ASEAN Insight Provider, CrossASEAN Research

Angus Mackintosh

ASEAN Insight Provider

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

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<p><a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a> released a reassuring set of 1Q2021 results this week, which were lower than last year but also reflect the company's resilience and represent some cause for optimism coupled with some interesting acquisitions in the digital space.</p>
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<p>The company saw its headline sales fall -4% YoY in 1Q2021 while net income fell by -22% YoY to IDR3,728bn. These numbers are against a high base last year since the pandemic only started to impact Indonesia in March 2020.</p>
<p>Car sales in 1Q2021 were down -24% YoY and motorcycle sales were down -17% YoY but there was a strong recovery in March of +70% MoM as luxury tax was cut.</p>
<p>Subsidiary <a href="https://www.smartkarma.com/entities/united-tractors-tbk-pt" target="_blank" data-smartkarma-citation="entities:698:1" rel="noopener">United Tractors (UNTR IJ)</a> saw higher Komatsu heavy equipment sales but this was partially offset by lower mining contracting volumes.</p>
<p>The company's plantation business under <a href="https://www.smartkarma.com/entities/astra-agro-lestari-tbk-pt" target="_blank" data-smartkarma-citation="entities:4050:1" rel="noopener">Astra Agro Lestari (AALI IJ)</a>saw a negative impact from lower crude palm oil prices. </p>
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<section class="figure">The above numbers were achieved with the backdrop of an increasingly strong balance sheet and funding position, with net cash increasing to IDR15.9tn as at the end of 1Q2021.</section>
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<section class="figure">Management suggested that if trading performance continues to improve in the remainder of the year then both capital expenditure and working capital could increase.</section>
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<p><a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a>'s heavy equipment, mining, construction, and energy division saw a +3% increase in net profit to IDR1.1tn, with 59.5%-owned <a href="https://www.smartkarma.com/entities/united-tractors-tbk-pt" target="_blank" data-smartkarma-citation="entities:698:1" rel="noopener">United Tractors (UNTR IJ)</a> benefiting from higher Komatsu heavy equipment sales and better gold and coal prices </p>
<p>In a move signaling a growing focus on building its digital pillar, <a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a>'s digital arm Astra Digital Internasional was the lead in the series C funding for Halodoc, one of Indonesia's largest health-tech start-ups. It also made an investment in groceries player Sayurbox.</p>
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<p><a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" data-smartkarma-citation="entities:46:1" rel="noopener">Astra International (ASII IJ)</a> trades on 12.3x FY21E PER and 10.3x FY22E PER versus its 5-year average forward PER, which stands at 14x making it look very attractive at these levels.</p>
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Astra International (ASII IJ) released a reassuring set of 1Q2021 results this week, which were lower than last year but also reflect the company's resilience and represent some cause for optimism coupled with some interesting acquisitions in the digital space.

The company saw its headline sales fall -4% YoY in 1Q2021 while net income fell by -22% YoY to IDR3,728bn. These numbers are against a high base last year since the pandemic only started to impact Indonesia in March 2020.
Car sales in 1Q2021 were down -24% YoY and motorcycle sales were down -17% YoY but there was a strong recovery in March of +70% MoM as luxury tax was cut.
Subsidiary United Tractors (UNTR IJ) saw higher Komatsu heavy equipment sales but this was partially offset by lower mining contracting volumes.
The company's plantation business under Astra Agro Lestari (AALI IJ)saw a negative impact from lower crude palm oil prices. 



The above numbers were achieved with the backdrop of an increasingly strong balance sheet and funding position, with net cash increasing to IDR15.9tn as at the end of 1Q2021.








Management suggested that if trading performance continues to improve in the remainder of the year then both capital expenditure and working capital could increase.








Astra International (ASII IJ)'s heavy equipment, mining, construction, and energy division saw a +3% increase in net profit to IDR1.1tn, with 59.5%-owned United Tractors (UNTR IJ) benefiting from higher Komatsu heavy equipment sales and better gold and coal prices 
In a move signaling a growing focus on building its digital pillar, Astra International (ASII IJ)'s digital arm Astra Digital Internasional was the lead in the series C funding for Halodoc, one of Indonesia's largest health-tech start-ups. It also made an investment in groceries player Sayurbox.


