Financials

• Companies in India have disclosed their shareholding pattern as of end-September in October. There are companies with significant float changes from end-March and/or end-June.
• The changes in free float could be reflected in domestic and global indices over the next few weeks and months resulting in action from passive trackers.
• Depending on the date that the shareholding was published, there could be 11 stocks with passive inflows from global trackers while 6 could see passive outflows in November.

• The Auswide Bank (ABA AU) IE has considered Mystate Ltd (MYS AU)’s all-scrip merger offer in the best interests of the Auswide shareholders. However, the opinion comes with caveats.  
• The offer is conditional on Auswide shareholder and regulatory approvals (ACCC, Treasury). The scheme meeting is on 2 December.
• Vote risk is low due to the lack of substantial shareholders and the disinterested retail base. At the last close and for 18 December payment, the gross/annualised spread was 1.6%/10.3%.  

• Our core pick is Brazilian exchange B3; this is a contrarian call, given its poor share price performance year to date, but it is attractively priced versus its peers
• B3’s share of post-trade revenue is understated, and it is a well-diversified exchange in terms of the product offering, which includes cash equities, equity derivatives, FX, interest rates and commodities
• We also like Hong Kong Exchange, with its high share of post-trade revenues; HKEx should benefit from improving investor sentiment towards China, boosted by the Chinese government’s recent economic stimulus

Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
We assess Shui On Land’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Strong”.

• Blockchain technology provides decentralized, transparent, and immutable digital ledgers, revolutionizing how transactions and data are managed without reliance on centralized authorities or intermediaries.
• Tokens enable participation in blockchain ecosystems by providing access to services, governance rights, or value transfers, playing a key role in incentivizing user engagement and network growth.
• Foundations and companies shape the development of blockchain projects, issuing tokens to fund innovation, promote decentralization, and drive community-driven governance, supporting the evolution of Web3 technologies.

• Spectral AI is developing an AI-guided predictive medical device that employs multispectral imaging (MSI) to estimate a wound’s capacity to heal.
• The company is pursuing indications in burn and diabetic foot ulcers (DFUs) with the former receiving support from BARDA & other government agencies.
• Spectral is distinguished by its combination of MSI and AI to improve diagnoses.

• There could be two or three Aussie names that are deleted from global passive portfolios in November. In each of the cases, there is a lot to sell from passives.
• One name is very high probability while the deletion of the others depends on the day of the week chosen.
• Shorts have been built up on the stocks and there are strong indications of positioning. But the extent of the positioning varies, and the stocks could have differently.

• On the 27th September, China Merchants China Direct Investments (133 HK) (CMCDI) teased a share buyback and a special dividend. But as of today. no firm details have been forthcoming. 
• CMCDI has also now offered to reduce management fees by 25 basis points in the new management agreement, which will be voted on  by independent shareholders in November/December.
• This concession does not go far enough. Especially when 45% of the management fees are received by founder Victor Chu. 

• The Nikkei 225 INDEX continues to move chaotically in highly unpredictable and fragmented fashion. At the moment it’s been falling for 2 weeks (CC=-2 to be confirmed on Friday).
• Since the index is in a phase where it keeps going up and down with no trend, we see an opportunity to accumulate short-term LONG positions on the current pullback.
• A small bounce from current levels, rising towards the 41k target, could generate some good returns in a short span of time. This would be a reversal trade.

• A new all-time high for Bitcoin is within reach, which aligns with the strength we anticipated in last week’s Crypto Crisp.
• As we have repeatedly emphasized, this quarter is primed for significant price growth due to a convergence of favorable factors.
• These include increased U.S. Dollar liquidity, strong seasonal trends, Chinese economic stimulus, and the post-fourth Bitcoin halving phase, which has historically led to substantial returns.

• On the 19th August, MyState Ltd (MYS AU), Tassie’s largest bank, entered into a merger agreement by way of a Scheme with Queensland-based Auswide Bank (ABA AU).
• MyState will issue 1.112 new shares for every share held by Auswide shareholders, with MyState/Auswide investors holding 65.9%/34.1% ownership in the MergeCo.  
• The Scheme Booklet is now out, with a Scheme Meeting to be held on the 2nd December Expected implementation on the 18th December. The IE (Kroll) says fair & reasonable.

