China Specialist, Auto and Industrial Specialist

Victoria Li

Thematic (Sector/Industry)

Due to the National Holiday, China's September car sales data is not yeat available. However, CAAM estimates that China's passenger vehicle sales in September increased by 7.6% yoy, indicating the sector recovery remains solidly on track.Meanwhile,  September sales data announcements from local leaders, including Geely, BYD, Great Wall and Changan Auto, confirmed that auto demand keeps warming up. In September, Geely (175.HK)auto sales increased by 11% yoy, within which its Lynk&amp;Co sales grew by 38% yoy. Great Wall (2333.HK) reported an 18% yoy sales growth. Changan Auto (000625.CH) reported a 28.6% yoy sales growth. BYD's (1211.HK) sales growth remained weak at 3.6% yoy.Reiterate BUY on Geely.

Due to the National Holiday, China's September car sales data is not yeat available. However, CAAM estimates that China's passenger vehicle sales in September increased by 7.6% yoy, indicating the sector recovery remains solidly on track.Meanwhile,  September sales data announcements from local leaders, including Geely, BYD, Great Wall and Changan Auto, confirmed that auto demand keeps warming up. In September, Geely (175.HK)auto sales increased by 11% yoy, within which its Lynk&amp;Co sales grew by 38% yoy. Great Wall (2333.HK) reported an 18% yoy sales growth. Changan Auto (000625.CH) reported a 28.6% yoy sales growth. BYD's (1211.HK) sales growth remained weak at 3.6% yoy.Reiterate BUY on Geely.

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

With the ongoing COVID-19 cases in the US, its auto sector is unlikely to recover this year that is a drag to <a href="https://www.smartkarma.com/entities/nexteer-automotive-group-ltd" target="_blank" data-smartkarma-citation="entities:15483:1" rel="noopener">Nexteer Automotive (1316 HK)</a> 's earnings but it has recently penetrated the Chinese auto market, supplying to <a href="https://www.smartkarma.com/entities/geely-automobile-holdings-ltd" target="_blank" data-smartkarma-citation="entities:127:1" rel="noopener">Geely Auto (175 HK)</a> for Electric Power Steering component, that could help to increase the company's overall profitability. From a credit perspective, Nexteer's debt-to-equity ratio is also very low compared to the Japanese small-cap peers such as Futaba and KYB and even compared to its two largest customers, <a href="https://www.smartkarma.com/entities/general-motors-co" target="_blank" data-smartkarma-citation="entities:18811:1" rel="noopener">General Motors Co (GM US)</a> and <a href="https://www.smartkarma.com/entities/ford-motor-co" target="_blank" data-smartkarma-citation="entities:19225:1" rel="noopener">Ford Motor Co (F US)</a> at 202% and 390% debt to equity ratio respectively. 
Nexteer is trading at a 30-37% discount to its peers and compared to the Chinese auto suppliers such as Minth, Fuyao and Huayu, Nexteer is also trading at a 55% discount in EV/EBITDA, 33% discount in PER, and 61% in PBR. 
As the Chinese auto sector recovers earlier compared to the US, the company's earnings should start to recover and its profitability should also increase, therefore, its share price should increase correspondingly. BUY.

With the ongoing COVID-19 cases in the US, its auto sector is unlikely to recover this year that is a drag to Nexteer Automotive (1316 HK) 's earnings but it has recently penetrated the Chinese auto market, supplying to Geely Auto (175 HK) for Electric Power Steering component, that could help to increase the company's overall profitability. From a credit perspective, Nexteer's debt-to-equity ratio is also very low compared to the Japanese small-cap peers such as Futaba and KYB and even compared to its two largest customers, General Motors Co (GM US) and Ford Motor Co (F US) at 202% and 390% debt to equity ratio respectively. 
Nexteer is trading at a 30-37% discount to its peers and compared to the Chinese auto suppliers such as Minth, Fuyao and Huayu, Nexteer is also trading at a 55% discount in EV/EBITDA, 33% discount in PER, and 61% in PBR. 
As the Chinese auto sector recovers earlier compared to the US, the company's earnings should start to recover and its profitability should also increase, therefore, its share price should increase correspondingly. BUY. 

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.

<div>With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.</div>

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and conflicts, waiting Trump out until after November. However, Beijing understands the White House’s targeting at China enjoys bipartisan support at this moment, one of the few exceptions of today’s politics in the U.S.

