Bottom-Up EquitiesDaily Briefs

Equity Bottom-Up: Evergrande Real Estate Group, Comfortdelgro Corp, Nature Home Holding Company, SISB Public Company Limited, Xiaomi Corp, HKEX, UiPath Inc, Siam Cement, Netgear Inc, Bank Central Asia and more

In today’s briefing:

  • Smartkarma Flash Webinar | Evergrande: Quantifying Risks and Potential Domino Effect
  • ComfortDelgro (CD): Buy On (Temp) Weakness
  • Nature Home (2083 HK): Possible Takeover Target
  • Smartkarma Corporate Webinar | SISB TB: Bringing International Education to Thai Students
  • Xiaomi Exodus:  Confidence Fading Among Active China Investors
  • HKEx(388.HK): Expect Slower Q2 Trading Volume, HKEx to Benefit As Offshore Venue for China Listings
  • UiPath, Inc (PATH) – Competition in the RPA Space Creates Questions Around Estimates and Valuation
  • SCC : Expected Strong 2Q21E but Would Lose Momentum in 3Q21E
  • NTGR: Missing a Gear, PT to $43
  • Bank Central Asia – Good, But New Credit Challenges Ahead

Smartkarma Flash Webinar | Evergrande: Quantifying Risks and Potential Domino Effect

By Smartkarma Research

Tune in for our Flash Webinar as we look at recent developments at Evergrande Real Estate Group (3333 HK). The highly indebted real estate company saw its share price jump from four-year lows on the resolution of a dispute with a Chinese bank, but trouble for China’s largest property developer seems far from over. Join us for a discussion with Insight Providers Travis Lundy and  Charles Macgregor on the current situation and where the company goes from here.

The flash webinar will be hosted on Friday, 23 July 2021, 4.00pm SGT/HKT.

Travis Lundy has 20+ years of experience in Asia doing alternative strategies (i.e. non-delta1 non long-only) in fixed income, equity derivatives, and activist/catalyst/event-driven and long-short equity strategies, with most of that time spent managing money.

Charles Macgregor is an industry veteran with over 35 years of experience. As Head of Asia, he is responsible for the Asian credit research product at Lucror, which he joined in 2013. Previously, he had worked for Deutsche Asset Management, where he was Head of Credit Research, Asia-Pacific and Co-Chair of their Global Credit Methodology Committee. He also worked at Moody’s, where he was a Senior Credit Officer and a member of their New Instruments Committee and Symbols & Definitions Committee.

ComfortDelgro (CD): Buy On (Temp) Weakness

By Henry Soediarko

The ban on dining-in as part of the stricter measures by the Singapore government starting today until next month has caused some fears in the market and ComfortDelgro is not spared. Singapore is on target to reach 2/3 of the country fully vaccinated by the 9th of Aug 2021 during the National Day hence there should be some restrictions easing as the Singapore government has to open the economy at some stage which means more mobility and reinstatement of dining-in among others. The government has mentioned that Singapore will live alongside COVID-19 as it expects to shift from pandemic to endemic. 

While mall operators such as Capitaland (CAPL SP) and City Developments (CIT SP) have to give some form of rent relief to their tenants, Comfortdelgro Corp (CD SP)does not need to give relief to its drivers and mobility does not seem to drastically decrease. Investors should expect some restrictions on easing measures during the National Day period that will lift Comfortdelgro Corp (CD SP) share price. 

source: analyst

Nature Home (2083 HK): Possible Takeover Target

By David Blennerhassett

Wood flooring manufacturer Nature Home Holding Company (2083 HK) is currently suspendedpursuant to the Code of Takeovers and Mergers“.

On the 13 July, Nature Home announced a positive profit alert, in which it expects 1H21 profit to match or exceed that of 1H19’s.

As discussed in Squeeze Box: The Port Congestion Contagion, after the Covid fallout entrenched itself, people stuck at home in the US and elsewhere started buying stuff. Lots of it.

Nature Home’s revenue is still predominantly sourced from China, But there has been a noticeable shift since FY18, with exports taking up a larger percentage. 

More below the fold.

Smartkarma Corporate Webinar | SISB TB: Bringing International Education to Thai Students

By Smartkarma Research

For our next Smartkarma Corporate Webinar, we are glad to welcome SISB Public Company Limited (SISB TB) ’s CEO and Co-Founder, Khun Kelvin Koh.

SISB is a leading provider and manager of Singapore International Schools in Thailand. Founded in 2001, SISB currently owns and manages five campuses, which adopt the Singapore and UK curricula as the foundation for teaching and learning. The SISB name is inspired by its first campus, Singapore International School of Bangkok, which pioneered the Singapore education curriculum in Thailand.

In this Webinar, Kelvin will share a short company presentation and engage in a fireside chat with Smartkarma Insight Provider Dr. Andrew Stotz, CFA, followed by a live Q&A session.

The Corporate Webinar will be hosted on Tuesday, 3 August, 17:00 SGT / 16:00 ICT

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.

Xiaomi Exodus:  Confidence Fading Among Active China Investors

By Steven Holden

China managers are losing faith in Xiaomi Corp (1810 HK). From peak ownership of 32.5% of funds back in December 2020, active China managers have closed positions in Xiaomi Corp (1810 HK) en masse.  Average holding weights have dropped from 0.77% to 0.37% over the same period, with the net underweight rising to -1.17%.

This leaves sentiment in Xiaomi Corp (1810 HK)  among the worst in the China universe at present.

