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.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a> is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 113 billion. Due to the competition from e-commerce platforms, Gome endured a tough time during the last four years with revenue declining at an annual compound rate of 12.9%. The company’s operating losses peaked at CNY 3.8 billion in 2020.Nevertheless, the future looks bright for Gome Retail as they have managed to transform the traditional brick and mortar retail business to an omni-channel model. In addition, the shift in government policy to eradicate unfair competition and encourage domestic consumption, especially in lower-tier cities could accelerate Gome’s omni-channel revival.

Gome Electrical Appliances (493 HK) is one of China’s largest electronic retailers with a Gross Merchandise Value (GMV) of CNY 113 billion. Due to the competition from e-commerce platforms, Gome endured a tough time during the last four years with revenue declining at an annual compound rate of 12.9%. The company’s operating losses peaked at CNY 3.8 billion in 2020.Nevertheless, the future looks bright for Gome Retail as they have managed to transform the traditional brick and mortar retail business to an omni-channel model. In addition, the shift in government policy to eradicate unfair competition and encourage domestic consumption, especially in lower-tier cities could accelerate Gome’s omni-channel revival.

We had many concerns regarding <a href="https://www.smartkarma.com/entities/gome-retail-holdings-ltd" target="_blank" data-smartkarma-citation="entities:170:1" rel="noopener">Gome Electrical Appliances (493 HK)</a>, of which the most pressing issue was that we thought the company would struggle to refinance the RMB 17.9 billion falling due in the immediate future.GOME Retail faced a mixed situation since we last wrote about the company in November 2020. The shares rallied 156% following the successful refinancing of over RMB 4.0bn corporate bonds. After peaking at HK$ 2.38 per share in February 2021, GOME’s share price went down by 45% following a profit warning on 26th February 2021 and a seasoned equity offering in March 2021.GOME’s immediate liquidity issues are almost entirely solved. However, the company is yet to showcase any improvement in financial performance for us to be confident about the company’s medium-long term financial stability. Therefore, we think GOME is overvalued at 1.3x P/B, compared to the 2014-20 median of 0.9x.

We had many concerns regarding Gome Electrical Appliances (493 HK), of which the most pressing issue was that we thought the company would struggle to refinance the RMB 17.9 billion falling due in the immediate future.GOME Retail faced a mixed situation since we last wrote about the company in November 2020. The shares rallied 156% following the successful refinancing of over RMB 4.0bn corporate bonds. After peaking at HK$ 2.38 per share in February 2021, GOME’s share price went down by 45% following a profit warning on 26th February 2021 and a seasoned equity offering in March 2021.GOME’s immediate liquidity issues are almost entirely solved. However, the company is yet to showcase any improvement in financial performance for us to be confident about the company’s medium-long term financial stability. Therefore, we think GOME is overvalued at 1.3x P/B, compared to the 2014-20 median of 0.9x.

