Down” Vol state

KRX Short Interest Weekly (Feb 23rd): Posco Holdings, Rotem

By Ke Yan, CFA, FRM

We analyzed the changes in short interest of KRX Stocks as of Feb 23rd which has an aggregated short interest worth USD7.7bn.
We tabulate league table for top short by value and short as multiple of ADT, as well as weekly increases & decreases in short value, short as multiple of ADT.
We highlight short interest weekly changes in Posco Holdings, Rotem.

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Feb 28

Daily Brief Technical Analysis: U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc. and more

By Smartkarma Daily Briefs | Daily Briefs, Technical Analysis

In today’s briefing:

U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.

U.S. Dollar Rolling Over; Small-Caps to Follow Mid- And Large-Caps to New Highs; Buys in Cons. Disc.

By Joe Jasper

Large-Cap indexes (S&P 500, Nasdaq 100, and DJI) remain bullish, all hitting new all-time highs last week while continuing to find short-term support at their respective 20-day MAs.
Mid-Caps (S&P 400, Russell Mid-Cap) starting another leg higher following breakouts from 2-month consolidations. Small-caps (S&P 600, Russell 2000) are likely to follow in the footsteps of large- and mid-caps.
Small-Cap indexes have been consolidating for 2.5 months following the historic rally from late-October to late-December 2023, a healthy sign. We expect they are gearing-up for another similar move higher.

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Feb 28

Daily Brief Thematic (Sector/Industry): Ohayo Japan | Lacklustre; Buffett Talks up Trading Companies and more

By Smartkarma Daily Briefs | Daily Briefs, Thematic (Sector/Industry)

In today’s briefing:

Ohayo Japan | Lacklustre; Buffett Talks up Trading Companies
US Banks – Weekly C&I Loan Growth Remains Negative, Total Loan Growth Still Only Barely Positive
Europe’s Magnificent Eleven
[Blue Lotus Daily]:LI/XPEV/NIO/1211 HK/BEKE/ZLAB
[Blue Lotus Daily – TMT Update]: 700 HK/1810 HK/BIDU/JD/BABA/PDD/1024 HK/3690 HK/WB/4689JP/4755JP
Retail Media in Japan: More Revenue for Retailers, More Sales for Brands
Weekly Sustainable Investing Surveyor – Week Ended February 23, 2024
Postcard from Mandya | Cruising Around the Sugar City in a BYD

Ohayo Japan | Lacklustre; Buffett Talks up Trading Companies

By Mark Chadwick

The S&P 500 and Nasdaq closed Tuesday with slight gains ahead of key inflation data.
Japanese trading houses soared to record highs following Warren Buffett’s bullish remarks, robust earnings, and share buyback plans
Japan core consumer price index, excluding fresh food, rose by 2% year-on-year, down from December’s 2.3% increase

US Banks – Weekly C&I Loan Growth Remains Negative, Total Loan Growth Still Only Barely Positive

By Daniel Tabbush

Large US bank weekly data shows a fragile economy still with negative 1.4% C&I loan growth YoY in the most recent week’s data
Total loans for large US banks are up only 0.5% YoY in the most recent week which is down from 0.7% to 1.3% just 4-5 months ago
Large time deposit growth is decelerating but remains very high at 84% YoY in the most recent week’s data, suggesting still core income pressure

Europe’s Magnificent Eleven

By Investment Talk

I was today-years-old when I learned that Europe has its own version of the Magnificent 7; the basket of giga-cap US tech companies comprised of Alphabet, Amazon, Apple, Meta, Microsoft, Nvidia, and Tesla.
The GRANOLAS Dubbed the “Granolas” by Goldman Sachs in 2020, this basket was chosen because it echoed themes present amongst the Mag 7 (back then it was just “FAAMG”) .
Namely, they were market leaders in the STOXX 600 Europe Index, they had grown to become an increasingly larger share of the market, and their earnings had far outpaced the broader index.