Analysis taken from our China research, which covers 116 active China managers with combined AUM of $68bn

HKEx(388.HK): Expect Slower Q2 Trading Volume, HKEx to Benefit As Offshore Venue for China Listings

By Roger Xie

  • HKEX (388 HK) June ADT (Average Daily Turnover) has been cooled off from recent high growth, delivering 16% year-over-year growth in the month. This is partially due to the high base from last year and the renewed worry about Beijing’s crackdown of big tech in China. For the 1st half in 2021, HKEx ADT has grown an amazing 60% year-over-year. But the volume on derivative market is more muted than investors expect. We expect HKEx will deliver an in-line interim  result on upcoming August 11th.
  • On the IPO market, HKEx has completed 14 IPO deals in Q2 2021 and raised HK$ 76 billion. The new economy companies have accounted more than 70% of the IPO deals. The significant ones include JD Logistics (2618 HK) , Nayuki Holdings (2150 HK) , Linklogis (9959 HK) and (9961 HK). We are the believer that HKEx will play a key role on offshore China listings. Ongoing regulatory uncertainty is likely to accelerate the Chinese ADS’ to diversify their listing risk and to benefit HKEx as a preferred offshore listing venue. 
  • On the technology front, HKEx has introduced the new digital platform FINI ( Fast Interface for New Issuance) to speed up the IPO process. The new initiative will shorten the time-consuming paper subscriptions and cut IPO process from pricing to listing from T+5 to T+2. This will improve efficiency of pricing and capital usage. And FINI will likely be rolled out in Q4 2022. We remain bullish on HKEX (388 HK) and have TP HKD 550. 

UiPath, Inc (PATH) – Competition in the RPA Space Creates Questions Around Estimates and Valuation

By Robert C Prather Jr

The RPA market has been growing rapidly, attracting new entrants and existing software companies introducing RPA offerings.  These risks and others may not be factored into revenue and earnings estimates and valuation multiples for this recent IPO with a market cap that exceeds $30bn.

SCC : Expected Strong 2Q21E but Would Lose Momentum in 3Q21E

By Research Group at Country Group Securities

We downgrade our recommendation to HOLD rating, from BUY, with new target price of Bt445.00, -19% from Bt553.00 previously, valued from Sum of the Parts valuation, divided to i) Petrochemical and CBM businesses at Bt334/share, derived from 10.6x PE, which is -1 SD of SCC’s 5 years trading average, and, ii) Packaging business at Bt111/share, derived from 15% conglomerate discounted to 21.3xPE valuation. We maintained valuation in Packaging part but de-rated valuation in Petrochemical and CBM part given the soften petrochemical outlook.

• We expect SCC to report 2Q21E net profit of Bt14bn (+51%YoY, -5%QoQ). While, the YoY increase came from Packaging business expansion and better petrochemical price, the QoQ decrease was mainly due to lower margin in petrochemical business.
• We expect soften outlook for 2H21E, weighted down by petrochemical business, which selling price and spread of key products have contracted since the late of 2Q21. Currently, HDPE spread is about US$466/ton, down from US$585-588/ton in 1Q21-2Q21. PP spread is about US$579/ton, down from US$730-808/ton in 1Q21-2Q21. The squeeze came from both lower selling price due to more supply in the market, and higher cost, following the oil price spike.

NTGR: Missing a Gear, PT to $43

By Hamed Khorsand

• NETGEAR (NTGR) surprised to the downside citing slower than anticipated sell through of products in the second quarter causing a buildup of channel inventory. The second quarter is seasonally the slowest time of the year, but this year it included Amazon Prime Day, which could have played a role in how much inventory retailers were willing to stock. Unfortunately for NTGR, Prime Day was towards the very end of the quarter giving the Company very little time to react. 

• The fallout from the disappointing second quarter revenue leads to the third quarter experiencing a sequential decline in revenue versus a seasonal lift. 

• We have lowered our estimates for the rest of the year bringing our non-GAAP EPS down to $2.89 from $3.50. 

• Our price target is now $43 from $54 to reflect the weakness in the third quarter and the reduced valuation the shares would likely receive until NTGR proves the inventory situation is a one-quarter event. 

Bank Central Asia – Good, But New Credit Challenges Ahead

By Thomas J. Monaco

*Solid Result, But Challenges Ahead: Bank Central Asia (BBCA.IJ) [BCA] reported 2Q21 results of IDR 7.4 tn, improving IDR 376 mn (5.3%) on a linked quarter basis. BCA’s positive operating results were highlighted by non-interest income growth and a decline in operating expenses; and

*Credit Challenges Persist, As Credit Break Re-Accelerates: By our calculation, we find that 2Q21 net new NPLs amounted to IDR 2.4 tn for an annualized rate of increase of 92.4%, comparing very unfavorably with 1Q21’s IDR 742 bn and 28.7%, respectively. Despite the recent acceleration in net new NPL formation, we calculate that loss reserves are likely right where they need to be given the uptick in special mention and lack of full clarity with the restructuring portfolio. Although, we worry the softness in current macro conditions.

Related tickers: Evergrande Real Estate Group (3333.HK), Comfortdelgro Corp (CMDG.SI), Nature Home Holding Company (2083.HK), SISB Public Company Limited (SISBM.BK), Xiaomi Corp (1810.HK), HKEX (0388.HK), Siam Cement (SCC.BK), Netgear Inc (NTGR.O), Bank Central Asia (BBCA.JK)

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