Financials

• Stake sales by Affinity and Bearing PE are attractive due to the absence of special partnerships with Shinhan Financial Group, indicating favorable exit potential at current stock prices.
• KB Financial draws attention due to Carlyle’s ₩240B EB investment in 2020. Carlyle can now convert to shares at ₩48,000/share, yielding 37.08%.
• Woori Financial is intriguing. IMM PE and Eugene PE hold stakes, investing ₩450B and ₩386B respectively. Their yields are 32.55% and 10.45% respectively. No constraints on divestment.

• Thai Credit Bank PCL (3674238Z TB) raised around US$281m in its Thailand IPO.
• TCB is a commercial bank that focuses on providing business loans to small and medium-size enterprises (SMEs), nano loans and micro credits to merchants, and home loans for individual customers.
• We had looked at the firm’s past performance and shared our thoughts on TCB’s valuation in earlier notes. In this note, we will look at the trading dynamics.

• We retain Bank of Baroda as the value Indian bank, despite its strong share performance, for its modest valuations, healthy ROE and further improvements in delinquency metrics
• HDFC Bank remains out of favour with the market but we retain it as a buy, with its potential for medium term gains post-merger and its strong balance sheet
• Axis bank remains on our watchlist; we remain negative on State Bank of India for its delinquency risks, low core capital ratio and limited progress on returns

• SBFC Finance Limited (SBFC IN) raised around US$131m in its India IPO, after the deal was priced at INR57/share. Its six-month lockup will expire on 12th Feb 2024. 
• SBFC Finance is a systematically important, non-deposit taking non-banking finance company (NBFC-ND-SI), offering secured MSME Loans and Loans against Gold.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Last week, we stuck to our bullish market perspective, and it turned out to be a wise choice.
• Yesterday’s celebration of our spot-on prediction resulted in today’s hangover of mine.
• Interestingly, in Denmark, there is a custom of referring to Thursday as ‘little Friday’ when we go out drinking on those days.

• New World Development (17 HK) stock has continued to drop and the decrease in market cap should result in selling from passive trackers at the end of the month.
• New World Development (17 HK) has underperformed its peers and now trades at cheaper valuations on most parameters.
• Passive trackers will need to sell over 100m shares of New World Development. That could provide liquidity for investors that see value and for shorts to cover their positions.

• The Financial Services Commission plans to delegate merger swap ratio determination to corporate autonomy. Initially, only mergers between non-affiliated companies will be affected, with potential extension to affiliate mergers later.
• The Financial Services Commission aims to start the legislative process in mid-February and complete the amendment by the third quarter of this year.
• This change will enhance trading dynamics by decreasing the likelihood of prices aligning with the ratio just before merger announcements due to pre-information leakage.

• Digital Core REIT (DCREIT SP) is looking to raise at least US$100m in its primary placement. The proceeds will be used to fund potential acquisitions and debt repayment. 
• The deal will be a large one to digest at 72.7 days of three month ADV and 12.8% dilution.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• A company that is geared to Japan’s macro revival with additional micro catalysts. 
• Ownership of financial companies which are set to benefit from a normalisation of Japanese monetary policy.
• The low Price to Book means the company will need to keep up momentum on its capital management plans to  stay in the Prime Section of Topix.

• Bank Mandiri (BMRI IJ) stood out from its peers with higher loan growth and lower cost of credit with PPOP growth of +17.3% YoY and its ROE reaching 23%. 
• The bank experienced a slight decline in NIM in 4Q2023 but asset quality remains solid and its digital initiatives continue to reduce costs and attract new users.
• Bank Mandiri‘s guidance for 2024 is more positive than peers for loan growth, as it continues to push out its value chain lending strategy into higher-yielding segments. Valuations remain attractive.

• The American Airlines Group reported adjusted pretax profit of $257 million for the fourth quarter and approximately $2.5 billion for the full year 2023.
• This result was driven by the strength of the network, demand for products, and execution by the team.
• Positive indications from the group include historically strong operation with the production of record free cash flow and a strengthened balance sheet through debt reduction.

