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Asian SaaS Stars: Embracing the New Leaders

By | Smartkarma Webinars

For our next Smartkarma Webinar, we welcome Insight Provider Douglas Kim who will discuss the Software-as-a-Service sector in Asia – a sector that’s “highly fragmented” but “filled with numerous innovative companies”, as Douglas puts it in his Smartkarma Original Insight, Asian SaaS Stars: Opportunities, Market Outperformance, & Key Challenges.  

The webinar will be hosted on Wednesday, 23/September/2020, 5.00pm SGT/HKT.

Douglas Kim has over 20 years of extensive experience in sell-side, buy-side, and M&A, covering sectors like technology, consumer, internet/telecom, holdcos/stubs, and more.

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Homecoming For Chinese Companies: Appraisal Rights & Fair Value

By | Smartkarma Originals

On 20 May 2020, the US Senate passed the  S. 945 the Holding Foreign Companies Accountable Act, an act which could force the delisting of US-listed Chinese companies should they be in noncompliance with US accounting standards. Shortly after, the U.S. House of Representatives introduced its version of the Bill which has yet to pass.

This bill requires certain issuers of securities to establish that they are not owned or controlled by a foreign government. Specifically, an issuer must make this certification if the Public Company Accounting Oversight Board (PCAOB) is unable to audit specified reports because the issuer has retained a foreign public accounting firm not subject to inspection by the board. Furthermore, if the board is unable to inspect the issuer’s public accounting firm for three consecutive years, the issuer’s securities are banned from trade on a national exchange or through other methods. 

This creates a conundrum, if not an impossibility, as Chinese regulators forbid foreign regulatory bodies, such as the PCAOB, from inspecting accounting firms based in China. 

The Act, which is still to be ratified by the House, reconciled with the Senate bill, and approved by President Trump, provides even greater impetus for “take private” transactions (often expecting to re-list elsewhere at higher valuations) and secondary listings in markets outside of the United States, such as Hong Kong and Shanghai.

Hong Kong is laying out the welcome mat. First the HKEx amended its listing rules in April 2018 to allow companies with multiple classes of shares with individual-controlled voting rights to sell shares in Hong Kong. This new listing regime enabled secondary listings for the likes of JD.com Inc (ADR) (JD US) / JD.com (HK) (9618 HK) and Alibaba Group (BABA US) / Alibaba Group (9988 HK). Further changes to the Listing Rules are anticipated to accommodate companies with corporate shareholders with weighted voting rights – such as Tencent Music (TME US).

But on occasion, the consideration paid under these take-private “homecoming” transactions are not always considered fair by the investment community.

The recently completed 58.Com Inc Adr (WUBA US) (58.com: Foregone Conclusion Amidst Proxy Advisor Pushback) faced considerable proxy advisor backlash. Similarly, Sina Corp (Class A) (SINA US)‘s preliminary non-binding “going private” proposal from its chairman/CEO,  is widely viewed as a low-balled, opportunistic Offer (Sina Corp: Management Buyout Offer). 

For Cayman Islands incorporated companies, such as SINA and 58.com, Section 238 of the Companies Law (2020 Revision) may provide scope for dissenting shareholders to a merger/take-private transaction to have the Grand Court determine the fair value of their shares.

That right to dissent also hinges off how these take-private transactions are undertaken,

As of today, four cases have resulted in final judgments handed down by the Grand Court of Cayman – Integra Group, Shanda Games Ltd Spons Adr (GAME US), Qunar Cayman Islands (QUNR US), and most recently, Nord Anglia Education (NORD US).


What’s Original?

This insight explores the mechanics of Section 238 of the Cayman Companies Law, the case history of four appraisal rights judgments, and what dissenting shareholders may expect when taking their merger objections to Court.

