Financials

• Bajaj Finance (BAF) reported a strong Q1FY24 earnings, led by an all-time-high quarterly AUM growth of INR 22718cr. With this, BAF has upgraded its FY24 AUM growth guidance to 29-31%.
• AUM growth was aided by the highest ever new loans in a quarter. New loans booked at 9.94mm in Q1FY24 were up 34% YoY and 31%+ QoQ.
• Opex-To-NII has come down to 34.0% vs 35%+ earlier, led by operational leverage and deceleration in investments. This has helped the ROE to jump to 24.0% vs 23.1% YoY.

• Japan online retail stock broker, better average daily volume and rising new accounts
• Monthly data shows strong July average daily volume after an exceptional June
• Granular data on monthly new accounts is strong, now  at +31% in July YoY

• Rakuten Group (4755 JP) announced last month that its consolidated subsidiary, Rakuten Securities (RAKUSEC JP), has applied for a listing on the Tokyo Stock Exchange.
• In the last eight quarters, the Securities business has experienced more than 100% profit growth, thanks to linear revenue growth while costs remained relatively stable.
• The previous private market valuation of ¥400bn implies a PE ratio of 15.0x, assuming the company maintains its current 2Q23 profitability level.

• I am short AURC (Aurora Acquisition Corp), the SPAC that will be bringing Better.com to market next week. I think the fair value of the company is ~81 cents – it is currently trading at $32.
• Yes, borrow is hard to come by – but it does exist in small quantities. When the DeSpac occurs next week, if the stock doesn’t collapse 98% on day one, then borrow should be accesible.
• Better CEO/founder Vishal Garg has a long history of bankruptcies, deception and fraud accusations.

• Henderson Land is one of the largest RE developers in Hong Kong, with investment properties portfolio in Central, as well as HK DP, China DP and IP.
• Major share price drivers include (1) farmland conversion in Hong Kong (2) US rate hike as it has the second highest gearing among HK real estate companies
• However, we see limited catalysts and therefore limited re-rating potential, thus bearish on the stock.

CoinShares International (CS) delivered another solid set of quarterly results, with Q223 EBITDA of £12.8m versus £8.4m in Q123. Its asset management business generated fee revenue of £10.6m (down from £14.2m in Q222, but up from £9.2m in Q123) as total AUM rebounded to £2.14bn at end-June 2023 from £1.44bn at end-2022. Its capital market infrastructure activities (CSCM) posted a £10.0m gain in Q223, bolstered primarily by fixed income, staking and decentralised finance (DeFi) activities. CS is continuing to develop its active asset management business, starting with running its first strategy to generate a track record ahead of the formal launch towards the end of 2023.

The Atlantis Japan Growth Fund (AJG) board has announced that it has agreed heads of terms for a proposed combination of its assets with those of Nippon Active Value Fund (NAVF). The proposal is intended to address AJG’s relatively small size – current assets under management (AUM) total c £78m ¬– and follows recent disappointing relative performance. The combination, which is subject to the approval of the shareholders of both AJG and NAVF, offers AJG shareholders ongoing exposure to the attractive investment opportunities available in the Japanese market, especially among cash-rich smaller companies. They may also benefit from the expertise of NAVF’s managers. NAVF has been the top-performing Japanese fund since its inception in February 2020 and its managers have over 30 years’ experience as active managers in this market. The proposal also includes the option for AJG’s shareholders to realise a portion of their cash if desired. The enlarged NAVF will offer all shareholders greater liquidity, as well as a likely reduction in ongoing costs.

• We think Futu has proved its ability to retain its mainland China users. The DAU remained stable, and the growth rate of clients’ HK assets outpaced the market in July.
• Futu’s overseas expansion is quickly ramping up in Japan, Malaysia, and is progress steadily in Singapore and Australia. We expect the monetization in Malaysia begin in 2024.
• We expect Futu 2Q23 revenue 4.5% higher than consensus, our non-GAAP NI 8.7% higher than consensus. We maintain BUY rating on FUTU and raise TP by US$4 to US$55.

• India Shelter Finance (0570670D IN) is looking to raise up to US$217m in its upcoming India IPO. The deal will be run by Ambit, Citigroup, ICICI Securities and Kotak Mahindra.
• India Shelter Finance (ISF) is a retail focused affordable housing finance company. Between FY21-23, the firm registered a two-year CAGR growth of 40.8% in terms of AUM, according to CRISIL. 
• Its target segment comprises self-employed customers, focusing on first time home loan takers in the low and middle income group in Tier II and Tier III cities in India. 

