Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/jd-com-inc" target="_blank" data-smartkarma-citation="entities:29043:1" rel="noopener">JD.com Inc. (9618 HK)</a> has been a shining example of what can be achieved through both Operating- and Financial leverage as a business scales up. This has been a commendable performance by its management team over the past nearly a decade, balancing gains from operating and financial leverage, whilst prudently, yet aggressively, investing in growth. Over the past 8 years it has delivered expansion at the Gross margin level (through mix change to advertising revenue and scale in 1P), the Operating margin level (lower losses in 3P), and the net margin level (cash generation and lower losses from associates). With lingering concerns around short-term margin expansion, as the group invests more aggressively in group purchasing aimed at the fresh food segment, in this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest direct retailer.

JD.com Inc. (9618 HK) has been a shining example of what can be achieved through both Operating- and Financial leverage as a business scales up. This has been a commendable performance by its management team over the past nearly a decade, balancing gains from operating and financial leverage, whilst prudently, yet aggressively, investing in growth. Over the past 8 years it has delivered expansion at the Gross margin level (through mix change to advertising revenue and scale in 1P), the Operating margin level (lower losses in 3P), and the net margin level (cash generation and lower losses from associates). With lingering concerns around short-term margin expansion, as the group invests more aggressively in group purchasing aimed at the fresh food segment, in this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest direct retailer.

JD.com: A Detailed Look at Long-Term Margins and Valuation

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

WM Tech Corporation / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/wm-tech-corporation" target="_blank" data-smartkarma-citation="entities:32976:1" rel="noopener">WM Tech Corporation (WMT HK)</a> is a leading fresh food and FMCG (fast-moving consumer goods) retailer in China through the Wumart and Metro China brands. It is the largest premium store-based fresh food and FMCG retailer in China with a 19.5% market share as measured by sales in 2020, according to Frost &amp; Sullivan. WM Tech counts <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> and <a href="https://www.smartkarma.com/entities/lenovo-group-ltd" target="_blank" data-smartkarma-citation="entities:13359:1" rel="noopener">Lenovo (992 HK)</a> as shareholders. WM Tech has filed for an HKEx IPO to raise potentially $1 billion, according to press reports.  The confusing “WM Tech” holdco name is to emphasise that the proprietary technology platform (WDOS) is a key differentiation from other players in an increasingly competitive market. The technology platform is claimed to provide a unified data loop between the online and offline channels to maximize operational efficiency and greatly improve the shopping experience. <div class="content-highlight">The full adoption of this technology platform is viewed as the key to delivering synergies from the April 2020 acquisition of Metro China from <a href="https://www.smartkarma.com/entities/metro-ag" target="_blank" data-smartkarma-citation="entities:21673:1" rel="noopener">METRO AG (MEO GR)</a>. While WM Tech is not the only store-based retailer with a complete technology platform, Wumart’s performance suggests that there is some merit in the claim of technology differentiation. Overall, we believe that WM Tech’s fundamentals offer more positives than negatives.</div>

WM Tech Corporation (WMT HK) is a leading fresh food and FMCG (fast-moving consumer goods) retailer in China through the Wumart and Metro China brands. It is the largest premium store-based fresh food and FMCG retailer in China with a 19.5% market share as measured by sales in 2020, according to Frost &amp; Sullivan. WM Tech counts Tencent Holdings (700 HK) and Lenovo (992 HK) as shareholders. WM Tech has filed for an HKEx IPO to raise potentially $1 billion, according to press reports.  The confusing “WM Tech” holdco name is to emphasise that the proprietary technology platform (WDOS) is a key differentiation from other players in an increasingly competitive market. The technology platform is claimed to provide a unified data loop between the online and offline channels to maximize operational efficiency and greatly improve the shopping experience. The full adoption of this technology platform is viewed as the key to delivering synergies from the April 2020 acquisition of Metro China from METRO AG (MEO GR). While WM Tech is not the only store-based retailer with a complete technology platform, Wumart’s performance suggests that there is some merit in the claim of technology differentiation. Overall, we believe that WM Tech’s fundamentals offer more positives than negatives.

Equity Analyst, LightStream Research

Supun Walpola

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.

Alibaba Group Holding  / Equity Bottom-Up

Despite the excitement over <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" data-smartkarma-citation="entities:787:1" rel="noopener">Alibaba Group (BABA US)</a>’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way to Alibaba’s valuation in the near term. However, Alibaba continues to invest heavily around the New Retail theme, both in Freshippo store expansions and through several recent investments in SunArt and Dufry. This implies that Alibaba is now pretty much committed to its New Retail strategy, and so far, seems to be happy with its progress. We do not see any major downside of New Retail for now either.In this note, we take a deep dive into Alibaba's new retail businesses, in particular, Freshippo.

Despite the excitement over Alibaba Group (BABA US)’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way to Alibaba’s valuation in the near term. However, Alibaba continues to invest heavily around the New Retail theme, both in Freshippo store expansions and through several recent investments in SunArt and Dufry. This implies that Alibaba is now pretty much committed to its New Retail strategy, and so far, seems to be happy with its progress. We do not see any major downside of New Retail for now either.In this note, we take a deep dive into Alibaba's new retail businesses, in particular, Freshippo. 