• Cellulose specialties production affected. RYAM issued a press release last Monday with respect to a fire that took place at the company’s largest plant in Jesup, GA plant on October 11 that will likely keep two cellulose specialties production lines offline until October 28, while the cause is investigated and repairs are made.
• Two of three production lines at Jesup affected. The fire, which occurred during scheduled maintenance work, was quickly contained without death or injury to plant employees or safety personnel, and has not affected the operations of Line C, which produces fluff pulp (270K mt annual capacity).
• Management believes the two-and-a-half-week disruption in the operations of Lines A and B, which manufacture cellulose specialties (330K mt annual capacity), will not materially affect its ability to supply its current customers.

• Last Thursday, Uniswap, the leading decentralized spot exchange, announced its upcoming Layer 2, also known as rollup, on Ethereum, called Unichain.
• For a detailed explanation of Ethereum rollups, please see Crypto Moves #16.
• This new rollup will be based on Optimism’s Superchain technology, which also powers Coinbase’s Base rollup and the soon-to-launch Layer 2 from Sony.

• KMC Properties ASA and Logistea AB have announced a merger expected to be completed by end of Q3 or beginning of Q4
• Potential 23% return in around 3 months by going long on KMC-P ASA and shorting Logistea AB
• Merger involves Logistea acquiring all assets of KMC Properties and issuing consideration shares in two tranches, with the first already distributed and second expected soon

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.

• The KRX announced the 100 constituents of the much-awaited Korea Value-Up Index on 24 September. There were hits and misses but broad consensus was that the index is a miss.
• Following market feedback, the KRX could conduct a special rebalance of the index in December. But this could be after the launch of ETFs tracking the index.
• With a big overlap and similar characteristics as the KOSPI 200 Index, there could be limited assets benchmarked to the Korea Value-Up Index in the short-term.

• Nikkei 225 (NKY INDEX) option implied volatility is stabilizing at an elevated level. This Insight analyses term structure, skew, open interest, and more.
• We identify a tactical option opportunity that profits from the current volatility structure.
• Are Consumer Price Index and Bank of Japan interest rate decision announcements systematically followed by unusually large market moves? We run the numbers. 

• SEBI-Mandated structural changes continue to percolate through for Options Markets. Position limits & lot sizes have been increased drastically, tilting regulations away from Retail & towards more Institutional participation.
• IV levels are in the middle of their 12-month ranges. Vol-Regime Model currently in “High & Down” state – grind lower in IVs projected. 
• In spite of a stronger underlying index, upcoming Bank earnings results have supported BankNifty IVs.  

• On Oct 17th, Kaspi.kz, Kazakhstan’s super-app, signed a stock purchase agreement to acquire a 65.4% stake in Hepsiburada, a leading e-commerce platform in Turkey. 
• The transaction is still subject to regulatory approval; Hepsiburada’s share price in the US increased by ~60% on Friday after the announcement.
• The acquisition makes a lot of strategic sense which would elevate Kaspi.kz to a position to target a combined market of >100 million population (vs. currently 20 million).

• The institutional demand forecasts were much worse than expected, leading to the company’s blunt admission in the latest filing that the book-building flopped, prompting them to cancel the IPO.
• Bankers NH and KB suggested an offering price below 8,500 KRW, but pre-IPO backers like Bain Capital and MBK strongly opposed, unhappy with shrinking proceeds, pushing for cancellation.
• K-Bank plans to regroup and adjust the heavy 50% secondary share portion to retry the IPO in six months before their prelim review window expires.

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.

• Lippo Karawaci

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. Vedanta Resources
2. Longfor Properties
3. Anton Oilfield
4. Adani Green Energy
5. Reliance Industries

and more…

• This week the S&P/ASX 200 INDEX entered WEEKLY OVERBOUGHT status intra-week, peaking at 8384.50, then pulling back to 8283.20 at Close.
• In this insight we will examine resistance levels the index will have a hard time to clear, without pulling back first at least 1 week.
• According to our quantitative models, a pullback is highly likely to happen this week, or the next.

