In this briefing:
- The New Year’s Week that Was in [email protected] – Indo Pharma, Industrials, and Weaker Oil
- Jardine C&C (JCNC SP): Close the Stub Trade
- StubWorld: A 2018 Review In Charts
- Global Semiconductor Sales Fall In November 2018. This Is Not A Good Sign.
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.
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 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 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
This week in StubWorld …
- The average NAV discount of a basket of 40 Holdcos steadily, and not altogether unsurprisingly, widened throughout the year.
- Passive, tech-related and illiquid Holdcos widened most; while cross-border and property Holdcos were the best of the worst.
- Illiquid, property, and passive Holdcos’ underperformance (or widening) was more pronounced in the first half. Tech Holdcos primarily widened in the second half.
- Worst performers (discount widening): In absolute % terms, United Co Rusal Plc (486 HK) and Asm International Nv (ASM NA) roughly shared the largest moves; while Dah Sing Financial (440 HK), First Pacific Co (142 HK), Genting Bhd (GENT MK) and Pasona Group (2168 JP) are trading at or near their 52-week wides and 52-week low prices.
- Best performers (discount narrowing): China Conch Venture Holdings Ltd (586 HK) is the only Holdco in positive territory; while Japan Post Holdings (6178 JP) is trading closest to its narrowest level in the last 12 months.
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.
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?