Financials

The Merchants Trust’s (MRCH’s) manager, Simon Gergel at Allianz Global investors, is very excited about the number of reasonably priced opportunities available in the UK market. Also, good income generation from the trust’s portfolio of high-quality companies with robust fundamentals enabled MRCH to record another consecutive dividend increase in FY24; it now has a 42-year track record. The trust’s attractive 5.1% dividend yield is one of the highest in the 19-strong AIC UK Equity Income sector and its NAV total return over the last three, five and 10 years is superior versus the peers with a higher yield. MRCH could be seen as a good income play in a scenario of improving investor sentiment towards UK companies, which Gergel envisages given the more stable political environment (as the two main political parties’ policies are now less divergent) and signs of improvement in the UK economy.

• While HDFCB’s results have been somewhat lackluster over the past couple of quarters, this has been largely due to merger-related drags, tight liquidity and irrational competition in the marketplace.
• From a medium-to-long-term perspective, the growth prospects for HDFCB remain tremendously attractive despite its large size, as evident from its consistent market share gains in deposits.
• Q4FY24 earnings came largely in line with the expectation in terms of core earnings, except for one-off gain from an asset sale that was more than offset by floating provisions.

• HDFC Bank results to FYE24 are improving and we retain it as a buy, with pre-provision returns improving slightly QoQ and best in peer group NPL ratio and coverage
• Bank of Baroda is our core value Indian bank pick, for its undemanding valuations, healthy ROE and potential for NPL improvements
• Bandhan bank is a potential contrarian pick for its value attributes; we are cautious on State Bank of India for its delinquency risks, low core capital ratio 

• Bank Negara Indonesia (BBNI IJ) booked a solid set of 1Q2024 results driven by +9.6% YoY growth in loans, despite being hampered by higher cost of funds amid tighter liquidity.
• Loan growth was driven by corporate lending, with corporate SOE lending showing the strongest growth and consumer loans. Funding was driven by CASA growth which limited the squeeze on NIMs. 
• Bank Negara Indonesia booked strong growth in fee income and a reduction in provisions which helped to offset the margin squeeze. Valuations remain attractive on 1.2x FY2024E PBV.

• Kemper’s sale under this new structure in the third quarter of 2023 could boost shareholder value
• It would bring Kemper’s valuation closer to its peers in the industry
• Kemper’s profitable underwriting and unique business model make it an appealing investment for long-term value investors

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.

• SEBI has asked BSE to pay regulatory fees on options trading based on notional turnover instead of premium turnover
• The impact of this would 10-20% on earnings in short term
• The bigger question lies ahead what BSE will do to offset the impact and grow its market share in derivative trading

• If the Hang Seng Index (HSI INDEX) closes the month of April up (i.e. above 16541.42), our previous forecast will change (read the insight below for the detailed analysis).
• The index performed an impressive bounce from the support levels (16050) we indicated in our previous insight, it is very overbought (WEEKLY model) and may close April up.
• A continuation of the WEEKLY uptrend is in doubt, this week, while the MONTHLY situation is more complex.

• BFI Finance Indonesia (BFIN IJ) booked a solid set of 1Q2024 numbers with improved QoQ bookings, although with some concerns over challenging market conditions slowing the recovery.
• The NPF ratio saw an ongoing improvement, although the cost of capital increased due to higher write-offs from last year’s bookings. Revenue declined due to a shift to lower-risk products. 
• The outlook for BFIN in 2H2024 looks more positive, with the company shifting back to higher-return products and with lower expected credit costs. Valuations are appealing on 1.5x PBV.

• It is no surprise that we have maintained a bullish stance in crypto over the past month, given the uptick in US dollar liquidity and the easing tensions between Israel and Iran.
• Despite these factors, the market adopted a predominantly pessimistic view, highlighted by a negative futures funding rate.
• This suggested to us that the market was misaligned with the outside environment.

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 Hongqiao
• Greentown China
• Medco Energi
• Yankuang Energy Group

• Based on the latest Q1 2024 financial results of Marsh & McLennan Companies Inc., there are several key highlights presenting a neutral standpoint of the company’s performance.
• Positive aspects include strong underlying revenue growth of 9% and an upswing of 11% in adjusted operating income compared to the prior year.
• The company’s adjusted operating margin expanded by 80 basis points from Q1 2023 and completed $300 million of share repurchases within the quarter.

