Quality-first, Business-perspective Strategy, Urbem (HK) Limited

Steven Chen

Quality-first, Business-perspective Strategy

Thematic (Sector/Industry)

<ul>
<li>Warren Buffett's dream business, well exemplified by Berkshire's See's Candies, is the one that can deliver a sizable increase in earnings power through minimal capital reinvested;</li>
<li>The quality above is what exactly is missing among most Chinese companies these days, in our opinion;</li>
<li>Nonetheless, we managed to land on three businesses that share such a rare characteristic.</li>
</ul>


Warren Buffett's dream business, well exemplified by Berkshire's See's Candies, is the one that can deliver a sizable increase in earnings power through minimal capital reinvested;
The quality above is what exactly is missing among most Chinese companies these days, in our opinion;
Nonetheless, we managed to land on three businesses that share such a rare characteristic.


Three Chinese Stocks that Meet Warren Buffett's Definition Of "Dream Business"

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

Equity Bottom-Up

<p><strong><em>*Simon Says:</em></strong> In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in the US across it’s significant footprint of retail shopping malls  - over 200 across the country. This collaboration enables Afterpay to establish an in-store presence in the US where both companies will work side by side with retailers in Simon shopping malls;</p><p><strong><em>*Tencent Tutelage: </em></strong>Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and</p><p><strong><em>*Magic Fairy Dust:</em></strong> While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 278% on this stake. </p>

*Simon Says: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in the US across it’s significant footprint of retail shopping malls  - over 200 across the country. This collaboration enables Afterpay to establish an in-store presence in the US where both companies will work side by side with retailers in Simon shopping malls;*Tencent Tutelage: Afterpay is helping Tencent enter markets earlier and with Tencent’s (700.HK) tutelage likely will help Afterpay more deeply penetrate North America.  We fully anticipate that Tencent will help Afterpay enter the Asian markets - uncharted territory with a large young population – with the big prize obviously being mainland China. Tencent’s digital expertise should also help Afterpay to improve its technology platform (e.g. its digital wallet checkout experience and its shopping platform, plus customer led generation). It also wouldn’t surprise us if Tencent took up greater than its pro rata share of the capital raise; and*Magic Fairy Dust: While no transaction particulars were disclosed, we calculate an average share purchase price of AUD 22.47 per share for the 5% stake or a hefty 6.8x P/BV for a company which is loss-making and where Tencent hasn’t control. Tencent has already earned 278% on this stake. 

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 Capital Markets

Excellence Commercial Property & Facilities Management / Equity Capital Markets

Excellence Commercial Property & Facilities Management

<div><p><a href="https://www.smartkarma.com/entities/excellence-commercial-property-facilities-management" target="_blank" data-smartkarma-citation="entities:29249:1" rel="noopener">Excellence Commercial Property (1611267D CH)</a> is a leading commercial operational service provider in China and ranked fourth among the commercial property management service providers in China, according to Frost &amp; Sullivan. At the proposed IPO price range of HK$9.30-10.68 per share, Excellence will have a market cap of HK$11,160.0-12,816.0 million ($1.4-1.7 billion).</p></div><div><p>Nine cornerstone investors will subscribe for 38.79% of the offer shares at the mid-point of the IPO price range. The cornerstone investors are <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/jd-com-inc-adr" target="_blank" data-smartkarma-citation="entities:446:1" rel="noopener">JD.com Inc (ADR) (JD US)</a>, China Southern Asset Management, Snow Lake Capital, 3W Fund, OP Capital, Orient Asset Management, J-Stone Capital and Matthews Funds. </p></div><div><div><div class="content-highlight"><p>In <a href="https://www.smartkarma.com/insights/excellence-commercial-property-facilities-mgmt-ipo-initiation-facilities-facilitate" target="_blank" rel="noopener">our initiation note</a>, we highlighted that Excellence’s fundamentals over the track record period are attractive. Overall, we think that an attractive valuation and solid cornerstone support makes Excellence tempting at the proposed pricing range. </p></div></div></div>

Excellence Commercial Property (1611267D CH) is a leading commercial operational service provider in China and ranked fourth among the commercial property management service providers in China, according to Frost &amp; Sullivan. At the proposed IPO price range of HK$9.30-10.68 per share, Excellence will have a market cap of HK$11,160.0-12,816.0 million ($1.4-1.7 billion).Nine cornerstone investors will subscribe for 38.79% of the offer shares at the mid-point of the IPO price range. The cornerstone investors are Tencent Holdings (700 HK), JD.com Inc (ADR) (JD US), China Southern Asset Management, Snow Lake Capital, 3W Fund, OP Capital, Orient Asset Management, J-Stone Capital and Matthews Funds. In our initiation note, we highlighted that Excellence’s fundamentals over the track record period are attractive. Overall, we think that an attractive valuation and solid cornerstone support makes Excellence tempting at the proposed pricing range. 

