Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Tracking Traffic

Focusing on Asian logistics, transportation, and travel companies

Equity Bottom-Up

We are upgrading <a href="https://www.smartkarma.com/entities/best-inc" target="_blank" data-smartkarma-citation="entities:25494:1" rel="noopener">BEST Inc (BEST US)</a> from HOLD to BUY on the expectation of Chinese express sector consolidation in the coming 12-18 months. Note that we do not expect sector fundamentals to improve in the near-term, nor do we expect Best to erase its losses in the next few quarters. 
While we concede we may be early in rating Best BUY, we believe conditions are developing in ways that make sector M&amp;A more likely in the medium-term. Given its size, its depressed valuation and its relationship to <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>, Best could become an acquisition target. 
We view Best as a cheap option on sector consolidation. At a 20% discount to peers on [EV/Revenue] and [EV/Parcel], we believe Best's express operation alone is worth US$5.05 per ADS -- investors effectively get the rest of its businesses for free. BUY below US$3 for ~70% upside.

We are upgrading BEST Inc (BEST US) from HOLD to BUY on the expectation of Chinese express sector consolidation in the coming 12-18 months. Note that we do not expect sector fundamentals to improve in the near-term, nor do we expect Best to erase its losses in the next few quarters. 
While we concede we may be early in rating Best BUY, we believe conditions are developing in ways that make sector M&amp;A more likely in the medium-term. Given its size, its depressed valuation and its relationship to Alibaba Group (BABA US), Best could become an acquisition target. 
We view Best as a cheap option on sector consolidation. At a 20% discount to peers on [EV/Revenue] and [EV/Parcel], we believe Best's express operation alone is worth US$5.05 per ADS -- investors effectively get the rest of its businesses for free. BUY below US$3 for ~70% upside. 

Upgrading Best Inc To Speculative BUY on Expectation of Express Sector Consolidation

Korea/Asia, Events, IPOs, Douglas Research Advisory

Douglas Kim

Korea/Asia, Events, IPOs

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In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, <a href="https://www.smartkarma.com/entities/netmarble-corporation" target="_blank" data-smartkarma-citation="entities:22839:1" rel="noopener">Netmarble Corporation (251270 KS)</a>, and <a href="https://www.smartkarma.com/entities/kakao-corp" target="_blank" data-smartkarma-citation="entities:15002:1" rel="noopener">Kakao Corp (035720 KS)</a> were made in the past decade. 
We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. 
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In this insight, we go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to invest in Korean companies about 14 years ago. Most of its big investments in Korea including Krafton Games, Netmarble Corporation (251270 KS), and Kakao Corp (035720 KS) were made in the past decade. 
We also discuss the US government's increasingly hostile stance on Tencent and other major Chinese tech companies and discuss the probabilities of the US government potentially following India's hard-line policy of removing major Chinese apps. 


Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

Alpha-Centric ESG Research

Kyle Rudden

Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The <a href="https://www.smartkarma.com/entities/saudi-aramco" target="_blank" data-smartkarma-citation="entities:27317:1" rel="noopener">Saudi Aramco (ARAMCO AB)</a> debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.
ESG impacts IPOs. But not Ant's IPO.
Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.
Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.
This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.
Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.
It is all a matter of perspective.
Seeing the forest for the trees.

Sometimes, the "ESG stuff" can really alter the outcome of an IPO. The Saudi Aramco (ARAMCO AB) debut was curbed by Environmental concerns. WeWork's failed IPO is a case study in founder-led Governance risk. Palantir quashed its "adjustable voting power for founders" after an uproar.
ESG impacts IPOs. But not Ant's IPO.
Ant's ESG profile is strong. There a few skeletons in the closet if you look hard enough, but they are bygone and irrelevant . Current ESG blemishes are minor. There isn't much dirt for ESG idealists to wallow in. If they are even looking at all; as a "China deal," ESG has a different relevance for Ant.
Ant's IPO is a momentous ESG event, but not in the traditional and obvious way.
This is not about ESG impacting Ant's IPO. This is about Ant's IPO impacting ESG.
Looking at Ant through a typical ESG lens will make one's head spin. But step back and look again, and it becomes clear that Ant is a strategically-integrated masterpiece at the vanguard of a critical crossroads – the intersection of Fintech, financial inclusion, green finance, and sustainability.
It is all a matter of perspective.
Seeing the forest for the trees.

