In this briefing:
- Japan Proxy Season – Power to the People
- Legend Biotech IPO Initiation: Choosing Therapies À La CAR-T
- Exasol IPO Initiation: Crunching the Numbers
- Weekly Oil Views: Prices to Inch up in Lockstep with the World’s Reopening
- The Week That Was in [email protected] – BUY Staples, Indonesian Telcos, and Thai Brokers
Shareholders are the owners, and owners have the power. I doubt that John Lennon would have written a song about shareholders, but if he had, that is what he would have said.
Shareholders would have been eagerly anticipating this year’s proxy season in Japan. Over the past three years, momentum had been building, with more and more shareholders exercising their right to put proposals to the will of the majority.
COVID-19 has probably taken some of the wind out of the activists’ sails, at least for this year. Still, we count fourteen proposals delivered so far and we dig a little deeper into the upcoming votes at Takeda Pharmaceutical (4502 JP) , Shinsei Bank (8303 JP) , Mitsubishi Logistics (9301 JP) and Mitsui Mining & Smelting Co (5706 JP)
Legend Biotech (BLG US) is one of the leading companies in developing CAR-T cell therapies in China, having received clearance for the first CAR-T cell therapy IND application by the NMPA. Legend is a majority-owned (76.9%) subsidiary of Genscript Biotech (1548 HK). Legend has filed for a Nasdaq IPO to raise proceeds $300 million, according to press reports.
Legend’s lead product candidate is LCAR-B38M/JNJ-4528 which is being co-developed with Janssen, which is owned by Johnson & Johnson (JNJ US). LCAR-B38M refers to the product candidate being studied in China, and JNJ-4528, refers to the product candidate being studied in the rest of the world. Overall, we believe that the solid prospects for the lead product along with the strong shareholder register make the IPO worth a closer look.
Exasol (EXA GR) is a database technology company which enables customers to access and analyse data at high speed and scale. Exasol has launched its IPO on the Frankfurt Stock Exchange. The IPO price range has been set at €8.50-10.50 per share. The IPO will raise total proceeds of €78-97 million, out of which Exasol will receive gross proceeds of €50 million. The offering period starts on 15 May and ends on 20 May 2020.
Like peers, Exasol will be impacted by the corona pandemic as customers reassess or postpone investments in IT infrastructure. Exasol is mitigating the potential top-line impact through a reduction in its cost base. While the timing of the IPO is not ideal, we think that on a longer-term view, Exasol fundamentals offer more positives than negatives. In combination with an attractive valuation, we would be tempted to participate in the IPO.
As the world tiptoes out of the coronavirus lockdowns, Crude Oil (CRUDE OIL COMDTY) prices have begun their slow ascent.
The risk-off sentiment in the oil market in the first half of last week triggered by reports of fresh outbreaks in China, South Korea and Germany — economies in the process of reopening — had given way to optimism and tentative confidence in the second half.
All three managed to contain and control the clusters through rigorous tracking and testing and averted the need to snap back to stringent containment measures. While that is not necessarily a blueprint for how the rest of the reopening across the world will proceed, we offer a view on how it is likely to play out. Demand recovery is currently the most important piece in the oil market rebalancing puzzle.
Meanwhile, the market is counting down to May 19, the day the June WTI contract expires. Will it go the same way as May, into negative territory? We have some clues for you.
This past week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights.
Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week’s relevant discussions in [email protected]
This week sees Smartkarma host its digital conference INSIGHT 2020, a Digital-First, Asia-focused Investment Conference in Support of COVID-19 Relief Efforts. For more details please refer to the following link:
INSIGHT 2020: https://www.smartkarma.com/home/insight2020/#form
In CrossASEAN Strategy – The Penny Drops for Indonesia – Buy Staples, CrossASEAN Insight Provider Angus Mackintosh highlights a number of recent positives for Indonesia but continues to recommend a defensive approach with a positive view on staples and specifically Unilever Indonesia (UNVR IJ).
In Thai Corona Crisis (May): HomeComing and Back to Business Themes, our Thai guru Athaporn Arayasantiparb, CFA zeros in on Thailand’s moves to get back to business coming out from COVID-19 restrictions.
In How Are Asian Investors Positioning Their Portfolios?,Michael J. Howell takes a look at Investors positioning and finds the potential for further upgrades to equity weightings ahead.
Equity Bottom-Up Insights
In PT Surya Citra Media Tbk (SCMA IJ) – Re-Runs Save the Day, CrossASEAN Insight Provider Angus Mackintosh revisits this leading Indonesian media player post a call with management.
