Financials

• Pacific Current (PAC AU) has disclosed a non-binding indicative proposal from Regal Partners (RPL AU) at A$7.50 cash per share and 2.2 GQG Partners (GQG AU) shares per PAC share.
• The implied offer price of A$11.12 per share based on GQG’s last close price is a juicy 42.6% premium to the undisturbed price of A$7.80 per share (26 July).
• The offer is attractive compared to historical ranges and peer multiples. Expect the Board to grant due diligence access to facilitate a binding proposal.

• Krung Thai remains our pick; it ranks second from top in terms of post-provision profitability, screens well on NPL coverage, funding as well as PBV ratios and PE multiples
• We also like Ayudhya, with its sound pre and post-provision profitability metrics in 2Q23, its sound credit quality metrics and attractive valuations
• Kasikorn has seen its TTM cost of risk remain high, and it is the negative outlier versus its peers; yet Kasikorn’s poor share performance makes it 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.

• Agung Podomoro Land

• Morgan Stanley delivered a positive result and managed an all-around beat in the last quarter.
• In Wealth Management, Morgan Stanley saw a decrease in sweep outflows and a stabilizing of retail assets in cash and cash equivalents.
• We give Morgan Stanley a ‘Hold’ rating with a revised target price.

• This is our first report on Aflac Incorporated, a prominent player in the American insurance industry.
• The year’s first quarter proved promising for Aflac, as the company reported solid earnings results despite a material yen weakening.
• The operations in Japan saw continued sales improvements, driven by the rollout of new and refreshed products, particularly the cancer insurance policy.

• Muthoot Microfin (1363943D IN) is looking to raise up to US$163m in its upcoming India IPO. The deal will be run by ICICI-Sec, Axis Capital, JM Financial and SBI Capital.  
• Muthoot Microfin is a microfinance institution providing micro-loans to women customers with a focus on the rural regions of India. 
• It is the fourth largest NBFC-MFI in India in terms of gross loan portfolio as of 9M23 (ending 31st Dec 2022). It is part of the Muthoot Group.

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 Vanke
• Greenland Holdings Corp
• Sino-Ocean Service

• Rakuten Securities (RAKUSEC JP), a leading Japanese online brokerage, seeks to raise US$500 million. Rakuten Group (4755 JP) (80.01%) and Mizuho Financial Group (8411 JP) (19.99%) are its shareholders.  
• In Rakuten Securities IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
• The key elements of the bear case rest on rapidly slowing operating revenue and commissions growth, lowest per-account monetisation rates vs peers and mid-tier profitability. 

• The JPY market is one big roller-coaster at the moment as the market constantly tries to sniff out potential clues on when the Bank of Japan will catch up to the rest of the G10 central banks with a tighter policy.
• In this piece, we look at the pros and cons of moving already this Friday for the Bank of Japan, but let’s take a look at the current back-drop before we move to the actual policy decision.
• Markets started pricing in an elevated risk of a further increase to the yield-curve-control cap on Friday after a spike in wage data three weeks ago.

Molten Ventures has recently faced pressure on tech valuations and muted deal activity from macroeconomic headwinds. That said, management reflected the lower public multiples in Molten’s H123 valuations, with greater stabilisation occurring in H223 (gross portfolio value was down 19% excluding FX in FY23 but only 2% in H223). Molten now offers exposure to a curated portfolio of 70+ assets at a significant discount to NAV. Management remains confident the portfolio is well funded, with 80% of the Core portfolio having a cash runway of more than 18 months on current projections, and expects weighted average top-line growth of over 65% in 2023 across the Core portfolio. Therefore, it still assumes a limited £20m funding requirement across the portfolio in FY24.

• Mexican banks, along with other Mexican assets, have benefitted from the near-shoring theme and more recently, the investor sentiment change in favour of EM assets which also supported bank shares
• Yet bank sector headwinds are emerging in the data to May, with rising funding costs eroding credit spreads and worsening credit quality trends implying a worsening in the credit cycle
• We believe that Banorte’s 2Q23 results vindicate our caution on the shares, with evidence of spread pressure and rising credit costs; we prefer to gain Mexican bank exposure through BBVA

• The KOSPI 200 (KOSPI2 INDEX EQUITY) last week closed the week down (CC=-1) after a strong rise the previous week. Could be getting ready to rise higher.
• The index last week tested supports in the Market Reversal Matrix’s Q2/Median support area (around 335).
• Valid support levels for the coming week (if CC=-2) are between 333 (Q2) and 324 (Q3).

