Financials

• IVs seesawed through the week on account of the Fed meeting. Trading up to 12.7% going into the meeting & selling-off to 11.4% thereafter.
• Vol-Curve Term-structure in Contango post Fed meeting – Nifty50 vol curve sheds its inversion & BankNifty vol curve loses its kinked-shape
• BankNifty Smile & Skew characteristics extend relative to previous weeks – despite falling IVs & strengthening index.

• Kolte Patil reported a decent Q1FY25 with pre-sales of INR 711cr. This was lower than expected, however, adjusted for weak new launch activity, it was healthy.
• Q1FY25 pre-sales was mostly led by sustenance sales. New launches worth INR 1500cr have been initiated mostly in Q2FY25, thus will start reflecting in 2HFY25 pre-sales numbers.
• With highest-ever quarterly collection at INR 612cr, operating cash flows has remained strong. The balance sheet remains robust with negative net debt, allowing Kolte Patil to aggressively pursue new projects.

• Bajaj Finance (“BAF”) reported a decent Q1FY25 with robust AUM growth, however, loan losses came in slightly elevated. AUM grew 31% YoY to reach INR 3,54,192cr.
• Annualized credit cost inched up to 2.1% vs 1.75-1.85% guided for FY25. This was led largely by weak collection efficiency. BAF is working on enhancing its collection infrastructure.
• BAF listed its housing finance subsidiary on Sep 16, unlocking value for the shareholders. It created history with highest-ever subscription amount and got listed at a premium of 114%.

• Nuvama’s Q1FY25 results were yet again stellar with 60% YoY growth in revenues. The excess growth came from the Capital Markets segment where the activity has been upbeat. 
• The Wealth Management and Asset Management segments, which are core to the business, continued to post secular growth in the range of 18-25% YoY.
• For the first-time ever, Nuvama Wealth Management (“Nuvama”) also declared dividend. Given the capital light nature of the business, it indicates prudent capital allocation.

• IREDA (1845911D IN) is looking to raise INR45bn (US$538m) via its qualified institutional placement (QIP).
• Most recently on 19th Sept 2024, IREDA received the Department of Investment and Public Asset Management’s (DIPAM) approval for said QIP.
• Overall, the deal wouldn’t be a large one for the stock to digest at just 4.7 days of three month ADV.

• This KODEX Samsung Group ETF sees 30% AUM outflows pre-rebalancing, with the same chunk flowing back in after, especially noticeable during December.
• Over three years, local brokers sold stock baskets before rebalancing, causing notable price impacts. During this time, Samsung affiliates in the ETF delivered 3-4% returns.
• ChatGPT said:ChatGPTThis isn’t typical NAV arbitrage; it’s likely an unhedged play. Nonetheless, given the consistent price impact and accessible stock futures, it’s worth considering.

• Ventive Hospitality Ltd (0807075D IN) is looking to raise up to US$238m in its upcoming India IPO. The deal will be run by JMF, Axis, HSBC, ICICI, IIFL, Kotak, SBI.
• Ventive is the largest hospitality asset owner amongst public listed market peers and is focused primarily on luxury offerings across business and leisure in India and Maldives.
• All of its hospitality assets are operated or franchised by renowned global operators i.e. Marriott, Hilton, Minor and Atmosphere. 

• K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million.
• In K Bank 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 rising competitive intensity, the smallest deposit base among Internet banks, below-peer loan book growth, and a high-risk crypto play due to the Dunamu partnership.

• We continue our coverage of the Hang Seng Index : in our previous insight we theorized a continuation of the rally in September.
• So far the index is following the path outlined (pullback, then rally). What is going to happen in the next few weeks, if September closes up?
• Broadly speaking we see a potential continuation of the rally in October, but there may be some resistance in the short-term.

Lippo Karawaci’s (LPKR) H1/24 results were robust in our view, with growth in all business segments pro forma for the deconsolidation of Siloam International Hospital (SILO). The new strategy and continued sell-down of SILO was a surprise. That said, the sales were carried out as SILO shares hit an all-time high, and at a very high valuation (PE ratio of almost 40x). The resulting cash proceeds and debt reduction are credit positive, and improved LPKR’s credit profile. If investment in listed associates are treated as cash, the company would have a large net cash position.

• Since the Ethereum merge on September 15, 2022, Ethereum has dropped 48% compared to Bitcoin.
• This Sunday marked the two-year anniversary of the Ethereum merge, during which it switched from Proof-of-Work to Proof-of-Stake.
• As part of this transition, Ethereum’s issuance of new Ether was sharply reduced from 4% to less than 1% annually.

