Financials

• Cost at PNB are high and rising, a major drag on its ROA and RORWA, which largely offsets better credit metrics.
• There are many market positives in India banks, but relative to all large peers, Punjab National Bank (PNB IN)has the lowest RORWA
• There is no LDR expansion at PNB. NIM is languishing. Its high 20% govt loans/total loans is high, with 2 peers’ even higher, but better returns.

• People’s Insurance (PICC) (1339 HK) is currently trading at an all-time low implied stub.
• Stripping out PICC’s 68.98% stake in PICC Property & Casualty H (2328 HK), the market is assigning HK$35.6bn less for its steady and profitable life/health insurance stub ops, year-to-date. 
• PICC is outperforming the HSI. It’s just that PICC P&C is on a hot streak, possibly driven (pun intended) by EV insurance. 

• Tian Tu Capital (1390587D CH) raised around US$144m in its Hong Kong IPO.
• Tian Tu Capital (TTC) is a private equity/venture capital investor and fund manager with a focus on Chinese consumer brands and companies.
• We have covered various aspects of the deal in our previous notes. In this note, we will talk about the demand and trading dynamics.

• SBI Holdings (8473 JP) may not be the easiest company to analyze with its many pages of affiliates, but at the least, it’s profit momentum is strong.
• Securities Group profit is key to the company where growth is excellent in earnings and in the number of new accounts, across many businesses.
• Its two banks in Japan are doing well, growing faster than others, but still SBI Holdings (8473 JP) is more of an alternative financial company to a traditional bank.

• New World Development (17 HK) nudges an all-time low P/B and implied stub; as the privatisation of NWS Holdings (659 HK) moves gradually forward. 
• Preceding my comments on NWD/NWS are the current setup/unwind tables for Asia-Pacific Holdcos
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• Today, Monex Group Inc (8698 JP) and NTT (Nippon Telegraph & Telephone) (9432 JP)‘s NTT Docomo announced a Capital and Business Alliance Agreement. It is a complicated deal.
• Monex GROUP will create a holdco which owns Monex Inc (the broker) and sell 51% to Docomo. Docomo will consolidate. Monex Group will own 49% as an equity method affiliate.
• Monex GROUP will then double its dividend, maybe buy back shares, and expects to grow as Docomo pushes and Monex invests. But what remains is a mixed bag.

• IDFC First Bank Limited (IDFCBK IN) is looking to raise up to INR30bn (US$361m) via a Qualified Institutional Placement (QIP). 
• The deal is a relatively small one to digest at 6.3 days of three month ADV and 4.9% dilution.
• In this note, we will talk about the placement and run the deal through our ECM framework.

The Biotech Growth Trust (BIOG) now has two co-managers, Geoff Hsu and Josh Golomb, at global healthcare specialist OrbiMed Capital. The trust has experienced a difficult period of relative performance due to the managers’ approach of focusing on emerging (smaller-cap) biotech stocks rather than large-cap biotech businesses, because of their higher growth prospects. This strategy has been out of favour in an uncertain macroeconomic environment. Hsu and Golomb highlight attractive valuations in the biotech sector, which are not reflecting favourable industry fundamentals, including high levels of innovation across a range of therapeutic areas and an acceleration in mergers and acquisitions (M&A) ahead of an upcoming patent cliff.

• Bandhan Bank Ltd (BANDHAN IN) has been an underperformer among Indian banks since the start of the COVID-19 pandemic due to asset quality issues in its core Group Microfinance portfolio.
• Bandhan Bank’s leading position in the microfinance sector, strong operating margins, strategic de-risking, self-sustaining capital base, and cheap relative valuations make it a value bet with strong positive re-rating potential.
• We value Bandhan Bank at 2.1x FY25e P/B in the base case, implying a 44% upside. On the other hand, we also discuss the risks to the thesis in detail.

• Midsize residential JREIT Daiwa Securities Living (8986 JP) (“DSLIC“) launched a follow-on equity offering to partially fund their recently-announced acquisitions.
• The primary offer quantity will be 139,047 units and there will also be an over-allotment quantity of 6,953 units.
• In this insight, we take a closer look at the details of this offering and the historical performance of DSLIC’s previous follow-on equity offerings.