[Blue Lotus Daily]:LI/XPEV/NIO/1211 HK/BEKE/ZLAB

By Eric Wen

LI/XPEV/NIO/1211 HK: Sales of strong EV brands held up better during CNY, Li and Tesla led and AITO and BYD followed (+)
BEKE : ByteDance suspend self-operating home decoration business( + )
ZLAB:Bristol-Myers Squibb （BMS） outsources Opdivo sales in ten southwestern provinces to Zai Lab, a long-term positive but with many prerequisites (+)

[Blue Lotus Daily – TMT Update]: 700 HK/1810 HK/BIDU/JD/BABA/PDD/1024 HK/3690 HK/WB/4689JP/4755JP

By Ying Pan

1810 HK/BIDU: Google’s Gemma is an important move for client-side AI (+)
3690 HK: Local news said Douyin has deemphasized take out business (+)
PDD/4689 JP/AMZN/4385 JP/4755 JP: Data indicates that Temu is particularly popular in Japan (+/~/-/-/-)

Retail Media in Japan: More Revenue for Retailers, More Sales for Brands

By Michael Causton

The growth in retail media (brand advertising delivered in stores based on detailed customer data) continues to be one of the big trends in 2024.
Large retailers are keen to add this new revenue stream – and lots of brands want to advertise with them – and companies like Rakuten are offering this service directly.
For many retailers, they still need help from experts in advertising and data analysis to make it work, providing an opportunity for Hakuhodo among others.

Weekly Sustainable Investing Surveyor – Week Ended February 23, 2024

By Water Tower Research

The WTR Sustainable Index was down by 0.5% W/W versus the S&P 500 Index (up 1.7%), the Russell 2000 Index (down 0.8%), and the Nasdaq Index (up 1.4%).
Energy Technology (12.7% of the index) was down by 10.5%, while Industrial Climate and Ag Technology (55.2% of the index) was up by 2.0%, ClimateTech Mining was down 6.8%, and Advanced Transportation Solutions was down 2.2%.
Top 10 Performers: EFOI, IPWR, CYDVF, ROOF, PGTK, CLIR, LITM, FIX, LOOP, RE

Postcard from Mandya | Cruising Around the Sugar City in a BYD

By Pranav Bhavsar

With the “Postcard” series, our objective is to bring to our readers on-ground insights based on interactions across key channels located in tier 2 and tier 3 locations.
For this Postcard, we traveled to Mandya, a city in the southern state of Karnataka, also known as the ‘Sugar City,’ on a rented E6 by BYD (1211 HK).
Sectors in focus include Consumer Finance, Mortgage Lenders, and Retailers.

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Feb 28

Daily Brief Equity Bottom-Up: Samsonite (1910 HK) Takeover Interest: Hold on to These Shares and more

By Smartkarma Daily Briefs | Daily Briefs, Equity Bottom-Up

In today’s briefing:

Samsonite (1910 HK) Takeover Interest: Hold on to These Shares
[Baidu, Inc. (BIDU US, BUY, TP US$146)TP Change]: The Commercialization Path of AI Is Becoming Clear
BFI Finance Indonesia (BFIN IJ) – Visibility Improves
Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages
MTAR Technologies- Forensic Analysis
Matahari Department Store (LPPF IJ) – Primed for Recovery
Comfortdelgro (CD): March on Chinese Tourists
[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY
Air China (753 HK): Up Stakes in CX?
Core Quality at Unjustified Discount

Samsonite (1910 HK) Takeover Interest: Hold on to These Shares

By Mohshin Aziz

Bloomberg reported that Samsonite (1910 HK) is considering several options, including going private, and there are several suitors including from buyout firms
Share price has surged by 14% in the morning session. Stock is still very cheap, at 10.5x PE, 7.5x EV/EBITDA with an impressive ROE of 30%
Our quick take values Samsonite at HKD34/share, based on its forecasted +1 year earnings multiplied to its average long-term PE of 15.5x

[Baidu, Inc. (BIDU US, BUY, TP US$146)TP Change]: The Commercialization Path of AI Is Becoming Clear

By Ying Pan

We expect Baidu to report C4Q23 revenue, GAAP op. profit and GAAP net income inline, (2.3%) and (4.5%) vs. consensus.
The slight bottom-line miss was mainly attribute to the increased marketing costs related to user acquisition. Baidu cloud revenue is robust due to AI product stimulating demand.
We cut our target price to US$146 for the spendings related to the construction of future e-commerce business but maintain BUY for its cheap valuation.

