In today’s briefing:
- Shortlist Of 2024 High Conviction Ideas: Income, Value, and Margin of Safety
- Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
- [Blue Lotus Sector Update]: 2024 High Conviction Idea: Two Scenarios Towards Year End
- Navigating the Potential of Hankook & Company’s Revised Tender Offer
- 2024 High Conviction | Eicher Motors (EIM IN) | Himalayan Ambitions
- Dekon Food and Agriculture Group IPO Trading – Tight Float at Listing, Subscription Rates Were Tepid
- Culp, Inc.- Culp Reports Improved 2QFY24
Shortlist Of 2024 High Conviction Ideas: Income, Value, and Margin of Safety
- We compile our selection of small and mid-cap names with our desired characteristics of high dividend yields, value, and margin of safety.
- Our top picks: Perfect Medical Health (1830 HK) , Water Oasis (1161 HK) , Taste Gourmet (8371 HK) , Uchi Technologies (UCHI MK) , and The Keepers Holdings (KEEPR PM) .
- We have included Sitoy Group Holdings (1023 HK) in our library. Given the low ROIC nature of the business, it’s more of a value trade with dividends.
Nikkei 225 Index Rebalance Preview (Mar 2024): Update on Ranking, Capping, Funding & Other Changes
- The review period for the Nikkei 225 (NKY INDEX) March rebalance ends end January. There could be three changes at the rebalance with sector balance in focus.
- Depending on the changes, passives trackers will need to buy 2.4-22.5x ADV (10-24% of real float) on the inclusions and sell between 3.5-42.5x ADV on the deletions.
- Fast Retailing (9983 JP) capping, Nitori Holdings (9843 JP) increase in PAF, a big funding trade, and potentially new stocks being added in two-steps.
[Blue Lotus Sector Update]: 2024 High Conviction Idea: Two Scenarios Towards Year End
- In our view, China growth equity faces high geopolitical uncertainty in C3Q24 ahead of the US election, but can experience a relief rally in C1Q24.
- We prepared high beta and low risk recommendations for 2024
- For low-risk, we recommend JD/JDL/JDH, Tencent and Luckin. For high beta, we recommend BEKE, LI Auto and Kuaishou.
Navigating the Potential of Hankook & Company’s Revised Tender Offer
- With the price almost 10% above ₩20,000, it’s practically fair to regard MBK’s tender offer as effectively canceled, raising the question of the proxy battle’s potential continuation.
- There is a significant likelihood that MBK has prepared a next-phase plan involving an upward adjustment of the offering price, considering the tight situation of successfully securing the target volume.
- Essentially, there’s a high likelihood that the situation will resemble the earlier battle between HYBE and Kakao Corp over S.M. Entertainment Co at the start of this year.
2024 High Conviction | Eicher Motors (EIM IN) | Himalayan Ambitions
- Several catalysts on the horizon support the case for a re-rating of Eicher Motors (EIM IN).
- The recent launch of the 450cc platform is positioned as a significant launch pad, propelling EIM’s aspirations to establish global leadership in the middleweight segment.
- We anticipate EIM to deliver higher-than-anticipated revenue growth with the possibility of a multiple re-rating for the company.
Dekon Food and Agriculture Group IPO Trading – Tight Float at Listing, Subscription Rates Were Tepid
- Dekon Food and Agriculture Group (DFAG CH) raised around US$128m in its Hong Kong IPO.
- Dekon Food and Agriculture Group (DFAG) is a vertically integrated livestock farming enterprise in China.
- We have covered various aspects of the deal in our previous note. In this note, we will talk about the demand and trading dynamics.
Culp, Inc.- Culp Reports Improved 2QFY24
- Culp, Inc. issued results for its 2QFY24 on Monday, December 4 after market close.
- Revenue and operating profit were better for the just-reported quarter than those posted in 2QFY23 and our estimates, bolstering management’s contention that it would deliver—and investors would witness—sequential quarterly improvements in operating profitability for the balance of FY24.
- Management also noted its belief of posting positive consolidated operating profitability by 4QFY24.
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