• Where there are many other areas of interest in Asia, globally, the figures just out for Bangkok Bank are incredible to us, not in a positive way.
• The bank has seen its NPLs rise from THB71bn to THB85bn to THB92bn from 4Q23 to 2Q24 to 3Q24, putting YTD growth at 29%
• The bank has more than 1/4 of its loans in manufacturing & commercial where loan balances are down 4.0% YTD and down 4.3% QoQ

• The Hillhouse (Asia-based global PE firm) deal for SAMTY HOLDINGS Co Ltd (187A JP) has seen Samty shares trade tight to terms in the first three days of trading.
• Some 7.5mm shares have traded. This is only 16% of shares out, but it is a much larger portion of Maximum Real World Float. 
• This begs the question of whether the deal could be put in jeopardy by the actions of one or two shareholders. 

• Chosun Business Daily mentioned that K Bank IPO book building results among institutional investors have been very poor so far. 
• As a result, the bankers and K Bank are currently considering on potentially reducing the IPO price to about 8,500 won or even cancelling the IPO altogether. 
• Our base case valuation of K Bank is target price of 9,151 won per share. Even if the IPO is priced at 8,500 won, we would pass on this IPO.

• Arvida (ARV NZ) will be deleted from the S&P/NZX 50 Index following its acquisition by Stonepeak Alps BidCo. Tower Ltd (TWR NZ) will be added to the index.
• Passive NZX50 Index trackers will need to buy nearly 18m shares of Tower Ltd (TWR NZ) – that is over 26 days of ADV.
• There has been a lot of positioning in Tower Ltd (TWR NZ) since Stonepeak’s offer for Arvida (ARV NZ). There should be enough supply for the passive trackers. 

• A special call auction shall be held on October 28, 2024 by BSE & NSE to discover hidden value in Investment Holding Companies.
• BSE and NSE came out with the list of 8-9 Companies that are eligible for this special session. 
• We calculated the upside left in these companies using the Current price with 30% discount: 3 Companies with more than 100% upside.

• Back on the 9th September, pub play Hotel Property Investments (HPI AU) announced – and summarily rejected – a A$3.65/share cash Offer from Charter Hall Retail Reit (CQR AU).
• Charter Hall has now increased terms to A$3.85/share (best & final), a 17.7% premium to undisturbed. The Offer remains conditional on an 50.1% minimum acceptance condition. Charter Hall holds 14.7%. 
• HPI’s reported response? “While Charter Hall’s improved offer provides an attractive exit for shareholders, we remain committed to evaluating all options that deliver the best long-term value.“

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.

• Vedanta Resources

• Beijing Capital Grand (1329 HK) entered a trading halt based on the Hong Kong Code on Takeovers and Mergers. 
• It is likely that Beijing Capital Land Ltd H (2868 HK), the largest shareholder, is launching an offer primarily to acquire the stake from Sino-Ocean Group (3377 HK) receivers. 
• As this is a forced sale, an offer of around HK$0.70-0.75, a 20%- 30% premium to the last close, would be sufficient to gain an irrevocable from the receivers. 

• NAV of Industrivarden (INDUC SS) was SEK 162.8 bn (SEK 377/share) on September 30. NAV increased by 8% during first nine months of 2024. 5-Y total return 96.3% (OMX30, 77%).
• Industrivärden C shares are trading at a 2.3% discount to NAV (vs. 7.9% average for last 5-years). It seems risky to bet on a further discount reduction, rather a reversal.
• My target NAV is SEK 169,667 million million. My TP for the C shares of Industrivärden, assuming a 5% discount to NAV, is SEK 373.2 (3% upside).

• The company required a $180 billion bailout from the US government during the financial crisis, but has since fully repaid it with interest.
• Under Peter Zafino’s leadership, AIG has refocused its underwriting efforts, returning to profitability and divesting non-core businesses.
• AIG has undergone a remarkable turnaround post-financial crisis, focusing on specialty insurance for top quartile industry returns

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

Primary Health Properties (PHP) has issued a Q324 trading update alongside its capital markets presentation. The presentation focused on the significant opportunities for growth that PHP has identified in both the UK and Irish markets. Most importantly, the trading statement shows organic rental growth continuing, underpinning PHP’s commitment to its progressive dividend policy. Our forecasts are, for now, unchanged.

