Financials

• There are no constituent changes for the Vaneck Vectors Australian Property ETF (MVA AU) in December but there are float and capping changes.
• Abacus Storage King (ASK AU) is the biggest sell and is due to a drop in float, a reversal of the excessively high float assigned at the September rebalance.
• Estimated one-way turnover is 4.5% and will result in a one-way trade of A$26m. There are a few stocks with over 1x ADV to trade.

• 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 18 different Australian vendor partners with long-term partnership purchasing arrangements in place with Commonwealth Bank of Australia (ASX:CBA).
• The company’s AGM updates highlighted the strong position PNC occupies in the marketplace and the expected improvement in NPAT following debt refinancing currently in progress. 

• Kasumigaseki Capital is a small cap consulting real estate speculator/developer. They have an interesting, aggressive model. People will recognise the model from pre-GFC but this one is structured better.
• The company had planned explosive growth and in October, brought growth plans forward and guidance way up. Now there is an offering to fund that growth. 
• It appears to also be an offering to get a very large short position out of a risk of potential squeeze. For that, I expect this goes smoothly.

• Itausa’s equity value is predominantly composed of its core holding stake in big cap Latin American bank Itaú Unibanco whilst it has actively reduced its exposure to wealth tech XP
• Yet these two financials together account for over 90% of Itausa’s total equity value, with Itaú accounting for almost the entirety of that value
• Itausa is trading at a HoldCo NAV discount of over 25%, which is historically high; currently, Itausa is an excellent vehicle that provides indirect and discounted exposure to Itaú

• The Nikkei 225 (NKY INDEX) closed the week down (CC=-2) at 32307.86, it’s OVERSOLD, WEEKLY and MONTHLY.
• Our hypothesis is that this pullback is about to end (it could last maybe another week, or maybe it’s already over…), and will be followed by higher prices.
• Go LONG the Nikkei 225 in the support area between 31000 and 32000, this coming week.

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. Kawasan Industri Jababeka
2. China Jinmao Holdings
3. Vedanta Resources
4. Yanlord Land
5. Geely Auto

and more…

• Strong Insurance Revenue growth by 11.71% for 2023 (FH 2023: EUR 42,305,397 vs FH 2022: EUR 37,869,728) and robust Investments and Miscellaneous Income growth by 176.62% for 2023 (FH 2023: EUR 12,189,980 vs FH 2022: EUR (15,910,269)) were the key factors for INTERLIFE to return to profitability, posting an EBIT of 13,535,165 EUR, 223.83% increase compared to FY 2022 and an EPS at 0.591 EUR, +221.38% from the FH 2022.
• INTERLIFE holds twice the capital needed for severe disasters, with a Solvency Capital Requirement (SCR=Total eligible own funds / Solvency Capital Requirement) Ratio adequacy of 201.44%, surpassing the 180% Greek benchmark of 2022 and with a Minimum Capital Requirement (MCR= Total eligible own funds / Minimum Capital Requirement) Ratio of 707.87%.
• INTERLIFE does not possess proportional contracts but reinsurance contracts that can reach up to 1 million.

• Yesterday, Washington H. Soul Pattinson and Co. Ltd (SOL AU) made a $3bn scrip offer Aussie-listed equities manager Perpetual Ltd (PPT AU).
• Under the indicative terms, PPT shareholders receive one-third of the Offer in SOL shares, and two-thirds in PPT’s asset management arm via an in-specie spin-off.
• PPT rejected the proposal as it undervalues PPT, its corporate trust and wealth management businesses; and it offers SOL shares as consideration. But the Offer is not without merit.

