Financials

• NPS abruptly joins ‘Corporate Value Up Program’, plans to select three asset managers. Deadline: this month’s 29th; results: March 19th, possibly linked to Korea Premium Index ETF launch in mid-May.
• The document outlines guidelines, allocating 90-100% to value stocks, with KOSDAQ under 20%. While benchmarked to the internally-built index, it will likely focus on Korea Premium Index and KOSDAQ Global.
• The fund size is crucial. NPS will disclose details later. But still, there is considerable room to this year’s ceiling for local equity; a significant amount could flow into this.

• Union Bank Of India (UNBK IN) is looking to raise up to INR 30bn (US$362m) with the floor price set at INR 142.78/share and a maximum discount of 5%.
• The stock has run up a lot and with index inclusion around the corner, this is as good a time as any to issue stock.
• Union Bank Of India (UNBK IN) trades cheaper than peers and could continue to outperform over the near-term.

• Union Bank Of India (UNBK IN) is looking to raise up to US$370m (INR30bn) via its QIP.
• The company last undertook a QIP in Aug 2023, which we covered in Union Bank of India QIP – Well-Flagged Deal, Recent Momentum Has Been Strong.
• This deal too is a very well flagged one, with the firm having earlier reported that it would look to do a QIP to boost its free float and capital.

Key points

• Previous VIC writeup accurately predicted BGC’s stock performance and highlighted key factors such as historical developments, valuation, and potential catalysts
• Minimal feedback received on previous writeup, but insights proved valuable as stock outperformed
• New writeup aims to provide more detail, updates, and analysis to support case for BGC’s potential growth, currently the largest position for the author.

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 the most recent quarters HSBC saw its NIM decline from around 1.7% to 1.5%
• As the bank de-risks its CRE lending it is left with a greater proportion of bad CRE loans
• There can be more significant impairment charges on BoCom, the USD3bn done was small

• The open interest of the HSCEI 2024 dividend futures is less than half that of the HSCEI 2023 and HSCEI 2022 open interest at the same time of the year.
• Market volatility and the fallout of the losses faced by Korean investors (and the scrutiny of Korean ELS-issuing banks) are among the primary reasons for the low open interest.
• Our fair value for the HSCEI 2024 dividend futures is higher than the current market but there is a lot of sensitivity to bank dividends and special dividends.

• HSBC will release its results on Thursday and there remains risk of far worse credit metrics, not only related to CRE lending in HK and China
• Construction loan risks are tangentially related to CRE and are also considered fairly high risk, where HSBC can see sizable migration to stage 3 loans
• HSBC remains highly concentrated in UK and N America in its wholesale lending book, which we do not believe is well understood, and risky given economies

• Juniper Hotels is looking to raise up to US$217m in its upcoming India IPO.
• Juniper Hotels is the largest owner by no. of keys of Hyatt affiliated hotels in India as of 2Q23 (30th Jun 23), according to Horwath.
• We have looked at the company’s past performance in our previous note. In this note, we provide our thoughts on valuations.

• Bank Mandiri is our top pick for its quality attributes, its premium and growing pre- and post-provision returns; Mandiri provides a better valuations to returns mix than Bank Central Asia
• Bank Negara is the value pick with its low PE multiples, its attractive PEG ratio, whilst also improving pre- and post-provision returns with cost of risk well controlled
• Bank Rakyat registered worsening pre- and post-provision returns in 4Q23, with cost of risk worsening; this reflects its heavily MSME focused loan mix which keeps structural cost of risk high

• U.S. interest rates have been climbing since early January 2024 after reaching their lowest points between December 27th and January 11th.
• For example, the yield on 2-year Treasury bonds has increased by 52 basis points (bps), and the yield on 10-year bonds has risen by 49 bps since their respective lows.
• Similarly, the Dollar Index (DXY), which measures the value of the U.S. dollar against a basket of other currencies, experienced its weakest point on December 28th, 2023.

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.