• National Securities Depository Limited (NSDL) is looking to raise around US$400m in its India IPO. 
• It is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets.
• In this note, we talk about the positive aspects of the deal.

• Recently awarded “Maharatna” status, only 12 companies, FY24 is first full year for this
• Growth is steady, with good returns, and major improvement in credit metrics
• Its 4.77% dividend yield is incredibly high and about 3x higher than peers

• All the APAC markets we cover (Nifty50, HSI, Nikkei225, Kospi200, S&P/ASX200) are pulling back and some of them have been doing so for 3 weeks.
• In this insight we want to offer a re-cap of all the MRM support levels and probabilities for the APAC markets above, after the August 16th Close.
• Check our previously published single-market insights for deeper analysis and related investment ideas: Nifty50, HSI, Nikkei225, Kospi200, S&P/ASX200.

• Proptech firm Goro is betting on fractional property investments in Indonesia. With its namesake being derived from the Indonesian term Gotong Royong or mutual cooperation, its platform allows users to purchase a fraction of a property starting from US$0.7.
• Returns come in the form of monthly paid-out rental income and capital gains when the property is sold.
• Since launching earlier this year, Goro said its user base has grown 15% per week. The company added that its current portfolio, which is picked by professional property managers, is generating 11% net annualized rental yield for its users.

JDC Group (JDC) reported H123 results that showed accelerating growth at its key Advisortech division (c 89% of revenue) of 11.2%. After three slower quarters, JDC expects overall growth to accelerate in H223 and reiterated its challenging but realistic FY23 guidance of 17% revenue growth at the midpoint, with EBITDA of €11.5–13.0m. JDC trades at an FY24e EV/EBITDA multiple of 13.2x on consensus estimates, which we believe is undemanding for what is essentially a fast-scaling platform business. Our DCF calculation provides a valuation of €34.09/share.

• National Securities Depository Limited (NSDL) is looking to raise around US$400m in its India IPO. 
• It is the largest depository in India in terms of number of issuers, number of active instruments, market share in demat value of settlement volume and value of assets.
• In this note, we talk about the not-so-positive aspects of the deal.

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

• Results show dramatically lower NIM, net interest income, but stock gains in spades
• The only way to analyze 7182 is to have a view on its stock, bonds, investment gains
• Unrealized gains more than doubled to JPY472bn: fire-power remains, but is it valuable?

• SBFC Finance Limited (1547353D IN) raised around US$131m in its India IPO, after the deal was priced at INR57/share, the top end of its IPO price range.
• 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 demand for the deal and other trading dynamics.

• 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 Hang Lung (10 HK) and Hang Lung Properties (101 HK).

• Fedbank Financial Services (0702066D IN) is looking to raise about US$200m in its upcoming India IPO.
• Fedbank Financial Services (Fedbank) is a retail-focused non-banking finance company (NBFC) promoted by The Federal Bank Limited.
• As per CRISIL, the firm had the second lowest cost of borrowing across the MSMEs, gold loan and MSME & gold loan peer set in India in FY23. 

Yanlord Land’s H1/23 results were acceptable, in our view, with the company reporting strong top-line growth. That said, the gross margin contracted, as Yanlord delivered projects outside of Tier 1 cities. Still, cash collection was strong, which supported net debt reduction and deleveraging.

Going forward, the company faces material near-term debt maturities, including a USD 600 mn syndicated loan and the USD 376 mn YLLGSP 6.8 24 (both due February 2024). Our base case assumes that Yanlord can refinance its syndicated loan, and repay the USD bond using cash on hand. We also expect the company to continue rolling over its secured SGD loan.

Overall, Yanlord’s credit profile is underpinned by its clean debt structure and moderately sizeable portfolio of investment properties. This is as the company may be able to monetise its unencumbered investment properties in China and Singapore to raise funds. Management is exploring a CMBS issuance backed by Yanlord Landmark in Chengdu. In addition, Yanlord may be able to pledge the Yanlord Reverie Plaza in Shenzhen for bank financing, as the asset has reached more than 80% occupancy (since its soft opening in late 2022). Moreover, the company’s unencumbered investment properties in Singapore may be used as credit enhancement to support the offshore notes in the unlikely event of default.

• HHH continues to exhibit the benefits of having operating assets as part of its MPCs. These operating assets provide essential cash flow to the rest of HHH
• Operating assets becoming the core part of the business and HHH no longer requiring debt to fund its expansion needs
• The Company has six unstabilized properties that could add $13.7 million of NOI by 2025 and has another six properties under construction to be completed by 2026.