• The NIFTY Index has been in a strong rally since early April 2023, returning almost +17% as of last Friday’s Close. The MRM tool shows the index is OVERBOUGHT WEEKLY .
• The NIFTY Index has reached a “Tails” area of the current pattern: forecasts in these price areas are less reliable, but the MRM tool indicates the index is topping.
• SHORT trades can be implemented at prices > Last Close (19745). Higher prices are possible, it could take +1/+2 weeks for the index to complete its topping process.

• The SBI Holdings Tender Offer for SBI Shinsei Bank (8303 JP) was completed about four weeks ago, and in something of a surprise, only 3.7% of 26.98% minority holdings tendered.
• The stock traded above terms every day during the Tender Offer Period. People accumulated in order to pursue their appraisal rights later. That is big. 
• This week, SBI Shinsei announced the schedule of dates relating to the squeezeout EGM. The record date was early. The reverse stock split announced is as expected, possibly game-able.

• This is our first report on one of the largest private sector banks in Brazil, Itau Unibanco.
• The loan portfolio showcased growth despite signs of a slowdown, with the SMEs loan portfolio registering an increase of 9.2% for Q1 2023 compared to Q1 2022.
• We initiate coverage on the stock of Itau Unibanco Holding S.A. with a ‘Hold’ rating.

• HDFC Bank (HDFCB IN) reported weak QoQ growth in deposits and advances. This is however temporary due to seasonality. The growth trajectory for rest of the year remains intact. 
• HDFCB continues to invest aggressively into expanding its geographical presence to drive growth. Benign credit cost enables investments without impacting the ROA.
• HDFC Ltd (“HDFC”) has been also merged into HDFCB effective Jul 1. The merged entity is carrying sufficient liquidity at 120%+ LCR to meet the additional CRR and SLR needs.

• This is our first report on Discover Financial Services, a prominent consumer finance company.
• Net interest income grew significantly, supported by an expanding net interest margin driven by higher prime rates.
• Additionally, the company introduced Discover Financial Health Improvement Fund to improve the financial well-being of low- and middle-income individuals, communities, and small enterprises.

• This is our first report on insurance behemoth, AIG.
• In Q1 2023, AIG reported a net income of $3.9 billion, marking a significant turnaround from the net loss of $7.9 billion reported in Q1 2022.
• Concurrently, AIG continues to monitor market conditions and regulatory approvals as it considers reducing its ownership interest in Corebridge via a secondary offering, amongst other options.

• This is our first report on PNC Financial Services Group, a major bank and financial service company.
• Despite a rise in the accumulated other comprehensive loss by $400 million during Q2, the tangible book value rose to $77.80.
• We initiate coverage on the stock of PNC Financial Services Group with a ‘Hold’ rating.

• This is our first report on Prudential Financial, Inc., a major global player in financial services and insurance.
• Prudential kept transforming throughout the quarter to become less reliant on the market and better able to produce steady, long-term growth.
• The company also had the financial strength to navigate the changing macroeconomic climate because of its rock-solid balance sheet.

• Digital Realty Trust, Inc. is executing a phenomenal strategy, with additional pipeline developments coming online soon.
• Digital Realty is faced with cyclical valuation concerns, we think they will be short-lived.
• Digital Realty Trust, Inc. (NYSE:DLR) presents an interesting talking point

• Rakuten Securities (RAKUSEC JP), a leading Japanese online brokerage, seeks to raise US$500 million. Rakuten Bank (5838 JP) (80.01%) and Mizuho Financial Group (8411 JP) (19.99%) are its shareholders.   
• Rakuten Securities has grown its business by pursuing a low-cost, high-volume strategy. It has the largest number of non-consolidated securities accounts among Japanese securities companies.
• The key elements of the bull case rest on rapid customer growth, low-cost fees, market share gains, synergies with the Rakuten ecosystem and improving profitability trends.