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

<ul>
<li>Meituan Dianping ownership surges among Asia Ex-Japan active funds.</li>
<li>Average holding weights have since risen to 0.99%, with 32.7% of funds invested. </li>
<li>MSCI inclusion has driven weights higher, but active managers find themselves well short of the benchmark MSCI Asia Ex-Japan index level, on average. </li>
<li>Meituan has now become a key underweight holding for the majority of Asia Ex-Japan managers, exacerbated by the ongoing outperformance in 2020.</li>
</ul>


Meituan Dianping ownership surges among Asia Ex-Japan active funds.
Average holding weights have since risen to 0.99%, with 32.7% of funds invested. 
MSCI inclusion has driven weights higher, but active managers find themselves well short of the benchmark MSCI Asia Ex-Japan index level, on average. 
Meituan has now become a key underweight holding for the majority of Asia Ex-Japan managers, exacerbated by the ongoing outperformance in 2020.


Meituan Dianping:  From Nowhere to Key Underweight

Silver Point

Thomas J. Monaco

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Thematic (Sector/Industry)

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor firm), with American US firms being required to apply for a license in order to export certain products to SMIC. These restrictions were reportedly implemented due to "an unacceptable risk of diversion to a military end use" and confirmed the recent market speculation of US action against SMIC;*Unreliable Entity List: Mainland China’s Ministry of Commerce finally issued regulations for its “unreliable entity” list aimed at foreign companies that it deems endanger national sovereignty, security, or development interests. Companies which end up on the list could be banned from importing/exporting from/to mainland China, and may be barred from investing in the country; and*Taiwan Flashpoint Coming: Rhetoric between is also being ramped up militarily between both sides over Taiwan, as the US government is contemplating providing Taiwan with an advanced defensive system and provocations of more "high-level official visits to Taiwan" by U.S. officials.

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor firm), with American US firms being required to apply for a license in order to export certain products to SMIC. These restrictions were reportedly implemented due to "an unacceptable risk of diversion to a military end use" and confirmed the recent market speculation of US action against SMIC;*Unreliable Entity List: Mainland China’s Ministry of Commerce finally issued regulations for its “unreliable entity” list aimed at foreign companies that it deems endanger national sovereignty, security, or development interests. Companies which end up on the list could be banned from importing/exporting from/to mainland China, and may be barred from investing in the country; and*Taiwan Flashpoint Coming: Rhetoric between is also being ramped up militarily between both sides over Taiwan, as the US government is contemplating providing Taiwan with an advanced defensive system and provocations of more "high-level official visits to Taiwan" by U.S. officials.

Trump Administration Continues to Ratchet Up The Pressure

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba (BABA US)

Upgrading Best Inc To Speculative BUY on Expectation of Express Sector Consolidation

What is rationale? What are catalysts? Why Best and not other potential targets? Price target?

Tracking Traffic

Tencent's Home-Run Investments in Korea & Will US Follow India's Move to Remove Tencent's Apps?

We go through the details of Tencent's numerous investments in Korea and try to estimate how much money it has made from them. Tencent started to...

Douglas Kim

Ant Group Pre-IPO ESG Assessment: Seeing the Forest for the Trees

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Kyle Rudden

Meituan Dianping: From Nowhere to Key Underweight

Meituan Dianping ownership among Asia Ex-Japan investors has surged since its addition to the MSCI indices earlier this year. After a less than...

Steven Holden

Trump Administration Continues to Ratchet Up The Pressure

*Export Restrictions On SMIC: The US Commerce Department has reportedly imposed export restrictions on mainland China’s SMIC (largest semiconductor...

Thomas J. Monaco

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