Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<p>Despite a much more mixed market environment, our weight-of-the-evidence approach continues to support a constructive intermediate-term outlook. The bottom line: there is little evidence that suggests a pullback would be anything more than a buying opportunity.</p>

Despite a much more mixed market environment, our weight-of-the-evidence approach continues to support a constructive intermediate-term outlook. The bottom line: there is little evidence that suggests a pullback would be anything more than a buying opportunity.

Defensives Are Worth A Look; Hang Seng, Shanghai Comp, Nikkei 225, STOXX 50 Support Levels Holding

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Equity Bottom-Up

<p>The Kerry Group has been busy of late.</p>
<p>Back in December, <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> IPO'ed <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a> as discussed by <a href="https://www.smartkarma.com/profiles/sumeet-singh" target="_blank" data-smartkarma-citation="accounts:4" rel="noopener">Sumeet Singh</a> in <em><a href="https://skr.ma/uGPdd" target="_blank" rel="noopener">Kerry Express Thailand IPO - Time for Delivery</a></em>.</p>
<p>Last month <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a> ("KPL") and <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a>.  This is an ongoing transaction - see <em><a href="https://skr.ma/D9RK7" target="_blank" rel="noopener">Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer</a></em>. KLN announced last night the composite document has been <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0308/2021030801425.pdf" target="_blank" rel="noopener">delayed</a> potentially up to the 16 August 201. </p>
<div>
<a href="https://www.smartkarma.com/entities/shangri-la-asia-ltd" target="_blank" data-smartkarma-citation="entities:19690:1" rel="noopener">Shangri-La Asia (69 HK)</a>, majority-owned by the Kerry Group, is well up on its March 2020 COVID low, and up 9.5% YTD.  Around half of its hotels are in China, which have witnessed a strong uptick in local leisure and corporate traveling, generating positive EBITDA as early as June last year, the first time since the first outbreak of the pandemic.</div>
<div></div>
<div>Currently trading at 0.6x P/B against a pre-COVID average multiple of 0.8x., this is worth a second look.</div>
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<div>More below the fold.</div>

The Kerry Group has been busy of late.
Back in December, Kerry Logistics Network (636 HK) IPO'ed Kerry Express Thailand (KEX TB) as discussed by Sumeet Singh in Kerry Express Thailand IPO - Time for Delivery.
Last month Kerry Properties (683 HK) ("KPL") and Kerry Logistics Network (636 HK) ("KLN") announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH).  This is an ongoing transaction - see Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer. KLN announced last night the composite document has been delayed potentially up to the 16 August 201. 

Shangri-La Asia (69 HK), majority-owned by the Kerry Group, is well up on its March 2020 COVID low, and up 9.5% YTD.  Around half of its hotels are in China, which have witnessed a strong uptick in local leisure and corporate traveling, generating positive EBITDA as early as June last year, the first time since the first outbreak of the pandemic.

Currently trading at 0.6x P/B against a pre-COVID average multiple of 0.8x., this is worth a second look.

More below the fold.

Event-Driven

<div>
<p>After <a href="https://www.smartkarma.com/entities/kerry-properties-ltd" target="_blank" data-smartkarma-citation="entities:3320:1" rel="noopener">Kerry Properties (683 HK)</a> ("KPL") and <a href="https://www.smartkarma.com/entities/kerry-logistics-network-ltd" target="_blank" data-smartkarma-citation="entities:367:1" rel="noopener">Kerry Logistics Network (636 HK)</a> ("KLN") were both <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0205/2021020500081.pdf" target="_blank" rel="noopener">suspended</a> ahead of trading on the 5 February, KLN has now <a href="https://www1.hkexnews.hk/listedco/listconews/sehk/2021/0210/2021021000043.pdf" target="_blank" rel="noopener">announced</a> a pre-conditional Partial Offer from  <a href="https://www.smartkarma.com/entities/maanshan-dingtai-rare-a" target="_blank" data-smartkarma-citation="entities:4128:1" rel="noopener">S.F. Holding (002352 CH)</a> ("SFH").</p>
<p>SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.</p>
<p>There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. </p>
<p>The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.</p>
<p>Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for <a href="https://www.smartkarma.com/entities/kerry-express-thailand" target="_blank" data-smartkarma-citation="entities:29253:1" rel="noopener">Kerry Express Thailand (KEX TB)</a>,  amongst other conditions, a number of which are waivable. </p>
<p>The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. </p>
<p>The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders <em>other than</em> the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). </p>
<p>Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.</p>
</div>
<div>
<p>Lots more below the fold.  Plus <em><strong>Ye Olde Arb Grids </strong></em>(or at least one of them). </p>
</div>


