Financials

• CapitaLand Ascendas REIT (CLAR SP) is looking to raise up to S$459m (US$344m) in its primary placement. The proceeds will be used for acquisition, redevelopment and debt repayment purposes. 
• The deal will be a large one to digest at 15.8 days of three month ADV and 3.9% dilution.  
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• On 15th May 2023, large-cap logistics JREIT GLP J-REIT (3281 JP) (“GLP”) announced a follow-on equity offering to fund part of their recently-announced property acquisition. 
• The primary offer quantity is 209,991 units. In addition, there will also be an over-allotment quantity of 3,200 units. The total size of this offering could be roughly ¥30.6bn (~US$225mn). 
• In this insight, we take a closer look at the details of this offering and the potential of this offering to trigger strong secondary market performance in the following weeks.

• Edelweiss’ stock was down over -5% yesterday. The reason for downfall seems to be a media article which states that three large brokers are being investigated for money laundering activities.
• We think Edelweiss is not one of them as the article mentions that these brokers are being investigated since their involvement in the NSEL scam, where Edelweiss had no involvement.
• In fact, Edelweiss was among the few brokers that had come out unscathed in the NSEL scam, as it detected early on that there was some wrongdoing happening at NSEL.

• We do not expect any constituent changes in June (that could change though!). The only flows are likely to be from capping the constituents at 10% of the index weight.
• Capping changes will lead to a one-way turnover of 2.15% resulting in a one-way trade of A$14m. There are two stocks with over A$5m to trade.
• Stockland (SGP AU) will be the most affected stock with passive trackers needing to sell over 1 day of ADV. The stock has run up and shorts are increasing.

• Pavilion Real Estate Investment Trust (PREIT MK) is looking to raise up to MYR$517m (US$115m) in its primary placement. 
• The proceeds will be used to partially finance its acquisition of Pavilion Bukit Jalil (PBJ) mall.
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• We expect Futu to report 1Q23 revenue in-line with consensus, while net income beat consensus by 4.2%, mainly due to less operating expenses.  
• The next catalysts in 2023 could be 1) gradual market share gain in HK region, 2) potential new markets in Japan and Southeast Asia. 
• We maintain BUY rating on FUTU and maintain TP at US$51.  

• The Yuexiu Property (123 HK) Rights start trading today. Last day is next Monday. There is a general pattern to the flows and it behooves investors to be aware.
• There is a pattern to these trades which is worth understanding.
• In this case, I expect it is worth going long Yuexiu Rights vs Short peer basket equity earlier in the cycle.

• GLP J-REIT (3281 JP) is looking to raise around US$220m through a primary follow-on offering. The deal is a large one to digest, at 17 days of three month ADV.
• The proceeds will be used to acquire three new properties and obtain a 30% co-ownership interest in a fourth one. 
• In this note, we’ll run the deal through our ECM framework and comment on deal dynamics.

• There are unlikely to be any inclusions to the index in June while there are three 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 over 4% and a one-way trade of A$78m.
• Short interest on AMP Ltd (AMP AU) has been increasing as the stock has dropped and a further decline in the stock could lead to deletion.

• The USD debt ceiling is a returning topic and it’s typically not overly important for markets, but this time is likely to be different. 
• He repercussions for USD funding markets may be material and in sharp contrast to consensus expectations the USD may stage the biggest comeback since Lazarus.
• In this piece we elaborate why you should expect volatility in USD funding rates in coming weeks

• Five Star Business Finance (FIVESTAR IN) raised around US$190m in its India IPO in Nov 2022.
• Five-Star Business is a non-banking financial company (NBFC-ND-SI) that provides secured business loans to micro-entrepreneurs and self-employed individuals.
• In this note, we will talk about the lock-up dynamics and updates since our last note.

• Last week, some of the biggest market makers in crypto, Jane Street and Jump Crypto, announced they were winding down some of their crypto exposure, particularly in the U.S due to regulatory uncertainty.
• This move should have major implications for liquidity in the industry which has already lost several big players over the last year.
• Interestingly, market depth for BTC has barely shifted since the announcement or over the past month, remaining at depressed levels.

