SK Hynix: Leading DRAM IDM, Trading at Discount Multiples, in a Strong Demand Environment

Global Emerging Markets Weekly: 23 July 2021

SK Hynix Expects Good Year to Get Even Better!

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Quantitative Analysis

<p>This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. </p><p>The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. </p><p>This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. </p><p>Notable new entrants to the top decile this month include Russian energy plays <a href="https://www.smartkarma.com/entities/gazprom-pjsc-6a7231a9-d5e4-4da4-bf21-aa1b9d50fbf8" target="_blank" data-smartkarma-citation="entities:27578:1" rel="noopener">Gazprom PJSC (GAZP RM)</a> and <a href="https://www.smartkarma.com/entities/lukoil-pjsc" target="_blank" data-smartkarma-citation="entities:24141:1" rel="noopener">Lukoil PJSC (LKOD LI)</a>, Brazilian securities exchange <a href="https://www.smartkarma.com/entities/b3-sa-brasil-bolsa-balcao" target="_blank" data-smartkarma-citation="entities:24580:1" rel="noopener">B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ)</a>, and <a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a>.</p><table class="table table-striped">
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<tbody>
<tr>
<td style="text-align: center; width: 74.7344px;">rank</td>
<td style="width: 263.203px;">Name</td>
<td style="width: 185.312px;">Sector</td>
<td style="width: 147.938px;">Location</td>
<td style="text-align: center; width: 74.8125px;">prev.</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">1</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/sk-hynix-inc" target="_blank" data-smartkarma-citation="entities:16955:1" rel="noopener">SK Hynix (000660 KS)</a> </td>
<td style="width: 185.312px;">Information Technology</td>
<td style="width: 147.938px;">Korea (South)</td>
<td style="text-align: center; width: 74.8125px;">3</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">2</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/china-mobile-ltd" target="_blank" data-smartkarma-citation="entities:27:1" rel="noopener">China Mobile (941 HK)</a> </td>
<td style="width: 185.312px;">Communication</td>
<td style="width: 147.938px;">China</td>
<td style="text-align: center; width: 74.8125px;">9</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">3</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/cnooc-ltd" target="_blank" data-smartkarma-citation="entities:175:1" rel="noopener">CNOOC Ltd (883 HK)</a> </td>
<td style="width: 185.312px;">Energy</td>
<td style="width: 147.938px;">China</td>
<td style="text-align: center; width: 74.8125px;">1</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">4</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/posco" target="_blank" data-smartkarma-citation="entities:208:1" rel="noopener">Posco (005490 KS)</a> </td>
<td style="width: 185.312px;">Materials</td>
<td style="width: 147.938px;">Korea (South)</td>
<td style="text-align: center; width: 74.8125px;">21</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">5</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/kia-motors-corp" target="_blank" data-smartkarma-citation="entities:156:1" rel="noopener">Kia Motors Corp (000270 KS)</a> </td>
<td style="width: 185.312px;">Consumer Discretionary</td>
<td style="width: 147.938px;">Korea (South)</td>
<td style="text-align: center; width: 74.8125px;">4</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">6</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/bank-of-china-ltd-h" target="_blank" data-smartkarma-citation="entities:656:1" rel="noopener">Bank Of China Ltd (H) (3988 HK)</a> </td>
<td style="width: 185.312px;">Financials</td>
<td style="width: 147.938px;">China</td>
<td style="text-align: center; width: 74.8125px;">5</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">7</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/gazprom-pjsc-6a7231a9-d5e4-4da4-bf21-aa1b9d50fbf8" target="_blank" data-smartkarma-citation="entities:27578:1" rel="noopener">Gazprom PJSC (GAZP RM)</a> </td>
<td style="width: 185.312px;">Energy</td>
<td style="width: 147.938px;">Russian Federation</td>
<td style="text-align: center; width: 74.8125px;">14</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">8</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/lukoil-pjsc" target="_blank" data-smartkarma-citation="entities:24141:1" rel="noopener">Lukoil PJSC (LKOD LI)</a> </td>
<td style="width: 185.312px;">Energy</td>
<td style="width: 147.938px;">Russian Federation</td>
<td style="text-align: center; width: 74.8125px;">32</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">9</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/b3-sa-brasil-bolsa-balcao" target="_blank" data-smartkarma-citation="entities:24580:1" rel="noopener">B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ)</a> </td>
<td style="width: 185.312px;">Financials</td>
<td style="width: 147.938px;">Brazil</td>
<td style="text-align: center; width: 74.8125px;">70</td>
</tr>
<tr>
<td style="text-align: center; width: 74.7344px;">10</td>
<td style="width: 263.203px;">
<a href="https://www.smartkarma.com/entities/china-construction-bank-h" target="_blank" data-smartkarma-citation="entities:45:1" rel="noopener">China Construction Bank H (939 HK)</a> </td>
<td style="width: 185.312px;">Financials</td>
<td style="width: 147.938px;">China</td>
<td style="text-align: center; width: 74.8125px;">41</td>
</tr>
<tr><td colspan="5" style="text-align: left; width: 746px;"><em>Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas</em></td></tr>
</tbody>
</table><p><em>As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.</em></p>

This insight provides the output, and an overview of our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index. The model is based on 1) a typical quantitative multifactor screening model, enhanced by two Artificial Intelligence Technology-based approaches using 2) a Deep Neural Network model, and 3) a Recurrent Neural Network model. This model, which has been developed and tweaked over the past 24 months (and implemented in its current state for &gt;12 months), has a solid real-world performance track record, which I set out in the detail below. Notable new entrants to the top decile this month include Russian energy plays Gazprom PJSC (GAZP RM) and Lukoil PJSC (LKOD LI), Brazilian securities exchange B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ), and China Construction Bank H (939 HK).









rank
Name
Sector
Location
prev.


1

SK Hynix (000660 KS) 
Information Technology
Korea (South)
3


2

China Mobile (941 HK) 
Communication
China
9


3

CNOOC Ltd (883 HK) 
Energy
China
1


4

Posco (005490 KS) 
Materials
Korea (South)
21


5

Kia Motors Corp (000270 KS) 
Consumer Discretionary
Korea (South)
4


6

Bank Of China Ltd (H) (3988 HK) 
Financials
China
5


7

Gazprom PJSC (GAZP RM) 
Energy
Russian Federation
14


8

Lukoil PJSC (LKOD LI) 
Energy
Russian Federation
32


9

B3 Sa - Brasil Bolsa Balcao (B3SA3 BZ) 
Financials
Brazil
70


10

China Construction Bank H (939 HK) 
Financials
China
41

Source: FactSet financial data and analytics, my estimates and calculations, Tensorflow, Keras, Google Colaboratory, pandas

As usual, please feel free to reach out for the full output table, any questions, clarifications needed or suggestions.

Screening for GEMs: July 2021