Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

This week in StubWorld ...
<ul>
<li>
<a href="https://www.smartkarma.com/entities/21096" target="_blank" data-smartkarma-citation="entities:21096:1">Asm International Nv (ASM NA) </a>is the more interesting play should TCL Corporation's rumoured acquisition in <a href="https://www.smartkarma.com/entities/15061" target="_blank" data-smartkarma-citation="entities:15061:1">Asm Pacific Technology (522 HK)</a> unfold.</li>
<li>The challenge of reconciling the implied market valuation for <a href="https://www.smartkarma.com/entities/5321" target="_blank" data-smartkarma-citation="entities:5321:1">IMAX Corp (IMAX US)</a><a href="https://www.smartkarma.com/entities/5321" target="_blank" data-smartkarma-citation="entities:5321:1"></a>'s deconsolidated operations.</li>
<li>At a 7.7% yield and a multi-year low ratio (<a href="https://www.smartkarma.com/entities/17638" target="_blank" data-smartkarma-citation="entities:17638:1">Intouch Holdings (INTUCH TB)</a> over <a href="https://www.smartkarma.com/entities/947" target="_blank" data-smartkarma-citation="entities:947:1">Advanced Info Service (ADVANC TB)</a>), Intouch looks attractive.</li>
</ul>
This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/Opco held must be at least 20% of the parent's market cap.
My comments on ASM, IMAX and Intouch follow my weekly setup/unwind tables.
<div class="content-caption">(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)</div>

This week in StubWorld ...


Asm International Nv (ASM NA) is the more interesting play should TCL Corporation's rumoured acquisition in Asm Pacific Technology (522 HK) unfold.
The challenge of reconciling the implied market valuation for IMAX Corp (IMAX US)'s deconsolidated operations.
At a 7.7% yield and a multi-year low ratio (Intouch Holdings (INTUCH TB) over Advanced Info Service (ADVANC TB)), Intouch looks attractive.

This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/Opco held must be at least 20% of the parent's market cap.
My comments on ASM, IMAX and Intouch follow my weekly setup/unwind tables.
(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)

StubWorld: TCL's Possible Stake in ASM, Imax Is Not The Ticket, Out of Touch Intouch

Asian Equities Analyst, Logistics & Transport, Tracking Traffic

Daniel Hellberg

Asian Equities Analyst, Logistics & Transport

Equity Bottom-Up

<ul class=""><li>Consensus EPS estimates for <a href="https://www.smartkarma.com/entities/11557" target="_blank" data-smartkarma-citation="entities:11557:1">CJ Korea Express Corp (000120 KS)</a> in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin compared to the current 3.8%.</li><li>A portion of this improvement may come from CJL's two Korea-centric segments, Contract Logistics and Parcel, which accounted for 37% and 30% of Sales in Q1 2017, respectively. But the opportunities for these two segments to scale up significantly are limited by Korea's relatively small domestic market size.</li><li>A much larger proportion of the expected earnings improvement will likely come from CJL's Global segment, which focuses on 'asset light' transportation services outside of Korea (primarily in China and elsewhere in developing Asia). CJL over the last two years has grown this segment organically and through M&amp;A.</li><li>In our view, the most likely path to significantly higher earnings in 2018 and 2019 would be a sharp increase in both the scale and profitability of CJL's Global (ie, non-Korean) logistics business. We believe improvements in domestic segments (such as raising automation in Parcel) will probably have a smaller impact on medium-term earnings, if any.</li><li>In this note we evaluate CJL's chances of successfully following one of these paths to EPS of 6,400+ Won by 2018. Given the company's recent track record, we believe consensus earnings estimates for 2018 (over 6,400 Won EPS) and 2019 (over 8,400 Won EPS) are simply too high, and that analysts will pull them down later in 2017 when it becomes apparent that progress towards those milestones is negligible.</li></ul>

Consensus EPS estimates for CJ Korea Express Corp (000120 KS) in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin compared to the current 3.8%.A portion of this improvement may come from CJL's two Korea-centric segments, Contract Logistics and Parcel, which accounted for 37% and 30% of Sales in Q1 2017, respectively. But the opportunities for these two segments to scale up significantly are limited by Korea's relatively small domestic market size.A much larger proportion of the expected earnings improvement will likely come from CJL's Global segment, which focuses on 'asset light' transportation services outside of Korea (primarily in China and elsewhere in developing Asia). CJL over the last two years has grown this segment organically and through M&amp;A.In our view, the most likely path to significantly higher earnings in 2018 and 2019 would be a sharp increase in both the scale and profitability of CJL's Global (ie, non-Korean) logistics business. We believe improvements in domestic segments (such as raising automation in Parcel) will probably have a smaller impact on medium-term earnings, if any.In this note we evaluate CJL's chances of successfully following one of these paths to EPS of 6,400+ Won by 2018. Given the company's recent track record, we believe consensus earnings estimates for 2018 (over 6,400 Won EPS) and 2019 (over 8,400 Won EPS) are simply too high, and that analysts will pull them down later in 2017 when it becomes apparent that progress towards those milestones is negligible.

Why CJ Logistics Won't Likely Reach Annual EPS of 6,400+ Won Any Time Soon

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. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

<ul><li><a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807">Las Vegas Sands Corp (LVS US)</a>  Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly believing it could fetch "a hefty price". Observers believe his number for the entire property is US$5.5 billion.</li><li>Proceeds from such a sale could more than double the LVS cash position of $2.13bn shown on the balance sheet as of December 31, 2016, arming the company with an immense war chest to either finance a potential mega integrated resort in Japan's coming market or declare a special cash dividend.</li><li>LVS shares now trading around US$52 do not reflect any deal yet but could be headed for a big bump later this year if the company gets the licensing nod from Japan officials.</li></ul>

Las Vegas Sands Corp (LVS US)  Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly believing it could fetch "a hefty price". Observers believe his number for the entire property is US$5.5 billion.Proceeds from such a sale could more than double the LVS cash position of $2.13bn shown on the balance sheet as of December 31, 2016, arming the company with an immense war chest to either finance a potential mega integrated resort in Japan's coming market or declare a special cash dividend.LVS shares now trading around US$52 do not reflect any deal yet but could be headed for a big bump later this year if the company gets the licensing nod from Japan officials.

Proposed Sale of 49% of Singapore Mall Could Bring $3.3 Billion in Cash to LVS Japan War Chest

China

TCL Corporation manufactures electronic products, telecommunication products, home appliances, and electrical products.  The Company's products include televisions, mobile phones, personal computers, air-conditioners, washing machines, refrigerators, and other related products.

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TCL Corp (A) (000100 CH)

StubWorld: TCL's Possible Stake in ASM, Imax Is Not The Ticket, Out of Touch Intouch

This week in StubWorld ... Asm International Nv (ASM NA) is the more interesting play should TCL Corporation's rumoured acquisition in Asm...

David Blennerhassett

Why CJ Logistics Won't Likely Reach Annual EPS of 6,400+ Won Any Time Soon

Consensus EPS estimates for CJ Korea Express Corp (000120 KS) in 2018 and 2019 assume a dramatic and sustained improvement in Operating Margin...

Daniel Hellberg

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

Proposed Sale of 49% of Singapore Mall Could Bring $3.3 Billion in Cash to LVS Japan War Chest

Las Vegas Sands Corp (LVS US) Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly...

Howard J Klein

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