Financials

• Of the six Malaysian banks screened, we keep RHB Bank and CIMB on the buy list; PB Bank and Maybank are quality but seem fully valued by comparison
• RHB Bank has, in the December quarter, maintained its improved its pre-provision profitability versus its peers; RHB’s high CET1 ratio understates its ROE, and it is attractive on PE multiples
• CIMB once again improved its positive post-provision returns which should support CIMB’s share price given its modest valuations and attractive PEG versus peers; its high NPL ratio is fully provisioned

• In 2020 and 2021, investors opted for TIPS over conventional bonds, yet over the past year, they have moved the other way.
• The TIPS ETF has fallen from $40bn of assets to $20bn, while the long bond ETF has doubled from $15bn to $30bn.
• The loud and clear message from this shift is that investors are woefully unprepared for an inflation shock.

During its Q422 results release, Princess Private Equity (PEY) announced the discontinuation of its foreign exchange (FX) hedging strategy from 1 April 2023 and an upsizing of its credit facility from €110m to €140m in response to the holding-level liquidity constraints it faced in late 2022. We believe investors should welcome these measures, as they facilitate PEY’s balance sheet management while allowing it to stay close to fully invested (investment level at 101.3% at end-January 2023) and to resume its dividend payments in line with the policy of paying out 5% of opening net asset value (NAV).

• 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). 
• Founded in 2007, SBI Sumishin Net Bank is owned 50% by SBI Holdings (8473 JP) and 50% by Sumitomo Mitsui Trust Holdings (8309 JP).
• The investment case rests on market share gains, the rude health of the digital bank segment, the nascent BaaS segment turning profitable and ambitious medium-term goals. 

• 2H22 and FY22 DPU rose 13.1% and 24.3% YoY respectively
• 4Q22 hotels RevPAR reached 90% of 4Q19. 4Q22 SR RevPAU surpassed 4Q19 level by 15%
• Far East Hospitality Trust’s (FEHT) 2H22 distribution per unit (DPU) increased 13.1% year-on year (YoY) to 1.73 Singapore cents, bringing full year DPU to 3.27 Singapore cents (+24.3%).

• HHC highlighted its self-funding business style that should contribute to growing the scale of the Company’s commercial operations within its master planned communities (“MPC”)
• HHC reported revenue of $482 million in Q4, bringing full year 2022 revenue to $1.61 billion. The full year revenue increase was expected as HHC recognizes condo sales upon delivery
• Since the seventh tower, Victoria Place, will be completed in 2024, which means, condo sales in 2023 would be limited 

In its capital markets event in February, Record provided more detail on the progress it is making with its strategy and in particular on its diversification initiatives. This highlighted a range of partnerships to develop new products and, as a result, a promising sales pipeline pointing towards growth and potentially contributing to realisation of the target for FY25 revenue of £60m. Subsequently, signalling a further step in its succession planning, the group has announced that Neil Record, founder of the group in 1983 and currently non-executive chairman, is to retire from his role and the board following the AGM in July. David Morrison has been appointed as chair elect.

• SES announced it is unable to complete the preparation of its Annual Report on Form 10-K (the “Form 10-K”) and its audit in time for the fiscal year ending December 31, 2022.
• The Securities and Exchange Commission (SEC) has received the company’s form NT 10-K, which grants a 15-calendar day “grace period” for filing its Form 10-K.
• SES expects that its Form 10-K should be filed on or before March 16.

• Banco do Brasil S.A. is an emerging market banking stock that presents a cyclical opportunity to risk-seeking investors.
• The bank’s operational prowess and dominant market position allow it to monetize high-yielding credit.
• In addition, the bank’s fee-based business is head above shoulders.

The Diverse Income Trust (DIVI) is managed by Gervais Williams and Martin Turner at Premier Miton. They are very optimistic about the prospects for UK stocks, with Williams recently stating: ‘I am more bullish than I have been in the last 30 years’. UK equity valuations are looking very attractive versus other markets and their own history, while there is a historically wide discount between the valuation of DIVI’s portfolio and that of the UK market. The trust’s income is now higher than pre-COVID-19 levels, with the improvement exceeding that of UK stocks in aggregate, which Williams attributes to the success of its portfolio companies. He believes that DIVI’s shareholders will be rewarded with a higher level of income, while successful stock selection, which has been demonstrated in the past, could lead to outperformance versus the UK and global markets.

