Financials

• Binjiang Service Group (3316 HK) trades at 12.2x/9.5x FY22/23e with 32% of the market cap in net cash and a dividend yield of 5%/6.4% FY22e/23e (assuming a 60% payout). 
• The company has asserted it will maintain its payout ratio at 60% and conserve cash for M&A. Its approach will be conservative and involve lengthy due diligence.
• With an improving market environment and good results around the corner in March, we believe a rally to 30 HKD/share is within the realm of possibility.

• KOSPI 200 ETFs will have to sell Meritz FIRE and buy Meritz FINANCIAL at the close on January 27. JB Financial, the top reserved issue, will replace FIRE.
• We should consider a Long Short for two Meritz companies just before the 27th. As a follow-up setup, we should aim for a potential widening of the swap arb spread.
• As for the Long JB Financial, I would set the entry timing one week towards the implementation at the latest and look into Kodex Banks ETF (091170) for a hedge.

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.

• Lippo Karawaci
• MGM China Holdings
• Sino-Ocean Service

• This is our first report on global insurance major, Aon.
• The company delivered a mixed set of results failing to meet the revenue expectations of Wall Street.
• The strong performance of Aon in this quarter, as well as the year to date, reflects the strength of the Aon Business Services platform and the Aon United Strategy delivered for clients across solution lines and regions.

• We believe Atour’s near-term goal is to build a national hospitality group. We expect Atour’s network to expand to 2,500+ in 2025 from the current 900+.
• The time window for chain hotel’s expansion is still open in China. Mobile-Internet-enabled business model changes will usher in new challengers like Atour to the industry’s Big Three.
• We initiate Atour (ATAT US) with a BUY rating and target price of US$35 per ADS to ride on its first phase of network expansion.

• This is our first report on insurance major, Chubb.
• The company had an excellent quarter given the enormous underwriting outcomes and it delivered an all-around beat.
• During the quarter, Chubb continued to accelerate the turnover of its portfolio in a targeted manner.

• Most of the bank’s restructuring charges will be phased out of its valuation as they are non-core.
• However, a residual income model suggests that Citigroup’s stock is tremendously undervalued.
• The bank is scheduled to release its Q4 earnings report on Friday, and we are exceptionally bullish.

• Retailers /hoteliers will welcome the return of Chinese travellers, with ~US$250bn in annual spending. That should bode well for mall operators like Swire Properties and, in turn, Swire Pacific.
• 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%.

• SBFC Finance Limited (SBFC123 IN) plans to come up with INR 16 bn IPO which comprises INR 7.5 bn worth of fresh issue.
• The company is MSME focused NBFC-ND-SI, and has shown attractive growth in AUM, disbursements in the last few years. SBFC also offers loans against gold.
• However, there are a few perils that must not be overlooked, such as lack of provisioning, low NII growth, mixed peer positioning, and few governance setbacks.

• Ethereum is the only profitable blockchain, a analysis of revenue and expense of Ethereum;
• Ethereum staking ratio is the lowest among all PoS blockchains and the Shanghai upgrade in March will change this;
• Why will there be a short-term rally ahead of the Shanghai upgrade?

• Bharat Highways InVIT (BHINV IN) is looking to raise about US$242m in its upcoming India IPO. The deal will be run by ICICI Securities, Axis Capital, HDFC Bank and IIFL Securities.
• Bharat Highways InVIT is an infrastructure investment trust established to acquire, manage and invest in a portfolio of infrastructure assets in India. 
• The InVIT’s initial asset portfolio will consist of seven road assets, in the states of Punjab, Gujarat, Andhra Pradesh, Maharashtra and Uttar Pradesh with an aggregate length of approximately 497.292km. 

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
• Sunac China Holdings
• Sunny Optical

• SPX bounce call from 3,800 to 3,950 is unfolding with risk of an early failure. Flat pattern wants to press lower post bounce.
• Sell points noted at 3,950 with scope to 3,980. We are using NDX and RTY as our short vehicles.
• DXY still needs some time to base at 103/102 but a low would fit with a risk top here.

• Align Partners Capital Management (APCM) held a media presentation and a Q&A session with both the investors community and the media today.
• Align Partners’ corporate activism of the Korean banks has been one of the biggest stories in the Korean stock market this year.
• The Korean banks are likely to outperform the market in 1H23. Nonetheless, if there are further signs of housing price declines in Korea, this outperformance may not continue in 2H23. 

