IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Equity Bottom-Up

<ul>
<li>
<a href="https://jehoshaphatresearch.com/wp-content/uploads/669HK-Short-Report-Feb-2023-Jehoshaphat-Research.pdf" target="_blank" rel="noopener">Jehoshaphat's short report</a> has alleged that <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a>/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.</li>
<li>Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.</li>
<li>TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.</li>
</ul>



Jehoshaphat's short report has alleged that Techtronic Industries (669 HK)/TTI has been inflating its profits dramatically for over a decade with manipulative accounting.
Our forensic analysis of the allegations suggests that some are credible red flags while others are essentially an exaggeration.
TTI’s response to Jehoshaphat is pitiful. Valuation is meaningless until management adopts more conservative accounting or compelling disprove the allegations.


Techtronic Industries (669 HK): Forensic Analysis Viewpoint

Equity Analyst, LightStream Research

Shifara Samsudeen, FCMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Forensic Accounting

Techtronic Industries / Forensic Accounting

<ul>
<li>
<a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a> was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.</li>
<li>As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.</li>
<li>We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.</li>
</ul>



Techtronic Industries (669 HK) was targeted by Jehoshaphat Research (JR) accusing that the company’s profits are inflated dramatically over a decade with manipulative accounting.
As per the report, routine expenses incurred have been booked under various asset accounts such as deferred development costs thereby showing ever increasing margins for a cyclical business.
We have assessed the merits of some of these claims using our forensic accounting framework and it appears that most of the claims are very difficult to refute.


Techtronic Industries: Jehoshaphat Research’s Allegations and Our Assessment

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

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Quantitative Analysis

<ul>
<li>We analyzed the latest HK SFC report for aggregate short position as of Feb 3rd.</li>
<li>Top short increases and decreases were tabulated for one week and four week period. </li>
<li>We highlight short changes in Bidu, Manulife, Mengniu Dairy, CDF, Tencent, Baba, Anta Sports, Wuxi Bio.</li>
</ul>


We analyzed the latest HK SFC report for aggregate short position as of Feb 3rd.
Top short increases and decreases were tabulated for one week and four week period. 
We highlight short changes in Bidu, Manulife, Mengniu Dairy, CDF, Tencent, Baba, Anta Sports, Wuxi Bio.


HK Short Interest Weekly: Short Covers for Tencent, Baba, Anta, Wuxi Biologics

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>"Buy the Worst" strategy returned 1.9% in 2022, sharply outperformed HSI's 15% drop. In the last two years, this strategy recorded massive aggregate outperformance of 41pp against HSI.</li>
<li>For 2023, we expect to switch into <a href="https://www.smartkarma.com/entities/country-garden-holdings-co" target="_blank" data-smartkarma-citation="entities:5225:1" rel="noopener">Country Garden (2007 HK)</a>, <a href="https://www.smartkarma.com/entities/sunny-optical-tech" target="_blank" data-smartkarma-citation="entities:13363:1" rel="noopener">Sunny Optical (2382 HK)</a>, <a href="https://www.smartkarma.com/entities/country-garden-services-holdings-company-limited" target="_blank" data-smartkarma-citation="entities:27343:1" rel="noopener">Country Garden Services (6098 HK)</a>, <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a> and <a href="https://www.smartkarma.com/entities/techtronic-industries-co-ltd" target="_blank" data-smartkarma-citation="entities:4561:1" rel="noopener">Techtronic Industries (669 HK)</a>. </li>
<li>Aggressive investors can consider shorting 2022 best-performing portfolio of <a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China (1928 HK)</a>, <a href="https://www.smartkarma.com/entities/haidilao-international-holding-ltd" target="_blank" data-smartkarma-citation="entities:27044:1" rel="noopener">Haidilao (6862 HK)</a>, <a href="https://www.smartkarma.com/entities/galaxy-entertainment-group-limited" target="_blank" data-smartkarma-citation="entities:806:1" rel="noopener">Galaxy Entertainment (27 HK)</a>, <a href="https://www.smartkarma.com/entities/china-shenhua-energy-co-h" target="_blank" data-smartkarma-citation="entities:382:1" rel="noopener">China Shenhua (1088 HK)</a> and <a href="https://www.smartkarma.com/entities/china-unicom-hong-kong-ltd" target="_blank" data-smartkarma-citation="entities:1016:1" rel="noopener">China Unicom (762 HK)</a>. </li>
</ul>


"Buy the Worst" strategy returned 1.9% in 2022, sharply outperformed HSI's 15% drop. In the last two years, this strategy recorded massive aggregate outperformance of 41pp against HSI.
For 2023, we expect to switch into Country Garden (2007 HK), Sunny Optical (2382 HK), Country Garden Services (6098 HK), Geely Auto (175 HK) and Techtronic Industries (669 HK). 
Aggressive investors can consider shorting 2022 best-performing portfolio of Sands China (1928 HK), Haidilao (6862 HK), Galaxy Entertainment (27 HK), China Shenhua (1088 HK) and China Unicom (762 HK). 


"Buy the Worst" HSI Strategy: Big Win in 2022 and Let's See if It Can Sustain in 2023

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

Thematic (Sector/Industry)

<ul>
<li>Active China funds are rotating back in to the Consumer Discretionary sector.  Holding weights bottomed out in early 2022, with an increasing number of managers re-positioning themselves as overweight</li>
<li>Large increases in ownership across key stocks underpin the sector rotation.  Pinduoduo saw an +8.4% increase in the percentage of funds invested, Trip.com Group +6.7% and NIO Inc +5.88%</li>
<li>If the rhetoric is that China is oversold here, then Consumer Discretionary stocks appears well placed to benefit from further inflows.</li>
</ul>


Active China funds are rotating back in to the Consumer Discretionary sector.  Holding weights bottomed out in early 2022, with an increasing number of managers re-positioning themselves as overweight
Large increases in ownership across key stocks underpin the sector rotation.  Pinduoduo saw an +8.4% increase in the percentage of funds invested, Trip.com Group +6.7% and NIO Inc +5.88%
If the rhetoric is that China is oversold here, then Consumer Discretionary stocks appears well placed to benefit from further inflows.


China Consumer Discretionary: Reducing The Underweight

Hong Kong

Techtronic Industries Company Limited designs, manufactures, and markets power tools, outdoor power equipment, accessories, hand tools, layout and measuring tools, and floorcare and appliances. The Company's products are used by consumers, professional, and industrial users in the home improvement, repair, and construction industries.

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Techtronic Industries (669 HK)