Financials

• Japan Post Bank (7182 JP) has announced that the offering price has been set at JPY 1131/share, a 2.08% discount to the closing price. Settlement is on 20 March.
• The buyback will run from 22 March to 12 May and at last prices will mop up 1.85% of shares outstanding or 4.62% of post-offering float.
• In the short-term, we expect buying from Topix (TPX INDEX), MSCI and other global trackers to support the stock price. 

• Japan Post Bank (7182 JP) priced its offer at JPY1,131, a discount of 2.1% to the last close. JPB’s on-market buyback period runs from 22 March to 12 May.
• Japan Post Holdings (6178 JP)/ JPH’s 2021 offering suggests that the share price will have support to trade above the offer price at delivery date and the on-market buyback period.
• The offer price’s forward P/B of 0.45x and yield of 4.42% are attractive vs peers. JPB’s price ratio at the offer price is undemanding vs TOPIX Banks ETF and JPH.

• SBI Sumishin Net Bank (7163 JP) (SSNB) is looking to raise around US$390m in its second listing attempt.
• SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
• In this note, we talk about implied valuations in the IPO price range

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 Transmission
• Country Garden Holdings Co

• The Offer Document for GK Goh Holdings (GKG SP)‘s MBO has been dispatched. The Offer price of $1.26/share, which is final, is a 38.5% premium to last close. 
• The Offer is conditional on the Goh family holding 90%, which may be reduced to 50%. GKG Investment, with 62.89%, has given an irrevocable to tender. 
• There is no IFA opinion in the Offer Doc. This will be present in the Circular which is expected to be sent out by the 28th March, at the latest.

• NAV/Share down 19% for FY2022 in line with falls in the market. Private/alternative assets represented 36.3% of GAV and 39.86% of NAV. Discount to NAV was 35.8% as of YE2022.
• The discount to NAV was 36.7% as of 10 March. GBL is buying and cancelling its own shares, which creates value as it’s done at a deep discount to NAV.
• GBL has completed its transition towards a 40% of private/alternative assets in portfolio, but still needs to convince investors to lower its discount to levels closer to Investor AB. 

• Sprott Physical Platinum & Palladium Trust has a nearly equally-weighted portfolio of physical Platinum and Palladium.
• The closed-ended trust has an expense ratio of only 0.5% and is trading below its short and long-term moving averages.
• Platinum Group Metal (“PGM”) prices offer researchers an exciting topic, given the velocity of the recent shift in supply and demand-side variables that influence PGM prices.

• The word floating around late Friday as books closed was that foreigners had bid strongly. More than the entire Japan Post Bank (7182 JP) offering size in fact.
• The offering is an interesting problem, as discussed before. Different people are going to buy it for different reasons. 
• This insight looks at the breakdown of ratios and the resultant foreign ownership, along with post-offer supply/demand balance.

• The upcoming rebalance of the MVIS Australia A-REIT Index will be implemented at the close on 17 March. There are no constituent changes, but there are float and capping changes.
• Estimated one-way turnover at the rebalance is 1.8% resulting in a one-way trade of A$11.1m. There is limited impact on the index constituents.
• The largest inflows are on Stockland, HomeCo Daily Needs REIT, Gpt Group and Charter Hall, while the largest outflows are on Goodman Group, Vicinity Centres, Dexus Property and Scentre Group.

• Japan Post Holdings (6178 JP) aims to sell around US$9bn worth of  Japan Post Bank (7182 JP), trimming its stake by a third.
• We have looked at the deal in our previous notes, Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback and Japan Post Bank Placement – Misbehaving. 
• In this note, we talk about the updates since our last note and have a look at the post pricing performance of a few more deals.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Japan Post Holdings (6178 JP)‘s large offering of Japan Post Bank (7182 JP)‘s shares, SBI Sumishin Net Bank (7163 JP) aims to raise up to US$440 million. 
• Event-Driven developments – ASM Pacific Technology (522 HK), Yashili International Holdings (1230 HK), Invocare Ltd (IVC AU), Oishi Group PCL (OISHI TB), Olam Group (OLG SP), Halcyon Agri (HACL SP). 

