Asia and Global Semiconductor and Tech Research

Andrew Lu

Thematic (Sector/Industry)

<ul><li>Over US$100bn industry by 2026E: By assuming BEVs to have 13% of global automotive industry shares at battery cell cost of US$80/KWh and 95KWh per BEV, we estimate over US$100bn market size for rechargeable battery industry by 2026E at a CAGR of over 30% if battery supply can meet up with 13mn BEVs demand in 2026E.</li><li>Technology, cost, and capital intensive: Similar DRAM/NAND industry, the key vendors lead in the highest Wh (Watt hours) per Kg (battery density), the lowest price in US$ per KWh (Kilo Watt hours), and cash flow for the scale (US$4bn investment for 30 GWh capacity).</li><li>Panasonic leads and LG Chem follows: Driven by 0.5mn BEVs in 2018 and 1.0 mn in 2020, Tesla and <a href="https://www.smartkarma.com/entities/222" target="_blank" data-smartkarma-citation="entities:222:1">Panasonic</a> lead to build a Gigafactory with 35GWh cell battery capacity by 2018 at Sparks, Nevada by spending US$4.5-5.0bn. LG Chem is aiming to build 18 GWh battery pack capacity in 2018 for 0.3mn EVs for GM, Volvo, Renault, Group PSA, and Daimler AG. </li><li>The most aggressive one in China-CATL: In 2016, CATL was ranked No. 3 with 6.72 GWh after Panasonic (8.5 GWh). CATL plans to increase its lithium-ion battery capacity by seven times to 50 GWh until 2020. However, if CATL could not penetrate global EV vendors which sell EV outside of the China, the aggressive capex plan could be overstated.</li><li>What vendors have internal cash flow to spend? We like Panasonic and LG Chem over others due to their larger design wins with the key vendors and stronger operational cash flow for their heavy capex. Between BYD and CATL, we like CATL more than BYD due to CATL's core technology competence and more diversified customers than BYD's integrated model. </li></ul>

Over US$100bn industry by 2026E: By assuming BEVs to have 13% of global automotive industry shares at battery cell cost of US$80/KWh and 95KWh per BEV, we estimate over US$100bn market size for rechargeable battery industry by 2026E at a CAGR of over 30% if battery supply can meet up with 13mn BEVs demand in 2026E.Technology, cost, and capital intensive: Similar DRAM/NAND industry, the key vendors lead in the highest Wh (Watt hours) per Kg (battery density), the lowest price in US$ per KWh (Kilo Watt hours), and cash flow for the scale (US$4bn investment for 30 GWh capacity).Panasonic leads and LG Chem follows: Driven by 0.5mn BEVs in 2018 and 1.0 mn in 2020, Tesla and Panasonic lead to build a Gigafactory with 35GWh cell battery capacity by 2018 at Sparks, Nevada by spending US$4.5-5.0bn. LG Chem is aiming to build 18 GWh battery pack capacity in 2018 for 0.3mn EVs for GM, Volvo, Renault, Group PSA, and Daimler AG. The most aggressive one in China-CATL: In 2016, CATL was ranked No. 3 with 6.72 GWh after Panasonic (8.5 GWh). CATL plans to increase its lithium-ion battery capacity by seven times to 50 GWh until 2020. However, if CATL could not penetrate global EV vendors which sell EV outside of the China, the aggressive capex plan could be overstated.What vendors have internal cash flow to spend? We like Panasonic and LG Chem over others due to their larger design wins with the key vendors and stronger operational cash flow for their heavy capex. Between BYD and CATL, we like CATL more than BYD due to CATL's core technology competence and more diversified customers than BYD's integrated model. 