Excellence Commercial Property & Facilities Mgmt IPO: Valuation Insights

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

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.

Event-Driven

<div>
<p>With the long drawn out merger of CCT+CMT finally approved with minimal resistance, with the little there was coming mostly from CCT holders, the combined entity will add to the bunch of listed REITs which offer a mix of office and retail exposure. </p>
</div>
<p>For investors interested in obtaining Singapore (SG) office or suburban retail exposure, the pure play options are now fairly limited.</p>
<p></p>
<div>
<p><strong>Links to my previous REITs insights:</strong></p>
</div>
<div>
<ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/singapore-reits-what-s-been-cooking-this-year" target="_blank" rel="noopener">Singapore REITs - What’s Been Cooking This Year,</a> I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them. </li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-for-sgreits-retail-reits-share-price-has-been-more-resilient-than-it-should-be" target="_blank" rel="noopener">Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be,</a> covers the factors that have been impacting retail REITs. </li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-sg-office-reits-this-time-it-s-different" target="_blank" rel="noopener">Trade Ideas SG Office REITs - This Time It’s Different</a> covers how the office REITs might fare better.</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-sg-industrial-reits-bigger-names-have-been-holding-up-a-little-too-well" target="_blank" rel="noopener">Trade Ideas SG Industrial REITs - Bigger Names Have Been Holding up a Little Too Well </a> looks at the industrial REITs</li>
<li>
<a href="https://www.smartkarma.com/insights/singapore-reits-get-out-of-jail-free-card-for-the-tenants" target="_blank" rel="noopener">Singapore REITs - Get Out of Jail Free Card, for the Tenants</a> I spoke about how the recent changes announced by the government would benefit the smaller tenants more than the landlords.</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-sg-eu-us-focus-reits-the-orphaned-lot-is-starting-to-look-interesting" target="_blank" rel="noopener">Trade Ideas SG EU/​US Focus REITs - The Orphaned Lot Is Starting to Look Interesting</a> looks at the EU/US focussed REITs trading wider than their SG and US listed peers</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-for-sgreits-update-on-office-vs-retail-trade-up-8-so-far" target="_blank" rel="noopener">Trade Ideas for SGREITs - Update on Office Vs Retail Trade, up 8% so Far</a> I spoke about the recent updates impacting the REITs and implications of Suntec Results</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-for-sgreits-more-updates-on-office-vs-retail-trade-from-kreit-and-mct-results" target="_blank" rel="noopener">Trade Ideas for SGREITs - More Updates on Office Vs Retail Trade from KREIT and MCT Results</a> I spoke about KREIT and MCT results</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-sgreits-office-vs-retail-vs-industrial-up-16-so-far" target="_blank" rel="noopener">Trade Ideas SGREITs - Office Vs Retail Vs Industrial, up 16% so Far</a> I spoke about sticking to the trade till CMT results and post that switching to office versus industrial</li>
<li>
<a href="https://www.smartkarma.com/insights/singapore-reits-update-even-as-circuit-breaker-ends-2q-dpu-for-retail-reits-will-be-close-to-0" target="_blank" rel="noopener">Singapore REITs Update - Even as Circuit Breaker Ends, 2Q DPU for Retail REITs Will Be Close to 0</a> I covered the impact of the governments plans for circuit breaker exit</li>
<li>
<a href="https://www.smartkarma.com/insights/trade-ideas-for-singapore-reits-coming-back-to-life" target="_blank" rel="noopener">Trade Ideas for Singapore REITs - Coming Back to Life</a> I covered the updates over the Jan-Mar 2020 earnings season</li>
<li>
<a href="https://www.smartkarma.com/insights/singapore-reits-reits-will-have-to-fund-some-sme-rents-by-law" target="_blank" rel="noopener">Singapore REITs - REITs Will Have to Fund Some SME Rents, by Law</a>, I spoke out the updates from the Fortitude budget</li>
<li>
<a href="https://www.smartkarma.com/insights/singapore-reits-new-rental-relief-framework-for-smes" target="_blank" rel="noopener">Singapore REITs - New Rental Relief Framework for SMEs</a>, I spoke about the impact of the rental relief for SMEs</li>
</ul>
</div>


With the long drawn out merger of CCT+CMT finally approved with minimal resistance, with the little there was coming mostly from CCT holders, the combined entity will add to the bunch of listed REITs which offer a mix of office and retail exposure. 

For investors interested in obtaining Singapore (SG) office or suburban retail exposure, the pure play options are now fairly limited.


