Insight Provider, CrossASEAN Research

Nicolas Van Broekhoven

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

Thematic (Sector/Industry)

<ul>
<li>The 2022 vintage of "5 High Conviction Ideas" had the weakest performance since 2017, with only China Shineway posting a positive return</li>
<li>Olam, Rex and Starhub all declined approximately 16% in FY22</li>
<li>Our 2023 vintage will hopefully perform better with 4 out of 5 favorites in the commodity space</li>
</ul>


The 2022 vintage of "5 High Conviction Ideas" had the weakest performance since 2017, with only China Shineway posting a positive return
Olam, Rex and Starhub all declined approximately 16% in FY22
Our 2023 vintage will hopefully perform better with 4 out of 5 favorites in the commodity space


Overview of My Winners and Losers in 2022...And 5 High Conviction Ideas Going into 2023

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.</li>
<li>The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.</li>
<li>The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash.  In slightly better market conditions, this could be a 6 HKD stock.</li>
</ul>



Oriental Watch (398 HK) paid a 31-cent dividend in its H1FY23 result on the 16th, equating to an annualized dividend yield of 15% on the current share price.
The outlook for the rest of the year is much brighter, given the recovery in China and the inability of the Chinese to travel. October numbers were strong.
The stock trades at a 6.7x PE, with more than 50% of the market capitalization in cash.  In slightly better market conditions, this could be a 6 HKD stock.


Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

<ul>
<li>After a disastrous April and May due to lockdowns resulting in &gt;-50% SSSGs, the company is seeing the situation stabilize in June and July.</li>
<li>We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.</li>
<li>Expect a generous dividend with over a 100% payout. Since &gt;50% of the market cap is in cash, a special dividend could also be expected. </li>
</ul>


After a disastrous April and May due to lockdowns resulting in &gt;-50% SSSGs, the company is seeing the situation stabilize in June and July.
We remain cautious on H1 2023, as margins and revenue will likely decline, with gross margins likely to drop 300-400 bps and revenues down 10-15% YoY.
Expect a generous dividend with over a 100% payout. Since &gt;50% of the market cap is in cash, a special dividend could also be expected. 


Oriental Watch Update: June and July Improve, Cautious H1 FY23

<ul>
<li>We have increasing confidence in <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). </li>
<li>Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. </li>
<li>Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.</li>
</ul>


We have increasing confidence in Oriental Watch (398 HK) paying out a &gt; 74 cent dividend for FY22 ( implied dividend &gt;40 cents for H2 2022, full-year yield 17%). 
Current net cash (ex-of dividend payable) is 1.1 bn HKD accounting for &gt;50% of the market capitalization ( 2.1 bn HKD ), providing a significant margin of safety. 
Expanding watch premiums for brands like Rolex and Patek Philippe due to tighter supply could result in better margins for the company, increasing upside potential.


Oriental Watch: Increasing Visibility on H2 2022

China Shineway Pharmaceutical / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/china-shineway-pharmaceutical-group-ltd" target="_blank" data-smartkarma-citation="entities:6241:1" rel="noopener">China Shineway Pharmaceutical (2877 HK)</a> has been listed since December 2004. The IPO was 231x oversubscribed and the company was listed at 4.36 HKD. Since then the company has consistently paid interim, final, and special dividends totaling 5.89 HKD/share. Currently, Shineway has 6 HKD/share in net cash on the balance sheet vs a 7.2 HKD stock price. Cash is therefore approximately 85% of the market cap. Shineway is not a hot stock, on the contrary, it is a TCM player out of Hebei which is rather boring. There's positive and negatives about the TCM sector which we will delve into below. What attracted us to Shineway, and why it deserves your attention, is the new dividend policy it announced in late July. We believe this has gone largely unnoticed by investors but provides a floor for the stock which was not there before.Shineway <a href="http://api.aconnect.com.hk/Attachment/67377" target="_blank" rel="noopener">announced</a> that from its 2021 dividend base of 0.6 RMB, the dividend would grow EVERY year with at least 15%, or by the % growth in earnings (whatever is higher). It also announced it would pay the dividend in quarterly installments. Shineway has effectively become a "Pharma REIT-or-BOND-like investment instrument". So while your downside is supported by 1) the 6 HKD/share cash pile and 2) the new dividend policy. The upside case is a change from rock-bottom sentiment towards TCM and any of their five key growth drivers delivering earnings upside (see corporate presentation attached).Shineway reminds us a lot of a similar situation at <a href="https://www.smartkarma.com/entities/oriental-watch-holdings" target="_blank" data-smartkarma-citation="entities:19950:1" rel="noopener">Oriental Watch (398 HK)</a> over the past few years. Assuming the dividend policy is followed and the dividend grows by the minimum %/year investors in Shineway get back their entire investment in 6.5 years.In our base case, we forecast Shineway to have a dividend yield of 11.5% in 2022, 13.3% in 2023, 15.3% in 2024, and 17.7% in 2025.In our bull case, we forecast Shineway to have a dividend yield of 12.5% in 2022, 15.7% in 2023, 19.7% in 2024, and 24.7% in 2025.