• Of the six Malaysian banks screened, we keep value play RHB Bank on the buy list and switch our prior CIMB for Maybank
• RHB Bank is our top pick for its undemanding PE and PBV whilst being second from top in post-provision profitability; its high CET1 ratio has not held back its ROE
• We drop CIMB from the buy list for its weaker credit quality and low NPL coverage; we upgrade quality pick Maybank to buy for its attractive valuations

• Below we lay out what we believe is a compelling case to add exposure to European/UK Financial stocks at current levels.
• The EURO STOXX 50 has been on an absolute tear since we discussed the bullish implications of a break above 4200, and it now breaking above 2+year resistance at 4400-4415.
• Financials are one of the leading Sectors within Europe/UK, and banks, insurance, and financial services are all attractive. We highlight several of our favorite names to buy at current levels

• A positive surprise – Q1-3 FY12/2023 results highlighted the positive demand environment for AZN’s services, with Inheritance consulting sales growing 47.1% YoY driven by new customer acquisitions.
• The company’s aim to improve the quality of earnings is demonstrated by improvements in underlying profitability with the sales mix shifting towards Wealth Consulting, while Real Estate Solutions provides cross-selling opportunities and strong access to engage with new customers.
• The company has revised its FY12/2023 earnings estimates and on track to book record-high earnings, and has currently maintained its FY dividend forecast of ¥41 per share.

• Nesco reported strong growth in BEC revenues led by Q2 being a seasonally strong quarter for the exhibition business. Even in YoY terms, the growth was decent at 8%.
• Nesco IT Park revenues also jumped by 14% QoQ, suggesting that the occupancy level in Tower 3 has gone up from 82% earlier.
• Nesco Foods business continues to grow rapidly as the new Food Court and Restaurants have seen strong traction. Revenue in Foods business has more than doubled YoY.

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.

• Kawasan Industri Jababeka
• Yuexiu Property

• After the close today, Rakuten Group (4755 JP) announced the sale of 25.5mm shares of Rakuten Bank (5838 JP), right as the IPO lockup was reaching its expiry. Expected.
• Pricing is 6-7 Dec (pre-Tokyo open 7 Dec), delivery 11 Dec 2023. Indicative price range is 8.5-12.5% discount for a deal of US$425mm or so.
• In an interesting technical detail, this will take Rakuten below 50%. There is some near-term index demand, some in April, some next October. Rheos could be more overhang.

• Yesterday afternoon, Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) announced a new buyback program. The last one was announced August 2022 and ran until the AGM.
• That was HK$4bn. In the meantime the company paid an HK$8.12 special div on the Swire As (14%) in September (on top of the HK$1.20 regular div). 
• Now they have announced a new HK$6bn buyback buying both A Shares and B shares. Details, index impact, historical B/A trading patterns, etc, below.

• Rakuten Group (4755 JP) aims to raise US$430m via selling around 14.6% of Rakuten Bank (5838 JP). 
• RB is the largest internet bank in Japan, by number of accounts. As of Sep 23, it had 14.3m deposit accounts with a total deposit base of JPY9.5tn.
• In this note, we will talk about the deal dynamics and updates since our last note.

• Yesterday afternoon (5th Dec), Swire Pacific (A) (19 HK) (and Swire Pacific (B) (87 HK)) announced a large (HK$6bn) buyback.
• The response this morning sees Swire A up 14.4% (as I type), and 11.8% for Swire Bs.
• I still like the idea of buying Swire A and Swire B outright here.

• Rakuten Group (4755 JP) is looking to sell 25.5m shares of Rakuten Bank (5838 JP) via a secondary offering at a discount of between 8.7%-12.3%.
• The offering will raise a maximum of US$433m and Rakuten Group (4755 JP) will use the funds to reduce its interest-bearing debt by the early repayment of its bonds.
• There will be limited passive buying at the time of settlement of the stock but there is an index inclusion coming up that will result in passives buying.

• Yesterday, Tokyo Rakutenchi (8842 JP)‘s #1 shareholder Toho Co Ltd (9602 JP) agreed to buy out the rest of Tokyo Rakutenchi from its #2 and #3 shareholders and minorities.
• The Takeover Price is a 51% premium. Which is nice. But the asset is a real estate portfolio, and it was sold as a company, not a real estate portfolio.
• The revaluation surplus to market value for the real estate assets is more than net equity, so Takeover PBR >1.0, but Price/NAV of the takeover is 0.7x, without synergies included. 

