Equity Analyst, LightStream Research

Oshadhi Kumarasiri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Event-Driven

<ul>
<li>In October 2020, <a href="https://www.smartkarma.com/entities/alibaba-group-holding-ltd" target="_blank" rel="noopener">Alibaba Group (BABA US)</a>-owned Taobao China Holding Limited acquired an additional 70.94% interest in A-RT Retail Holdings Limited (which owns 51% of <a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a>) from its owners, the Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).</li>
<li>As a result, Alibaba took control of 72.35% of the Chinese supermarket chain’s share capital, triggering a mandatory offer at HK$ 8.10 per share.</li>
<li>
<a href="https://www.smartkarma.com/entities/sun-art-retail-group-ltd" target="_blank" data-smartkarma-citation="entities:401:1" rel="noopener">Sun Art Retail (6808 HK)</a> shares closed 16.7% above the implied acquisition price of HK$ 8.10 per share, on the date of the announcement. Around 170m shares changed hands on the same date, compared to an average daily trading volume of 17.0 million shares in the three months leading up to this transaction.</li>
</ul><section class="figure"><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/175/144/original/Picture1.png?1606704586" class="editor-image img-responsive" data-smartkarma-image-id="175144"></figure></section><ul>
<li>From the 19<sup>th</sup> October to 27<sup>th</sup> November, Sun Art Retail shares traded above the minimum mandatory offer price of HK$ 8.10 per share, perhaps an indication that the market may have been expecting an offer of a higher price than HK$ 8.10 per share.</li>
<li>The mandatory offer commenced at the minimum offer price of HK$ 8.10 per share on 27<sup>th</sup> November 2020, and will remain open until 18<sup>th</sup> December 2020.</li>
<li>The independent financial advisor, Somerley Capital Limited, which was appointed by the Independent Board Committee to ascertain the fairness of the mandatory offer, has looked at the company’s historical share price range, PE ratios, and PE discount to the peers and decided that the offer is unfair to the minority shareholders.</li>
</ul>


In October 2020, Alibaba Group (BABA US)-owned Taobao China Holding Limited acquired an additional 70.94% interest in A-RT Retail Holdings Limited (which owns 51% of Sun Art Retail (6808 HK)) from its owners, the Mulliez Family, for an aggregate consideration of US$ 3.6 billion (HK$ 27.96 billion).
As a result, Alibaba took control of 72.35% of the Chinese supermarket chain’s share capital, triggering a mandatory offer at HK$ 8.10 per share.

Sun Art Retail (6808 HK) shares closed 16.7% above the implied acquisition price of HK$ 8.10 per share, on the date of the announcement. Around 170m shares changed hands on the same date, compared to an average daily trading volume of 17.0 million shares in the three months leading up to this transaction.

From the 19th October to 27th November, Sun Art Retail shares traded above the minimum mandatory offer price of HK$ 8.10 per share, perhaps an indication that the market may have been expecting an offer of a higher price than HK$ 8.10 per share.
The mandatory offer commenced at the minimum offer price of HK$ 8.10 per share on 27th November 2020, and will remain open until 18th December 2020.
The independent financial advisor, Somerley Capital Limited, which was appointed by the Independent Board Committee to ascertain the fairness of the mandatory offer, has looked at the company’s historical share price range, PE ratios, and PE discount to the peers and decided that the offer is unfair to the minority shareholders.