• With the 15% ownership cap complicating buybacks, Samsung Fire’s more likely to roll out a dividend-focused value-up play instead.
• They’ve flagged a mix of shareholder returns and investments, but the big question is how much will be funneled into returns this year.
• If Samsung Fire hits a 50% shareholder return this year, DPS could jump to ₩23,000–₩25,000 with a 6.5% yield, potentially boosting the stock price by 20–30%.

• Swire Pacific (19 HK) is coming up “cheap” on my monitor vs. Swire Properties (1972 HK) and Cathay Pacific (293 HK), after Cathay settles its Hong Kong government tab.
• Preceding my comments on Swire and Cathay are the current setup/unwind tables for Asia-Pacific Holdcos.
• These relationships trade with a minimum liquidity of US$1mn, and a % market capitalisation >20%.

• IVs traded lower as risk sentiment received a boost. Markdown in risk-premia confirms earlier premise that the early-September Vol-spike was a seasonality driven event
• Vol-Curve Term-structure going into the Fed meeting – Slightly inverted for Nifty50 options & exhibiting V-shape kinked curve for BankNifty options
• Volatility Regime Model for BankNifty has switched to “Low & Down”, while Nifty50 options retain their “High & Down” vol-state. 

IP Group reported broadly stable private portfolio values in H124, assisted by the positive revaluation of Featurespace, an AI-powered fraud and financial crime detection business, which delivered strong top-line growth of 46.5% in 2023 to £50.4m. This helped offset a further carrying value reduction of First Light Fusion and a partial write-down of Ultraleap Holdings, a human-machine interface business. The de-rating of listed Oxford Nanopore (ONT) was therefore the major driver behind IP Group’s 9% NAV fall in total return (TR) terms in H124. Roughly half of ONT’s share price decline has reversed post reporting date, supported by its half-year trading update and the Novo Holdings investment. Across other life sciences holdings, there were four positive clinical trial results and only one failure. Importantly, IP Group has seen an uptick in exits in the year to date, with cash proceeds of £44.6m (c 4% of opening portfolio value, with £30m from the sale of Garrison Technology). This encouraged the company to increase the current buyback programme by £10m to £30m.

• In late August, Taishin Financial Holding (2887 TT) and Shin Kong Financial Holding (2888 TT) agreed to merge in what appeared to be a hastily papered deal discussed here.
• CTBC Financial Holding (2891 TT) put forth its own proposal at a big premium. Shin Kong traded up. Both deals need FSC approval. Taishin’s deal has a vote 9 October. 
• Taishin recently upped terms. And now the FSC has said “no” to CTBC’s proposal. But it’s weird. It’s not “NO”; more like, “not this.” Bit of a sticky wicket here.

• Back on the 19th August, MyState Ltd (MYS AU), Tasmania’s biggest bank, entered into a merger agreement by way of a Scheme with Queensland-based Auswide Bank (ABA AU).
• Under the terms, MyState will issue 1.112 new shares for every share held by Auswide shareholders, with MyState/Auswide investors holding 65.9%/34.1% ownership in the combined group.
• This is done and is expected to be wrapped up in December. Today is the last day of trading for Auswide cum-FY24 final dividend. 

• K Bank (279570 KS) is a Korean internet bank. It has launched an IPO to raise up to US$734 million. 
• K Bank began operations in April 2017 as the first internet-only bank in Korea. KT Corp (030200 KS) and Woori Bank (000030 KS) are the two largest shareholders.
• The bull case rests on rising market share, solid deposit growth, robust loan book growth, stable NIM, rising margins and a low NPL ratio.

• Belstar Microfinance Ltd (3624918Z IN) is looking to raise around US$156m in its upcoming India IPO.
• Belstar Microfinance is a non-banking finance company (NBFC) in India with a focus on furnishing micro-enterprise loans. 
• In this note, we talk about the company’s historical performance.

• kopi-C with GuocoLand’s Group CEO: ‘We have twin engines for growth’ Real estate company GuocoLand’s Group Chief Executive Officer Cheng Hsing Yao shares how focusing on development and investment has driven its growth and prepared it for the future.
• GuocoLand Limited (“GuocoLand”) and its subsidiaries (“the Group”) is a leading real estate group that is focused on its twin engines of growth in Property Investment and Property Development.