Princess Private Equity Holding’s (PEY’s) 12-month NAV total return (TR) to end-February 2024 was a modest 0.6% amid low exit activity across private equity (PE) markets. That said, if the pick-up in global M&A volumes witnessed earlier in 2024 continues, it should support PEY’s exit activity. This in turn would translate into improved returns if PEY delivers sizeable uplifts to previous carrying values upon exits, as it has done historically. In this context, we note that PEY has a good pipeline of mature investments that are potentially ripe for sale. PEY’s shares now trade at a 24% discount to NAV versus a 10-year average of 18%.

• SEBI extends cross-margining discounts to correlated assets with different maturities – Dispersion trading & vol arb strategies to benefit. 
• In spite of upcoming tier-1 event risks the vol surface has flattened  dramatically. Current IV levels are supportive of a continued “High & Down” vol state.
• Curve steepening seen in Nifty50 IVs. Unusual kinked-shaped in BankNifty term structure has normalized – vol curve now has a uniform orientation.

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
• Road King Infrastructure

• 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. 20 days straight net buying. NORTHBOUND saw big inflows Friday. A record day I believe.
• HK stocks bounced VERY hard. Seemed like big allocation trade. HSCEI +8.7% vs CSI300 +1.2%. In H/A Pairs, liquid pairs saw Hs outperform their A by 4+% on average.

• The Quiddity Mainland Connect NORTHBOUND Monitor. Like the A/H Premium Monitor and HK Connect SOUTHBOUND Monitor. Lots of Flows/Position Tables and Charts with which to play.
• Last week saw NORTHBOUND net BUY RMB 25+bn of A-shares on low gross volume but a huge Friday playing catchup to a massive up-week in HK shares. 
• H outperformed As and it feels like the massive day Friday was just to play reversion on underperformance vs HK shares.

• Bank Central Asia (BBCA IJ) surprised with a strong set of 1Q2024 numbers driven by unseasonably strong loan growth coupled with continuing growth in CASA, helping to underpin NIMs. 
• Loan growth was driven by corporate loans with investment loans outpacing working capital loans together with SME loans and consumer loans, especially mortgages, autos, and personal loans. 
• Digital banking initiatives drove customer numbers and transactions, whilst improving operating efficiencies. Credit costs continue to come down with falling loans at risk. Valuations remain high but credentials remain intact. 

• The Nikkei 225 (NKY INDEX) is closing the month of April in negative territory, first month down after 3 months up.
• Our seasonal model indicates that May could also close down, but the index should find strong support in the 37770-36750 price area.
• The month of May is a coin flip: the index could close up or down, caution is advised.

• Chosun reports Korean financial authorities advance Value-up plan guidelines to May 2nd, citing momentum decline post-election. Chosun’s credibility enhances report validity.
• Companies will commence Value-up-related disclosures in alignment with the guidelines within May. A dedicated Value-up website is set to launch in May.
• The May 2nd guideline release date is crucial for Value-up momentum trading. Anticipate heightened volatility in Value-up stocks approaching this date.

On 18 April, AGBA announced a surprise deal to acquire 100% of Triller Corp, a global AI-driven social video platform, in an all-stock transaction. Triller is privately-owned but has been independently valued at US$3.2bn. AGBA’s management is using a US$4bn valuation for the combined entity, in which AGBA shareholders will own 20% and Triller shareholders 80%. Triller recorded FY23 revenues of US$45m on 450m user accounts and 2.2m creators but is loss-making. In FY23, AGBA reported revenues of US$54m and 400,000+ clients. The combined group expects synergies from expanding and marketing to Triller’s users and utilizing Triller’s AI, natural language processing (NLP) technology and digital marketing capabilities to drive growth in its Asian investment advisory business and fintech investments.

• Every day, 32.5 million Ether, valued at more than $100 billion, are used as collateral to verify transactions, propose blocks, and protect the Ethereum blockchain from external attacks by acting as validators.
• These Ethereum validators consequently hold substantial influence over the network.
• To manage this influence wielded by Ethereum stakers, the network has the capability to slash validators.