Links to my previous REITs insights:




Singapore REITs - What’s Been Cooking This Year, I spoke about how the REITs have performed this year and touched upon some of the factors that have been driving them. 

Trade Ideas for SGREITs - Retail REITs Share Price Has Been More Resilient than It Should Be, covers the factors that have been impacting retail REITs. 

Trade Ideas SG Office REITs - This Time It’s Different covers how the office REITs might fare better.

Trade Ideas SG Industrial REITs - Bigger Names Have Been Holding up a Little Too Well  looks at the industrial REITs

Singapore REITs - Get Out of Jail Free Card, for the Tenants I spoke about how the recent changes announced by the government would benefit the smaller tenants more than the landlords.

Trade Ideas SG EU/​US Focus REITs - The Orphaned Lot Is Starting to Look Interesting looks at the EU/US focussed REITs trading wider than their SG and US listed peers

Trade Ideas for SGREITs - Update on Office Vs Retail Trade, up 8% so Far I spoke about the recent updates impacting the REITs and implications of Suntec Results

Trade Ideas for SGREITs - More Updates on Office Vs Retail Trade from KREIT and MCT Results I spoke about KREIT and MCT results

Trade Ideas SGREITs - Office Vs Retail Vs Industrial, up 16% so Far I spoke about sticking to the trade till CMT results and post that switching to office versus industrial

Singapore REITs Update - Even as Circuit Breaker Ends, 2Q DPU for Retail REITs Will Be Close to 0 I covered the impact of the governments plans for circuit breaker exit

Trade Ideas for Singapore REITs - Coming Back to Life I covered the updates over the Jan-Mar 2020 earnings season

Singapore REITs - REITs Will Have to Fund Some SME Rents, by Law, I spoke out the updates from the Fortitude budget

Singapore REITs - New Rental Relief Framework for SMEs, I spoke about the impact of the rental relief for SMEs



Trade Ideas for Singapore REITs - Implications from CCT+CMT Merger

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

<p>Although the Golden Week has historically created many record-breaking box offices such as <em>Jiang Ziya: Legend of Deification</em>, the holiday season is only one week thus there are only so many movies that can be released and cinema-goers can only watch so many movies, thus the impact is typically short-lived. </p>
<p>In light of the delay of the big title releases such as James Bond's No Time To Die, Marvel's Black Widow, and DC's Wonder Woman 1984, Cineworld has decided to shut its business down temporarily. Although <a href="https://www.smartkarma.com/entities/imax-china-holding-inc" target="_blank" data-smartkarma-citation="entities:888:1" rel="noopener">Imax China Holding (1970 HK)</a> will most likely stay afloat and keep operating despite the difficult period, its Hollywood movies supply may be limited thus the revenue recovery story will be capped as well. <em>Stay out of IMAX China</em>. </p>

Although the Golden Week has historically created many record-breaking box offices such as Jiang Ziya: Legend of Deification, the holiday season is only one week thus there are only so many movies that can be released and cinema-goers can only watch so many movies, thus the impact is typically short-lived. 
In light of the delay of the big title releases such as James Bond's No Time To Die, Marvel's Black Widow, and DC's Wonder Woman 1984, Cineworld has decided to shut its business down temporarily. Although Imax China Holding (1970 HK) will most likely stay afloat and keep operating despite the difficult period, its Hollywood movies supply may be limited thus the revenue recovery story will be capped as well. Stay out of IMAX China. 

IMAX China (1970): Golden Week and Cineworld

China

Tencent Holdings Limited operates as an investment holding company. The Company, through its subsidiaries, provides Internet and mobile value-added services (VAS), online advertising, and e-commerce transactions. Tencent Holdings offers services to users worldwide.

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Tencent Holdings (ADR) (TCEHY US)

Three Chinese Stocks that Meet Warren Buffett's Definition Of "Dream Business"

We have developed two primary metrics to gauge the "dream business" quality of business: i.e., the return on retained earnings and the incremental...

Steven Chen

Tencent - One If By Land

*Simon Says: In Afterpay’s Touch’s (APT.AU) [Afterpay] latest move, it was announced that it will collaborate with Simon Property Group (SPG.US) in...

Thomas J. Monaco

Excellence Commercial Property & Facilities Mgmt IPO: Valuation Insights

Converge ICT Solutions Inc (ITC PM) is the only major pure-play fixed broadband provider, with an exclusive focus on serving the Philippine fixed...

Arun George

Trade Ideas for Singapore REITs - Implications from CCT+CMT Merger

In my earlier insight on Singapore's Fortitude budget, Singapore REITs - REITs Will Have to Fund Some SME Rents, by Law, I had mentioned the...

Sumeet Singh

IMAX China (1970): Golden Week and Cineworld

Although th

Henry Soediarko

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