• Alam Sutera Realty
• Citicore Renewable Energy

• Unipol Gruppo S.p.A (UNI IM) offers €2.7/share to buy out UnipolSai SpA (US IM), for an implied €7.64 billion equity value, 12.6% premium, in an awaited move to simplify the group’s structure.
• If taken in full, would be worth €1,126.9 million. The share alternative is 3 UNI MI x 10 US IM, and does not account for the huge discount/NAV of Unipol.
• Gross spread is: 1.63%/21.5% (cash/share alternative respectively). Annualised return of cash offer is 7.51%. I would expect the share alternative to progressively close the discount.

• Today, we are launching our new weekly cryptocurrency note called ‘Crypto Crisp’.
• In ‘Crypto Crisp’, every Monday, we will explore the upcoming week in crypto, reflecting on the previous week’s developments.
• The aim of ‘Crypto Crisp’ is to efficiently and precisely bring you up to date with the crypto industry in just a few minute’s worth of reading time.

• It has been reported in numerous local media outlets that WeBull is discussing with the local financial authorities to enter the Korean retail stock brokerage market.
• If the Korean financial authorities provide a license to WeBull to directly provide stock brokerage services to the Korean retail market, this would be the first case ever.
• If FSC grants a full license to WeBull to operate stock brokerage services to retail investors in Korea, this could result in the local brokerages losing market shares to WeBull

Key points

• Arthur J Gallagher is a strong player in the U.S. SME broking market with fair value shares trading at $245 and 16.0x EV/2024E EBITDA
• Expected 5-year returns of around 10% IRR / 1.5x MOIC with 7.5% EBITDA growth rate, potential for higher returns with 15% IRR / 2.0x MOIC
• Insurance brokers like Arthur J Gallagher are benefiting from firm P&C pricing cycle, inflation protection, and tight labor market, providing stability and growth opportunities with focus on sustainable organic growth trends.

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.

• Freshworks had a strong fourth quarter in 2023, with revenue exceeding the high end of its financial estimates at $160.1 million.
• They significantly improved their operating efficiency, changing from using cash for operations in 2022 to generating $78 million of free cash flow in 2023.
• For the full year 2023, Freshworks finished with a revenue of $596.4 million and free cash flow margin of 13%.

• The Feb 26th announcement introduces the Corporate Value Up Program and unveils the Korea Premium Index direction. Methodology finalization expected by mid-March; ETFs launch by mid-May.
• Similar to JPX Prime 150, KRX aims to target enhancing equity spread and PBR trends (+1.0x) while also integrating dividend growth rate. KOSDAQ stocks may be omitted.
• NPS’s role is vital for the Korea Premium Index, yet aligning its passive strategy with this index faces challenges. Ongoing discussions aim to adjust regulations for this index investment.

Key points

• Arthur J Gallagher is a strong player in the U.S. SME broking market trading at fair value with potential upside
• Estimated 5-year returns are 10% IRR / 1.5x MOIC, with possibility of higher returns with EBITDA growth and multiple expansion
• Insurance brokers benefiting from firm P&C pricing cycle and market conditions, providing downside protection and potential for sustained organic growth, investor focus on growth trend maintenance

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.

• Bell Financial Group Ltd (ASX:BFG) is a diversified provider of financial products and software solutions within, and increasingly outside, its traditional full-service stockbroking business.
• BFG reported FY23 NPAT of $24.3m, 5% below FY22 and 10% below RaaS estimates.
• A H2 FY23 miss in Technology & Platforms (down 8% against a H1 result +100%) was the major difference to RaaS estimates, with all other divisions trading in-line with generally challenging but improving trading conditions. 

• Bell Financial Group Ltd (ASX:BFG) is a diversified provider of financial products and software solutions within, and increasingly outside, its traditional full-service stockbroking business.
• BFG reported FY23 NPAT of $24.3m, 5% below FY22 and 10% below RaaS estimates.
• A H2 FY23 miss in Technology & Platforms (down 8% against a H1 result +100%) was the major difference to RaaS estimates, with all other divisions trading in-line with generally challenging but improving trading conditions.

