So we hear that President Trump may be doing something in Vietnam prior to the March 1 trade deadline. Even though Trump tweeted the tariffs will not be implemented on March 1, you can be sure that negotiations are still going at full speed. However, in the shadow of trade talks we are looking at China’s Flash numbers as an indicator of economic health.
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So we hear that President Trump may be doing something in Vietnam prior to the March 1 trade deadline. Even though Trump tweeted the tariffs will not be implemented on March 1, you can be sure that negotiations are still going at full speed. However, in the shadow of trade talks we are looking at China’s Flash numbers as an indicator of economic health.
Select media ops (Free TV and OTT), together with substantial losses booked to other businesses and eliminations, continue to weigh heavily on PCCW Ltd (8 HK)‘s stub ops.
Preceding my comments on PCCW and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
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In April 2018, we published a FCF screen with the sole aim of identifying potential names which could prove to be strong candidates in a Small-Mid Cap portfolio. We move to update this list with a strong bias to the mid-cap stocks appearing.
This screen performs well with markets where the value style is in favour. Given the market appears to be trending back to this style, we believe the Small-Mid Cap universe should capitalise on this over the next 12-months. We identify within the screen some high trading liquidity deep value candidates across the Asia Pacific universe.
Our updated 2019 list of names contains 17 stocks, with a more diversified spread of countries and sectors, compared to April 2018. A point to note is that basic material stocks have strengthened within the composition. Interestingly, the style of stock which has increased its presence amongst the list is the contrarian style, highlighting an opening up in value.
Viva Biotechnology, a China-based drug discovery company, is seeking to raise USD 200m to list on the Hong Kong Stock Exchange. It has recently obtained approval for listing by the Hong Kong Stock Exchange. In our previous insight (link here), we discussed the company’s fundamentals, its unique business model, its shareholders, and our thoughts on its valuation.
In this insight, we look at its latest prospectus and review our valuation for Viva Biotech.
CanSino Biologics raised USD 148 million at HKD 22/share, at the high end of its guided price range. We have previously covered the IPO in the following note:
On Friday, March 15th, an estimated 1.6 million students in over 120 countries (source: Time magazine) walked out of classrooms and took to streets demanding radical climate action. Climate change activism rarely grabbed headlines or wider public attention as it is doing now. Rising climate activism will continue to train the spotlight on industries/businesses associated with carbon-emission making it increasingly difficult for them to expand capacities or secure funding. Large institutional investors – sovereign funds, pension funds, insurance companies – have begun toincorporate climate risk into investment policy and are limiting exposure to sectors that directly contribute to carbon emissions – primarily coal, crude oil producers and power plants based on them. Expect sector devaluation; active investors may well look beyond juicy near term earnings and dividend yield.
Even as scientists and meteorological organisations keep warning of dire consequences unless concrete action is taken to limit carbon emissions to stall climate change, political establishment/regulators in most countries are in denial while others are doing little more than lip service. If so, should corporates care? even though businesses are the ones that play a direct role in escalating carbon emissions. With rising consumer awareness and activism, several industries associated with carbon emissions are already facing operational and funding challenges; we believe, it pays for all businesses to be above par on ‘climate action’ – it would be in their own self-interest, not just general good. And do Investors bother?Under the aegis of Climate Action 100+, an investor initiative with 320 signatories having more than USD33 trillion in assets collectively under management, they have been engaging companies on improving governance, curbing emissions and strengthening climate-related financial disclosures. It has listed out Oil & Gas, Mining, Utilities and Auto manufacturers as target sectors. Investors have already been making an impact – by vote or exit. It sure makes logical sense to effect positive change and minimise climate risk when you have a long term investment horizon.
In the detailed note below we
discuss how rising consumer/investor activism and/or political/regulatory changes are posing challenges to key sectors –Coal, Oil & Gas, Automobiles/Aviation, Consumer goods – that are associated with carbon emissions.
analyse how rising climate activism is negatively impacting growth prospects and valuation of companies in these sectors.
highlight the opportunities for businesses to capitalise on changing consumer preferences for products that minimise carbon footprint and differentiate themselves by being on the right side of climate action.
present a quick primer on climate change and lay down the key facts and data on climate change as presented by World Meteorological Organisation, NASA and IPCC.
