Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

Equity Bottom-Up

*Virtual Call Does Little To Quell Concerns: Last week a competitor held a virtual conference with AIA Group (1299.HK) [AIA]. In typical fashion, the management of AIA only discussed the positives neglecting many of the market realities;   *Mainland China Expansion and ASEAN Margins In Focus: According to management, the mainland Chinese expansion is of course progressing well as it plans three regional hubs - Beijing, Shanghai and recently approved Sichuan branch - to act as business centers. As discussed at the latest 3Q20 earnings release and now re-discussed, VONB margins have been increasing in select ASEAN markets; and*Elephants In The Room: Given both the earnings and balance sheet headwinds, who really cares about how many agents were added in mainland China? What was not discussed: negative tax implications for mainland Chinese subsidiaries versus branches; the bogusly rated AAA mainland Chinese bonds; the flailing Hong Kong flagship; and its USD-based investment portfolio.

*Virtual Call Does Little To Quell Concerns: Last week a competitor held a virtual conference with AIA Group (1299.HK) [AIA]. In typical fashion, the management of AIA only discussed the positives neglecting many of the market realities;   *Mainland China Expansion and ASEAN Margins In Focus: According to management, the mainland Chinese expansion is of course progressing well as it plans three regional hubs - Beijing, Shanghai and recently approved Sichuan branch - to act as business centers. As discussed at the latest 3Q20 earnings release and now re-discussed, VONB margins have been increasing in select ASEAN markets; and*Elephants In The Room: Given both the earnings and balance sheet headwinds, who really cares about how many agents were added in mainland China? What was not discussed: negative tax implications for mainland Chinese subsidiaries versus branches; the bogusly rated AAA mainland Chinese bonds; the flailing Hong Kong flagship; and its USD-based investment portfolio.  

*Third Indian Bank Failure In 15 Months: For the third time in 15 months, the Reserve Bank of India (RBI) took over a failing regional bank - announcing that it would limit deposit withdrawals and replace the board of directors at Lakshm Vilas Bank (LVB.IN) due to a "serious deterioration" in its finances. After the failure of Punjab and Maharashtra Co-operative Bank and Yes Bank (YES.IN); and 12 consecutive quarters of posting losses it should come as no surprise that the RBI placed LVB under moratorium through December 16, 2020; and*Not Letting Cash Burn A Hole In Its Pocket: On Novenber 17, 2020, the RBI also announced a draft scheme to merge LVB with DBS Bank India Limited, the 100%-owned subsidiary of DBS Bank Holdings (DBS.SP), which will infuse INR 25 bn into its subsidiary to absorb and recapitalize LVB. This transaction is riddled with problems and will certainly cost DBS far greater than its initial investment.

*Third Indian Bank Failure In 15 Months: For the third time in 15 months, the Reserve Bank of India (RBI) took over a failing regional bank - announcing that it would limit deposit withdrawals and replace the board of directors at Lakshm Vilas Bank (LVB.IN) due to a "serious deterioration" in its finances. After the failure of Punjab and Maharashtra Co-operative Bank and Yes Bank (YES.IN); and 12 consecutive quarters of posting losses it should come as no surprise that the RBI placed LVB under moratorium through December 16, 2020; and*Not Letting Cash Burn A Hole In Its Pocket: On Novenber 17, 2020, the RBI also announced a draft scheme to merge LVB with DBS Bank India Limited, the 100%-owned subsidiary of DBS Bank Holdings (DBS.SP), which will infuse INR 25 bn into its subsidiary to absorb and recapitalize LVB. This transaction is riddled with problems and will certainly cost DBS far greater than its initial investment.  

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

*VONB Better Linked Quarter: AIA Group (1299.HK) {AIA} reported 3Q20 Value of New Business (VONB) of USD 706 mn, increasing 22% linked quarter with positive growth noted in Malaysia, Singapore and India – but VONB declined 28% YOY;*Greater China Challenges: Hong Kong’s pure domestic business reported modest linked quarter growth in VONB, but is still likely struggling with mainland Chinese clients as the border remains closed due to quarantines. Mainland China too was weaker as demand for protection products remains challenged. AIA China's VONB in 3Q20 was broadly in -line with 2Q20, but was likely lower YOY given the savings shift, and lower VONB margin; and* Watch The Investment Portfolio: Yields drive the bottom-line at life insurers. Rates have been reduced to all-time lows in most markets globally, and investment returns at AIA’s bottom-line will continue to be challenged. In addition, ratings agency downgrades are expected to negatively impact AIA solvency margins.  With over USD 220 bn in corporate debt issues likely on the verge of downgrade by the venerable ratings agencies (which is greater than the actual USD 147 bn downgraded during the GFC) the market must be prepared for substantive hits to AIA’s investment portfolio.

