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

Equity Bottom-Up

<p><a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> has been a small-cap gem we have written about on numerous occasions. The company is not a buy &amp; hold stock but in September 2020 we called it "very cheap" <a href="https://www.smartkarma.com/insights/pc-partner-poor-man-s-play-on-nvidia-part-2-trades-at-2x-fy20-p-e-and-14-dividend-yield" target="_blank" data-smartkarma-citation="insights:43227" rel="noopener">PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield</a> when it was trading at 1.2 HKD/share. Fast forward one year and the company just reported close to 1 billion HKD in net profit and is paying an <strong>interim</strong> dividend of 0.84 HKD on 1H21. This is a <strong>14% interim dividend yield on a stock that closed at 5.82 HKD recently.</strong> While a year ago the company was in a net debt position today the balance sheet is rock solid and approximately 65% of the market cap is cash.</p><p>So far Mr. Market has met last Friday's results with a big yawn as the stock barely moved. Investors are assuming results will fall off a cliff in 2H21 and into 2022. <strong>Now, what if we told you 2H21 results could grow over 1H21?</strong> Cash on the balance sheet has ballooned to 65% of market cap and even taking into account the large interim distribution we forecast cash to grow to over 100% of current market cap by late 2021! Pc Partner has a history of doing shareholder friendly things (buybacks, tender offers, special dividends) and we expect this to continue. The wild card with Pc Partner is if the tight supply and fantastic pricing of VGA's will last for just one more quarter or well into 2022.</p><p>For now there is no indication that 3Q trends have changed meaningfully from 2Q21. This implies that bumper profits will continue at least this quarter. Historically, 4Q is always Pc Partner's strongest quarter and if Covid strikes again in EU/USA winter season we see no reason why demand for PC's/gaming will drop off sharply. As echoed by several car manufacturers and chip suppliers we see no end in sight for chip shortages keeping ASP's elevated. This gets us to a scenario (not guarantee!) that 2H21 profits might actually be higher vs 1H21 profits. It would be an understatement to say that Pc Partner is NOT priced for this scenario at all.</p><p><strong>Fair Value raised to 10 HKD (2x 5HKD FY2021 EPS estimate)</strong>. Major risk here is the VGA supply situation improves drastically and ASP's fall. The company is scheduled to hold a conf call with investors next week and we look forward to more guidance at this time.</p>

PC Partner (1263 HK) has been a small-cap gem we have written about on numerous occasions. The company is not a buy &amp; hold stock but in September 2020 we called it "very cheap" PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield when it was trading at 1.2 HKD/share. Fast forward one year and the company just reported close to 1 billion HKD in net profit and is paying an interim dividend of 0.84 HKD on 1H21. This is a 14% interim dividend yield on a stock that closed at 5.82 HKD recently. While a year ago the company was in a net debt position today the balance sheet is rock solid and approximately 65% of the market cap is cash.So far Mr. Market has met last Friday's results with a big yawn as the stock barely moved. Investors are assuming results will fall off a cliff in 2H21 and into 2022. Now, what if we told you 2H21 results could grow over 1H21? Cash on the balance sheet has ballooned to 65% of market cap and even taking into account the large interim distribution we forecast cash to grow to over 100% of current market cap by late 2021! Pc Partner has a history of doing shareholder friendly things (buybacks, tender offers, special dividends) and we expect this to continue. The wild card with Pc Partner is if the tight supply and fantastic pricing of VGA's will last for just one more quarter or well into 2022.For now there is no indication that 3Q trends have changed meaningfully from 2Q21. This implies that bumper profits will continue at least this quarter. Historically, 4Q is always Pc Partner's strongest quarter and if Covid strikes again in EU/USA winter season we see no reason why demand for PC's/gaming will drop off sharply. As echoed by several car manufacturers and chip suppliers we see no end in sight for chip shortages keeping ASP's elevated. This gets us to a scenario (not guarantee!) that 2H21 profits might actually be higher vs 1H21 profits. It would be an understatement to say that Pc Partner is NOT priced for this scenario at all.Fair Value raised to 10 HKD (2x 5HKD FY2021 EPS estimate). Major risk here is the VGA supply situation improves drastically and ASP's fall. The company is scheduled to hold a conf call with investors next week and we look forward to more guidance at this time.

PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash

<p><a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> reported solid 2020 results but last week's earnings call provided a mixed outlook. </p><p>On the one hand, there is great demand for GPU's and this is likely to continue into 2H21. On the other hand, the companies' two main suppliers <a href="https://www.smartkarma.com/entities/advanced-micro-devices-inc" target="_blank" data-smartkarma-citation="entities:19009:1" rel="noopener">Advanced Micro Devices (AMD US)</a> and <a href="https://www.smartkarma.com/entities/nvidia-corp" target="_blank" data-smartkarma-citation="entities:5891:1" rel="noopener">NVIDIA Corp (NVDA US)</a> can not deliver GPUs fast enough. On the positive side, this is leading to increased ASP (+15%) but on the negative side, volumes are dropping (-20/-30%) while costs (labor, logistics, memory) are rising.</p><p>Clearly, this is an industry-wide issue and not Pc Partner specific but it does mean that 1H21 will still be stronger than 1H20 but weaker vs 2H20. Fortunately, Pc Partner remains cheap and it will pay a 0.22 HKD dividend (6.4% dividend yield) by mid-July. Investors can also look forward to an interim dividend in August. The downside in the stock is limited but the upside is capped until supply issues at Nvidia and AMD are resolved. </p><p>We lower our Fair Value estimate to 4 HKD (based on 6x 0.67 HKD FY21 EPS vs 0.75 HKD prior estimate), which leaves another 17% upside. Since IPO the company has traded on a multiple of 4x (low end)-6x (high-end). </p>

PC Partner (1263 HK) reported solid 2020 results but last week's earnings call provided a mixed outlook. On the one hand, there is great demand for GPU's and this is likely to continue into 2H21. On the other hand, the companies' two main suppliers Advanced Micro Devices (AMD US) and NVIDIA Corp (NVDA US) can not deliver GPUs fast enough. On the positive side, this is leading to increased ASP (+15%) but on the negative side, volumes are dropping (-20/-30%) while costs (labor, logistics, memory) are rising.Clearly, this is an industry-wide issue and not Pc Partner specific but it does mean that 1H21 will still be stronger than 1H20 but weaker vs 2H20. Fortunately, Pc Partner remains cheap and it will pay a 0.22 HKD dividend (6.4% dividend yield) by mid-July. Investors can also look forward to an interim dividend in August. The downside in the stock is limited but the upside is capped until supply issues at Nvidia and AMD are resolved. We lower our Fair Value estimate to 4 HKD (based on 6x 0.67 HKD FY21 EPS vs 0.75 HKD prior estimate), which leaves another 17% upside. Since IPO the company has traded on a multiple of 4x (low end)-6x (high-end). 

PC Partner: Great Demand, but Limited Supply of GPU's Created Mixed 2021 Outlook

Chart based progressive global trading strategies, Chart Partners

Thomas Schroeder

Chart based progressive global trading strategies

Chart Partners

Chart Partners objective is to discover medium-term cycle turns and profit opportunities before they unfold, within structural trends while preserving capital with clear degrees of risk. We have real return ideas. 

Markets are dynamic and trading systems must reflect this. It is crucial to determine underlying correlations and lead-lag relationships within global markets and the impact on linked instruments. Our weekly Chartonics product gives you short-term trading strategies that can be applied within the medium and longer term macro trends that are mapped out in our strategy updates. 

Our methodology fuses global market variables and isolates drivers in trends. We specialize in FX, index trade in NY and Asia with a focus on Asian stocks. 

Technical Analysis

<p><a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> is gunning for new highs if it can sustain gains above the 5.0 direction pivot barrier. Near term strength is exhausting but a pullback sets up a fresh buying opportunity to firmly clear 5.0 and challenge the high at 7.40. Long call on December 8 <a href="https://www.smartkarma.com/insights/pc-partner-macro-bullish-wedge" target="_blank" data-smartkarma-citation="insights:46126" rel="noopener">PC Partner Macro Bullish Wedge</a> has cleared some key levels and geared for further gains.</p><p>8.80 is our new high projection.</p>

PC Partner (1263 HK) is gunning for new highs if it can sustain gains above the 5.0 direction pivot barrier. Near term strength is exhausting but a pullback sets up a fresh buying opportunity to firmly clear 5.0 and challenge the high at 7.40. Long call on December 8 PC Partner Macro Bullish Wedge has cleared some key levels and geared for further gains.8.80 is our new high projection.

