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

Equity Bottom-Up

Indonesia e-commerce player Bukalapak, which counts <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a> as its largest local backer but also has <a href="https://www.smartkarma.com/entities/microsoft-corp" target="_blank" data-smartkarma-citation="entities:15273:1" rel="noopener">Microsoft Corp (MSFT US)</a>, <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a>, GIC, and Naver Corp is investors in reportedly in talks to list through a SPAC with a valuation of US$4bn-US$5bn, with a local listing of part of the business in Jakarta first. The timing suggests a target transaction date in 3Q2021.
Bukalapak is the No.4 e-commerce player in Indonesia with 13.5m online sellers and 100m monthly active users, competing with players such as <a href="https://www.smartkarma.com/entities/tokopedia-pt" target="_blank" data-smartkarma-citation="entities:24239:1" rel="noopener">Tokopedia PT (1087142D IJ)</a>, Shopee (<a href="https://www.smartkarma.com/entities/sea-ltd" target="_blank" data-smartkarma-citation="entities:8509:1" rel="noopener">Sea Ltd (SE US))</a>, and <a href="https://www.smartkarma.com/entities/lazada-group" target="_blank" data-smartkarma-citation="entities:26148:1" rel="noopener">Lazada Group (LAZADA SP)</a> but with an edge providing fulfillment and logistics for around 5.4m warungs (mom&amp;pop stores) in Indonesia.
The company recently saw <a href="https://www.smartkarma.com/entities/standard-chartered-plc" target="_blank" data-smartkarma-citation="entities:193:1" rel="noopener">Standard Chartered (STAN LN)</a> come in as part of a US$200m funding round, with a view of helping to build financial services through the platform and offer to its sellers and customers financial services.
<a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a> is the most direct beneficiary of a listing for Bukalapak, even through a SPAC, given that it will crystallize a market value for the company. <a href="https://www.smartkarma.com/entities/elang-mahkota-teknologi-tbk" target="_blank" data-smartkarma-citation="entities:7752:1" rel="noopener">Emtek (EMTK IJ)</a>approved a stock split in December and the company has become more liquid and it may look at a further restructuring at a later stage to bring all its digital and media assets under one roof.
The IDX (Indonesia Stock Exchange) is already talking about both allowing SPACs to list in Indonesia but also more importantly to allow main-board listings for high-growth companies that may not be profitable, as well as allowing dual-class shares.

Indonesia e-commerce player Bukalapak, which counts Emtek (EMTK IJ) as its largest local backer but also has Microsoft Corp (MSFT US), Standard Chartered (STAN LN), GIC, and Naver Corp is investors in reportedly in talks to list through a SPAC with a valuation of US$4bn-US$5bn, with a local listing of part of the business in Jakarta first. The timing suggests a target transaction date in 3Q2021.
Bukalapak is the No.4 e-commerce player in Indonesia with 13.5m online sellers and 100m monthly active users, competing with players such as Tokopedia PT (1087142D IJ), Shopee (Sea Ltd (SE US)), and Lazada Group (LAZADA SP) but with an edge providing fulfillment and logistics for around 5.4m warungs (mom&amp;pop stores) in Indonesia.
The company recently saw Standard Chartered (STAN LN) come in as part of a US$200m funding round, with a view of helping to build financial services through the platform and offer to its sellers and customers financial services.
Emtek (EMTK IJ) is the most direct beneficiary of a listing for Bukalapak, even through a SPAC, given that it will crystallize a market value for the company. Emtek (EMTK IJ)approved a stock split in December and the company has become more liquid and it may look at a further restructuring at a later stage to bring all its digital and media assets under one roof.
The IDX (Indonesia Stock Exchange) is already talking about both allowing SPACs to list in Indonesia but also more importantly to allow main-board listings for high-growth companies that may not be profitable, as well as allowing dual-class shares. 

Emtek (EMTK IJ) - Bukalapak Eyeing a SPAC Listing But Jakarta May Be First?

Head of Research, IPOs & Placements, Aequitas Research

Sumeet Singh

Head of Research, IPOs & Placements

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.In this insight, I'll cover the positive aspects of the deal.

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors include Tencent, GIC and Standard Chartered Bank.Linklogis’ cloud-native solutions optimize the payment cycle of supply chain transactions and digitalize the entire workflow of supply chain finance. As per CIC, Linklogis was the leader among technology solution providers in China in terms of supply chain finance transactions processed over 9M20, accounting for 20.5% market share.Linklogis overall revenue grew by 83% YoY in FY19 and was up another 52% over 9M20. While its core function of Supply Chain finance has been registering strong growth of 64.4% YoY in FY19 and 53.8% in 9M20, revenue from its Emerging solutions was up nearly 6x in FY19 and grew by another 38% over 9M20.In this insight, I'll cover the positive aspects of the deal.

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier

Silver Point

Thomas J. Monaco

Independent Insight Provider

Silver Point is a boutique research firm that focuses on the broader financial services sector, with a particular focus on troubled institutions globally. 

