Financials

• Established in 2002, Smilegate Holdings is well known for its globally popular games including Crossfire (a first person shooter game), Lost Ark (MMORPG), and Epic Seven.
• In August 2020, Smilegate RPG entered into a partnership with Amazon Games, reaching an exclusive publishing agreement for North America and Europe.
• At a P/S valuation of 6-7x using company’s 2021 sales of 1.4 trillion won would suggest implied valuations of 8 trillion won to 10 trillion won for Smilegate Holdings.

• Bank Mandiri (BMRI IJ) is seeing significant rewards already being harvested from its digital strategy as it attracts low-cost fund through both its Livin’ app and its KOPRA platform.
• The bank’s 9M2022 results reflected the changing shape of its business, with lower costs and higher returns being generated through its move to higher-yielding assets and digital strategy.
• Bank Mandiri (BMRI IJ) remains a core holding among the Indonesian banks as a proxy for the overall economy with valuations attractive given rising and sustainable returns. 

• 10 months + since Russia invaded Ukraine and there is yet no end to the war in sight.
• The negative 2/10 spread generates quite a conviction by almost all of market participants that the world is heading into recession next year.
• We believe inflation could slow down and the on-going rate hikes may end faster than expected. Slower/smaller than expected rate hikes provide a bullish case for bond investments in 2023..

• JPX-Nikkei 400 is composed of common stocks listed on the Tokyo Stock Exchange. It is a free-float-adjusted market-value-weighted (capped) index composed of 400 constituents.
• A periodic review is conducted by the Index providers, the JPX Group and Nikkei Inc, in August every year. We look at the potential forward inclusions and removals every month.
• Below is a look at potential Inclusions and Removals for the JPX-Nikkei 400 Rebalance to come in August 2023 based on trading data as of end-December 2022.

• Bank Negara Indonesia (BBNI IJ) has been a perennial underdog in terms of valuations versus its peers but as its ROE and ROA converge with those peers it should rerate.
• The bank’s 3Q2022 reflected the changing shape of its loan portfolio towards higher-quality and lower-risk exposure in corporate loans and tier 1 clients’ value chain, KUR, and payroll loans. 
• BNI management is cautiously optimistic about the outlook for FY2023 in terms of loan growth and credit quality. Valuations remain attractive and ROEs may rise faster than consensus estimates. 

• Radiant Cash Management Services (1926794D IN) has come up with INR 3.9 bn IPO which includes fresh issue to the tune of INR 600 mn.
• In spite of being one of the largest players in the retail cash management segment, there are few cautions one must take note of.
• These primarily include related party transactions with promoters, concentration risk and few industry related restraints

• Indonesia-based banking and digital finance platform Akulaku has secured a US$200 million investment from Japanese megabank Mitsubishi UFJ Financial Group (MUFG).
• The investment will support its expansion of banking services across Southeast Asia, including underserved customers and markets.
• The company’s future growth plans align with MUFG’s, and their joint expansion into new territories, markets, and products will accelerate heading into 2023.

• KFin Technologies (1804170D IN) raised around US$180m in its India IPO. The IPO had been a 100% OFS.
• KFin Technology (KFin) is a technology driven financial services platform providing comprehensive services and solutions to the capital markets ecosystem.
• We have looked at various aspects of the deal in our previous note, in this note, we talk about the demand and trading dynamics.

• Percentage of UK funds invested in the LSE Group has risen from under 10% in 2012 to a record 41.8% today
• Rise in ownership has been driven by high growth investors, with both Aggressive Growth and Growth strategies at their highest levels of ownership on record
• The LSE Group has risen to the 22nd most widely held stock in the UK and the 12th largest on an average weight basis.

• 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 – Very quiet week as VinFast (1905332D VN) continues to pre-market a US$1bn IPO.
• Event-Driven developments  Conexio Corp (9422 JP), Jafco Co Ltd (8595 JP), Nippon Steel Trading Corporation (9810 JP), Origin Energy (ORG AU), OZ Minerals Ltd (OZL AU), Warrego Energy (WGO AU). 

• For OZ Minerals (OZL AU),  look elsewhere unless you are VERY bullish copper. But if you are VERY bullish copper, buy copper options rather than the embedded option in OZL. 
• Game on as Warrego Energy (WGO AU) shareholders weigh the pros and cons of Hancock’s all-cash Offer against Strike Energy (STX AU)‘s “superior” scrip proposal. 
• Jafco Co Ltd (8595 JP) succumbed to greenmail and tried to boost the price to explain the exit they were going to give Murakami-san. It didn’t work. 