Alibaba: New Retail Is Exciting but Too Small For Now

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

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas.In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn.In this insight, we will highlight inflows into <a href="https://www.smartkarma.com/entities/goertek-inc-a" target="_blank" data-smartkarma-citation="entities:11547:1" rel="noopener">Goertek Inc A (002241 CH)</a>, <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a>, as well as outflows from <a href="https://www.smartkarma.com/entities/yonghui-superstores-co-ltd" target="_blank" data-smartkarma-citation="entities:15910:1" rel="noopener">Yonghui Superstores Co., (601933 CH)</a> and <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a>.

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the northbound Shanghai and Shenzhen Connect, as analyzed by our proprietary data engine and highlight interesting trade ideas.In this insight, we will have an overview of the weekly inflows into the A-share market via Shanghai/Shenzhen connect, top inflow and top three outflow stocks. We will also cover inflows and holdings by sectors, after which we will highlight top five inflows and outflows on a relative basis for large-cap and mid-cap stocks: stocks with a market capitalization above $5 bn, and those between $1 bn and $5 bn.In this insight, we will highlight inflows into Goertek Inc A (002241 CH), Luxshare Precision Industry (002475 CH), as well as outflows from Yonghui Superstores Co., (601933 CH) and China Tourism Group Duty Free Corp Ltd (601888 CH).

SH/​​SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

APAC IPOs & Placements

Zhen Zhou, Toh

Powerlong Commercial Management Holdings / Equity Capital Markets

<a href="https://www.smartkarma.com/entities/powerlong-commercial-management-holdings" target="_blank" data-smartkarma-citation="entities:28672:1" rel="noopener">Powerlong Commercial Management Holdings (9909 HK)</a> IPO lock-up expired recently on the 30th of June, 2020. We have covered the IPO earlier last year in:
<ul>
<li>
<a href="https://www.smartkarma.com/insights/powerlong-commercial-management-holdings-ipo-enough-reasons-to-not-even-bother-about-valuations" target="_blank" data-smartkarma-citation="insights:35326" rel="noopener">Powerlong Commercial Management Holdings IPO - Enough Reasons to Not Even Bother About Valuations</a> </li>
<li>
<a href="https://www.smartkarma.com/insights/powerlong-commercial-ipo-trading-good-subscription-results-but-issues-remain" target="_blank" data-smartkarma-citation="insights:35352" rel="noopener">Powerlong Commercial IPO Trading - Good Subscription Results but Issues Remain</a> </li>
</ul>
In this note, we will look at the potential sellers upon lock-up expiry and provide an update of how the company has performed since listing.

Powerlong Commercial Management Holdings (9909 HK) IPO lock-up expired recently on the 30th of June, 2020. We have covered the IPO earlier last year in:


Powerlong Commercial Management Holdings IPO - Enough Reasons to Not Even Bother About Valuations 

Powerlong Commercial IPO Trading - Good Subscription Results but Issues Remain 

In this note, we will look at the potential sellers upon lock-up expiry and provide an update of how the company has performed since listing.

Powerlong Commercial Mgt Lock-Up Expiry Trade Idea - Cornerstone May Look to Lock in Some Profits

China

Yonghui Superstores Company Limited operates supermarket franchises . The Company mainly operates hypermarkets, marketplace and supermarkets.

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Yonghui Superstores Co., (601933 CH)

JD.com: A Detailed Look at Long-Term Margins and Valuation

In this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest...

Wium Malan, CFA

WM Tech IPO Initiation: Food for Thought

WM Tech has filed for an HKEx IPO to raise potentially $1 billion, according to press reports. Overall, we believe that WM Tech’s fundamentals...

Arun George

Alibaba: New Retail Is Exciting but Too Small For Now

Despite the excitement over Alibaba’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way...

Supun Walpola

SH/SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the...

Ke Yan, CFA, FRM

Powerlong Commercial Mgt Lock-Up Expiry Trade Idea - Cornerstone May Look to Lock in Some Profits

Powerlong Commercial Management Holdings (9909 HK) IPO lock-up expired recently on the 30th of June, 2020. We have covered the IPO earlier last...

Zhen Zhou, Toh

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

JD.com: A Detailed Look at Long-Term Margins and Valuation

In this insight, I analyse the potential for long-term margin expansion and what that implies for current valuation levels for China’s largest...

Wium Malan, CFA

WM Tech IPO Initiation: Food for Thought

WM Tech has filed for an HKEx IPO to raise potentially $1 billion, according to press reports. Overall, we believe that WM Tech’s fundamentals...

Arun George

Alibaba: New Retail Is Exciting but Too Small For Now

Despite the excitement over Alibaba’s New Retail strategy, we believe the likes of Freshippo are still too small to contribute in a meaningful way...

Supun Walpola

SH/​​SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism

In our weekly Shanghai/Shenzhen Connect Ideas series, we aim to highlight key stocks and sectors which the mainland investors traded via the...

Ke Yan, CFA, FRM

Powerlong Commercial Mgt Lock-Up Expiry Trade Idea - Cornerstone May Look to Lock in Some Profits

Powerlong Commercial Management Holdings (9909 HK) IPO lock-up expired recently on the 30th of June, 2020. We have covered the IPO earlier last...

Zhen Zhou, Toh

SH/SZ Connect Flow Weekly: Goertek, Luxshare, Yonghui, China Tourism