In this briefing:
- GDS Placement – Momentum Is Still Strong but Don’t Expect the Same Kind of Returns
- Fast Retailing 1QFY20 Results to Form an Attractive Entry Point
- Kingdee: Cloud Growth Is Strong and It’s Coming From New Customers
- Eicher Motors (EIM IN)
- Semiconductor Surge: GEM Managers Hit Max Exposure
Shareholder(s) of Gds Holdings (Adr) (GDS US) is looking to sell 7.9m ADS. We have previously looked at the company’s IPO and placement in:
- GDS Holdings IPO: High Market Share Mirage?
- NASDAQ:GDS Placement – Visible Growth, Additional Ping An Investment
- GDS Placement – Accretion Will Take Awhile to Be Realized but Deal Dynamics Are Favorable
Overall, the deal still scored well on the framework , albeit borderline, owing to good track record and strong price momentum but got weighed down by poor deal dynamics and relatively expensive valuation.
In our previous insight on Fast Retailing on 22nd November 2019, we predicted Fast Retailing’s 1QFY20 results to fall short of expectations. We specifically highlighted the impact on Fast Retailing’s international business from the South Korea boycott, Hong Kong protests, unfavourable FX and the economic slowdown in China and predicted that the International segment will go into a decline in 1QFY20. Furthermore, we said the weak quarterly results will continue until the Hong Kong and Korea issues are resolved.
Please refer to the link below to read our previous insight.
Fast Retailing released its 1QFY20 results on 9th January 2020 and our predictions were spot on. Fast Retaining started regular quarterly disclosures for its International business in 2013 and since then the International business has never had a quarterly revenue decline until 1QFY21.
In our previous insight we said to short Fast Retailing until the share price reacts to 1QFY21 results, before going long on Fast Retailing for the medium to long term. From 22nd November to date, Fast Retailing shares are down 7% while Nikkei was up 3%. It appears that the time is almost right to cover the shorts and go long on Fast Retailing.
We believe that the market may have overlooked Kingdee International Software (268 HK)’s prospects on the grounds that growth in its cloud business would cannibalise its traditional software business. However, recent disclosure seems to suggest that the demand for cloud services is coming from new customers rather than its existing ones.
The Objective of this insight is to give a preliminary on-ground perspective on the post-festive demand environment and factors that could drive Q4 Volumes. The Insight is based on interactions with three Eicher Motors (EIM IN) Dealers (Royal Enfield) in Hyderabad and a Hero Motocorp (HMCL IN) dealer.
The probability of a bottom being formed on volumes remains very high. However, the customers’ acceptance of BS6 Models and price hikes still remains uncertain. Channel feedback on Royal Enfield’s GTM strategy makes us optimistic on Royal Enfield’s ability to ride through this period of uncertainty.
This Insight is labelled bullish as we expect volumes to have bottomed out and our interactions suggest high-level dealer confidence resonating similar view aided by Royal Enfield’s GTM Strategy.
- Global EM managers have increased Semiconductor exposures to their highest levels on record.
- Taiwanese and South Korean Semiconductor overweights hit all-time highs.
- Most favoured stocks are Taiwan Semiconductor Manufacturing Company (TSMC) (2330 TT) , SK Hynix (000660 KS) and Mediatek Inc (2454 TT) with buying seen in Win Semiconductors (3105 TT)
- Fund close positions in Chipbond Technology (6147 TT) and Novatek Microelectronics Corp (3034 TT)
- Semiconductor stocks are the largest Industry group overweight bet by EM active managers heading into 2020.
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