Financials

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.

• Bharti Airtel
• China Jinmao Holdings
• China Vanke
• Greentown China
• Yuexiu Property

• Every crypto market cycle is fuelled by a new coordination structure, business model or alleviant to a constraint of a previous cycle.
• We see Layer 2 solutions as the next area of innovation and investor attention.
• In this article, we will explore Layer 2 solutions and attempt to describe their role in the broader crypto economy. 

• The ACCC has decided not to authorize the ANZ takeover of Suncorp-Metway Bank
• Can be positive for ANZ without executive risk, integration costs, unknown new risks
• Differentiator ANZ to peers its islessor exposure to Australia, and better credit metrics

• Lucror Analytics’ ESG Scores are based on a 3-tiered scale and are adjusted for Controversies (if applicable).
• We view Altice International’s ESG as “Adequate”, in line with the Environmental, Social and Governance pillars. Controversies are “Material” and Disclosure is “Adequate”.
• Altice International offers cable TV, broadband Internet as well as fixed and mobile telephony services in Portugal, Israel and the Dominican Republic.

• Nextrade aims to secure the business permit within the next year’s second half. They intend to launch their services by the end of next year or early the following year.
• All eyes are focused on the proposal to be operational from 8:30 AM to 11:59 PM, with the afternoon call auction session running from 3:00 PM to 6:00 PM.
• It would be crucial to observe how the elongation of the time period for specific issues to be reflected in prices could potentially lead to changes in intraday flow patterns.

• We believe the added threat from Apple Pay has been one of the reasons for the worsening profit margins and lower than expected sales growth of Kakao Pay in 2Q23. 
• After the poor earnings results in 2Q 2023,the consensus is likely to reduce Kakao Pay’s sales estimate in 2024 by 3-5% and positive operating profit to be postponed to 2025. 
• We continue to be Bearish on Kakao Pay due to its high valuations, likelihood of consensus earnings downgrades, heightened competition, and concerns about continued profit margin weakness.   

Founder Securities Co. Ltd.’s third-largest shareholder, China Cinda Asset Management Co. Ltd., is selling 2% of the brokerage’s stock worth 1.2 billion yuan ($166 million).

The share sale is to meet Cinda’s needs for corporate operations, Founder Securities said Monday night in a statement.

China Cinda, the nation’s biggest state-owned bad-debt manager, plans to sell as many as 165 million shares of Founder Securities between Aug. 23 and Feb. 22, 2024, through centralized bidding, the brokerage said.

• Curve Finance is back as the center of attention in DeFi just a few weeks after CEO Michael Egorov’s large CRV-backed loans drew scrutiny.
• This time, however, the inciting incident was an exploit.
• Rekt and Llama Risk have done a nice job breaking down the technical aspects of the exploit.

• The NIFTY Index has been falling for 2 weeks and is reaching mildly OVERSOLD territory. If this was a retracement during the main rally, it may be time to BUY.
• The Market Reversal Matrix’s shows a bullish pattern, the time+price combined probability of success for LONG trades from current prices, after 2 weeks down, is >66%.
• Price area to go LONG: 19400 to 18792, you can go LONG this week and also next week, if down (CC=-3).

• CapitaLand Ascott Trust (CLAS SP) is looking to raise around S$200m from its primary follow-on. Included in the deal is another S$100m preferential offering to existing shareholders.
• Proceeds will be used towards acquiring three new properties, and for asset enhancement initiatives.
• The deal would be a relatively large one for the REIT to digest, at 31.6 days of three month ADV.

• SBFC Finance Limited (1547353D IN) IPO opens for subscription this week.
• The company has shown strong operations in F23, led by growth in overall business, productivity, profits on the back of controlled credit costs.
• There are however few cautions that warrant attention, which includes the litigations, attritions, write offs, etc.

• Realized/Unrealized gains on securities are increasingly oversized relative to profit
• In the latest quarter these are USD10.1bn compared with net profit of USD7.0bn
• HSBC’s credit costs rose over 100% both YoY and QoQ

• SBFC Finance Limited (1547353D IN) is looking to raise up to US$131m in its India IPO. 
• 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 our previous note, we looked at the company’s past performance. In this note, we talk about RHP updates, undertake a peer comparison and provide our thoughts on valuation.

• The S&P 500 INDEX rally that started in October 2022 is currently encountering some turbulence, possibly due to various factors including the recent US credit downgrade by Fitch.
• The current WEEKLY pullback may be an opportunity to accumulate LONG position, buy& hold trade.
• The price area to buy where is between 4540 and 4332: probability of the uptrend resuming from there is between 50% and 75% based on current pattern readings.

