CHINA - Healthcare, Steel, Autos, Education, Research From Beijing

Scott Laprise/ 乐天虎

CHINA - Healthcare, Steel, Autos, Education

Research From Beijing

We try to provide our clients with on the ground research of what is really going on here in China.

Our business goal and focus are to provide on the ground research This will give our clients an early look at changes about to happen in China and to give them an edge.

To have the ability to go out and check a car dealer or visit a hospital or go see any new launches in the market. We have regular products such as our steel monthly, a visit to the traders and discuss with them what they see. The steel trader visit gives a great early proxy to spending by the government. We do weekly car dealer visits to see how the car companies are doing but this is also a proxy to the consumer and how is the consumer thinking these days. We visit school and hospitals and attend events to find out what people are really thinking.

Our primary method of research is fundamental research starting with a neutral view, analyzing the financials and building the case for the company. We rarely look at the news as we have found the views to be incomplete lacking the understanding of Chinese thinking. We strive for a fresh differential view on the Chinese stocks. Most Chinese research is made by analysts reading the news and reading other Chinese analysts giving clients the same old view. We also try to give you a better understanding of how the Chinese look at issues. The English media tends to focus on examining issues from the western view giving investors often an incomplete view.

If you want your research done by professionals on the ground who are able to give you early feedback instead of most research taking a long distance view driven by the media. This is our value proposition: focused on the ground research to limited clients. We think this is the best way to give you the best chance to generate alpha for your funds.

Equity Bottom-Up

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<li>
We talk with a salesman about demand, discounts and sales.
</li>
<li>We discuss the inventory levels at the dealership.</li>
<li>We discuss demand and what they are hearing from high customers.</li>
<li>We give you our view on luxury car demand for the rest of the year.</li>
</ul><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/059/145/original/intro.PNG?1532785017" class="editor-image img-responsive" data-smartkarma-image-id="59145"></figure>



We talk with a salesman about demand, discounts and sales.

We discuss the inventory levels at the dealership.
We discuss demand and what they are hearing from high customers.
We give you our view on luxury car demand for the rest of the year.


Investment Advisors, JL Warren Capital

Junheng Li

Investment Advisors

JL Warren Capital

JL Warren Capital LLC is a leading independent equity research firm focused on Chinese companies and listed multinationals in China. We employ a bottom-up research approach that takes great care to avoid the acquisition of material non-public information. Through investigative due diligence including channel surveys and interviews, our research helps clients to pinpoint the dislocations in the market.

Brilliance China Automotive / Equity Bottom-Up

Brilliance China Auto (1211 HK) is an early victim of China’s open market access, which unfortunately, is largely due to the OEM's incompetence.  The stock took a hit, down 12% last night - as its JV partner BMW is said to increase its stake in BMW-Brilliance Auto partnership from its current 50% to unspecified higher percentage.  Anecdotally we have always heard from dealership that Munich has been long dissatisfied in its relationship with Brilliance.  Breaking free of the “marriage” is made possible by China’s latest policy to allow foreign OEMs to operate by themselves without a local partner by 2022. Within the next 15 years, we will see a rebalancing of the relationships between the auto JVs, as the need for a local intermediary for market access is phased out.  Judging from the poor sales of the non-BMW cars that Brilliance makes and sells, there is little sign of tech transfer from BMW to Brilliance despite 15-years of the partnership since 2003.  Brilliance is likely to remain the main manufacturer of BMW cars, but BMW is now free to set up its own factories and work with multiple partners.  A 35% YTD selloff in Brilliance stock can be partially explained by its ongoing diminishing role in BBA JV.

Brilliance China Auto (1211 HK) is an early victim of China’s open market access, which unfortunately, is largely due to the OEM's incompetence.  The stock took a hit, down 12% last night - as its JV partner BMW is said to increase its stake in BMW-Brilliance Auto partnership from its current 50% to unspecified higher percentage.  Anecdotally we have always heard from dealership that Munich has been long dissatisfied in its relationship with Brilliance.  Breaking free of the “marriage” is made possible by China’s latest policy to allow foreign OEMs to operate by themselves without a local partner by 2022. Within the next 15 years, we will see a rebalancing of the relationships between the auto JVs, as the need for a local intermediary for market access is phased out.  Judging from the poor sales of the non-BMW cars that Brilliance makes and sells, there is little sign of tech transfer from BMW to Brilliance despite 15-years of the partnership since 2003.  Brilliance is likely to remain the main manufacturer of BMW cars, but BMW is now free to set up its own factories and work with multiple partners.  A 35% YTD selloff in Brilliance stock can be partially explained by its ongoing diminishing role in BBA JV.

