Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

This week: <a href="https://www.smartkarma.com/entities/50" target="_blank" data-smartkarma-citation="entities:50:1">Hang Lung Group Ltd (10 HK)</a>’s discount remains stretched after bouncing off a 12-month low earlier in the week; and <a href="https://www.smartkarma.com/entities/18845" target="_blank" data-smartkarma-citation="entities:18845:1">Tsugami Corp (6101 JP)</a> optically looks expensive vs. newly-listed sub, <a href="https://www.smartkarma.com/entities/26199" target="_blank" data-smartkarma-citation="entities:26199:1">Precision Tsugami China Corp (1651 HK)</a>.These relationships trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/opco held must be at least 20% of the parent's market cap.A detailed NAV for a number of these parent/holding relationships highlighted can be found in our holdco monitor.My comments on Hang Lung, Tsugami and others (including <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a> &amp; <a href="https://www.smartkarma.com/entities/21085" target="_blank" data-smartkarma-citation="entities:21085:1">Naspers Ltd (NPN SJ)</a> follow the weekly setup/unwind tables.(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)

This week: Hang Lung Group Ltd (10 HK)’s discount remains stretched after bouncing off a 12-month low earlier in the week; and Tsugami Corp (6101 JP) optically looks expensive vs. newly-listed sub, Precision Tsugami China Corp (1651 HK).These relationships trade with: 1) a minimum liquidity threshold of US$1mn on a 90-day moving average; and 2) a minimum 20% 'market capitalisation' threshold, whereby the value of the holding/opco held must be at least 20% of the parent's market cap.A detailed NAV for a number of these parent/holding relationships highlighted can be found in our holdco monitor.My comments on Hang Lung, Tsugami and others (including Wynn Resorts Ltd (WYNN US) &amp; Naspers Ltd (NPN SJ) follow the weekly setup/unwind tables.(Market cap and liquidity noted below are in US$. Liquidity is assessed on a 3-month average)

StubWorld - Set-Up & Unwind Extremes: Hang Lung, Tsugami

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

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Thematic (Sector/Industry)

Eighteen sales and marketing executives at Crown Resorts were reported as being detained in China, likely due to illegally soliciting Chinese to gamble in overseas casinos. Our contacts in the industry have already seen immediate termination of marketing efforts in mainland China by Macau casinos, which imply lower near-term gaming revenue in our view. A loss of higher-margin direct VIP business could also mean lower overall VIP margin for the Macau casinos, as junket VIP margins are one to two percentage points lower compared with direct VIP margins. Near-term sentiment will be unfavorable for the Macau gaming stocks. However, we gauge that marketing activities in mainland China will resurface as the dust settles, though casinos will take a lower-profile approach.To reflect the short-term impact, if we reduced 2016 full-year VIP, mass and slot revenue by 7.5% for our Macau gaming coverage, there would still be no impact on fair value estimates. Therefore, we maintain our long-term forecast and long-term-based, DCF-generated fair value estimates. Our narrow moat ratings also remain unchanged.Analyst: Chelsey Tam

Eighteen sales and marketing executives at Crown Resorts were reported as being detained in China, likely due to illegally soliciting Chinese to gamble in overseas casinos. Our contacts in the industry have already seen immediate termination of marketing efforts in mainland China by Macau casinos, which imply lower near-term gaming revenue in our view. A loss of higher-margin direct VIP business could also mean lower overall VIP margin for the Macau casinos, as junket VIP margins are one to two percentage points lower compared with direct VIP margins. Near-term sentiment will be unfavorable for the Macau gaming stocks. However, we gauge that marketing activities in mainland China will resurface as the dust settles, though casinos will take a lower-profile approach.To reflect the short-term impact, if we reduced 2016 full-year VIP, mass and slot revenue by 7.5% for our Macau gaming coverage, there would still be no impact on fair value estimates. Therefore, we maintain our long-term forecast and long-term-based, DCF-generated fair value estimates. Our narrow moat ratings also remain unchanged.Analyst: Chelsey Tam

Negative Near-Term Read-Throughs from the Detainment of Crown Resorts' Marketing Executives in China

Hong Kong

Pou Sheng International (Holdings) Limited retails and wholesales sportswear, including sports footwear, apparel and accessories.

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Pou Sheng International (3813 HK)

StubWorld - Set-Up & Unwind Extremes: Hang Lung, Tsugami

This week: Hang Lung Group Ltd (10 HK)’s discount remains stretched after bouncing off a 12-month low earlier in the week; and Tsugami Corp (6101...

David Blennerhassett

Negative Near-Term Read-Throughs from the Detainment of Crown Resorts' Marketing Executives in China

Eighteen sales and marketing executives at Crown Resorts were reported as being detained in China, likely due to illegally soliciting Chinese to...

Morningstar, Inc.

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