GOME Retail: No More Going Concern Issues

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

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Quantitative Analysis

Following the <a href="https://www.smartkarma.com/entities/gamestop-corp-class-a" target="_blank" data-smartkarma-citation="entities:13790:1" rel="noopener">GameStop Corp Class A (GME US)</a> saga that has been all over the financial press (and is now spreading into the mainstream press), we have been getting questions on names in Hong Kong that could be prone to a squeeze.We do not believe that retail players in Hong Kong have the heft that retail investors in the US do, nor are single stock options frequently used (though there is a lot of retail activity in warrants on large cap names), but the pain that is being felt in global portfolios could lead to unwinding in Hong Kong shorts too.Some highly shorted stocks in Hong Kong that have seen prices jump today along with volume surge are <a href="https://www.smartkarma.com/entities/ping-an-healthcare-and-technology-company-limited" target="_blank" data-smartkarma-citation="entities:27008:1" rel="noopener">Ping An Healthcare and Technology Company Limited (1833 HK)</a>, <a href="https://www.smartkarma.com/entities/hang-seng-bank-ltd" target="_blank" data-smartkarma-citation="entities:24:1" rel="noopener">Hang Seng Bank (11 HK)</a>, <a href="https://www.smartkarma.com/entities/vitasoy-intl-holdings-ltd" target="_blank" data-smartkarma-citation="entities:2807:1" rel="noopener">Vitasoy Intl Holdings (345 HK)</a>, <a href="https://www.smartkarma.com/entities/china-literature-ltd" target="_blank" data-smartkarma-citation="entities:24388:1" rel="noopener">China Literature (772 HK)</a>, <a href="https://www.smartkarma.com/entities/bank-of-east-asia-ltd" target="_blank" data-smartkarma-citation="entities:341:1" rel="noopener">Bank of East Asia (23 HK)</a>, <a href="https://www.smartkarma.com/entities/mtr-corp" target="_blank" data-smartkarma-citation="entities:13289:1" rel="noopener">MTR Corp (66 HK)</a>, <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>, <a href="https://www.smartkarma.com/entities/samsonite-international-sa" target="_blank" data-smartkarma-citation="entities:12790:1" rel="noopener">Samsonite (1910 HK)</a> and <a href="https://www.smartkarma.com/entities/wharf-real-estate-investment" target="_blank" data-smartkarma-citation="entities:26031:1" rel="noopener">Wharf Real Estate Investment (1997 HK)</a>.We identify more stocks that could be prone to short covering based on short interest as a percentage of issued shares, free float and in terms of days of ADV to cover.

Following the GameStop Corp Class A (GME US) saga that has been all over the financial press (and is now spreading into the mainstream press), we have been getting questions on names in Hong Kong that could be prone to a squeeze.We do not believe that retail players in Hong Kong have the heft that retail investors in the US do, nor are single stock options frequently used (though there is a lot of retail activity in warrants on large cap names), but the pain that is being felt in global portfolios could lead to unwinding in Hong Kong shorts too.Some highly shorted stocks in Hong Kong that have seen prices jump today along with volume surge are Ping An Healthcare and Technology Company Limited (1833 HK), Hang Seng Bank (11 HK), Vitasoy Intl Holdings (345 HK), China Literature (772 HK), Bank of East Asia (23 HK), MTR Corp (66 HK), Want Want (151 HK), Samsonite (1910 HK) and Wharf Real Estate Investment (1997 HK).We identify more stocks that could be prone to short covering based on short interest as a percentage of issued shares, free float and in terms of days of ADV to cover.

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Japan Post, JD.com, Toyota, NTT, Jardines, Indices/Exec. Orders, Tianneng

Haier Electronics Group Co / Event-Driven

Last Week in Event SPACE: Haier, NTT Doco, Tesla, Beijing Jingneng, China Biologics, HK IPO Lock-Ups

China

GOME Retail Holdings Limited retails household appliances. The Company provides televisions, washing machines, computers, mobile phones, digital devices, air conditioners, and other products. GOME Retail Holdings also provides equipment repairing, recycling, and other services.

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GOME Retail Holdings (493 HK)

Gome Retail: Time to Shop

At 1.96x price to book, Gome does not look especially cheap considering it’s current liquidity levels. However, we believe the worst has passed for...

Oshadhi Kumarasiri

GOME Retail: No More Going Concern Issues

GOME’s immediate liquidity issues are almost entirely solved. However, the company is yet to showcase any improvement in financial performance for...

Oshadhi Kumarasiri

HK Shorts: Squeeze-O-Meter

Following the GameStop saga, we try to identify stocks in HK that could be susceptible to a short squeeze based on short interest vs issued shares...

Brian Freitas

Last Week in Event SPACE: Japan Post, JD.com, Toyota, NTT, Jardines, Indices/Exec. Orders, Tianneng

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

Last Week in Event SPACE: Haier, NTT Doco, Tesla, Beijing Jingneng, China Biologics, HK IPO Lock-Ups

The weekend is here! Pour yourself a coffee, grab a comfortable seat, and sift through a brief summary of insights on various events discussed...

David Blennerhassett

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