• Companies wouldn’t accept shareholder proposals, interpreting that they need’t disclose individual executive compensation if it’s below certain amount and that they can continue holding policy-shares if the policy is defined.
• Even if JSF claims to have enhanced corporate governance practices, it is reasonable  for shareholders to demand a review of its management strategy for a company with below average ROE.
• The company, which doesn’t require very large capital expenditures, plays a role in the infrastructure of the capital market, and has an oligopoly on the market, may be worth more.

• China is the real pivot that could drive stocks, say investors.
• China’s economic growth could be a real pivot for stocks, they say.
• China’s economy is a key factor in the growth of the country’s economy, according to analysts.

• In August this year, Swire Pacific started a buyback programme for up to HK$4.0 billion worth of their shares (Swire Pacific (A) (19 HK) | Swire Pacific (B) (87 HK)).
• The shares went up. And B briefly outperformed A, but since then, the B/A ratio has fallen and my impression was Swire may have been misinterpreting the buyback rules.
• Swire had been buying both every day. But they’ve been Buying Bs but no As for the last ten days in a row. This begs a few questions.

• Jafco Co Ltd (8595 JP) and Murakami have reached an agreement on a revised tender offer for 16.8 million shares (23.60% of outstanding shares) at JPY2,500 per share. 
• The revised tender offer’s primary purpose remains to facilitate Murakami to tender his 19.53% shareholding at the expense of other shareholders and the misallocation of JPY42 billion (tender cost).
• The justification for the transaction is weak as most of the benefits could have been achieved without it. This calls into question the Board’s ability to enhance value.

• Futu Holdings Ltd (FUTU US) will Dual Primary list on the HKEX (388 HK) by Way of Introduction and the stock is expected to start trading on 30 December.
• Following the changes to the handling of Dual-Primary-listed companies, Futu Holdings Ltd (FUTU US) should be added to the Hang Seng Tech Index (HSTECH INDEX) at the March rebalance.
• Futu Holdings Ltd (FUTU US) should also be added to the HSCI at the March rebalance and should be added to Southbound Stock Connect late July/ early August.

• The all-inclusive CGT will be implemented in 2025. The current partial capital gains tax will be maintained until 2024. And the STT will drop from 0.23% to 0.15% in 2024.
• The critical cause of an arb opportunity on ex-date price correction+dividend yield has been the yearend selling flow on T-1 ex-date for the purpose of tax avoidance by majority shareholders.
• So, from this year to 2024, we should keep an eye on this arbitrage opportunity, which will continue to arise.

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. Kawasan Industri Jababeka
2. China South City
3. China Jinmao Holdings
4. Guangzhou R&F Properties
5. Sunac China Holdings

and more…

Is there still hope for Crypto in 2023? In the next webinar, we speak with Insight Provider Edward Wu on just that, as he shares with us the landscape of the Crypto industry in 2023. From the problems with the current crypto industry, to Ethereum Layer 2 solutions, Edward will share with us his thoughts in this next episode of our Webinar Wednesdays. Have any burning questions about Crypto, DeFi trading or Ethereum Layer 2 solutions? Get them answered in the live Q&A that will conclude the session. 

The webinar will be hosted on Wednesday, 4 January 2023, 17:00 SGT/HKT.

Edward Wu is an experienced financial professional with strong research experience in macroeconomics, credit as well as corporate banking. He is a true believer in the future of Crypto/DeFi and foresee widely adoption of tokenization of real-world assets. He is currently actively researching in the crypto field, mainly focused on DeFi, DAO governance, and tokenomic design.

• Some people think of crypto as purely an investment opportunity. A highly volatile asset class that comes with risk, but eventually the returns will be worth it.
• However, this perception is somewhat naive, as it ignores one of crypto’s biggest use cases: financial freedom.
• The concept of financial freedom is hard to grasp for the privileged of us living in Europe or the US – despite record levels of inflation, we are not financially oppressed, and we can bank on our savings being relatively intact next year.

• Jafco Co Ltd (8595 JP) was the target of activist Murakami-san in August 2022. They threatened a poison pill. Murakami-san sold, then bought to 19.5%. They negotiated. He won.
• His result excluded others. The market did not take it well. Murakami-san rejected taking a 1% hit to original terms (vs reference NAV). JAFCO went back to the drawing board. 
• Then submitted to greenmail at a higher price. The first buyback was agreed at ¥2,500 vs ¥2,651 NAV. The new one? ¥2,730-2,840 vs ¥2,513 NAV. Inexplicable – Spectacularly Bad Governance.

• Nikkei was touted as our top short bet in Asia and has panned out nicely. 27k sell resistance for a test on sub 26k to probe for a bull reversal.
• USD/JPY sell an uptick near 134. PT at sub 131 and 129.50. Jury still out as to the policy impact on global rates/equities. We are trading a lot like 2018.
• Taiwan and Nifty short targets are reiterated. SPX and NDX levels are in line but price action remains poor to bearish.

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.

• First Pacific Co

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.