• Natwest Group PLC managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• With the liquidity portfolio being predominantly composed of central bank deposits, the liquidity coverage ratio was 141%, providing Natwest with a comfortable excess above the minimum requirements.
• We give Natwest Group PLC a ‘Hold’ rating with a revised target price.

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.

• Vista Land & Lifescapes

• Japan Post Bank (7182 JP) was effectively re-IPOed in March when Japan Post Holdings (6178 JP) offered more than a BILLION shares against the 400mm shares then in float. 
• It was a huge offering. A huge increase in float. Lots of immediate liquidity. A PERFECT opportunity for the TSE to do an ad hoc FFW change. But they didn’t. 
• Then in June they lowered the FFW (on a technicality). That leaves a big upweight in October. In this insight we measure the opportunity.

• IDFC First Bank is now at USD7bn market cap, and it will now be seen by more than before
• Net interest income rising from INR27.5bn to INR37.5bn is amongst best in India banking
• Credit metrics improving dramatically, but credit costs have yet to trail lower – to come

• We turn to granular Pillar 3 disclosure of NAB seeing divergent moves in PD buckets
• Its worst PD buckets are seeing sharp rise, while best buckets are falling, flat-ish
• LT credit cost data, PD buckets, timely CBA data, suggests higher provision costs

• The 2023 multi-month rally in APAC markets started roughly in autumn 2022, in sync with the US market rally, then stalled when the US market began to pull back.
• We propose an analysis of the S&P500 MONTHLY, to find support levels to be used as a proxy for predicting APAC bloc’s markets supports.
• Main forecast: August/September could be down, but the current MRM pattern reading is bullish – the correction (currently at Q2 supports) should not last beyond end of September.

S&U held a cautious approach to new lending in H124, emphasising higher-quality customers and avoiding competition directly on price. Consequently, net receivables were 5% below our expectations in H124. Encouragingly, S&U has experienced a rise in transactions and new customer pipeline in the past two months in the Advantage motor business, but weakening consumer confidence, higher interest rates and paydowns are likely to curtail the usual rate of growth in Aspen for FY24. Despite this, impairments and arrears are below budget, which should provide some resilience to the net interest margin. We have marginally lowered our estimates for FY24 and FY25 but still expect EBITDA growth of 16% and 15%, respectively.

• The Curve 3pool – long one of the most important sources of liquidity for DAI, USDC, and USDT – has continued to bleed this summer, shrinking by $175mn.
• This outflow has been primarily led by USDC; users have withdrawn $125mn of Circle’s stablecoin.
• By this metric, USDT has remained roughly even while $60mn DAI has been removed, $25mn of which came in just three transactions on July 31.

• Quarterly figures are poor, with net interest income growth negative, again
• Fees appear to be topping out, with operating costs at very high levels
• 7 August letter from Senator Warren: congressional scrutiny on SVB

• Essential Properties Realty Trust, Inc. has held up well compared to other REITs this year, suggesting it has unique strengths.
• The REIT’s cash-on-cash returns have increased, indicating a high rental yield relative to purchase price, but valuation risks remain, according to the REIT.
• Essential Properties Realty Trust, Inc. (NYSE:EPRT), unlike many other real estate investment trusts, or REITs, has held up quite well this year, suggesting it possesses significant idiosyncratic strengths.

• There could be two deletes for the index in September. There are two other stocks that are close to the deletion threshold.
• Even if there are no constituent changes, there will be capping changes that will result in one-way turnover of around 2.7% and a one-way trade of A$51m.
• Short interest has been increasing on Charter Hall (CHC AU) and JB Hi-Fi Ltd (JBH AU) and could be partially driven by potential index deletions.

• There should be one deletion from the index in September. And there could be another deletion. And there will be capping changes for a few stocks.
• The index changes will lead to a one-way turnover of 2.12% resulting in a one-way trade of A$13m. There is only one stock with over A$5m to trade.
• Following the spinoff, Abacus Group (ABG AU) and Abacus Storage King (ASK AU) will be the lowest ranked index constituents and at risk of deletion from the index.

• The Nikkei 225 index closed up last week and it has a good probability to rise further this week: the MRM tool has identified the current pattern as “bullish”.
• Resistance targets are located past 33500, the index could reach that target this week.
• If the index rises for 3 weeks or more, it could breakout from the previous resistance range around 33700, and reach targets past 34000.

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.