• As a background, can I refer the reader to Substack Note No One Cares 有中国特色 Real Estate Liquidity Spiral to Solvency Challenge 31st October 2022 ?
• It bottoms ticked recovery in the highly leveraged Real estate Index Hang Seng Mainland Property Index (HSPMI) and rallied 103% from trough to peak 27th January 2023.
• The mainland listed Index CSI 300 Real estate (CSI300RE) trough (1^st November) to peak (27^th November) was 43.5%.

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 Jinmao Holdings
• Road King Infrastructure
• Sunny Optical
• Vedanta Resources
• Yanlord Land

• Opportunity in any market exists in anything that causes the perception of the investor to take on a new shape.
• For many years, the Fat Protocol Thesis popularised by Placeholder VC has dominated the perception of the digital asset market.
• But as the market and, more importantly, those who have come to use this new technology platform change, so too does the perception of where value will be captured.

• Saigon Thuong Tin Commercial (STB VN) will be deleted from the MVIS Vietnam Index at the close of trading on 17 March.
• One-Way turnover is 4.2% and the one-way trade is US$21m. There are two stocks where passive trackers need to buy over 1 day of ADV.
• There have been big inflows to the Market Vectors Vietnam ETF (VNM US) over the last three months as the index has traded near its lows.

• Bearish from SPX 4,060-80. Near resistance at 4,020 was used to add to shorts. Downside surprise due this week on break of 3.900.
• Key support breaks amid systemic risk saw us raise our net short going into this more turbulent period that should wrap up near the 20th. Started shorting in Feb.
• Added Japan to our short list being a laggard. Once laggards buckle we will be closer to a short term low.

• After two months of zero buybacks under their HK$4bn buyback programme, on Friday Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK) again bought back shares.
• Ostensibly, it was as Swire A shares fell below HK$60/share. They were 65% of B volume and 51% of A volume on Friday – not shy about their return.
• Assuming participation patterns normalise and the shares don’t bounce back above the self-imposed limit, the buyback will probably last 6-7 weeks more. The div arb is real if you hold. 

• 2022 was a challenging year for web3. We witnessed the collapse of TerraLUNA, the fall of FTX, and several notable insolvencies including Three Arrows Capital, Voyager, Celsius and BlockFi.
• These events deeply impacted the sector, with the crypto market losing over $2 trillion in market cap in 2022 and public perception of web3 turning sour.
• Many suspect we have yet to feel the full magnitude of the contagion effect of these events, as they are still ongoing (e.g. the FTX trial), and we could reach new lows.

• Through operating luxury shopping malls in China, Hang Lung Properties is the only HK-listed stock that provides exposure to the China luxury consumption story.  It is trading at attractive valuation.
• Major concerns are 1) leakage of retail sales after re-opening and 2) impact on luxury consumption from negative wealth effect.  Most of the risks are priced in at current valuation.
• Short-Term, China consumption will recover post-COVID as consumer sentiment rebounds.  Long-term, the structural story of China consumption remains intact, supported by growing middle class and increasing disposable income and savings.

• 4Q22 revenue grew 14% Y/Y in a tough market. Transacting accounts grew 11% Y/Y and digital asset conversion volumes were up 19%.
• Opex, excluding goodwill and intangible assts impairments, was $73.2 million.
• While 2022 was a difficult year for crypto, President and CEO Gavin Michael highlighted the company “delivered on our product roadmap, worked closely with our partners to go-to-market, added leading industry players to our partner network, and announced our acquisition of Apex Crypto.”

JDC Group (JDC) reported preliminary FY22 results that were on the lower side of the guided range for revenues and on the higher end for EBITDA. FY22 revenue increased by 6.3%, compared to 18% in 2021, reflecting low German consumer confidence especially in December. This led to weaker demand especially for life insurance products. JDC expects FY23 revenue growth to accelerate, to 17% at the midpoint of guidance (€175–190m) based on cooperation agreements that are already signed. The EBITDA margin is also expected to increase based on a guided EBITDA range of €11.5–13.0m. We will review our valuation after the final results, which will be published on 31 March.

