Financials

• OCBC (OCBC SP) has made a voluntary unconditional general Offer for the 11.56% in Great Eastern Holdings (GE SP) not held. 
• The S$25.60 cash Offer for the life/non-life insurer is a 36.9% premium to last close; and a 30% discount to its S$36.59/share embedded value (as at 31st Dec 2023).
• The Offer is unconditional in all respects. This will trade tight.  A delisting Offer is next on the cards.

• ZEEKR (ZK US), a premium EV brand by Geely, raised around US$440m in its US listing, after the deal was upsized and priced at the top.
• Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
• We have looked at the company’s past performance and provided our thoughts on valuations in our earlier notes. In this note, we talk about the trading dynamics.

• Nihon Housing (4781 JP) is a business which manages real estate for owners (office, apartment management, janitorial, cleaning, facilities management, security, agency, sub-leasing package systems, etc). 
• The company has operated in Tokyo for 60+yrs, and they are finally just going to take what has always been a tight register private. Foreigners own 0.05%. Index owns nothing.
• This is basically a completely done deal. It will trade tight, and illiquidly.

• Branches visited – Ajmer, Bengaluru, Mandya, Mysuru, Jaipur, Solapur, Pimpri and Pune.
• Business growth is driven by taking calls that peers are reluctant to take with regards to property and incomes.
• Lack of team and increasing competition are primary concerns that also warrant attention. 

• In our latest South Korean banks screener, we keep Woori on the buy list along with KB Financial as our Korean banks picks
• Delinquency ratios continued to worsen QoQ, yet Woori is the benchmark for NPL ratio; Woori had lagged in terms of returns, but these are holding at the pre-provision level
• KB has a low PBV ratio relative to its ROE, it delivers rising post-provision returns, with cost of risk declining and it has a healthy CET1 ratio

• This is an update to our previous insight published on April 22nd: “EQD | KOSPI 200 WEEKLY Bounce: Rally or Not?“.
• The KOSPI 200 INDEX  has performed a nearly +6% rally in the last 3 weeks, closing up 3 weeks in a row (CC=+3).
• We have something to say about this pattern that was identified 3 weeks and ago and so we wanted to post this insight to explicit our view.

Information Services Corporation’s (ISC’s) Q124 results highlight the strength of the underlying business, with topline and adjusted EBITDA growth of 15% and 34%, respectively, augmented by the sustained organic growth of the Services division and CPI fee adjustments. This progress was made less obvious at the statutory net income level by increases in interest costs and share-based compensation expenses of C$5.0m and C$5.8m, respectively. FY24 guidance has been reiterated, and we maintain our forecasts and valuation of C$40/share, implying 58% upside.

Yesterday, Lippo Malls Indonesia Retail Trust (LMIRT) launched an exchange offer for the USD 7.25% 2024 notes maturing on June 19th, with an outstanding amount of USD 138.4 mn. The company has offered to exchange each of the USD 1,000 principal of the notes for USD 432 of USD 7.5% 2026 notes and a USD 600 cash payment. The funding will come from a credit facility of up to IDR 1.5 tn.

We recommend that holders of the 2024 notes participate in the offer. Considering that it requires 70% of holders to take part, holding out could cause the transaction to fall through, with LMIRT then defaulting on the notes.

• On March 13, nearly two months ago, Ethereum implemented its most significant upgrade in the past 20 months, marking a notable development since the Ethereum Merge on September 15, 2022.
• Known as Dencun or Cancun-Deneb, this upgrade introduced the highly anticipated Proto-Danksharding feature, designed to significantly improve the scalability of Ethereum’s Layer 2 solutions, also known as rollups.
• This enhancement has allowed rollups to drastically reduce transaction costs by approximately five to 10 times, while also stabilizing their cost fluctuations.

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 Oil And Gas
• Lippo Karawaci
• SJM Holdings
• Softbank Group

• Back in December last year, Aussie-listed equities manager Perpetual Ltd (PPT AU) rejected Washington H. Soul Pattinson (SOL AU)‘s $3bn all-scrip non-binding indicative proposal. 
• Yet Soul Patt’s proposal was in sync with Perpetual’s previously flagged intentions to explore a potential separation of its corporate trust and wealth management businesses, from its asset management business.
• Perpetual has now entered a Scheme, to carve out the corporate trust and wealth management businesses to KKR for A$2.175bn. A lack of clarity on net proceeds saw shares rollover.

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.