BFI Finance Indonesia (BFIN IJ) – Visibility Improves

BFI Finance Indonesia saw a marked turnaround in new bookings and a declining NPF ratio in 4Q2023, as its business recovered from the malware attack in May last year.
The company has started to be more aggressive in non-dealer 4W space but remains cautious on 2W. Write-offs peaked in 4Q2023 and will decline in 2024, leading to lower CoC.
BFIN will launch a tripartite collaboration with GoTo and Bank Jago which will help to drive future bookings growth. Valuations remain attractive with BFIN trading in 2.0x PBV

Cathay Pacific – Reported Air China Interest Prompts Assessment of Structural Disadvantages

By Neil Glynn

We publish a deep dive on historical margin management at Cathay Pacific following Bloomberg reports that Air China is considering raising its 29.99% stake.
We see Cathay’s consistent underperformance of the global industry as due to structural disadvantages competing against lower cost competitors without the benefit of attractive joint ventures or M&A.
Our deep dive comparing margin generation to ten major global peers highlights weak pricing power without sufficient offset from staff cost/other cost efficiencies as the key problem.

MTAR Technologies- Forensic Analysis

By Nitin Mangal

MTAR Technologies (MTARTECH IN) is a precision engineered company that caters to customers in clean energy, Space, Defense sectors, etc.
The company has done well over the last few years in terms of securing business, however there are concerns on the margins end, working capital and cash generation.
There also exists a high business risk in terms of customer concentration since more than 75% of the revenues (F23) come from one single entity.

Matahari Department Store (LPPF IJ) – Primed for Recovery

Matahari Department Store (LPPF IJ) reported another slow set of results in 4Q2023, as it saw slower demand and continues to clear aged inventory.
The company is well-prepared for the upcoming Lebaran season with more conservative inventory levels. It will also see the benefits of new brands coming on stream this year.
Matahari Department Store will open 4-6 new stores in 2024 but close 10 underperforming stores, with a continued focus on new DP brands like SUKO. Valuations remain attractive.

Comfortdelgro (CD): March on Chinese Tourists

By Henry Soediarko

Comfortdelgro Corp (CD SP) share price has underperformed its tourism related transport operator peers.
Key drivers are still strong, including the expected influx of Chinese tourists from visa-free travel arrangements.
Valuation is still compelling, and it is not too late to own it.

[Luckin Coffee (LKNCY US, BUY, TP US$41) TP Change]: Weak Earnings Could Be Temporary…Reiterate BUY

By Eric Wen

Luckin Coffee reported 4Q23 revenue/non-GAAP NI in-line/(39.8%) vs. our estimate due to (1) extra winter subsidies; (2) rental cost from new stores; (3) more operating expenditures.
We view the non-GAAP NPM decline to 5.1% in 4Q23 as temporary and outlook for sequential improvements in 1H24 from (1)ASP rebound from easing competition, (2)efficiency improvement in rental cost
We think Luckin’s profitability outlook is intact and maintain BUY rating, but lower TP by US$2 to US$41 to factor in the rising cost.

Air China (753 HK): Up Stakes in CX?

By Osbert Tang, CFA

Speculations on Air China Ltd (753 HK) seeking control of Cathay Pacific (293 HK) reappeared recently. We think a change in CX’s ownership is just a matter of time.
CX has been a more important profit contributor to Air China after the pandemic, and depends on pricing, Air China is expected to benefit from such acquisition.
Both are trading on 0.5SD below their 5-year P/B average and we prefer CX in the short term, but Air China looks to be a better long-term choice.