• It’s impossible to paint a full picture of Ethereum DeFi without an understanding of Curve.
• Its unique AMM mechanism enables large stablecoin swaps with extremely low price slippage and its governance and incentives make it a kingmaker for stablecoins; Terra founder Do Kwon touted the infamous 4pool – containing UST – as the thing that would catapult his stablecoin ahead of DAI.
• In the past, we have written on how Curve pools can be a useful barometer for stablecoin demand particularly during volatile market events. 

• China Vanke aims to raise around US$500m in its H-share primary placement.
• Vanke had recently stated that it aimed to raise around US$2bn via an A-share private placement, so a placement was expected for sure.
• In this note, we will talk about the placement and run the deal through our ECM framework.

• News reports indicate that China Vanke (H) (2202 HK) is looking to place 300m shares at a price range of HK$12.93-13.20/share to raise around US$500m.
• The 300m shares is nearly 33 days of ADV, but around 11-12% of the new shares will be bought by passive trackers early next week and provide near-term support.
• China Vanke (H) (2202 HK) trades cheaper than its peers on EV/Sales, EV/EBITDA and forward PE. Shorts have ticked higher in the last couple of weeks.

• In February 2022, SBI Holdings (8473 JP) and Sumitomo Mitsui Trust Holdings (8309 JP) announced they would IPO SBI Sumishin Net Bank (7163 JP) but that got cancelled by Ukraine.
• Yesterday, they announced they were going to try again. This time, with a reduced price and reduced aspirations. Given the way banks have performed in the last year… 👀
• That changes – completely – the picture of index demand. But it also changes the fundamental picture. 

• Srisawad Power 1979 (SAWAD TB) has been added to the SET50 INDEX following the Total Access Communication (DTAC TB) / True Corp Pcl (TRUE TB) merger.
• Passive SET50 INDEX trackers will need to buy 9.7m shares (THB 534m; 1x ADV) of Srisawad Power 1979 (SAWAD TB) at the close of trading today.
• There could be two more changes in June with relatively new listings, Thai Life Insurance (TLI TB) and Betagro (BTG TB), being added to the SET50 INDEX.

• Nexus Select Trust (NST IN)  is looking to raise up to US$500m in its upcoming India IPO. 
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
• In this note, we will talk about the not-so-positive aspects of the deal.

• SBI Sumishin Net Bank (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 the updates from the latest filings.

• A tale of two very different tapes with the HSI our top short on this bounce and Taiwan holds firm with trendline buy support as our top long in Asia.
• At this juncture Asia remains mixed but increasing downside pressure will emerge after the SPX bounce terminates and brings into play a harder down leg.
• HSI 21k resistance to short. Taiwan trend, price and dual moving average support lies at 14,900/700 with RSI buy support to align.

• On 1 March the shares of Appreciate were cancelled from AIM and the new shares of Paypoint were admitted to trading on the LSE.
• In my previous insight, I mentioned that although the offer price did not seem generous and liquidity limited, the risk/reward was favourable. 
• In the end, shareholders saw a good opportunity to cash in after a sluggish performance since the pandemic outbreak.

Yanlord Land’s FY 2022 results were acceptable, given its robust contracted sales and cash collection despite the challenging industry environment. In addition, its net debt and leverage metrics were largely stable. We also view positively that the company has not declared any dividend, in order to conserve cash.

Going forward, we expect Yanlord’s liquidity risk profile to remain manageable, despite a reduction in the company’s proportion of freely available cash at FYE 2022. We also anticipate that the company will continue to limit new land acquisitions, in favour of an asset-light approach towards property development. For FY 2023, management has guided for a moderate y-o-y decline in contracted sales. This could reflect its expectation for the property sector to remain subdued. 