• On 21 November, Washington H. Soul Pattinson and Co. Ltd (SOL AU) submitted a non-binding, indicative offer to acquire Perpetual Ltd (PPT AU) at ~A$27/share.
• A few hours ago, that offer was rejected by Perpetual Ltd (PPT AU)‘s Board citing a material undervaluation, conditional on demerger of the Asset Management business and execution risk.
• If the deal goes through, there will be small passive buying in Washington H. Soul Pattinson and Co. Ltd (SOL AU). No major index changes expected. 

• Tokyo Rakutenchi (8842 JP) has recommended Toho Co Ltd (9602 JP)’s tender offer of JPY6,720 per share, a 51.5% premium to the undisturbed (6 December). 
• The transaction is a two-step acquisition through a cash tender offer and subsequent squeeze-out. The lower limit of the tender offer is set at a 24.29% ownership ratio.
• Based on the irrevocables, the minimum acceptance condition requires a 30.2% minority acceptance rate. This acceptance rate is doable as the offer represents a ten-year high. 

• Sunshine Insurance Group (6963 HK) (SIG), a life, health and P&C insurance company, raised around US$850m in its HK IPO in Dec 2022. Its IPO linked lockup will expire tomorrow.
• SIG is an integrated insurance provider which offers both life and health (L&H) and property and casualty (P&C) insurance in China
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Legend Capital (LC), one of the principal shareholders of Atour Lifestyle Holdings (ATAT US), is looking to raise around US$124m through a secondary selldown. 
• The deal is a large one to digest, at approximately 22.6 days of three month ADV and 5.5% of current mcap.  
• In this note, we will talk about the placement and run the deal through our ECM framework.

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

• After a strong rally in November, the Nikkei is currently in a temporary corrective phase, reaching between the Q1 and Q2 support levels of the MRM LONG chart.
• There are 2 possible paths from here: 1) a modest pullback, followed by a rally into the end of December, 2) a dive to <= 31672, and December closes down.
• Both these scenarios offer very good seasonal LONG odds for January closing up (based on our SRM model), so we suggest going LONG the Nikkei 225 on the pullback.

• Market sentiment remains optimistic, we anticipate the rally to continue with 20,200 on the NIFTY Index (NIFTY INDEX) as a trend check level. 
• There are concerns about Paytm (PAYTM IN) growth in personal loans in the near term, but the merchant side provides a large enough opportunity.  
• Other names discussed include Eicher Motors (EIM IN), Poonawalla Fincorp (POONAWAL IN), and Five Star Business Finance (FIVESTAR IN) 

Information Services Corporation’s (ISC’s) strong track record of acquiring and innovating registries, and related information services, was highlighted by yesterday’s five-year contract win with the Bank of Canada. This awards ISC with the role of operator and technology solutions provider for the Bank Act Security Registry, a clear testament to the company’s expertise. The operation is expected to commence in the summer of 2024, utilising ISC’s RegSys platform. We estimate that revenue for this contract, akin to the company’s other contracts, will amount to c C$5–15m over the five-year period. We maintain our forecasts and valuation of C$37 per share, implying a 74% upside.

Princess Private Equity Holding (PEY) posted a year-to-date NAV total return (TR) to end-October 2023 of 4.9%, 2.4% of which was from Q323. PEY’s performance continues to be assisted by portfolio earnings, with last-twelve-month (LTM) revenue and EBITDA growth to end-September 2023 of 16% and 15%, respectively, and sustained healthy average EBITDA margin of 24%. PEY’s balance sheet remains firm with c €134m in undrawn credit facility and €3m in cash, further assisted by the Civica sale proceeds upon deal closure. Consequently, PEY will pay out two interim dividends of €0.73 in total in 2023, implying a yield of 6.9% at the current share price.