IP Group has built a commendable portfolio of businesses developing breakthrough technologies, with an aggregate value of more than £200m at end-June 2023 (c 16% of IP Group’s total portfolio value), mostly across four key focus areas: applied AI, next-generation networks, human-machine interface and future compute. Importantly, around 90% of the deeptech portfolio (by fair value) has already started to generate revenue. Both of its two most valuable holdings, Featurespace (adaptive behavioural analytics for fraud and financial crime detection) and Garrison Technology (which provides a remote web browser and related hardware) have revenues in the tens of millions sterling and growing quickly.

• Shriram Finance (formerly Shriram Transport Finance) now includes two major subsidiaries in its numbers, in the listed entity, driving up AUM, ROA and net profit.
• There is strong latent demand in India for pre-owned commercial vehicles and passenger vehicles, where SHTF focuses, with a long track record of good profit, ROA, NIM.
• Underwriting seems strong given stage 3 and stage 2 loan data, and with funding cost improvements, from distribution of liabilities, good scope for profit growth, ROA, NIM.

• With the potential corporate action (see additional reading below) there is more interest in Haitong Securities but operationally it does not appear positive, for many reasons
• The company is seeing worse revenue growth in asset management, brokerage and investment banking, while its Haitong Bank can see far higher credit costs
• Total operating costs are now 63% of revenue, tax rate is a lot higher, litigation risks seem to be oversized, with potential impact to costs

• The Brand-Spanking New (8 weeks old) A-H Monitor has tables, charts, measures galore to track A/H premium positioning, southbound and northbound positioning in pairs over time, etc.
• We used to do it. We brought it back better, with lots of cool interactive tables, and charts, heat maps, and comparative data. And 47 Trade Recommendations.
• The last 7 weeks (since the start of the new Trcker and Portfolio 8 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%.

• UOB can be harder hit than peers due to its greater SME focus. SME’s may be less able to absorb or pass on higher costs, or manage worse demand.
• Domestic credit growth is at -4.1% in July YoY, from -3.3% YoY in June and from 2.1% in May. This can represent risk-aversion, worse demand, deteriorating credit metrics in SG.
• UOB’s Greater China lending is SGD52bn, nearly identical to Thailand, Malaysia combined. Building & Construction NPLs rose from SGD1.1bn to SGD1.4bn HoH to 2Q23.

• The S&P/ASX 200 INDEX is trading below the Q3 WEEKLY support at 7072 (OVERSOLD). It closed down 2 weeks in a row (CC=-2) and this week is also down (CC=-3).
• As previously discussed the index is stuck in a range since August 2021, but from a short-term tactical viewpoint it could bounce soon, still remaining in range.
• Current support range is 7072-6900, there is a good chance to see a bounce from this area within 2 weeks.

• This is a special one-time report on DLocal, a company that has been a subject of intense scrutiny and intrigue, especially after reports by Bloomberg News about the company considering various future paths, including a potential sale.
• The speculation of its sale has set the financial markets abuzz, leading to a noticeable uptick in the company’s shares.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• Haitong International Securities Group (665 HK) entered a trading halt pending the release of an announcement under the Hong Kong Code on Takeovers and Mergers on 27 September. 
• Bloomberg reported that Haitong Securities Co Ltd (H) (6837 HK), the controlling shareholder, plans to buy the remainder of Haitong International to stem its losses.
• Privatisation through a Bermuda scheme involves the headcount test, so a decent premium is required – privatisation precedents suggest HK$1.08-1.13 per share offer (52%-59% premium to last close). 

• This is the brand spanking new Quiddity HK Connect SOUTHBOUND Monitor. We work off the same presentation as the A/H Premium Monitor and Mainland Connect NORTHBOUND Monitor.
• The data on liquid names is presented for 5 days and four weeks and anything seen can be ranked in tables or selected and charted (names, sectors, outperformance, etc).
• We like the nifty interactive tables+charts (please play with them!) and we welcome feedback. This 4-day week saw HKD 14.0bn+ of net buying. That makes 11 weeks of net inflows.

• The S&P 500 INDEX is OVERSOLD, WEEKLY and MONTHLY. There will be a LONG reversal soon, and it should be a MONTHLY reversal (at least 1 month uptrending).
• The WEEKLY model is telling us the market is oversold, but there is a possibility of having 1-2 more weeks down, that should be the end of the correction.
• Go LONG Global Equities and pay attention to the MONTHLY (4203) and WEEKLY (4077) supports: if the index reaches these supports it will be very oversold.

