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Smartkarma Originals

Asian Nuclear Energy Industry: The Value Chain

By | Smartkarma Originals

Asia is the focal region globally where nuclear power is growing significantly to meet its increasing demand for clean electricity. There are approximately 135 operable nuclear power reactors, with 35 under construction – around two-thirds of the reactors under construction worldwide. China is the clear leader in nuclear generation growth.

There were divergent responses to the Fukushima accident, leading some countries to reassess their long-term domestic energy policy, while others experienced a short-term pause, before continuing with long-term strategies, with few to no changes. 

The debate is ongoing whether nuclear power is a safe energy source for mitigating global climate change, or presents an unnecessary risk, given past disasters, coupled with the unavoidable by-product of radioactive waste. Additionally, renewable energy such as solar and wind has become increasingly competitive and sustainable.

For countries such as China, India, and South Korea, there remain solid economic reasons for the expansion of global nuclear power, and its role in lowering emissions from energy production.

The vast majority of nuclear power plants in Asia are operated by unlisted government entities; or in Japan, the bulk of reactors remain in shutdown mode after Fukushima.

CGN Power Co Ltd H (1816 HK) is one of the few listed nuclear pure-plays in Asia, and trades at undemanding multiples, together with an attractive ROE and yield.

What’s Original?

This insight presents a comprehensive view of the Asian nuclear energy industry, and its value chain

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

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Pet Care Sector in Asia: Saga Has Just Started. Opportunities Galore.

By | Smartkarma Originals

In this Smartkarma Original Series report, we look at how the pet care industry in Asia, specifically China, grew 10x fold in the past 10 years and what sets it apart. Compared to the west, the pet care industry is a relatively recent development in emerging Asia. It is still early days of growth and evolution for the various segments of the industry and local players are still trying to establish a meaningful presence in most categories. However, the unique social/demographic factors that have spurred the pet boom in China has also opened up new product needs that are being addressed by local players – smart petting gadgets being one of them. Investors have been active in segments where local players have established a strong presence, like medical facilities; an IPO is reportedly on the anvil in 2021. This could attract more market attention to this high-growth sector especially if investors get an option to ride the sector growth. 

What is original about this report? In this report, we analyse the data available on Pet ownership in Asia, predominantly China, and compare it with the US to understand and assess the scope of growth for Asia’s pet care sector. We study the underlying factors driving the pet boom and spending spree in China and discuss the various segments of the pet care industry and highlight emerging trends and pockets of opportunity. Lastly, we scan the Asia-based branded pet industry space in each segment, to select and study players that have built a meaningful presence in the market place. We see attractive growth potential for many of the early entrants – listed and unlisted- in the sector. We believe there is room for more branded players to enter the industry and tap into the existing and emerging product white spaces.

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

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Unlisted Gaming Companies in Asia – The Acquisition Landscape Heats Up

By | Smartkarma Originals

With Microsoft making a big splash acquiring Zenimax Media for $7.5bn last September and Sony rumoured to have been interested in acquiring Leyou Games prior to its agreement with serial acquirer Tencent, it is clear that the war for IP is well underway. With many acquisitions having already taken place in Europe and the US over the last decade however, perhaps it is time to examine the landscape in Asia to identify both potential acquisition targets that could sway the competitive balance amongst the console and mobile giants as well as fast growing unlisted players in the mobile space who are aiming to establish themselves as genuine rivals to the likes of Tencent and Netease.

What’s Original?

Perusing through Asia’s unlisted gaming companies, we profile a variety of companies from China, Japan, Korea and ASEAN, highlighting companies to watch for a variety reasons. Some are threatening Tencent’s dominance in China while expanding overseas to also encroach on the mobile game earnings of foreign players, some are helping PC and console game makers manage escalating development costs from increasing graphical fidelity while others specialise in remastering old hit titles to provide publishers an easy way to monetise past successes and their IP library. We also examine the connection of gaming to anime and the ways in which both incumbents and challengers are exploiting this link to enhance their competitiveness.