A Low-Ball Offer - Aimed to Keep Sun Art Retail Listed

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

Pop Mart International Group L / Equity Capital Markets

<div><p><a href="https://www.smartkarma.com/entities/pop-mart-international-group-limited" target="_blank" data-smartkarma-citation="entities:29016:1" rel="noopener">POP MART (POP HK)</a>  plans to raise around US$200-300m in its Hong Kong IPO.</p></div><div><p>Pop Mart (PM) is the largest and fastest growing pop toy company in China, in terms of 2019 revenue and revenue CAGR over 2017-19. PM had a 8.5% market share by retail value, making it the largest player in the pop toy retailing market.</p></div><div><p>In our previous insights, we spoke about the positive/negative aspects, peers and valuation, and undertook store and product reviews: </p></div><div><ul style="list-style-type: disc;">
<li>
<a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-the-positives-expanding-portfolio-wider-distribution-explosive-earnings-growth" target="_blank" rel="noopener">Pop Mart Pre-IPO - The Positives - Expanding Portfolio+Wider Distribution= Explosive Earnings Growth,</a> and</li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-the-negatives-is-it-a-brand-owner-or-just-a-retailer" target="_blank" rel="noopener">Pop Mart Pre-IPO - The Negatives - Is It a Brand Owner or Just a Retailer?</a></li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-peer-set-and-valuation" target="_blank" data-smartkarma-citation="insights:41850" rel="noopener">Pop Mart Pre-IPO - Peer Set and Valuation</a></li>
<li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-quick-note-on-the-ground-pop-up-stores-are-effective" target="_blank" rel="noopener">Pop Mart Pre-IPO Quick Note - On the Ground - Pop-Up Stores Are Effective</a></li>
</ul></div><div>
<ul><li><a href="https://www.smartkarma.com/insights/pop-mart-pre-ipo-phip-updates-still-riding-on-past-expansion" target="_blank" rel="noopener">Pop Mart Pre-IPO - PHIP Updates - Still Riding on past Expansion</a></li></ul>
<p>In this note, I’ll talk about the updates to valuation post the PHIP updates.</p>
</div>

POP MART (POP HK)  plans to raise around US$200-300m in its Hong Kong IPO.Pop Mart (PM) is the largest and fastest growing pop toy company in China, in terms of 2019 revenue and revenue CAGR over 2017-19. PM had a 8.5% market share by retail value, making it the largest player in the pop toy retailing market.In our previous insights, we spoke about the positive/negative aspects, peers and valuation, and undertook store and product reviews: 

Pop Mart Pre-IPO - The Positives - Expanding Portfolio+Wider Distribution= Explosive Earnings Growth, and
Pop Mart Pre-IPO - The Negatives - Is It a Brand Owner or Just a Retailer?
Pop Mart Pre-IPO - Peer Set and Valuation
Pop Mart Pre-IPO Quick Note - On the Ground - Pop-Up Stores Are Effective

Pop Mart Pre-IPO - PHIP Updates - Still Riding on past Expansion
In this note, I’ll talk about the updates to valuation post the PHIP updates.


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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