Core Quality at Unjustified Discount

By Jesus Rodriguez Aguilar

Inmobiliaria Colonial Sa (COL SM), with a quality portfolio, trades at 55% discount to NAV. Lacking short-term catalysts, buy on improving earnings guidance, rate cuts and favorable market conditions.
Colonial probably has one of the best-quality office portfolio in Europe, with the great majority of its assets are situated in core areas of Paris, Madrid, and Barcelona.
Colonial offers a 24.5% upside, which implies a 40% discount/NAV. The shares offer a 5.26% 2024e dividend yield (source: IBES), which I consider sustainable over time.

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Feb 28

Daily Brief Credit: IFS Connect Takeaways | Nvidia Earnings as the New Semiconductor King and more

By Smartkarma Daily Briefs | Credit, Daily Briefs

In today’s briefing:

IFS Connect Takeaways | Nvidia Earnings as the New Semiconductor King
Morning Views Asia: China Vanke

IFS Connect Takeaways | Nvidia Earnings as the New Semiconductor King

By The Circuit

Nvidia emerges as a strong challenger in the semiconductor industry, while intel remains the dominant player
Intel makes significant strides in its foundry business, showcasing a clear focus on advanced nodes like 18A and 14A
Intel positions itself as a serious player in the foundry market, attracting key customers like Microsoft and building a strong ecosystem around its offerings

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

Morning Views Asia: China Vanke

By Leonard Law, CFA

China Vanke

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Feb 28

Daily Brief ECM: Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting and more

By Smartkarma Daily Briefs | Daily Briefs, ECM

In today’s briefing:

Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting
Pre-IPO Xunfei Healthcare Technology – Continuous Losses Will Be the Norm

Toei Animation (4816 JP) – This Offering Could Be Heavy; the NEXT Offering Is More Interesting

On 14 February, Sony Corp (6758 JP) and Bandai Namco Holdings (7832 JP) announced an equity offering of nearly 4.5mm shares of Toei Animation (4816 JP).
Float on Toei Animation (4816 JP) has been low. This would raise it to meet the minimum standard to stay listed on the TSE Standard market section.
To get to TSE Prime, it needs another offering. And there are lots of cross-holders to go.

Pre-IPO Xunfei Healthcare Technology – Continuous Losses Will Be the Norm

By Xinyao (Criss) Wang

In healthcare AI industry, the commercialization process is complex and burdened with challenges. Related products mainly plays an auxiliary role in medical scenarios, rather than a core support or rigid-demand.
The idea of creating corresponding solutions for C-end and B-end customers by FUNFEI is not inappropriate. However, both B-end and C-end businesses of FUNFEI have encountered varying degrees of problems.
We’re not optimistic about XUNFEI’s profitability. The sluggish stock price performance after Airdoc’s listing indicates that the market/investors have not fully recognized healthcare AI enterprises, leading to low valuation.

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Feb 28

Daily Brief Event-Driven: Final Flows for Hang Seng and more

By Smartkarma Daily Briefs | Daily Briefs, Event-Driven

In today’s briefing:

Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal
Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz
HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)
Samsonite (1910 HK): Evaluating a Potential Privatisation
Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB
Samsonite (1910 HK): Leader Of The Pack
Ecopro BM KOSPI Transfer Listing Disclosure
Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display
Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms
Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer

Final Flows for Hang Seng, HSCEI, HS Tech on 1 March Rebal

The Hang Seng Index, HSCEI, and HS Tech rebals were announced on 16 Feb. Janaghan Jeyakumar, CFA had expected GDS out, Tongcheng Travel in on HSTECH, along with the…
…deletion of Zhongsheng Group (881 HK) in HSCEI, with a low conviction replacement of Zijin Mining, which turned out to be an add of China Unicom Hong Kong (762 HK).
No changes to the main HSI Index, which means evolution is further delayed. Today was the day to recap the caps. Mar1 Flow estimates are included below for all three.

Rakuten’s New “Bond-Type Share” Issuance – Quite Quirky to Quantulate Rakuten’s Quisquous New Quoz

Today, Rakuten Group (4755 JP) announced it would propose an amendment to its Articles at the AGM (28 March) to issue “Bond-Type Class Shares.” First reaction: You wot, mate?
The company states it wants to “strengthen its financial base through reducing interesting-bearing debt by equity-related financings and conduct proactive control of debt maturity schedule, etc.”
Now it wants to issue listed bond-type shares. Dividends not interest. The last Japanese issuer of something similar was NEC in 2001. Few will remember, so we study the situation.