Key points (machine generated)

• BV Financial recently completed its conversion from a mutual holding company to a full-converted stock company.
• The bank has consistently achieved a return on equity of 10-11% in recent years.
• Despite its significant growth, BV Financial’s securities represent only 5% of its total assets of $933 million.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• March 2023 was a noteworthy month for US stock market investors. It was one of only two significant corrections in an otherwise stellar year.
• The other one was in October driven by an interest rate scare.
• Usually a cocktail of several reasons is needed to create a correction. These typically involve technical, seasonal and fundamental/macro factors.

• The KOSPI 200 INDEX last week displayed and impressive bounce, maybe too impressive, too quick, too fast.
• A short-selling ban is in place until June 2024 for this market, but that does not mean it cannot pull back: according to our models the KOSPI 200 INDEX is OVERBOUGHT.
• We expect a pullback next week, unless the index closes this week down, in that case SHORT resistance levels will be reset.

• Marsh & McLennan Companies Inc.
• wrapped up the 2023 fiscal year with strong results, underscoring the firm’s robust organic and inorganic growth strategies.
• Total revenue for the year was $22.7 billion, marking a growth of 10%.

• With the review period for the March rebalance complete, there could be 6 potential changes for the NSE Nifty Next 50 Index (NIFTYJR INDEX) using the current index methodology.
• Estimated one-way turnover is 13.9% resulting in a one-way trade of INR 28.6bn. Four inclusions will have over 1x ADV to buy; five deletions will have 2.5x+ ADV to sell.
• The potential adds have outperformed the potential deletes by 28.6% over the last month. With positioning from a rebalance perspective mostly done, gradually unwind over the next few weeks.

• State Bank Of India (SBIN IN) has reported its 3Q24 (Dec-23) results with a one-off pension and wages revision charge which impacts the short-term earnings profile.
• Medium-Term ROE Forecast Intact (16% to 18%) with management confident of even touching 20% in next couple of years; loan growth forecast of 14% to 16% for FY25e-FY26e.
• We reiterate our view: P/BV is cheap at 1.3x FY25e. SBIN has the potential to re-rate to P/BV of ~1.6x FY25e in the near term (~40% upside). Opportunity to ADD.

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.

• Bharti Airtel
• Guangzhou R&F Properties
• UPL Ltd

In FY23 Information Services Corporation (ISC) remained on a positive trajectory of securing new contracts and customers, despite prevailing macroeconomic headwinds and a subdued Canadian property market. We expect this momentum to continue in FY24, bolstered by the Services division, the key organic engine of the group. Management has reaffirmed FY23 revenue and adjusted EBITDA guidance of C$207–212m (Edison: C$210m) and C$71–76m (Edison: C$75m), respectively. In addition, FY24 guidance has been introduced; our FY24e adjusted EBITDA estimate of C$90m falls within the guided range of C$83–91m, while our conservative FY24e revenue estimate of C$230m is marginally below the guided C$240–250m range. We will update our estimates following the release of FY23 results in early March.

Secure Trust Bank’s (STB’s) Q423 trading update showcased a robust performance with net loans of £3.3bn, up 13.6% y-o-y. The bank reaffirmed that it is on track to deliver £5m in annualised cost savings in FY24 through its ongoing cost optimisation programme. Despite rising deposit costs, STB’s net interest margin (NIM) remained flat with H123 at 5.4%. STB’s disclosure of modest exposure to discretionary commissions in motor finance lending should be a relief to investors, as the ongoing Financial Conduct Authority (FCA) investigation has been an uncertainty overhanging the sector. Our underlying continuing PBT estimates fell by 2% on marginally lower NIM expectations. Meanwhile, we have reduced our continuing PBT estimate by 7% to £41.7m as we have included a £2.3m exceptional cost related to the FCA’s Borrowers in Financial Difficulty industry-wide review. Our FY24 estimates are unchanged.

