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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<p><em><strong>Corrigenda: There is an error in this Insight. Please note the correction.</strong></em></p>
<p><em><strong>Correction: The <a href="https://www.smartkarma.com/insights/singapore-sti-macro-bear-pressure-mounting-with-tactical-relief-from-2-400" target="_blank" data-smartkarma-citation="insights:42932" rel="noopener">Singapore STI Macro Bear Pressure Mounting with Tactical Relief from 2,400</a> Insight is improperly attributed to Thomas Monaco. That Insight was published by <a href="https://www.smartkarma.com/profiles/thomas-schroeder" target="_blank" data-smartkarma-citation="accounts:381" rel="noopener">Thomas Schroeder</a>.</strong></em></p>
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<div class="content-highlight">
<p>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.</p>
<p>Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week's relevant discussions in <a href="mailto:ASEAN@Smartkarma" target="_blank" rel="noopener">ASEAN@Smartkarma.</a></p>
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<h3>Equity Bottom-Up Insights</h3>
<p>In <a href="https://www.smartkarma.com/insights/kalbe-farma-klbf-ij-a-nutritional-spin-off" target="_blank" data-smartkarma-citation="insights:42533" rel="noopener">Kalbe Farma (KLBF IJ) - A Nutritional Spin-Off?,</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 South East Asia's largest pharmaceutical company in light of news that the company is considering spinning off its Nutritionals division to raise around US$500m. </p>
<p>In <a href="https://www.smartkarma.com/insights/link-net-tbk-pt-link-ij-summer-migration-at-last" target="_blank" data-smartkarma-citation="insights:42829" rel="noopener">Link Net Tbk Pt (LINK IJ) - Summer Migration at Last,</a> <a href="https://www.smartkarma.com/profiles/angus-mackintosh" target="_blank" data-smartkarma-citation="accounts:937" rel="noopener">Angus Mackintosh</a> revisits Indonesia's highest quality high-speed broadband provider following a call with managment, which focused on its recent results, as well as the decision to build its own pole infrastructure to carry its fibre.  </p>
<p>In <a href="https://www.smartkarma.com/insights/singtel-make-the-call" target="_blank" data-smartkarma-citation="insights:42900" rel="noopener">SingTel: Make The Call,</a> <a href="https://www.smartkarma.com/profiles/david-blennerhassett" target="_blank" data-smartkarma-citation="accounts:840" rel="noopener">David Blennerhassett</a> zeros in on Singapore's leading telecom provider and finds deep value appearing in the stock.</p>
<p>In <a href="https://www.smartkarma.com/insights/scg-packaging-ipo-initiation-shrink-wrapping" target="_blank" data-smartkarma-citation="insights:42967" rel="noopener">SCG Packaging IPO Initiation: Shrink Wrapping,</a> <a href="https://www.smartkarma.com/profiles/arun-george" target="_blank" data-smartkarma-citation="accounts:1680" rel="noopener">Arun George</a> takes a first look at the upcoming spin-off from <a href="https://www.smartkarma.com/entities/siam-cement-pcl-the" target="_blank" data-smartkarma-citation="entities:2589:1" rel="noopener">Siam Cement (SCC TB)</a> and IPO of SCG Packaging, which will get a lot of investor focus given ist size and share in of the packaging market in SE Asia. </p>
<p>In <a href="https://www.smartkarma.com/insights/sembcorp-last-chance-before" target="_blank" data-smartkarma-citation="insights:42886" rel="noopener">Sembcorp - Last Chance Before...</a> <a href="https://www.smartkarma.com/profiles/travis-lundy" target="_blank" data-smartkarma-citation="accounts:25" rel="noopener">Travis Lundy</a> looks at the enormously dilutive rights issue and de-merger of Semcorp Marine. </p>
