Financials

• Cuscal Limited (1229Z AU) is looking to raise US$234m in its upcoming Australia IPO. 
• Cuscal is an authorized deposit-taking institution (ADI) in Australia that primarily provides financial infrastructure and payment services in Australia. 
• In this note, we will talk about the positive aspects of the deal.

• LICI has significant 62% market share of new business premiums with 92% coverage of all districts in the country, compared with 72% for all of the private sector combined.
• Long track record of operations since 1956 and strong growth, with recent years seeing exceptional strength in net profit, and with ROE reaching 148%.
• Well maintained SG&A costs with revenue growth exceeding policy benefits growth, with strong investment returns, especially in FY23. 1Q24 also shows continued operational strength, in a hugely under-penetrated market.

• HDFC Life Insurance (HDFCLIFE IN) reported 2Q24/ 1H24 results last week which were decent given the context: moderating VNB Margins amid changing product-mix and growth outlook positive for remaining year.
• The strong growth at the HDFC Bank counter is the key positive, though expected, on back of the HDFC Bank-HDFC merger.
• We value HDFC Life (HDFCL) at ~2.4x FY25e P/EV, implying a ~5% upside to current price. HDFCL is fairly valued in our view.

• Cuscal Limited (1229Z AU) is looking to raise US$234m in its upcoming Australia IPO.
• Cuscal is an authorized deposit-taking institution (ADI) in Australia that primarily provides financial infrastructure and payment services in Australia.
• In this note, we will talk about the not so positive aspects of the deal.

• The NIFTY 50 Index closed last week up at 19751.05, 2nd week up, in synch with the S&P 500 INDEX WEEKLY bounce.
• The index has not moved up much from a price perspective, weak bounce. Resistance levels must be monitored: if the index rallies this week it could pull back next week.
• The trade orientation is to go SHORT once the NIFTY reaches Q2/Q3 OVERBOUGHT resistance levels in the 20167-20230 price area, this week. SHORT Trade at Close is also valid.

Advantage and Aspen both performed well and broadly in line with our expectations. PBT in H124 was £21.4m, 2% above H123. Impairments were better than expected, particularly at Aspen, but costs were affected by the inflationary environment and a more than twofold increase in finance expenses. Profit after tax came in at £16.2m, 5% below H123 as the tax rate rose. The group declared a dividend of 35p/share, in line with H123. S&U also increased its funding facilities by £70m to £280m in anticipation of future growth. Graham Wheeler, CEO of Advantage, is to retire at the beginning of FY24 and will be replaced by Karl Werner, former managing director of Motor, Aldermore Bank and deputy CEO of MotoNovo Finance.

• WFC is seeing net interest income growth rate decelerate sharply from 29% YoY in 2Q23 to 8% YoY in 3Q23. Its deposit costs rose from 23bps to 192bps YoY
• CRE NCO’s rose to USD93m in 3Q23 from reversals in 3Q22. Its CRE non-accruals rose to USD3,863m in 3Q23, vs USD2,507m in 2Q23, vs USD853m in 3Q22
• Mortgage, Auto, CRE loans are down QoQ and YoY. C&I loans, its largest loan bucket are down 0.9% QoQ. Total gross loans declined USD5.5bn QoQ, now down USD13bn from peak.

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.

• Anton Oilfield
• China Jinmao Holdings
• Pan Brothers
• Tata Motors ADR

• An ad hoc S&P/ASX 200 (AS51 INDEX) rebalance will be implemented at the close on 17 October with Light & Wonder (LNW AU) replacing United Malt Group Ltd (UMG AU). 
• The rebalances of Wisdomtree Emerging Markets (DEM US), Wisdomtree Em Small Cap (DGS US) and Wisdmtree Emerg Mkt Ex-St Ow (XSOE US) will be implemented on 18 October.
• There were net outflows from onshore China ETFs with inflows to larger cap ETFs and outflows mainly from the CSI Smallcap 500 Index and CSI 1000 Index trackers.

• The U.S. Big 3 banks delivered strong 3Q23 earnings on the back of record net interest income, despite a lower balance in commercial loans and residential mortgages.
• Credit quality is mostly steady, with credit card charge-offs normalized. The main pain point is in CRE, especially for WFC. 
• The proposed Basel III end game, if materialized, could have a huge impact on JPM and Citigroup in particular.

