FT : Wuling: big hopes for mini-electric cars in China

Wuling: big hopes for mini-electric cars in China
Local automaker capitalises on rising demand amid price war that Tesla sparked last year

Tesla’s rise to the top of Chinese electric car sales did not last long. More galling, the local carmaker that has taken the lead has done so with a smaller, slower vehicle.

The Wuling Hong Guang Mini EV has a top speed of 100 kmph and a 170km driving range. Once scoffed at for its size and weak horsepower it has become the most sold electric vehicle in China this year.

A $4,500 pricetag helps. Tesla’s Model 3 costs about $39,000 in China. Wuling has worked around the issue of high fixed battery prices by making its car small and light, meaning smaller and cheaper batteries can be used. The car is made by SAIC-GM-Wuling Automobile, a joint venture known as Wuling in which state-backed SAIC Motor and Guangxi Automobile Group own a combined 56 per cent and US automaker General Motors 44 per cent.

Sales of Wuling-made electric cars almost tripled in 2020. Yet SAIC shares (one of the listed components of the joint venture) have fallen 15 per cent this year as its other foreign joint ventures, including SAIC Volkswagen, have underperformed. Local demand for cheaper EVs has hurt sales of pricier vehicles. SAIC trades at just 9 times trailing earnings. This is a steep discount to both EV and traditional automaker peers.

The share price decline make this a good time to buy. Tesla’s slowing sales in China come amid increased government scrutiny, including reported bans on parking Teslas in Chinese government offices. This gives Wuling a chance to capitalise on growing mainstream demand amid a price war that Tesla’s locally made Model Y sparked last year.

Like the slogan “Young and Eager” painted on Wuling’s headquarters, there is ample room for growth. EVs account for less than a tenth of all cars in China, the world’s largest auto market. Narrow streets, young demographics and small budgets in nearby countries such as Vietnam and Indonesia offer significant potential too. Longer term, it might even have a chance at capturing low price EV car sales in Europe and the US.

FT Lex : Aviva/Cevian: tough targets license Blanc to push harder

Aviva/Cevian: tough targets license Blanc to push harder
Large, lethargic and underperforming, the UK insurer is tempting for the Swedish activist investor

Scandinavian visitors had a mixed reputation in Britain’s distant past. They might be raiders, traders or peaceful settlers. Amanda Blanc must countenance all three scenarios in dealing with Cevian, the powerful Stockholm-based investor that has taken a 5 per cent stake in Aviva.

The activist has engineered break-ups, takeovers and management shake-ups across Europe. It would be just as happy if gentler remedies doubled the value of its £800m cash equity stake in the UK insurer over three years.

Aviva is a tempting target. Large, lethargic and underperforming, it has been a graveyard for managerial ambitions for at least a decade. Newish chief executive Blanc has shown greater dynamism than predecessor Maurice Tulloch, agreeing £8bn in disposals. But the business remains the last big insurance conglomerate listed in London. RSA, another Cevian investment, has just completed its well-priced £7.2bn break-up sale to Canada’s Intact and Tryg of Denmark.

Cevian has not suggested that Aviva should hoist a For Sale sign over remaining assets. They include life and non-life insurance, lacklustre fund manager Aviva Investors and a big “closed book” of legacy cover.

The investor has set financial targets instead. The first two look tough, but achievable. The eye-catching biggie is a £5bn capital return. The starting point is Aviva’s capital. This is about 250 per cent of its regulatory minimum, 70 percentage points or £6.6bn above the insurer’s 180 per cent target, which incorporates a safety buffer.

Cevian is making lower subsequent deductions than some analysts. Panmure’s Ming Zhu, for example, reckons just under £4bn may be refundable to shareholders. As a second aim, the activist wants Blanc to lift her cost-saving target from £300m to £500m yearly out of operating expenses of some £3bn.

Blanc’s sharpest intake of breath must have been reserved for Cevian’s suggestion that she should more than double the dividend to 45p within three years. The activist optimistically hopes the share price would also double to over £8, a level not regularly seen since 2007.

To get anywhere close, Blanc would need to do two things. First, hit annual and half-yearly targets with the same consistency as Legal & General. Second, strip out layers of management while galvanising ordinary staff. External pressure from Cevian should make both tasks easier to justify and achieve.