• Powerful UAE franchise owned by the government of Dubai 
• Strong profitability, underpinned by robust operating metrics. Earnings have recovered strongly since pandemic lows of FY20/21.
• We are residual buyers of the EBIUH 4.25% Perpetual, up to par

• As expected, Japan Post Bank (7182 JP) has announced their ToSTNeT-3 buyback of ¥70 billion on Day 1 of the potential TN-3 Buyback period.
• Also as somewhat expected, investors and traders pushed up the stock price today after the news there would be a buyback, hoping to buy then sell, or short today’s close.
• Japan Post Holdings (6178 JP) will offer shares. Others obviously will too. How this works and what you have to watch out for discussed below.

• GK Goh Holdings (GKG SP) has disclosed a voluntary conditional offer from management at S$1.26 per share, a 38.5% premium to the undisturbed price (24 February).
• The offer price is final barring a competitive situation. The VGO has a 90%+ minimum acceptance condition which can be waived or lowered. Irrevocables represent 62.89% of outstanding shares.
• The offer price is attractive in comparison to historical trading ranges. The offer will remain open for at least 28 days which points to the earliest of 11 April close.

• Nexus Select Trust (NST IN)  is looking to raise up to US$500m in its upcoming India IPO. 
• NST is a REIT with a portfolio of 17 Grade A urban consumption centers. It is backed by Blackstone.
• In this note, we will talk about the positive aspects of the deal.

• Barclays PLC (Barclays; “the bank”) was established in 1690 and is headquartered in London. The bank has a strong presence in the UK.
• The bank has two principal business segments – Barclays UK and Barclays International. Barclays international is split into corporate and investment banking (CIB) and consumer, cards and payments (CCP).
• The bank has a global presence, with a focus on the UK, EU and the US.

• 2022 net profit up 20% YoY, beating expectations.
• Final dividend of 42 S cents/share and special dividend of 50 S cents/share proposed.
• Flags downside risks to 2023 peak group NIM guidance, while keeping guidance for mid-single digit loan and double-digit fee income growth.

In challenging conditions, The Law Debenture Corporation (LWDB) has reported robust 2022 results. IPS delivered its fifth consecutive year of growth, in line with its mid-to-high single-digit target. The extreme polarisation of equity market performance, with only a handful of large companies generating positive returns worked against the investment managers’ consistent, diversified, value-driven approach in 2022. Nonetheless, LWDB’s track record of outperformance over three, five and 10 years remains. The share price return was positive while DPS, held or increased for 44 years, rose 5.2% to 30.5p.

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
• Vedanta Resources

• Last week there were headlines from media publishers that read something along the lines of; NBA-Branded ‘Top Shot Moments’ NFTs May Be Securities, Judge Rules in Dapper Labs Case
• This brewed discourse around 1) Top Shots themselves being securities and 2) NFTs as a thing being securities.
• Both 1) and 2) are wrong in my opinion, for a variety of reasons.

Ahead of interim results for the six months ended 31 December 2022 (H123), Supermarket Income REIT (SUPR) has reported its externally assessed property valuation. The like-for-like 13.3% decline is below the broad market decline of c 19% but above our assumption. We have reduced our FY23e EPRA NTA per share by c 10% to 91p but our forecasts for EPRA earnings, dividends and dividend cover are unchanged.

• Japan Post Bank (7182 JP) has announced the mooted offering by Japan Post Holdings (6178 JP) whereby they will sell 29% of the bank to go from 89% to 60%.
• There are two buybacks – one pre offering and one after – which is an attempt to mitigate impact. This creates interesting but complicated strategy possibilities. Lots of details here.
• Big picture, this is a Very Big Offering at ¥1.236trln at today’s close including greenshoe. 80/20 dom/international. A TOUGH sell. 1.089bn shares is 4x current float. 

• Japan Post Holdings (6178 JP) plans to sell around US$9bn worth of Japan Post Bank (7182 JP), trimming its stake by a third.
• Initial news of the deal broke last week, and we had a look in, Japan Post Bank Possible Placement – Here We Go Again with the US$9bn Overhang.
• In this note, we talk about the deal structure and impact.

• Japan Post Holdings (6178 JP) is looking to reduce its stake in Japan Post Bank (7182 JP) from 89% to 60%. That is over US$9bn at the last close.
• The placement is supported by buybacks (ToSTNeT-3 and on-market) that will absorb some of the offering. Then there is the passive buying that will absorb a third of the offering. 
• One of the key short-term supports will be the exercise of the over-allotment of the Japan offering. But that will require persuading retail investors to buy into the offering.