<p> In <a href="https://www.smartkarma.com/insights/singapore-sti-macro-bear-pressure-mounting-with-tactical-relief-from-2-400" target="_blank" data-smartkarma-citation="insights:42932" rel="noopener">Singapore STI Macro Bear Pressure Mounting with Tactical Relief from 2,400,</a> technical analysis specialist <a href="https://www.smartkarma.com/profiles/thomas-j-monaco" target="_blank" data-smartkarma-citation="accounts:1716" rel="noopener">Thomas J. Monaco</a> works his technical magic on the <a href="https://www.smartkarma.com/entities/ftse-straits-times-index-sti" target="_blank" data-smartkarma-citation="entities:22902:1" rel="noopener">FTSE Straits Times Index (STI) (STI INDEX).</a></p>
<p>In <a href="https://www.smartkarma.com/insights/ratch-3q20-earnings-to-improve-from-overseas-performance" target="_blank" data-smartkarma-citation="insights:42789" rel="noopener">RATCH: 3Q20 Earnings to Improve from Overseas Performance</a>, our friend at <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> report back on <a href="https://www.smartkarma.com/entities/ratch-group-pcl" target="_blank" data-smartkarma-citation="entities:15338:1" rel="noopener">Ratchaburi Electric (RATCH TB)</a> post its more recent analyst meeting, which left a positive impression.  </p>
<p>In <a href="https://www.smartkarma.com/insights/b-work-good-dividend-yield-makes-an-attractive-investment" target="_blank" data-smartkarma-citation="insights:42782" rel="noopener">B-WORK: Good Dividend Yield Makes an Attractive Investment,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> revisits <a href="https://www.smartkarma.com/entities/bualuang-office-leasehold-real-estate-investment-trust" target="_blank" data-smartkarma-citation="entities:26187:1" rel="noopener">Bualuang Office Leasehold Real Estate Investment Trust (B-WORK TB)</a> and takes a positive view. </p>
<p>In <a href="https://www.smartkarma.com/insights/rbf-the-excessive-outperformance-may-come-to-a-halt" target="_blank" data-smartkarma-citation="insights:42788" rel="noopener">RBF: The Excessive Outperformance May Come to a Halt,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> upgrades his recommendation on <a href="https://www.smartkarma.com/entities/r-b-food-supply-pcl" target="_blank" data-smartkarma-citation="entities:28949:1" rel="noopener">R&amp;B Food Supply PCL (RBF TB)</a> to HOLD from SELL based on raising his target price of THB9.25 from THB8.70, implying a downside of 9% from the current price. </p>
<p>In <a href="https://www.smartkarma.com/insights/sti-acquisition-benefits-are-not-fully-priced-in-strong-buy" target="_blank" data-smartkarma-citation="insights:42785" rel="noopener">STI: Acquisition Benefits Are Not Fully Priced In, Strong BUY,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> revisits <a href="https://www.smartkarma.com/entities/stonehenge-inter-pcl" target="_blank" data-smartkarma-citation="entities:27353:1" rel="noopener">Stonehenge Inter (STI TB)</a> with a BUY recommendation based on his target of THB10.10, implying an upside of 31% from the current share price. </p>
<p>In <a href="https://www.smartkarma.com/insights/dod-strong-performance-deserves-a-re-rating" target="_blank" data-smartkarma-citation="insights:42676" rel="noopener">DOD: Strong Performance Deserves a Re-Rating,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> upgrades his recommendation on <a href="https://www.smartkarma.com/entities/dod-biotech-pcl" target="_blank" data-smartkarma-citation="entities:26179:1" rel="noopener">DOD Biotech PCL (DOD TB)</a> to BUY from HOLD based on raising his target price to Bt10.70 from Bt7.55, implying an upside of 26% from the current price. </p>
