Financials

• 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

• On 31 August, I published Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks. It’s up 40.6% since the day after I wrote, reasons unclear.  
• TOPIX Banks Index is up 10.4% since then, with post-BOJ meeting price movements indicating a kind of momiai.
• For Rakuten Bank, while growth means it may not be “expensive” it is no longer dirt cheap. And I cannot identify the culprit, so time to take profits. 

• 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 Yantai North Andre Juice H (2218 HK).

• Tian Tu Capital (1390587D CH) is looking to raise up to US$253m 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.
• In this note, we will look at the updates since our last note and share our thoughts on valuation.

• IDFC First Bank Limited (IDFCBK IN) plans to launch a Qualified Institutional Placement (QIP) of up to INR30bn (US$362m) in Oct 23, as per media reports. 
• On 22nd Sep 23, IFR had reported that IDFC First Bank is looking to launch a Qualified Institutional Placement (QIP) to raise up to INR30bn (US$362m) in Oct 23. 
• In this note, we will talk about the possible placement and other deal dynamics.

• JPEX may be the biggest financial fraud in Hong Kong’s history, impacting government’s ambition to become a global centre for virtual assets
• SFC appeared to have no direct jurisdiction and powerless in the protection of investors in the JPEX case
• Web 3.0 and Virtual Assets are rapidly evolving, regulators may need to take a more dynamic approach in regulating such activities

• In this insight, we take a look at the names leading the race to become ADDs/DELETEs for the DAX, MDAX, and SDAX Indices in the September 2023 Rebalance.
• I currently do not see any index changes for DAX but Fresenius Medical Care & (FME GR) and Zalando (ZAL GR) are close to being an ADD and DELETE respectively.
• I see one change for the MDAX index. Separately, there could be up to three SDAX change in the run up to the December 2023 review including one intra-review change.

• The KOSPI 200 INDEX closed down last week (CC=-1) and is currently down this week as well (CC=-2 to be confirmed on Friday), currently approaching Q3 support at 324.
• Based on Market Reversal Matrix time/price models, if this week the KOSPI closes down at <=324, the index will have a >75% probability to close the next week up.
• Going LONG is not without risk at this stage: this pattern is not bullish, the correction could reach <300, based on the models, but the index is getting OVERSOLD.

• Bajaj Finance Ltd (BAF IN), one of India’s largest NBFCs, aims to raise up to US$1bn via a QIP.
• Bajaj Finance is an NBFC offering auto, consumer and home loans, along with other products as well.
• In this note, we talk about the deal dynamics and recent updates.

• Onewo (2602 HK) (OST) had raised around US$730m in its Hong Kong IPO in Sep 2022. Its one-year lockup is set to expire soon.
• OST is a property management service provider in China, primarily owned by China Vanke (H) (2202 HK).
• In this note, we will talk about the lock-up dynamics and updates since our last note.

Lucror Analytics Morning Views comprise our fundamental credit analysis, opinions and trade recommendations on high yield issuers in the region, based on key company-specific developments in the past 24 hours. Our Morning Views include a section with a brief market commentary, key market indicators and a macroeconomic and corporate event calendar.

• Vedanta Resources
• Yuexiu Property

• 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 in earlier notes. In this note, we undertake a peer comparison.

Triple Point Social Housing (SOHO) reported solid H123 results. With borrowing costs fixed, growth in indexed rental income partly offset the impact of credit loss provisions against its two unperforming tenants. Progress is being made in resolving these issues, and as there is no read-across to the wider portfolio, we forecast full dividend cover through FY24. Meanwhile, with the demand for specialised supported housing remaining strong, SOHO has entered a partnership with one of the leading providers in the sector.

• Fee income is down 33% in the most recent quarter which may have prompted the bank to realize gains up 63% in the period to preserve profit growth
• Quality of earnings is not strong, with more than half of the bank’s pre-tax income delta driven by realized and unrealized gains, with credit cost decline the other key driver
• Loss NPLs are now 26% of total NPLs, from 11% a few year ago, suggesting worsening credit metrics. Declining credit costs seem at odds with economy, NPL distribution.