• Adani Ports & Special Economic Zone
• China Jinmao Holdings
• Road King Infrastructure

• Back on the 26 April, First Pacific (142 HK) and three other entities, proposed delisting Metro Pacific Investments (MPI PM) at PHP 4.63/share. This was subsequently bumped to PHP 5.20.
• A Special Stockholders’ Meeting was held on August 8, and MPI stakeholders approved all the resolutions. An SGM for independent First Pac shareholders will be held on the 24 August. 
• The Tender Offer is now open and closes on the 7 September, with (expected) settlement on 19 September – provided the Tender Offer delisting conditions are met.

• Rakuten Bank is a clear beneficiary of the steepening yield curve in Japan, with its low LDR and healthy capital ratio
• Rakuten Bank’s LTM PE multiple of 11.4x, LTM PBV ratio of 1.5x and ROE of 13.8% makes it the best ROE to PBV ratio bank among its digital peers
• Rakuten Bank is also the lowest cost to serve Japanese digital bank; it is narrowing the PBV ratio discount gap with SBI Sumishin

• Sino Land is a developer in Hong Kong and China with both DP and IP rental business. 
• Sino Land has a net cash position of HKD41bn, its strong balance sheet makes the stock a defensive play
• Despite trading at attractive valuation (0.46x P/B), we see there is a lack of catalyst and the stock may remain as value trap

Country Garden Holdings Co. Ltd., one of China’s largest property developers, said it expects to report a record, multibillion-dollar net loss for the first half, raising further concerns as the company slides deeper into a debt crisis.

Guangdong-based Country Garden estimated its net loss at 45 billion yuan to 55 billion yuan ($6.2 billion to $7.6 billion) for the first six months of 2023, compared with a net profit of 1.91 billion yuan a year ago, according to a Hong Kong exchange filing late Thursday.

The company warned July 31 that it would report red ink for the first half.

• According to Sing Tao, two PRC firms and a mainland bank have formed a consortium to acquire Hongkong Land (HKL SP)‘s 33-storey Three Exchange Square.
• This “news” is straight out of left field. For its part, HKL said the market rumour is pure speculation.
• HKL’s P/B of 0.24x is closing in on its all-time low of 0.21x during the depths of Covid. 

• Metro Pacific Investments Co (MPI PM)‘s voluntary delisting tender offer from a consortium at PHP5.20 (net price of PHP5.1677 per share) will run from 9 August to 7 September.
• The delisting proposal was approved on 8 August. Excluding the consortium’s votes, only 37.4% of minorities (representing 13.73% of outstanding shares) voted YES for the delisting proposal.
• A key risk is satisfying the 95% delisting threshold, which would require a minorities acceptance rate of 86.4%. The risk/reward is unattractive at the current spread of 4.4% (net 3.8%). 

• SMFG achieved less of its FY24 profit forecast than peer megabanks; less upgrades
• SMFG reported a far lower ROE than peer megabanks & some worse financial metrics
• SMFG’s JPY bonds are only 0.88x of total equity; it is less leveraged than peer megabanks

Interim results showed Primary Health Properties (PHP) to be well on track to meet its fully covered 6.7p DPS target, the 27th consecutive year of growth. Organic rent growth continues to increase, borrowing costs are nearly all fixed/hedged and the cost ratio is among the lowest in the sector. Despite this, the prospective dividend yield is now c 7%.

• Power Finance, Astral, IDFC First Bank, Cummins India, HDFC Asset Management, Ashok Leyland, Polycab India and Supreme Industries have all run up over the recent past and have investor attention.
• The increase in market cap has put the stocks on active manager radars and could also result in the stocks being added to global indices in the near future.
• We take a look at the positioning on the stocks and recommend pair trades to reduce market risk while trying to capture alpha.

• Credit cost surge in 1H23 is strangely tempered in 2H23 results, although still rising
• Despite rising credit costs, they remain at relatively low levels compared with history
• Data on credit metrics suggest to us that credit costs should have been higher in 2H23

• In our latest South Korean banks screener; we stick with quality play Hana Financial but remove contrarian call Industrial Bank of Korea, due to fast rising credit quality headwinds
• NPLs and precautionary quality credits continue on a rising trend, whilst Hana seems to be containing delinquency better than most
• Hana has a low PBV ratio relative to its premium ROE, high post-provision returns, a sound CET1 ratio and a healthy LDR; Kakaobank is one for the watchlist

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 SCE
• Hopson Development
• Sunny Optical Technology Group

Target Healthcare REIT’s Q423 shows a second consecutive quarter of NAV growth, as property yields stabilise and indexed rent uplifts drive valuation growth. Rental growth and near-full rent collection are supporting earnings and delivering full dividend cover. Audited full year results will be published in early October.