Quiddity Advisors • Pan-Asia Catalysts/Events • (Opens in a new window) ⧉

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India Ecommerce Logistics: A Rising Tide

By | Smartkarma Webinars

Our next webinar zeroes in on ecommerce and logistics in India, with the help of Insight Providers Pranav Bhavsar and Nitin Mangal who take us through their Original Insight, Indian E-Commerce Logistics – Shipping Into The Limelight, studying the sector and how the latest ecommerce boom has affected public and private players in the market.

The webinar will be hosted on Wednesday, 16/September/2020, 5.00pm SGT/HKT.

Pranav Bhavsar is the Founder of ASA Capital Management, focusing on research on consumer themes and companies operating in India or global companies that have significant exposure to India or the Indian economy.

Nitin Mangal is a SEBI registered Research Analyst with more than 10 years of experience in Indian equities. He is Pioneer of Corporate Governance and Accounting Research in Indian Market and has successfully developed a product for Institutional Investors named as “Analysis Beyond Consensus” during his association with Edelweiss Securities Ltd, Mumbai. 

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Ant Group IPO: The World’s Greatest?

By | Smartkarma Webinars

In this flash Webinar, we are joined by Insight Providers Arun George and Victor Galliano to discuss the upcoming IPO of Ant Financial (1051260D CH). The Chinese fintech giant is slated for a dual listing in Shanghai and Hong Kong to raise US$30 billion, making it potentially the largest IPO ever.

The flash webinar will be hosted on Thursday, 10/September/2020, 5.00 pm SGT/HKT.

Arun George has over 13 years’ experience covering the Technology sector. During this time, he has worked with technology startups and as an equity analyst in investment banks and independent research firms. He was formerly a Technology Analyst for Canaccord Genuity, Altium Securities, Espirito Santo Investment Bank, Noble Group, and Clear Capital. 

Victor Galliano is an experienced equity banks analyst, having covered Latin America banks and non-bank financials for over 12 years, as well as more recently covering Italian banks and Fintech. He has worked in sell-side equity research for 30 years in a career spanning Barclays, HSBC, BBVA LatInvest, Barings, and NatWest.

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Asia Restaurant Sector: Disrupted

By | Smartkarma Webinars

In our next Smartkarma Webinar, we are joined by Insight Provider Devi Subhakesan to discuss disruption in Asia’s restaurant sector, which is currently struggling to overcome the brutal impact of COVID-19. Devi will present her findings from her Smartkarma Original, Asia Restaurant Sector: Disrupted. Opportunities/Challenges Ahead -Time to Pivot & Persist, which looked at companies from Yum China Holdings, Inc (YUMC US) and Haidilao (6862 HK), to Jollibee Foods (JFC PM) and Starbucks Corp (SBUX US) China.

The webinar will be hosted on Wednesday, 9/September/2020, 5.00pm SGT/HKT.

Devi Subhakesan is an Equity Analyst with an Asia Consumer Sector Focus. She has been part of Buy-side and Sell-side Institutions, and has covered Oil, Gas & Coal, Media, Textiles, and Consumer Discretionary sectors across ASEAN, India, and North Asia.

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Suga as Japan’s Next PM: Implications and Possibilities

By | Smartkarma Webinars

In this flash webinar, we welcome a panel of Insight Providers to discuss the implications of Suga Yoshihide, Japan’s current Chief Cabinet Secretary, ascending to the position of leader of the Liberal Democratic Party and Prime Minister of Japan, following Abe Shinzo’s resignation. 

For this 45-minute panel-style discussion, we will hear from Insight Providers Campbell Gunn, Mio Kato, Scott Foster, and Travis Lundy

The flash webinar will be hosted on Friday, 4/September/2020, 11.00 am SGT/HKT.

Campbell Gunn is a former Japan Equity PM with over 30 years of experience, now providing database-driven analysis of the Japanese market, sectors, peer groups, and stocks for LightStream Research.

Mio Kato is the Founder of LightStream Reasearch, and has over 15 years of experience looking at Japanese and Asian cyclically driven sectors such as Gaming, Factory Automation, and Autos.