<div><p>The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.</p></div><div><p>Hong Kong saw shorts rise on <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>, <a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, <a href="https://www.smartkarma.com/entities/wuxi-apptec" target="_blank" data-smartkarma-citation="entities:23679:1" rel="noopener">Wuxi Biologics (2269 HK)</a> and <a href="https://www.smartkarma.com/entities/haier-electronics-group-co" target="_blank" data-smartkarma-citation="entities:4877:1" rel="noopener">Haier Electronics Group Co (1169 HK)</a> while there was short covering on <a href="https://www.smartkarma.com/entities/alibaba-group" target="_blank" data-smartkarma-citation="entities:28434:1" rel="noopener">Alibaba Group (9988 HK)</a>, <a href="https://www.smartkarma.com/entities/meituan-dianping" target="_blank" data-smartkarma-citation="entities:26970:1" rel="noopener">Meituan (3690 HK)</a>, <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> and <a href="https://www.smartkarma.com/entities/want-want-china-holdings-ltd" target="_blank" data-smartkarma-citation="entities:355:1" rel="noopener">Want Want (151 HK)</a>. Shorts increased in Real Estate, Health Care, Communication Services and Financial stocks, and decreased on Information Technology and Consumer Discretionary names.</p></div><div><p>In Japan, stocks that saw the most shorts were <a href="https://www.smartkarma.com/entities/showa-denko-k-k" target="_blank" data-smartkarma-citation="entities:1496:1" rel="noopener">Showa Denko K.K. (4004 JP)</a>, <a href="https://www.smartkarma.com/entities/pigeon-corp" target="_blank" data-smartkarma-citation="entities:3294:1" rel="noopener">Pigeon Corp (7956 JP)</a>, <a href="https://www.smartkarma.com/entities/change-inc" target="_blank" data-smartkarma-citation="entities:27414:1" rel="noopener">Change Inc (3962 JP)</a> and <a href="https://www.smartkarma.com/entities/nippon-building-fund-inc" target="_blank" data-smartkarma-citation="entities:1900:1" rel="noopener">Nippon Building Fund (8951 JP)</a> while shorts decreased on <a href="https://www.smartkarma.com/entities/fast-retailing-co-ltd" target="_blank" data-smartkarma-citation="entities:751:1" rel="noopener">Fast Retailing (9983 JP)</a>, <a href="https://www.smartkarma.com/entities/advantest-corp" target="_blank" data-smartkarma-citation="entities:18107:1" rel="noopener">Advantest Corp (6857 JP)</a>, <a href="https://www.smartkarma.com/entities/tdk-corp" target="_blank" data-smartkarma-citation="entities:18847:1" rel="noopener">TDK Corp (6762 JP)</a> and <a href="https://www.smartkarma.com/entities/aozora-bank-ltd" target="_blank" data-smartkarma-citation="entities:6483:1" rel="noopener">Aozora Bank Ltd (8304 JP)</a>. Sectorally, shorts increased on Materials, Industrials, Real Estate and Consumer Discretionary names.</p></div><div><p>In Korea, the biggest increase in shorts were seen on <a href="https://www.smartkarma.com/entities/lg-chem-ltd" target="_blank" data-smartkarma-citation="entities:3583:1" rel="noopener">LG Chem Ltd (051910 KS)</a> and <a href="https://www.smartkarma.com/entities/doosan-infracore-co-ltd" target="_blank" data-smartkarma-citation="entities:3982:1" rel="noopener">Doosan Infracore (042670 KS)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/amorepacific-corp" target="_blank" data-smartkarma-citation="entities:20854:1" rel="noopener">Amorepacific Corp (090430 KS)</a>, <a href="https://www.smartkarma.com/entities/celltrion-inc" target="_blank" data-smartkarma-citation="entities:991:1" rel="noopener">Celltrion Inc (068270 KS)</a>, <a href="https://www.smartkarma.com/entities/lg-display-co-ltd" target="_blank" data-smartkarma-citation="entities:7145:1" rel="noopener">LG Display (034220 KS)</a> and <a href="https://www.smartkarma.com/entities/samsung-electronics-co-ltd" target="_blank" data-smartkarma-citation="entities:191:1" rel="noopener">Samsung Electronics (005930 KS)</a>. </p></div><div><p>Stocks in Taiwan that saw the highest increase in shorts were <a href="https://www.smartkarma.com/entities/largan-precision-co-ltd" target="_blank" data-smartkarma-citation="entities:9126:1" rel="noopener">Largan Precision (3008 TT)</a>, <a href="https://www.smartkarma.com/entities/pegatron-corp" target="_blank" data-smartkarma-citation="entities:12852:1" rel="noopener">Pegatron Corp (4938 TT)</a>, <a href="https://www.smartkarma.com/entities/pan-jit-international-inc" target="_blank" data-smartkarma-citation="entities:12501:1" rel="noopener">Pan Jit International (2481 TT)</a> and <a href="https://www.smartkarma.com/entities/elite-semiconductor-memory" target="_blank" data-smartkarma-citation="entities:9373:1" rel="noopener">Elite Semiconductor Memory (3006 TT)</a> while shorts were covered on <a href="https://www.smartkarma.com/entities/taiwan-semiconductor-manufacturing-company" target="_blank" data-smartkarma-citation="entities:11230:1" rel="noopener">TSMC (2330 TT)</a>, <a href="https://www.smartkarma.com/entities/macronix-international" target="_blank" data-smartkarma-citation="entities:3247:1" rel="noopener">Macronix International (2337 TT)</a>, <a href="https://www.smartkarma.com/entities/yageo-corporation" target="_blank" data-smartkarma-citation="entities:13212:1" rel="noopener">Yageo Corporation (2327 TT)</a> and <a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a>. </p></div>