• Back in March, the CSRC said it aimed to “form two to three investment banks and institutions with international competitiveness and market leadership by 2035″.
• Last week’s announced merger between China’s leading state-backed brokerages, Guotai Junan Securities (2611 HK) and Haitong (6837 HK), is a move in that direction. Expect more scrip mergers to follow. 
• There have also been some media reports that the GJS/Haitong terms disadvantage holders of other Hong Kong broker stocks if potentially acquired in a merger. It’s not quite that simple. 

• Odyssey is looking to raise A$277m (US$186m) from selling its entire stake in AUB Group Limited (AUB AU).
• The PE has been invested since May 2022 with its stake subjected to a two-year escrow period. There have been media reports surrounding the selldown over the past few months.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• Blockchain Basics: Blockchain is a decentralized ledger recording transactions without a central authority. Participants validate and store immutable, transparent data, ensuring trust and security throughout the network.
• Blockchain Layers: The blockchain ecosystem consists of Layer 1 (core blockchain), Layer 2 (scaling solutions), and Layer 3 (applications), all working together to enable secure, scalable interactions with blockchain technology.
• Key Concepts: Blockchain principles include immutability (data cannot be changed), permissionless participation (open to anyone), and decentralization (no single entity controls the system), ensuring security, transparency, and trust across networks.

• Revenue for cumulative Q3 FY11/24 reached JPY27.0bn, a 17.7% YoY increase, achieving 75.7% of the full-year forecast.
• Operating profit decreased by 3.1% YoY to JPY4.4bn, with a shift towards foreign currency-denominated products impacting margins.
• Full-year forecasts for operating profit, recurring profit, and net income were revised downward due to sales mix changes.

• Moon River announced the initial results from analysis on the by-product metals in the Davidson deposit (tungsten, copper, REEs and gallium).
• The results showed high potential recovery for tungsten and possibly copper, giving us confidence in the upcoming metallurgical results.
• This is the first step in MOO’s goal of including these by-product metals in the mine plan, potentially improving the economics in the PEA.

• TSE-Listed companies are asked to file “Management Conscious of Capital Cost/Stock Price” awareness reports/policies. Many have. Some are still working on it. And policies change, and CGR reports are updated.
• Our tools show every report, links to every document, and now a new diff file tool. input a name, see the difference between the Old/New Reports. We hope it helps.
• This tool is designed to be a shelf reference. We update it once a month, and every CorpGovReport and new “Management Conscious” report updated since a CGR update is here.

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
• Reliance Industries
• West China Cement

• The crypto market showed some encouraging signs over the weekend, despite Coinbase showing a significant discount on its Bitcoin and Ethereum prices.
• This suggests that Coinbase users are net sellers, possibly due to concerns about the 69,330 bitcoins seized by the U.S. government in connection with the Silk Road case.
• However, we believe it is very unlikely that the government will liquidate these bitcoins anytime soon.

• September showed positive returns, bucking the seasonal negative returns we have seen in previous years.
• BTCUSD (6.79%), ETHUSD (2.99%), SOLUSD (10.51%) and OTHERS index (15.86%) were green across the board.
• The odds of an explosive expansionary phase significantly increased in September.

In line with earlier guidance, S&U reported H125 PBT of £12.8m, a significant decline versus H124 but an improvement versus H224. Customer repayment collections and earnings in the motor finance business were materially affected by the temporary restrictions agreed with the Financial Conduct Authority (FCA). These have since been lifted, and while regulatory discussions are ongoing, this is an important step towards the strong recovery in motor finance earnings that we forecast. Meanwhile, as previously reported, the property lending division continues to perform strongly, with a positive outlook for continuing growth.

• Discussion on the impact of elections on FX and various hedges
• Focus on trade and fiscal policies as key factors influencing FX
• Potential scenarios and dominant teams in different election outcomes, with Republican sweep seen as favorable for dollar strength

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

The Diverse Income Trust (DIVI) is a member of the 18-strong AIC UK Equity Income sector. It has a differentiated multi-cap income strategy and therefore its performance can differ meaningfully from those of its peers. Managers Gervais Williams and Martin Turner at Premier Miton Investors are very bullish on the outlook for UK stocks, which they believe can outperform overseas mainstream equity indices due to very attractive valuations and income prospects. They note that with global profit margins at all-time highs and increased geopolitical tensions, there could be a change in investor behaviour, with increased demand for income rather than capital growth strategies, which have dominated the investment landscape for the last few decades.