AIA Group – Greater China and Investments Remain Risks

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

Cross Asset Strategy

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Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The Insight <a href="https://www.smartkarma.com/insights/bjbr-positive-fundamental-momentum-at-a-decent-valuation" target="_blank" data-smartkarma-citation="insights:44897" rel="noopener">BJBR: Positive Fundamental Momentum at a Decent Valuation</a> was improperly attributed to Thomas Monaco. It was published by <a href="https://www.smartkarma.com/profiles/paul-hollingworth" target="_blank" data-smartkarma-citation="accounts:2554" rel="noopener">Paul Hollingworth</a>.
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The week that was in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma</a> is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  
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<a href="https://www.smartkarma.com/insights/smartkarma-corporate-webinar-indo-banks-the-worst-is-over" target="_blank" data-smartkarma-citation="insights:44882" rel="noopener">Smartkarma Corporate Webinar | Indo Banks: The Worst Is Over</a>- 10th November at 4 pm.
For our next Corporate Webinar, we welcome <a href="https://www.smartkarma.com/entities/bank-mandiri-persero-tbk-pt" target="_blank" data-smartkarma-citation="entities:441:1" rel="noopener">Bank Mandiri Persero (BMRI IJ)</a>'s Group Head of Investor Relations, <a href="https://www.smartkarma.com/profiles/yohan-setio" target="_blank" rel="noopener">Yohan Setio</a>, who will share some company updates and sit down for a fireside chat with Smartkarma Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener">Angus Mackintosh</a>.
<h2>Indonesia's Recovery and the Next Digital Darling</h2>
This week below the fold we look at Indonesia's recent economic numbers which saw the country slide into recession, its first since the Asian Crisis but find it encouraging that the economy is moving onto a recovery track. We see selective banks and <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> as core ways to play this recovery. 
<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US)</a> is SoutEast Asia's largest Market Cap stock, and there are very few if any alternatives to get exposure to the region's e-commerce boom, certainly in the listed universe. One potential future candidate is <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ),</a> which is the major shareholder of <a href="https://www.smartkarma.com/entities/surya-citra-media-pt-tbk" target="_blank" data-smartkarma-citation="entities:14739:1" rel="noopener">PT Surya Citra Media Tbk (SCMA IJ)</a> but it also has stakes in Bukalapak and Dana, the number three digital payments player in Indonesia and a JV with Ant Financial.
<a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a> has announced that it will seek approval for a stock split in December but this may not be the end of the story. Any restructuring which brings all of its digital assets under one roof and improves liquidity would certainly help the company attract more institutional investors and secure a higher valuation. 
<h3>Macro Insights</h3>
In <a href="https://www.smartkarma.com/insights/thai-strategy-2021-part-2-top-10-stock-picks" target="_blank" data-smartkarma-citation="insights:40851" rel="noopener">Thai Strategy 2021 (Part 2): Top 10 Stock Picks,</a> our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> lays out his top stock picks in Thailand for next year.
In <a href="https://www.smartkarma.com/insights/thai-strategy-2021-part-3-sector-outlooks" target="_blank" data-smartkarma-citation="insights:40864" rel="noopener">Thai Strategy 2021 (Part 3): Sector Outlooks,</a> our Thai guru <a href="https://www.smartkarma.com/profiles/athaporn-arayasantiparb-cfa" target="_blank" data-smartkarma-citation="accounts:766" rel="noopener">Athaporn Arayasantiparb, CFA</a> provides us with his sector strategy in Thailand for the coming year. 
<h3>Equity Bottom Up</h3>
In an Indonesian Insight,<a href="https://www.smartkarma.com/insights/astra-international-asii-ij-an-auto-recovery-story-with-a-golden-digital-twist" target="_blank" rel="noopener"> Astra International (ASII IJ) - An Auto-Recovery Story with a Golden Digital Twist</a>, CrossASEAN Insight provider<a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" rel="noopener"> Angus Mackintosh</a> returns to look at<a href="https://www.smartkarma.com/entities/astra-international-tbk-pt" target="_blank" rel="noopener"> Astra International (ASII IJ)</a> after a conversation with management. 
In <a href="https://www.smartkarma.com/insights/pt-surya-citra-media-tbk-scma-ij-let-the-games-begin" target="_blank" data-smartkarma-citation="insights:44914" rel="noopener">PT Surya Citra Media Tbk (SCMA IJ) - Let the Games Begin,</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits one of Indonesia's leading media companies, which has an increasingly digital twist.
In <a href="https://www.smartkarma.com/insights/aem-holdings-optimistic-on-fy21-fair-value-remains-at-5-sgd-41-upside" target="_blank" data-smartkarma-citation="insights:44915" rel="noopener">AEM Holdings: Optimistic on FY21; Fair Value Remains at 5 SGD (41% Upside),</a> CrossASEAN Insight Provider <a href="https://www.smartkarma.com/profiles/nicolas-van-broekhoven-24a66c2d-bca4-4f5b-adda-c4e2bcc509f4" target="_blank" data-smartkarma-citation="accounts:1208" rel="noopener">Nicolas Van Broekhoven</a> revisits <a href="https://www.smartkarma.com/entities/aem-holdings-ltd" target="_blank" data-smartkarma-citation="entities:11019:1" rel="noopener">AEM Holdings (AEM SP)</a> after an impressive set of results and remains positive.