• IREDA (1845911D IN) is looking to raise at least US$100m in its upcoming India IPO. The deal will be run by IDBI Capital, SBI Capital and Bob Capital.
• Indian Renewable Energy Development Authority (IREDA) is a wholly owned Government of India (GoI) enterprise under the administrative control of the Ministry of New and Renewable Energy (MNRE). 
• It is registered with the Reserve Bank of India (RBI) as a Systemically Important Non-Deposit-taking Non-Banking Finance Company (NBFCND-SI), with Infrastructure Finance Company (IFC) status.

• The markets closed below our stop of 19,900, primarily driven by weakness in global market sentiments. 
• For HDFC Bank (HDFCB IN) while the street seems to be worried about asset quality, trends in whistle-blower complaints and the timing of the merger also raise alarms.  
• Other names discussed this week include Delta Corp Ltd (DELTA IN) and Godrej Properties (GPL IN).  

• The Brand-Spanking New (7 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 and brought it back better. There are lots of cool interactive tables, and charts, heat maps, and comparative data. And 47 Trade Recommendations.
• The last 6 weeks (since the start of the new Monitor and Portfolio 7 weeks ago) have seen net portfolio performance of +0.50%, +1.35%, +0.14%, +0.47%, +0.15%, +0.12%.

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.

• JSW Steel Ltd
• Redsun Properties Group Ltd

• On September 21, a debt restructuring agreement was reached with debt holders of Sunac China, in which part of the agreement included Sunac Services shares.
• The debt restructuring for Sunac China should provide a positive feedback loop to the sentiment and fundamentals of Sunac Services.
• The core property management business (86% of sales) grew 8% yoy in 1H23, with total gross floor area growing by 12% yoy. 

• PBOC and NAFR included Bank of Nanjing in its latest D-SIBs list, increasing the total D-SIBs to 20
• 13 benchmarks were used to assess the D-SIBs using 1H23 data
• All D-SIBs fulfilled their additional capital requirements as of 1H23, but the buffer is wearing thin for some especially in view of the difficult economic environment 

• QBE Insurance is seeing a deteriorating combined operating ratio, in part due to CAT events and it unclear to us how underwriting, exposures will immediately improve
• Net profit is nearly static, USD750m in FY21, USD770m in FY22. USD400m profit in 1H23 may note repeat in 2H23, due in part to USD700m more debt in interim.
• North America net earned premiums are seeing far more distribution toward Commercial, where the COR is especially poor at 109% in 1H23

• Our overall outlook remains largely unchanged; we remain bullish on global equities as long as the MSCI ACWI (ACWI-US) is above major $93 support.
• We also discussed that if the 10-year Treasury yield remains below 4.35% and the DXY is below $105.70, we would continue to expect $93 support on ACWI-US to hold.
• The 10-year Treasury yield is attempting to break above 4.35% and this could create a problem for ACWI-US; we will continue to monitor closely.

The Brunner Investment Trust’s (BUT’s) two co-managers, Christian Schneider (deputy CIO global growth) and Julian Bishop (global equity specialist) are supported by deputy managers Marcus Morris-Eyton (European equity specialist) and Simon Gergel (CIO UK equities). BUT can be considered as a global equity fund for all seasons given its steady trend of outperformance in recent years despite volatile share prices and changes in stock market leadership. The trust stacks up well in both absolute and relative terms with double-digit annual NAV total returns over the last decade and above-average returns within the AIC Global sector over the last one, three and five years. BUT’s dual mandate of income and capital growth means it should appeal to a broad range of investors.

• Champion REIT is facing multiple headwinds, including weakness in its office building due to upcoming office supply
• Its retail asset Langham is doing better post COVID, but not enough to offset the weakness in office
• DPU may continue to decline over time. Therefore we stay bearish until we see turn-around signal

• Bank Mandiri (BMRI IJ) continues to positively surprise on loans, NIMs, and credit costs, with a consequential improvement in returns, only non-interest income seeing a slowdown but likely temporary.
• Digital banking initiatives through Livin’ and KOPRA continue to grow and help the bank drive higher CASA and fee income whilst reducing costs, with smart branches also improving returns.
• Bank Mandiri remains a core holding as a proxy to the Indonesian economy with its digital initiatives driving higher returns. Valuations remain attractive on 2.2x FY2023 PBV with 20% ROE.