<p>In <a href="https://www.smartkarma.com/insights/vranda-the-calm-before-challenging-times" target="_blank" data-smartkarma-citation="insights:42781" rel="noopener">VRANDA: The Calm Before Challenging Times,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> has a SELL recommendation on <a href="https://www.smartkarma.com/entities/veranda-resort-pcl" target="_blank" data-smartkarma-citation="entities:29176:1" rel="noopener">Veranda Resort PCL (VRANDA TB)</a> based on a target price of THB4.30, implying a downside of 26% from the current share price. </p>
<p>In <a href="https://www.smartkarma.com/insights/ace-results-are-not-stunning-stay-on-hold" target="_blank" data-smartkarma-citation="insights:42784" rel="noopener">ACE: Results Are Not Stunning, Stay on HOLD,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> upgrades his recommendation on <a href="https://www.smartkarma.com/entities/absolute-clean-energy-pcl" target="_blank" data-smartkarma-citation="entities:29155:1" rel="noopener">Absolute Clean Energy PCL (ACE TB)</a> to HOLD from SELL based on raising his target price to THB3.49 from THB2.64, implying an upside of 8% from the current price. </p>
<p>In <a href="https://www.smartkarma.com/insights/spa-weak-demand-continues-to-pressure-2h20-earnings" target="_blank" data-smartkarma-citation="insights:42813" rel="noopener">SPA: Weak Demand Continues to Pressure 2H20 Earnings,</a> <a href="https://www.smartkarma.com/profiles/dr-andrew-stotz-cfa" target="_blank" data-smartkarma-citation="accounts:756" rel="noopener">Dr. Andrew Stotz, CFA</a> downgrades <a href="https://www.smartkarma.com/entities/siam-wellness-group-pcl" target="_blank" data-smartkarma-citation="entities:3765:1" rel="noopener">Siam Wellness Group (SPA TB)</a> from BUY to HOLD rating and cut his target price by 31% to THB6.6 to factor in weakening earnings momentum in 2H20. </p>
<p>In <a href="https://www.smartkarma.com/insights/gunkul-new-60mw-power-plant-to-drive-2h20-earnings" target="_blank" data-smartkarma-citation="insights:42820" rel="noopener">GUNKUL: New 60MW Power Plant to Drive 2H20 Earnings,</a> <a href="https://www.smartkarma.com/companies/country-group" target="_blank" data-smartkarma-citation="companies:965" rel="noopener">Country Group</a> maintain a BUY rating on <a href="https://www.smartkarma.com/entities/gunkul-engineering-pcl" target="_blank" data-smartkarma-citation="entities:15272:1" rel="noopener">Gunkul Engineering (GUNKUL TB)</a> with a target price of THB3.24 derived using DCF method (WACC 7.8% and TG 1%) implying 11.4x FY20E PER or 0.5x relative PER to Thai utility sector. </p>
<h3>Sector and Thematic Insights</h3>
<p>In <a href="https://www.smartkarma.com/insights/telecom-review-sept-2020-ais-and-asiasoft-get-aggressive-on-gaming" target="_blank" data-smartkarma-citation="insights:41022" rel="noopener">Telecom Review (Sept 2020): AIS and AsiaSoft Get Aggressive on Gaming,</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> takes a look at gaming, specifically related to <a href="https://www.smartkarma.com/entities/advanced-info-service-pcl" target="_blank" data-smartkarma-citation="entities:947:1" rel="noopener">Advanced Info Service (ADVANC TB)</a> and <a href="https://www.smartkarma.com/entities/asiasoft-corp-pcl" target="_blank" data-smartkarma-citation="entities:5429:1" rel="noopener">Asiasoft Corp (AS TB)</a> in Thailand. </p>


