Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

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Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for <a href="https://www.smartkarma.com/entities/472" target="_blank" data-smartkarma-citation="entities:472:1">MGM China Holdings Ltd (2282 HK)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a>, HKD 14 for <a href="https://www.smartkarma.com/entities/473" target="_blank" data-smartkarma-citation="entities:473:1">Wynn Macau Ltd (1128 HK)</a>, USD 17 for <a href="https://www.smartkarma.com/entities/810" target="_blank" data-smartkarma-citation="entities:810:1">Melco Crown Entertainment ADR (MPEL US)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/806" target="_blank" data-smartkarma-citation="entities:806:1">Galaxy Entertainment Group Limited (27 HK)</a>, HKD 6.6 for <a href="https://www.smartkarma.com/entities/805" target="_blank" data-smartkarma-citation="entities:805:1">SJM Holdings Ltd (880 HK)</a>, $133 for <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a>, $56 for <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a>, and $29.50 for <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a>. We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for MGM China Holdings Ltd (2282 HK), HKD 36 for Sands China Ltd (1928 HK), HKD 14 for Wynn Macau Ltd (1128 HK), USD 17 for Melco Crown Entertainment ADR (MPEL US), HKD 36 for Galaxy Entertainment Group Limited (27 HK), HKD 6.6 for SJM Holdings Ltd (880 HK), $133 for Wynn Resorts Ltd (WYNN US), $56 for Las Vegas Sands Corp (LVS US), and $29.50 for MGM Resorts International (MGM US). We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

Asia Frontier Capital Travel Report: Laos

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

Smartkarma

Smartkarma unites the fragmented investment industry, connecting institutional investors, independent research providers, and corporates within a single network.

Research Reinvented

Equity Capital Markets

Minsheng Education / Equity Capital Markets

Minsheng Education, a China Chongqing province based education provider, is looking to raise up to US$200m in its Hong Kong listing. Our fellow insight provider <a href="https://www.smartkarma.com/profiles/803" target="_blank" data-smartkarma-citation="accounts:803">Valerie Law, CFA</a> has covered the fundamentals of the company in her insight <a href="https://www.smartkarma.com/insights/minsheng-education-ipo-preview-fair-on-fees-tall-on-margins" target="_blank">here</a>. In this insight, we will recap the company's background, offer our additional thoughts and score the deal in our ECM framework.<h2>Company Background</h2><a href="https://www.smartkarma.com/profiles/803" target="_blank" data-smartkarma-citation="accounts:803">Valerie Law, CFA</a> has covered the basics of Minsheng Education (MSE) in her insight: <a href="https://www.smartkarma.com/insights/minsheng-education-ipo-preview-fair-on-fees-tall-on-margins" target="_blank" data-smartkarma-citation="insights:6939">Minsheng Education IPO</a>…

Minsheng Education, a China Chongqing province based education provider, is looking to raise up to US$200m in its Hong Kong listing. Our fellow insight provider Valerie Law, CFA has covered the fundamentals of the company in her insight here. In this insight, we will recap the company's background, offer our additional thoughts and score the deal in our ECM framework.Company BackgroundValerie Law, CFA has covered the basics of Minsheng Education (MSE) in her insight: Minsheng Education IPO…

Minsheng Education IPO: Premium for First Listed Tertiary and Vocational Education Player?

China Specialist, Auto and Industrial Specialist

Victoria Li

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the governments competing to burnish their 'green' credentials. The central government has announced the plan to reduce the subsidy for NEV in a phased manner out to 2020. The local governments now can only provide subsidy up to only 50% of the level provided by the central government. The economic attractiveness of buying an NEV for the average working…

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the governments competing to burnish their 'green' credentials. The central government has announced the plan to reduce the subsidy for NEV in a phased manner out to 2020. The local governments now can only provide subsidy up to only 50% of the level provided by the central government. The economic attractiveness of buying an NEV for the average working…