• The bank is seeing high growth in cash and deposits, with loans in decline, and the composition moving more toward government and corporate loans
• ALM does not appear strong, and without any easy way to reduce operating costs, the bank is now seeing cost/income surge to 74%
• Credit metrics on surface may appear fine, but the 47% QoQ rise in provision costs, suggests to us provisions were cut too much last year, and now there is normalization

• SBI Life leads the Private Life Insurers in India in terms of market share, thanks to exclusive access to Banca channel of the largest bank in the country.
• SBI Life has been one of the best-performing life insurers in terms of growth as well as margin expansion among peers in recent years, which we expect to continue. 
• SBIL is our primary pick in the Indian Life Insurance space with an upside of ~24% and its relatively cheaper valuations offers a margin of safety to cover near-term risks.

• We visit the ‘City of Joy,’ Kolkata, to understand the state of the industry, focusing on microfinance and the status of lenders concentrated in the region.
• Multiple factors argue for a cyclical bottom for lenders operating in West Bengal and Assam. 
• We have been positive on Bandhan Bank Ltd (BANDHAN IN), but it is a play on cyclicality rather than a complete turnaround & transformation of its habits.

• The WisdomTree Emerging Markets SmallCap Dividend Index is a fundamentally weighted index that measures the performance of small cap stocks within Emerging Markets.
• The October rebalance will result in a one-way turnover of ~45% and in a one-way trade of US$1.24bn. There are ~300 stocks with over 1 day of ADV to trade.
• With only 4 trading days to implementation, there could be large moves on stocks with large flows and impact over the next few days.

• The Obligatory Corporate Governance Report Disclosure System will stand as the only source for furnishing trustworthy data on the proportion of listed companies that have genuinely adopted enhanced dividend procedures.
• From a dividend strategy perspective, the companies of primary interest for strategic trading are predominantly those falling under the scope of this disclosure obligation.
• Next year, it’s anticipated that with dependable data, we will have the means to craft dividend strategies aimed at this specific group.

• Central Huijin, the sovereign wealth fund, increased their shareholding of the Big 4 banks in China on 11 October 2023
• Contrary to their last similar action, Huijin will increase its stakes in these banks over the next 6 months period, providing stabilizing force of the stock prices 
• Worries on property sector, LGFV and the overall health of the economy have significantly depressed banking stocks. 

• The WisdomTree Emerging Markets ex-State-Owned Enterprises Index measures the performance of emerging markets stocks that are not state-owned enterprises.
• The October rebalance will result in a one-way turnover of ~16% and in a one-way trade of US$329m. There are 16 stocks with over US$3m to trade.
• HDFC Bank (HDFCB IN) will be added to the index while there will be selling in Taiwan Semiconductor (TSMC) (2330 TT).

• Sun Communities (SUI US) is looking to raise A$165m (US$106m) via selling its entire stake in Ingenia Communities (INA AU).
• With the investor selling down its entire stake, the deal will be a large one for the firm to digest, with shares representing 32.9 days of three month ADV.
• While short covering could potentially provide some support for share price post-deal, the selldown here doesn’t seem particularly well flagged.

• Southeast Asian SME digital finance platform Funding Societies (known as Modalku in Indonesia) has secured US$27 million in debt funding led by AlteriQ Global. 
• Aument Capital Partners (ACP) and Orange Bloom also invested.
• The funds will be channelled via the fintech startup’s tailored financing solutions to support the underserved SME segments in its five markets.

• The Progressive Corporation delivered a disappointing set of results as the company was unable to meet the revenue and earnings expectations of Wall Street.
• At the corporate level, these incidents have increased their combined ratio by 4.5 points, 1.7 points more than the impact catastrophe events had on their combined ratio in the first half of 2022.
• However, there are segmentation opportunities within the new-to-renewal loss ratio performance as not all policy characteristics at new businesses have the same predicted lifetime loss ratio performance.

• The Travelers Companies, Inc. delivered a mixed set of results for the latest quarterly report, with revenues above analyst expectations but below-par earnings.
• The underlying profitability in the Business Insurance segment was particularly outstanding, with the underlying combined ratio improving by 3 points to an excellent 89.4%.
• The Personal Insurance segment saw a 2-point improvement in the underlying combined ratio, reflecting the proactive steps to enhance profitability.

• On 10 October, Kiwoom Securities announced shareholder friendly policies. This could lead to Kiwoom Securities outperforming other major Korean securities companies in the next several months. 
• First, the company will return more than 30% of its net profit to the shareholders in the next three years through dividends and share buybacks/cancellations of treasury shares.
• In addition, Kiwoom Securities plans to cancel all 1.4 million treasury shares it currently holds, representing 5.3% of outstanding shares.