Corrigenda: There is an error in this Insight. Please note the correction.
Correction: The Singapore STI Macro Bear Pressure Mounting with Tactical Relief from 2,400 Insight is improperly attributed to Thomas Monaco. That Insight was published by Thomas Schroeder.



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.
Please find a brief summary below, with a fuller write up in the detailed section. We also include in the detailed section the past week's relevant discussions in ASEAN@Smartkarma.

Equity Bottom-Up Insights
In Kalbe Farma (KLBF IJ) - A Nutritional Spin-Off?, CrossASEAN Insight Provider Angus Mackintosh revisits South East Asia's largest pharmaceutical company in light of news that the company is considering spinning off its Nutritionals division to raise around US$500m. 
In Link Net Tbk Pt (LINK IJ) - Summer Migration at Last, Angus Mackintosh revisits Indonesia's highest quality high-speed broadband provider following a call with managment, which focused on its recent results, as well as the decision to build its own pole infrastructure to carry its fibre.  
In SingTel: Make The Call, David Blennerhassett zeros in on Singapore's leading telecom provider and finds deep value appearing in the stock.
In SCG Packaging IPO Initiation: Shrink Wrapping, Arun George takes a first look at the upcoming spin-off from Siam Cement (SCC TB) and IPO of SCG Packaging, which will get a lot of investor focus given ist size and share in of the packaging market in SE Asia. 
In Sembcorp - Last Chance Before... Travis Lundy looks at the enormously dilutive rights issue and de-merger of Semcorp Marine. 
 In Singapore STI Macro Bear Pressure Mounting with Tactical Relief from 2,400, technical analysis specialist Thomas J. Monaco works his technical magic on the FTSE Straits Times Index (STI) (STI INDEX).
In RATCH: 3Q20 Earnings to Improve from Overseas Performance, our friend at Country Group report back on Ratchaburi Electric (RATCH TB) post its more recent analyst meeting, which left a positive impression.  
In B-WORK: Good Dividend Yield Makes an Attractive Investment, Dr. Andrew Stotz, CFA revisits Bualuang Office Leasehold Real Estate Investment Trust (B-WORK TB) and takes a positive view. 
In RBF: The Excessive Outperformance May Come to a Halt, Dr. Andrew Stotz, CFA upgrades his recommendation on R&amp;B Food Supply PCL (RBF TB) to HOLD from SELL based on raising his target price of THB9.25 from THB8.70, implying a downside of 9% from the current price. 
In STI: Acquisition Benefits Are Not Fully Priced In, Strong BUY, Dr. Andrew Stotz, CFA revisits Stonehenge Inter (STI TB) with a BUY recommendation based on his target of THB10.10, implying an upside of 31% from the current share price. 
In DOD: Strong Performance Deserves a Re-Rating, Dr. Andrew Stotz, CFA upgrades his recommendation on DOD Biotech PCL (DOD TB) to BUY from HOLD based on raising his target price to Bt10.70 from Bt7.55, implying an upside of 26% from the current price. 
In VRANDA: The Calm Before Challenging Times, Dr. Andrew Stotz, CFA has a SELL recommendation on Veranda Resort PCL (VRANDA TB) based on a target price of THB4.30, implying a downside of 26% from the current share price. 
In ACE: Results Are Not Stunning, Stay on HOLD, Dr. Andrew Stotz, CFA upgrades his recommendation on Absolute Clean Energy PCL (ACE TB) to HOLD from SELL based on raising his target price to THB3.49 from THB2.64, implying an upside of 8% from the current price. 
In SPA: Weak Demand Continues to Pressure 2H20 Earnings, Dr. Andrew Stotz, CFA downgrades Siam Wellness Group (SPA TB) from BUY to HOLD rating and cut his target price by 31% to THB6.6 to factor in weakening earnings momentum in 2H20. 
In GUNKUL: New 60MW Power Plant to Drive 2H20 Earnings, Country Group maintain a BUY rating on Gunkul Engineering (GUNKUL TB) with a target price of THB3.24 derived using DCF method (WACC 7.8% and TG 1%) implying 11.4x FY20E PER or 0.5x relative PER to Thai utility sector. 
Sector and Thematic Insights
In Telecom Review (Sept 2020): AIS and AsiaSoft Get Aggressive on Gaming, our Thai guru Athaporn Arayasantiparb, CFA takes a look at gaming, specifically related to Advanced Info Service (ADVANC TB) and Asiasoft Corp (AS TB) in Thailand. 

