Financials

• On-The-Run Quarterly Options now capture India General Elections. Position buildup can be seen in the 21,000 put and 24,000 call strikes
• Weekly and Monthly contract risk premia being squeezed lower due to holiday shortened trading but Quarterly contracts exhibit vol richness
• Scale back short gamma exposure as reward-risk unappealing at current IV levels

• The Italian Treasury sold an additional 12.5% stake in Banca Monte dei Paschi di Sien (BMPS IM), raising €650 million as part of re-privatization efforts following the 2021 failed attempt.
• The Treasury’s divestment makes BMPS more appealing for buyers. BMPS still trades at attractive valuation multiples. The bank announces approval from the ECB for a €0.25 cash dividend per share. 
• Economy Minister Giorgetti and PM Meloni aim to boost competition through privatization, favoring a merger with another mid-sized Italian bank, possibly BPER Banca or Banco BPM.

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
• First Pacific Co
• Xiaomi Corp

• Atour reported C4Q23 revenue vs. our estimate/consensus by 18%/21% and guided a robust 30% yoy revenue growth for 2024, outpacing the consensus by 12% and our estimate by 7%
• C4Q23 operating margin decline was due to one-off leased hotel impairment and seasonality in retail marketing. We foresee stable margin in 2024;
• We maintain our BUY rating and keep our TP at US$37.5, implying a 2024 P/E of 34x, vs. currently trading at 16x.

• Kawasan Industri Jababeka released a strong set of FY2023 results, with revenue growth of 20% overall and EBITDA increasing by +15% YoY due to higher land sales at Kendal.
• KIJA also saw strong recurrent revenue from its infrastructure pillar making up 44% of sales. Marketing sales came in above its target and it is projecting a higher 2024 number.,
• The company’s Kendal Estate is a key beneficiary of shifting supply chains from China with 81% of sales to foreign companies and marketing sales increasing 68% YoY in 2023. 

• The NIFTY Index has been rallying for months, but in the last few weeks there has been a considerable slow down in its rising pace.
• Currently the index is at a point where it could pull back this coming week, based on our MRM patterns reading.
• A possible alternative scenario would be a continuation of the rally for a total of 4-5 weeks up in a row.

• Despite Rakuten Bank shares’ re-rating, we believe it remains attractive, with its strong balance sheet and its low cost base with undemanding valuations compared to its Asian digital banking peers
• Rakuten Bank is well positioned to benefit from the negative interest rate policy exit in Japan, with its low LDR, high cash balances, growing loan book and healthy capital ratio
• It continues to leverage off the Rakuten Group eco-system, as a low cost source of new customers; nearly a third of clients use Rakuten Bank as their primary Japanese bank

• Citic Securities, China’s leading brokerage, has shifted over 100 investment bankers from initial public offering (IPO) roles to other divisions, in a major overhaul to address slowing business amid the stock market downturn.
• Most of the employees affected were transferred to debt financing business while the rest were relocated to mergers and acquisitions, and investment departments, a person close to the matter said.
• “The adjustment is an internal optimization of personnel, involving a broad range of investment banking positions,” said the person.

• Hywin [NASDAQ:  HYW] announced a broad business transformation plan in response to overall market and regulatory conditions in China.
• The stock price, under considerable pressure since November last year, has clearly anticipated some of this uncertainty.
• As part of its transformation, Hywin will shift is wealth management product distribution away from asset-backed products.

Alpha Bank (Alpha) reported €611m in net profit, a 66% jump from FY22, as the bank benefited from an elevated interest rate environment with little impact from deposit migration and strong cost control. Alpha delivered a normalised return on tangible equity (RoTE) of 12.9% in FY23, beating its own upgraded target of >11.5%. The increased profitability coupled with a robust capital position (fully loaded common equity tier 1 (FL CET1) of 14.3%) have enabled a proposed dividend of €0.05 a share, subject to regulatory approval.

China Jinmao has released FY 2023 numbers that were weak in our view, as the company reported a lower top line and reduced margins. However, the earnings decline was in line with expectations, as it reflected industry trends and the company had issued a profit warning in March 2024.

Negatively, leverage further deteriorated to a very weak level. In addition, we are concerned about whether Jinmao would be able to maintain access to domestic bond markets. This is as the company has seemingly stopped issuing domestic notes since July 2023. Instead, it issued perpetual bonds to immediate parent Sinochem HK in December. Going forward, Jinmao may have to increase its reliance on Sinochem for financing.

• I mentioned Noah holdings as a trade to buy before earnings since I anticipated an announcement of significant capital returns.
• This has worked out well with over $2 in dividends announced. Half of that dividend will be recurring.
• So I sold out all of my shares at just under $12. This was never a high conviction investment, but merely a trade. Marking it as a 18% return.

• Nesco reported a strong Q3FY24 led by significant growth in the exhibition business. It grew by 55%+ YoY and grew 3%+ QoQ despite Q2 being a seasonally strong quarter.
• The IT business performed steady with revenues at around INR 80cr and EBIT at around 65cr. Revenue declined by -4% QoQ, led by slight decline in occupancy.
• Nesco is now on track to beat our prior FY24 upgraded PAT estimate of INR 330cr+. It may now end FY24 with a PAT of INR 350cr+.