Scott Foster is a securities analyst covering electronics, precision equipment & robotics, engineering, construction, transport, and other sectors for more than 25 years in Japan and 3 years in Korea.

Travis Lundy has 20+ years experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies with most of that time spent managing money.


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Asian Governance: Diversity & Incentives Through the Cultural Lens

By | Smartkarma Originals

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.

Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.

The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 

The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.

We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.

We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.

Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Bondcritic • Independent Asian Credit Research • (Opens in a new window) ⧉

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Mercari: The Ten-Bagger Investment Thesis

By | Smartkarma Webinars

In our next Smartkarma Webinar, we welcome back Insight Provider Mio Kato, who will walk us through his “ten-bagger” call in Mercari Inc (4385 JP) , as outlined in his Insights including Mercari – Our Ten Bagger Call Is Actually Starting to Look Somewhat Sane and Mercari – A Primer to Refresh Our Top Conviction Call – a conviction that now seems justified after the ecommerce firm’s latest results.

The webinar will be hosted on Wednesday, 2/September/2020, 5.00pm SGT/HKT.

Mio Kato has over 15 years of experience looking at Japanese and Asian cyclically driven sectors such as Gaming, Factory Automation and Autos. He was previously with FrontPoint Partners LP, Arrowhawk Capital Partners, and Uzabase before founding LightStream Research.

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China Brokers: M&A Ushers in a New Landscape

By | Smartkarma Webinars

For our latest Smartkarma Webinar, we welcome Insight Provider Roger Xie, who will present on the topic of consolidation in the Chinese brokerage business, and who stands to gain and lose against the backdrop of China’s economic transformation.

The webinar will be hosted on Wednesday, 26/August/2020, 11.00am SGT/HKT.

Roger Xie has 10 years of investment experience in public and private equity. He specialises in deep-dive fundamental research in China and the US market.

Related Smartkarma Insights

China Brokers: Regulator Encourages M&A Among Brokers and Mutual Fund Houses

China Brokers: Too Fast Too Furious — Accumulate CSC Financial (6066.HK) During Weakness

China Brokers: Surging Trading Activities Benefit the Sector, CSC Financial (6066.HK) Is Top Pick

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Asia Restaurant Sector: Disrupted. Opportunities/Challenges Ahead -Time to Pivot & Persist

By | Smartkarma Originals

Restaurants globally not just in Asia are passing their darkest days as pandemic-led caution and restrictions have impacted operations and viability, even threatening the survival of many independent restaurants. Well-funded restaurant chains are better positioned to weather this crisis; the agile and resilient operators that can adapt to the change in consumption behavior could eventually benefit from the likely sector consolidation. We look at leading listed restaurant players in Asia  – Yum China Holdings, Inc (YUMC US), Haidilao (6862 HK), Jiumaojiu (9922 HK), Cafe De Coral Holdings (341 HK), Xiabuxiabu Catering Mgt Chn Hldgs (520 HK), Jollibee Foods (JFC PM) and Jubilant Foodworks (JUBI IN) as well as Western players Starbucks Corp (SBUX US) China, Mcdonald’s China that have established a presence here – to evaluate their operational and investment outlook at a time when pandemic-led uncertainties have disrupted regular operations. 

What is original? In this report, we assess the operational and investment outlook for leading listed Asian restaurant players (referred to earlier) based on (1) how they have responded to the challenges posed by the pandemic and (2) the resilience and adaptability of their business model to operate under the new sector-realities, beyond the pandemic crisis. We also discuss how several near-term and long-term factors are acceleratedly disrupting the restaurant sector. These changes under the new normal poses challenges and opportunities to the sector’s players. Digital and Delivery capabilities will help the established players with strong brands to better weather the crisis and benefit from likely sector consolidation. Convenience and Value-for-money offerings will benefit strong QSR brands as macro-economic headwinds impact consumption patterns.

Investory • Asia Consumer Research, Equity Analyst • (Opens in a new window) ⧉

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