• ZetaChain simplifies Web3 by making blockchain interactions as easy as Web2, lowering barriers for non-technical users.
• It enables omnichain smart contracts, expanding developer capabilities and use cases across multiple blockchains.
• ZetaChain enhances DeFi with advanced cross-chain operations and supports non-smart contract chains like Bitcoin, broadening participation in decentralized finance.

Utilico Emerging Markets Trust (UEM) is managed by Charles Jillings, at specialist value-based investor ICM. He reports that, operationally, the trust’s investee companies are performing extraordinarily well, although this is not being reflected in the market. The manager suggests that investors have multiple distractions including concerns about a US recession, the US presidential election and wars in Ukraine and the Middle East. UEM’s investments in infrastructure and utility assets ensure the fund has a consistently low beta. The use of gearing has resumed following the arrangement of a new £50m debt facility, reflecting Jillings’ bullish outlook. UEM has solidly outperformed the MSCI Emerging Markets (EM) Index over the last three years. Since inception in 2005, the trust’s NAV total return has compounded at 9.2% per year.

• K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
• K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
• In this note, we talk about the not-so-positive aspects of the deal.

• Platinum Asset Management (PTM AU) has confirmed, and is “considering the merits” of an  unsolicited confidential, non-binding, indicative proposal from Regal Partners (RPL AU).
• Regal has offered, by way of a Scheme, 0.274 Regal shares for every Platinum share. A $0.24/share special dividend is permitted, and added. Regal holds an estimated 5.1% stake.
• With funds under management down 27% yoy, a merger with Regal is just the tonic for Platinum’s long-suffering investors. Founder Kerr Neilson, holding 21.7%, will have the final say.

• Our base case valuation of K Bank is target price of 9,151 won per share, which is 4% lower than the low end of the IPO price range. 
• Given the lack of upside in our target price relative to the IPO price range, we would avoid in subscribing to the IPO.
• Our base case valuation is based on 1.6x P/B multiple using the company’s equity post IPO (2.35 trillion won). 

• Platinum Asset Management (PTM AU) confirmed it received a non-binding indicative proposal from Regal Partners (RPL AU) at 0.274 RPL shares per PTM share + special dividend of A$0.24.
• The implied offer price of A$1.14 per share based on Regal’s undisturbed price of A$3.30 per share is a 15.6% premium to the undisturbed price of A$0.99 (16 September).
• Despite the modest takeover premium, the offer is attractive compared to historical and peer multiples. Expect the Board to engage to facilitate an improved binding proposal.

• AIB Group (AIBG IE) is expected to experience an increase in free float from 75% to 80% in November 2024 due to the Irish Government reducing its stake this month.
• Commerzbank AG (CBK GR) is forecasted to have a ~2% points free float decrease in Global and European Indices as UniCredit bought more than what the German Government sold.
• The UK Government continues slashing its stake in NatWest Group (NWG LN) with potential further free float increases coming in November and December 2024.

• K Bank (279570 KS) plans to raise up to US$740m in its upcoming South Korean IPO.
• K Bank is one of three Internet-only banks in Korea. It provides a full range of commercial banking products and services.
• In this note, we talk about the positive aspects of the deal.

Triple Point Social Housing REIT (SOHO) returned to full dividend cover in H124, with EPRA earnings benefiting from inflation-linked, mostly uncapped rental growth and improving rent collection. Property valuations and NAV per share were lower, but progress with the two problem tenants and falling interest rates suggest this could reverse. Meanwhile, the shares yield more than 8% with the board targeting asset sales and share repurchases to address the discount to NAV.

• JM Financial has decadal experience of being the powerhouse of financial services giant. 
• The company has been a bad capital allocator for the years and hence could not participate in the mega bull run.  
• What makes it interesting is a company is changing its strategy of capital allocation while cherry on the cake is attractive valuations and promoter buying.

• Although the Nikkei 225 INDEX was rallying strong early in the year, from mid-March the rally started to falter, and after a fake recovery into July, it fell again, lower.
• Should the index go lower from last week’s Close at 36581.76, the next paragraphs of this insight will indicate what price levels are strong support to buy.
• The only doubt we have is that the index’s overall trend does not look good. A correction to 33000 (or lower) is a possibility – a negative YEARLY performance.