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. China SCE
2. Road King Infrastructure
3. Sino-Ocean Group
4. Greentown China
5. Anton Oilfield

and more…

• Tomorrow is BOJ Governor Kuroda’s last Monetary Policy Meeting, capping a ten year run as one of the most dynamic central bankers in the world.
• Tomorrow is also the day BEFORE the first day on which the Japan Post Bank (7182 JP) mega offering could price and the last day of bookbuild indications.
• I am not saying this is not coincidence, but it is worth thinking about the interplay.

• There were some positive takeaways from Swire stable’s set of FY22 accounts; however, the Hong Kong office segment faces increased vacancy rates, and new supply in 2023.
• Preceding my comments on Swire 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%.

• Pavilion Real Estate Investment Trust (PREIT MK) is expected to raise MYR$1.27bn (US$280m) to partially fund its acquisition of Pavilion Bukit Jalil mall (PBJ mall). 
• Non-Interested unitholders will vote on the planned acquisition in the next EGM to be held on 22 March 2023.
• In this note, we will discuss the deal dynamics, details on the planned acquisition, and the REIT’s recent financial performance. 

• At first sight, Itaú Unibanco’s offer for the minorities of Itaú Corpbanca is great value for Itaú Unibanco shareholders, but we do not believe that this is so clear cut
• In Chile, Itaú Corpbanca is addressing its scale issue through cost control and its digital banking strategy; Colombia is more of a challenge, not helped by President Petro’s anti-business attitude
• We see this as a fair offer for Itaú Corpbanca shareholders, given the drag from Colombia; yet it needs a successful Colombia disposal to create value for Itaú Unibanco shareholders

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.

• Powerlong Commercial Management Holdings

In times of economic stress or extreme investor risk aversion, small-cap stocks are frequently indiscriminately sold down by investors, which has created significant headwinds for European Assets Trust (EAT) over the past 12 months. Factors like stock market volatility created by the war in Ukraine and associated secondary effects such as supply chain disruption, lower economic growth, higher inflation and more hawkish central bank activity have contributed to weak investor sentiment towards European small-cap stocks. Also, the rotation away from long-duration growth assets has presented seismic challenges for managers regardless of asset class, but especially for European smaller companies. In our November 2022 update on EAT, we made the case for backing the experienced management duo, and continue to believe that once markets focus on the fundamentals of the innovation, growth and cheapness in the market, EAT and European smaller companies are well placed to outperform again.

• Crypto optimists have said for the last few months that the worst is behind us.
• Just in the last year we’ve seen the collapse of crypto hedge funds, lenders and exchanges.
• They say the bad actors have been removed from the space and there’s only good news from here

• In early February, Link REIT (823 HK) announced it would do a 1 for 5 rights offering, with the Exercise Price well below TERP.
• The REIT units dropped in price as the already unlevered REIT was not seen to be needing further deleverage and early debt repayment in a rising rate environment.
• Units went ex-Rights on 24 February. The rights start trading tomorrow. That means flows. Of multiple kinds. Worth thinking about.

• Since the offer announcement, Japan Post Bank (7182 JP)/JPB’s shares have risen by 4.4%. On 1 March, JPB completed the ToSTNeT-3 buyback by acquiring 59.5 million shares for JPY70 billion.
• To understand JPB’s trading pattern, it is instructive to look at Japan Post Insurance (7181 JP)/JPI’s 2019 offering and Japan Post Holdings (6178 JP)/ JPH’s 2021 offering.
• JPB’s shares should follow the trading pattern playbook of JPI’s 2019 and JPH’s 2021 offerings and start trading below the pre-offer last trading price during the subscription period.