Astra International (ASII IJ) trades on 12.3x FY21E PER and 10.3x FY22E PER versus its 5-year average forward PER, which stands at 14x making it look very attractive at these levels.



Astra International (ASII IJ) - Digitally Remastered in a Cyclical Recovery

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>In this Insight, we look at Asian financial pairs that normally trade in a tight band versus each other and are now trading at levels that are close to an extreme, making it likely that there could be a short term reversal. We also recap our earlier ideas and recommend exiting a position where there are gains and the price ratio is near a turning point.</p></div><div><p>These are all large cap financials that trade in excess of US$20m a day, so implementing the strategy should be possible using stock borrow or single stock futures.</p></div><div>
<p>These ideas are based purely off the stock price history and we recommend investors use a fundamental overlay to determine if the price action is reflective of changes in the sector that benefit one company at the expense of the other, or benefit one company more than the other.</p>
<p>Over the last couple of months, our pair trades have returned 2.54% on average.</p>
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In this Insight, we look at Asian financial pairs that normally trade in a tight band versus each other and are now trading at levels that are close to an extreme, making it likely that there could be a short term reversal. We also recap our earlier ideas and recommend exiting a position where there are gains and the price ratio is near a turning point.These are all large cap financials that trade in excess of US$20m a day, so implementing the strategy should be possible using stock borrow or single stock futures.
These ideas are based purely off the stock price history and we recommend investors use a fundamental overlay to determine if the price action is reflective of changes in the sector that benefit one company at the expense of the other, or benefit one company more than the other.
Over the last couple of months, our pair trades have returned 2.54% on average.


Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

<p><strong>Executive Summary:</strong> The narrative has changed and there is little to stand in the way of further Treasury market strength near term. This should lead to US dollar weakness and may be Emerging Market risk asset supportive. Nonetheless, we suspect that Asia will remain driven by concerns that China is tightening which could constrain investor sentiment in this market.</p><p>Trading volume-, Treasury issuance- and economic data-risks were no match for short-position unwinding, data reappraisal, and Japanese investor re-entry into the Treasury bond market over the last week<strong>. </strong>Treasury yields continued their retracement, posting their biggest weekly rally since August. Furthermore, after the worst quarter since 1980, Treasuries have gained around 1% this month, paring 2021 losses to about 3.3%. We may have seen a sell-the-rumor, buy-the-fact market event occur with respect to Treasuries and the better-than-expected March economic data set.</p><p>The narrative has changed to one that is Treasury bond supportive. Fixed income markets are discounting lower economic growth and price expectations. Scenarios with a declining growth rate may be increasingly discounted in the Treasury markets. With GDP growth anticipated to tail-off over the next few quarters, sustainable wage growth may not materialize. Meanwhile, supply chain bottlenecks and rising producer prices may negatively impact corporate margins rather than consumer wallets<strong>. </strong>We elaborate on each of these themes within.</p><p>Against this backdrop, there are limited economic announcements which could impact the Treasury market over the next few weeks. Meanwhile, Japanese investors may find buying US$ denominated bonds attractive after hedging the currency risk. This may be risk asset supportive going forward.  We review this inside.</p><p>In the bank credit markets, March’s carry trade outperformance continued to unwind as shorter-duration bonds outperformed during the week. All recent higher coupon outperformers experienced large spread declines. Even the Turkish bank credit curve behaved in a manner consistent with other bonds globally, rather than trade at a discount. We identify the winners and losers.</p><p>In China, while the immediate threat of Credit Armageddon may be lower, the ultimate game plan for China Huarong Asset Management is yet to be known. As such, the market may remain skittish while trading opportunities remain amongst the other asset management companies. Please see: <a href="https://www.smartkarma.com/compose/insight/50463/China%20Huarong:%20Contagion%20Creates%20Opportunity.%20Read%20more:%20https:/skr.ma/SmFJQ" target="_blank" rel="noopener">China Huarong: Contagion Creates Opportunity</a> for more details.</p><p>US banks set a high bar for performance by announcing stellar investment banking and progressively improving core banking results last week. Then they signaled that they anticipate significantly higher interest rates later this year by hitting the market for record breaking amounts. Middle East- and Asia-headquartered banks may lead the headlines next week. Amongst major European names, only Credit Suisse is scheduled to provide final Q1 results on Tuesday, 20 April. For our thoughts, please see: <a href="https://www.smartkarma.com/compose/insight/50463/Credit%20Suisse:%20Skating%20on%20a%20Thin%20Layer%20of%20Capital.%20Read%20more:%20https:/skr.ma/rGLd5" target="_blank" rel="noopener">Credit Suisse: Skating on a Thin Layer of Capital</a>.</p><p><strong>Market Outlook</strong>: Already looking past upcoming spikes in inflation and job creation, the Treasury market is repricing for lower growth and lower rates over a longer time-period. This should be risk asset supportive as the US dollar finally weakens. The risk is that of impotent monetary policy and a constrained fiscal response in a shorter than expected business cycle.  </p>