• The bank expects its 2 new for 1 old stock split to be done on 10 October
• Total shares should move from 18.6tr to 37.3tr after the stock split
• Compared with peers, BBNI has low market cap/assets, good ROA

• Coinbase sees the looming opportunity in the global crypto futures & derivatives market. It’s positioning itself to capitalize on a market that’s been hollowed out over last 12-18 months.
• We explore 3 key areas of Coinbase’s business that we believe Wall Street is overlooking. These include: Coinbase International, ETF Spot approvals, and Base Chain
• We estimate Coinbase has the potential to realize additional top-line revenue in the range of 15-20% on the low-end to +150% increase on the high-end over the next few years.

• SignatureGlobal India Pvt Ltd (1468641D IN) IPO will go live for subscription this week. 
• The company is one of the renowned players in the NCR and Haryana in the affordable and lower mid segment housing.
• The company has grown well in the recent times, however there are certain forensic takeaways such as poor health of subsidiaries, related party transactions, etc.

• Remitly (RELY) offers remittances services with 5m active customers, in over 170 countries, with 4 billion bank accounts, and 4,800 corridors, mostly to persons in US, Canada. 
• Revenue growth is strong at 49% YoY in 2Q23 and averaging 43% YoY for the preceding 5 quarters, with active customers up 474,000 in 2Q23 QoQ vs 371,000 in 1Q23
• Costs remain high, GAAP earnings are in loss, but this is due to stock-based compensation; adjusted EBITDA is now USD20.4m in 2Q23 from an adjusted EBITDA loss YoY

• 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).
• In Seoul Guarantee Insurance IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The bear case rests on ongoing market share losses, weak performing credit insurance business, a 1H23 increase in the combined ratio and a decline in ROA/ROE metrics. 

• Active clients increased 6.5% to 46,627 [roughly 30% of total], despite challenging domestic markets. Note: this metric surged 27% sequentially
• 82% of client activity focused on international markets/products, highlighting the diverse, value-added nature of Hywin’s offerings
• Transaction value of overall wealth products declined -9%, asset-backed products down -5.8%, reflecting weak equity & property markets

• China further expanded the use of the digital yuan by enabling consumers to use it to pay utility bills. 
• The digital yuan, also known as the e-CNY, is a legal currency in digital form issued by the central bank.
• The People’s Bank of China (PBOC) recently updated its e-CNY mobile wallet app, adding new features that allow users to pay water, gas, electricity, heating and phone bills with the digital yuan. 

• Major pressure on net interest income where deposits are growing much faster than loans in the past six months, especially with term deposits, is creating major NIM contraction
• Earnings may disappoint based on weakening net interest income, weakening margins, and where the overlay is far higher credit costs; from KRW17bn to KRW59bn in 2 yrs to 2Q23
• Operating costs are not helping to support ROA and with a new virtual bank investment in Thailand, costs can remain high; fixing operational risks can also keep costs high.

• 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.
• In this note, we will talk about the not so positive aspects of the deal.

• This is our first report on insurance and reinsurance brokerage player, Arthur J Gallagher & Co.
• The company surpassed Wall Street’s revenue and earnings expectations in its latest quarterly result.
• The company posted revenue and organic growth for its risk management and combined brokerage segments.

• SBI Sumishin Net Bank (7163 JP) raised around US$370m in its Japan IPO in Mar 2023. Its IPO linked lockup is set to expire on 24th Sep 2023.
• SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• The Allstate Corporation delivered a mixed result in the recent quarter, with revenues above market expectations but failed to surpass the analyst consensus regarding earnings.
• Property-Liability earned premium surged by 9.6% compared to the prior year quarter due to increased average premiums in auto and homeowners insurance, offset slightly by a reduction in policies in force.
• In this report, we have carried out a fundamental analysis of the historical financial statements of the company.

• The NIFTY Index closed up 3 weeks in a row, then fell on Monday, but current pattern looks bullish according to MRM models, we expect a modest correction (if any).
• Usually (69% of the times) this pattern brings a pullback that does not last for more than 1 week, then the following week the index closes up.
• Broadly speaking buy-the-dips support for this week is found between 20050 and 19900. If the correction becomes multi-week, it can go much lower, we will re-assess in that case.