Target Healthcare REIT’s Q224 update shows indexed rent reviews driving increased earnings and property values. Tenant profitability continues to strengthen, reflected in a new high level of rent cover and a continuing high level of rent collection. Quarterly DPS, increased by 2% at the start of FY24, is now well covered by adjusted earnings.

• The FT carries an article this AM saying Elliott Management have built a stake in Mitsui Fudosan (8801 JP) and has asked it to undertake measures to increase ROE.
• Measures requested apparently include a very large buyback and a demand the company sell down its stake in Oriental Land (4661 JP). The article is worth reading.  
• Shares are up sharply on this news. The fund was in the news last year about this time regarding Dai Nippon Printing (7912 JP). I’d expect more noise to come. 

• Even the company itself shows in its recent presentation that a substantial portion of its revenue growth was due to rising rates on its cash deposit balances. This should wane.
• The company’s effective tax rate moved from 14% in the past few years, when it was stable to 10% in most recent period, this is not a core positive attribute.
• Geopolitical risk, economic malaise in both Hong Kong and China, can lead to less interest in the market, trading, placements, perhaps suggesting its 6x PB is not warranted?

• HashKey Group, an end-to-end digital asset financial services group based in Hong Kong, has completed a Series A financing round of nearly US$100 million at a pre-money valuation of over US$1.2 billion.
• The round attracted new and existing investors, including prominent institutional investors, leading Web3 institutions, and strategic partners.
• The group will use the money to accelerate the product diversification of its licensed business in Hong Kong and drive development globally.

• FY2023 was another year of value creation: 19% increase of NAV. Discount/NAV of C shares is 4.3%, below both the “usual” 15% conglomerate discount, and 5-year average of 9%.
• C shares are trading at a 0% discount to A shares. My target NAV is SEK 158,215 million, an 8.5% increase. My target TP, assuming 5% discount/NAV, is SEK 329.5.
• Implementing the typical holding discount trade would be risky. However, I would put on a reversal trade, betting on a widening of the discount up to around 7.5%-8%.

As part of its strategy to focus on profitable, cash-generative businesses, the boards of EML Payments and PFS Card Services Ireland Limited (PCSIL) have decided to wind down the PCSIL business. This removes a source of considerable cash burn and management distraction and leaves the group better positioned to support the Gifting and the Australian and UK General Purpose Reloadable (GPR) businesses. The strategic review is ongoing and management noted it had received several expressions of interest for Sentenial. FY24 guidance given in November is maintained despite the PCSIL liquidation. We have revised our forecasts to reflect the November trading update and the PCSIL liquidation, upgrading our underlying EBITDA forecasts by 14.9% in FY24 and 6.0% in FY25.

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.

• Hopson Development

• 3QFY23 results reveal losses related to Aozora’s US CRE exposure and securities portfolio; management forecasts a FY23 loss and a 50% cut in the previously forecast FY2023 dividend
• US CRE exposure is 6.6% of total loans and Aozora’s US CRE deterioration propelled the NPL ratio to 2.87% up 162bps QoQ, the worst NPL ratio of the peer group
• The securities portfolio hits are in US MBS and US bond ETFs; SMFG and Mizuho have large relative FX bond exposures, but they have less duration risk

• Bank Rakyat Indonesia’s results reflected its ability to offset a tighter liquidity environment with a higher margin loan mix as it continues to shift to commercial Kupedes microloans. 
• The bank has also seen the benefit of increasing digitalisation benefitting costs with more BRILink agents and users of mobile banking through BRIMO, which has also helped to grow CASA.
• Guidance for 2024 remains positive on loan growth, NIMs,  increasing leverage, and rising loan yields, with stable credit quality. Valuations look attractive relative to a forecast ROE of above 20%. 