Executive Summary: The narrative has changed and there is little to stand in the way of further Treasury market strength near term. This should lead to US dollar weakness and may be Emerging Market risk asset supportive. Nonetheless, we suspect that Asia will remain driven by concerns that China is tightening which could constrain investor sentiment in this market.Trading volume-, Treasury issuance- and economic data-risks were no match for short-position unwinding, data reappraisal, and Japanese investor re-entry into the Treasury bond market over the last week. Treasury yields continued their retracement, posting their biggest weekly rally since August. Furthermore, after the worst quarter since 1980, Treasuries have gained around 1% this month, paring 2021 losses to about 3.3%. We may have seen a sell-the-rumor, buy-the-fact market event occur with respect to Treasuries and the better-than-expected March economic data set.The narrative has changed to one that is Treasury bond supportive. Fixed income markets are discounting lower economic growth and price expectations. Scenarios with a declining growth rate may be increasingly discounted in the Treasury markets. With GDP growth anticipated to tail-off over the next few quarters, sustainable wage growth may not materialize. Meanwhile, supply chain bottlenecks and rising producer prices may negatively impact corporate margins rather than consumer wallets. We elaborate on each of these themes within.Against this backdrop, there are limited economic announcements which could impact the Treasury market over the next few weeks. Meanwhile, Japanese investors may find buying US$ denominated bonds attractive after hedging the currency risk. This may be risk asset supportive going forward.  We review this inside.In the bank credit markets, March’s carry trade outperformance continued to unwind as shorter-duration bonds outperformed during the week. All recent higher coupon outperformers experienced large spread declines. Even the Turkish bank credit curve behaved in a manner consistent with other bonds globally, rather than trade at a discount. We identify the winners and losers.In China, while the immediate threat of Credit Armageddon may be lower, the ultimate game plan for China Huarong Asset Management is yet to be known. As such, the market may remain skittish while trading opportunities remain amongst the other asset management companies. Please see: China Huarong: Contagion Creates Opportunity for more details.US banks set a high bar for performance by announcing stellar investment banking and progressively improving core banking results last week. Then they signaled that they anticipate significantly higher interest rates later this year by hitting the market for record breaking amounts. Middle East- and Asia-headquartered banks may lead the headlines next week. Amongst major European names, only Credit Suisse is scheduled to provide final Q1 results on Tuesday, 20 April. For our thoughts, please see: Credit Suisse: Skating on a Thin Layer of Capital.Market Outlook: Already looking past upcoming spikes in inflation and job creation, the Treasury market is repricing for lower growth and lower rates over a longer time-period. This should be risk asset supportive as the US dollar finally weakens. The risk is that of impotent monetary policy and a constrained fiscal response in a shorter than expected business cycle.  