Brilliance China Auto – Victim of Open Market Access

Per our dealership survey, we hear increasingly aggressive price discounts on the BMW 5 Series from 10-15% in Q1 to 15-20% in May - June.  Current inventory to sales ratio has elevated to ~2.5-3.0 months from ~1.0-1.5 months one year ago.  Most of the dealerships reported flat unit sell-through in H1 2018/2017 for JV models and imports combined.  Dealerships attribute slowing end demand, overly segmented product lines and a highly competitive landscape as reasons for increasing inventory.  <a href="https://www.smartkarma.com/entities/469" target="_blank" data-smartkarma-citation="entities:469:1">Brilliance China Automotive (1114 HK)</a> has launched the 1 Series and 2 Series in 2016 and 2017 respectively. Both are small models selling at very low, if any, profitability in crowded, mid-range priced market.  In addition, the dealerships also mentioned that a tightening credit environment in China for both consumers and small businesses is impacting their liquidity, which in turn limits their ability to finance working capital.   <figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/057/108/original/Capture.PNG?1531084765" class="editor-image img-responsive" data-smartkarma-image-id="57108"></figure>

Per our dealership survey, we hear increasingly aggressive price discounts on the BMW 5 Series from 10-15% in Q1 to 15-20% in May - June.  Current inventory to sales ratio has elevated to ~2.5-3.0 months from ~1.0-1.5 months one year ago.  Most of the dealerships reported flat unit sell-through in H1 2018/2017 for JV models and imports combined.  Dealerships attribute slowing end demand, overly segmented product lines and a highly competitive landscape as reasons for increasing inventory.  Brilliance China Automotive (1114 HK) has launched the 1 Series and 2 Series in 2016 and 2017 respectively. Both are small models selling at very low, if any, profitability in crowded, mid-range priced market.  In addition, the dealerships also mentioned that a tightening credit environment in China for both consumers and small businesses is impacting their liquidity, which in turn limits their ability to finance working capital.   

BMW Brilliance Dealership Survey: 20% Discount for 5 Series, Escalating Inventory

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

Brilliance China Automotive / Technical Analysis

With HK back in the drivers seat, we find ourselves looking for stock plays outside of the top teir financials and Brilliance Auto stands out as a high confidence pattern to buy for a fast breakout higher given the underlying bullish indicator structures. Descending wedge formation have about a 70% probability of breaking to the upside in what is a continuation pattern. If one add in stronger indicator profiles that percentage increased to the 85% mark.The well manner price wedge clearly labels…

With HK back in the drivers seat, we find ourselves looking for stock plays outside of the top teir financials and Brilliance Auto stands out as a high confidence pattern to buy for a fast breakout higher given the underlying bullish indicator structures. Descending wedge formation have about a 70% probability of breaking to the upside in what is a continuation pattern. If one add in stronger indicator profiles that percentage increased to the 85% mark.The well manner price wedge clearly labels…

Thematic (Sector/Industry)

In November, the number of mainland Chinese passengers flying overseas reached 1.8 mm, which reflects a growth of 15% year-over-year (yoy).  Macau (+ 52% yoy), Southeast Asia (+39%) and Hong Kong (+25%) were the top 3 destinations in terms of growth of visitation (Exhibit 1).Tourists to South Korea (SK) moderated their decline to -15% yoy (from the trough of -60% in July, Exhibit 2).  Anecdotally we are seeing an improvement in relations between China and South Korea.  For example, the social…

In November, the number of mainland Chinese passengers flying overseas reached 1.8 mm, which reflects a growth of 15% year-over-year (yoy).  Macau (+ 52% yoy), Southeast Asia (+39%) and Hong Kong (+25%) were the top 3 destinations in terms of growth of visitation (Exhibit 1).Tourists to South Korea (SK) moderated their decline to -15% yoy (from the trough of -60% in July, Exhibit 2).  Anecdotally we are seeing an improvement in relations between China and South Korea.  For example, the social…

Chinese Outbound Tourists Up 15%, Strong Macau GGR Growth, Robust High End Discretionary Consumption

Hong Kong

Brilliance China Automotive Holdings Limited, through its subsidiaries, manufactures and distributes minibuses and sedans in the People's Republic of China.  The Company also manufactures and trades automotive components.

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Brilliance China Automotive (1114 HK)

Mercedes Dealership Visit in WUHAN

We talk with a salesman about demand, discounts and sales. We discuss the inventory levels at the dealership. We discuss demand and what they...

Scott Laprise/ 乐天虎

Brilliance China Auto – Victim of Open Market Access

Brilliance China Auto (1211 HK) is an early victim of China’s open market access, which unfortunately, is largely due to the OEM's incompetence. ...

JL Warren Capital

BMW Brilliance Dealership Survey: 20% Discount for 5 Series, Escalating Inventory

Per our dealership survey, we hear increasingly aggressive price discounts on the BMW 5 Series from 10-15% in Q1 to 15-20% in May - June. Current...

JL Warren Capital

Buy Brilliance Auto for a Fast Ride

With HK back in the drivers seat, we find ourselves looking for stock plays outside of the top teir financials and Brilliance Auto stands out as a...

Thomas Schroeder

Chinese Outbound Tourists Up 15%, Strong Macau GGR Growth, Robust High End Discretionary Consumption

In November, the number of mainland Chinese passengers flying overseas reached 1.8 mm, which reflects a growth of 15% year-over-year (yoy). Macau...

JL Warren Capital

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