>>> US Gapping down

Gapping down
In reaction to earnings/guidance:

  • COUP -8.8% (also names new CFO), HQY -5.2%, MTN -0.7%, MOMO -0.7%

Other news:

  • PLBY -9.8% (stock offering)
  • TIGR -8% (stock offering)
  • RFL -7.1% (stock offering)
  • APR -6.6% (stock offering)
  • LBRT -6.6% (commences 12.3 mln share offering by Riverstone)
  • LESL -6.2% (stock offering)
  • JAMF -5.8% (stock offering)
  • GENI -5.8% (commences public offering of 20 mln ordinary shares, consisting of 12 mln shares being offered by Genius and 8 mln by certain of its shareholders)
  • KDP -3.9% (announces 28 mln share offering by MDLZ)
  • FBK -2.7% (stock offering by selling shareholder; also files mixed securities shelf offering)
  • WPC -2.7% (prices offering of 5.25 mln shares of common stock at for gross proceeds of 395.3 mln)
  • TPX -2% (expands US manufacturing capacity)
  • ETSY -1.7% (convertible notes offering)
  • GDRX -1.6% (Walmart+ platform adds savings on prescriptions)
  • CPG -1.5% (completes disposition of non-core Saskatchewan assets)
  • FSLY -1.5% (spokesperson says the company is investigating issue with service which is causing several website outages; fix is being implemented)
  • SUP -1% (files for $150 mln mixed securities shelf offering)

Analyst comments:

  • SAIC -1.8% (downgraded to Sell from Neutral at Goldman)
  • EPAC -1% (downgraded to Underweight from Equal Weight at Wells Fargo)

>>> US Gapping up

Gapping up
In reaction to earnings/guidance:

  • SFIX +14.3%, DADA +10.8% (also announces $150 mln share repurchase plan), REVG +8%, MRVL +5.6%, THO +5.1%, NAPA +3%, LUV +1.2%, WWW +0.9% (guides Q2 revs above pre-pandemic levels)

Other news:

  • SLQT +11.5% (to join S&P SmallCap 600)
  • MCF +9.3% (Contango Oil & Gas and Independence Energy to combine in all-stock merger)
  • ATCX +7.2% (files for $250 mln mixed securities shelf offering; also files for 29,678,938 offering by selling shareholders)
  • CHS +6.1% (issues statement in response to letter issued by Barington Group)
  • VCNX +5% (plans to activate at least 13 clinical sites for Alzheimer's study and 18 clinical sites for head and neck cancer across the US)
  • CW +4% (awarded contract by LMT worth up to $70 mln)
  • JWEL +3.8% (signs strategic cooperation agreement for COCOVEL brand with Shanghai Gesber Group to jointly seek household product business growth)
  • TLRY +3.4% (announces launch of new medical cannabis brand, Symbios)
  • TSLA +3.1% (discloses departure of Jerome Guillen, President, Tesla Heavy Trucking)
  • HOOK +3.1% (provides Phase 1 HB-200 data)
  • AFYA +3.1% (notified of stake purchase by Bertelsmann affiliate)
  • CAMT +2.7% (received orders for inspection and metrology systems totaling about $60 mln since the beginning of April; expected to be delivered primarily during the second half of 2021)
  • PLTR +1.6% (receives $7.4 mln one-year contract renewal with the CDC)
  • MRNA +1.2% (New CDC study finds that mRNA COVID-19 vaccines reduce risk of infection by 91% for fully vaccinated people)

Analyst comments:

  • JCI +2.6% (upgraded to Overweight from Neutral at JP Morgan)
  • ARCB +2% (upgraded to Buy from Hold at Vertical Research)
  • ARES +1.7% (upgraded to Outperform from Market Perform at BMO Capital Markets)
  • DAL +1.7% (upgraded to Buy from Hold at Jefferies)
  • GNRC +1.5% (upgraded to Overweight from Sector Weight at KeyBanc Capital Markets)
  • LDOS +1.5% (upgraded to Conviction Buy from Buy at Goldman)
  • LW +1.4% (upgraded to Buy from Hold at Jefferies)