In <a href="https://www.smartkarma.com/insights/bjbr-positive-fundamental-momentum-at-a-decent-valuation" target="_blank" data-smartkarma-citation="insights:44897" rel="noopener">BJBR: Positive Fundamental Momentum at a Decent Valuation,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> writes on this smaller Indonesian lender with a positive slant.
In <a href="https://www.smartkarma.com/insights/oversea-chinese-banking-corp-still-not-a-great-eastern" target="_blank" data-smartkarma-citation="insights:44901" rel="noopener">Oversea Chinese Banking Corp – Still Not A Great Eastern,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> looked in detail at <a href="https://www.smartkarma.com/entities/great-eastern-holdings-ltd" target="_blank" data-smartkarma-citation="entities:13993:1" rel="noopener">Great Eastern Holdings (GE SP)</a> numbers ahead of <a href="https://www.smartkarma.com/entities/oversea-chinese-banking-corp" target="_blank" data-smartkarma-citation="entities:114:1" rel="noopener">Oversea Chinese Banking Corp. (OCBC SP)</a> results. 
In <a href="https://www.smartkarma.com/insights/oversea-chinese-banking-corp-solid" target="_blank" data-smartkarma-citation="insights:45061" rel="noopener">Oversea Chinese Banking Corp. – Solid,</a><a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> revisits this Singapore lender with a positive view post its recent 3Q2020 numbers. 
<a href="https://www.smartkarma.com/entities/surya-citra-media-pt-tbk" target="_blank" data-smartkarma-citation="entities:14739:1" rel="noopener"></a>In<a href="https://www.smartkarma.com/insights/dbs-group-holdings-not-trending-the-right-way-yet" target="_blank" rel="noopener"> DBS Group Holdings – Not Trending The Right Way Yet</a>,<a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" rel="noopener"> Thomas J. Monaco</a> reports back<a href="https://www.smartkarma.com/entities/dbs-group-holdings-ltd" target="_blank" rel="noopener"> DBS Group Holdings (DBS SP)</a>'s post its recent 3Q2020 results with a chequered view.
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In this Thai Insight,<a href="https://www.smartkarma.com/insights/hmpro-expect-government-stimulus-scheme-drive-4q20-recover-qoq" target="_blank" rel="noopener"> HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> circle back to Thailand's leading home improvements player <a href="https://www.smartkarma.com/entities/home-product-center-pcl" target="_blank" data-smartkarma-citation="entities:9906:1" rel="noopener">Home Product Center (HMPRO TB)</a>. 
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In<a href="https://www.smartkarma.com/insights/synex-solid-earnings-growth-outlook-but-largely-priced-in" target="_blank" rel="noopener"> SYNEX: Solid Earnings Growth Outlook but Largely Priced In</a>,<a href="https://www.smartkarma.com/companies/country-group" target="_blank" rel="noopener"> Country Group</a> provides a view on<a href="https://www.smartkarma.com/entities/synnex-thailand-pcl" target="_blank" rel="noopener"> Synnex Thailand (SYNEX TB),</a> following the recent run-up in the share price. 
In this Thai Insight, <a href="https://www.smartkarma.com/insights/scc-strong-3q20-thanks-to-petrochemical-spread" target="_blank" rel="noopener">SCC: Strong 3Q20 Thanks to Petrochemical Spread</a>, our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> return to look at<a href="https://www.smartkarma.com/entities/siam-cement-pcl-the" target="_blank" rel="noopener"> Siam Cement (SCC TB)</a> post 3Q2020 results. 
In <a href="https://www.smartkarma.com/insights/mc-prominent-denim-brand-with-new-growth-momentum" target="_blank" data-smartkarma-citation="insights:45077" rel="noopener">MC: Prominent Denim Brand with New Growth Momentum,</a> our friends at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a>initiate on this leading Thai denim apparel player. They initiate coverage of <a href="https://www.smartkarma.com/entities/mc-group-pcl" target="_blank" data-smartkarma-citation="entities:17093:1" rel="noopener">MC Group Pcl (MC TB)</a> with a BUY rating and a target price of Bt12.0, derived from 18.5x FY21E PER, which is +1SD above its 5-year trading average but slightly lower than its global apparel peers.
<h3>Credit Insights</h3>
In <a href="https://www.smartkarma.com/insights/lippo-karawaci-earnings-flash-q3-fy-2020-results-lucror-analytics" target="_blank" rel="noopener">Lippo Karawaci - Earnings Flash - Q3 FY 2020 Results</a>, credit specialist<a href="https://www.smartkarma.com/profiles/trung-nguyen" target="_blank" rel="noopener"> Trung Nguyen</a> looks at<a href="https://www.smartkarma.com/entities/lippo-karawaci-tbk-pt" target="_blank" rel="noopener"> Lippo Karawaci (LPKR IJ)'s</a> after its recent results, which continued to be robust in Q32020. 
In <a href="https://www.smartkarma.com/insights/chandra-asri-earnings-flash-9m-fy-2020-results-lucror-analytics" target="_blank" data-smartkarma-citation="insights:44814" rel="noopener">Chandra Asri - Earnings Flash - 9M FY 2020 Results</a> credit specialist <a href="https://www.smartkarma.com/profiles/leonard-law-cfa" target="_blank" data-smartkarma-citation="accounts:7106" rel="noopener">Leonard Law, CFA</a> circles back to this leading chemicals player post 3Q2020 results.