IP Group’s private portfolio valuations remained broadly stable in H123, with its c 4.1% NAV decline in total return (TR) terms mostly due to a de rating of listed holdings (Oxford Nanopore, ONT, in particular) and FX headwinds, though subsequently largely offset by a rebound in quoted holdings to date. IP Group’s holding-level liquidity remains firm and 84% of its direct portfolio holdings have a cash runway of 12 months or more. IP Group shares continue to trade at a wide 53% discount to NAV.

• kopi-C with Uni-Asia Group’s CFO: “Being small sets us apart” Uni-Asia Group Chief Financial Officer Lim Kai Ching explains how staying small and diversified has allowed the company to find a niche in shipping vessels and property investments.
• This is the belief of Mr.
• Lim Kai Ching, Group Chief Financial Officer (CFO) of Uni-Asia Group, an alternative investment company that has forged its specialty in niche assets within the property and shipping markets.

• On 1 August, the Korea Exchange approved the transfer of listing of Nice Information Service Co (030190 KS) from KOSDAQ to KOSPI. 
• Nice Information Service will also be deleted from KOSDAQ 150 index and it will be replaced by Hydro Lithium (101670 KS). 
• The recent share price decline in Nice Info Service has resulted in more attractive valuations for the company.

• Mizuho has well positioned for YCCC relief with its balance sheet management in 1Q24
• Less low yielding cash assets, higher loans, securities, shift into NCDs, from deposits
• Mizuho reports credit costs reversals and better credit metrics are clear in NPL detail

• CKA is a well diversified conglomerate with residential DP and IP (office and retail) in HK and China, with sizable business in UK (pubs) and infra assets in EU
• CKA focuses on capital mgmt (share buybacks, M&As, disposals), and consistently unlock value for shareholders.  CKA is in net cash, its strongest balance sheet position for 20 years
• Valuation is extremely compelling. We recommend CKA as a long-term buy and hold for investors and traders

We view Yuexiu Property (YXP) as “Low Risk” on the LARA scale. Our assessment takes into account the company’s: [1] parental support from Guangzhou Yuexiu (GYX), which is an SOE; [2] sound operating track record; [3] good contracted sales performance; and [4] geographical diversity, with a focus on the Greater Bay Area. These are balanced against weak market sentiment and a change in government policy.

Our fundamental Credit Bias on YXP is “Stable”. We expect its near-term credit profile to be supported by stable sales and cash collection, with Transit-oriented Development being a key factor underpinning the company’s growth. While YXP likely has limited room for margin improvement given the industry trends, we believe YXP could still outperform most of its competitors in terms of profitability. In addition, we expect the developer to have good funding access, given parent GYX’s SOE status and close relationship with the municipal government.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”.

We maintain our “Buy” recommendation on the YUEXIU curve. We like the company’s fundamentals and its support from GYX. We also expect YXP’s near-term credit profile to be supported by stable sales and cash collection.

• Moodys delivered a positive result and managed an all-around beat in the last quarter.
• Amid a consistent improvement in issuance, Moody’s Investor Services (MIS) had its first quarter of revenue gain in six quarters.
• Its revenue growth exceeded issuance growth by growing by 6%.

• Chubb managed to deliver a mixed set of results in its most recent result, with revenues below analysts’ expectations but above-par earnings.
• This quarter, Chubb experienced double-digit growth in its consumer and commercial P&C businesses in North America and abroad and in its life business.
• Commercial premiums increased in the quarter.

Foxtons’ interim results highlighted revenue and margin expansion as well as market share gains, evidence of success in rolling out the new strategy, which focuses growth on non-cyclical revenue streams and decouples performance from sales market cycles. If the strategy succeeds, over the medium term Foxtons expects margins to expand by c 500bp and operating profit to more than double. We retain our base case valuation of 59p/share, which implies c 50% upside, and our preferred ‘bull’ case valuation of 124p/share.

• Lloyds Banking Group delivered a solid financial performance in the first half and Q2 and managed an all-around beat in the last quarter.
• Lloyds’ structural hedge continued to provide a substantial earnings tailwind while the bank exhibited effective cost management and prudent risk practices.
• We give Lloyds Banking Group a ‘Hold’ rating with a revised target price.