• Powell’s dovish tone at the press conference led to initial market reaction, but subsequent dollar rally due to revised growth and inflation forecasts in the SCP release
• Market leaning towards higher median dot in SCP, but overall outlook remains for shallower cutting cycle by Fed
• Yen vulnerability due to negative real yields despite BOJ rate hikes, yen weakening may impact other Asian currencies and markets

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

Yuexiu Property’s (YXP) FY 2023 results were largely stable and in line with our expectations. The company reported strong contracted sales and top-line growth, albeit the margins weakened in tandem with industry trends. Leverage was mixed, as net debt crept up slightly. Importantly, liquidity appears sound, supported by YXP’s healthy access to financing. The company remains active in land acquisitions and has a good quality land bank, with 95% of its projects in Tier 1 and 2 cities.

• BNP Paribas (BNP FP) is looking to raise around US$680m via selling 3.5% of its stake in Shinhan Financial (055550 KS).
• This will be the fourth selldown for the stock since the start of the year. It will also be the largest one of the lot, so far.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• After the market close on 26 March, it was announced that BNP Paribas plans to sell its 3.6% stake in Shinhan Financial in a block deal sale 18.7 million shares). 
• The block deal sale is estimated to be about 900 billion won, which would represent one of the largest block deal sales in Korea in the past several years.
• We have a Negative view on the Shinhan Financial Group block deal and we would not subscribe to it due to three major reasons. 

• The S&P/ASX 200 Index has reached a specific resistance level that often precedes a short-term pullback, when this pattern is encountered.
• The pullback may happen next week, but this week is also a potential candidate since the 2nd week up is usually pretty weak when this pattern is encountered.
• Hold your LONG positions and cover them to hedge. Going SHORT is probably best at the end of the week, on Friday, if the week is closing up.

• We are witnessing an unexpected showdown in the crypto world.
• On one side stands Larry Fink, co-founder and CEO of BlackRock, the world’s largest asset manager.
• On the opposite side is Gary Gensler, the chair of the U.S. Securities and Exchange Commission (SEC).

Greentown China’s FY 2023 performance was satisfactory in our view, given the above-industry sales, stable top line and acceptable (albeit reduced) gross margin. Importantly, its access to onshore financing appears healthy and liquidity is adequate. In addition, the company remains active in land acquisitions and has a good quality land bank, mostly in high-tier cities in the Yangtze River Delta.

That said, leverage remained somewhat weak. Moreover, Greentown is more exposed to a prolonged industry downturn (vs. peers such as Longfor Group and China Vanke), due to its low recurring income and outsized exposure to the property development segment. This means that the company’s contracted sales and margins are likely to remain soft despite outperforming the industry. In the meantime, Greentown will likely focus on improving operating efficiency by maintaining a high sell-through rate and fast churn for its projects.

We revise our fundamental Credit Bias to “Negative” from “Stable”, and move our trade recommendation on the GRNCH 5.95 ’24s to “Buy” from “Hold” .

• Binjiang Service Group (3316 HK) posted a 42% YoY increase in revenue and 19% YoY in profits for FY23, aided by 170% revenue growth in VAS services (24% of revenues).
• Margin decline remains a concern, with a GPM(%) decline of 510 bps to 24.8%, with declines across all business segments. 
• Net cash increased to 74% of market capitalization, with the company declaring a dividend of 1.37 HKD/share ( implying an 8% trailing yield). 

• This is our first report on powersport vehicles and marine products, BRP Inc. The company’s fiscal year 2024 third quarter results conference call highlighted mixed performances across its categories of operation.
• Revenue reached $2.5 billion, which fell short of expectations due to softer demand in international markets and a temporary slowdown at the Texas-Mexico border.
• Although these conditions negatively impacted deliveries of its off-road vehicles and ETVs over three weeks, normalcy has been restored.

• Bakkt’s new President and CEO Andy Main led the earnings call, where net revenue of $16.7 million was better than pre-announced, while the GAAP EPS loss of $0.29 was worse than our expectation of a $0.19 loss, driven by higher restructuring and goodwill write-downs.
• While 4Q23 was pretty much old news, Main highlighted how strong tailwinds in 1Q24 have led to significant notional crypto trading volume increases.
• He stated that, “QTD notional traded volumes have been very strong, with March QTD up over ~260% from 4Q23 versus overall market activity up ~65%.”

• The Japanese banks’ share prices have barely moved following the Bank of Japan’s exit from negative interest rates; is it largely discounted or does the continued accommodative stance instil caution? 
• Japanese banks will benefit from 100% of their deposits at the BoJ earning 0.1%, as opposed to 40% of bank deposits which was the case up to the 20th March
• We believe our positive recommendations are all geared into higher domestic interest rates; we highlight Resona, Mizuho and Suruga in this report for their high cash and at bank balances

Longfor Group’s FY 2023 results were acceptable in our view. The earnings decline was in line with expectations, driven by reduced revenue from the property development segment. The gross margin for property development was decent at 11%, relative to some distressed peers with negative to low single-digit gross margins. Recurring revenue from rentals and services rose by 6%, with recurring operating profit covering 1.4x of interest expense. Net debt declined marginally, supported by slightly positive FCF generation.