Key points

• Marsh McLennan is the largest insurance broker globally, with strong organic growth driven by its consulting business
• Current valuation at $198 with an EV/2024E EBITDA of 16.0x is considered fair, offering potential 5-year returns of 12% IRR / 1.7x MOIC
• Predicted returns could increase to 16% IRR / 2.1x MOIC with a 13% EBITDA growth rate and a multiple expansion to 17.0x, with a favorable market backdrop for insurance brokers helping to drive growth trends

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.

Key points

• MFA Financial’s Series C preferred stock offers a 25% IRR and 40% total return over 18 months
• Favorable entry point for investors due to current interest rate environment and preferred instruments being out of favor
• MFA’s position in the face of LIBOR transition challenges sets it apart, making it a strong choice for short-duration fixed income investing

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 a surprise, the Hang Seng index committee has decided not to make any constituent changes to the Hang Seng Index (HSI INDEX) at the March rebalance.
• We now see the index reaching its 100-member target in 2025 at the earliest, though we would not be surprised to see it spill into 2026 as well.
• Free float and capping changes will result in one-way turnover of 1.2% resulting in a round trip trade of HK$4.54bn. HSBC Holdings (5 HK) is the biggest sell.

• There has been a recent non-life insurer price-fixing scandal. The JFTC and FSA investigated. Last December, the FSA issued Business Improvement Orders to the four majors. 
• There was a Bigmotor scandal last summer and Sompo Japan got a Business Improvement Order last month. All four insurers have 
• 9 Feb post-close, Jiji/Nikkei had articles saying the FSA had urged four major non-lifes subject to the first BIO to accelerate sales of ¥6.5trln+ of 5,900 Cross-Holdings. That’s big.

• Investment firms are using ten east to diversify their personal portfolios.
• Zero Hash is a software company that allows businesses to launch crypto products quickly and compliantly.
• Zero Hash provides infrastructure for businesses to embed digital assets within their own infrastructure, serving as a regulated entity.

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• Intercontinental Exchange Inc.
• (ICE) delivered strong financial results for the fourth quarter of 2023, posting a record net revenue of $2.2 billion, representing a 7% increase compared to the same period last year.
• The record figures were driven by lower compensation expense and accelerated expense synergies which led to earnings per share of $1.33, up 6% year-on-year.

• China Vanke Co. Ltd. is selling its entire stake in a Shanghai retail complex to Link Real Estate Investment Trust (Link Reit) at a discount, as the indebted developer offloads assets to ease liquidity crunch.
• Hong Kong-listed Link Reit, Asia’s largest real estate investment trust, said in a Friday filing that it agreed to acquire a 50% stake in Qibao Vanke Plaza from Vanke at 2.38 billion yuan ($334 million).
• Link Reit already owns the remaining 50% stake in the plaza after a 2.77-billion-yuan purchase from Vanke’s partner GIC Pte. Ltd. in April 2021.

• The Hang Seng Index is rallying as anticipated in a previous insight, but it could stop this week and pullback a bit. 
• 3 possible trades available: go SHORT and hold to profit from a re-start of the downtrend, go SHORT and close after 1 week, wait the pullback and go LONG.
• It’s unclear at the moment if the index will go lower or rebound after the upcoming pullback.

For our next Corporate Webinar we are glad to welcome Sasseur REIT’s CEO, Ms Cecilia Tan. 

In the upcoming webinar, Cecilia will share a short company presentation after which, she will engage in a fireside chat with Smartkarma Insight Provider, Robert Ciemniak.

Robert will also be providing an industry overview, featuring landscape commentary and returns analysis. The Corporate Webinar will include a live Q&A session.

In the spirit of giving back to our community, one of the attendees will also be awarded an Amazon Kindle as part of our exclusive lucky draw. 

The Corporate Webinar will be hosted on Thursday, February 29 2024, 18:30 SGT.

About Sasseur REIT

Sasseur Real Estate Investment Trust (“Sasseur REIT”) is the first outlet REIT listed in Asia. Sasseur REIT’s portfolio comprises four outlets strategically located in the high-growth cities of Chongqing, Hefei and Kunming in China and is well-positioned to ride on the growth of the rising spending power of the Chinese middle class.