After Kerry Properties (683 HK) ("KPL") and Kerry Logistics Network (636 HK) ("KLN") were both suspended ahead of trading on the 5 February, KLN has now announced a pre-conditional Partial Offer from  S.F. Holding (002352 CH) ("SFH").
SFH intends to acquire 931.21mn shares or 51.8% of shares outstanding, of Kerry Logistics Network. The Offer price is HK$18.80/share - a 19.83% discount to last close. KLN's shares gained 25% prior to the suspension.
There is a side transaction which is conditional on the Partial Offer becoming Unconditional. The transaction is to sell KLN's warehouses to its parent company. A substantial portion of the proceeds would be paid to shareholders on the Record Date as a special dividend totalling HK$7.28/share. Shareholders who tender will get HK$7.28 on all their shares and HK$18.80 for the shares taken up under the Partial Offer. 
The timing of that Record Date and the Close of the Offer may mean that Shareholders will get the FY20 Final Dividend as well, and if it stretches on, perhaps even the FY21 Interim Dividend.
Pre-conditions are numerous, including approvals from SAMR, NDRC, MoC, CFIUS, FTC, a waiver from the relevant Thai authorities not to make a downstream Offer for Kerry Express Thailand (KEX TB),  amongst other conditions, a number of which are waivable. 
The controlling shareholders of KLN, including KPL, plus shares held by executive directors, comprise 63.1% of shares out. These shareholders have given an irrevocable to tender 575.545mn shares or 32% of shares out. In addition, the document suggests Executive Directors and their affiliates will tender another 22.757mn shares. 
The Partial Offer is conditional on 51.8% of shares out tendering, and the minimum acceptance of 336.706mn shares (18.7% of shares out) from shareholders other than the controlling shareholders and executive directors (at least that is what it says in bold, but other language in the document could lead one to believe that isn't an absolute). 
Should the Partial Offer complete, SFH will outlay HK$17.55bn or US$2.25bn.


Lots more below the fold.  Plus Ye Olde Arb Grids (or at least one of them). 


Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

<p><strong><a href="https://www.smartkarma.com/entities/52" target="_blank" data-smartkarma-citation="entities:52:1" rel="noopener">Wheelock &amp; (20 HK)</a></strong> /<strong><a href="https://www.smartkarma.com/entities/51" target="_blank" data-smartkarma-citation="entities:51:1" rel="noopener">Wharf Holdings (4 HK)</a></strong>/<strong><a href="https://www.smartkarma.com/entities/26031" target="_blank" data-smartkarma-citation="entities:26031:1" rel="noopener">Wharf Real Estate Investment (1997 HK)</a></strong></p>
<p>Inputting the 2019 interim numbers for all three companies backs out a discount to NAV of ~33%, compared to Wheelock's one-year average of 38%.</p>
<p>Net debt at the parent level widened to ~$40bn from ~$28bn as at December 18, which was largely offset by the increase in development property and available for sale assets during the same period. </p>
<p>With both WREIC and Wharf underperforming in the face of Hong Kong's prevailing political atmosphere, Wheelock's implied negative stub is now at its lowest negative level (i.e. its best level) since WREIC's 2017 listing.</p>

Wheelock &amp; (20 HK) /Wharf Holdings (4 HK)/Wharf Real Estate Investment (1997 HK)
Inputting the 2019 interim numbers for all three companies backs out a discount to NAV of ~33%, compared to Wheelock's one-year average of 38%.
Net debt at the parent level widened to ~$40bn from ~$28bn as at December 18, which was largely offset by the increase in development property and available for sale assets during the same period. 
With both WREIC and Wharf underperforming in the face of Hong Kong's prevailing political atmosphere, Wheelock's implied negative stub is now at its lowest negative level (i.e. its best level) since WREIC's 2017 listing.

StubWorld: Wheelock Stub Gains on Ructions in Retail

Singapore Property Analyst

Anni Kum

Thematic (Sector/Industry)