There has been some market concern recently that some investors might switch from Geely's H share into to its coming A share (STAR Board) listing and that might hurt Geely's share performance. SMIC's STAR Board listing is the case referred to by investors as a precedent.In our view, in short term, only investors who prefer trading/investing in A share market but have to buy H shares due to them being extremely keen on some specific companies would move back to A share once corresponding company is available in A share. In this note, we analyzed what happened to SMIC's share performance if that might be repeated by Geely's share performance.  Our conclusion is Geely would likely to get a share price boost by the coming STAR Board listing. details below.

There has been some market concern recently that some investors might switch from Geely's H share into to its coming A share (STAR Board) listing and that might hurt Geely's share performance. SMIC's STAR Board listing is the case referred to by investors as a precedent.In our view, in short term, only investors who prefer trading/investing in A share market but have to buy H shares due to them being extremely keen on some specific companies would move back to A share once corresponding company is available in A share. In this note, we analyzed what happened to SMIC's share performance if that might be repeated by Geely's share performance.  Our conclusion is Geely would likely to get a share price boost by the coming STAR Board listing. details below.

Geely (175.HK): How Would STAR Board Listing Affect H Share Performance?

Senior Credit Analyst, Lucror Analytics

Leonard Law, CFA

Senior Credit Analyst

High Yield Experts

Lucror Analytics

Lucror Analytics is a leading credit and ESG research specialist and a provider of technology solutions for differentiated fixed income strategies. Our roots are in bottom-up fundamental credit analysis with a specialization in high yield corporate credits from Europe, Asia and Latin America. We are one of few research specialists integrating ESG considerations with fundamental credit research through a dedicated ESG platform. Our ESG assessment covers five key criteria: Disclosure, E,S, & G Pillars, Controversies, ESG Impact on Credit and ESG Momentum.

Recognizing the importance and value-add of Factor Investing in fixed income, Lucror developed the Smart Quant Navigator (SQN), an intuitive platform that helps clients devise and implement factor-based strategies ranging from pure quant to active fundamental, with integrated ESG.

Our company has been at the forefront of developments in the fixed income markets, identifying opportunities and consistently delivering new products and value-adding solutions to clients. Lucror has close relationships with the largest and most reputable asset managers, family offices, hedge funds, investment and wealth managers globally.

Credit

In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a limited basis. We also look at the context for the policy’s introduction and its implications on credit access for industry players at large.  The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.

  In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a limited basis. We also look at the context for the policy’s introduction and its implications on credit access for industry players at large.    The Asia Monthly focuses on providing updates on recent events, information on new issues and spread movements, as well as summarising our top picks, and discussing specific areas of interest in the “In-Focus” section. The Asia Monthly is intended to broaden investors' understanding of the Asian USD high-yield market.  

Asia HY Monthly - China's Three Red Lines - Lucror Analytics

Hong Kong

Geely Automobile Holdings Limited operates as a passenger vehicles manufacturing company. The Company provides passenger vehicles development, manufacturing, sales, and other services. Geely Automobile Holdings also exports passenger vehicles.

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Geely Auto (175 HK)

China Auto: Sales Recovery on Track

Positive price momentum for China auto sector. Local leaders' car sales in September increased strongly, indicating sector demand recvoery remains...

Victoria Li

Nexteer (1316): China Recovery to Help

As the Chinese auto sector recovers earlier compared to the US, Nexteer's revenues start to recover and its profitability should also increase,...

Henry Soediarko

China Macro and Geopolitical Briefing

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and...

JL Warren Capital

Asia HY Monthly - China's Three Red Lines - Lucror Analytics

In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a...

Lucror Analytics

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Auto: Sales Recovery on Track

Positive price momentum for China auto sector. Local leaders' car sales in September increased strongly, indicating sector demand recvoery remains...

Victoria Li

Nexteer (1316): China Recovery to Help

As the Chinese auto sector recovers earlier compared to the US, Nexteer's revenues start to recover and its profitability should also increase,...

Henry Soediarko

China Macro and Geopolitical Briefing

With only 40+ days left before the Presidential Election in the U.S, China is wisely taking a laissez faire approach to the bilateral issues and...

JL Warren Capital

Geely (175.HK): How Would STAR Board Listing Affect H Share Performance?

We noticed that some investors worry about

Victoria Li

Asia HY Monthly - China's Three Red Lines - Lucror Analytics

In this month’s “In-Focus” section, we consider China’s new Three Red Lines leverage guidelines for developers, which have been rolled out on a...

Lucror Analytics