Sasseur REIT is managed by Sasseur Asset Management Pte. Ltd., an indirect wholly-owned subsidiary of Sasseur Cayman Holding Limited (the “Sponsor”) which is part of Sasseur Group, one of the leading premium outlet operators in China with 17 outlets under management.

• Industrial & Infrastructure Fund Investment (3249 JP) is looking to raise around US$341m in its primary follow-on offering to acquire 28 properties and an equity interest in a silent partnership. 
• The deal is a somewhat large one to digest, at 83 days of three month ADV and 16.2% dilution.
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

• Bank Negara Indonesia (BBNI IJ) remains a laggard amongst the top 4 banks in Indonesia in valuation terms, with improving returns leading to some upward re-rating. 
• The bank continues to grow its high-quality corporate loans and consumer banking with a dramatic increase in its mobile banking users, which is helping to grow its low-cost CASA. 
• BBNI remains an interesting proxy for Indonesia’s economy, with digital banking helping to drive returns. Valuations remain below peers but the bank is now approaching fair value.

• Northern Arc Capital (0542390D IN) is looking to raise at least US$100m in its upcoming India IPO. The bookrunners on the deal are Citigroup, Axis Capital, and ICICI Securities.
• Northern Arc Capital (NAC) is a retail-focused non-banking financial company (NBFC) catering its banking services to the under-served households and businesses in India.
• According to CRISIL, NAC was one of the leading players amongst India’s diversified NBFCs in terms of AUM as of Mar 23.

• It has been just over a month since the first Bitcoin spot ETFs hit the market on January 11th.
• The initial weeks saw a slow start in terms of net inflow into these ETFs, mainly because investments into the two Bitcoin ETF titans from BlackRock’s iShares and Fidelity were lower than expected.
• This situation was made worse by the significant outflow from Grayscale’s Bitcoin Trust ETF.

Key points

• ServisFirst, an Alabama bank, is observing strong loan and deposit growth, despite a temporary decrease in net interest margin.
• The bank is expected to achieve sustainable 20-25% return on equity within the next two years, thereby expanding profitability.
• ServisFirst is the leading local bank for privately owned businesses in Alabama, with impressive organic core deposit growth and comparable net interest margins. Additionally, its balance sheet is strong, and its financial forecast predicts further expansion in multiples and profitability.

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.

• During the period under consideration, i.e. December 28th , 2023 to January 26th, 2024, the USD/AED exchange rate fluctuated between 3.672 and 3.673. AED is pegged to the US Dollar at 3.67.
• The MA-10 line was moving above the MA-20 line for the whole period. Both MA 10 and MA-20 lines maintained a steady upward trend throughout the entire period.
• Based on Graph 2, the PPO (red line) was moving upwards at the beginning of the period under consideration but after January 15th the movement changed. 

• The Carlyle Group / (CG US) via Kingsman Investment, is looking to raise US$244m from selling its entire stake in KB Financial (105560 KS).
• Carlyle has been invested in the firm since mid-2020, where it then expressed that it would hold on to its stake for at least three and a half years. 
• The deal would be a small one to digest at just 3.8 days of KB Financial’s three month ADV, representing 1.2% of its current mcap.

• After the market close on 14 February, KB Financial announced that The Carlyle Group is trying to sell a 1.2% stake in the company through a block deal sale. 
• The expected block deal price range is 64,608 won to 65,954 won per share, representing a 2 to 4% discount to the closing price of 67,300 won on 14 February. 
• We would pass on this block deal sale. Despite excellent gains so far YTD, there is looming risk of many investors that may bail out of KB Financial post ex-dividend.

• High frequency trading (HFT) involves building systems that can react in real time to incoming packets from exchanges, making fast decisions about sending orders and quickly executing them.
• Working on HFT systems requires a focus on performance and often involves building systems from scratch. 
• HFT systems need to be scalable to handle trading multiple instruments and flexible enough to adapt to different market conditions. Models used in trading also need to be continuously retrained and optimized for speed without sacrificing accuracy.