• AMP Ltd (AMP AU) and A2 Milk Co Ltd (A2M AU) could be deleted as the lowest ranked current index constituents.
• There are three other stocks that are close to the deletion threshold and a change in the free float could result in the stocks being deleted.
• With the exception of A2 Milk Co Ltd (A2M AU), shorts have been increasing on nearly all the potential and close deletions.

• There are 3 changes for the S&P/ASX 200 (AS51 INDEX) that will be implemented at the close on 15 December. One name is a relative surprise.
• There will be 8-15 days of ADV to buy on the inclusions and there will be 12-18 days of ADV to sell on the deletions.
• Cumulative excess volume and changes in short interest indicate there will be positioning in most stocks. But it may not yet be enough to cover the passive trade.

• The rejection by shareholders of an independent director’s re-appointment reveals the growing influence of proxy advisory firms on institutional investors
• Indian corporate boards appear ill-prepared to engage with stakeholders to provide valuable feedback 
• Stakeholders Relationship Committee of the Board needs to reactivated and re-oriented to engage with stakeholders to improve governance

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.

• The data in this insight is collated from the “shareholding disclosure” link on the HKEx website.
• Often there is a corresponding HKEx announcement on the increase – or decrease – in the shareholding by directors. Or pledging. However, such disclosures are by no means an absolute.
• The key stocks mentioned in this regular insight are Sun Hung Kai Properties (16 HK) and Akeso Biopharma Inc (9926 HK).

• In any economy with persistently high interest rates, high living costs and decelerating loan growth, the risk is generally greater for bad corporate loans, not mortgage loans.
• BEN is nearly only residential mortgage loans, highly different to CBA, NAB, WBC, ANZ and MQG. This is also clear in long-term low levels of credit costs.
• NIM has moved up for BEN in FY23. There is limited risk of maturing debt to hurt its NIM in FY24, very much unlike large peer banks, especially NAB, MQG.

• We focus on five key factors, namely capital adequacy, credit quality, exposure to government securities, interest rate gearing and valuation with growth metrics for our Japanese banks universe
• It is important to note that the relaxation of yield curve control is translating into rising loan yields generally in the BoJ data to September-end 2023
• We stick with our positive views on Resona, Mizuho and Concordia; we remove Hachijuni from the buy list and SMFG, replacing the latter with MUFG in the large cap banks

• Kolte Patil reported a steady Q2FY24 led by continued momentum across sales, business development and deliveries.
• Sales volume grew by 5%+ QoQ to 0.98mm sq ft in Q2FY24, led by strong sales in the Life Republic projects. This brings the H1FY24 total sales volume to 1.91mm. 
• With 4.94mm sq ft slated to be launched in H2FY24 vs 2.73mm launched in H1FY24, Kolte Patil is on track to achieve its FY24 sales guidance of 3.9mm+ sq ft.

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. Road King Infrastructure
2. Yanlord Land
3. Azure Power Global Ltd
4. Yankuang Energy Group
5. Tata Motors Ltd

and more…

• We think FUTU is stepping into a stagnant phase in 2024. Japan is not a game changer.
• Client asset inflow from overseas is not meaningful, and growth from mainland is frozen by regulation.
• We downgrade the stock into SELL rating and cut TP to US$46/ADS, mainly due to slow progress in overseas expansion and difficulty in monetization.

• OCBC has seen its mkt cap RISE by ~4% YTD. This is stark contrast to the ~6.5% lower mkt cap at DBS and around 10% lower mkt cap at UOB.
• Net interest income had been strong, and this likely slows, a lot. Other areas are far from strong. Credit costs are up 103% YoY at 9M23.
• Profit from insurance is down 12% YoY and down 16% QoQ, in 3Q23 (Great Eastern). Profit from associates is -1% YoY in the quarter and only +1% YoY

• Arthur J.
• Gallagher & Co. delivered an all-around beat in the previous quarter, delivering impressive results in various segments.
• In the retail brokerage operations, the US P/C business showed strong underlying organic growth of around 8%.