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • SFIX +14.3%, SLQT +12.5%, DADA +9.1%, HOOK +7.6%, ATCX +7.2%, CHS +6.6%, REVG +5.9%, MCF +5%, MRVL +5%, CW +4%, AFYA +3.1%, TSLA +2.7%, THO +2.4%, CAMT +2%, RFL +1.8%, MRNA +1.5%, INN +1.3%, WWW +0.9%, GOOD +0.8%
  • Gapping down:
    • PLBY -10.6%, TIGR -8.5%, COUP -8.4%, APR -6.6%, HQY -5.5%, LESL -5%, JAMF -5%, LBRT -5%, NAPA -4.9%, KDP -3.4%, FBK -2.7%, WPC -2.5%, ETSY -2.1%, CPG -1.5%, GDRX -1%, SUP -1%, M -0.7%, MTN -0.7%, MOMO -0.5%

>>> US Early premarket gappers

Early premarket gappers

  • Gapping up:
    • SFIX +14.3%, SLQT +12.5%, DADA +9.1%, HOOK +7.6%, ATCX +7.2%, CHS +6.6%, REVG +5.9%, MCF +5%, MRVL +5%, CW +4%, AFYA +3.1%, TSLA +2.7%, THO +2.4%, CAMT +2%, RFL +1.8%, MRNA +1.5%, INN +1.3%, WWW +0.9%, GOOD +0.8%
  • Gapping down:
    • PLBY -10.6%, TIGR -8.5%, COUP -8.4%, APR -6.6%, HQY -5.5%, LESL -5%, JAMF -5%, LBRT -5%, NAPA -4.9%, KDP -3.4%, FBK -2.7%, WPC -2.5%, ETSY -2.1%, CPG -1.5%, GDRX -1%, SUP -1%, M -0.7%, MTN -0.7%, MOMO -0.5%

FT : Taiwan’s Covid-19 outbreak spreads to chip companies

Taiwan’s Covid-19 outbreak spreads to chip companies
Disruptions to semiconductor groups comes as industry battles global shortage

The spread of Covid-19 into Taiwan’s electronics factories is threatening to delay semiconductor shipments, according to companies and analysts, raising the prospect of renewed disruption to an industry gripped by a global shortage. 

The country, viewed as a linchpin in the world’s chip supply chain, is suffering from its first large coronavirus outbreak. It has come against a backdrop of escalating warnings about the depth of the semiconductor shortage, which has hit everything from cars to consumer electronics.

King Yuan Electronics, a chip testing and packaging company, said on Monday that it expected an outbreak among its workers to reduce its June output and revenue by up to 35 per cent. Of KYEC’s 7,300 staff, 238 are confirmed to have been infected with Covid-19.

An outbreak among migrant workers in Taiwan has also hit chip packager Greatek, telecoms gear producer Accton and Foxsemicon, a semiconductor equipment maker affiliated with Apple supplier Foxconn.

Taiwan reported 214 new Covid-19 cases on Tuesday, 211 of them locally spread, and 26 deaths. The country has recorded more than 11,000 cases and 260 deaths since the start of the pandemic.

KYEC and Foxsemicon have each closed one factory for two days for disinfection, and all four companies are testing their entire workforce, an undertaking that is expected to identify more infections.

“The supply market is already under huge pressure, we have already got four months lead time from order to delivery for Taiwan chips, so any further reduction in supply capacity is going to exacerbate the shortage as it stands,” said Olaf Schatteman, a supply chain expert at Bain, the consultancy.

KYEC and its ilk test and package chips produced by contract manufacturers such as Taiwan Semiconductor Manufacturing Company. Those are the last steps in a complex manufacturing process before the chips are shipped to the companies that designed them.

Among KYEC’s customers is MediaTek, one of the world’s largest chip design houses, which sells semiconductors for electronics gadgets from smartphones to televisions. 

Analysts said there were few options for customers of KYEC and Greatek to shield themselves from delivery delays as other testing and packaging companies, such as global industry leader Advanced Semiconductor Engineering, were already running at full capacity. 