Georgia Capital (GCAP) continued to make progress on its strategic priorities in Q123: reduction in the net capital commitment (NCC) ratio, deleveraging its portfolio companies, selling subscale businesses, executing tactical buybacks (a US$10m programme was announced in April 2023), further investments in the renewable energy and education businesses and moving to the LSE standard listing. GCAP operates against the backdrop of strong GDP growth in Georgia at 7.2% y-o-y in Q123 (after 10.1% in 2022), where inflation seems largely contained, with headline and core inflation rates of 2.7% and 4.7% in April 2023, respectively. GCAP’s share price has been rising but is yet to catch up with the growing NAV and implies a 64% discount to the ‘live’ NAV estimate.

The Brunner Investment Trust (BUT) is led by a very strong team at Allianz Global Investors (AllianzGI). Its 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). The trust has notably outperformed its benchmark over each of the last four financial years despite significant market rallies and falls and periods of growth and value stock leadership. BUT’s NAV total return is above the average of the 13 funds in the AIC Global sector over the last one, three and five years (ranking second over three years). The trust has delivered 51 consecutive years of higher dividends plus capital growth for investors.

JDC Group (JDC) reported Q123 results in line with management’s expectations. Despite the relatively low year-on-year revenue growth of 1.4% in Q1, JDC reiterated its FY23 guidance for revenue of €175–190m based on cooperation agreements that have been signed. This translates to 17% top-line growth at the midpoint of guidance. EBITDA is still expected to be in the range of €11.5–13.0m. We have made no changes to our estimates, which are more or less at the midpoint of guidance. JDC trades at an FY24e EV/EBITDA multiple of 12.0x on our estimates, which we believe is undemanding for what is essentially a fast-scaling platform business.

• After the large tender offer in late 2021, SBI was always going to try to take Shinsei Bank private. Now they have launched their deal at ¥2,800/share. 
• That is below fair according to the Board, Special Committee, and implicitly to SBI. But the Shinsei Board has recommended shareholders tender so The Government will vote to squeeze out. 
• I expect some upset, the possibility of some activism, but it all plays out in the back end in my opinion. Not the front end.

• On 20 April, Yuexiu Property (123 HK) announced plans to raise US$1.1 billion through 30 rights shares for every 100 existing shares rights offering, with a rights price of HK$9.00.
• Since the announcement of the rights issue, Yuexiu shares have declined by -23.6% to the undisturbed price and by -18.2% compared to the TERP of HK$11.74 per share.
• The shares went ex-rights on 2 May and the rights start trading on 15 May. Link REIT (823 HK)’s trading over its rights period provides the playbook for Yuexiu’s trading.

• We summarise the latest spreads and newsflow of merger arb situations covered by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
• Highest spreads  111 Inc (YI US), ARTERIA Networks Corp (4423 JP), Estia Health (EHE AU), United Malt Group Ltd (UMG AU), Aag Energy Holdings (2686 HK), Hailan Holdings (2278 HK).
• Lowest spreads – Healius (HLS AU),Liontown Resources (LTR AU), Penguin International (PBS SP), Lian Beng (LBG SP), Mincor Resources NL (MCR AU), Blackmores Ltd (BKL AU), Arcland Service.

• Triangle breakouts are considered one of the more powerful patterns with a higher reliability and followed by high momentum moves. TLT 102 and 109 breakout pivots.
• Slowing growth and falling inflation set a bullish backdrop for bonds and lower yields. US 1 year yield exhibits a compelling bearish flat range.
• KRE bear break represents the biggest threat to the SPX in May/June. We are maintaining our sell from SPX 4,200 for mid-June cycle low.

• SBI Shinsei Bank (8303 JP) has recommended SBI Holdings (8473 JP)’s tender offer of JPY2,800 per share, a 12.6% premium to the undisturbed price (11 May).
• There is no minimum acceptance condition. SBI and irrevocables from government entities represent 73.02% of voting rights, ensuring the implementation of tender squeeze-out procedures.
• The special committee failed to unanimously recommend the offer. Minorities will feel short-changed as the outcome is predetermined and the offer tends to favour the government shareholders.

