* The recovery in 4Q2018 shows that CTRP has already survived the new law and the new competitor in 2018. * We believe EPS will grow 12% in 2019. * However, we believe the market has already over-reacted to the news last November that CTRP became the largest online travel agency. * We set a target price of USD23.80, which is 32% below the market price.
It is time to go increase exposure to Taiwanese equities, if you haven’t already. Like bourses around the region, Taiwan’s stock market has rebounded from its January low and is up over 10% in two months. Underpinning our and investor optimism are expectations that Taiwan stands to benefit disproportionately from the fiscal and monetary policy easing underway in China, that China and the US will get to some kind of trade deal and a positive reaction to TSMC’s 2019 dividend pay-out plan.
Preceding my comments on Jardine and other stubs are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
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Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!
So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.
Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing.
Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.
However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.
The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.
The PH Score of 7.7 encompasses valuation as well as generally positive metric progression. Combined with an underbought technical position and an additional valuation filter, the bank stands out with the aforementioned strategic peers in the top decile of global bank opportunity. Valuations are not stretched: shares trade at a P/Book of 0.74x, a Franchise Valuation of 4%, and an Earnings Yield of 15.5%.
Despite the aforementioned deep concerns and caveats, we believe that Postal Savings Bank is a valuable, liquid, deposit-rich franchise with a capacity to grow.
In terms of fundamental momentum and trends (our core focus) Bank Of China (601988 CH) reported a mixed set of numbers at FY18.
While systemic asset quality issues weigh heavily on results, the bank has prudently improved its liquidity metrics, enhanced its provisioning, while cost-control remains exemplary in the face of stresses from loan quality and some systemic funding cost pressure. Underlying “jaws” are highly positive at 558bps. The improvement in Efficiency is a plus signal amidst the asset quality smoke.
All in all, it’s a stable rather than a gung-ho picture. Pre-tax Profit has barely budged since 2014.
But you are being paid for the risk which ultimately lies with the PRC. The Dividend Yield stands at 5.7%. This makes shares attractive as they are at the other Chinese core strategic lenders. P/Book and Franchise Valuation lie at 0.6x and 7% while the earnings yield has reached 19%. A PH Score of 7.6 reflects valuation to a great extent as well as reasonable metric progression. This looks like a coupon-clipping opportunity.
Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States. Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress.
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Tesla also admitted it delivered half of its total deliveries for the entire quarter in the last nine days of March, blaming “challenges encountered” for delays in getting cars to buyers in Europe and China. But even adding cars “in transit” doesn’t cover the shortfall versus guidance and market expectations.
It also doesn’t ease investors’ concerns about cooling demand for Model 3 in the US, or the alarming drop-off in sales for Models S and X, well, everywhere.
Preceding my comments on Naspers are the weekly setup/unwind tables for Asia-Pacific Holdcos.
These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold – the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent – of at least 20%.
Huya, a leading live streaming player in China, announced share placement of USD 550 million after market close on April 3rd. In this insight, we will look at recent developments of Huya and score the deal in our ECM Framework.
China Construction Bank H (939 HK) (CCB) added real estate loans at more than double the amount of total corporate loans during 2018. This is something we see with many of China’s banks in the period. What is also apparent is a sharp drop in real estate NPL ratios during the year – not simply due to a larger denominator. There is nothing anecdotally or otherwise that we have seen, that should suggest a dramatically more healthy China real estate sector, e.g. property development, commercial real estate during 2018 compared with 2017. The risk is that banks are extending substantially more credit here to support weak, frail debtors. With a weakening economy, this is not likely to last without negative consequences.
In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.
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NIO Inc (NIO US)‘s lock-up will expire next week on the 11th of March. Shareholding breakdown suggests that there will be overhang upon lock-up expiry due to the large number of scattered pre-IPO shareholders.
In this insight, we will look at the principal and pre-IPO investors and analyze who and how many shares would likely be sold upon lock-up expiry.
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China Construction Bank H (939 HK) (CCB) added real estate loans at more than double the amount of total corporate loans during 2018. This is something we see with many of China’s banks in the period. What is also apparent is a sharp drop in real estate NPL ratios during the year – not simply due to a larger denominator. There is nothing anecdotally or otherwise that we have seen, that should suggest a dramatically more healthy China real estate sector, e.g. property development, commercial real estate during 2018 compared with 2017. The risk is that banks are extending substantially more credit here to support weak, frail debtors. With a weakening economy, this is not likely to last without negative consequences.
Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!
So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.
Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing.
Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.
However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.
The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.
The PH Score of 7.7 encompasses valuation as well as generally positive metric progression. Combined with an underbought technical position and an additional valuation filter, the bank stands out with the aforementioned strategic peers in the top decile of global bank opportunity. Valuations are not stretched: shares trade at a P/Book of 0.74x, a Franchise Valuation of 4%, and an Earnings Yield of 15.5%.
Despite the aforementioned deep concerns and caveats, we believe that Postal Savings Bank is a valuable, liquid, deposit-rich franchise with a capacity to grow.
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Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports.
Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.
In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.
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Lyft Inc (0812823D US) plans to list in the US at a valuation of US$20-25bn, as per media reports.
Overall growth numbers have been great but some of the numbers are missing like the quarterly driver numbers, the number of shared riders versus single riders, organic growth in major cities, and progress of Canada operations, to name a few.
In my view, without the quarterly active driver numbers and the full picture of the extent of shared rides, one can’t develop an accurate picture of the business.
Our positive view of the Asian region in 2018 was not reflected in stock market performance. But now is not the time to discard fundamentals and fundamental analysis. Unlike the US, the Asian region is in the early stages of a profit upcycle. As we have argued on many occasions, that is the building block required to kick start the investment cycle. But theoretical explanations of the growth process aside, is there any empirical support for the argument that profits and investment, and therefore growth, are related? We would answer in the affirmative and, in the following report, we try to show how the process works and where Asia stands on two of our Austrian Stress Indicators (ASIs). Market volatility aside, the conditions for good growth gains are firmly in place in most of the region.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Naspers (NPN SJ) recently announced another attempt to reduce the holdco discount which has remained stubbornly high despite previous attempts by management to reduce it. Since the announcement there has been movement, so perhaps this time it really is different!
So what is being done? Naspers will spin off its international internet assets, which account for >99% of its value, into a newco. They will then list 25% of newco on the Euronext in Amsterdam by issuing these shares to Naspers’ shareholders. The intention is to create a vehicle which can attract increased foreign and tech investors without the complication of a South African listing. The company believes this has been a key factor behind the wide holdco discount. The move also reduces Naspers weighting in South African indices which is another contributing factor.
Alastair Jones sees the announcement as a positive, although there are still issues with the main listing being in South Africa. He still believes a buyback would be the most effective way to reduce the discount, but Naspers is also keen to keep investing.
Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.
However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.
The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.
The PH Score of 7.7 encompasses valuation as well as generally positive metric progression. Combined with an underbought technical position and an additional valuation filter, the bank stands out with the aforementioned strategic peers in the top decile of global bank opportunity. Valuations are not stretched: shares trade at a P/Book of 0.74x, a Franchise Valuation of 4%, and an Earnings Yield of 15.5%.
Despite the aforementioned deep concerns and caveats, we believe that Postal Savings Bank is a valuable, liquid, deposit-rich franchise with a capacity to grow.
In terms of fundamental momentum and trends (our core focus) Bank Of China (601988 CH) reported a mixed set of numbers at FY18.
While systemic asset quality issues weigh heavily on results, the bank has prudently improved its liquidity metrics, enhanced its provisioning, while cost-control remains exemplary in the face of stresses from loan quality and some systemic funding cost pressure. Underlying “jaws” are highly positive at 558bps. The improvement in Efficiency is a plus signal amidst the asset quality smoke.
All in all, it’s a stable rather than a gung-ho picture. Pre-tax Profit has barely budged since 2014.
But you are being paid for the risk which ultimately lies with the PRC. The Dividend Yield stands at 5.7%. This makes shares attractive as they are at the other Chinese core strategic lenders. P/Book and Franchise Valuation lie at 0.6x and 7% while the earnings yield has reached 19%. A PH Score of 7.6 reflects valuation to a great extent as well as reasonable metric progression. This looks like a coupon-clipping opportunity.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Postal Savings Bank Of China (1658 HK) is outgrowing its peers on the top-line given exuberant pace of credit growth (especially in consumer lending such as credit cards but also in corporate and in agriculture). Expansion in Interest Income on earning assets is well in excess of an increase in Interest Expenses on interest-bearing Liabilities. This is not always the case in China today. Fee income is also growing by double-digits too. The bank has a huge deposit base and Liquidity is ample. In addition, “Jaws” stand out as being highly positive at 20pts given aforementioned top-line growth coupled with OPEX restraint.