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The Insight BJBR: Positive Fundamental Momentum at a Decent Valuation was improperly attributed to Thomas Monaco. It was published by Paul Hollingworth.



The week that was in ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive, and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up and credit insights over the past week.
We add below a NEW section, which includes emerging themes in ASEAN and selects important news flow or developments for commentary, which may impact SE Asian companies and markets.  

Smartkarma Corporate Webinar | Indo Banks: The Worst Is Over- 10th November at 4 pm.
For our next Corporate Webinar, we welcome Bank Mandiri Persero (BMRI IJ)'s Group Head of Investor Relations, Yohan Setio, who will share some company updates and sit down for a fireside chat with Smartkarma Insight Provider Angus Mackintosh.
Indonesia's Recovery and the Next Digital Darling
This week below the fold we look at Indonesia's recent economic numbers which saw the country slide into recession, its first since the Asian Crisis but find it encouraging that the economy is moving onto a recovery track. We see selective banks and Astra International (ASII IJ) as core ways to play this recovery. 
Sea Ltd (SE US) is SoutEast Asia's largest Market Cap stock, and there are very few if any alternatives to get exposure to the region's e-commerce boom, certainly in the listed universe. One potential future candidate is Emtek (EMTK IJ), which is the major shareholder of PT Surya Citra Media Tbk (SCMA IJ) but it also has stakes in Bukalapak and Dana, the number three digital payments player in Indonesia and a JV with Ant Financial.
Emtek (EMTK IJ) has announced that it will seek approval for a stock split in December but this may not be the end of the story. Any restructuring which brings all of its digital assets under one roof and improves liquidity would certainly help the company attract more institutional investors and secure a higher valuation. 
Macro Insights
In Thai Strategy 2021 (Part 2): Top 10 Stock Picks, our Thai guru Athaporn Arayasantiparb, CFA lays out his top stock picks in Thailand for next year.
In Thai Strategy 2021 (Part 3): Sector Outlooks, our Thai guru Athaporn Arayasantiparb, CFA provides us with his sector strategy in Thailand for the coming year. 
Equity Bottom Up
In an Indonesian Insight, Astra International (ASII IJ) - An Auto-Recovery Story with a Golden Digital Twist, CrossASEAN Insight provider Angus Mackintosh returns to look at Astra International (ASII IJ) after a conversation with management. 
In PT Surya Citra Media Tbk (SCMA IJ) - Let the Games Begin, CrossASEAN Insight Provider Angus Mackintosh revisits one of Indonesia's leading media companies, which has an increasingly digital twist.
In AEM Holdings: Optimistic on FY21; Fair Value Remains at 5 SGD (41% Upside), CrossASEAN Insight Provider Nicolas Van Broekhoven revisits AEM Holdings (AEM SP) after an impressive set of results and remains positive.
In BJBR: Positive Fundamental Momentum at a Decent Valuation,Thomas J. Monaco writes on this smaller Indonesian lender with a positive slant.
In Oversea Chinese Banking Corp – Still Not A Great Eastern,Thomas J. Monaco looked in detail at Great Eastern Holdings (GE SP) numbers ahead of Oversea Chinese Banking Corp. (OCBC SP) results. 
In Oversea Chinese Banking Corp. – Solid,Thomas J. Monaco revisits this Singapore lender with a positive view post its recent 3Q2020 numbers. 
In DBS Group Holdings – Not Trending The Right Way Yet, Thomas J. Monaco reports back DBS Group Holdings (DBS SP)'s post its recent 3Q2020 results with a chequered view.