• Japan Post Holdings (6178 JP)/JPH has announced the offering of up to 1.1 billion shares in Japan Post Bank (7182 JP)/JPB to reduce its stake from 89.00% to 59.95%.
• JPB will carry out a ToSTNeT-3 buyback (maximum of JPY70 billion) and an on-market buyback (maximum of JPY80 billion). JPH can sell additional shares into the ToSTNeT-3 buyback.
• For long-term investors, JPB’s forward P/B of 0.47x and yield of 4.41% are attractive to peers. JPB’s current price ratio is undemanding vs TOPIX Banks ETF and JPH.

• A key re-rating trigger for Edelweiss’ stock is nearing as its wealth management (WM) arm gets close to demerge and list over the next couple of months.
• Edelweiss’ WM business could list at a market cap of around INR 8750cr, suggesting that Edelweiss’ 44% stake in it alone could be valued at INR 3850cr.
• Edelweiss also reported strong Q3FY23 earnings with 31% YoY growth in ex-insurance PAT. Edelweiss has significant potential to re-rate over the next couple of years as the credit business normalizes.

• Verveine Pte. Ltd., a vehicle controlled by Goh Geok Khim (executive chairman) and Goh Yew Lin (MD), has made a voluntary offer for GK Goh Holdings (GKG SP).
• The Offer price of $1.26/share, which is final, is a 38.5% premium to last close.  It is conditional on the Gohs holding 90%, which may be reduced to 50%.
• GKG Investment, with 62.89%, has given an irrevocable to tender. 

• 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 HSCEI has produced 2 material failures below 5000 in the last 17 years, in October 2008 and October 2022. Aggressive bullish multi-month reversals followed in both cases. 
• The 2008 upswing paused when a bearish monthly reversal pattern was delivered in January 2009, but only for 2 months. The bearish monthly reversal pattern in February 2023 appears similar. 

Regional REIT (RGL) has confirmed a Q422 DPS of 1.65p, taking the total for the year to 6.6p. It expects this to be fully covered by EPRA earnings when results are published in March, supported by leasing progress and strong rent collection. Market-wide valuation yield widening reduced NAV and increased gearing, but RGL notes that it has ample headroom available across the debt facilities, which are fixed at a cost of 3.5%.

• There are no index changes, in what comes as a surprise given the index is now 9 months late getting to 80 names, with a target to get to 100. 
• There are, however, several capping changes, leading to nearly 3 days to sell on HSBC Holdings (5 HK) and 2.6% one-way turnover.
• The lack of name changes is disappointing. They don’t need to find names to delete, just names to add to improve tracking and coverage. This portends further slowness to change.

• In a surprise, the Hang Seng index committee has decided not to make any changes to the Hong Kong Hang Seng Index (HSI INDEX) at the March rebalance.
• This further delays the timeline for the index to reach 80 constituents. The earliest we will reach the target now is June 2023 (a year later than targeted).
• Despite no changes to the index constituents, capping and float changes will lead to a one-way turnover of 2.61% resulting in a one-way trade of HK$5.1bn.

• There are 35 adds and 28 deletes for the Hang Seng Composite Index (HSCI) at the March rebalance to take the number of index constituents up to 527.
• We expect 29 of the 35 inclusions to the HSCI will be added to Stock Connect, while 20 of the 28 HSCI deletions will be removed from Southbound Stock Connect.
• 19 stocks could be deleted from Stock Connect only since their average market cap has dropped below HK$5bn- unless the new threshold of HK$4bn is approved in the next week.