• On 28 July, Macquarie Korea Infra Fund (088980 KS) announced that it will conduct a rights offering worth 361 billion won, representing 7.4% of its current market cap. 
• The major uses of funds from the rights offering include acquisition of a city gas supplier (128 billion won) and investment in Incheon-Gimpo Expressway private investment project (128 billion won).
• We have a positive view of this rights offering. We believe the acquisition of CN City Energy and the investment in Incheon-Gimpo Expressway will add additional value on the company. 

• Abacus Property (ABP AU) de-stapled Abacus Storage King (ASK AU), its self-storage business. 
• Offering 1 ASK share for every 5.6 ABP share, the REIT raised A$225m (US$150m) after the deal was priced at the bottom end of the indicative price band at A$1.41/share.
• The deal is effectively an IPO, and after having been in the making for some time now, it is well flagged as well.

• The Nikkei 225 (NKY INDEX) rallied +27% in the first 6 months of 2023. 6 months closed up, July closed (barely) down. The index can rise further in Aug/Sep.
• If August is down, a LONG opportunity: look at support prices between 32391 and 30600,  good probability to see the market going higher from there.
• If rallying in August, Nikkei could rise between +1.73% (33745) and +3.29% (34265). Continuation of the rally into September could reach higher prices but will encounter resistance at +8.29% (35922).

• Mitsui Fudosan Logistics Park Inc (3471 JP) is looking to raise US$106m in its primary follow-on offering to acquire three properties and two 50% co-ownership interests in two properties. 
• The deal is a somewhat large one to digest, at 20 days of three month ADV and 5.3% dilution. 
• In this note, we will talk about the deal dynamics and run the deal through our ECM framework.

Lippo Karawaci’s (LPKR) H1/23 results were much better than expected, and showed that the company was on track to achieve its turnaround goals. All business segments performed well, with healthcare again the largest contributor to revenue and earnings. Still, we note positively that the real estate segment’s performance was in line with guidance amid a challenging operating environment, with high and rising interest rates. Conversely, the financial risk profile remains weak, with elevated leverage ratios and thin fixed charge cover. Liquidity is barely adequate.

The healthcare segment continues to be LPKR’s key pillar, accounting for two-thirds of revenue and boasting strong (and improved) EBITDA. Moreover, we note that the segment should be relatively immune to the volatility in the economy.

• Many analysts have a bullish outlook on The Bank of Nova Scotia’s stock, which is arguably warranted.
• But plenty of risk factors are being overlooked, and late payments are mounting with short-term retail obligations in particular focus.
• Scotiabank’s emerging market strategy could present compelling trend growth.

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.

• Country Garden Holdings Co
• Pan Brothers
• Pertamina Geothermal Energy PT
• Sino-Ocean Service
• UPL Ltd

• Starting Monday, July 31st, the FSS-operated disclosure website, DART (Data Analysis, Retrieval, and Transfer System), will provide an English search service for all disclosures.
• This measure will open up possibilities for diverse position strategies that require timeliness and comparability for Korean local stocks, leading to a significant turning point.
• This calls for a more comprehensive approach in identifying the overall market flow. We should be attentive to potential alterations in the structure of foreign flows.

• The S&P/ASX 200 INDEX  has been stuck in the 7000-7400 range for 16 weeks until last week when it briefly pierced the upper range (but closed the week at 7403).
• This WEEKLY trend pattern can lead to a multi-week rally when it rises for => + 3 weeks in a row (it’s a pattern that can include momentum trades).
• The index is at a make-it-or-break-it junction: either it starts to trend higher towards the previous peak (7567, January 2023), or it will pullback into the 7000-7400 range.

• We believe equity bulls run the risk of a credit event which could spark a bear market.
• Market-Based indicators used by technicians have failed to anticipate and discount well-telegraphed events such as the GFC and the start of the Russo-Ukraine War.
• If you want to be bullish, we wouldn’t argue with you. Just be careful.

• In the rapidly evolving world of blockchain technology, one concept that has gained significant attention is interoperability.
• Interoperability, in its simplest terms, refers to the ability of different systems or platforms to communicate and interact with each other seamlessly.
• In the context of blockchain, it means the ability of different blockchain networks to exchange information and transactions, thereby enabling them to work together in a cohesive manner.

