Daily Brief Financials: Rakuten Bank, Evergrande, Latitude Group Holdings, China Huarong Asset Management, UOB, Road King Infrastructure, USD, Wharf Holdings, China Life Insurance and more

• Rakuten Bank (5838 JP), the online banking arm of Rakuten (4755 JP), aims to raise up to around US$900m in its Japan listing in April 2023.
• RB is the largest internet bank in Japan, by number of accounts. As of Dec 22, it had 13.3m deposit accounts with a total deposit base of JPY8.8tn.
• In our earlier notes, we have looked at the company’s past performance. In this note, we talk about the updates from its recent filings.

• Rakuten Bank (5838 JP) is an online bank in Japan. It is looking to raise about US$870 million. The pricing is on 5 April and the listing is on 21 April. 
• Rakuten Bank, wholly owned by Rakuten (4755 JP), is the largest Japanese internet bank as measured by the number of accounts and customer deposits.
• The investment case rest on Rakuten Ecosystem’s competitive advantage, growth in accounts/deposits, robust loan book growth, rising margins and low NPL ratio.

• Having first introduced the three red line guidance in late 2020, the government has begun shifting its stance, and relaxing some of its regulatory oversight.
• In this note, we looked at recent news developments and how some larger developers fared against the three red lines criterion.
• Of the large developers we looked at, there are a few names which stand out which could potentially do a capital raising given their financial standing. 

• On the morning of the 16 March, consumer finance play Latitude Group Holdings (LFS AU) announced what appeared to be a “sophisticated and malicious cyber-attack.” 
• Shares were voluntarily suspended on the 20 March and were reinstated yesterday (22 March). 
• Latitude reckons no compromised data has left its systems; but its review has uncovered evidence of large-scale information theft affecting customers (past and present) across Australia and New Zealand.

• China Huarong Asset Management Co. Ltd. expects to post a net loss of 27.6 billion yuan ($4 billion) for 2022.
• Citing factors including volatility in the capital markets leading to declines in the value of some assets, business transition and the real estate industry slump.
• The bad-debt manager said it adjusted its business structure last year, resulting in less nonperforming asset acquisition and restructuring and less revenue.

• 4Q22 results release on 23rd February 2023.
• Expect NIM expansion of ~20bps quarter-on-quarter (QoQ) for 4Q22E, while FY23’s NIM guidance and updates on its Citi consumer business integration would be of focus.
• Citi acquisition to add to full year NIMs and growth prospects from FY23, despite potential uptick in asset quality risks, which should be manageable.

Road King’s FY 2022 earnings were weaker than expected. The company posted a significant EBITDA decline, owing to a reduction in property deliveries amid the COVID-19 pandemic as well as a gross margin contraction. Looking ahead, we expect Road King’s FY 2023 contracted sales to remain weak, given the absence of land acquisitions in FY 2022 and the uncertain sales pipeline. This could pressure the company’s cash collections and internal cash generation. Positively, we expect Road King’s access to financing to remain sound, supported by its good quality asset base.

Overall, the company’s credit profile remains supported by its toll-road business, with cash dividends from the toll-road JVs covering 28% of FY 2022 interest expense. We expect recurring income from toll roads to increase in FY 2023, supported by the resumption of socio-economic activities in Mainland China and contribution from Road King’s newly acquired expressway in Indonesia. We believe the toll-road assets could be monetised in the event of tight liquidity, though bondholders are unlikely to have recourse to these assets in the event of debt restructuring (given the highly regulated nature of infrastructure assets).

• Crypto markets are at their most volatile when liquidity is low.
• Prices have less support to both the downside and the upside, which could explain BTC’s rapid +17% surge since the start of the month.
• Liquidity has also become a hot topic in traditional financial markets as the banking sector reels from several high-profile collapses.

• Payout ratio rise, but expected dividend yield just around 1%
• Mainland DP booked HK$2bn Impairment provision
• Considering uncertainties in Mainland DP market and the construction process slowing down, we cut FY22-23 revenue booking in DP, thus cut revenue forecasts for 3-13% and net profit for 14-20%

• More constructive outlook this year, despite near term impact on activities from current surge in Covid-19 infections as China re-opens.
• Prefer H shares listing (2628 HK) where valuations remain more attractive despite recent rebound.
• Fair value is lifted to CNY26.60.