However, capital remains tight and asset quality has deteriorated markedly. Despite the top-line growth and cost-control, an increasing amount of pre-impairment Income is being consumed by loan loss provisions and other asset writedowns. Substandard loans have exploded while loss loans have climbed forcefully. The bank shapes as if it is striving to grow itself out an asset quality bind. Given Balance Sheet risks, the bank has adjusted its provisioning accordingly.
The relatively meagre capital position (for example Equity/Assets or Basel 111 Leverage Ratio) while improving is surely the reason why Postal Savings cannot pay a higher dividend in comparison with say Agricultural Bank Of China (1288 HK) , Bank Of China (601988 CH), and China Construction Bank (601939 CH) which all command yields in excess of 5% and rate as income stocks. The Dividend Yield here though is not unattractive at 3.9%.
The PH Score of 7.7 encompasses valuation as well as generally positive metric progression. Combined with an underbought technical position and an additional valuation filter, the bank stands out with the aforementioned strategic peers in the top decile of global bank opportunity. Valuations are not stretched: shares trade at a P/Book of 0.74x, a Franchise Valuation of 4%, and an Earnings Yield of 15.5%.
Despite the aforementioned deep concerns and caveats, we believe that Postal Savings Bank is a valuable, liquid, deposit-rich franchise with a capacity to grow.
In terms of fundamental momentum and trends (our core focus) Bank Of China (601988 CH) reported a mixed set of numbers at FY18.
While systemic asset quality issues weigh heavily on results, the bank has prudently improved its liquidity metrics, enhanced its provisioning, while cost-control remains exemplary in the face of stresses from loan quality and some systemic funding cost pressure. Underlying “jaws” are highly positive at 558bps. The improvement in Efficiency is a plus signal amidst the asset quality smoke.
All in all, it’s a stable rather than a gung-ho picture. Pre-tax Profit has barely budged since 2014.
But you are being paid for the risk which ultimately lies with the PRC. The Dividend Yield stands at 5.7%. This makes shares attractive as they are at the other Chinese core strategic lenders. P/Book and Franchise Valuation lie at 0.6x and 7% while the earnings yield has reached 19%. A PH Score of 7.6 reflects valuation to a great extent as well as reasonable metric progression. This looks like a coupon-clipping opportunity.
Despite some signs of stabilization in China’s factory gauges the primary trend is still weakness and it might be rash for investors to read too much into the recent data given the apparent weakness in the Eurozone and the moderation form a high level of growth in the United States. Quantitative tightening is on hold in the United States but a sharp “U-turn” to easing has not happened yet and is politically embarrassing. As inflation falls real rates are rising. Housing markets are showing signs of price weakness. Investors need to watch for signs of credit quality decay that could be an indicator of the next period of severe financial distress.
The future of the US and China relationship remains the most significant geopolitical and economic issue watched by the markets. While the markets prefer to focus on the positives, the eventual outcome of the talks may yet prove disappointing. Meanwhile, a rift is emerging among EU members who have diverging attitudes to cooperation with China. Authorities in Turkey have again spooked investors with their ham-fisted approach to markets. In Ukraine, comedian Zelensky has won in the first round of the presidential poll. In India, sabre-rattling continues ahead of parliamentary elections despite the de-escalation of tensions with neighbouring Pakistan.
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The Premier Li Keqiang had just conducted an annual Government Work Report in the two session conference (两会) in Beijing this morning. In this insight, we will briefly walk through key points of his report and identify bulls and bears in the market.
While the theme of cost reduction benefits manufacturing companies, it will negative for some infrastructure service providers, such as telecom companies.
In Q3, Lenovo (992 HK) reported revenue growth – well ahead of market expectations, improved margins and US$1.9bn of cashflow. This was a considerable surprise to us – and the market. However, having analysed the results, most of the reported revenue and profit growth comes from the Fujitsu Ltd (6702 JP) acquisition. The rise in cashflow largely came from working capital, but also benefitted from the structure of the Fujitsu deal. We think real full-year cashflow after investment, US$0.8bn, will yet again, fail to cover finance costs and dividends, and Lenovo will need to borrow another US$400m.
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