Bank Credit Weekly: Narrative Change Pushes Carry-Trade Unwind as Treasuries Rally

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

<div><p>Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. </p></div><div><p>NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020, it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. </p></div><div><p>Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20. Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium. </p></div><div>
<p>We have covered various aspects of the deal in our earlier note, <a href="https://www.smartkarma.com/insights/ngern-tid-lor-pre-ipo-pre-covid-growth-track-record-has-been-very-strong" target="_blank" rel="noopener">Ngern Tid Lor Pre-IPO - Pre-COVID growth track record has been very strong</a> and <a href="https://www.smartkarma.com/insights/ngern-tid-lor-pre-ipo-peer-comparison-playing-catch-up-after-being-left-behind" target="_blank" rel="noopener">Ngern Tid Lor Pre-IPO - Peer Comparison - Playing Catch up After Being Left Behind</a>.</p>
<p>In this note we’ll talk about valuation and deal dynamics.</p>
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Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020, it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20. Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium. 
We have covered various aspects of the deal in our earlier note, Ngern Tid Lor Pre-IPO - Pre-COVID growth track record has been very strong and Ngern Tid Lor Pre-IPO - Peer Comparison - Playing Catch up After Being Left Behind.
In this note we’ll talk about valuation and deal dynamics.


Ngern Tid Lor IPO - Not Really at a Large Discount but the Overall Sector Has Been Doing Very Well

<p>Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$750m via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. </p><p>NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020,  it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. </p><p>Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20.</p><p>Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium.</p>

Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$750m via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly owned by Bank of Ayudhya and CVC Capital Partners. As per Oliver Wyman’s estimates, NTL had a 16% market share in the vehicle lending market in Thailand, as of 2019. NTL provides hire purchase loans for motorcycles and cars, along with new and used trucks. It also provides insurance brokerage services through its branches for non-life and life insurance. It offers motor insurance, compulsory motor insurance, personal accident insurance, cancer insurance, and loan insurance. As of Dec 2020,  it had over 730,000 accounts with total outstanding loans of THB51.3bn. In 2020, it generated non-life insurance premium sales of THB4bn. Over 2016-20, NTL’s gross loans grew at 25.1% CAGR, averaging 25%+ per annum over 2017-19 before slowing down to 7% YoY growth in 2020. Its total income has grown at 22.5% CAGR, while PAT did better with a CAGR of 29.1% over 2016-20.Although, asset quality has taken a hit owing to COVID-19 and Bank of Thailand's induced moratorium.

Ngern Tid Lor Pre-IPO - Pre-COVID Growth Track Record Has Been Very Strong

Thailand

Bangkok Bank Public Company Limited provides various banking and financial services including commercial, consumer, credit card, and mortgage lending, international trade financing, investment banking, and securities services.

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Bangkok Bank Public (BBL TB)

Astra International (ASII IJ) - Digitally Remastered in a Cyclical Recovery

Astra remains a top pick to play the economic recovery in Indonesia through autos, motorbikes, financial services, and heavy equipment with...

Angus Mackintosh

Pair Trading Ideas - Asian Financials

We highlight potential trades among liquid large cap Asian financial stocks that are correlated and exhibit mean reversion. We recommend closing...

Brian Freitas

Bank Credit Weekly: Narrative Change Pushes Carry-Trade Unwind as Treasuries Rally

The narrative has changed. There is little to stand in the way of further Treasury market strength near term. This should lead to US$ weakness and...

Hank Calenti, CFA

Ngern Tid Lor IPO - Not Really at a Large Discount but the Overall Sector Has Been Doing Very Well

Ngern Tid Lor aims to raise around US$1bn via selling a mix of primary and secondary shares in its Thailand IPO. Prior to listing, it was jointly...

Sumeet Singh

Ngern Tid Lor Pre-IPO - Pre-COVID Growth Track Record Has Been Very Strong

Ngern Tid Lor (NTL), a financial service provider based in Thailand, aims to raise around US$750m via selling a mix of primary and secondary shares...

Sumeet Singh

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