• K200 ad hoc change announcement date should be March 30 as the buyback ends on March 28, and rebalancing trading should occur on March 31.
• From a juice-level perspective, the entry point and timing for JB Financial showed much better performance from EGM approval rather than the announcement.
• We should consider gradually building up positions from this point until March 30 announcement or one day after (T-1 effective) while utilizing Kodex Banks ETF to hedge our long positions.

• The HSCEI 2023 dividend futures have moved up over the last few months though there was a sharp move lower in the last couple of weeks.
• With results and dividends scheduled to be announced in the next few weeks, we take a look at the fair value estimate for the 2023 dividend futures.
• We also list out the things to watch for over the next few weeks and months that could impact the 2023 dividend futures and the 2023/24 dividend steepener.

• Sabana Industrial REIT (SSREIT SP)’s partial offer from Volare of S$0.4504 per unit (S$0.465 in cash – S$0.0146 2H2022 distribution) is now unconditional. The final closing date is 24 March.
• On the assumption that ESR Cayman and Quarz Capital did not tender, acceptances representing 16.16% of outstanding units imply current proration is 61.87%.
• Based on the current proration of 61.87% and at the last close price of S$0.420 per unit, the breakeven price is S$0.373 per unit.

• Shum Yip Property Operations Group (SYPOG HK) is looking to raise about US$200m in its upcoming Hong Kong IPO.
• Shum Yip Property Operations Group (SYPOG) is a property management, commercial operational and city services provider in China.
• As per Frost & Sullivan (F&S), the firm was eighth among comprehensive property management, commercial operational and city services providers in China as per 2021 revenue.

IP Group’s NAV per share came in at 132.9p at end 2022, down 20% year-on-year in total return terms but only 2% below the end-June 2022 level. The NAV decline during 2022 was primarily due to the £428.5m loss from listed holdings (before FX changes, mostly Oxford Nanopore Technologies, ONT), while private holdings contributed gains before FX of c £101.4m (or 5.8% of opening NAV). Excluding ONT, IP Group posted a £25.2m profit in 2022. The company will focus on driving short- to medium-term returns from its more developed holdings and devote resources to its ‘priority companies’, which it believes will underpin its self-sustaining model (its top 20 holdings make up 71% of portfolio value).

Georgia Capital’s (GCAP’s) NAV per share total return in Q422 was 14.9% in Georgian lari (GEL) terms (8.5% in sterling), bringing the full year return to 4.0% (33.2% in sterling terms due to the significant appreciation of GEL). The portfolio value uplift in the quarter was mainly driven by the strong share price performance of Bank of Georgia (BoG), up 31% in sterling terms. This allowed GCAP to bring holding leverage closer to its target level, while maintaining a good liquidity position (up 14% y-o-y in US dollar terms). Meanwhile, GCAP shares continue to trade at a wide discount to NAV, currently 61%, based on GCAP’s ‘live’ NAV estimate, implying that the value of BoG shares and the put option on the water utility business is currently higher than GCAP’s market capitalisation.

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
• Greentown China
• Lippo Malls Indonesia Retail Trust
• Road King Infrastructure
• Sino-Ocean Service

• SPX is holding above its 200-day MA/3940 coinciding with its prior downtrend from 2022 near 3915; 3915-3940 remains critical support, and is the gateway to a much deeper pullback.
• Additionally, the Nasdaq 100 (QQQ) is breaking back above $297, another important line in the sand for us.
• The SPX holding at 3915-3940 could be the spark that allows another run toward YTD highs, but we continue to expect 4165-4200 to cap upside on the S&P 500.

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
• Central China Securities
• Yuexiu Property

• SBI Sumishin Net Bank (7163 JP) (SSNB) is now looking to raise around US$380m in its second listing attempt.
• SBI Sumishin Net Bank is a Japanese digital bank set up as a 50-50 joint venture between Sumitomo Mitsui Trust Bank, Japan’s largest trust bank, and SBI Group.
• In this note, we talk about our updated earnigns forecast and thoughts on valuations

• Japan Post Holdings (6178 JP) plans to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
• We have looked at the deal in our past note, Japan Post Bank Placement – Deal Structure, past Deals, Index, Buyback.
• In this note, we talk about the updates since our last note and have a look at some of the past deals.

