Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Bank Negara Indonesia Persero, China Education Group, Verso Corp, AXT Inc and more

In today’s briefing:

  • Smartkarma Corporate Webinar | BBNI IJ: Transformation – New Leadership and Digital Innovation
  • China Education (839 HK): More Flows of Positive Development
  • VRS: Stacking the Cash
  • AXTI: Buying in Selling Pressure

Smartkarma Corporate Webinar | BBNI IJ: Transformation – New Leadership and Digital Innovation

By Smartkarma Research

For our next Corporate Webinar, we are glad to welcome the IR team of Bank Negara Indonesia Persero (BBNI IJ)

  • Yohan Setio, Head of IR

  • Yudha Pradipta, AVP

  • Jonathan Siagian, AVP

  • Ananda Elise Natasya, Manager 

BNI was founded in 1946 and, until 1955, it served as both the Central Bank of the Republic of Indonesia and a commercial bank. BNI is the fourth-largest bank in Indonesia by total assets (IDR 875 trillion / ~US$61 billion) with NIM of 4.9%, CAR of 18.2%, NPL ratio of 3.9%, and NPL coverage ratio of 215.3% as of June 2021. BNI has more than 79 million deposit accounts, over 20,000 network branches and ATMs throughout Indonesia, and six offshore branches.

In their upcoming webinar, Elise will share a short company presentation, after which Yohan, Yudha, and Jonathan will engage in a fireside chat with Smartkarma Insight Provider, Daniel Tabbush. The Corporate Webinar will include a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 21 September 2021, 17:00 SGT.

Corporate Webinars by Smartkarma Corporate Solutions feature discussions with IROs and Executives, discussing their companies, the challenges they face, and the opportunities in their sectors and markets.


China Education (839 HK): More Flows of Positive Development

By Osbert Tang, CFA

We take the recent newsflow on business development at China Education Group (839 HK) positively. While the market may still skeptical towards the company due to the sector’s regulatory worries, CEG is standing in a better position than many of its peers given its focus on the vocational and higher education segment. In our view, the beaten-down performance of CEG’s share price is not justified, and it is an interesting time to look at its long-term promising outlook now.   

The 58% increase in approval higher education enrollment quota for 2021/2022 academic year, upside from contribution of the newly added Chengdu Jincheng College, support from banks and IFC through provisions of seven-year loan facilities at low pricing, rapid execution of M&A and further potential pipeline acquisitions all lend support to CEG’s business prospects amid a turbulent time. Our belief is that at 13.5x PER for FY22, CEG is inexpensively priced relative to growth.


VRS: Stacking the Cash

By Hamed Khorsand

  • The tight supply conditions for coated paper have not dissipated so far through the year leading to Verso Corp. (VRS) and other coated paper producers to raise prices again.

 

  • The latest price increase puts VRS ahead of peak pricing during the cycle of 2018. Without additional supply coming online, demand could deteriorate with further transition to digital media. However, the latest US Postal Service data suggests this is not the case this year.

 

  • The recovery in the coated paper industry affirms our reasoning for VRS being worth more than the current take-out offer of $20 a share.

 

  • Current market conditions are expected to spill over into 2022 as demand remains ahead of supply. VRS’s ability to generate an aggregated $6.80 per share of free cash flow over 2021 and 2022 should result in a stock trading closer to $30.

AXTI: Buying in Selling Pressure

By Hamed Khorsand

  • AXT Inc. (AXTI) shares suffered from an aggressive seller that led to many investors concerned there was a company-specific event pushing the shares lower. There have been no news alerts in China related to AXTI’s operations and the Company remains on schedule to file its Shanghai listing documents in the next couple of months.

 

  • The current state of the end markets AXTI serves should result in AXTI experiencing revenue growth over the next couple of quarters. There have been no signs of slowing in data center connectivity and LED lighting and sensing.

 

  • The Company’s recent wins with new tier-one customers should result in fourth quarter revenue being higher than consensus estimates.

 

  • The selling pressure looks to have been initiated by a forced seller spiraling into other investors fearing for the worst even though the stock is now selling at a lower valuation than the last time the stock was at current prices.

Related tickers: Bank Negara Indonesia Persero (BBNI.JK), China Education Group (0839.HK), Verso Corp (VRS.N), AXT Inc (AXTI.O)

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