ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Cross Asset Strategy

<ul>
<li>The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.</li>
<li>The past week has seen Insights on <a href="https://www.smartkarma.com/entities/grab-holdings-inc" target="_blank" data-smartkarma-citation="entities:26950:1" rel="noopener">Grab (GRAB US)</a>, <a href="https://www.smartkarma.com/entities/sumber-alfaria-trijaya-tbk-pt" target="_blank" data-smartkarma-citation="entities:15659:1" rel="noopener">Sumber Alfaria Trijaya (AMRT IJ)</a>, <a href="https://www.smartkarma.com/entities/semen-indonesia-persero-tbk" target="_blank" data-smartkarma-citation="entities:11161:1" rel="noopener">Semen Indonesia (Gresik) (SMGR IJ)</a>, and the <a href="https://www.smartkarma.com/entities/mapletree-commercial-trust" target="_blank" data-smartkarma-citation="entities:106:1" rel="noopener">Mapletree Commercial Trust (MCT SP)</a> deal.</li>
<li>We also explored online groceries in South-East Asia as we see increasing interest in the space plus <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> also lays out his top picks for 2022 performance.</li>
</ul>


The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity bottom-up, from across South East Asia.
The past week has seen Insights on Grab (GRAB US), Sumber Alfaria Trijaya (AMRT IJ), Semen Indonesia (Gresik) (SMGR IJ), and the Mapletree Commercial Trust (MCT SP) deal.
We also explored online groceries in South-East Asia as we see increasing interest in the space plus Nicolas Van Broekhoven also lays out his top picks for 2022 performance.


The Week That Was in ASEAN@Smartkarma - Grab Expands, Alfamart, and Mapletree Mega-Merger

Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

Insight Provider

Thematic (Sector/Industry)

<ul>
<li>2021's vintage of my 5 High Convictions Ideas did extremely well</li>
<li>
<a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> was up 543%, <a href="https://www.smartkarma.com/entities/rex-international-holding" target="_blank" data-smartkarma-citation="entities:17074:1" rel="noopener">Rex International Holding (REXI SP)</a> was up 80%, <a href="https://www.smartkarma.com/entities/straits-trading-co-ltd" target="_blank" data-smartkarma-citation="entities:15745:1" rel="noopener">Straits Trading (STRTR SP)</a> was up almost 74% and Shougang Fushan just under 40%.</li>
<li>The underperformer award goes to HK restaurant operator <a href="https://www.smartkarma.com/entities/taste-gourmet-group-ltd" target="_blank" data-smartkarma-citation="entities:27339:1" rel="noopener">Taste Gourmet Group Ltd (8371 HK)</a> as it declined 25%. Below the fold we'll give our 5 High Conviction Ideas for 2022.</li>
</ul>


2021's vintage of my 5 High Convictions Ideas did extremely well

PC Partner (1263 HK) was up 543%, Rex International Holding (REXI SP) was up 80%, Straits Trading (STRTR SP) was up almost 74% and Shougang Fushan just under 40%.
The underperformer award goes to HK restaurant operator Taste Gourmet Group Ltd (8371 HK) as it declined 25%. Below the fold we'll give our 5 High Conviction Ideas for 2022.


Overview of My Winners and Losers in 2021... And 5 High Conviction Ideas Going Into 2022

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> is a "funny" stock to follow. On a full-year basis, the company has always been profitable since its IPO in 2012. Yet investors value the company as if it is perenially going out of business. The company mostly trades at a single-digit P/E and has zero sell-side coverage. Management has been mostly shareholder-friendly and paid out very regular dividends to long-term shareholders.Since our last insight in August we have received many questions from old and new investors: can this last? Surely, this must be a one-off profit for Pc Partner? Are the numbers real? How do you value this business? What is going on here? Why is it so cheap?After weeks of speaking to competitors and industry contacts in Taiwan, the US, and Singapore we are fundamentally more optimistic that this period of supernatural profits is not behind us for a while. We are making this statement knowing full-well that the industry that Pc Partner is a part of can be very fickle and the outlook can change quickly.All that being said we believe (oh oh, the most dangerous words!)this time is different. Supply-chain constraints and strong gaming demand coupled with TSMC implementing the largest price increase in a decade have meant that 3Q21 pricing has continued to increase over 1H21. We are now entering seasonally the strongest quarter with all indications that pricing will remain exceptional. Bottom line: Pc Partner has been wrongly valued by investors for too long. We are raising our forecast for FY21 profits substantially, make some FY22 scenario analysis for the bears and raise our Fair Value to 18 HKD, or 143% upside from here. *our headline is not a typo: At yesterday's close of 7.4 HKD, this stock trades at 1.2x P/E and 40% FY21 dividend yield. More details are below the fold.

