In today’s briefing:
- KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes
- Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
- LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today
- Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid
- Z Holdings (Buy) – FY22 Should Be Brighter
- Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- SPA: Keep Eye on Tourism Recovery Ahead of Soft 1Q22
- Giverny Capital Asset Management Q1 2022 Letter
- Galaxy Entertainment: Change in Sentiment Among Greater China Managers
- Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom
KOSPI 200 June Rebalancing: Nearly Finalized Results with 7 Adds/Deletes
- The review period for the KOSPI 200 June rebalancing ends this Friday. This June rebalancing will have seven additions and seven deletions.
- Additions: F&F (383220 KS), Meritz Fire (000060 KS), SD Biosensor (137310 KS), Iljin Hysolus (271940 KS), Hanil Cement (300720 KS), K Car (381970 KS), and Hana Tour (039130 KS).
- Deletions: CJ CGV (079160 KS), Yungjin Pharmaceutical (003520 KS), Bukwang Pharmaceutical (003000 KS), Sk Discovery (006120 KS), S&T Motiv (064960 KS), Cuckoo Holdings (192400 KS), and Nexen Tire (002350 KS).
Panic Selling Achieved, Now Waiting for Panic Buying; Major Indexes At/Near Support
- We are getting the test of the lows we have been calling for, following some indiscriminate selling late last week which produced back-to-back 80%+ downside volume days on the NYSE.
- There can certainly be more 80%-90%+ downside days that take the indexes to new lows.
- We need to see back-to-back 80%+ upside volume days or one 90%+ upside day on the NYSE in order to have confidence that a major market bottom is in place
LG Energy Fails Inclusion in LIT’s April Rebalancing & Faces 3M Lockup Release (3.7x ADTV) Today
- Solactive Global X Lithium (LIT) made an ordinary rebalancing announcement. LG Energy fails to join the Index this time. The inclusion seems to have been pushed back to October.
- LG Energy’s short-term flow is likely to receive downward pressure from the 3M IPO lockups to be released today as it cannot expect additional passive inflows in the short term.
- These are 1.87M shares (3.7x ADTV). As the share price is still up more than 40% from the IPO price, their profit realization incentives are expected to be quite strong.
Kakao Pay IPO Lock-Up – IPO Was Great, Performance Since Then Has Been Tepid
- Kakao Pay (KP), one of South Korea’s largest payment and financial services apps, raised US$1.3bn in its South Korean IPO in Nov 21. Its 6 month lock-up will expire soon.
- The stock more than doubled on listing, providing one of the best first day returns in 2021. However, its performance since then hasn’t been all that great.
- In this note, we will talk about the lock-up dynamics and updates since our last note.
Z Holdings (Buy) – FY22 Should Be Brighter
- The company reports Thursday and markets have priced in bad news (shares down 22% YTD and 38% from November highs) but that pattern of weakness in year-end results isn’t new
- It has happened the last four years as management’s penchant for investment dampens hopes for profitability growth but LINE synergies and digitization should enable double-digit EBITDA growth anyway
- We are posting updated company forecasts/estimates including a separate table for PayPay
Workman to Disrupt Footwear Market with ¥60 Billion Sales Target
- Workman sees an opportunity to disrupt the footwear market by creating Japan’s first national low price chain, with a strong focus on women’s shoes.
- It launched the first store this month with prices as low as ¥680 and expects to have 200 stores in the near future.
- The Japanese footwear market is ripe for disruption as Abc Mart Inc (2670 JP) diversifies and Chiyoda Co Ltd (8185 JP) and Gfoot Co Ltd (2686 JP) struggle to maintain momentum.
SPA: Keep Eye on Tourism Recovery Ahead of Soft 1Q22
- Maintain BUY rating with a new TP of Bt9.60 (revise up by 16%) as we roll forward valuation base to 30xPE’23E which is -1SD of 5-years trading mean.
- We expect 1Q22E operation to be the bottom quarter at a net loss of Bt55m,ahead of earnings modestly gearing up in 2Q22 and onwards, on the back of tourism recovery.
- In our view, recovery trend to continue into 2H22, based on full reopening country for foreign tourists post COVID crisis, with upside risk from new branches and products.
Giverny Capital Asset Management Q1 2022 Letter
- Giverny Capital Asset Management, LLC is a partnership between GivernyCapital of Montreal and David Poppe, the former president and chief executive officer of Ruane, Cunniff & Goldfarb, LLC.
- The best companies tend to weather crises better than average ones, Poppe says.
Galaxy Entertainment: Change in Sentiment Among Greater China Managers
- Sentiment towards Galaxy Entertainment among Greater China managers has taken a turn for the better
- Managers move from underweight to overweight, bucking a 4-year decline in allocations among active managers.
- Allocation increases driven by new positions from Fubon China Growth (+3.32%), Eaton Vance Greater China Growth (+2.24%) and Eastspring Investments Greater China (+1.56%) since 09/30/2021.
Breaking Growth Short Candidates: MercadoLibre, Outset Med, Universal Display, Dexcom
- This model looks for slowing growth, margin declines, sales and/or earnings disappointments, troubling working capital trends, poor estimate trends or lowered guidance, among other characteristics.
- The key judgement is whether a slowdown is temporary or the beginning of a trend. These shorts tend to have high valuations and betas. Multiple compression accelerates the stock’s decline.
- Today we are flagging MercadoLibre, Outset Med, Universal Display, Dexcom
Before it’s here, it’s on Smartkarma