• We explore Citibank’s upcoming Banamex disposal, which appears to have become a one horse race and question whether an IPO is completely off the cards
• Bank sector data trends to December remain robust, but headwinds are building; rising funding costs threaten credit spreads and worsening cost of credit trends, both set to erode 2023 returns
• BBVA Mexico generates consistent premium ROE of 25%+, investors can gain exposure through parent BBVA shares; we remain cautious on Banorte, due to the growing risks to returns and valuation

We view Shui On as “Medium Risk” on the LARA scale. Our opinion is underpinned by the company’s portfolio of high-quality assets situated in prime locations in major Chinese cities. Shui On has a large investment property portfolio, which generates sufficient recurring revenue to cover more than 1x of adjusted interest expense. The investment properties were worth CNY 51.2 bn as at end-June 2022, covering net debt by 1.7x. Moreover, the company can dispose assets to boost cash flow if needed. These positive factors are balanced against Shui On’s small scale and lumpy earnings profile.

Our fundamental Credit Bias on Shui On is “Stable”, supported by the improved operating and financing environment for stronger Chinese developers. The company has a high-quality asset base and sizeable investment property portfolio, which would support access to bank financing. We also believe Shui On’s differentiated business model (compared to peers with heavy reliance on property development) will thrive in the post-property crisis environment.

Controversies are “Immaterial” and the ESG Impact on Credit is “Neutral”. Shui On’s management appears to place a strong emphasis on ESG issues, and we note positively the company’s high level of disclosure and transparency.

• The completion of the Total Access Communication (DTAC TB) – True Corp Pcl (TRUE TB) merger could cause an intra-review change next week.
• There could be two more index changes in the regular review in June 2023.
• In this insight, we take a look at the current rankings of potential ADDs and potential DELs and their recent price and volume performance. 

• On Monday, Hong Kong made its intentions clear to open the door to crypto trading for retail. 
• Reports claim that China is quietly encouraging the move, using Hong Kong as a testing ground for what safe crypto trading might look like.
• The Hong Kong Securities and Futures Commission (SFC) outlined various caveats for retail investing in crypto, namely hinting at only having a small subset of the largest tokens available to trade.

• On 23 December, the CMA announced the launch of its Phase 1 review. On 22 February, the CMA has unconditionally cleared the merger, therefore the CMA Condition has been satisfied.
• The Court sanction hearing is expected to take place on 2 March, and subject to the satisfaction or waiver of the remaining Conditions, completion is expected on 6 March. 
• Spread traded at a premium since the deal announcement until the CMA clearance, now at a discount. Spread (gross/annualised) is 0.78%/22.3%.

• SPX 3,980 is where a mild bounce should unfold. 4,060 sell resistance then the set-up calls for a break below 3,980 to test lower targets.
• This next leg down will cause more damage in EM/Asia and Europe. MACD on the verge of an ugly break below the “0” acceleration line.
• US 10yr yield dip is a buy for a push above the 3.95% pivot resistance with new highs in store.

In Q323, Custodian Property Income REIT (CREI) continued to capture occupational demand, lease vacant space across all sectors and grow rental income. This underpins fully covered dividends and provided a partial offset to strong market-wide pressure on property valuations. Moderate gearing mitigated the impact on NAV, while income is protected by 80% of drawn debt having a fixed cost.

• Overnight a Reuters article suggested Japan Post Holdings (6178 JP) had started talks to sell a near 30%) stake in Japan Post Bank (7182 JP), the first sale since IPO. 
• A sale is designed with two aims: 1) the TSE requires a 35% tradable share ratio, and 2) JPH is supposed to lower holdings in JPB to <50% by 2025.
• This event may include a buyback, and has moving parts, and flows on the back end, but fundamentally a sale would effectively constitute a “re-IPO” of the shares.

• Operating costs moved to USD8.9bn in 4Q22 from USD8.0bn in 3Q22
• Continued high growth in QoQ credit costs up 33% QoQ in 4Q22
• Net fee income seems to be shrinking about USD100m quarterly

• Japan Post Holdings (6178 JP) is looking to trim its stake in Japan Post Bank (7182 JP) by a third, as per Reuters. 
• The deal would be worth around US$9bn and could come as soon as next month.
• In this note, we talk about the news and take an early look at the possible selldown.

• 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.
• USGG10YR traded in a perfectly structured downtrend from 1981 to 2020. This downtrend was clearly broken in Q2 2022, confirming a dominant multi-year uptrend.
• A mere 38.2% retracement of the 1981/2020 downtrend targets 6.24 in the coming 1-2 years. This is our big picture outlook. February may confirm the next leg in this uptrend.