LightStream Research • Japan/Asia Long-Short • (Opens in a new window) ⧉

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Asian OTT Wars

By | Smartkarma Originals

The Asian OTT sector is one of the most attractive industries to be in the next five years. In this report, we highlight numerous major potential winners and discuss some of the most important factors impacting the OTT sector in Asia. There are three crucial trends that will impact the Asian OTT sector:

  • A surging growth of 5G services
  • Increased consolidations and partnerships especially among the global OTTs and local content providers/OTTs
  • Greater spending on higher quality contents in efforts to improve consumer retention

The main purpose of this report is as follows:

  • Identify the major players (both public & private) in the OTT sector in Asia
  • Specify the key trends driving the Asian OTT industry
  • Provide an initial overview of the key companies in the Asian OTT industry

• Korea/Asia, New Economy, IPOs, Events • (Opens in a new window) ⧉

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Asia Buyback Forecasting | Which Companies Are Likely to Raise/Cut Buybacks?

By | Smartkarma Originals

In this Smartkarma Original, we bring to you a quantitative approach for identifying Asian companies that are likely to raise/cut buyback. Applying this approach to a universe of 920+ companies listed across Asia helped us identify 40+ and 50+ companies that have a high likelihood of raising and cutting buybacks, respectively, over the next five years.

What’s Original?

  • We have two separate models, one for forecasting Buyback Raise and the other for Buyback Cut.
  • Our back test results are very encouraging with >85% hit rate for our Buyback Raise model and >94% hit rate for our Buyback Cut model.
  • For our Buyback Raise model, we differentiate from other quantitative buyback models by incorporating competing uses of cash like inorganic acquisitions through “Goodwill as % of Total Assets” parameter. Based on our analysis, we have also determined that, contrary to usual perception, any dividend payout is not a competing use of cash vs buyback but a healthy sign of capital return discipline and have incorporated it accordingly in our model. We also use long-term ROE vs growth trends to filter companies where the cash levels maybe low but the capability to do buyback with time can grow significantly. At the same time, we ensure to weed off very high growth companies that may have high re-investment needs through our carefully selected threshold for the “Long-term Revenue CAGR” parameter. 

Insight Flow

  • Live Dashboard
  •  Methodology
    • Buyback Raise Model
    • Buyback Cut Model
  • Universe
  • Back Test Results
    • Buyback Raise Model
    • Buyback Cut Model
  • Model Results
    • Summary Statistics
    • Companies with High Probability of Buyback Raise
    • Companies with High Probability of Buyback Cut
  • Buyback Timing
  • Model Risks & Limitations
  • Conclusion

• Equity L/S Analyst | Forensic Accounting | India • (Opens in a new window) ⧉

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Asia and the Era of Activism Part 3: Corporate Readiness for Activism

By | Smartkarma Originals

“The measure of intelligence is the ability to change.” ― Albert Einstein

In Part One of Asia and the Era of Activism, we outlined why activism cannot be ignored. The data presented highlighted that it is not just the traditional activist driving this growth, but the non-traditional Activist is increasingly being drawn into these campaigns. 
As Part Two of this series stated, 2021 is expected to see unprecedented increases in the level of activism as investors play catch up and corporates are called out on actions made during the pandemic when the spotlight was off them.
Part Three, our final component of this series, explores company readiness strategies and potential responses to Activist campaigns.

SR Services DMCC • Global Special Situations & Strategy • (Opens in a new window) ⧉

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D2C Brands in Asia: Disruption Potential in Consumer Space

By | Smartkarma Originals

 In this Smartkarma Original Series report, we scan the Asia Direct-to-Consumer (D2C) channel space for Consumer Packaged Goods to identify the verticals that have gained wider consumer acceptance and witnessed steady growth in each of the key geographies – China, South East Asia, and India. We look into the factors that enabled notable D2C brands in the Beauty, Fashion, and Food verticals to make steady inroads and disrupt the sector within a short period. We discuss the D2C ecosystem, brand journey and key challenges. 2020 has been the year that fast-tracked online retail penetration in most parts of Asia. In this context, we profile D2C brands with either a dominant segment presence or unique business model to gain a deeper understanding of the Asia D2C landscape.

What is original about this report? Insights and takeaways for Investors in Asia D2C branded players in consumer space based on our comparative study of the segment across three key geographies – China, SE Asia, and India. China’s early march in digital transformation and D2C market space offers valuable lessons to players/investors in early-stage digital markets like India which is witnessing aggressive traction in this space. Insights discussed in the report have mostly been weaned from the startup experiences shared by founders of reputed D2C brands. The report also analyses investment outlook for select digitally native D2C brands with lead segment presence and/or unique business models.