<p>Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we look into the first white site at Pasir Ris Central launched by the Housing Development Board (HDB). The white site, which is next to the Pasir Ris MRT station on the East-West Line, is to be developed into a mixed-use commercial and residential development and is likely to be also seamlessly connected to the bus interchange and MRT station.  </p><p>On 14 December 2018 at the close of the tender, the Pasir Ris white site saw a weak response from developers with only three bids received. This was below expectations given its prime location next to the MRT station and was likely the result of the July 2018 property cooling measures which made developer turn more cautious. The three bidders for the white site were Far East Organization, <a href="https://www.smartkarma.com/entities/9952" target="_blank" data-smartkarma-citation="entities:9952:1">Singapore Press Holdings (SPH SP)</a> (SPH) and Kajima Developments in a joint bid, and Phoenix Residential and Phoenix Commercial; both owned by Allgreen Properties and Kerry Properties.</p><p>On 25 January 2019, the Land Transport Authority (LTA) announced the alignment and 12 station locations for Phase 1 of the Cross Island Line (CRL), Singapore’s eighth MRT line. The CRL Phase 1, to be completed by 2029, is 29-km long and comprises 12 stations from Aviation Park to Bright Hill. The line will pass through the Pasir Ris MRT station, making it into a MRT interchange station. Spanning about 50-km in length in its entirety, the CRL will serve existing and future developments in the eastern, western, and north-eastern corridors, linking major hubs such as Jurong Lake District, Punggol Digital District and Changi region when fully completed.</p><p>Now that the Pasir Ris MRT station is being named as an interchange station with the CRL, the potential of a successful integrated mixed-use property development will be greater. According to the LTA, the projected daily ridership of the entire CRL is more than 600,000 in the initial years, increasing to over 1 million in the longer term.</p><p>The prices of private homes in the future Pasir Ris Central mixed-use development will very much depend on the land price paid by the winning bidder and also other macro and micro factors including the interest rate environment, product mix, design, and cost of integration with amenities and etc. However, we attempted to predict a reasonable price point for the private homes at this future mixed-use development by using two other integrated mixed-development projects currently under-construction as references. The two references are The Woodleigh Residences above Woodleigh MRT station in the up-and-coming Bidadari estate and Park Place Residences at PLQ in the new business district at Paya Lebar Central. We also work backwards to estimate the bid price. Market conditions are assumed to remain the same two years from now.</p>

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we look into the first white site at Pasir Ris Central launched by the Housing Development Board (HDB). The white site, which is next to the Pasir Ris MRT station on the East-West Line, is to be developed into a mixed-use commercial and residential development and is likely to be also seamlessly connected to the bus interchange and MRT station.  On 14 December 2018 at the close of the tender, the Pasir Ris white site saw a weak response from developers with only three bids received. This was below expectations given its prime location next to the MRT station and was likely the result of the July 2018 property cooling measures which made developer turn more cautious. The three bidders for the white site were Far East Organization, Singapore Press Holdings (SPH SP) (SPH) and Kajima Developments in a joint bid, and Phoenix Residential and Phoenix Commercial; both owned by Allgreen Properties and Kerry Properties.On 25 January 2019, the Land Transport Authority (LTA) announced the alignment and 12 station locations for Phase 1 of the Cross Island Line (CRL), Singapore’s eighth MRT line. The CRL Phase 1, to be completed by 2029, is 29-km long and comprises 12 stations from Aviation Park to Bright Hill. The line will pass through the Pasir Ris MRT station, making it into a MRT interchange station. Spanning about 50-km in length in its entirety, the CRL will serve existing and future developments in the eastern, western, and north-eastern corridors, linking major hubs such as Jurong Lake District, Punggol Digital District and Changi region when fully completed.Now that the Pasir Ris MRT station is being named as an interchange station with the CRL, the potential of a successful integrated mixed-use property development will be greater. According to the LTA, the projected daily ridership of the entire CRL is more than 600,000 in the initial years, increasing to over 1 million in the longer term.The prices of private homes in the future Pasir Ris Central mixed-use development will very much depend on the land price paid by the winning bidder and also other macro and micro factors including the interest rate environment, product mix, design, and cost of integration with amenities and etc. However, we attempted to predict a reasonable price point for the private homes at this future mixed-use development by using two other integrated mixed-development projects currently under-construction as references. The two references are The Woodleigh Residences above Woodleigh MRT station in the up-and-coming Bidadari estate and Park Place Residences at PLQ in the new business district at Paya Lebar Central. We also work backwards to estimate the bid price. Market conditions are assumed to remain the same two years from now.

Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris

Hong Kong

Kerry Properties Limited, through its subsidiaries, invests in and develops real estate.  The Company also owns and operates logistics, freight and warehouses business.  In addition, Kerry Properties invests in infrastructure-related projects and operates hotels.

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Kerry Properties (683 HK)

Defensives Are Worth A Look; Hang Seng, Shanghai Comp, Nikkei 225, STOXX 50 Support Levels Holding

A review of major global indexes reveals an absence of major breakdowns. We highlight opportunities within defensive Sectors (Real Estate, Consumer...

Vermilion Research

Shangri-La Asia (69 HK): Stay Safe

Based on the average price to book - pre-COVID - I would expect around 33% upside from here, or HK$10.80/share, where it traded as recently as May...

David Blennerhassett

Kerry Logistics (636 HK): SF Holdings' Pre-Conditional Partial Offer

Undisturbed is ~HK$16.92/sh, or $9.64/sh ex-SpecDiv. At HK$24.75, there are a lot of assumptions embedded. If public shareholders hold on b/c a...

David Blennerhassett

StubWorld: Wheelock Stub Gains on Ructions in Retail

Wheelock & (20 HK) /Wharf Holdings (4 HK)/Wharf Real Estate Investment (1997 HK) Inputting the 2019 interim numbers for all three companies...

David Blennerhassett

Singapore Real Deals (Issue 3): Integrated Mixed-Use Development in Pasir Ris

Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore's real estate market. In this issue, we...

Anni Kum

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