• In mid-January, the TSE announced a “name-and-shame” list where they listed all the companies which had put forth a disclosure about 【資本コストや株価を意識した経営の実現に向けた対応】.  But they did not actually shame.
• The list shows which companies have disclosed a policy/consideration. But no data/links. We have the links. On Feb 1, the TSE put out a presentation and set of case studies.
• Designed to present the “Investor’s Point of View”, they have unexpectedly worthwhile advice/commentary for corporates. The TSE appears to be trying hard to prompt serious consideration rather than box-ticking.

Edison Investment Research is terminating coverage on Atlantis Japan Growth Fund (AJG), Paradigm Biopharma (PAR), The European Smaller Companies Trust (ESCT), The Brunner Investment Trust (BUT), Channel Islands Property Fund (CIPF), Sequana Medical (SEQUA), RTW Biotech Opportunities (RTW), Itaconix (ITX), Endeavour Mining (EDV), Riverstone Credit Opportunities Income (RCOI) and Molecure (MOC). 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.

Edison Investment Research is terminating coverage on Atlantis Japan Growth Fund (AJG), Paradigm Biopharma (PAR), The European Smaller Companies Trust (ESCT), The Brunner Investment Trust (BUT), Channel Islands Property Fund (CIPF), Sequana Medical (SEQUA), RTW Biotech Opportunities (RTW), Itaconix (ITX), Endeavour Mining (EDV), Riverstone Credit Opportunities Income (RCOI) and Molecure (MOC). 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.

• After announcing flattish results for both parent and subsidiary, Hang Lung (10 HK) announced Ronnie Chan is stepping down as chairman, with his son Adriel to assume the mantle. 
• Ronnie, 75-years of age, has been chairman since 1991. Adriel (42-years old) has been an ED since 2016 and vice-chairman since 2020. 
• Separately, HLG’s 66% discount to NAV is wide for a straightforward parent-sub structure. The P/Bs for both HLG and Hang Lung Properties (101 HK) are around the lowest-ever levels. 

• With the review period complete, Shriram Finance (SHFL IN) should replace UPL Ltd (UPLL IN) in the NIFTY Index (NIFTY INDEX) at the March rebalance.
• We have Trent Ltd (TRENT IN) marginally ahead of Bharat Electronics (BHE IN) as lower probability replacements for Bharat Petroleum Corp (BPCL IN) in the index.
• The impact on the stocks will be large in terms of delivery volume to trade, but the stocks have moved a lot over the last few months.

• China’s embattled property developer Country Garden Holdings is ramping up overseas asset sales as the company struggles to raise cash to address its debt woes.
• The Guangdong-based developer has listed a residential development project in East London for sale, British media reported last week.
• The divestiture came after Country Garden offloaded two projects in Australia.

Key points (machine generated)

• Timber REITs, specifically Potlach and Weyerhaeuser, are overvalued and have not adjusted to the current interest rate environment.
• Potlach has experienced declining timberland volumes due to issues in the US north and Canada, and the recent rise in interest rates is not expected to improve this.
• Potlach is also considered expensive relative to its forward EV/EBITDA multiple and consensus 1-year forward numbers, leading the author to recommend shorting the stock.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Earlier this week, we shifted to a bullish stance as we noticed promising developments in the cryptocurrency market.
• Concurrently, we launched our cryptocurrency portfolio.
• However, our short-term optimism has been tempered slightly.

• WAM Leaders Ltd (WLE AU) has launched an all-scrip off-market takeover offer for QV Equities Ltd (QVE AU) at 1 WLE share per 1.4675 QVE shares.
• The offer is subject to a 50.1% minimum acceptance condition and several onerous conditions, which disproportionately shift the risk to QVE shareholders. 
• The lack of meaningful premium (5.0% to undisturbed price) and unattractive deal metrics suggest a high probability of Board rejection. The Board has started a formal strategic review. 