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

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Virtual IPOs/Direct Listings: Uninhibited Price Discovery

By | Smartkarma Originals

Necessity is the mother of financial innovation. The non-traditional listings of Spotify Technology SA (SPOT US)Slack Technologies Inc (WORK US) and Palantir Technologies Inc (PLTR US) exhibit an increasing trend toward direct listings, in place of traditional IPOs incorporating lock-up agreements and dysfunctional pricing and allocation process.

This week Airbnb announced plans to go public next year joining the ranks of companies like Spotify and Slack that have used a direct listing to go public.

Is this IPO shortcut route appropriate for all companies? What are the pros and cons? And closer to home, which exchanges are open these virtual IPOs?

In this insight, I address the questions above, discuss various discussions with exchanges in the Asia-Pac regions, and also analyse alternative IPO routes such as special purpose acquisition company (SPACs).

What’s Original?

This insight explores the process, benefits, and track record to date of direct listings in equity markets, through to the current developments in Asia.

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

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Asian Healthcare – Coming of Age

By | Smartkarma Originals

Healthcare’s presence in Asian capital markets has increased substantially over the last four years on the heels of substantial investments in private markets (VC/PE). Policy reforms and changes in listing rules, most notably in China, have led to an explosion of market cap creation for the sector as the universe of companies has expanded to include innovative companies, most notably pre-revenue biopharmaceutical companies. At the same time, substantial investments in digital healthcare, fueled by the COVID-19 pandemic, adds a new source of listed companies. This Insight focuses on leading unlisted healthcare companies in China, India, and ASEAN that have raised substantial amounts of capital and appear to be candidates for listing.   

Cherrystone Hill Research • Founder • (Opens in a new window) ⧉

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🇯🇵 Japan in the Suga Era – Policy Priorities & ‘Suga Stocks’

By | Smartkarma Originals
Source for all charts & tables unless otherwise stated: Japan Analytics

SHORT TENURE – Since 1979 the average prime ministerial tenure in Japan has been 750 days. Excluding the three longest-serving Prime Ministers of the last forty years – Nakasone, Koizumi and Abe 2 – the average is 494 days. The equity market has favoured long-serving Liberal Democratic Party government (marked in light green above) and disliked periods of coalition or opposition (野党 yatō) government and also tenures of less than eighteen months.

PM SUGA – Prime Minister Suga Yoshihide succeeded former Prime Minister Abe on 16th September the latter having stepped down for health reasons. Suga had served as Chief Cabinet Secretary (内閣官房長官, Naikaku-kanbō-chōkan) for all of Abe’s premiership. The continuity offered by Suga’s elevation provides Japan with the prospect of an extended period of political stability. From his policy statements made during the brief prime-ministerial election campaign, Suga has bold aims for challenging Japan’s economic and social ills. Given his previous role and mastery of the balance between political necessities and bureaucratic realities, the Suga era could be as impactful as those of Nakasone, Koizumi and Abe 2. We view such an outcome as bullish for the Japanese economy and stock market.


In the DETAIL below, we shall cover the following topics:-

I: SUGA’s BACKGROUND & POLITICAL CAREER

II: POLICY PRIORITIES

Defence & Foreign Policy

Economic Policy

Administrative Reform

The Digital Agency

Telecommunications Services

Birth-rate and Fertility Treatment

Regional Revitalisation & Regional Bank Reform

SME restructuring

Carbon Neutrality & A Nuclear Renaissance

III: SUGA STOCKS RECOMMENDATIONS


WHAT’S ORIGINAL? – This Insight reviews the implications of PM Suga’s policy platform for specific sectors and stocks in the Japanse equity market and concludes with five long and five short recommendations for large-cap growth and value-orientated portfolios.  


“Self-help, mutual help, public help, and “kizuna” (bonds) is our vision for society. With that in mind, we firmly believe, overcoming various issues, such as regional revitalization and the shrinking population, as well as the declining birth-rate and aging society, will create dynamism in Japan. To this end, we will meet the people’s expectations by giving birth to a “Cabinet that works for the People,” which gives its all to advance regulatory reforms without being constrained by the vested interests of the stakeholders, tearing down bureaucratic sectionalism and the notorious habit of following past precedents.

Statement of the Prime Minister

September 16th, 2020

LightStream Research • ‘Quantamental’ Japan Specialist • (Opens in a new window) ⧉

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