• Seoul Guarantee Insurance (031210 KS), a leading guarantee provider in Korea, is pre-marketing an IPO to raise up to KRW362 billion (US$272 million).
• We previously discussed the IPO in Seoul Guarantee Insurance IPO: The Bull Case and Seoul Guarantee Insurance IPO: The Bear Case. 
• In this note, we look at the syndicate’s valuation methodology. Our valuation analysis suggests that the IPO price range is unattractive, and we would pass on the IPO.

• The SBI Holdings (8473 JP) takeout of SBI Shinsei Bank (8303 JP) was opportunistic – done at a price SBI Shinsei’s Board considered not reasonable. Until it changed its mind.
• I had thought appraisal rights a great trade. I also thought it a good trade to own the back end, but that involved one holder putting ¥55bn on the table. 
• Activist Murakami-san’s S Grant Corporation has done that. It will own one share of 8 post-consolidation on Monday. They are now equal shareholders with the govt entities.  Wow.

• Real estate consultant/developer/speculator Kasumigaseki Capital (3498 JP) announced Friday that it would move from TSE Growth to TSE Prime on 6 October. 
• The stock was on the list of top potential candidates in TOPIX Inclusions: Who Is Ready (Sep 2023) (and has been for nearly a year). It’s a good list.
• This event leads to a TOPIX inclusion on 29 November. Analysis below.

• Absolute value of index-linked assets is the ultimate measure of market share, but it misses an important aspect of the ESG-related indexing market – i.e., relative market share growth.
• A category of ESG index providers that leads vis-à-vis relative growth is exchange-owned ESG index providers, a group which currently accounts for US$46.3 billion in indexed assets.
• Asian exchange-owned ESG indexers are the clear leaders in that subcategory, with Singapore Exchange (SGX SP) and Korea Exchange leading that cohort with double-digit growth.

• kopi-C with Thakral’s CEO: “We’ve re-invented ourselves from VCRs to Drones” With the faster pace of development in sectors nowadays, adaptability and willingness to learn from others are crucial in business, says Thakral’s CEO Inderbethal Singh Thakral Building on the momentum, Thakral has invested in Skylark Drones, a start-up specialising in integrating drones in workflows in different industries.

• Our thesis has not changed even though the Federal Reserve (the Fed) appears to be more hawkish than many investors thought.
• We expect countries with lagging rate cycles, such as China and Thailand, to suffer capital outflows and rising yields.
• In Asia, the spotlights remain on Indonesia and India where macroeconomic fundamentals continue to improve.

• We maintain that Bank of Baroda is the stand-out value in this peer group of Indian banks, for its modest valuations, healthy ROE and improving pre- and post-provision returns
• We retain HDFC Bank as our higher quality bank pick, with its strong balance sheet, especially on NPA coverage, and potential for improved return from the HDFC merger
• Axis bank remains a name to watch, although valuations are not compelling; we remain negative on State Bank of India, and we are also cautious on ICICI Bank

• The Nikkei 225 INDEX closed September down at 31857.62, CC=-3 (3 months down). Did not double-bottom at August’s lows (31674), but is starting to be OVERSOLD MONTHLY (time perspective).
• A new Market Reversal Matrix Seasonality model is hinting that October 2023 probably will not see a rally/reversal, but just below-average gains (if any).
• One possible scenario (due to concomitant WEEKLY OVERSOLD conditions) is to see the Nikkei up early in October, then down again, closing the month with small gains or a loss.

• Intercontinental Exchange, Inc. had a strong quarter, with adjusted earnings per share of $1.43, an increase of 8% over the prior year.
• In the Exchange segment, net revenues totaled $1.1 billion, up 9% over the prior year.
• Also, because of these improvements, they have seen a roughly 60% increase in energy volume performed through their ICE Chat platform over the first half of this year.

• M&T Bank Corporation delivered an all-around beat in the previous quarter.
• The quarter’s net income was $867 million, a 24% increase over the previous quarter.
• Trust income dropped from $194 million in the first quarter to $172 million in the most recent quarter.

• Seven Bank Ltd (8410 JP) is the 7-11 convenience store bank, which focuses on ATM fees more than loans, so its cash is JPY952bn vs loans JPY35bn at FY23.
• Loan growth in 1Q24 is 7% YoY, one of strongest in Japan and it is accelerating in recent periods, alongside 8-9% growth in ATM transactions, retail accounts
• Exceptionally strong ATM transactions abroad at 92.4m in 1Q24 vs 66.5m in 1Q23, including US, Indonesia and Philippines.