However, the report does NOT discuss potential risks to businesses from the aftermath of Climate change. Unlike our recently released report Fast Fashion in Asia: Trendy Clothing’s Toxic Trails – Investors Bewarethat looked into sector’s environmental violations and attempted to estimate potential earnings/growth/valuation downside as leading textile players adopt sustainable practices, we believe the impact of unpredictable climate change poses a threat that is not easy to identify or quantify.
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CStone Pharma’s IPO was priced at HKD 12.00/share and started trading today. In this insight, we summarize the allocation, the use of proceeds and recap our view on our valuation. We also look at past few biotech listings and discuss our thoughts on the market sentiments. We are of the view that despite a strong debut performance, CStone lacks near term catalysts that can continue to drive performance after the first day.
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CanSino Biologics raised USD 148 million at HKD 22/share, at the high end of its guided price range. We have previously covered the IPO in the following note:
On Friday, March 15th, an estimated 1.6 million students in over 120 countries (source: Time magazine) walked out of classrooms and took to streets demanding radical climate action. Climate change activism rarely grabbed headlines or wider public attention as it is doing now. Rising climate activism will continue to train the spotlight on industries/businesses associated with carbon-emission making it increasingly difficult for them to expand capacities or secure funding. Large institutional investors – sovereign funds, pension funds, insurance companies – have begun toincorporate climate risk into investment policy and are limiting exposure to sectors that directly contribute to carbon emissions – primarily coal, crude oil producers and power plants based on them. Expect sector devaluation; active investors may well look beyond juicy near term earnings and dividend yield.
Even as scientists and meteorological organisations keep warning of dire consequences unless concrete action is taken to limit carbon emissions to stall climate change, political establishment/regulators in most countries are in denial while others are doing little more than lip service. If so, should corporates care? even though businesses are the ones that play a direct role in escalating carbon emissions. With rising consumer awareness and activism, several industries associated with carbon emissions are already facing operational and funding challenges; we believe, it pays for all businesses to be above par on ‘climate action’ – it would be in their own self-interest, not just general good. And do Investors bother?Under the aegis of Climate Action 100+, an investor initiative with 320 signatories having more than USD33 trillion in assets collectively under management, they have been engaging companies on improving governance, curbing emissions and strengthening climate-related financial disclosures. It has listed out Oil & Gas, Mining, Utilities and Auto manufacturers as target sectors. Investors have already been making an impact – by vote or exit. It sure makes logical sense to effect positive change and minimise climate risk when you have a long term investment horizon.
In the detailed note below we
discuss how rising consumer/investor activism and/or political/regulatory changes are posing challenges to key sectors –Coal, Oil & Gas, Automobiles/Aviation, Consumer goods – that are associated with carbon emissions.
analyse how rising climate activism is negatively impacting growth prospects and valuation of companies in these sectors.
highlight the opportunities for businesses to capitalise on changing consumer preferences for products that minimise carbon footprint and differentiate themselves by being on the right side of climate action.
present a quick primer on climate change and lay down the key facts and data on climate change as presented by World Meteorological Organisation, NASA and IPCC.
However, the report does NOT discuss potential risks to businesses from the aftermath of Climate change. Unlike our recently released report Fast Fashion in Asia: Trendy Clothing’s Toxic Trails – Investors Bewarethat looked into sector’s environmental violations and attempted to estimate potential earnings/growth/valuation downside as leading textile players adopt sustainable practices, we believe the impact of unpredictable climate change poses a threat that is not easy to identify or quantify.