Andrew on Tech: Rechargeable Battery - The Next US$100bn Industry /Part 1

China Specialist, Auto and Industrial Specialist

Victoria Li

Retail sales of China's passenger vehicles would probably decline y-y again in March, after a 2% y-y decline in 2M2017. Our channel checks with dealers suggest that the end demand on passenger vehicles (PV) has not increased as they expected after the CNY holiday. Most JV brands dealers we contacted said their sales in March may decrease y-y from the low base of March 2016, which is weaker than we expected. Only feedback from dealers of top Chinese brands like Geely remains positive. We are…

Retail sales of China's passenger vehicles would probably decline y-y again in March, after a 2% y-y decline in 2M2017. Our channel checks with dealers suggest that the end demand on passenger vehicles (PV) has not increased as they expected after the CNY holiday. Most JV brands dealers we contacted said their sales in March may decrease y-y from the low base of March 2016, which is weaker than we expected. Only feedback from dealers of top Chinese brands like Geely remains positive. We are…

China Auto- Dealer Channel Check: End Demand in March Weaker than Expected, Destocking Needed

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for <a href="https://www.smartkarma.com/entities/472" target="_blank" data-smartkarma-citation="entities:472:1">MGM China Holdings Ltd (2282 HK)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a>, HKD 14 for <a href="https://www.smartkarma.com/entities/473" target="_blank" data-smartkarma-citation="entities:473:1">Wynn Macau Ltd (1128 HK)</a>, USD 17 for <a href="https://www.smartkarma.com/entities/810" target="_blank" data-smartkarma-citation="entities:810:1">Melco Crown Entertainment ADR (MPEL US)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/806" target="_blank" data-smartkarma-citation="entities:806:1">Galaxy Entertainment Group Limited (27 HK)</a>, HKD 6.6 for <a href="https://www.smartkarma.com/entities/805" target="_blank" data-smartkarma-citation="entities:805:1">SJM Holdings Ltd (880 HK)</a>, $133 for <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a>, $56 for <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a>, and $29.50 for <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a>. We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for MGM China Holdings Ltd (2282 HK), HKD 36 for Sands China Ltd (1928 HK), HKD 14 for Wynn Macau Ltd (1128 HK), USD 17 for Melco Crown Entertainment ADR (MPEL US), HKD 36 for Galaxy Entertainment Group Limited (27 HK), HKD 6.6 for SJM Holdings Ltd (880 HK), $133 for Wynn Resorts Ltd (WYNN US), $56 for Las Vegas Sands Corp (LVS US), and $29.50 for MGM Resorts International (MGM US). We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

Asia Frontier Capital Travel Report: Laos

Making sense of the Global Market, Euromonitor International Ltd.

Yu Mitsuhashi

Making sense of the Global Market

Euromonitor International Ltd.

We are a global market research company focused on industries, countries, economies and consumers worldwide. Our cross-country comparable research helps your organisation identify opportunities and develop growth strategies in countries and regions across the globe. With offices around the world, 1,200 analysts in 100 countries and market research on every key trend and driver, we give you powerful access to the real story behind consumer change.

2016 was another bumpy year for China’s luxury goods market, plagued by the long-term impact of the anti-corruption campaign undertaken by the central government and the economic downturn as well as China’s latest effort to curb wrongdoing in luxury consumption in a crackdown on the grey market.

2016 was another bumpy year for China’s luxury goods market, plagued by the long-term impact of the anti-corruption campaign undertaken by the central government and the economic downturn as well as China’s latest effort to curb wrongdoing in luxury consumption in a crackdown on the grey market.

China's Luxury Market Set for Steady Performance Amid Unfavourable Market Environment

China

BYD Company Limited, through its subsidiaries, manufactures and sells automobiles. The Company also researches, develops, manufactures and sells batteries, which are applied on mobile phones, cordless phones, power tools and other kinds of portable electronic devices.

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BYD (1211 HK)

Andrew on Tech: Rechargeable Battery - The Next US$100bn Industry /Part 1

Over US$100bn industry by 2026E: By assuming BEVs to have 13% of global automotive industry shares at battery cell cost of US$80/KWh and 95KWh...

Andrew Lu

China Auto- Dealer Channel Check: End Demand in March Weaker than Expected, Destocking Needed

Retail sales of China's passenger vehicles would probably decline y-y again in March, after a 2% y-y decline in 2M2017. Our channel checks with...

Victoria Li

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in...

Morningstar, Inc.

Asia Frontier Capital Travel Report: Laos

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos...

Asia Frontier Capital

China's Luxury Market Set for Steady Performance Amid Unfavourable Market Environment

2016 was another bumpy year for China’s luxury goods market, plagued by the long-term impact of the anti-corruption campaign undertaken by the...

Euromonitor International Ltd.

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