HSI, HSCEI, HSTECH, HSIII: Rebalance Flows Post Capping (Mar 2024)

The March rebalance of the HSI, HSCEI, HSTECH and HSIII indices will use today’s closing prices to cap the index constituent weights at 8%/12%. This will lead to large flows.
Tencent (700 HK), Meituan (3690 HK) and Tongcheng Travel (780 HK) are the biggest buys while Alibaba (9988 HK), Li Auto (2015 HK), HSBC (5 HK) are the biggest sells.
The round-trip trade across all stocks across the four indices is estimated at HK$16.16bn (US$2.06bn).

Samsonite (1910 HK): Evaluating a Potential Privatisation

Bloomberg reports that Samsonite (1910 HK) is drawing takeover interest from several PE firms which aim to relist Samsonite in the US to draw a higher valuation.
A standard takeover premium (around 30%) should be sufficient due to the shareholder register. There is no single large shareholder(s) to pose an issue to an offer.
The probability of an offer is medium, with an offer price likely around HK$30.00. Irrespective of a binding offer, the upside remains as Samsonite trades at an undemanding valuation.

Outsourcing (2427) MBO Arrives! Bain Launches Cheeky, Opportunistic, Low(Priced) TOB

After an extension due to a European Foreign Subsidies Review filing, and a small ‘accident’ regarding the earnings release, we have a deal.
The earnings release itself seemed more innocuous than articles and rumour suggested show the causes of impairments and so it seemed like there was little cause to walk/declare MAC.
Now it will be done in 20 days. I still think this is cheeky, opportunistic, and low, and it is up to the float to decide what to do.

Samsonite (1910 HK): Leader Of The Pack

By David Blennerhassett

Luggage maker Samsonite (1910 HK) is up 11.8% today, as I type, after Bloomberg reported it is working with advisers as it studies possibilities, including going private.
With the reopening of China and the ongoing recovery in travel globally, Samsonite’s net sales improved markedly across all regions. 1H23 profit gained 185.3% versus 1H22.
FY23 figures should be out in the middle of next month.

Ecopro BM KOSPI Transfer Listing Disclosure

By Sanghyun Park

The schedule includes submitting the transfer listing application post-EGM on March 26th. KRX approval expected in 4-6 weeks due to Ecopro BM’s financial soundness. KOSPI listing follows in 2-3 weeks.
As for KOSDAQ 150 ad-hoc change, it will be replaced with the top reserved issue. The anticipated timing for this ad-hoc change is around mid or late May.
Following Feb 7 disclosure, stock surged over 10% in 2 days. Precedents show rallies pre-shareholder meetings, but KOSPI listing brings corrections. Today’s resolution could boost Ecopro BM short term.

Block Deal Sale of 5% Stake In SFA Engineering by Samsung Display

By Douglas Kim

After the market close on 27 February, Samsung Display announced that it will sell its 4.95% stake in Sfa Engineering (056190 KS) in a block deal sale.
We would take the trade. We like the relatively large block deal sale discount as well as the company’s attractive valuations.
SFA Engineering is trading at P/E of 8.3x, EV/EBITDA of 2.7x, and P/B of 0.7x in 2024, which are much lower than historical valuations.

Outsourcing (2427 JP): Relief as Bain Launches Tender at Unchanged Terms

Outsourcing Inc (2427 JP) announced that the pre-condition was satisfied, and Bain’s tender offer remains unchanged at JPY1,755 per share, a 52.1% premium to the undisturbed (8 December).
Shareholders will breathe a sigh of relief as the weak 4Q and significant impairments have raised concerns that Bain would cut its offer or walk away.
The offer attractiveness has increased partly due to lower consensus. At the last close and for a 3 April payment, the gross/annualised spread is 2.0%/22.8%.

Ecopro BM (247540 KS): Index Impact of KOSDAQ to KOSPI Transfer