• Market pricing suggests nearly a 50% chance of a 50 basis point cut by the Fed, leading to uncertainty in the market.
• The direction of the Fed’s policy is clear regardless of the cut amount, with aggressive easing likely to continue throughout the year.
• Concerns about labor market weakness in Canada have prompted the Bank of Canada to shift its focus from inflation to potential weakening in economic activity.

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• Ingenia Communities (INA AU) will be deleted from the Vaneck Vectors Australian Property ETF (MVA AU) in September. There are float changes and capping changes too.
• Estimated one-way turnover is 2.9% and will result in a one-way trade of A$19m.
• After declining over the last year, shorts have started to tick higher in Ingenia Communities (INA AU). 

• Bajaj Housing Finance (BHF IN) raised around US$800m in its India IPO.
• BHF is a non-deposit taking housing finance company engaged in mortgage lending since FY18. Its mortgage products include home loans, loans against property, lease rental discounting and developer financing.
• In our previous notes, we looked at the company’s past performance and valuation. In this note, we will talk about the trading dynamics.

• Raysum Co Ltd (8890 JP) has recommended Hulic Co Ltd (3003 JP)’s tender offer at JPY5,913, a 94.2% premium to the last close price of JPY3,045.
• The tender offer runs from 17 September to 30 October (30 business days), with payment commencing from 7 November. The offer represents an all-time high. 
• This is a done deal, as the irrevocable (Oasis) represents a 63.88% ownership ratio. With a knockout offer, the required 7.7% minority acceptance rate is easily achieved.  

• K Bank finally provided its IPO prospectus which includes more details of the IPO than what the company already announced about the IPO several days ago. 
• Bankers used KakaoBank, SBI Sumishin Net Bank, and Bancorp Inc as comps. Average PBR of 2.56x was used to value K Bank. 
• Some investors will question the inclusion of overseas comps including SBI Sumishin Net Bank and Bancorp in the valuation of K Bank.

• In this China banks screen, we focus on the credit quality headwinds going forward and which are the better positioned banks to confront the challenge
• China bank shares’ PBV ratios have eroded over time, due to low growth and credit quality concerns; yet through our analysis of these bank, we see selective contrarian positive opportunities
• CCB is a core GEM bank buy for its deeply discounted valuations and strong balance sheet; Ping An Bank is the deep value contrarian pick; Minsheng is our fundamental sell

• SOUTHBOUND was a net buyer this week. Over five days, it was +HK$12.5bn on high gross volume, but all of that net buying was on Alibaba Group Holding (9988 HK). 
• Alibaba Group Holding (9988 HK) became SOUTHBOUND-eligible on Tuesday, and mainland buyers bought US$2.1bn of BABA shares, more than total SOUTHBOUND net buys.
• Gross volumes were highest in months. This was a big week. Even bigger than just BABA. After BABA the story was banks buying. 

• The HSCEI serves as a benchmark to reflect the overall performance of the top 50 “Mainland China” securities listed in Hong Kong.
• In this insight, we take a look at the potential index changes and the resultant capping flows for HSCEI index rebal event in December 2024.
• At present, we see two ADDs/DELs based on the latest available data but the rankings can change until 30th September 2024.

• Compared to its overseas peers, K-Bank’s high valuation still stands out due to a significant gap in net income size relative to market cap.
• The offering structure, with 50% secondary sales and weak lock-up commitments, means post-IPO float could spike to around 40%, making a stock price bump unlikely.
• K-Bank’s crypto-focused model might attract investors valuing it as a crypto play, potentially influencing IPO pricing and post-listing stock performance.

• The change in control of Raysum Co Ltd (8890 JP) has a complex backstory. But one week shy of two years ago, Oasis launched a buyout to own 65%.
• The company had a strong MTMP. Oasis paid ¥1,700/share to own 65%. The MTMP came through, there was an offering, and it stayed near ¥3,000/share. 
• Now Hulic Co Ltd (3003 JP) has come out with a Tender Offer to buy the company for ¥5,913/share. That’s a 94% premium and 3.5x what Oasis paid 2yrs ago.

• It is becoming increasingly clear that the first U.S. interest rate cut is just around the corner.
• The next Federal Open Market Committee (FOMC) meeting, scheduled for September 18, will determine the Federal Reserve’s (FED) next move on U.S. Dollar interest rates.
• The FED has strongly indicated its intent to reduce rates by at least 25 basis points, with a slim possibility of a 50 basis point cut, although this is highly unlikely following the release of a slightly higher-than-expected U.S. Consumer Price Index (CPI) yesterday.