• Federal Bank (FB IN) aims to raise around US$370m via a QIP to increase its Tier-1 capital.
• The deal is well flagged as the company had earlier obtained board approval for a fundraising and had guided towards a funding raising in FY24.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• Aon delivered a mixed result in the recent quarter, with revenues above market expectations, but it failed to surpass the analyst consensus in terms of earnings.
• For the entire year 2023, as well as for the long term, Aon’s management anticipates organic revenue growth in the mid-single digits or higher.
• Aon Business Services is still a major driver of margin expansion and offers a competitive edge, particularly in an inflationary market.

• Invincible Investment (8963 JP) plans to raise around US$230m to fund the acquisition of six hotel assets in Japan.
• The stock has done well over the past year and so have most of its deals which we have covered in the past.
• In this note, we talk about the deal dynamics and run the deal through our ECM framework.

• In this insight, we conducted fundamental analysis and look at major share price drivers for Hysan Development, who is a major landlord in Hong Kong
• Hysan Development has a simple business model and owns a retail/office portfolio in Causeway Bay, Hong Kong.  Its retail properties are largely tourist-centric
• Despite trading at attractive valuation, the stock has low trading liquidity.  Also there is no visible catalyst which means there is little chance for re-rating for the stock

• Welcome to the second research piece in our “Business Cycle Week”.
• In this edition of the series on the business cycle, we will focus on whether FX markets sniff out the cycle ahead of other asset markets.
• Is the USD a bellwether of global trends or is it just a saying?

• Yibin City Commercial Bank Co Ltd (1315463D CH) is looking to raise around US$300m in its upcoming Hong Kong IPO. The bookrunners on the deal are CCBI and ICBC.
• Yibin City Commercial Bank (YCCB) is a city commercial bank in Yibin, Sichuan Province of China.
• As per CBIRC Yibin Office, it was the largest bank in Yibin in terms of total assets as of Dec 22.

• Searchlight agreed to acquire via scheme of arrangement UK asset manager Gresham House PLC (GHE LN) for 1,105p/share in cash, c.£470 million, 12.6x EV/Fwd NTM EBITDA, 17.6x Fwd P/E. Terms are final.
• Irrevocables plus letters of intent total 33%. Although the consensus median TP is 1,170p/share (c. 5.8% higher), it seems difficult to argue with a 63% premium.
• Taking 680p break, the shares are pricing an 89% probability of completion. Spread is 4.3%/10.3% (gross/annualised), which explains why the shares have been liquid since the offer announcement. Long.

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.

• Greenland Holdings Corp
• Sunny Optical Technology Group

• Rakuten Securities, the online securities arm of Rakuten, aims to raise around US$500m (estimated) in its Japan listing.
• It is the largest online securities firm in Japan with a 33.7% market share. In FY22, it had over 8.64m accounts, with around JPY18.2tn (US$131bn) of assets under custody.
• In this note, we talk about the not-so-positive aspects of the deal.

• SAMHI Hotels (SAMHI IN)  plans to raise around US$200m (estimated) in its Indian IPO.
• Samhi is India’s third-largest hotel asset owner, by number of keys, with a portfolio of 25 operating hotel assets comprising 3,839 keys, as of Feb 2023.
• In this note, we look at its updated filings and discuss the changes since its last filing in 2019.

• The Hong Kong Hang Seng Index (HSI) last week closed strongly up. This week it’s pulling back, but MRM pattern readings forecast a very short-lived pullback (-1 to -2 weeks).
• The suggested strategy is: let the index play out its pullback (warning: it can be volatile) and then enter LONG trades when the probability is good.
• Suggested support price areas are between 18965 (Q2) and 18732 (Q3) – or this Friday at Close (as long as the close is negative).

• Rakuten Securities (RAKUSEC JP), the online securities arm of Rakuten, aims to raise around US$500m (estimated) in its Japan listing.
• It is the largest online securities firm in Japan with a 33.7% market share. In FY22, it had over 8.64m accounts, with around JPY18.2tn (US$131bn) of assets under custody.
• In this note, we talk about the 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.

• Shui On Land
• Sino-Ocean Service

• Ally Financial is about to release its Q2 2023 earnings tomorrow as tightening within the auto loans market continues.
• The deposit mix will be a key area to watch as it will have a major impact on the company’s return on tangible common equity.
• The company is expected to report its second quarter of 2023 on Thursday.