In this upcoming flash webinar, Insight Provider Travis Lundy will discuss the recent privatisation offer from SBI Holdings (8473 JP) for SBI Shinsei Bank (8303 JP). Japan’s SBI Holdings Inc said last Friday that it would take SBI Shinsei Bank private by launching a 154.2 billion yen (US$1.14 billion) tender offer, at 2,800 yen per share. Travis will go over the background and opportunities ahead of Monday’s Japan trading hours.

The Webinar will be hosted on Monday, 15 May 2023, 07:30 SGT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

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. Softbank Group
2. Wynn Macau Ltd
3. Central China Real Estate
4. Seazen (Formerly Future Land)
5. Agile Property Holdings

and more…

• Property developer/investor CK Asset Holdings made a 80p/share (+1.425p dividend) cash takeover offer for value-destroyer Civitas Social Housing REIT, implied equity value £485million, 44% premium and 26.7% discount to NAV.
• Before offer announcement, Civitas traded at 50% discount to NAV, 8.1% dividend yield (covered <1x). Although my fair value estimate (dividend discount model) is 83p, shareholders will likely cash in.
• Spread is 1.26%/3.91% (gross/annualised, assuming all payments by 11 September for simplicity). Readacross: Triple Point (SOHO LN), at 49% discount/NAV, 10.1% dividend yield (covered 0.92x), could also be a target.

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
• MGM China Holdings
• Softbank Group

• Curve recently made waves with the release of crvUSD, its new stablecoin.
• However, another under-the-radar development at Curve could cause an even more significant shift in the DeFi landscape: a new TriCrypto pool [1].
• This pool contains three high-volume Ethereum assets—ETH, USDT, and wBTC—and could potentially challenge Uniswap’s market share

• 1Q23 revenue grew 4% Y/Y in a tough market. Expense control improved with opex, excluding a non-recurring restructuring charge, down 11% Y/Y.
• These results do not include Apex Crypto, but the 2Q23 report and beyond will include it.
• The acquisition of Apex Crypto closed on April 1 and significantly changes Bakkt’s trajectory. With the combined custody solutions from Bakkt and trading capabilities from Apex, the company will be positioned to become the crypto infrastructure provider of choice.

• The HDFC Bank (HDFCB IN) / HDFC Limited (HDFC IN) merger will result in capping and funding changes on the Nifty Bank Index (NSEBANK INDEX) constituents.
• We estimate one-way turnover of around 8.4% resulting in a one-way trade of INR 21,865m (US$266m) at the time of merger implementation.
• The impact in terms of ADV is less than 1x on all stocks, but the impact in terms of delivery volume is higher than 1x on a few stocks.

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.

• Central China Securities
• Country Garden Holdings Co
• Wynn Macau Ltd

• We rate Bank Negara as our top pick for its deep value attributes of low PE multiples and PEG ratio relative to sound returns and strong liquidity metrics
• We also recommend Bank Mandiri, for its premium returns and modest PE multiples; Bank Central Asia, albeit fully valued, has impressive liquidity and return metrics
• Bank Rakyat registered worsening returns in 1Q23, with pre-provision returns declining again QoQ and cost of risk rising; its loan mix implies a high structural cost of risk going forward

We consider IP Group a compelling healthcare play with 31% of its end-2022 portfolio invested in life sciences companies, or 47% including Oxford Nanopore Technologies (ONT). These investments provide exposure to drugs developed for a variety of indications, including different types of cancer, autoimmune diseases (eg rheumatoid arthritis), as well as respiratory and kidney diseases. Investors may benefit from the platform established by management over the past decade and nurtured over many years, with nine life sciences companies expected to deliver major data over the next 24 months or so. Exposure to IP Group’s innovative portfolio is now available at a wide discount to NAV of c 60%.