Liquidity was adequate, with Unrestricted Cash/ST Debt of 1.4x. We note positively that the company has been repaying some debt well in advance of maturity, possibly using cheaper and longer tenor loans backed against its commercial properties. We believe near-term default risk for Longfor is low, albeit its financial flexibility would gradually diminish as the company pledges more assets for funding.

• Taylor Swift concerts in Singapore has increased both hotels’ occupancy rate and daily rate
• Far East Hospitality Trust (FEHT SP) share price has not moved much since the Swift concert. 
• There is a slim chance FEHT hotels did not participate in the upside during Swift event, but the odds are higher that FEHT hotels will participate in the upside.

• It’s the largest bank by assets in Indonesia, but its loan growth is about 2x the country aggregate growth rate.
• NPL decline is stronger than most all banks in the country over the past few years, implications for credit costs are positive.
• Boring old costs should not be ignored, especially where they are driving radical expansion of ROA.

• Fiscal spending has been the key driver for this bull market as it reaccelerated in late 2022 following the inflation and subsequent interest rate shock.
• This impulse will likely diminish over the next months. It will be replaced by a credit impulse from rate cuts, the first few of which will be very powerful.
• Market mechanics will be accommodating. Leverage in the system is low. In fact, the pain trade is still higher.

• Indian markets to implement T+0 settlement cycle starting 28-March-2024. Phase-wise transition planned .
• Upcoming long weekends causing drastic markdown in IV levels. This combined with “High & Down” vol regime – short gamma/ short vega trades recommended.  
• Contango shape of Volatility curves are an additional reason to be short gamma & earning theta

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
• Hopson Development

• The Nikkei 225 INDEX has been rallying for >3 months, rising more than 28%. Is it too much, too fast?
• Short-Term, if we look at the Market Reversal Matrix’s SHORT WEEKLY model for the index, it looks like it could either reverse within a couple of weeks, or stall.
• Look for the ~41000 resistance area to place SHORT or hedge your LONG positions.

• The Hang Seng Index is at a turning point: investors want to know if the current rally can continue into April.
• Our MONTHLY seasonal matrix model indicates that to see the index rallying in April, usually we should have a negative close in March, so this week will be crucial.
• Buy between 16281 and 15924 to ride the continuation of the rally in April.

• Last Wednesday, on March 13th, Ethereum launched its biggest upgrade in the past 18 months, marking a significant milestone since the Ethereum Merge on September 15, 2022.
• Dubbed Dencun or Cancun-Deneb, this upgrade introduced the eagerly awaited Proto-Danksharding feature, aimed at dramatically enhancing the scalability of Ethereum’s Layer 2, also known as rollups, and slashing the costs associated with rollup transactions, while making them less volatile.
• Proto-Danksharding brought to the table so-called ‘blobs’.

Shui On Land’s (SOL) FY 2023 results were slightly weak, in our view. Positively, the company’s rental income increased moderately, supported by contributions from new commercial assets and China’s re-opening from the pandemic. Recurring operating income from rentals and property management covered 0.8x of interest expense. In addition, the gross margin remained very strong, even as revenue from the property development segment was halved on account of lower sales and deliveries.

Negatively, SOL’s net debt climbed 14% from FYE 2022, owing to lower cash collections and its acquisition of a Shanghai project in April 2023. Moreover, the company’s increased asset encumbrance would reduce its financial flexibility. Liquidity is weak, considering the thin unrestricted cash balance and substantial refinancing needs over the next 12 months. That said, the company might be able to pledge or dispose of more assets to raise cash.

• COMP is a residential real estate brokerage firm with a market cap of around $1.7B founded to disrupt the low-tech residential market.
• Despite a decline in share value due to high mortgage rates, COMP has shifted focus to profitability and cost-cutting measures.
• With interest rates expected to decrease and potential for a rebound in the residential market, COMP is well-positioned for growth and has potential for significant upside in share price.

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.

Edison Investment Research is terminating coverage on LXi REIT (LXI). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website.

• StoneCo had a successful year with substantial strategic advancements, impressive financial performance, as well as strategic milestones that bolstered the company’s market position while paving the way for future growth.
• The year saw the implementation of strategic adjustments that aimed to better position the business for the future.
• As such, the company reorganized itself to effectively deliver solutions across different client segments, from micro to medium businesses.

Triple Point Social Housing REIT (SOHO) reported a robust FY23 financial performance. Benefiting from inflation-linked rental growth and improving rent collection, DPS is once again covered on a run-rate basis, and we expect further progress. Operational initiatives included the roll-out of the new lease clause and launch of the eco-retrofit pilot project.