The Diverse Income Trust (DIVI) has two co-managers, Gervais Williams and Martin Turner at Premier Miton, who employ a genuine all-cap UK equity income strategy. DIVI’s long-term total returns are a function of its income and above-average income growth and although valuations can vary, over time they become less important as they trade in a range. While the trust’s performance has been disappointing over the last two years as stocks have derated and AIM stocks have underperformed, its income profile remains robust; hence, the managers are anticipating an improvement in DIVI’s performance. The trust has delivered a rising level of regular annual dividends throughout a range of market conditions.

• In this insight, we take a look at the potential index changes for F100 and F250 in the run up to the September 2023 Rebalance.
• I currently expect two changes for the F100 index and three changes for the F250 index.
• As always, there are several names lurking just outside the borders and could be involved in index changes in September 2023 if there are sharp price changes.

• In this insight, we conducted fundamental analysis for SHKP, which is a proxy for Hong Kong given 70% of its GAV comes from Hong Kong
• SHKP has well diversified businesses in residential, retail and office in Hong Kong and China, and there are a lot of share price drivers
• We would recommend a BUY as long as the stock trades below HKD100, as the stock has a trading range of HKD100 to HKD 130

• This is our first report on UBS Group AG, one of the largest banking service companies.
• The company delivered a decent result in the last quarter driven by strong flows across Global Wealth Management and Asset Management.
• The company will continue to prioritize a capital-light and client-focused Investment Bank model while managing activities outside its strategic focus.

We view Greentown China as “Medium Risk” on the LARA scale. The company is an established residential property developer targeting high-end markets, mainly in Eastern China (i.e. Zhejiang province). Greentown has an SOE background, with its largest shareholder China Communications Construction Group (CCCG; 28% stake) being an SOE under the central government. Greentown also has strong branding.

Our Credit Bias on the company is “Stable”, on account of the: [1] resilient contracted sales and revenue growth; [2] adequate liquidity; and [3] access to diversified onshore financing channels. We believe Greentown is well-supported by CCCG. That said, we remain concerned over the high JV usage, which diminishes financial transparency.

We maintain our “Hold” recommendation on the GRNCH curve. We note that Greentown no longer issues USD perpetuals and has limited offshore maturities. We also note that the GRNCH 2025 bonds are trading c. 150 bps wider than the notes by peer China Jinmao (BBB-). This is likely due to a three-notch rating difference, given Greentown’s higher leverage. However, the two developers share the same ultimate central state parent, and we believe Greentown does not lack financial access or liquidity.

• This is our first report on HSBC Holdings PLC, one of the biggest banks and financial service providers in the world.
• Notably, Hong Kong, Mainland China, the Middle East, and the U.K. have shown strong economic resilience and recovery.
• We initiate coverage on the stock of HSBC Holdings PLC with a ‘Hold’ rating.

• This is our first report on Truist Financial Corporation, one of the largest regional banks in the United States.
• Truist opened 146,000 bank accounts online.
• We initiate coverage on the stock of Truist Financial Corporation with a ‘Hold’ rating.

• This is our first report on Manulife Financial Corporation, a leading financial products and services provider.
• Despite a difficult market and operating environment, Manulife produced strong core earnings and sustained an increase in adjusted book value per share.
• We initiate coverage on the stock of Manulife Financial Corporation with a ‘Buy’ rating.

• This is our first report on Sun Life Financial, a prominent financial service provider.
• Sun Life US and Sun Life Canada delivered solid earnings driven by growth across their business lines.
• We initiate coverage on the stock of Sun Life Financial Inc. with a ‘Hold’ rating.

• After years of waiting, Ripple finally got a ruling in their highly anticipated lawsuit with the SEC: the company did not violate federal securities law by selling its XRP token on public exchanges.
• The market reaction was near instantaneous.
• Since Thursday, XRP is up 61% and several exchanges that had previously de-listed the token, including Coinbase and Kraken, immediately re-listed it.

• This is our first report on one of the largest banking and financial partners, Mitsubishi UFJ Financial Group.
• The company plans to utilize its group-wide customer base, including Asian partner banks and Morgan Stanley, to navigate the final year of the current Medium-Term Business Plan (MTBP).
• We initiate coverage on the stock of Mitsubishi UFJ Financial Group, Inc. with a ‘Hold’ rating.