Mark Li, a chip analyst at Bernstein, said the disruption was likely to be short-term. “My guess is that it will mostly hurt smaller chip design houses as priority will be given to large customers,” he said, adding that MediaTek had reiterated its revenue target for the second quarter despite the problems at KYEC. 

The risk of infections disrupting production in the rest of the chip supply chain is considered much lower because those stages are significantly less labour intensive than packaging, allowing companies such as TSMC and MediaTek to implement socially-distanced work arrangements.

But analysts said it was unclear if measures taken by Taiwan’s health authorities were enough to stop the spread of Covid-19 in electronics factories.

According to Taiwan’s Central Epidemic Command Centre, migrant workers from the affected plants were staying in the same dormitories. 

“The same thing happened in Singapore, and I don’t know if maybe there are lessons to be learned,” said Patrick Chen, head of Taiwan Research at CLSA, a brokerage. “They need to improve living conditions for the migrant workers.” 

Taiwan has 713,000 migrant workers, according to government statistics, as well as at least 50,000 undocumented ones. Almost 470,000 work in industrial sectors, with many living in dormitories on factory premises or nearby. 

Employers, which are required by law to provide migrant workers with accommodation and food, mostly outsource these services to brokers that cram large numbers of workers into shared rooms.

While the government has installed rapid testing stations at the main technology industry parks and is quarantining those who test positive, health authorities are struggling to improve the cramped living conditions for migrant workers who have not tested positive.

>>> Europe : Brokers Upgrades & Downgrades - 8th of June 2021 V2(+)

>>> Up
* Banco BPM Raised to Outperform at Mediobanca SpA; PT 3.60 euros (+)
* BBVA Raised to Overweight at JPMorgan; PT 6.60 euros
* CTS Eventim Raised to Hold at Nord/LB; PT 56 euros
* EasyJet Raised to Buy at Goldman; PT 1,150 pence
* Kuka Raised to Reduce at AlphaValue
* Lonza Raised to Buy at Goldman; PT 745 Swiss francs
* Magyar Telekom Raised to Buy at Erste Group; PT 520 forint
* Metro Raised to Add at Baader Helvea; PT 12 euros
* Nexi PT Raised to 25 euros from 20 euros at Jefferies
* Orsted Raised to Outperform at RBC; PT 1,050 kroner
* Paragon PT Raised to 660 pence from 580 pence at Peel Hunt (+)
* SBB Estimates, PT Raised at Nordea After JM Stake Acquisition (+)
* UniCredit Raised to Outperform at Mediobanca SpA; PT 15.70 euros (+)

>>> Down
* Alm Brand Cut to Hold at SEB Equities; PT 67.30 kroner
* GEA Group Cut to Sell at Goldman; PT 28 euros
* Guala Closures Cut to Reduce at Equita; PT 8.20 euros
* Hella Cut to Neutral at Citi; PT 60 euros
* IAG Cut to Neutral at Goldman; PT 204 pence
* Lufthansa Cut to Sell at Goldman; PT 8.10 euros
* Maersk Cut to Neutral at JPMorgan; PT 17,758 kroner
* Rockhopper Exploration Cut to Hold at Peel Hunt; PT 10 pence (+)
* SIF Cut to Neutral at Oddo BHF; PT 16 euros

>>> Initiation
* Diaceutics Rated New Buy at Stifel; PT 200 pence (+)
* Halfords Rated New Outperform at RBC; PT 450 pence
* Marzocchi Pompe Rated New Buy at Integrae SIM; PT 6.80 euros (+)
* Pets at Home Rated New Sector Perform at RBC; PT 450 pence

>>> Call
* European Banks Have Ample Room to Improve Further, Goldman Says (+)
* British American Tobacco’s Update Is Impressive, RBC Says (+)
* Continental Best Placed for Autos Restock, Hella Cut: Citi
* Halfords Outperform at RBC on Strong Position, Growth Drivers
* Intermediate Capital Results a Beat Across the Board, Citi Says (+)
* Orsted Upgraded With Long-Term Attractions Intact, RBC Says
* Roche, MorphoSys Have Read Across From Biogen’s FDA Approval: DB (+)
* Terveystalo’s Feelgood Deal May Pave Way for More: Jefferies (+)