The Asia Short Interest weekly looks at moves in market wide short interest and highlights movements in stock specific short interest across Hong Kong, Japan, Korea and Taiwan using the last available data published by the relevant authorities.Hong Kong saw shorts rise on Tencent Holdings (700 HK), Ping An Insurance (H) (2318 HK), Wuxi Biologics (2269 HK) and Haier Electronics Group Co (1169 HK) while there was short covering on Alibaba Group (9988 HK), Meituan (3690 HK), Xiaomi Corp (1810 HK) and Want Want (151 HK). Shorts increased in Real Estate, Health Care, Communication Services and Financial stocks, and decreased on Information Technology and Consumer Discretionary names.In Japan, stocks that saw the most shorts were Showa Denko K.K. (4004 JP), Pigeon Corp (7956 JP), Change Inc (3962 JP) and Nippon Building Fund (8951 JP) while shorts decreased on Fast Retailing (9983 JP), Advantest Corp (6857 JP), TDK Corp (6762 JP) and Aozora Bank Ltd (8304 JP). Sectorally, shorts increased on Materials, Industrials, Real Estate and Consumer Discretionary names.In Korea, the biggest increase in shorts were seen on LG Chem Ltd (051910 KS) and Doosan Infracore (042670 KS) while shorts were covered on Amorepacific Corp (090430 KS), Celltrion Inc (068270 KS), LG Display (034220 KS) and Samsung Electronics (005930 KS). Stocks in Taiwan that saw the highest increase in shorts were Largan Precision (3008 TT), Pegatron Corp (4938 TT), Pan Jit International (2481 TT) and Elite Semiconductor Memory (3006 TT) while shorts were covered on TSMC (2330 TT), Macronix International (2337 TT), Yageo Corporation (2327 TT) and Mediatek Inc (2454 TT). 

Asia Short Interest Weekly: Tencent, Want Want, Showa Denko, NBF, LG Chem, AmoreCorp, Pegatron

Chief Economist

Diana Choyleva

Enodo Economics

Enodo Economics is an independent macroeconomic forecasting company that untangles complexity, challenges the consensus, and makes sense of the future. Our focus is on China – one of the most misunderstood economies in the world, but one of the most important to figure out.  Enodo’s chief economist, Diana Choyleva, has been analysing China for almost 20 years, while Enodo’s team boasts a combined 140 years’ experience covering China’s economy, politics and markets. 

Macroeconomics

<h2>China News That Matters</h2><ul>
<li>China claims an end to (extreme) poverty</li>
<li>Defaults and a big choice on debt </li>
<li>Rule of law, according to man who controls courts </li>
<li>Hong Kong leader enjoys obedient legislature</li>
<li>China’s most ambitious moonshot yet</li>
</ul><div class="content-remarks"><p>In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.</p></div>

China News That Matters
China claims an end to (extreme) poverty
Defaults and a big choice on debt 
Rule of law, according to man who controls courts 
Hong Kong leader enjoys obedient legislature
China’s most ambitious moonshot yet
In my weekly digest China News That Matters, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and highlight why I think the news is significant. These posts are meant to neither be bullish nor bearish, but help you separate the signal from the noise.