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
• Greenland Holdings Corp
• Lippo Karawaci

• The KRX has approved Nice Information Service Co (030190 KS)‘s transfer from the KOSDAQ Board to the KOSPI Board. The transfer could take place in the next two weeks.
• Hydro Lithium (101670 KS) was the highest ranked non-constituent from the Industrials sector at the June rebalance and could replace Nice Information Service (030190 KS) in the KOSDAQ 150 Index.
• Nice Information Service Co (030190 KS) has no chance of inclusion in the Korea Stock Exchange KOSPI 200 (KOSPI2 INDEX) and will not be short sell eligible post section transfer.

• The simplified tender offer for Rothschild & Co (ROTH FP) opened on 24 July and will last until 8 September (inclusive). The ex-dividend offer price is €38.60.
• The offer represents 7.22x NTM Fwd P/E (ex-dividend), rather low for the top European M&A player and a high quality business. Merchant Banking division could have a lot of upside.
• The enlarged family concert has bought shares in the market and has now c.66%. I anticipate the offer to go according to plan. Gross spread is nil.

• Broad General Holding (BG HK) is looking to raise at least US$100m in its upcoming Hong Kong IPO. The bookrunners on the deal are Deutsche Bank and Everbright Securities.
• Broad General Holding is a private investment fund manager with a focus on serving high network individuals (HNWIs).
• As per F&S, the firm was the second largest private investment fund manager in China focused on serving HNWIs in terms of total AUM as of Dec 22.

• BFI Finance Indonesia (BFIN IJ) booked a solid set of 1H2023 results that were marred by an operational blip, with 2Q2023 impacted but this is likely to abate in 2H2023.
• The company continues to stand out for its leading position in collateralized lending backed by 4W, 2W, heavy equipment, shophouses and property, with an accomplished 15-year track record
• BFI Finance Indonesia remains the top pick to play the increasing growth from multi-finance in Indonesia. It trades on 2x FY2023E PBV, forecast to book an ROE over 20%.

Lucror Analytics Weekly Wraps provide an overview of all Morning Views comments and reports published by our analyst team in the past week, and also showcase a list of the most-read reports.

In this Insight:

1. 21Vianet Group
2. SK Hynix
3. Yuexiu Property
4. Nameson Holdings
5. China Jinmao Holdings

and more…

• American Express delivered a mixed result in the most recent quarter, with revenues below market anticipation, but it surpassed the analyst consensus regarding earnings.
• Their fee-based premium products and solid customer base contribute to fast-growing subscription-like revenues.
• We give American Express Company a ‘Hold’ rating with a revised target price.

• Today, Nomura Real Estate Master Fund, (3462 JP) – the largest REIT in the ‘Diversified REIT’ JREIT space – announced sponsor Nomura Real Estate (3231 JP) would up its stake.
• They would lift their stake from 4.47% by 2.54% to 7.01%. There is a reason for this, just like there was last time with Japan Excellent (8987 JP). 
• Understanding the reason is how you understand the trade to do. 

• Yesterday (26 July), asset manager Pacific Current (PAC AU)  announced a cash/scrip NBIO from Regal Partners (RPL AU).
• Under Regal’s proposal, Pacific Current shareholders would receive an implied $10.77/share. Pacific Current considers the current share price doesn’t reflect the underlying value of its portfolio and business.
• Now GQG Partners (GQG AU) has announced it intends to submit its own NBIO. No price was mentioned.

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.

• Sands China
• Sino-Ocean Service
• SK Hynix
• O-Net Technologies (Group)
• Yuexiu Property

• Mizuho’s current tax expenses can see normalization that restores profitability by June quarter
• Yield curve control relief coming at a time of tax normalization, can be significant to profit
• Credit costs have moved higher, but the magnitude may wane, given NPL distribution

• National Securities Depository Limited (NSDL) is looking to raise around US$400m in its India IPO. 
• The deal will be run by ISec, Axis Capital, HSBC, IDBI, Motilal and SBI Caps.
• 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.

• Wildly improving credit metrics, with NPL coverage now at 1,144% in 1Q23
• Core net interest income is strong for past 3 quarters, now at +31% YoY
• Key line item deltas can continue, suggesting ROA to surpass 1.0% soon

• It’s easy to identify breakouts because they are the most noticeable and generate a strong response.
• It is precisely what happened when DXY broke below 100.53.
• On the other hand, head fakes are often met with silence as hope for sustained trends persists.

• Worldcoin’s launch was one of the most unique and controversial in recent years.
• Much of the controversy stems from the understandable skittishness with Worldcoin’s goal (creating a global identity network) and sci-fi-like methods of achieving this goal (eye scans).
• This has been nicely summarized by the MIT Technology Review.