• On Friday after the close, S&P DJI Indices announced that PEXA Group (PXA AU) would replace Pendal Group (PDL AU) in the S&P ASX 200 on 12 January at close.
• This is unsurprising. Pendal was scheduled to exit in January due to takeover. PEXA was already an interim S&P ASX 200 member after the distribution by Link Administration (LNK AU).
• The timing is conveniently in the timeframe for the LNK distribution of PXA shares to its shareholders implemented on the 10th. 

• Our biggest shift in Asia stems from reversing from short to long Japan and Taiwan. We have held a positive view in Australia and Thailand.
• SPX bounce call from 3,800 to 3,950, is lacking needed energy. Flat pattern wants to press lower post bounce and represents pullback risk in Asia as does an oversold USD.
• Asia longs are tactical in nature but have the ability to run into late January within the context of a larger degree Q1 equity bear cycle.

• Korea’s ETF market achieved top-line growth last year as well. AUM increased by 7% YoY, a significant achievement considering that global ETF AUM has shrunk by 8%.
• Since one-third of local ACTIVE ETFs are equity types (particularly SECTOR), we can conclude that the local equity ETF market has not shrunk but has migrated to ACTIVE.
• Recently listed sector ETFs are expected to play an accelerating role in expanding the scope of these arb opportunities as they expand beyond electric vehicles/secondary batteries to groups/defense.

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.

• Sands China
• SJM Holdings
• Yanlord Land

• SBI Holdings (8473 JP) is still expected to buy out SBI Shinsei Bank (8303 JP) minorities sooner rather than later
• Not one to rest on its laurels, Hancock immediately bumped its Offer for Warrego Energy (WGO AU) to A$0.36/share, up from A$0.28/share, provided it gets to 40%. We need more popcorn.
• APCM reckons Korean banks can pay out more than 50% of net income to their shareholders annually.   

• PEXA Group (PXA AU) will replace Pendal Group (PDL AU) in the S&P/ASX 200 (AS51 INDEX) at the close of trading on 12 January.
• Passive S&P/ASX 200 (AS51 INDEX) trackers will receive PEXA Group (PXA AU) shares from their Link Administration (LNK AU) holdings and will have to buy the rest from the market.
• There will be selling in Pendal Group (PDL AU) from S&P/ASX 200 (AS51 INDEX) and S&P/ASX 300 Index trackers as well as from global trackers.

• JGB band shifting has been unable to calm down Fixed Income markets
• The BOJ is being forced to intervene in both bond and currency markets due to a pick-up in volatility
• Equity vol has yet to react and we see an opportunity to pick-up some gamma/vega

• TPG and Anchor experienced EOD risk due to the recent plunge in Kakao Bank’s stock price. So, they will sell shares if the current price rise continues a little further.
• All three PEs of Shinhan Financial are currently expected to be seeking an early exit although they expressed last year that they would remain strategic shareholders.
• Other notable targets are Hahn & Co’s Hanon Systems and K Car and MBK Partners’ ConnectWave, likely via a phased stake sale in tranches.

The Chinese Property Weekly focuses on providing updates in the Chinese real-estate sector, including recent regulatory and company developments, top and bottom performers, rating actions, as well as a list of bond maturities in the next 30 days.

• Quietly KTC has seen its bad loans and credit costs rise
• During last year it saw a final surge in credit costs in the last quarter
• Market share losses and regulatory risk may continue to pressure its 5x PB

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. Fosun International
2. Lippo Karawaci
3. Agile Property Holdings
4. China Jinmao Holdings
5. Lifestyle International Holdings

and more…

• The one-sided downward movement in both equity and bond prices in 2022 was both unusual and expected.
• The set-up for the next 12 to 18 months is favourable for bonds, both on the short and the long-end of the curve.
• The one- sided downward movement was both unexpected and expected.

• Ping An Insurance (H) (2318 HK) has outperformed Ping An Insurance (601318 CH) by 38% since our last Insight. With the AH premium near parity, we take profit.
• We also reverse the position and go long Ping An Insurance (601318 CH) and short Ping An Insurance (H) (2318 HK) to play the premium expansion trade.
• Northbound holding of Ping An Insurance (601318 CH) has increased over the last couple of months while Southbound holding of Ping An Insurance (H) (2318 HK) has decreased.