• The lock-up on nearly 9.4bn shares of Yes Bank (YES IN) expires on 13 March. Most of that is from the banks that helped in the recapitalisation in March 2020.
• There will be forced sellers as soon as the lock-up ends, and there will be other sellers that will want to sell.
• The forced and discretionary selling will be offset to a very small extent by inflows from passive trackers in May/June as the free float for the stock increases.

• Samsung FN REIT is getting ready to complete its IPO in April 2023, which will be the first Samsung Group related REIT that will become public. 
• The core real estate properties of Samsung FN REIT will include the ‘Daechi Tower’ and ‘S1 Building’ which have excellent locations in Seoul. 
• We expect a huge demand for this IPO of Samsung FN REIT and we have a Positive view of this IPO. 

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
• Lippo Malls Indonesia Retail Trust
• NagaCorp Ltd
• Times China

• Silvergate is in deep trouble. On March 1, the “crypto bank” revealed in a regulatory filing that it could soon be “less than well capitalized.”
• The news prompted Coinbase, Paxos, Galaxy Digital and a host of other large crypto enterprises to drop Silvergate as a banking partner. Why does this matter? 
• The “fiat problem” has long plagued crypto markets: to buy bitcoin, you at some point need to interact with the traditional banking system.

• SBI Sumishin Net Bank (7163 JP), an online bank in Japan, has revived its listing plans to raise up to US$440 million (vs the 2022 target of US$1 billion).
• We previously discussed the IPO in SBI Sumishin Net Bank IPO: The Investment Case. The shares will be listed on 29 March.
• In this note, we discuss valuation. Our analysis suggests that SBI Sumishin Net Bank is fairly valued at the IPO reference price of JPY1,260. We would participate in the IPO.

• EEM stage is set for a rise from 38.20/37.80 but will find it hard to get back above 42. Intermediate risk to 36.50 from which point we are more constructive.
• USD and yield pullbacks are primary inputs amid weak EEM buy volume. Bull yield wedge breakout on the back of high degree bull divergence in yield and the USD.
• DXY trendline support turn. USD rise has not been aggressive and needs yield to clear 4.25% with a 4.70% target. Risk of a dual yield top exists.

• A weekly summary of key developments across ECM and Event-Driven names tracked by us across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India and Chinese ADRs.
• ECM developments – Japan Post Holdings (6178 JP)‘s large offering of Japan Post Bank (7182 JP) shares, SBI Sumishin Net Bank (7163 JP) aims to raise up to US$440 million. 
• Event-Driven developments – HKBN Ltd (1310 HK), Yashili International Holdings (1230 HK), GK Goh Holdings (GKG SP), Golden Energy & Resources (GER SP), Pushpay Holdings (PPH NZ), OZ Minerals. 

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.

• Adaro Energy
• China Vanke
• Hopson Development

• Big picture: Japan Post (6178 JP) selling 29% of Japan Post Bank (7182 JP) is a Very Big Offering at ¥1.236trln. 80/20 dom/international. A TOUGH sell. 1.089bn shares is 4x float. 
• Downer EDI (DOW AU)‘s CEO resigned ahead of announcing accounting irregularities last December. The CFO resigned this week after Downer announced another profit downgrade. Now the chairman is exiting. 
• Hong Kong broadband play HKBN Ltd (1310 HK)said it has been approached by I Squares’ HGC. No pricing announced, but talks continue. 

• The March 2023 index changes for the DAX index family were confirmed after the close on Friday 3rd March 2023.
• There will be one change for DAX, two for MDAX, and two for SDAX mostly in line with our expectations. Separately, there is also a change in TecDAX.
• In this insight, we take a closer look at our expectations for index flows and the recent price and volume performance of the names involved in the index rebalance event.