The Week that Was in ASEAN@Smartkama - Kalbe Spin-Off, SingTel's Deep Value, and Thailand's Gamers

Pan-Asia Catalysts/Events, Quiddity Advisors

David Blennerhassett

Pan-Asia Catalysts/Events

Quiddity Advisors

Event-Driven

Last Week in Event SPACE: Toshiba, Softbank, Cardinal Resources, Sembcorp, Intouch, SingTel, 58.Com

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<p>Investors and <a href="https://www.smartkarma.com/entities/singapore-telecommunications" target="_blank" data-smartkarma-citation="entities:20:1" rel="noopener">Singtel (ST SP)</a> have unerringly been disconnected in 2020. Shares are currently trading at their lowest level outside the GFC.</p>
<p>Sentiment was not helped by the 24% decline in EBITDA (excluding the results of its regional associates) for the <a href="https://links.sgx.com/FileOpen/1stqtr-BusinessUpdate.ashx?App=Announcement&amp;FileID=628134" target="_blank" rel="noopener">June-ending quarter</a> announced the 14 August.</p>
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<p>I see the implied stub - net of all its listed holdings - at an all-time low.</p>
<h2>Implied Stub (in S$/share) - Stripping Out All Listcos</h2>
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/156/814/original/image_98073797421599099095235.png?1599099097" class="editor-image img-responsive" data-smartkarma-image-id="156814"></figure>
<div style="text-align: left;" class="content-caption">Source: CapIQ, the orange band represents 2StDevs from the average</div>
<p>The discount to NAV of 44% is also around its widest ever recorded. </p>
<div>
<p>COVID-19 promotes tough market conditions. Yet SingTel appears to have overshot to the downside, providing an inexpensive entry into <a href="https://www.smartkarma.com/entities/bharti-airtel-ltd" target="_blank" data-smartkarma-citation="entities:953:1" rel="noopener">Bharti Airtel (BHARTI IN)</a>.</p>
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Investors and Singtel (ST SP) have unerringly been disconnected in 2020. Shares are currently trading at their lowest level outside the GFC.
Sentiment was not helped by the 24% decline in EBITDA (excluding the results of its regional associates) for the June-ending quarter announced the 14 August.

I see the implied stub - net of all its listed holdings - at an all-time low.
Implied Stub (in S$/share) - Stripping Out All Listcos

Source: CapIQ, the orange band represents 2StDevs from the average
The discount to NAV of 44% is also around its widest ever recorded. 

COVID-19 promotes tough market conditions. Yet SingTel appears to have overshot to the downside, providing an inexpensive entry into Bharti Airtel (BHARTI IN).


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<p>This week in StubWorld ...</p>
<div class="content-highlight">
<p>The board of  <a href="https://www.smartkarma.com/entities/gulf-energy-development-public-company-limited" target="_blank" data-smartkarma-citation="entities:26038:1" rel="noopener">Gulf Energy Development Public Company (GULF TB)</a> has <a href="https://www.set.or.th/set/newsdetails.do?newsId=15985721258680&amp;language=en&amp;country=US" target="_blank" rel="noopener">approved</a> its investment in <a href="https://www.smartkarma.com/entities/intouch-holdings-pcl" target="_blank" data-smartkarma-citation="entities:17638:1" rel="noopener">Intouch Holdings (INTUCH TB)</a> up to 10% of shares out, from 7.99% currently. Gulf reckons Intouch provides a steady dividend yield; but Investors expect listed companies to focus on their core competencies, and return excess capital to shareholders, so that <em>they </em>can invest it. </p>
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<div>Preceding my comments on Intouch, <a href="https://www.smartkarma.com/entities/united-co-rusal-plc" target="_blank" data-smartkarma-citation="entities:8517:1" rel="noopener">United Co Rusal (486 HK)</a> &amp; <a href="https://www.smartkarma.com/entities/kingboard-holdings-ltd" target="_blank" data-smartkarma-citation="entities:8122:1" rel="noopener">Kingboard Holdings (148 HK)</a>, are at the top of the weekly setup/unwind tables for Asia-Pacific Holdcos.</div>
<div><hr></div>
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<p><em>These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20</em></p>
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This week in StubWorld ...