In XL Axiata (EXCL IJ) – Defensive Data Growth with a Fibre Twist,Angus Mackintosh circles back to XL Axiata (EXCL IJ) post its recent 1Q2020 results and a call with management.
In Sunpower (SPWG): Risk/Reward Rarely Been Better; Fair Value Remains at 1 SGD or 142% Upside, CrossASEAN Insight Provider Nicolas Van Broekhoven revisits this tech player and finds an attractive picture.
In DRB Hi Com: Winner in COVID-19 Malaysian Auto Segment, CrossASEAN Insight Provider revisits this Malaysian auto player in light of the impact of COVID-19.
In Permata Bank Q1 Announced; MTO Likely On Its Way,Travis Lundy circles back to Bank Permata (BNLI IJ) post it’s recent results.
In Golden Land (GOLD TB): Delisting Offer,David Blennerhassett zooms in on the potential delisting offer for high-quality Thai property company Golden Land Property (GOLD TB).
In Singapore Air Rights Entitlements – Flow Dynamics,Travis Lundy provided his views on how investors should deal with Singapore Airlines (SIA SP) rights entitlements.
In CBG: The Best Pick Amid COVID-19 Outbreak, our friends at Country Group upgrade Carabao Group (CBG TB) from HOLD to BUY rating with a new target price of Bt110 based on 33x FY20E PER (Previous TP was Bt89), close to the average of the Thailand Beverage group.
In SCCC: Negative Outlook Should Already Priced In,Country Group maintains a BUY rating on Siam City Cement (SCCC TB) with new 2020E target price at Bt139.0 (from Bt229.00), derived from 14.2xPE’20E, which is currently trading of Asia ex. Japan materials peers.
In PTTEP: 1Q20 Results Above Our Expectation,Country Group circle back to Thailand’s largest Oil & Gas E&P company.
In ASIAN: Foresee an Improvement YoY Thanks to Baht Weakness,Country Group circle back to ASIAN, which saw its profit skyrocket to Bt105m (76%YoY, 576%QoQ), the highest level in the past six quarters.
In Back to Normal Operation from 2Q20E Onwards,Country Group revisit Tipco Asphalt (TASCO TB) which held an analysts meeting held yesterday and came out with a positive tone for the remaining quarters this year.
In M: Expect 2Q20 Performance to Bottom Out,Country Group maintain their HOLD rating but cut their target price by 9% to Bt50 (25xPE’21E, a 20% premium to the Asia ex-Japan consumer staple sector).
In AWC: Fastest-Growing Hotel Chain in Thailand,Country Group initiate coverage of Asset World Corporation (AWC TB) with a HOLD rating, based on a target price of Bt4.90, derived from a DCF methodology (WACC of 6.0%, terminal growth of 3%).
In SIS: Cheap Valuation with Solid Earnings Growth,Country Group circle back to Sis Distribution Thailand Pc (SIS TB) post its recent 1Q2020 results.
In 1Q20 Core Earnings Grew from 50% Capacity Expansion in 2019,Country Group revisit B Grimm Power (BGRIM TB) following the release of 1Q2020 results.
In SPCG: Stable Earnings,Country Group revisit Spcg Pcl (SPCG TB) and maintain a Neutral rating on SPCG with new 2020E target price at Bt18.80 (from Bt22.80), derived from a discounted cash flow valuation (WACC 7.3% and terminal growth of 1.0%).
In QH: Expect 2Q20 to Be the Bottom Quarter,Country Group circle back to Quality Houses (QH TB) post its recent 1Q2020 earnings.
Sector and Thematic Insights
In the third part in a series, Thai M&A (Part 3): Consolidating the Thai Wall Street, our Thai guru Athaporn Arayasantiparb, CFA looks at M&A in the Thai broking industry.
In MSCI ASEAN May 20th Index Review – Big Turnover in Indonesia,Brian Freitas assesses the impact on the semi-annual review for its MSCI ASEAN Index constituents.
In Garuda Indonesia – Event Flash – Government Drafting USD 1 Bn Rescue Package,Lucror Analytics look at the most recent plans for a rescue package for Garuda Indonesia (Persero) (GIAA IJ).
In Bayan Resources – Earnings Flash – Q1 FY 2020 Results,Lucror Analytics look at the recent results from Bayan Resources (BYAN IJ).
In Olam – Earnings Flash – FY 2019 Results,Lucror Analytics revisit Olam International (OLAM SP) post the release of its earnings.
In Lippo Karawaci – Event Flash – Investor Update,Lucror Analytics revisits Lippo Karawaci (LPKR IJ) post its recent results call.