• Today’s reveal includes two main parts: first, setting up internal balance management for investors; second, building the detection system to block naked short-selling.
• FSC and FSS haven’t provided a set date for system completion but suggest it may start late this year or early next year. Uncertainty remains on overseas investor participation.
• A decision on short selling is due in June, but no confirmation was given today. However, the local market anticipates short selling resuming before this system is fully operational.

• RBI has barred Kotak Bank from expanding its digital business and credit card issuance
• Rather than earnings damage (max -10%) there is more reputational damage to the bank taking away premium valuations it used to command
• The way ahead lies for the bank is the path of moderate growth 

• Crypto bankruptcies are complicated as crypto currencies are extremely volatile and there are no regulatory frameworks existing for crypto currencies.
• The treatment of ownership of digital assets as property of the debtor or the depositor is one of the key debates in settling crypto bankruptcy cases.
• One of the key lessons is that crypto investors need to be focused on how they transact with crytpo exchanges in the future.

• Will Campion and the speaker met with Nick Carey from Blockchain.com in September 2021 to discuss blockchain and cryptocurrencies
• Despite initial skepticism, the conversation was rich and wide-ranging, spanning two episodes on the Moneymakers podcast
• Blockchain.com, founded in 2011 in York, serves both institutions and retail customers and has over 90 million wallet holders globally

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

Henderson Far East Income (HFEL) has consistently delivered on its objective to provide a rising dividend. However, like many investors, HFEL’s managers overestimated the potential for a post-pandemic rebound in China. The trust’s resultant overweight to Chinese consumer and other cyclicals led to a fall in portfolio revenues and underperformance in the financial year ended 31 August 2023 (FY23). With a view to improving future returns, HFEL’s board has since indicated an increased willingness to use reserves when necessary to support dividend payments, which it did in FY23. This reduces the requirement to focus primarily on high income names to fund dividend payments, giving lead manager Sat Duhra scope to move into other areas of the market where he can acquire well-priced value names offering performance and yield, or the prospect of dividend growth over time. Duhra has been quick to reduce the trust’s exposure to China and increase positions into well-priced value names in India and Indonesia. Early signs suggest this repositioning is paying off – HFEL outperformed the market in the six months to end March 2024.

EML Payments announced that on 23 April the Financial Conduct Authority (FCA) in the UK lifted the new customer restriction for Prepaid Financial Services Limited (PFSL), which had been in place since October 2022. With the appropriate structure and risk management controls now in place, PFSL can focus on growing the business. This marks another positive step forward for the group, after exiting PFS Card Services Ireland Limited (PFS), agreeing to sell Sentenial and finalising the settlement liabilities for the PFS acquisition.

• Northeast Bank is a $3 billion bank based in Portland, Maine with a tangible book value of $312 million
• Led by a management team with a strong track record of generating substantial returns for shareholders
• Trading at attractive valuation metrics with potential for significant investor returns over the next few years

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.

• In RMB Dual Counter Trading Is Coming – This Changes AH Relationships, Travis Lundy discussed the forthcoming inclusion of RMB dual counters in the Hong Kong Southbound Connect programs.
• This is but one of the five capital market cooperation measures announced by the CSRC last Friday. 
• The other four measures include ETFs, improving mutual recognition of funds, increasing China IPOs in Hong Kong, and the inclusion of REITs. This insight discusses the latter.

• Krung Thai is our value pick among Thai banks, having solid post-provision profitability, close to double digit ROE with a healthy balance sheet, along with undemanding PBV and PE ratios
• We maintain Kasikorn on the buy list, as its cost of risk was well contained in 1Q24, a key positive catalyst for its improving post-provision returns
• Bank of Thailand is currently accepting applications for digital banking licenses until 19 September 2024; incumbent banks and domestic big corporates are likely to form the core of applicants

• Advance Create Co., Ltd. is an independent insurance agent that sells insurance products mainly to individuals on behalf of multiple insurance companies, also undertaking follow-up services on their behalf.
• In FY09/23, the company reported revenue of JPY10.2bn, operating loss of JPY2.0bn, recurring loss of JPY2.2bn, and net loss attributable to owners of the parent of JPY1.8bn
• On February 20, 2024, Advance Create Co., Ltd. announced that it expects to receive dividends from its consolidated subsidiary, Advance Create Reinsurance Incorporated.