<p><a href="https://www.smartkarma.com/entities/pc-partner-group-ltd" target="_blank" data-smartkarma-citation="entities:8492:1" rel="noopener">PC Partner (1263 HK)</a> has reached our 3 HKD Fair Value target set in September last year. When our insight <a href="https://www.smartkarma.com/insights/pc-partner-poor-man-s-play-on-nvidia-part-2-trades-at-2x-fy20-p-e-and-14-dividend-yield" target="_blank" data-smartkarma-citation="insights:43227" rel="noopener">PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield</a> was published shares were trading around 1.66 HKD and skepticism around the company's prospects was high.</p><p><strong>Now that 3 HKD is in reach: where to from here?</strong></p><p>A preview before PC Partner FY20 results which will be out on 26 March 2021:</p><ul>
<li>Positive FY20 profit alert in the coming 30 days</li>
<li>FY20 earnings and revenue to meet consensus forecasts</li>
<li>0.22 HKD dividend for FY20</li>
<li>+/-20% upside to FY21 consensus as GPU tightness results in significant margin expansion</li>
<li>Crypto miners competing with historical GPU buyers (gaming, data, etc)</li>
<li>FY21 gross margins to improve from 9% in 1H20 to 12% in 1H21</li>
<li>Shortage of Nvidia and AMD GPU to last entire 1H21 = positive for pricing power</li>
<li>Fair Value raised to 4.5 HKD (55% upside)</li>
</ul><p>More details below...</p>

PC Partner (1263 HK) has reached our 3 HKD Fair Value target set in September last year. When our insight PC Partner: Poor-Man's Play on Nvidia  (Part 2); Trades at 2x FY20 P/E and 14% Dividend Yield was published shares were trading around 1.66 HKD and skepticism around the company's prospects was high.Now that 3 HKD is in reach: where to from here?A preview before PC Partner FY20 results which will be out on 26 March 2021:
Positive FY20 profit alert in the coming 30 days
FY20 earnings and revenue to meet consensus forecasts
0.22 HKD dividend for FY20
+/-20% upside to FY21 consensus as GPU tightness results in significant margin expansion
Crypto miners competing with historical GPU buyers (gaming, data, etc)
FY21 gross margins to improve from 9% in 1H20 to 12% in 1H21
Shortage of Nvidia and AMD GPU to last entire 1H21 = positive for pricing power
Fair Value raised to 4.5 HKD (55% upside)
More details below...

Preview PC Partner FY20 Earnings + Outlook: Tight GPU Margin Gives FY21 Upside Potential

Thematic (Sector/Industry)

<div>
<p>In a follow up to similar styled notes from 2017-2018-2019</p>
<p><a href="https://www.smartkarma.com/insights/overview-of-my-winners-and-losers-in-2019-and-5-high-conviction-ideas-going-into-2020" target="_blank" data-smartkarma-citation="insights:35000" rel="noopener">Overview of My Winners and Losers in 2019... And 5 High Conviction Ideas Going into 2020</a> </p>
</div><div><p><a href="https://www.smartkarma.com/insights/overview-of-my-winners-and-losers-in-2018-and-5-high-conviction-ideas-going-into-2019" target="_blank" data-smartkarma-citation="insights:26696" rel="noopener">Overview of My Winners and Losers in 2018...and 5 High Conviction Ideas Going into 2019</a> </p></div><div><p><a href="https://www.smartkarma.com/insights/overview-of-my-winners-and-losers-in-2017-and-5-high-conviction-ideas-going-into-2018" target="_blank" data-smartkarma-citation="insights:16368" rel="noopener">Overview of My Winners and Losers in 2017...and 5 High Conviction Ideas Going into 2018</a></p></div><div><p>I again look at my stock ideas that have worked out in 2020, those that have not, and those where the verdict is still pending. I will also highlight 5 new high conviction ideas for 2021.</p></div><div><p>Last year I provided 5 high conviction ideas and here is their performance:</p></div><div><table class="table table-striped"><tbody>
<tr>
<td style="width: 188.19px;">Company</td>
<td style="width: 135.71px;">Share Price 19 Dec 2019</td>
<td style="width: 173.14px;">Share Price 24 December 2020</td>
<td style="width: 64.07px;">Dividends</td>
<td style="width: 80.89px;">% Total Return</td>
</tr>
<tr>
<td style="width: 188.19px;">
<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> </td>
<td style="width: 135.71px;">1.89 SGD</td>
<td style="width: 173.14px;">3.43 SGD</td>
<td style="width: 64.07px;">0.0081 SGD</td>
<td style="width: 80.89px;">+81.91%</td>
</tr>
<tr>
<td style="width: 188.19px;"><a href="https://www.smartkarma.com/entities/24110" target="_blank" data-smartkarma-citation="entities:24110:1" rel="noopener">Procurri Corporation (PROC SP)</a></td>
<td style="width: 135.71px;">0.48 SGD</td>
<td style="width: 173.14px;">0.28 SGD</td>
<td style="width: 64.07px;">0.000 SGD</td>
<td style="width: 80.89px;">-41.66%</td>
</tr>
<tr>
<td style="width: 188.19px;">
<a href="https://www.smartkarma.com/entities/sunpower-group-ltd" target="_blank" data-smartkarma-citation="entities:18395:1" rel="noopener">Sunpower Group (SPWG SP)</a> </td>
<td style="width: 135.71px;">0.57 SGD</td>
<td style="width: 173.14px;">0.76 SGD</td>
<td style="width: 64.07px;">0.0025 SGD</td>
<td style="width: 80.89px;">+33.77%</td>
</tr>
<tr>
<td style="width: 188.19px;">
<a href="https://www.smartkarma.com/entities/ips-securex-holdings-ltd" target="_blank" data-smartkarma-citation="entities:15717:1" rel="noopener">IPS Securex (IPSS SP)</a> </td>
<td style="width: 135.71px;">0.004 SGD</td>
<td style="width: 173.14px;">0.08 SGD</td>
<td style="width: 64.07px;">0.000 SGD</td>
<td style="width: 80.89px;">+100%</td>
</tr>
<tr>
<td style="width: 188.19px;">
<a href="https://www.smartkarma.com/entities/cosco-shipping-international-8a9750d4-23c7-4832-9b67-2032ca7ec1f3" target="_blank" data-smartkarma-citation="entities:672:1" rel="noopener">Cosco International Holdings (517 HK)</a> </td>
<td style="width: 135.71px;">2.01 HKD</td>
<td style="width: 173.14px;">2.38 HKD</td>
<td style="width: 64.07px;">0.16 HKD</td>
<td style="width: 80.89px;">+26.50%</td>
</tr>
</tbody></table></div>