• The results for Bank Of Queensland (BOQ AU) are illustrative of risks for the mainstream banks in Australia and market expectations
• Even with almost all residential mortgage loans, BOQ’s credit costs rose from AUD13m to AUD71m YoY and Pillar 3 data shows mortgage NPLs up nearly 10% in past 2 months
• Net interest income only +6% YoY and -8% HoH, with operating costs +8% YoY and fee income down, there is nothing core holding the P&L together

• We’ve discussed since late Sept increasing odds of a pullback to confluence of support at 4165-4200/the 200-day MA on SPX, and that if this support holds, it’s a normal pullback
• Ongoing market dynamics allow us to be even more confident in our unchanged outlook; 4216 was the low for this pullback, with 4200 getting hit overnight (early Wednesday last week).
• The broad equity market is not yet out of the woods, but as long as the SPX is above 4165-4200 and the 200-day MA, we are bullish.

• Thai Credit Bank PCL (3674238Z TB) is looking to raise US$300m from its upcoming Thailand IPO via selling a mix of primary and secondary shares 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. 
• In this note, we will talk about the not so positive aspects of the deal.

Ahead of interim results covering the six months to 30 September 2023, to be published in November, Picton Property Income has published a portfolio and asset management update. The company expects the continued progress with a range of initiatives, across all sectors, including leasing, asset enhancement and non-core disposal, to be accretive to NAV and income. Ahead of the results, our forecasts are unchanged.

• MADCash, a fintech startup focused on providing zero-interest micro funds to women entrepreneurs in Malaysia, has completed its MYR 5 million (US$1.1 million) pre-series A funding round led by Artem Ventures.
• MSW Ventures and ScaleUp Founders Fund also co-invested.
• The startup will use the funds to enhance its online platform using AI technology, cover operational and marketing expenses, and explore expansion opportunities within Southeast Asia.

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 Hongqiao
• Sunny Optical Technology Group
• Yanlord Land

• At the October rebalance, Free Float Weight (FFW) will be reduced on 284 stocks and increased on 458 stocks. 43 stocks will be removed from Phased Weight Reduction.
• Estimated one-way turnover is 1.77% resulting in a one-way trade of ¥1.45tn. 364 stocks have over 4 days ADV to trade, 97 stocks have over 8 days ADV to trade.
• Over the last 6 months, the stocks with inflows (>US$25m) have outperformed the stocks with outflows (>US$25m) with most of the outperformance coming in the last three months.

• The three-way merger of Kenedix Office Investment Co (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) will be implemented in less than 3 weeks.
• With the market cap of the merged entity at US$4.85bn, there will be upgrades to indices with larger tracking assets and significant passive buying at the time of merger implementation.
• All three stocks have outperformed their peers since merger announcement and over the last month and at least part of the upcoming passive flow is baked into the price.

• India’s inclusion in global bond indexes by JP Morgan is significant, but the expected foreign inflow is relatively small, not likely to impact exchange rates or interest rates significantly.
• The bond inclusion won’t strengthen the Rupee against the Dollar due to limited foreign inflows. A slight reduction in interest rates is expected with JP Morgan’s inclusion.
• Indian bonds offer attractive yields, but rising US bond yields and rupee depreciation could affect foreign investor interest. This development could lead to improved fiscal policies and Indian bond markets.

• Rakuten Bank (5838 JP) (RB),  the online banking arm of Rakuten Group (4755 JP), raised around US$630m in its Japan IPO. Its IPO linked lockup will expire soon.
• RB is the largest internet bank in Japan, by number of accounts. As of Jun 23, it had 14.0m deposit accounts with a total deposit base of JPY9.4tn.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• In this insight, we discuss a pair trade between CTCI (long) and Ruentex Development (short). 
• We believe CTCI Corp is more attractive than Ruentex Development mainly due to different types of business mix and valuations. 
• CTCI’s construction of refinery plants, waste water treatment, and power plants could thrive in higher oil price environment. Ruentex’s construction of residential and commercial buildings could experience lower demand. 

• Thai Credit Bank PCL (3674238Z TB) is looking to raise US$300m from its upcoming Thailand IPO via selling a mix of primary and secondary shares 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.
• In this note, we will talk about the positive aspects of the deal.

• In this insight, we take a look at the Potential ADDs/DELETEs for the BSE SENSEX, 100, and 200 Indices in the December 2023 Rebalance.
• At present, I do not see any changes for the SENSEX index. For the BSE 100 and BSE 200 indices I see six and five changes respectively.
• Some of these changes are different from those expected in my last insight. However, the changes expected in this insight will be my final expectations for the December 2023 Rebalance.