• It was reported in numerous local media that the sale process of Lotte Non Life Insurance Co (000400 KS) could start in October 2023.
• There are four companies including Shinhan Financial (055550 KS), Hana Financial (086790 KS), Woori Financial Group (316140 KS), and Kyobo Life Insurance that may be interested in acquiring Lotte Non-Life Insurance. 
• Minority shareholders are not likely to benefit from this potential huge management M&A premium of Lotte Non-Life Insurance. 

• Integral Corporation (5842 JP) priced its IPO at JPY2,400 per share to raise gross proceeds of US$122 million. The shares will start trading on 20 September.
• We previously discussed the IPO in Integral Corporation IPO: The Bull Case, Integral Corporation IPO: The Bear Case and Integral Corporation IPO: New Price Range Is Tempting.
• The market sentiment on the sector has steadily improved since the prospectus’ release. Our analysis suggests that the IPO price remains attractive.

• The Nikkei 225 INDEX is getting WEEKLY OVERBOUGHT after just +1 week up. Rallying further during the next 2-3 weeks may be hard, it could stall or fall.
• If the index rallies further this week, it could fall the following week. Alternatively it could stall this week and rally the following week/s, but OVERBOUGHT status won’t go away.
• 34256 is the Q3 resistance target on CC=+3, this should be a hard barrier to breach. An earlier barrier is Q3 resistance on the Gen.Pattern Boxplot = 33835.

• In this insight, we conducted fundamental analysis on Longfor, which has always been perceived as the best Chinese developer among all private players
• However, since Chairlady resigns due to personal reasons, and given the policy clamp down, we think Longfor may not be able to sustain its competitive advantages over time
• Longfor was trading at a premium to CRL and COLI, we believe the valuation premium should narrow over time.  On a relative basis we are not positive on Longfor

• 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).
• The IPO price range is KRW39,500-51,800 per share. The bookbuilding will run from 13 to 19 October, with pricing on 25 October. The shares will be listed in November.
• The bull case rests on a leading market share, solid premium growth, the highest industry margins, a high solvency ratio and a high dividend payout. 

• 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.
• In this note, we will talk about the positive aspects of the deal.

• Integral Corporation (5842 JP) raised around US$123m in its Japan IPO.
• Integral is a private equity management company advising funds that invest in both listed and unlisted companies in Japan, with a focus on mid-sized companies.
• In our previous notes, we looked at the company’s past performance and valuation. In this note, we talk about the trading dynamics.

• During 1H24 CGF expects to sell its bank for ~AUD36m which could include a AUD11m gain and allow to free-up bank capital of around AUD40-50m.
• Return on capital is now at the highest it has been since FY10 at 6.2% with a substantial 160bps increase in normalized ROE in 2H23 YoY to 13.1%
• 85% market share of annuity FUM from 50% about 10 years ago, operating in system with strong forced savings in superannution funds now at AUD3.5tr up 91% over 10 yrs.

• Last week, the trio of DBS, UOB and OCBC averaged 3.4% gains, bringing their average 3Q23-to-date total return to 8.7%.
• The 3Q23-to-date has seen the trio of DBS, UOB & OCBC report combined 2Q23 Net Interest Income (NII) of S$8.26 billion, marking the third-consecutive quarter that combined quarterly NII has been above the S$8.0 billion mark.
• DBS Group Holdings (DBS), United Overseas Bank (UOB) and Oversea-Chinese Banking Corporation (OCBC) also moved in tandem averaging a 4% gain on the week.

• Bank Negara Indonesia (BBNI IJ)continues to focus on growing the quality end of its corporate loan book, and de-risking its smaller sized commercial loans, whilst growing consumer exposure.
• The bank’s digital initiatives remain core, with strong growth in mobile transactions by value as well as the number of users, whilst BNI Direct is driving digitisation of business customers.
• Hibank has launched, growing FMCG related loans fast, with the help of Mayora Indah. BNI valuations remain attractive, with the bank trading on 1.2x FY2023E PBV with 15% ROE.