• Due to the ongoing earnings season, for the next couple of weeks, we will temporarily deviate from our regular format and instead focus on reported earnings.
• This edition focuses on earnings commentary from Financials highlighting the commentary on costs, growth, and elections. 
• Earnings review includes AU Small Finance Bank Limited (AUBANK IN), Home First Finance (HOMEFIRS IN), IIFL Holdings (IIFL IN), Shriram Finance (SHFL IN). 

• Bank Negara Indonesia Persero (BBNI IJ) has stated its target of achieving an FY28e ROE of 20%, with ambition to join the other three big Indonesian Banks already doing it. 
• Although the current results are not on par with the other three, the bank has outlined its strategy to reach the target (1% credit cost; 37% CIR by 2028 exit)
• Projecting a gradual re-rating to align with peers by 2028 and extrapolating book value growth over the 5-year period provides a shareholder return of 30% CAGR

• We expect Atour to report 4Q23 revenue 3.5% higher than consensus, and non-GAAP NI 15.1% higher than consensus, mainly due to (1) stable business travellers in tourism off-season;
• (2) raising retail sales drive up gross margin. We think hotel supply and demand will turn to equilibrium in 2024.
• Occupancy may stabilize but ADR will fall, especially economy hotels. Atour, however, will be immune to the price fall, in our view.

• This is our first report on global insurance major, Marsh McLennan.
• The company had a mixed quarterly result as it failed to meet the revenue expectations of analysts but managed an earnings beat.
• The company recently announced the acquisition of MZI (McDonald Zaring Insurance), a full-service agency situated in Walla Walla, Washington.

• WAM Leaders Ltd (WLE AU), an investment company managed by Wilson Asset Management, has made an all-scrip off-market Offer for QV Equities Ltd (QVE AU).
• Terms are one WLE for every 1.4675 shares of QVE, for an implied price of A$0.95/share, a 5% premium to undisturbed.  
• The key condition is a 50.1% acceptance condition. WLE-related entities hold a 15.8% stake. QVE should hold out for an improved Offer.

• This is our first report on fintech solutions provider, StoneCo.
• The company delivered strong financial results in Q3 2023 with a 25% increase in total revenue YoY, achieving BRL 3.1 billion which surpassed its guidance by 2%.
• The impressive growth in the top line was followed by a 3.3x increase in adjusted EBT, hitting BRL 545 million.

Picton Property Income’s (PCTN’s) Q324 trading update details a range of positive leasing events that provided underpinning to income, reflected in its well-covered DPS. Together with progress on specific asset management initiatives this mitigated the impact of market-wide outward yield movements on NAV.

IP Group has released its year-end update, indicating that its end-2023 NAV per share will be in the range of 111p to 117p. This would represent a NAV total return decline of c 7–12% versus end-June 2023 and 11–16% versus end-2022. Management highlighted that this was driven by a further softening of valuations of early-stage companies in Q423. That said, management indicated that many of IP Group’s leading portfolio companies continued to make strong progress and it expects some major inflection points in 2024. IP Group’s balance sheet remains robust with gross cash and deposits of £227m at end-2023 (vs £250m at end-June 2023). IP Group expects to release its FY23 results on 13 March 2024.

Key points (machine generated)

• Grand City Properties is offering a 5.90% perpetual bond that provides a double-digit annualized total return potential for bearing Investment Grade risk.
• The bonds are currently trading at 57 cents on the euro, offering a cash-on-cash yield of 10.4%.
• Grand City Properties is a real estate company focused on the German residential sector, holding 76k units in various locations. The company’s balance sheet shows a market cap of 1,448 million and gross debt of 4,032 million, with cash and liquid assets of 714 million.

This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

• Conglomerate Guoco Group (53 HK) has fielded three privatisation Offers from Guoline (the Quek family) over the past twenty years. 
• Elliott Advisors, then holding 9.72% of shares out, backed the most recent Offer of HK$135/share in November 2018; but it was voted down at a Scheme Meeting. 
• Elliott has now, surprisingly, exited. This may open the door for a fourth Offer. Shares popped 14% on the news.  