• Bajaj Finance Ltd (BAF IN) reported key performance metrics for Q3FY23. AUM growth came in weak with incremental AUM addition at just 12,500cr vs 14,700cr YoY. 
• QoQ, the AUM growth looks decent at 5.5%+, however, given that the Q3FY23 was a festive season quarter, QoQ comparison is not as relevant.
• However, BAF did a good job on customer acquisition. It acquired 3.1mm new customers (highest ever quarterly increase) vs 2.56mm YoY, a growth of 21%+.

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.

• Fosun International
• Hopson Development
• Lippo Karawaci
• Lippo Malls Indonesia Retail Trust

• SBI Shinsei Bank (8303 JP) was my High Conviction reco in late 2020 for 2021 at ~¥1200/share. It was my High Conviction reco in late 2021 for 2022 at ¥1900/share.  
• I did not get around to writing it in late December 2022, but on the first day of trading I offer Shinsei as a 2023 high conviction recommendation. 
• What’s new? Not a lot, but Reading Between The Lines is still top drawer stuff. 

• Just one day ahead of its dual primary listing in Hong Kong, Futu Holdings Ltd (FUTU US) postponed its Listing by Introduction. 
• According to the China Securities Regulatory Commission, Futu has been illegally operating cross-border securities trading without approval.
• Suitably, the share prices of Futu and UP Fintech (TIGR US), another online brokerage forced to quit accepting new onshore investors. It’s probably too premature to buy the dip.

• The insurance sector should definitely warrant more investor attention going forward as some insurance names in the region have had a very strong year in 2022.
• Two key markets we view positively in 2023 are China’s P&C and Korea’s L&H insurance markets, given their favorable industry catalysts and tailwinds. 
• Among all the insurance stocks in these two markets, we believe PICC P&C and Samsung Life will continue to have an exciting year ahead.

• PayPoint has launched an agreed cash and shares offer for closest rival Appreciate. On completion, PayPoint shareholders will hold c. 95% and Appreciate shareholders c. 5% of the merged firm. 
• The offer price doesn’t seem generous (my fair value estimate is 53p vs. 43.45p package value). Event-driven investor Samson Rock is the top shareholder with a 19.7% stake.
• Gross spread is 5.9% (including dividend). I believe there are grounds for an offer sweetening, and although both stocks are illiquid, the risk/reward looks appealing, in my view.

• In November most consumer NPL ratio categories, except credit cards, worsened with corporate delinquencies, especially in micro and SME, also deteriorating; the system NPL ratio is approaching its pre-pandemic high
• System loan growth continues to decelerate; +14.7% for the twelve months to November is a further reduction from the October rate (+15.7%), due to slower corporate and consumer loan growth
• New system credit spreads rose further MoM, and we expect average loan spreads to remain elevated into 2023; we favour Banco do Brasil, and are cautious on Santander Brasil

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.

• Times China

• The Sprott Focus Trust exhibits outstanding risk attribution metrics.
• The fund’s constituents typically host high earnings yields, and ROIC ratios, suggesting that a value trap is unlikely.
• This is a high-conviction closed-end fund with little emphasis on sector rotation. Thus, beware of recession risk.

• SPX macro top and sell call from 4,150 targets 3,300/200 where a base and low is expected ahead of a more bullish 2H23. 
• Cycle: Equity weak bias into January 8 if not closer to the 18th. From January 20 onwards we see a tactical rally cycle unfolding (still within the more bearish Q1 framework).
• Asian positioning outlined with charts and details to follow once markets come online.

• On 2 January, Align Partners Capital Management (APCM) started to go activist on seven leading Korean banking group companies.
• According to APCM, the major Korean banking groups could pay out at least half of their net income to their shareholders, which would be more than double the current levels.
• Korean banks are trading at deep discount to global peers, now trading at PBR of 0.2~0.4x whereas global peers trade at 1.3x. 

• Liquidity is deeply misunderstood in crypto markets. Specifically, the metric “market depth”. 
• Unless you are a trader, it can be hard to wrap your head around the meaning of “2% Bid Depth” and how it relates to the value of an asset.  
• As FTX collapsed, we took a hard look at liquidity for FTT, specifically aggregated market depth across all active markets.

• A third of the way through the review period, we see three potential changes. There are a few stocks that are close to inclusion and could lead to more changes.
• There should be a couple of index changes prior to the June review due to the merger of Meritz Financial Group, Meritz Securities and Meritz Fire & Marine Insurance.
• Passive trackers need to trade between KRW 5-23bn on the stocks and short interest is quite low on the potential inclusions and exclusions.