In a follow up to similar styled notes from 2017-2018-2019
Overview of My Winners and Losers in 2019... And 5 High Conviction Ideas Going into 2020 
Overview of My Winners and Losers in 2018...and 5 High Conviction Ideas Going into 2019 Overview of My Winners and Losers in 2017...and 5 High Conviction Ideas Going into 2018I again look at my stock ideas that have worked out in 2020, those that have not, and those where the verdict is still pending. I will also highlight 5 new high conviction ideas for 2021.Last year I provided 5 high conviction ideas and here is their performance:

Company
Share Price 19 Dec 2019
Share Price 24 December 2020
Dividends
% Total Return



AEM Holdings (AEM SP) 
1.89 SGD
3.43 SGD
0.0081 SGD
+81.91%


Procurri Corporation (PROC SP)
0.48 SGD
0.28 SGD
0.000 SGD
-41.66%



Sunpower Group (SPWG SP) 
0.57 SGD
0.76 SGD
0.0025 SGD
+33.77%



IPS Securex (IPSS SP) 
0.004 SGD
0.08 SGD
0.000 SGD
+100%



Cosco International Holdings (517 HK) 
2.01 HKD
2.38 HKD
0.16 HKD
+26.50%



Overview of My Winners and Losers in 2020...And 5 High Conviction Ideas Going into 2021

Hong Kong

PC Partner Group Ltd. is principally engaged in the design, development and manufacture of video graphics cards. The Group manufactures various electronics components and products for customers under its electronics manufacturing services division and also manufactures other personal computers related products.

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PC Partner (1263 HK)

PC Partner: 1H21 Off the Chart Results To Be Followed by Large Div Stream; 65% of Mkt Cap Is Cash

PC Partner reported record 1H21 results and declared a 0.84 HKD interim dividend. Mr.Market assumes results will not remain this good in 2H21 but...

Nicolas Van Broekhoven

PC Partner: Great Demand, but Limited Supply of GPU's Created Mixed 2021 Outlook

Pc Partner reported solid FY20 results. During last week's earnings call the company explained industry dynamics are mixed and result in us...

Nicolas Van Broekhoven

PC Partner New High Charge

PC Partner (1263 HK) is gunning for new highs if it can sustain gains above the 5.0 direction pivot barrier. Near term strength is exhausting but a...

Thomas Schroeder

Preview PC Partner FY20 Earnings + Outlook: Tight GPU Margin Gives FY21 Upside Potential

PC Partner will enjoy rising gross margins in FY21 which will benefit profits and dividends going forward. We forecast another 55% upside from...

Nicolas Van Broekhoven

Overview of My Winners and Losers in 2020...And 5 High Conviction Ideas Going into 2021

Looking back at our 2020 favorite picks shows good performance across the board except for Procurri which declined over 40%. We also highlight 5...

Nicolas Van Broekhoven

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