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• We screen our coverage universe for earnings disappointments, EPS downgrades, and management narratives to identify fundamental shorts.
• Stocks in focus include SBI Cards & Payment Services (SBICARD IN) , Pvr Inox (PVRINOX IN), and Escorts Kubota Limited (ESCORTS IN). 
• Credit Cost for SBI is expected to remain elevated, PVR management seems to be misreading consumer preferences, and Macro uncertainties cloud ESCORTS.

The Diverse Income Trust’s (DIVI’s) managers Gervais Williams and Martin Turner focus on generating a dividend income stream that is more resilient and has the potential to grow faster than those of the trust’s peers. They believe that over time this strategy should lead to superior capital appreciation as well as income growth. Since launch in 2011, DIVI’s dividend has compounded at an average annual rate of around 6%. UK stocks have been out of favour with global investors, who now make up around two-thirds of the UK shareholder base compared with 17% in 1994. As a result, the UK market looks very attractively valued in both absolute and relative terms, so there may be considerable upside potential from an improvement in sentiment towards UK stocks.

• E-Mini S&P 500 Futures closed down at 4971.29 on Tuesday. Big recovery rally at the end of the day, but the sell-off could continue into the end of the week.
• Both the DAILY and WEEKLY time period are already OVERSOLD according to our models, however we see no reason to rush to buy.
• This insight is a roadmap for the next 2-3 days, to find support levels to go LONG, to profit on the next, DAILY, LONG reversal.

• BMRI is more profitable than BBNI, less cyclical than BBRI  and less expensive than BBCA. This combination makes it an attractive play on the Indonesia credit growth story.
• BMRI’s FY23 results are a strong beat with industry-leading loan growth and strong ROE; BMRI also has the potential to aggressively grow its retail portfolio which still is likely under-appreciated
• BMRI still trades at a discount to BBRI and has the potential to re-rate by another 20% in the near term, apart from the compounding driven by strong loan growth.

• The review period for the March rebalance ends in a couple of weeks. There could be one deletion from the index and a bunch of capping changes.
• The index changes will lead to a one-way turnover of 2.2% resulting in a one-way trade of A$13m. There are two stocks with over A$3m to trade.
• With market participants expecting lower interest rates, there has been short covering on a lot of the REITs in the last few months.

• The increase in news articles mentioning tariff and trade war risks is making it difficult for cyclical currencies like the euro to factor in any potential growth outside of the US.
• US exceptionalism is evident in strong services ISM and relative equity performance, which is leading to the dollar’s dominance in capital flows.
• The Chinese yuan is facing bearish sentiment due to double-digit drawdowns in onshore equity indices, deepening deflation, weak sentiment in the housing market, and limited policy options for policymakers. Outbound travel restrictions during the Chinese New Year season also add to the pressure on the currency. However, there have been some positive signs in financial flows, such as stabilization in equity flows and increased bond purchases by foreigners. Overall, the outlook for the yuan remains bearish.

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• LIC Housing Finance (LICHF) reported a strong Q3FY24 on the back of a strong NIM. Growth, however, has been tepid as LICHF recently transitioned its technology and organizational structure.
• FY24 has been a consolidation year due to technology and organizational changes; however, LICHF is setting up well to post strong growth in FY25.
• Among other things, affordable housing is going to be a key growth area going forward. Asset quality has been also improving and should further normalize with recoveries and upgradations.

• The Nikkei 225 (NKY INDEX) has been rising for 2 weeks and it is starting to be overbought.
• The index may rise for another week (this week) according to our models, then the chances for a WEEKLY pullback will become substantial.
• Look at resistance targets in the 37200-37900 price area to place SHORT trades, target 1 week, then close the trade.

Custodian Property Income REIT (CREI) has released a trading update for the three months to 31 December 2023 (Q424). The quarterly DPS was fully covered by unaudited EPRA earnings and was in line with the full year target of at least 5.5p; at the current share price the target DPS reflects a yield of 8%.