• Adaro Energy
• Greentown China
• Vedanta Resources

• Pioneer Credit Limited (ASX:PNC) is one of the leading acquirers and managers of impaired credit in Australia and has gained its status by maintaining positive customer engagement, an unblemished compliance record with ASIC, and strong relationships with Australia’s largest bank and non-bank lenders.
• PNC purchases debt from numerous Australian vendor partners (18 different vendors in the past 12 months) with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• Pioneer’s success in purchasing large debt portfolios at attractive IRRs since October highlights the strong position the company occupies in the marketplace, now enhanced by the recent purchases on attractive IRRs.

• Aon Plc has delivered a strong start to the year, reporting 5% overall organic revenue growth, a 100 basis point margin expansion, and 9% EPS growth.
• He highlighted that the company managed to deliver solid results during the quarter despite commercial risk pressures and a slow rebound in M&A and IPO activity.
• Regardless, Aon Plc was able to close its acquisition of NFP, which is said to strengthen its position in the fast-growing $31 billion North American middle market.

• SK Finance Limited (0893736D IN) is looking to raise US$260m in its upcoming India IPO. The bookrunners on the deal are Kotak, Jefferies, Motilal Oswal, and Nomura.
• SK Finance is a non-deposit non-banking finance company middle layer (NBFC ML) operating in two main verticals, vehicle financing and financing for micro, small and medium enterprises (MSMEs).
• As per the CRISIL report in the DRHP, the firm was the fastest growing player in the vehicle financing and MSME financing segments based on AUM growth over FY21-23.

• On 6 May, the Board of Sabadell rejected the merger proposal as “it significantly undervalues its growth prospects and is not aligned with the interests of its customers and shareholders”.
• BBVA could take the offer directly to Sabadell shareholders, but a hostile offer seems extremely unlikely and there are no precedents in the Spanish banking sector.
• I find it unlikely that both parties reach an agreement because the terms would likely be unfavourable for BBVA (premium 40%-50%). Market sentiment also suggests a low probability.

• NIM is continuing to decline, from ~2.5% at its recent peak to ~1.8% in the most recent quarter. This may be from higher rescheduled loans.
• Loan growth ascent is strangely steady, and not indicative at all, of any business cycle. This alone is a concern, for true visibility of figures.
• Impairment costs do not suggest concern on underlying credit metrics, but with far higher loan balances in the past few years, this is an even greater worry.

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Custodian Property Income REIT (CREI) produced a strong Q424 performance, driven by leasing progress and rental growth, rounding off a positive year. Reflecting FY24 performance, the company will pay a special dividend of 0.3p per share, additional to aggregate quarterly DPS of 5.5p, fully covered by EPRA earnings. The FY25 annual DPS target is increased by 9% to 6.0p, underpinned by the continuing strength of the commercial property occupier market and CREI’s increasing confidence in the outlook.

Key points

• Short shares of EWBC, a medium-sized regional bank serving the Chinese/Asian expat community
• Trading at 1.5x price/TBV with compression in NIM and increased deposit costs
• Concerns about CRE exposure, uninsured deposits, investments in China/HK, and creditworthiness due to uniquely correlated customer base and soft guidance from management

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.

• E Royalties reported its 4Q23 results. During the conference call hosted by management, the company said it continues to see substantial new quality investment opportunities, including solar projects in Asia.
• The company also mentioned a potential “tidal wave” in EV battery charging and storage opportunities in North America.
• The company reported 4Q23 revenue of C$2.6 million, up 64.7% Y/Y.

• With the review period nearing completion, 6 stocks are in inclusion zone and 9 are in deletion zone. However, there can be a maximum of 5 changes at a review.
• We estimate a one-way turnover of 7.1% at the June rebalance leading to a one-way trade of CNY 9.9bn (US$1.37bn). Index arb balances should increase the impact on the stocks.
• The potential inclusions (of which four are Financials) have continued to outperform the mixed bag of potential deletions. With pretty big impact on the deletes, expect further divergence.

• Aadhar Housing Finance (AHF) is now looking to raise around US$360m in its India IPO, via selling a mix of primary and secondary shares.
• AHF is focused on the low income housing segments (ticket size less than INR1.5m) in India. It offers a range of mortgage-related loan products.
• We have looked at the company’s performance in our past note. In this note, we talk about valuations.