• ICICI Securities Ltd (ISEC IN) Turbulent Journey: From a disappointing IPO to a challenging delisting attempt.
• Delisting Plan and Shareholder Discontent: ICICI Securities Ltd (ISEC IN)  seeks to become a wholly-owned subsidiary of ICICI Bank Ltd (ICICIBC IN), facing resistance from minority shareholders.
• Uncertain Future: The outcome of the delisting hinges on the decisions of institutional shareholders like Life Insurance of India (LICI IN)  and the board’s actions.

• Seoul Guarantee Insurance (031210 KS) is looking to raise around US$270m in its Korean IPO.
• Seoul Guarantee Insurance (SGI) is a guarantee insurance firm operating predominantly in Korea.
• We have looked at the firm’s past performance and undertaken a peer comparison in earlier notes. In this note, we discuss our thoughts on valuation.

• Block, Inc. managed to surpass analyst prospects in terms of revenue as well as earnings, with gross profit reaching $1.87 billion, marking a 27% increase year-over-year.
• Turning to the performance of Square and Cash App, Square achieved $888 million in gross profit, reflecting an 18% increase year-over-year.
• The Buy Now, Pay Later (BNPL) platform contributed $84 million of gross profit to both Square and Cash App in the second quarter, with GMV reaching $6.4 billion, a 22% year-over-year increase.

• Haitong International Securities Group (665 HK) (HITSEC) is suspended pursuant to Hong Kong’s Code on Takeovers and Mergers.
• The rumour doing the rounds is that Haitong Securities Co Ltd (A) (600837 CH) (HSC) may take private its 73.4%-held Hong Kong-listed investment banking unit.
• HITSEC’s share performance since 1Q18 has been tragic. Financials have been dire since 2H20.  But expect a punchy premium if HTS does seek to take HITSEC private. 

• Edelweiss reported a strong Q1FY24 earnings led by its asset management and ARC businesses. In particular, the asset management business is scaling up well for Edelweiss.
• In the ARC business, Edelweiss saw strong recoveries during Q1FY24. Also, gradually, Edelweiss is scaling up the retail ARC business.
• The credit business continues to see reduction in the wholesale loan book AUM. Asset quality remains stabilized and the co-lending model is helping Edelweiss to grow well.

• HKEX (388 HK) announced strong results, defying some worsening trends in volume, new listings, with quarterly profit growth rising from 11% to 28% to 34% YoY from 4Q22 to 2Q23
• Cost controls have been key to 31% 1H23 profit growth, with 0% growth depreciation, amortization, financing costs, and taxation, which can continue to support profit delta
• Revenue growth of 18-19% YoY in each of the past 2 quarters is partly driven by new revenue streams, which can offset some weaknesses in traditional metrics

• Q1 tends to be a seasonally weak quarter for the exhibition business (BEC) and as a result, the revenues declined on a QoQ basis.
• However, in YoY terms, BEC revenues grew 75%+ and exceeded pre-COVID levels, i.e. the revenues are up 7% vs that in Q1FY20.
• The IT Parks business saw marginal improvement of 1% QoQ growth suggesting that the occupancy level is steady. Occupancy is 97% in Tower 4 and 82% in Tower 3.

• Of the six Malaysian banks screened, we keep value plays RHB Bank Bhd (RHBBANK MK) and CIMB Group Holdings (CIMB MK) on the buy list
• RHB Bank is our top pick for its second from top post-provision profitability, for its high CET1 ratio not inhibiting its ROE, and for its undemanding PE and PBV valuations
• CIMB remains our deep value pick with its solid CET1 ratio and premium pre-provision returns, despite its weaker credit quality; its modest valuations include a very attractive PEG ratio

Custodian Property Income REIT (CREI) continues to generate stable underlying earnings, fully covering DPS and providing an attractive 6.5% yield. Total return is benefiting from a stabilisation of property yields. Average rental values have continued to increase and, combined with asset management opportunities and a strong balance sheet, this provides strong ongoing support for the company’s enhanced income strategy.

Regional REIT’s (RGL’s) post-pandemic recovery in new lettings paused in H123, as occupiers adopted a cautious ‘wait and see’ approach, although rents increased and the strong ‘return to the office’ supports RGL’s expectation that leasing will accelerate. With DPS lowered to match reduced income prospects, the shares have fallen sharply, maintaining a sector-high dividend yield. Including asset sales focused on low-income properties, our forecasts show the rebased dividend to be fully covered and gearing reduced.

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.

• Agung Podomoro Land