In today’s briefing:
- Taiwan Dual-Listings: TSMC Spread Opens Again for Opportunity; Others Have Swung Substantially
- Oriental Watch (398 HK)
- Rohm (6963 JP): Taking the Long View
- Hong Kong Land HKL SP – a Long-Term Value Play on Hong Kong Office Recovery
- Anhui Conch Cement (914 HK): Time for More Aggressive Thoughts?
- Benesse Holdings (9783): Time to Cover
- Thomson Medical Group (TMG SP): Scouting for Expansion in South East Asia
- China Resources Pharmaceutical (3320.HK) – Growth Recovery and SOE Advantages Improve the Outlook
- Edelweiss: Retail Credit Business Is Now Scaling Up | Rest of the Businesses Continue to Grow Strong
- From Bottlenecks to Breakthroughs
Taiwan Dual-Listings: TSMC Spread Opens Again for Opportunity; Others Have Swung Substantially
- TSMC is back to an 11.8% ADR premium after dropping to 8%… potentially another good Long/Short point.
- UMC has flipped to a -0.6% ADR discount, from a 5.6% Premium. If the discount ticks slightly more negative then a good setup level will open up.
- ASE, ChipMOS, and CHT spreads have also experienced significant swings since our last dual-listings piece.
Oriental Watch (398 HK)
- Oriental Watch is a prominent luxury watch retailer in the Greater China region.
- While the company offers various brands, the majority of its sales, over 80%, come from its core brands, particularly Rolex and Tudor, a sister brand of Rolex.
- Over the past two years, Oriental Watch has benefited greatly from the strong popularity of Rolex watches and has rewarded its shareholders with a dividend payout of over 100%.
Rohm (6963 JP): Taking the Long View
- Share price performance has been strong in spite of pressure on margins from heavy investment in power semiconductors for electric vehicles.
- Management’s medium-term targets are ambitious, but could be achieved in a reasonably favorable economic environment.
- Projected valuations compare favorably with historical ranges. The primary risk to investors appears to be over-optimism.
Hong Kong Land HKL SP – a Long-Term Value Play on Hong Kong Office Recovery
- We explored the primary share price drivers for HKL, the prime office landlord in Hong Kong, including share buybacks, HK office recovery and as a reopening/ESG thematic play.
- HKL has been constantly evaluating its capital management strategy. Despite interest rate environment has changed substantially, HKL still sees buyback (7% earnings yield) as a good option
- Valuation remains attractive. Part of the risks is priced in. Although it can remain as a value trap, it can unlock its value and re-rate over the long term.
Anhui Conch Cement (914 HK): Time for More Aggressive Thoughts?
- Anhui Conch Cement (914 HK) has been facing numerous challenges, but at 0.5x P/B (2SD below average) and 36.4% of share price is net cash, it pays not overly bearish.
- Government stimulus measures may not be effective immediately, but should pave the way for better cement demand. A 16.5% increase in special purpose bond issuance in 4M23 is positive.
- Depressed cement price is bad, but this will drive small and inefficient players out of the market. This will bring more orderly competition and allow Conch Cement gain market share.
Benesse Holdings (9783): Time to Cover
- Benesse Holdings (9783 JP) share price has fallen 18% annually since 4 years ago with PER going from 55x to 14x
- The structural decline in the main business remains although the smaller business has shown some improvement.
- Japan has received a lot of investors interest recently and Benesse could pick up some investor interest too.
Thomson Medical Group (TMG SP): Scouting for Expansion in South East Asia
- Thomson Medical Group Limited (TMG SP) has updated its future growth plan in Southeast Asia. The company is currently in preliminary confidential discussions to explore a potential transaction.
- Media reports suggest, Thomson Medical is eyeing a controlling stake in Vietnam-based leading multi-specialized tertiary care provider, FV Hospital for $300–400M.
- Thomson Medical has a strong balance sheet, with cash reserve of S$143M, against debt of S$626M. Last month, the company has issued S$120M 5.5% notes due 2028.
China Resources Pharmaceutical (3320.HK) – Growth Recovery and SOE Advantages Improve the Outlook
- 2022 was a turning point for China Resources Pharmaceutical (CRP), because performance of core subsidiaries saw a historic improvement.After China reopens, CRP is expected to achieve double-digit growth in 2023.
- CRP’s development history indicates that its current scale/industry position are mainly due to continuous M&A based on SOE resource advantages/background, but holding platform companies have valuation discounts in secondary market.
- Different business models lead to different valuation logic. But Sinopharm/SH Pharma/CRP all enjoy SOE background dividends+valuation system with Chinese characteristics. If investors mainly focus on industry trend, they can all be invested.
Edelweiss: Retail Credit Business Is Now Scaling Up | Rest of the Businesses Continue to Grow Strong
- Edelweiss reported a decent Q4FY23. Across businesses, Edelweiss reported strong growth. The credit business is also now scaling up with Q4FY23 disbursements at INR 400cr in housing finance.
- The demerger of Nuvama Wealth Management is now complete with record date as Jun 2 2023. Nuvama is on track to list on the exchanges by the end of July.
- Based on our sum-of-the-parts valuation, Edelweiss can be valued at INR 15000cr+. At the current market cap of INR 4400cr, it is trading at a huge discount of 70%+.
From Bottlenecks to Breakthroughs
- The evolution of the digital age over the last two decades has seen an uninterrupted growth trajectory for the data center market, with demand being driven by increasing storage and computing requirements, as well as the widespread shift from on-premises infrastructure to cloud solutions.
- Developments in software applications and IT have reshaped the way clients interact with data, instigating a significant expansion of data center inventory.
- As the wheel of progress spins inexorably forward, Fortune 500 companies are turning their gaze toward the vast and uncharted frontier of Artificial Intelligence (AI) and its applications.
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