• Buy Donegal Group “B” shares at a $2 discount to “A” shares
• “B” shares have 10X voting rights but are priced lower, potential for rebound
• Low average volume of “B” shares may impact liquidity and potential for price rebound; catalyst for trade is pricing reversion to $13-$14 range

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.

JPMorgan European Discovery Trust (JEDT) invests in European small-cap companies (excluding UK). European small caps have outperformed most other markets over the long term, although they underperformed large caps in 2022 and 2023, as the sector was confronted with a number of challenges. Against this unfavourable backdrop, JEDT underperformed as a result of asset allocation decisions. Following a strategic review, JEDT’s board appointed three new managers, Jon Ingram, Jack Featherby and Jules Bloch, who replaced Francesco Conte and Edward Greaves with effect from 1 March 2024. The trust’s relative performance has improved, and it is outpacing its peers. The new team is very excited by the outlook for the sector, and for JEDT. Several previous headwinds are now supporting European small caps, and history suggests that current low valuations are due for a substantial re-rating.

• We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads Seven & I Holdings (3382 JP), Shanghai Henlius Biotech (2696 HK), Canvest Environmental Protection Group (1381 HK), Haitong Securities Co Ltd (H) (6837 HK), Shinko Electric Industries (6967 JP).
• Lowest spreads: Dyna Mac Holdings (DMHL SP), Xingda International (1899 HK), Fuji Soft Inc (9749 JP), Trancom Co Ltd (9058 JP), Descente Ltd (8114 JP), T Gaia Corp (3738 JP). 

• Options Markets expected risk sentiment to deteriorate further – IVs were elevated. But lack of RV follow through caused sharp markdowns, especially for short-dated contracts.  
• Increased Vol-of-vol has triggered multiple switches in Vol Regime Model – currently in “High & Down” vol-state. Multiple state-switches indicative of unfolding structural changes in Vol Markets.
• Smile looking overly compressed in Monthly & Quarterly contracts as OTM Strangles trade close to par with ATMs.

• This strategy exploits relative value in implied volatilities and combines it with a long Nifty 50 vs. short Nikkei 225 directional view over a period of two months.
• The strategy performs well if the Nifty 50 rises and outperforms the Nikkei 225. If both indices decline, neither profit nor loss is incurred.
• Leverage increases both the strategy’s payoff and probability of success.

IP Group’s realisation activity has picked up notably in the months leading up to the company’s interim results publication in September, encouraging the company to increase the current buyback programme by £10m to £30m. Subsequently, IP Group agreed to sell the AI-powered financial crime detection business Featurespace to Visa. The exit will result in £134m in realisation proceeds at a 70% uplift to end-2023 carrying value, part of which was recognised in the H124 results, translating in a broadly stable value of IP Group’s private holdings. The de-rating of listed Oxford Nanopore (ONT) was therefore the major driver behind IP Group’s 9% NAV fall in total return (TR) terms in H124 to 104.7p, though nearly half of the ONT share price fall was reversed post end-June 2024, assisted by its half-year trading update and the Novo Holdings investment.

• RaaS has published an update report on diversified financials company Bell Financial Group (ASX:BFG) on the back of supportive September 2024 metrics including ECM league tables, ASX volumes and equity markets performance.
• BFG is sitting fourth on the LSEG ECM league tables for the nine months to September 2024, raising $1.2b and on-track with RaaS forecasts (positive for Retail and Institutional).
• The ASX200 closed 6.3% higher at the end of September 2024 relative to June 2024, above implied RaaS assumptions for the full-year and positive for the Portfolio Administration Services (PAS) business and overall investor confidence.ASX transaction volumes continue to recover from a weak CY23, up 32% for the September quarter and positive for the Retail and Technology & Platforms divisions.

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 Jinmao Holdings
• Yuexiu Property