China Shineway Pharmaceutical (2877 HK) has been listed since December 2004. The IPO was 231x oversubscribed and the company was listed at 4.36 HKD. Since then the company has consistently paid interim, final, and special dividends totaling 5.89 HKD/share. Currently, Shineway has 6 HKD/share in net cash on the balance sheet vs a 7.2 HKD stock price. Cash is therefore approximately 85% of the market cap. Shineway is not a hot stock, on the contrary, it is a TCM player out of Hebei which is rather boring. There's positive and negatives about the TCM sector which we will delve into below. What attracted us to Shineway, and why it deserves your attention, is the new dividend policy it announced in late July. We believe this has gone largely unnoticed by investors but provides a floor for the stock which was not there before.Shineway announced that from its 2021 dividend base of 0.6 RMB, the dividend would grow EVERY year with at least 15%, or by the % growth in earnings (whatever is higher). It also announced it would pay the dividend in quarterly installments. Shineway has effectively become a "Pharma REIT-or-BOND-like investment instrument". So while your downside is supported by 1) the 6 HKD/share cash pile and 2) the new dividend policy. The upside case is a change from rock-bottom sentiment towards TCM and any of their five key growth drivers delivering earnings upside (see corporate presentation attached).Shineway reminds us a lot of a similar situation at Oriental Watch (398 HK) over the past few years. Assuming the dividend policy is followed and the dividend grows by the minimum %/year investors in Shineway get back their entire investment in 6.5 years.In our base case, we forecast Shineway to have a dividend yield of 11.5% in 2022, 13.3% in 2023, 15.3% in 2024, and 17.7% in 2025.In our bull case, we forecast Shineway to have a dividend yield of 12.5% in 2022, 15.7% in 2023, 19.7% in 2024, and 24.7% in 2025.

China Shineway: Cash Is 85% of Market Cap, and New Dividend Policy Gives More Downside Support

Hong Kong

Oriental Watch Holdings Limited, through its subsidiaries, trades watches and invests in properties.

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Oriental Watch (398 HK)

Overview of My Winners and Losers in 2022...And 5 High Conviction Ideas Going into 2023

Our FY22 vintage of High Conviction Ideas had its weakest performance since FY17. We hope for better returns for our commodity-focused FY23 selection.

Nicolas Van Broekhoven

Oriental Watch Mgmt Call: Big Dividend Yet Again, 50% of Mkt Cap in Cash with >15% Yield Post Rally

Oriental watch trades at a 6.7x PE with a >15% dividend yield and more than 50% of the market cap in net cash. Management was upbeat about H2 FY23...

Sameer Taneja

Oriental Watch Update: June and July Improve, Cautious H1 FY23

Oriental Watch is an attractive investment in the luxury watch space with >50% of its market cap in cash trading at a 15.4% dividend yield on FY23...

Sameer Taneja

Oriental Watch: Increasing Visibility on H2 2022

Trading at a 17% dividend yield with >50% of the market capitalization in cash, Oriental Watch is a compelling investment in the medium term.

Sameer Taneja

China Shineway: Cash Is 85% of Market Cap, and New Dividend Policy Gives More Downside Support

China Shineway is a TCM player which has decided to share more of its cash pile with minority investors. Cash makes up 85% of market cap which...

Nicolas Van Broekhoven

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