Poverty/ Debt/ Xi Jinping/ Hong Kong/ Space

Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/naspers-ltd" target="_blank" data-smartkarma-citation="entities:21085:1" rel="noopener">Naspers (NPN SJ)</a> gives you deeply discounted exposure to one of the highest quality companies listed in the Emerging Markets, <a href="https://www.smartkarma.com/entities/tencent-holdings-ltd" target="_blank" data-smartkarma-citation="entities:26:1" rel="noopener">Tencent Holdings (700 HK)</a>. Should you back out the estimated fair values of all investments outside of Prosus’ 31% holding in Tencent from the current Naspers market cap, you are effectively buying exposure to Tencent for only 16.2x 2021F earnings.</p>
<p>Often overlooked, Naspers also gives exposure to a diverse range of online businesses, in differing stages of development, which are likely to structurally benefited from lasting changes to consumer behaviour in the wake of the COVID-19 pandemic.</p>
<p>Further, Management has signalled their focus on meaningfully reducing its discount to listed net asset value by implementing a $5bn share buyback program, during November 2020, which should also support the share price through volatility in the near term. </p>
<p>The key risk to the investment thesis regards the newly proposed Anti-Monopoly Compliance Guidelines for the Platform Economy released by China’s State Administration for Market Regulation (SAMR), a clear signal of tougher antitrust regulations going forward. Tencent should, however, be able to manage through these better than the large eCommerce players.</p>

Naspers (NPN SJ) gives you deeply discounted exposure to one of the highest quality companies listed in the Emerging Markets, Tencent Holdings (700 HK). Should you back out the estimated fair values of all investments outside of Prosus’ 31% holding in Tencent from the current Naspers market cap, you are effectively buying exposure to Tencent for only 16.2x 2021F earnings.
Often overlooked, Naspers also gives exposure to a diverse range of online businesses, in differing stages of development, which are likely to structurally benefited from lasting changes to consumer behaviour in the wake of the COVID-19 pandemic.
Further, Management has signalled their focus on meaningfully reducing its discount to listed net asset value by implementing a $5bn share buyback program, during November 2020, which should also support the share price through volatility in the near term. 
The key risk to the investment thesis regards the newly proposed Anti-Monopoly Compliance Guidelines for the Platform Economy released by China’s State Administration for Market Regulation (SAMR), a clear signal of tougher antitrust regulations going forward. Tencent should, however, be able to manage through these better than the large eCommerce players.

2021 High Conviction: Naspers, Deeply Discounted Exposure to Accelerating Online Sales

China

Alibaba Group Holding Limited provides online sales services. The Company provides internet infrastructure, electronic commerce, online financial, and internet content services through its subsidiaries. Alibaba Group Holding offers its products and services worldwide.

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Alibaba Group Holding (BABA US)

A Low-Ball Offer - Aimed to Keep Sun Art Retail Listed

It appears that Alibaba is not particularly keen on adding any more to the 72.35% of Sun Art shares it already owns. However, by law, Alibaba is...

Oshadhi Kumarasiri

Pop Mart Pre-IPO - Valuation Updates

POP MART plans to raise around US$200-300m in its Hong Kong IPO. Pop Mart is the largest and fastest growing pop toy company in China, in terms of...

Sumeet Singh

Asia Short Interest Weekly: Tencent, Want Want, Showa Denko, NBF, LG Chem, AmoreCorp, Pegatron

The Asia short report highlights large movements in weekly short interest across HK, Japan, Korea and Taiwan to be used as an input in trading...

Brian Freitas

Poverty/ Debt/ Xi Jinping/ Hong Kong/ Space

In my weekly digest, I will give you selected summaries, sourced from a variety of local Chinese-language and international news outlets, and...

Diana Choyleva

2021 High Conviction: Naspers, Deeply Discounted Exposure to Accelerating Online Sales

Naspers: Deeply discounted exposure to Tencent, a diverse range of online businesses set to benefit from accelerated online activity post-COVID-19...

Wium Malan, CFA

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