• UOL Group (UOL SP) has underperformed its Singapore peers and the drop in market cap could result in the stock being deleted from global passive portfolios in February.
• UOL Group (UOL SP) has traded higher since end October and there has been a steady increase in cumulative excess volume on the stock since then.
• UOL Group (UOL SP) trades richer than its closest peer, City Developments (CIT SP), on EV/Sales and EV/EBITDA. The recent outperformance presents a trading opportunity.

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 Malls Indonesia Retail Trust
• Road King Infrastructure

• Bank Central Asia (BBCA IJ) booked a strong finish to the year with PPOP rising by +15.4% YoY and zero provisioning in 4Q2023, driven by loan growth of +13.9% YoY. 
• The bank’s net interest income grew by +19.5% YoY, with a stable NIM of 5.5% in 4Q2023 and CASA growth of +4.3% YoY, bringing the CASA ratio to 80.3%.
• BCA remains a core holding amongst Indonesian banks, with conservative bank guidance of +9%-10% loan growth, stable NIMs and CoC in 2024. Valuations reflect bank returns and quality.

• Outlook for interest rates in 2024 remains uncertain with market expectations diverging from Fed’s dot plot. Overall, rate cuts are expected in 2024.
• Lower rate outlook for 2024 will drive higher deal-making which is likely to benefit Goldman. A slowdown in the US economy could hamper Goldman’s recovery.
• Market metrics point to a positive sentiment around Goldman Sachs stock amongst analysts with summary analyst recommendation pointing to a Buy rating and average upside of 11%.

• Krung Thai has solid post-provision profitability, close to double digit ROE with a healthy balance sheet, along with attractive PBV and PE ratios
• We add Kasikorn to the buy list, as its cost of risk sharply improved in 4Q23, suggesting that it peaked in 3Q23; this should improve post-provision returns going forward
• We remove Ayudhya from the buy list, as its worsening cost of risk trends are eroding post-provision returns; it is also relatively weak in terms of capital adequacy

• The S&P 500 INDEX is WEEKLY OVERBOUGHT, it may continue higher this week or the next but a pullback is behind the corner.
• Currently the index has reached beyond the Q3 resistance target (4897) and it’s up 4 weeks in a row.
• Cover your LONG holdings for the upcoming pullback, going SHORT is also possible but maybe won’t be much profitable as we expect the index main rally to last into April.

• Here we are revisiting the Thai bond market, as per requests from our Thai readers, to see the impact of the global rate trajectory on Thailand.
• The Thai bond market will remain unattractive to foreign institutional investors, in our view.
• The attempt to increase yield should involve a material change in Thailand’s financial structure and regulatory mindset.

• Since early November 2023 we have laid out our bullish expectations for a year-end rally that we anticipated would continue into the early part of 2024. 
• Here we are in the early part of 2024, and we see every reason to continue riding this bull market higher. We see small- and mid-caps resuming uptrends $IWM $VXF
• Downgrading Staples (XLP) to underweight after brief stint at market weight. Highlighting several buys within Financials: Property & Casualty Insurance BRK.B, PGR, CB, TRV, ALL, CINF, ERIE, and more

Martin Currie Global Portfolio Trust’s (MNP’s) manager Zehrid Osmani was correct in his assumption that investors were too conservative in 2023; global equities delivered an above-average total return led by large-cap US technology stocks. However, he believes that the consensus outlook for 2024 is too bullish given economic uncertainty and increasing geopolitical risks. The manager’s view is that with inflation remaining elevated, western central banks will not reduce interest rates until the second half of 2024, which is likely to cause disappointment and stock market volatility. With such an investment backdrop, he stresses the importance of focusing on high-quality companies with structural growth opportunities and strong balance sheets that can weather the prevailing headwinds.