Jinxin Fertility, a leading privately owned assisted reproductive service provider in China and the US, refiled to list in Hong Kong. Per news reports, the company planned to raise up to USD 500 million. In this insight, we will cover the following topics:
We launched coverage of Dali Foods Group (3799 HK) in February with a Sell rating and a HK$4.18 target price. FY18 financial results, which were released late Tuesday March 26th, appear to confirm at least half of our negative thesis (slowing revenue growth), though the other half (margin compression) has failed to materialize so far.
Dali Foods appears to have met — just — the FY18 consensus EPS target of HK$0.307 per share. The company cut its Final dividend from HK$0.10 to HK$0.075 per share.
However, the pace of revenue growth plummeted in H218. From solid growth of +11.4% YoY in H118, H218 revenues actually declined by -0.6% YoY in the latter half of the year. This result was beyond even our pessimistic view and we believe bulls on the company will be forced to revisit their overly optimistic assumptions about double-digit revenue growth in 2019e.
Besides assuming slower revenue growth going forward, the other leg of our negative thesis on Dali Foods was the expectation of margin compression due to rising raw materials costs, specifically for paper and key food and beverage ingredients. Although H218 gross margin declined versus H217 (to 37.7% from 37.8%), it did so only marginally, and probably due to a change in product mix (ie, a decline in high-margin beverage sales).
After reviewing FY and H218 results, we see no reasons to change our negative view of Dali Foods, and our HK$4.18 price target (-26% potential downside) and Sell rating remain unchanged.
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CStone Pharma’s IPO was priced at HKD 12.00/share and started trading today. In this insight, we summarize the allocation, the use of proceeds and recap our view on our valuation. We also look at past few biotech listings and discuss our thoughts on the market sentiments. We are of the view that despite a strong debut performance, CStone lacks near term catalysts that can continue to drive performance after the first day.
This insight covers the positive and negative takeaways from the FY18 updated filing and also includes our thoughts on valuation.
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We believe Baidu’s stock price has been fairly impacted.
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On Friday, March 15th, an estimated 1.6 million students in over 120 countries (source: Time magazine) walked out of classrooms and took to streets demanding radical climate action. Climate change activism rarely grabbed headlines or wider public attention as it is doing now. Rising climate activism will continue to train the spotlight on industries/businesses associated with carbon-emission making it increasingly difficult for them to expand capacities or secure funding. Large institutional investors – sovereign funds, pension funds, insurance companies – have begun toincorporate climate risk into investment policy and are limiting exposure to sectors that directly contribute to carbon emissions – primarily coal, crude oil producers and power plants based on them. Expect sector devaluation; active investors may well look beyond juicy near term earnings and dividend yield.
Even as scientists and meteorological organisations keep warning of dire consequences unless concrete action is taken to limit carbon emissions to stall climate change, political establishment/regulators in most countries are in denial while others are doing little more than lip service. If so, should corporates care? even though businesses are the ones that play a direct role in escalating carbon emissions. With rising consumer awareness and activism, several industries associated with carbon emissions are already facing operational and funding challenges; we believe, it pays for all businesses to be above par on ‘climate action’ – it would be in their own self-interest, not just general good. And do Investors bother?Under the aegis of Climate Action 100+, an investor initiative with 320 signatories having more than USD33 trillion in assets collectively under management, they have been engaging companies on improving governance, curbing emissions and strengthening climate-related financial disclosures. It has listed out Oil & Gas, Mining, Utilities and Auto manufacturers as target sectors. Investors have already been making an impact – by vote or exit. It sure makes logical sense to effect positive change and minimise climate risk when you have a long term investment horizon.
In the detailed note below we
discuss how rising consumer/investor activism and/or political/regulatory changes are posing challenges to key sectors –Coal, Oil & Gas, Automobiles/Aviation, Consumer goods – that are associated with carbon emissions.
analyse how rising climate activism is negatively impacting growth prospects and valuation of companies in these sectors.
highlight the opportunities for businesses to capitalise on changing consumer preferences for products that minimise carbon footprint and differentiate themselves by being on the right side of climate action.
present a quick primer on climate change and lay down the key facts and data on climate change as presented by World Meteorological Organisation, NASA and IPCC.
