From TSMC to Water Oasis to Shinko Electric here's what you need to know this week.

The Smartkarma Weekly Starter is a newsletter published every Sunday and pulls together the ten top research notes published over the last 7-days from across our platform.

In this week's edition of the Smartkarma Weekly Starter, we get a quick rundown on the top engaged insights for the week.

Start your week off on the right foot with:

Sea Limited (SE) - Friday, Jan 12, 2024

Sea Limited is a gaming and e-commerce company in Southeast Asia that has experienced fluctuations in its stock price but has strong underlying business performance.

• Sea Limited is a gaming and e-commerce company in Southeast Asia that has experienced fluctuations in its stock price but has strong underlying business performance.
• Founded in 2009 as Garena by CEO Forrest Li, the company rebranded to Sea Ltd in 2017 and gained access to a wide range of games through Tencent's investment in 2010.
• After achieving profitability in 2023, Sea Ltd is now focused on accelerating growth and drawing comparisons to Amazon's early years.

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

By Value Investors Club in Equity Bottom-Up

Shinko Electric (6967) - Break/Gap Risk Update

The JIC deal for Shinko Electric still has ~6mos to go until it gets settled. And that is if the schedule goes to plan. China delay risk is real, even if break risk is small. Spread is OK, but meh.

• When this deal was announced, it was light. But the timing, JSR influence, large-ish float, ensured FUD would make this trade wide. It traded wider.?
• 12wks ago, Shinko had much-underperformed peer Ibiden, meaning downside gap risk from undisturbed was negative as spreads were wide. I reco'd a buy. Then 5wks ago, reco'd trimming.
• Shinko had outperformed Ibiden, and gross spreads had come in 5+% on JSR's approval. Spreads are now 3% wider than their narrowest, but gap risk has widened as Shinko outperforms.

By Travis Lundy in Event-Driven

Multiple Positive Catalysts Ahead Of Q124 Earnings Season

PC, Smartphone Unit shipments both registering YoY growth in Q124. TSMC will beat guidance. Samsung sees strength in memory, smartphone shipments. Server unit shipments up ~17% YoY. Wow!

• PC, Smartphone Unit shipments both registering YoY growth in Q124
• TSMC will beat guidance & likely guide Q224 up ~5% QoQ. Samsung's pre earnings showed strong recovery in operating profit
• Server unit shipments are on a ~17% YoY growth run rate

By William Keating in Thematic (Sector/Industry)

Iron Ore Primer: Understanding The Drivers Of the Market, Ways To Play The Sector

We initiate on the iron ore space with a primer and provide our top picks among the eleven listed names we look at. Look out for detailed initiations on each of these names in the future

• We provide a comprehensive introduction to the iron ore sector, covering the drivers and a view of the commodity in the short run.?
• We look at eleven listed names in the space ( from large-cap miners to the juniors deriving a vast majority of their revenues from ore) and list our favorite miners.
• We like Vale (VALE US) for its capital return in large caps, Kumba Iron Ore (KIO SJ)? in midcaps, and Mount Gibson Iron (MGX AU)? in junior miners.?

By Sameer Taneja in Commodities

Perfect Medical: Post Card From HK, Yield of 11.5%

We provide an update on Perfect Medical (1830 HK). The stock trades at 9.3x FY24 PE/11.5% yield (assuming a 110% payout) with a growth option once the HK economy kickstarts.

• Perfect Medical Health (1830 HK), post a correction of consumer discretionary stocks in HK, now trades at a yield of 11.5%, with cash&investments representing 24% of the market cap.
• HK is experiencing a dip in consumer sentiment, and the company isn't immune to it, but flat sales/profitability, a 24% net margin, and >40% ROE provide great margin of safety.
• The stock trades at 9.3x FY24 PE and 11.5% yield (assuming a 110% payout average across company history) with a growth option once the HK economy kickstarts.

By Sameer Taneja in Equity Bottom-Up

Iran-Israel Conflict, Stay on the Sideline First and Wait for a BUYING Opportunity

Iran's attack on Israel raises fears of wider war. We think it is unlikely as Western countries are pursuing diplomacy. The futures market will likely open rough, but we think it will recover fast.

• Iran led a direct attack on Israel, prompting fears of a wider war in the Middle East and jittering the global markets??
• We think the futures market will start rough, but eventually chill towards the end of the day. Iran has stated its objectives are met and is not keen to continue?
• Western countries are taking the diplomatic route with Antony Blinken saying that the U.S. did “not seek escalation”. This is a positive sign??

By Mohshin Aziz in Thematic (Sector/Industry)

Water Oasis (1161 HK)

Following the positive response to our article on Perfect Medical , we are keen to introduce our readers to another noteworthy company in the...

• Following the positive response to our article on Perfect Medical , we are keen to introduce our readers to another noteworthy company in the healthcare and beauty industry, Water Oasis.
• Despite initial appearances suggesting sluggish revenue growth over the past decade, a deeper examination reveals significant improvements in business quality and consistent shareholder returns through substantial dividends.
• This under-the-radar company, we believe, presents an attractive risk-reward profile.

By Oriental Value in Equity Bottom-Up

Pasona (2168 JP) Special Div - Too Small to Matter

Pasona announced a special div and plans to spend the rest of the Benefit One windfall on "growing and improving". The dividend is split over 5yrs, which is stupid. Investor stewardship is key here.

• On Friday, Pasona Group (2168 JP) announced its expected use of funds into the May 2024 results, including a special dividend plan, investment for growth, and "strengthening the operating platform."
• The plan will disappoint. The stock may get hit hard. The truth is somewhere in the middle. This is where active stewardship matters. So get stewarding.
• A special div paid over 5yrs should be paid one-shot, now. If the company has plans worth supporting, set KPIs now, ask for money later. Good plans get good money.

By Travis Lundy in Event-Driven

TSMC. How To Turn Chicken Salad Into Chicken Sh*t

TSMC beat & raised guidance, maintained FY outlook. Minor, unnecessary tinkering with semi and foundry forecasts plus confusion about the root cause dragged the stock down ~8% in overnight trading

• Q124 revenues of $18.87 billion, marginally above the high end of the guided range, up 12.9% YoY and down 3.8% QoQ. Guided Q224 +6% QoQ.? Maintained full year 2024 outlook
• Unnecessary, minor downward revisions for semi & foundry growth, combined with confusion about the reason triggered an allergic reaction on the markets. TSMC down ~8% since.
• SMCI plunged 23% by Friday close, ARM down 16.9%, NVIDIA down 10%, AMD & Micron down ~5% etc. Nice one, TSMC!

By William Keating in Equity Bottom-Up

Hang Lung Properties (101 HK): Scrip Div Helps the Family to Chip Away at Minorities

The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.

• In its final results on 30 January, the Hang Lung Properties (101 HK)?board declared a final dividend of HK$0.60 per share, which can be paid in cash or by scrip.
• The Chan family's share of outstanding shares has steadily increased from 53.15% in 2013 to 61.89%. The scrip dividend could increase the family to 63.57% of post-dividend outstanding shares.?
• The Chan family have plenty of headroom to chip away at minorities before breaching the 25% public float requirements. HPL’s valuation is undemanding, but a privatisation offer is unlikely.

By Arun George in Event-Driven

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