In this Thai Insight, HMPRO: Expect Government Stimulus Scheme Drive 4Q20 Recover QoQ, our friends at Country Group circle back to Thailand's leading home improvements player Home Product Center (HMPRO TB). 



In SYNEX: Solid Earnings Growth Outlook but Largely Priced In, Country Group provides a view on Synnex Thailand (SYNEX TB), following the recent run-up in the share price. 
In this Thai Insight, SCC: Strong 3Q20 Thanks to Petrochemical Spread, our friends at Country Group return to look at Siam Cement (SCC TB) post 3Q2020 results. 
In MC: Prominent Denim Brand with New Growth Momentum, our friends at Country Groupinitiate on this leading Thai denim apparel player. They initiate coverage of MC Group Pcl (MC TB) with a BUY rating and a target price of Bt12.0, derived from 18.5x FY21E PER, which is +1SD above its 5-year trading average but slightly lower than its global apparel peers.
Credit Insights
In Lippo Karawaci - Earnings Flash - Q3 FY 2020 Results, credit specialist Trung Nguyen looks at Lippo Karawaci (LPKR IJ)'s after its recent results, which continued to be robust in Q32020. 
In Chandra Asri - Earnings Flash - 9M FY 2020 Results credit specialist Leonard Law, CFA circles back to this leading chemicals player post 3Q2020 results.

The Week that Was in ASEAN@Smartkarma - Indonesia's Recovery and the Next Digital Darling

*Negative Operating Jaws Were A Surprise: DBS Group Holdings (DBS.SP) [DBS] reported 3Q20 results of SGD 1.3 bn, increasing SGD 50 mn (4.0%) on a linked quarter basis. Results were solely led on a justified SGD 295 mn (34.7%) reduction in loss provisions, which point to DBS’real challenges with negative operating jaws; and*Credit Risk Rising: By our calculation, and despite the net recovery of SGD 24 mn, we find that net new NPLs continue to increase – up SGD 272 mn or 18.9% on an annualized basis. Management too was less sanguine about credit quality on a go forward basis, expecting a re-acceleration of NPL formation in 2021 as COVID-19 government programs are set to expire. We feel that reserves should be shored up in the neighborhood of SGD 1.3 bn – amounting to a full quarter of results – and intimating this quarter was more managed than DBS would have the investment community believe.

*Negative Operating Jaws Were A Surprise: DBS Group Holdings (DBS.SP) [DBS] reported 3Q20 results of SGD 1.3 bn, increasing SGD 50 mn (4.0%) on a linked quarter basis. Results were solely led on a justified SGD 295 mn (34.7%) reduction in loss provisions, which point to DBS’real challenges with negative operating jaws; and*Credit Risk Rising: By our calculation, and despite the net recovery of SGD 24 mn, we find that net new NPLs continue to increase – up SGD 272 mn or 18.9% on an annualized basis. Management too was less sanguine about credit quality on a go forward basis, expecting a re-acceleration of NPL formation in 2021 as COVID-19 government programs are set to expire. We feel that reserves should be shored up in the neighborhood of SGD 1.3 bn – amounting to a full quarter of results – and intimating this quarter was more managed than DBS would have the investment community believe.      