However, the report does NOT discuss potential risks to businesses from the aftermath of Climate change. Unlike our recently released report Fast Fashion in Asia: Trendy Clothing’s Toxic Trails – Investors Bewarethat looked into sector’s environmental violations and attempted to estimate potential earnings/growth/valuation downside as leading textile players adopt sustainable practices, we believe the impact of unpredictable climate change poses a threat that is not easy to identify or quantify.
Jinxin Fertility, a leading privately owned assisted reproductive service provider in China and the US, refiled to list in Hong Kong. Per news reports, the company planned to raise up to USD 500 million. In this insight, we will cover the following topics:
We launched coverage of Dali Foods Group (3799 HK) in February with a Sell rating and a HK$4.18 target price. FY18 financial results, which were released late Tuesday March 26th, appear to confirm at least half of our negative thesis (slowing revenue growth), though the other half (margin compression) has failed to materialize so far.
Dali Foods appears to have met — just — the FY18 consensus EPS target of HK$0.307 per share. The company cut its Final dividend from HK$0.10 to HK$0.075 per share.
However, the pace of revenue growth plummeted in H218. From solid growth of +11.4% YoY in H118, H218 revenues actually declined by -0.6% YoY in the latter half of the year. This result was beyond even our pessimistic view and we believe bulls on the company will be forced to revisit their overly optimistic assumptions about double-digit revenue growth in 2019e.
Besides assuming slower revenue growth going forward, the other leg of our negative thesis on Dali Foods was the expectation of margin compression due to rising raw materials costs, specifically for paper and key food and beverage ingredients. Although H218 gross margin declined versus H217 (to 37.7% from 37.8%), it did so only marginally, and probably due to a change in product mix (ie, a decline in high-margin beverage sales).
After reviewing FY and H218 results, we see no reasons to change our negative view of Dali Foods, and our HK$4.18 price target (-26% potential downside) and Sell rating remain unchanged.
Ping An Bank Co Ltd A (000001 CH) results show gradual erosion in fundamental trends. We believe that positive fundamental momentum (within our quantamental approach) leads to higher stock prices.
Behind the headline numbers, there lies an acute rise in funding costs in excess of the growth in interest income on earnings assets. As elsewhere in China, there is a festering asset quality issue too. While not as toxic versus diverse peers, it is notable: the impaired asset portfolio more than doubled YoY.
Valuations are not especially cheap relative to the region (including Japan). Franchise Valuation at 10% and P/Book of 0.94x are at a premium to the regional medians of 8% and 0.77x, respectively. The Total Return Ratio is <1x.
In conclusion, we do not see a lot that has changed for the better at Ping An Bank (funding, liquidity, efficiency, profitability and asset quality) though the headline deterioration is not so drastic. Underlying concerns lie with core interest income generation given sky-high funding expenses and pervasive asset quality issues.
There is no apparent value enhancement to Naspers Ltd (NPN SJ)‘s spinning-off and separately listing Tencent Holdings (700 HK), while there is no change in governance and no monetisation at the parent level.
Preceding my comments on Naspers are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
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Last Friday China torpedoed Australia’s coal imports after announcing that the middle kingdom would no longer accept coal imports from Australia. This leads us to consider some of the energy issues related to China. We write often about coal and the importance it has on China’s energy consumption.
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Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Last Friday China torpedoed Australia’s coal imports after announcing that the middle kingdom would no longer accept coal imports from Australia. This leads us to consider some of the energy issues related to China. We write often about coal and the importance it has on China’s energy consumption.
On the eve of the Chinese New Year holiday Nine Dragon Paper (NDP) released a profit warning regarding their H1 FY19 fiscal earnings. This warning came ahead of the 26th February 2019 Board Meeting.
Management guidance calls for a decrease for H1-2019 of approximately 45% YoY and revenue line of not less than RMB2.4bn. NDP cites an increase in raw materials and a decrease in the selling price of the products.
Despite the negative news, the share price has rallied 15% since the announcement. We examine the implications.
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