• In Smartkarma Corporate Webinar | Elite Commercial REIT: Essential Assets at an Attractive Yield we conducted a fireside chat with Elite Commercial REIT.
• Elite Commercial REIT is a Singapore real estate investment trust established with the investment strategy of principally investing, directly or indirectly, in commercial real-estate related assets in the United Kingdom.
• The company has recently expanded its strategy to look at other commercial assets in the UK, beyond its existing portfolio of assets rented by the UK government.

This Insight is part of the Smartkarma Corporate Webinar series, supported by SGX through the Investor Education Fund.

• In this insight, we look at the fundamentals of J-REITs.  We look at overall Japan real estate, interest rate impact, as well as industry dynamics
• We like logistics sector due to its strong industry fundamentals; we are more bearish on office as vacancy will see more fluctuation in terms of new supply
• On the back of valuation and industry fundamentals, we suggest LONG Nippon Prologis REIT and SHORT Nippon Building Fund

• CLS Holdings is a vertically integrated cannabis company with core operations in Nevada.
• The company owns and operates Oasis cannabis dispensary, one of the leading stores in Las Vegas.
• CLS also has a state-of-the art extraction and manufacturing facility in Nevada and a suite of top-performing brands.

• The Deputy Prime Minister Choi Sang Mok reaffirmed the Corporate Value Up program, pushing up the major value driven/low PBR stocks in Korea today.
• Deputy Prime Minister Choi emphasized that as part of Corporate Value Up program, corporate tax benefits to companies that have made efforts to strengthen shareholder return policy will be provided.
• The Korean government also plans to revise the law to separate taxation on the dividend income of shareholders of companies that expand dividends.

• Strong dollar not seen as a problem for the US or the Fed, more concerning for the rest of the world
• Unlikely to see coordinated global intervention due to high hurdles and lack of exceptional circumstances
• Dollar CNY stability due to PBOC holding it down, may welcome cooling pressures on the currency from Japan and Korea verbal interventions

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

• CapitaLand is a real estate investment manager with funds under management of c.S$100b and core markets being Singapore, China and India
• They reported solid FY2023 results earlier this year.  Singapore and India are showing strong market outlook while China struggles.
• Valuation is attractive with >50% upside and we view there are multiple catalysts ahead

• The KOSPI 200 INDEX has closed down for 3 consecutive weeks (CC=-3), it is WEEKLY oversold.
• If the index rallies this week, it could reach >362 (Q2 resistance) and that could be enough to end the bounce.
• Our hypothesis is that the index will pull back again, after the bounce, next week (if this week ends with a positive WEEKLY close).

• Halving Dynamics: Bitcoin’s imminent halving reduces issuance, influencing short-term price movements amidst evolving market narratives.
• Liquidity Catalyst: Bitcoin thrives in liquidity upcycles, offering a hedge against currency debasement and driving sustained market growth. 
• Bitcoin’s Resilience: Engineered precision and apolitical nature underline Bitcoin’s strength as a censorship-resistant alternative amid global economic uncertainties.

• Postal price hike approved  swinging the Post business from a loss to a profit
• Cancellation of 7.36% of outstanding shares from the latest buyback
• Management Plan to be released in May will provide further details on improving ROE and PB

S&U reported FY24 PBT of £33.6m, down from £41.4m in FY23 on higher funding and regulatory costs and higher impairments in Advantage in H2. PBT was 2% ahead of our forecast as stronger revenues – up 12% to £115.4m – and better costs offset higher-than-expected impairments. Net receivables grew to a record at both Advantage and Aspen and management noted particular strength in Q4 and a good trading environment in the current year. Having absorbed a significant rise in funding cost as well as additional regulatory cost, the company looks well positioned to deliver steady growth from here on, especially if interest rates fall in the latter half of 2024 (which we have not included in our model). Diluted EPS was 209.3p (FY23: 277.5p) and DPS was 120p (FY23:133p). We have raised FY25e EPS estimate by 2.4% to 230p and introduced FY26e EPS at 263p.

• In recent weeks, the crypto market has responded markedly negatively to geopolitical tensions before rebounding almost fully, as seen again this past weekend.
• We believe the tensions between Israel and Iran are calming down, and we anticipate the market will soon agree.
• As the market adjusts, we simultaneously expect an end to tax season effects, improving USD liquidity, while other technicalities such as the repo market will arguably likewise improve liquidity.