DBS Group Holdings – Not Trending The Right Way Yet

Singapore

United Overseas Insurance Limited and its subsidiary, UOB Insurance (H.K.) Limited, underwrite general insurance and reinsurance. General insurance covers fire, marine, motor, engineering, general accident and liability businesses.

Singapore Exchange Limited owns and operates Singapore's Securities and derivatives exchange and their related clearing houses.  The Company also provides ancillary securities processing and information technology services to participants in the financial sector.

UOB-Kay Hian Holdings Limited is an investment holding company whose subsidiaries provide management services.  The Company provides stock broking, futures broking, investment trading, nominee services, margin financing, and research activities.

Yangzijiang Financial Holding Ltd operates as an investment holding company. The Company serves customers in Singapore.

Hong Leong Finance Limited provides depository and financing services to its clients.  The Company's services include hire purchase, leasing, factoring, mortgages, and other secured loans in the commercial, industrial, and consumer sectors.

Pacific Century Regional Developments Limited operates in the holding of investments and development of infrastructure and properties.

Pacific Century Regional Developments (PAC SP)

Valuemax Group Ltd. operates pawnshops. The Company provides the valuation of products for pawning, selling and buying through its outlet stores..

G. K. Goh Holdings Limited is a diversified investment holding company with significant exposure to the aged care industry, corporate and business services, property development and fibre networks.

Sing Investments & Finance Limited provides loans and credit services to individuals and businesses.  The Company also offers deposit, hire purchase financing, mortgage lending, stock and share financing, trade and inventory financing, equipment leasing, and nominee services.

Maxi-Cash Financial Services Corp Ltd. offers financial services. The Company offers its services in the form of pawnbroking and the retail and trading of pre-owned jewellery and watches through pawnshops and retail outlets in locations throughout Singapore.

Maxi Cash Financial Services Corp (MCFS SP)

Samsung Fire & Marine Insurance Co., Ltd. provides insurance services. The Company offers auto, fire, marine, casualty, health, leisure, and retirement products and services. Samsung Fire & Marine Insurance serves customers in South Korea.

Samsung Fire & Marine Insurance (000810 KS)

Japan Post Insurance Co. Ltd. operates life insurance business. The Company offers whole life insurance, education endowment, ordinary endowment, medical insurance, and special endowment insurance. Japan Post Insurance provides services for individuals and businesses throughout Japan.

Globe Life Inc. operates as an insurance company. The Company offers term, whole, and children's life insurance, as well as accidental benefits, mortgage protection, and medicare supplement plans. Globe Life operates in the State of Texas.

Unum Group provides group disability and special risk insurance.  The Company provides disability insurance, group life insurance, and payroll-deducted voluntary benefits offered to employees at their worksites.

T&D Holdings, Inc. is a holding company established through the merger of Taiyo Life Insurance, Daido Life Insurance, and T&D Financial Life Insurance. The Company manages life insurance operations for its subsidiaries.

Assurant, Inc. provides specialized insurance and insurance-related products. The Company offers individual and small employer group health insurance, group dental insurance, pre-funded funeral insurance, group disability and life insurance, creditor-placed homeowners insurance, manufactured housing homeowners insurance, debt protection administration, credit insurance, and warranties.

Primerica Inc. distributes financial products to middle income households in North America. The Company products include term life insurance, mutual funds, variable annuities and other financial products, which are distribute primarily on behalf of third parties.

American Financial Group, Inc. provides multi-line property and casualty insurance.  The Company also sells tax-deferred annuities and certain life and supplemental health insurance products.  American Financial operates in the United States.

Old Republic International Corporation is an insurance holding company whose subsidiaries market, underwrite, and provide risk management services.  The Company provides services for a variety of coverages in the property and liability, mortgage guaranty, title, and life and health insurance fields.

AEGON N.V. offers life and health insurance, and related pension, savings, and investment products in Europe and North America.  The Company also offers property and casualty insurance in the Netherlands, Spain, and Hungary, and financial services including banking, equipment lease financing, and mortgage lending.

Great Eastern Holdings Limited operates in the life insurance business. The Company provides fund management services including retirement plans and endowments as well as life and health insurance, personal accident insurance, and general insurance

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Great Eastern Holdings (GE SP)

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