• The rise in popularity of BRC-20 tokens, essentially memecoins on the Bitcoin blockchain, has pushed Bitcoin fees to 2 year highs.
• BRC-20s have massively increased demand for Bitcoin blockspace for the first time in recent history, with the network suffering from congestion and unconfirmed transactions as a result.
• Over the weekend, Binance had to pause BTC withdrawals twice as they hadn’t accounted for a surge in BTC fees in the amount they pay miners, which had caused many transactions to go unconfirmed.

• Chubb had a mixed start to 2023 and delivered a mixed result with revenues above Wall Street expectations.
• However, it failed to meet earnings expectations of analysts despite managing a double-digit operating earnings growth.
• Life Insurance premium revenue and Life earnings doubled.

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
• Powerlong Commercial Management Holdings
• Sino-Ocean Service
• Sunny Optical
• Tata Steel Thailand
• Yuexiu Property

• Hailan Holdings (2278 HK) disclosed a voluntary conditional offer from its controlling shareholder at HK$3.36 per share, a 5.0% premium to the undisturbed price.
• The offer is conditional on a 90% minimum acceptance condition which requires a minority acceptance rate of 60.0%. The offeror/concert parties own 75.0% of shares.
• The offeror aims to exercise compulsory acquisition rights (requires 90% minority acceptance rate) which suggests a bump is possible. The offer price has not been declared final. 

• The new head of Woori Financial Group (316140 KS) Chairman Lim Jong-Ryong recently revealed his willingness to acquire a major/mid-scale securities company.
• Among these potential acquisition candidates, Samsung Securities is considered to be the most likely securities companies that could be purchased by Woori Financial Group.
• In the long term (next 2-3 years), there is a good probability that Woori Financial Group could acquire Samsung Securities, which is not a core business of the Samsung Group.

• Moody’s Corporation saw some quite strong upticks in usage in the quarter and delivered an all-around beat.
• MA delivered ARR growth of 10% as Moody’s continues enhancing and extending its mission-critical workflow solutions and data analytics.
• Despite overall revenues down in the quarter, Moody’s adjusted operating margin was up.

• Block’s management is blaming the state of the economy for the company’s struggles, but the reality is very different.
• Shareholder dilution continues while cash flow remains suppressed and the macroeconomic conditions are still supportive, according to Block’s management.
• The macroeconomic condition is still supportive and the Macroeconomic conditions remain supportive.

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.

• Anton Oilfield
• China Vanke
• Sunac China Holdings
• Times China
• UPL Ltd

• Hong Kong retail sales strongly rebounded 41% yoy in March
• During May Day Holiday (Apr 29 – May 3), there was 625k mainland visitors to Hong Kong, around 63% of pre-COVID level
• Among all RE sub-sectors, retail and residential will be the first to recover (already seeing recovery), office will be lagging and the last. 

• Deposit outflows for 1Q23 in the most affected of the mid-sized US banks were in low double digits, much less severe than the deposit collapse suffered by First Republic
• In fact, since the end of 1Q23, some smaller banks have reported slightly positive deposit flows, and the recent usage of Fed and FHLB funding lines is not alarming
• We review a select group of mid-sized US banks focusing in on a number of key metrics; despite the challenging times, we like M&T Bank and Western Alliance

• Liontrust is offering 0.0589 of its own shares per share of fallen angel GAM (which had CHF132 billion AuM by end 2020 vs CHF 23.3 billion now).
• Although the GAM brand arguably retains some value, Liontrust is being somehow genereous, in my view. My fair value estimate (multiples based) is CHF 0.58/share.
• Gross spread is +16.4%. I wouldn’t get involved right now, because spread is positive, there is risk of a legal challenge and next results are likely to be ugly.

• At TMA we deliver high probability outcomes by focusing on our 3 pillars of technical analysis. •1) Response to key levels. •2) Price action. •3) Momentum confirmation.
• The LT downtrend structure in 1288 HK was simply defined by its 2018/2022 sequence of lower highs and lower lows. This structure was broken last week.  
• LT momentum indicators (monthly RSI / MACD) have recently confirmed this bullish LT trend change. The current uptrend appears set to extend towards 3.60/3.90 (+13%-24%) in the coming 2-3 quarters.

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
• Vedanta Resources
• Yanlord Land