• 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.
• Since our initiation in October 2023 there have been some positive developments across a number of divisions.
• Against our forecast of $550m in equity raisings over H2 FY23 we now estimate $800m with a spike in activity over October and November. 

• Intercontinental Exchange, Inc. managed to exceed analyst expectations in terms of revenue as well as earnings, with adjusted earnings per share reaching a historic high at $1.46, marking an 11% increase from the previous year.
• Net revenues also soared to $2 billion, exhibiting a 4% pro forma increase, primarily fueled by a substantial double-digit surge in the Exchange segment.
• Transaction revenues, notably in energy, surged by 13%, with a significant 42% growth in energy revenues, particularly in global natural gas.

• Mach Natural Resources is an independent upstream oil and gas company with a neutral investment outlook.
• One of the primary drivers for Mach Natural Resources is its substantial inventory of over 2,000 identified horizontal drilling locations, with a significant emphasis on the Oswego formation.
• Additionally, Mach Natural Resources holds a competitive edge with its ownership of midstream assets, including gathering systems, processing plants, and water infrastructure.

In a challenging market environment, Picton Property Income (PCTN) produced a resilient H124 financial performance, supporting fully covered DPS. This was underpinned by continued portfolio outperformance of the MSCI UK Quarterly Property Index, building on a long-term track record of upper quartile performance since inception. Rents continued to grow, asset management initiatives are in place, aimed at capturing reversionary income potential, and borrowings are mostly long term and fixed rate.

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.

• Azure Power Global Ltd
• Powerlong Commercial Management Holdings
• Road King Infrastructure
• Yanlord Land

• Ameriprise Financial, Inc. managed to surpass the revenue and earnings expectations of Wall Street.
• Despite external pressures, Ameriprise has successfully guided clients with high-quality advisory solutions and services, yielding positive results.
• Ameriprise manages $587 billion in assets in the Asset Management segment, emphasizing improving flows and investment performance.

• Block, Inc. surpassed the revenue expectations as well as the earnings expectations of Wall Street, elevating profitability expectations for the remainder of the year.
• The quarter saw the highest-ever adjusted EBITDA of $477 million, reflecting a 25% margin on gross profit.
• Square and Cash App played pivotal roles in this success, with Square generating $899 million in gross profit, up 15% year-over-year, and Cash App yielding $984 million in gross profit, a notable 27% year-over-year increase.

• The equity linked securities (ELS) losses related to Hang Seng China Enterprises Index (HSCEI INDEX) could lower dividend expectations for Korean banks in 2024. 
• On average, if H-Index declines below 5,699, then the majority of the investors on these H-Index could start to incur major losses starting 1Q 2024. 
• Amid challenges of lower interest rates expectations and higher losses from ELS products, major Korean banks could be more hesitant on share buybacks and increasing their dividends in 1H 2024.

• Fedbank Financial Services (0702066D IN) raised around US$130m in its India IPO.
• Fedbank Financial Services (Fedbank) is a retail-focused non-banking finance company (NBFC) promoted by The Federal Bank Limited.
• In our previous note, we looked at the company’s past performance and valuation. In this note, we talk about the demand and trading dynamics.

• On November 29, 2023, Blockchain.com announced it is partnering with SoFi so users can migrate their crypto accounts to the Blockchain.com platform.
• Bakkt provides the platform for Blockchain.com in seven states: HI, LA, NJ, NV, TN, TX, and VA.
• The additional SoFi accounts in these states will come onto the Bakkt platform for crypto trading.

• Pru is currently trading below its embedded value, with the valuation assigning a negative value for the group’s new business profits.
• Given its quality franchise across all key markets in Asia and continued strong new business recovery (to pre-Covid levels), this doesn’t seem to make sense at all.
• We would continue underwriting the investment case of Pru in the coming year, with the stock offering significant upside potential.