PC Partner (1263 HK) is a "funny" stock to follow. On a full-year basis, the company has always been profitable since its IPO in 2012. Yet investors value the company as if it is perenially going out of business. The company mostly trades at a single-digit P/E and has zero sell-side coverage. Management has been mostly shareholder-friendly and paid out very regular dividends to long-term shareholders.Since our last insight in August we have received many questions from old and new investors: can this last? Surely, this must be a one-off profit for Pc Partner? Are the numbers real? How do you value this business? What is going on here? Why is it so cheap?After weeks of speaking to competitors and industry contacts in Taiwan, the US, and Singapore we are fundamentally more optimistic that this period of supernatural profits is not behind us for a while. We are making this statement knowing full-well that the industry that Pc Partner is a part of can be very fickle and the outlook can change quickly.All that being said we believe (oh oh, the most dangerous words!)this time is different. Supply-chain constraints and strong gaming demand coupled with TSMC implementing the largest price increase in a decade have meant that 3Q21 pricing has continued to increase over 1H21. We are now entering seasonally the strongest quarter with all indications that pricing will remain exceptional. Bottom line: Pc Partner has been wrongly valued by investors for too long. We are raising our forecast for FY21 profits substantially, make some FY22 scenario analysis for the bears and raise our Fair Value to 18 HKD, or 143% upside from here. *our headline is not a typo: At yesterday's close of 7.4 HKD, this stock trades at 1.2x P/E and 40% FY21 dividend yield. More details are below the fold. 

PC Partner: Just the Wrong Price; Raising Fair Value Est to 18 HKD; 1.2x P/E and 40% Div Yield FY21

<a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> has been a small-cap gem we have written about on numerous occasions. The company is not a buy &amp; hold stock but in September 2020 we called it "very cheap" <a href="https://www.smartkarma.com/insights/pc-partner-poor-man-s-play-on-nvidia-part-2-trades-at-2x-fy20-p-e-and-14-dividend-yield" target="_blank" data-smartkarma-citation="insights:43227" rel="noopener">PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield</a> when it was trading at 1.2 HKD/share. Fast forward one year and the company just reported close to 1 billion HKD in net profit and is paying an interim dividend of 0.84 HKD on 1H21. This is a 14% interim dividend yield on a stock that closed at 5.82 HKD recently. While a year ago the company was in a net debt position today the balance sheet is rock solid and approximately 65% of the market cap is cash.So far Mr. Market has met last Friday's results with a big yawn as the stock barely moved. Investors are assuming results will fall off a cliff in 2H21 and into 2022. Now, what if we told you 2H21 results could grow over 1H21? Cash on the balance sheet has ballooned to 65% of market cap and even taking into account the large interim distribution we forecast cash to grow to over 100% of current market cap by late 2021! Pc Partner has a history of doing shareholder friendly things (buybacks, tender offers, special dividends) and we expect this to continue. The wild card with Pc Partner is if the tight supply and fantastic pricing of VGA's will last for just one more quarter or well into 2022.For now there is no indication that 3Q trends have changed meaningfully from 2Q21. This implies that bumper profits will continue at least this quarter. Historically, 4Q is always Pc Partner's strongest quarter and if Covid strikes again in EU/USA winter season we see no reason why demand for PC's/gaming will drop off sharply. As echoed by several car manufacturers and chip suppliers we see no end in sight for chip shortages keeping ASP's elevated. This gets us to a scenario (not guarantee!) that 2H21 profits might actually be higher vs 1H21 profits. It would be an understatement to say that Pc Partner is NOT priced for this scenario at all.Fair Value raised to 10 HKD (2x 5HKD FY2021 EPS estimate). Major risk here is the VGA supply situation improves drastically and ASP's fall. The company is scheduled to hold a conf call with investors next week and we look forward to more guidance at this time.

PC Partner (1263 HK) has been a small-cap gem we have written about on numerous occasions. The company is not a buy &amp; hold stock but in September 2020 we called it "very cheap" PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield when it was trading at 1.2 HKD/share. Fast forward one year and the company just reported close to 1 billion HKD in net profit and is paying an interim dividend of 0.84 HKD on 1H21. This is a 14% interim dividend yield on a stock that closed at 5.82 HKD recently. While a year ago the company was in a net debt position today the balance sheet is rock solid and approximately 65% of the market cap is cash.So far Mr. Market has met last Friday's results with a big yawn as the stock barely moved. Investors are assuming results will fall off a cliff in 2H21 and into 2022. Now, what if we told you 2H21 results could grow over 1H21? Cash on the balance sheet has ballooned to 65% of market cap and even taking into account the large interim distribution we forecast cash to grow to over 100% of current market cap by late 2021! Pc Partner has a history of doing shareholder friendly things (buybacks, tender offers, special dividends) and we expect this to continue. The wild card with Pc Partner is if the tight supply and fantastic pricing of VGA's will last for just one more quarter or well into 2022.For now there is no indication that 3Q trends have changed meaningfully from 2Q21. This implies that bumper profits will continue at least this quarter. Historically, 4Q is always Pc Partner's strongest quarter and if Covid strikes again in EU/USA winter season we see no reason why demand for PC's/gaming will drop off sharply. As echoed by several car manufacturers and chip suppliers we see no end in sight for chip shortages keeping ASP's elevated. This gets us to a scenario (not guarantee!) that 2H21 profits might actually be higher vs 1H21 profits. It would be an understatement to say that Pc Partner is NOT priced for this scenario at all.Fair Value raised to 10 HKD (2x 5HKD FY2021 EPS estimate). Major risk here is the VGA supply situation improves drastically and ASP's fall. The company is scheduled to hold a conf call with investors next week and we look forward to more guidance at this time.

PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash

<a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> reported solid 2020 results but last week's earnings call provided a mixed outlook. On the one hand, there is great demand for GPU's and this is likely to continue into 2H21. On the other hand, the companies' two main suppliers <a href="https://www.smartkarma.com/entities/advanced-micro-devices-inc" target="_blank" data-smartkarma-citation="entities:19009:1" rel="noopener">Advanced Micro Devices (AMD US)</a> and <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> can not deliver GPUs fast enough. On the positive side, this is leading to increased ASP (+15%) but on the negative side, volumes are dropping (-20/-30%) while costs (labor, logistics, memory) are rising.Clearly, this is an industry-wide issue and not Pc Partner specific but it does mean that 1H21 will still be stronger than 1H20 but weaker vs 2H20. Fortunately, Pc Partner remains cheap and it will pay a 0.22 HKD dividend (6.4% dividend yield) by mid-July. Investors can also look forward to an interim dividend in August. The downside in the stock is limited but the upside is capped until supply issues at Nvidia and AMD are resolved. We lower our Fair Value estimate to 4 HKD (based on 6x 0.67 HKD FY21 EPS vs 0.75 HKD prior estimate), which leaves another 17% upside. Since IPO the company has traded on a multiple of 4x (low end)-6x (high-end).

PC Partner (1263 HK) reported solid 2020 results but last week's earnings call provided a mixed outlook. On the one hand, there is great demand for GPU's and this is likely to continue into 2H21. On the other hand, the companies' two main suppliers Advanced Micro Devices (AMD US) and NVIDIA Corp (NVDA US) can not deliver GPUs fast enough. On the positive side, this is leading to increased ASP (+15%) but on the negative side, volumes are dropping (-20/-30%) while costs (labor, logistics, memory) are rising.Clearly, this is an industry-wide issue and not Pc Partner specific but it does mean that 1H21 will still be stronger than 1H20 but weaker vs 2H20. Fortunately, Pc Partner remains cheap and it will pay a 0.22 HKD dividend (6.4% dividend yield) by mid-July. Investors can also look forward to an interim dividend in August. The downside in the stock is limited but the upside is capped until supply issues at Nvidia and AMD are resolved. We lower our Fair Value estimate to 4 HKD (based on 6x 0.67 HKD FY21 EPS vs 0.75 HKD prior estimate), which leaves another 17% upside. Since IPO the company has traded on a multiple of 4x (low end)-6x (high-end). 

PC Partner: Great Demand, but Limited Supply of GPU's Created Mixed 2021 Outlook

Hong Kong

PC Partner Group Ltd. is principally engaged in the design, development and manufacture of video graphics cards. The Group manufactures various electronics components and products for customers under its electronics manufacturing services division and also manufactures other personal computers related products.

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PC Partner (1263 HK)

The Week That Was in ASEAN@Smartkarma - Grab Expands, Alfamart, and Mapletree Mega-Merger

The Week That Was in ASEAN@Smartkarma is filled with an eclectic mix of differentiated, substantive, and actionable insights, macro and equity...

Angus Mackintosh

Overview of My Winners and Losers in 2021... And 5 High Conviction Ideas Going Into 2022

2021's vintage of 5 High Conviction Ideas did extremely well led by star performer Pc Partner. Our new selection for 2022 will hopefully have some...

Nicolas Van Broekhoven

PC Partner: Just the Wrong Price; Raising Fair Value Est to 18 HKD; 1.2x P/E and 40% Div Yield FY21

Pc Partner has been wrongly valued for too long. We significantly raise FY21 earnings, show how FY22 earnings could look like, and present a matrix...

Nicolas Van Broekhoven

PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash

PC Partner reported record 1H21 results and declared a 0.84 HKD interim dividend. Mr.Market assumes results will not remain this good in 2H21 but...

Nicolas Van Broekhoven

PC Partner: Great Demand, but Limited Supply of GPU's Created Mixed 2021 Outlook

Pc Partner reported solid FY20 results. During last week's earnings call the company explained industry dynamics are mixed and result in us...

Nicolas Van Broekhoven

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