Tetragon Financial Group (Tetragon) reported a 1.7% ROE in H123 and its NAV increased by 1.7% in total return terms. The portfolio gained 3.0% on the back of TFG Asset Management (which remains Tetragon’s largest asset, representing 50% of its NAV), private equity assets and its direct listed equity investments, while the remaining asset classes had a limited impact on NAV. Tetragon targets returns uncorrelated with broader equity markets and a 10–15% ROE (9.9% on average over the last five financial years, and 11.4% pa since IPO). In H123 Tetragon was a net investor and increased its credit facility utilisation to 75% (US$300m), deploying capital predominantly into private equity assets and hedge funds, and further supporting the growth of TFG Asset Management.

• The shareholders of Kenedix Office Investment (8972 JP), Kenedix Residential Investment (3278 JP) and Kenedix Retail REIT (3453 JP) meet in a couple of weeks to vote on the merger.
• The stocks are trading in line with the merger ratio and the initial spike following merger announcement has been followed by some selling.
• The market cap of the combined entity should now be large enough for migration to indices with larger tracking assets bringing in large passive flows on merger completion.

• There is no refuting the strong net interest income figures at DBS, although it seems toppy
• DBS took credit costs/assets at 4bps in 2Q23 vs 13bps average during FY18, FY19 quarterly
• There are not many banks that we can turn too with over 50% QoQ decline in credit costs

• Swire Properties is one of the largest office and retail landlords in HK.  Office is facing headwind despite should see recovery in the long-term.  HK retail is recovering.
• Swire announced to spend 100bn to expand its portfolio in terms of capital management, yet it did not announce a share buyback that many investors would like to see
• Lack of share buyback, with weak HK office and China retail, could drag Swire’s share price.  Despite we see value in the stock, it could remain as value trap

• Fitch’s U.S. credit downgrade has done little to change the intermediate-term trend; we continue to believe the path of least resistance is higher for the major equity indexes.
• We remain bullish on the S&P 500, and we expect to see support at its 50-day MA moving forward (currently 4415).
• Short term supports we are watching include 4460-4475 on the S&P 500, $371.50 on the $QQQ, and $190-193 on the $IWM.

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.

• Adani Ports & Special Economic Zone
• Softbank Group

• Bank of Kyoto (8369 JP) has been on a relative tear recently. This is a bit surprising.  On a static equity-portfolio discount measure, it has outperformed regional banks.
• On a static regional bank PBR basis, it has outperformed its equity portfolio and the discount to the After Tax Equity Portfolio Value (ATEPV) is the smallest in eight years.
• Is there a sea change? There is a possibility, however remote, that domestic investor disappointment rears its voting head. That’s the dream scenario. But I don’t see it coming soon.

• Star Asia Investment (3468 JP) is looking to raise around US$180m in its extended primary follow-on raising. The proceeds will be used to acquire 12 new hotels.
• The deal would be a large deal to digest at 110 days of three month ADV, with the new shares representing around 19% of dilution.
• The REIT has undertaken capital raisings over the past few years to fund its active portfolio management strategy. Thus, we would argue that the deal here is well flagged. 

• The KOSPI 200 index last week closed down (CC=-1). This particular pattern is very bullish: 78% of the time the index closes the week up after -1 week down.
• The index has been stuck sideways between 348 and 330 for weeks, we still see a buy-the-dip opportunity to ride the continuation of the Bull run from here.
• Main support area to go LONG, based on the Market Reversal Matrix’s readings, is between 337 and 335. Time+space estimated probability of success is between 64% and 76%.

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.

• Yanlord Land

• Curve’s 3pool and Uniswap V3’s main USDT-USDC pool both became imbalanced heading into the weekend as USDT selling escalated.
• However, this trend actually started in mid-July, with $100mn net selling on Uniswap from July 15 to July 22.
• While the net selling eased in the last few weeks of July, it picked up again on July 31, the day after the Curve exploit (these two events seem to be unrelated).

The Law Debenture Corporation (LWDB) continued to successfully navigate challenging conditions in H123, growing its professional services business (IPS) in line with its mid to high single-digit target, while consolidating its strong, long-term performance record. This rare combination of a UK investment trust and the cash-generative IPS operating business has delivered outperformance of its broad UK equity benchmark over multiple periods with a strong record of dividend growth.