• The company’s management fees now cover the operating costs after many years of losses
• Recent fund raising has surpassed expectations for its latest VC fund
• The company’s steps towards better capital allocation are trending in the right direction

• ZEEKR (ZK US), a premium EV brand by Geely Auto (175 HK), aims to raise around US$370m in its US listing.
• Zeekr was formed in Mar 2021 as a JV between Geely and its founder. Its first model was launched in Apr 21 with deliveries starting in Oct 21.
• We have looked at the company’s past performance in our earlier notes. In this note, we talk about the updates from its recent filings and have a relook at valuations.

• SSE 50 and SSE 180, respectively, aim to represent the performance of the 50 and 180 largest and most liquid A-share stocks listed on the Shanghai Stock Exchange.
• The 12-month reference period used for the June 2024 review is now complete. The SSE 180 expected ADDs/DELs list has changed slightly since I published my last insight (link).
• In this insight, we take a look at our final expectations for index changes during the June 2024 index rebal event.

• The last week of SPACs was packed with buyouts, IPOs, and deal amendments.
• A co-working spaces provider gets a lifeline with a restructuring deal with its creditors, while a SPAC terminates a deal with a group of companies.
• Also, two new IPOs are announced, including one from serial sponsor Michael Klein after a three-year hiatus. Read on to find out the latest about all things SPACs. 

• Unfortunately, it is not only Monday, but we have also found ourselves on the wrong side of the crypto market over the weekend.
• In Thursday’s Crypto Moves #26, we expressed a bearish outlook on the market for the short term.
• Contrary to our expectations, the overall industry did not adhere to our forecast.

• S&P Global’s Q1 2024 earnings highlighted several key performance aspects that potential investors should consider while evaluating the company.
• The financial market intelligence provider posted a 14% increase in revenue, excluding the divestiture of Engineering Solutions, with transaction revenue in its Ratings division being a significant part of this rise.
• Subscription revenue across all business areas also achieved a year-on-year uptick of 8%, contributing to the quarterly revenue of roughly $3.5 billion, the highest in the company’s history.

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

• American Airlines Group reported an adjusted net loss of $226 million for the first quarter of 2024, with revenues reaching $12.6 billion, a record high for a first quarter.
• Despite a surge in fuel expenses during the quarter which was around $100 million higher than initially anticipated, the company remains on track with its full year EPS guidance.
• American Airlines benefits from robust business travel, especially from small and medium-sized enterprises.

• The HSCEI 2024 dividend futures have moved higher following mainland China banks announcing that they will pay out interim dividends starting this year.
• The HSCEI 2025 dividend futures have moved higher too, though they have lagged the HSCEI 2024 dividend futures.
• Even though the HSCEI 2024/25 dividend steepener has dropped by around 10 points in the last few weeks, we see further downside in the near-term.

• 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.

• Implied Volatilities (IVs) have stabilized over the past few weeks & look to be in the early stages of an uptrend. 
• Breakdown in Spot-Vol correlation – higher IVs at a time when Equity Indices are flirting with All-time-Highs.
• Skew compression in BankNifty Options driven by call-buying on the break above 49000, further exacerbated by pre-election demand for June & July expiries. 

• CSI 300 represents the 300 largest stocks by market cap and liquidity from the Shanghai and Shenzhen Exchanges. CSI 500 is the next 500.
• The reference period for the June 2024 review is now complete. There are some changes to the expected ADDs/DELs list since I published my last insight (link) ~3 weeks ago.
• In this insight, we take a look at our final expectations for index changes in June 2024.

• People’s Insurance (PICC) (1339 HK) has bounced off its lifetime low implied stub and simple ratio (PICC/PICC Property & Casualty (2328 HK)); but still trades below its historical trailing/forward metrics.
• Preceding my comments on PICC are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• MMAS prioritizes dividends over low-PBR, key to government’s Value-up momentum. Despite initial market disappointment, dividend stocks rebounded, underscoring continued investor interest.
• Government officials are collecting historic dividend data to simulate separate taxation impact of dividend income, likely to be included in July’s tax reform bill for National Assembly approval.
• Local institutions focus on dividend-centric Value-up trading, targeting stocks with high cash reserves and dividends. Strategy needed to manage market impact pre-tax reform bill in July.

• Ohmyhome Property Management continues to increase the number of residential units managed.
• The business unit managed 6,746 residential units as of December 31, 2023, up about 45% compared to some 4,648 units at the end of 2022, according to the company’s filings, and up from 2,962 at the end of 2021.
• The goal is to continue to increase the number of units under management, which Ohmyhome believes will contribute to consolidated revenue growth.