• Fair value gains are the single most important driver of good net profit at King’s Town Bank (2809 TT) in the most recent quarter.
• Monthly revenue figures show strong 179% growth YoY in September, which we can see before any 3Q23 release.
• Credit costs rose from 43bps to 83bps of loans from 1Q23 to 2Q23, which is a significant increase, may be more reflective of underlying operations.

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
• Country Garden Holdings Co

BlackRock Greater Europe Investment Trust (BRGE) manager Stefan Gries seeks high-quality growth stocks that he can hold for the long term. The manager prides himself on being an ‘investor in businesses, not a trader in shares’ and stresses that his selective approach of focusing on the best businesses that are based in Europe means that investors do not need to have a positive view on the European economy to consider the trust. BRGE has a solid five- and 10-year record of outperformance versus the Europe ex-UK market, despite a difficult period in 2022 when growth stocks came under pressure in a rising interest rate environment. The trust also ranks favourably versus the averages of its peers in the AIC Europe sector over the last one, three, five and 10 years.

• The TOPIX October Free Float Weight Review details are out. This is the biggest FFW review of the year. This year, it’s $11.3bn a side. 
• As discussed in Japan Post Bank (7182) – The October TOPIX FFW Adjustment, JPB is the big buy. $2bn/23d of ADV. There is $2bn to buy of trading cos too.
• There are lots of large names to trade in both directions. If you have interests to sell the buys and vice versa, it is good to know the flows.

• In this insight, we provide additional industry analysis of Seoul Guarantee Insurance Corp which is getting ready to complete its IPO in Korea in the next several weeks.
• The IPO of Seoul Guarantee Insurance is an important signal that the Korean government may allow greater competition in the local surety insurance market in 2-3 years. 
• SGIC has promised high dividends. If we assume the IPO price at the low end of the IPO price range (39,500 won), this would suggest a dividend yield of 8%.

• The HSI INDEX has fallen for 2 more weeks since our last insight – current CC is =-5, and Q3 support was breached last week, the index is clearly OVERSOLD.
• If the HSI bounces this week, it could be an occasion to go SHORT – take note that the index could take 3 weeks to rally before rolling down again.
• The target price area where to enter SHORT trades,to benefit from a continuation of the downtrend is: 17598-18784.

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We assess InRetail RE’s ESG as “Adequate”, in line with its Environmental, Social and Governance scores. Controversies are “Immaterial” and Disclosure is “Adequate”.
• We have based our assessment on parent InRetail Peru Corp’s sustainability reports, which disclose ESG-related information on a consolidated basis, with some details provided for its (bond-issuing) credit pools InRetail RE and InRetail Consumer.

• Juniper Hotels (6593708Z IN) is looking to raise up to US$217m in its upcoming India IPO. The deal will be run by JM Financial, CLSA and ICICI Securities. 
• 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. 
• The company is jointly held by Saraf Hotels and its affiliate, Juniper Investments and Two Seas Holdings (an indirect subsidiary of Hyatt Hotels Corporation).

• Foreign shareholding in HDFC Bank (HDFCB IN) has dropped to 59% and the HDFC Bank (ADR) (HDB US) premium to the local line has dropped to 7%.
• HDFC Bank (HDFCB IN) has underperformed its peers and the local indices on expectations of lower NIMs and higher NPAs.
• There will be passive buying in HDFC Bank in December and March. Further passive buying will require foreign room to increase above 25% which will first require foreign investor selling.

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.

• Greentown China
• Tata Motors ADR

• Haitong International Securities Group (665 HK) announced a pre-conditional privatisation offer from Haitong Securities Co Ltd (H) (6837 HK), the controlling shareholder, at HK$1.52, a 114.1% premium to the undisturbed price.
• The pre-condition related to regulatory approvals are a formality as Haitong Securities’ largest shareholder is the Shanghai SASAC. The offer price is final.
• The key conditions are approval by at least 75% of independent shareholders (<10% of independent shareholders rejection) and headcount test. The highest HKEx takeover premium in a year facilitates approval.  

• When Haitong International Securities Group (665 HK) was suspended on the 27 September, a punchy premium was expected if controlling shareholder Haitong Securities Co (600837 CH) was launching an Offer. 
• And that is what we got: a $1.52/share Offer, by way of a Scheme, and a 114% premium to last close. Terms have been declared final.
• This is a pre-conditional Offer, requiring approvals from approvals from Shanghai SASAC, CSRC, NDRC, and the Shanghai branch of the PBOC.