Daily Singapore: The New Year’s Week that Was in [email protected] – Indo Pharma, Industrials, and Weaker Oil and more

By January 11, 2019 Singapore

In this briefing:

  1. The New Year’s Week that Was in [email protected] – Indo Pharma, Industrials, and Weaker Oil
  2. Jardine C&C (JCNC SP): Close the Stub Trade
  3. StubWorld: A 2018 Review In Charts
  4. Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.

1. The New Year’s Week that Was in [email protected] – Indo Pharma, Industrials, and Weaker Oil

This pre and post-Hogmanay week’s offering of Insights across [email protected] is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.

The top three Equity Bottom-up ideas this weak come from CrossASEAN Insight Provider Jessica Irene on Indonesian pharma and consumer health play Kalbe Farma (KLBF IJ), CrossASEAN Insight Provider Angus Mackintosh on high-quality industrial Selamat Sempurna (SMSM IJ), and Daniel Tabbush‘s Insight on high ROA Indonesian finance company PT BFI Finance Indonesia (BFIN IJ). In the Sector and Thematic section, Athaporn Arayasantiparb, CFA presents his top picks in Thailand on the back of the weaker oil price. 

Macro Insights

In Strong Revenues / Benign CPI / Indrawati’s Award / Prabowo’s Arabic / Scandals Mount / Tsunami Toll, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week.

Equity Bottom-up Insights

In Kalbe Farma (KLBF IJ): Navigating Through the New Pharma Dynamics, CtossASEAN analyst, Jessica Irene zeros in on Indonesia’s largest pharma company as its consumer health division overtakes pharmaceuticals as a source of revenue and asks whether now is the time to revisit the stock. 

In Selamat Sempurna (SMSM IJ) – Truly Industrious, former Jakartan Angus Mackintosh circles back to Indonesia’s largest filter manufacturer, which he sees as one of the country’s best quality listed industrials. 

In Indonesia Banks – Exceptional ROA Still Unrecognized at PT BFI Finance, banking specialist Daniel Tabbush circles back to PT BFI Finance Indonesia (BFIN IJ), which he suggests is an attractive prospect. 

In Reality Check 2019: What Premium Does Thanachart Deserve from TMB’s Takeover? , out Thai guru Athaporn Arayasantiparb, CFA takes a look at Thanachart Capital (TCAP TB) as TMB Bank PCL (TMB TB) comes close to concluding its takeover. 

In Sea Ltd: A Surprise Winner in Cut-Throat E-Commerce Battle?, Johannes Salim, CFA takes another looks at US-listed South East Asian e-commerce player Sea Ltd (SE US) and sees the company gaining ground in Indonesia, which is its most important growth market. 

In Jardine C&C (JCNC SP): Close the Stub Trade, Curtis Lehnert revisits his recommendation on Jardine Cycle & Carriage (JCNC SP) and suggests now is the time to close the trade idea. 

In M1 Offer Coming – Market Odds Suggest a Bump But…  Travis Lundy investigates that the take over of Konnectivity Pte. Ltd. by leading Singapore telecoms firm M1 Ltd (M1 SP)

In Tuan Sing: Beneficiary of Exuberant Demand for Prime Office Investment Properties, Property Specialist Insight Provider Anni Kum suggests that recent large office acquisition by Gaw Capital in Singapore should benefit office player Tuan Sing Holdings (TSH SP)

In Hotel Properties Ltd– Dissolution of Wheelock-OBS Partnership Could Pave Way for Privatization Offer, event-driven specialist David Blennerhassett zeros in on Hotel Properties (HPL SP) after a recent change in shareholding. 

Sector and Thematic Insights

In Thai Macro Watch: Traditional ‘Weak Oil’ Plays in Thailand, Thai guru Athaporn Arayasantiparb, CFA searches for beneficiaries of the weaker oil price in Thailand. 

In The Four Vulnerabilities in Thai Property, Athaporn Arayasantiparb, CFA looks takes a step back to look at the Thai Property Sector and explores a number of vulnerabilities. 

2. Jardine C&C (JCNC SP): Close the Stub Trade

In my original insight on October 17, 2018 TRADE IDEA – Jardine Cycle & Carriage (JCNC SP) Stub , I proposed setting up a stub trade to profit from volatility in the markets that caused the Jardine Cycle & Carriage (JCNC SP) stub to trade at a historically low discount to NAV. During the 78 calendar days that followed, Jardine Cycle & Carriage (JCNC SP) has gained 23% and the trade has made 5.03% on the gross notional. I now recommend closing the trade.

In this insight I will discuss:

  • Performance of ALL my recommended stub trades
  • a post-mortem trade analysis on the JCNC stub

3. StubWorld: A 2018 Review In Charts


This week in StubWorld …

Below the various NAV discount chart summaries of various baskets are my weekly setup/unwind tables.

This, and other relationships discussed below, trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% ‘market capitalisation’ threshold, whereby the value of the holding/Opco held must be at least 20% of the parent’s market cap.

Comments on Jardine Matheson Hldgs (JM SP)Jardine Strategic Hldgs (JS SP) also follow the setup/unwind tables.

4. Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.

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The Semiconductor Industry Association (SIA) just announced that worldwide sales of semiconductors reached $41.4 billion for the month of November 2018, an increase of 9.8% YoY, but down 1.1% MoM, the first such decline since February 2018. While the decline is modest and total 2018 total semiconductor sales are on track to reach ~$470 billion for a YoY increase of 15.7%, any decline in what should be peak holiday season is not a good sign. 

Semiconductor sales historically track Wafer Fab Equipment (WFE) sales with a roughly six month time lag. North American WFE sales have been declining each month for the past six months meaning that this latest semiconductor MoM sales decline is right on schedule.  

Leveraging a decade’s worth of historical data, we analyse two key questions that are likely on every investors mind. Firstly,for how long should we expect semiconductor sales to continue their decline. Secondly, how steep should we expect that decline to be?    

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