• During the period under consideration, i.e. February 28th , 2024 to March 29th, 2024, the EUR/JPY exchange rate fluctuated between 160.55 and 165.17.
• The MA-10 line was moving above the MA-20 line for the first two weeks, and then it crossed below the MA-20, maintaining a steady movement until it crossed over again on March 22nd MA-20 line retained upward trend throughout the entire period.
• Based on Graph 2, the CCI (red line) was moving downwards at the beginning of the period under consideration but after March 12th the movement changed to the opposite direction.

• Today, NPS made the final decision to introduce a reference portfolio. The critical point is the increase in risky assets from 56% to 65%, also decided at today’s meeting.
• Initially, overseas equity was prioritized, but recent forecasts suggest significant potential in increasing local equity, aligning with the value-up policy.
• Monitoring NPS’s execution plan, including allocation and timing by asset class, is vital to gauge inflow size, especially for Value-up beneficiaries.

• As we step into the earnings season focus on highlighting key earnings and what catches our attention analyzing companies part of the same sector or industry.
• Companies highlighted include Bajaj Finance Ltd (BAF IN); Shriram Finance (SHFL IN); L&T Finance Holdings (LTFH IN) ; Poonawalla Fincorp (POONAWAL IN) & Aavas Financiers Ltd (AAVAS IN) .
• BAF’s negative commentary around rural B2C business is surprising and an area that warrants further investigation.

• In the Politburo meeting this week, China announced the intention to stabilize the property market and improve housing inventory.  Following the meeting, Beijing announced a relaxation of home purchase restrictions.
• Given the extreme pessimism on China property, good opportunities exist for select quality companies in the China property space, especially in property management.
• One name I would like to highlight is CIFI Ever Sunshine Services Gr (1995 HK), a non-SOE property management company with a good reputation in terms of execution.

• This month’s Deep Dive will be on TSMC which I’m hoping to publish sometime in the last week of this month.
• Following TSMC, I will spend some time out of semis for a few months and then come back to semis later in the year.
• I also wanted to share some brief notes on why I have started buying Aon today.

• Bank Negara stands out versus its peers for its value attributes, its attractive PEG ratio, and its improving pre- and post-provision returns with top NPL coverage relative to its peers
• Bank Mandiri remains a buy for its quality attributes, its premium returns, and its well-controlled CoR; Mandiri has a far better valuations-to-returns mix than mega-cap BCA 
• Bank Rakyat comes off the sell list; it registered improved pre-provision returns in 1Q24, and although cost of risk worsened, post-provision returns were maintained along with its NPL coverage ratio

• The crypto market has experienced a second-to-none year so far.
• Now, as summer begins, it may be a good time to unwind with a Gin & Tonic and enjoy the sunshine, given that the crypto market is unlikely to offer much excitement in the near future.
• According to the latest issue of ‘Crypto Crisp‘ published on Monday, we have adopted a bearish outlook for the short-term prospects of the crypto market.

Molten Ventures has recently completed the acquisition of Forward Partners, which allowed Molten to further broaden its portfolio, add a complementary strategy focused on earlier stage companies and potentially provide a pipeline of new core holdings. Furthermore, its recent equity raise gave Molten the funds to pursue new investments in what it currently considers a buyer’s market, with an emphasis on the venture capital (VC) secondary market. In FY24 (to end-March 2024), Molten’s gross portfolio value remained broadly stable on a like-for-like basis (ie excluding the Forward Partners deal and the Seedcamp Fund III secondary investment). Management sees good prospects for realisations in FY25.

• OneMain Financial is a high-quality and well-managed subprime consumer lender with strong financial performance
• The company is expanding its product offerings and market share in a growing market with limited competition
• Despite trading along with the consumer credit cycle, OneMain’s current share price does not fully reflect its potential for growth and profitability, making it an attractive long-term investment opportunity with significant upside potential

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.

Ahead of FY24 results to be published on 23 May, Picton Property Income has declared a Q424 DPS of 0.925p, a 5.7% increase on the previous quarter. The company intends to maintain fully covered dividends at the new level, an annualised run rate of 3.7p, well above the pre-pandemic DPS and the 3.5p paid in respect of FY24. The uplift reflects a continuing robust occupier market, supporting rental growth, as well as asset management activity, most notably the recent sale of Angel Gate. The sale was part of Picton’s strategy to accelerate the unlocking of value in its portfolio through the selective repurposing of office assets and accretively recycle the capital. Further repurposing asset management initiatives are being progressed.

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.