The board of  Gulf Energy Development Public Company (GULF TB) has approved its investment in Intouch Holdings (INTUCH TB) up to 10% of shares out, from 7.99% currently. Gulf reckons Intouch provides a steady dividend yield; but Investors expect listed companies to focus on their core competencies, and return excess capital to shareholders, so that they can invest it. 


Preceding my comments on Intouch, United Co Rusal (486 HK) &amp; Kingboard Holdings (148 HK), are at the top of the weekly setup/unwind tables for Asia-Pacific Holdcos.


These relationships trade with a minimum liquidity threshold of US$1mn on a 90-day moving average, and a % market capitalisation threshold - the $ value of the holding/opco held, over the parent’s market capitalisation, expressed in percent - of at least 20


StubWorld: Gulf's Questionable Stake In Intouch

Independent Asian Credit Research, Bondcritic

Warut Promboon

Independent Asian Credit Research

Asian Fixed Income/Frontier Market Research

Bondcritic

Bondcritic, established in 2009, is designed to be an independent credit research voice that helps investors gain insights and unbiased analyses on Asian fixed income market. Our mission is to discover deep-value Asian high-yield and distressed bonds with a bottom-up approach, together with the help of our proprietary ESG (Environmental, Social Development, and Governance) model. At the same time, we focus on bringing investment cases of unrated and unloved issuers to the general public.

Thematic (Sector/Industry)

<p style="text-align: justify;">In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.</p>
<p style="text-align: justify;">Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.</p>
<p style="text-align: justify;">The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. </p>
<p style="text-align: justify;">The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.</p>
<p style="text-align: justify;">We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.</p>
<p style="text-align: justify;">We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.</p>
<p style="text-align: justify;">Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.</p>

In this Smartkarma Original, we seek to study how diversity and incentives influence stock performance and profitability. We tallied diversity and incentive data related to the board of directors, management, and employees across major economies in Asia and picked top 10 companies of each country in terms of market capitalization. We chose to exclude major companies listed in exchanges of other economies such as Tencent and Alibaba to limit our sample size.
Then we devised diversity and incentive scores to assign to those companies and compare those scores against a 5-year trend of their return on shareholders’ equity (ROE) ratios and 1-year stock performance from 1-July-19 to 30-June-20 over its corresponding exchange indices.
The report covers diversity vs. incentives in Asia, diversity score vs. 1-year stock performance and ROE trend, incentives vs. 1-year stock performance and ROE trend, diversity + incentives scores vs. 1-year stock performance and ROE trend, companies with top and bottom diversity + incentive scores, countries with top and bottom average diversity + incentive scores, and incentive score vs. staffing cost trend. 
The results show that companies with high diversity scores do perform well. A high diversity score also has a positive impact on the ROE trend, based on our regression analysis at 95% confidence level. We found that employee incentives are not significant as staff diversity but they can still have an influence on company performances at a lower 90% confidence level.
We note that this study is at the preliminary stage and stock performance is a function of many factors, not only the diversity scores that we concluded. Needless to say, our diversity and incentive scores also reflect the level of disclosures by selected companies, not necessarily the actual practice within each company. Our diversity and incentive scores are also not a credit rating or ranking with peers and, hence, do not reflect default probability of selected companies.
We caution that in Asia, many diversity trends in the West may not apply. The fact that many Asian business communities may remain less sensitive to equal opportunities for females, disabled persons, or LGBTQ communities could make returns of Asian companies less correlated to diversity than in the West. Likewise, additional incentives in some countries in Asia may not be necessary as employees’ strong performance (i.e. in Japan) is a norm, according to the prevalent work culture.
Bondcritic is developing a scoring model, which includes environment, social development, and corporate governance; the last of which cover diversity and incentives. This report is the first of the series to uncover shenanigans in the Asian corporate sector.

Asian Governance: Diversity & Incentives Through the Cultural Lens

Singapore

Singapore Telecommunications Limited wireless telecommunication services. The Company offers diverse range of services including fixed, mobile, data, internet, TV,  and digital solutions. Singapore Telecommunications serves customers worldwide.

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Singtel (ST SP)

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Bondcritic

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