China NEV - Driving in the Post-Subsidy World

HK/China small/mid-caps specialist

Pep So, CFA, CPA

Equity Bottom-Up

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two successful online platforms for online games and mobile apps in the past with millions of users.This time, ND is building its third online platform for its education business. Despite the and strong growth in recent years, Chinese online education industry is highly fragmented and has no dominant industry leader. ND considers this a golden opportunity and is well-positioned to compete in this fast-growing industry with its online education ecosystem. The investment highlights are:<ul><li>Proven management with solid track record: Management has shown capabilities to create value by innovation. It has shown strong expertise in building successful online platforms with millions of users.</li><li>Best-in-class products for education: ND’s online education ecosystem, integrating advanced hardware, platform and content with cutting-edge technologies enables the company to have clear competitive advantages over competitors.</li><li>Strong pipeline for online game: ND’s online game segment has a strong pipeline, following the launch of two popular games in 2H16. ND is incorporating some of its proprietary VR/AR technologies in some of its upcoming games which will enhance gamer experience.</li><li>Limited downside, unlimited upside: We estimate ND’s floor value to be HKD18 per share by using sum-of-parts valuation under a very conservative scenario, which represents only 20% downside from the current level. Meanwhile, ND’s upside is unlimited once its platform becomes a go-to education platform for users not just from China but also from countries around the world!</li></ul>Despite the significant progress made in its education business, investors seem to be overlooking the stock due to limited profit contribution just yet. However, that should not last long as multiple catalysts, including Series B funding and the start of monetization, are emerging this year.

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two successful online platforms for online games and mobile apps in the past with millions of users.This time, ND is building its third online platform for its education business. Despite the and strong growth in recent years, Chinese online education industry is highly fragmented and has no dominant industry leader. ND considers this a golden opportunity and is well-positioned to compete in this fast-growing industry with its online education ecosystem. The investment highlights are:Proven management with solid track record: Management has shown capabilities to create value by innovation. It has shown strong expertise in building successful online platforms with millions of users.Best-in-class products for education: ND’s online education ecosystem, integrating advanced hardware, platform and content with cutting-edge technologies enables the company to have clear competitive advantages over competitors.Strong pipeline for online game: ND’s online game segment has a strong pipeline, following the launch of two popular games in 2H16. ND is incorporating some of its proprietary VR/AR technologies in some of its upcoming games which will enhance gamer experience.Limited downside, unlimited upside: We estimate ND’s floor value to be HKD18 per share by using sum-of-parts valuation under a very conservative scenario, which represents only 20% downside from the current level. Meanwhile, ND’s upside is unlimited once its platform becomes a go-to education platform for users not just from China but also from countries around the world!Despite the significant progress made in its education business, investors seem to be overlooking the stock due to limited profit contribution just yet. However, that should not last long as multiple catalysts, including Series B funding and the start of monetization, are emerging this year.

NetDragon: Quality Business with Limited Downside & Unlimited Upside. Value or Growth? Why Not Both!

China

New Oriental Education & Technology Group, Inc. offers educational services. The Company offers foreign language training, test preparation courses for admissions and assessment tests in the United States, the PRC and Commonwealth countries, primary and secondary school education, and other services. New Oriental Education & Technology Group also operates software development.

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New Oriental Education & Techn (EDU US)

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in...

Morningstar, Inc.

Asia Frontier Capital Travel Report: Laos

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos...

Asia Frontier Capital

Minsheng Education IPO: Premium for First Listed Tertiary and Vocational Education Player?

Minsheng Education, a China Chongqing province based education provider, is looking to raise up to US$200m in its Hong Kong listing. Our fellow...

Ke Yan, CFA, FRM

China NEV - Driving in the Post-Subsidy World

It is well recognised that the New Energy Vehicle (NEV) growth in China (and elsewhere for that matter) has been fueled by subsidies with the...

Victoria Li

NetDragon: Quality Business with Limited Downside & Unlimited Upside. Value or Growth? Why Not Both!

NetDragon (“ND”) is a true innovator as a Chinese internet company. In addition to online game development and operation, ND has built two...

Pep So, CFA, CPA

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