Asia Ex Japan

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

*Greensill Bankruptcy: Greensill Capital (Greensill) has filed for insolvency in the United Kingdom today after Apollo Global Management’s (APO.US) [Apollo] walked away from this deal. Lawyers for Greensill cited Greensill’s inability to repay a USD 140 mn bridge loan provided by Credit Suisse Group (CSGN.VX) [Credit Suisse]. In addition, Greensill allegedly has USD 5 bn in risk outstanding to  GFG Alliance Group (GFG) – a company owned by Sanjeev Gupta, who appears to be at the center of this debacle; and*Further Tail Risk: Credit Suisse , GAM Holdings (GAM.VX), Tokio Marine Holdings (8766.JP), SoftBank Group (9984.JP) amongst others are likely to see additional weakness given the growing uncertainties with Greemsill and GFG Alliance. In particular, the allegations of fraud by Bafin and the British Business Bank removing UK government guarantee on COVID-19 lending highlight the increased likelihood of substantially higher losses and other tail risk. With the UK and European Central Bank (ECB) asking their institutions for their Greensill and GFG exposures, no doubt the hit parade will continue.

Financials Credit Analyst

Hank Calenti, CFA

CreditContinuum

Credit

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see <a href="https://www.smartkarma.com/insights/credit-suisse-greensill-sows-reputation-risks-underweight-cs-bonds" target="_blank" data-smartkarma-citation="insights:48839" rel="noopener">Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds</a> for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see <a href="https://www.smartkarma.com/insights/bank-credit-strategy-melt-up-before-meltdown-where-to-position" target="_blank" data-smartkarma-citation="insights:48133" rel="noopener">Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position</a> for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Stronger than expected US employment data combined with uncertainty surrounding the Fed’s next steps to drive broader credit markets wider by weekend, although financials remained better bid. Taperless tantrums may be repeated over the near term but financials may be less impacted.While US CCC-rated bonds and Asia High Yield sold-off, almost all European contingent capital and Asia High Yield bonds tightened in credit spread terms as investors remained anchored to banks as an economic recovery play. Investors grabbed longer duration Additional Tier 1 (AT1) bonds as the week progressed, on economic strength expectations, while lower duration Senior Unsecured bonds outperformed on rising interest rate expectations. Friday’s non-farm report generated concerns on European growth in a rising rate environment. Queue central bank assurances that they will respond to rising rates over the next few weeks.Despite higher spreads available in more moderate duration AT1 notes, Europe's outperformers were almost exclusively long duration bonds. This outperformance is a very bullish signal. However, we are not convinced that this should apply to each of these institutions.  Please see Credit Suisse: Greensill Sows Reputation Risks, Underweight CS Bonds for further details.Financials remain the sweet spot in Asia credit. Levered to the economy and rising rates, this is the place to be at this point in the market cycle.  Performance attributes varied amongst the various bank credit classes in Asia. Risk-on sentiment drove higher risk AT1 and less subordinated Tier 2 bonds tighter. Meanwhile duration concerns drove investors to target higher spreads per unit of duration in BBB-rated and High Yield Senior Unsecured notes. Taken together, this performance outcome is likely evidence of the melt-up in spreads that we anticipated several weeks ago. Please see Bank Credit Strategy: Melt-Up Before Meltdown, Where to Position for more details.Admittedly, however, we are surprised by the credit strength of Asia-headquartered financials during the global rates rout. We attribute this to two items. First, China is further along the Covid-19 curve in recovery and will clearly benefit as the rest of the world catches-up. Second, financials are a leverage play on the global recovery. Taken together, Asia financials overall are well placed to continue outperforming other markets over the near term.Market Outlook: The Fed will likely Twist before it Tapers, but the timing of both remain uncertain as real long term interest rates remain negative. In the interim, global treasury markets may remain unsettled. The US economy may run very hot before we see a change in Fed policy regarding short-term interest rates and the US dollar should remain stronger than analysts forecasted at year-end. Broadly, this is not Emerging Market IEM) friendly; however, a strong US economic rebound should benefit EM and European financials. Short duration in investment grade financials combined with high credit spreads in High Yield financials and more subordinated debt may remain the way forward.

Bank Credit Weekly: One Size Does Not Fit All

*Poor Results: BDO Unibank (BDO.PM)[BDO] reported 4Q20 net income of PHP 11.3bn, a PHP 1.0 bn (8.5%) decline linked quarter. Highlighting the linked quarter result we note that loss provisions increased PHP 5.0 bn (360.8%) reflecting the continued breakdown in credit quality;  Credit Risk Rising: Not including the doubling of restructured loans, the level of net new NPLs increased PHP 17.8 bn or 115.8% on an annualized basis which is alarming considering the 67.9% annualized increase at 2Q20.  By our calculation, BDO’s reserves  - at a minimum  - are light in the neighborhood of PHP 66 bn or six quarters of bottom-line results.   This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, and this certainly calls into question what competitor loan and securities portfolios look like; and *Capital Raise Potential: Assuming that our provision analytics are correct, we find that BDO’s CET1 ratio would decline 13.2% to under 11.0% - raising concerns of a capital raise given BDO’s unrealized losses at hefty restructured loans, BDO Life, decelerating loan growth, narrowing margins, and trading volatility.

*Poor Results: BDO Unibank (BDO.PM)[BDO] reported 4Q20 net income of PHP 11.3bn, a PHP 1.0 bn (8.5%) decline linked quarter. Highlighting the linked quarter result we note that loss provisions increased PHP 5.0 bn (360.8%) reflecting the continued breakdown in credit quality;  Credit Risk Rising: Not including the doubling of restructured loans, the level of net new NPLs increased PHP 17.8 bn or 115.8% on an annualized basis which is alarming considering the 67.9% annualized increase at 2Q20.  By our calculation, BDO’s reserves  - at a minimum  - are light in the neighborhood of PHP 66 bn or six quarters of bottom-line results.   This is particularly disturbing as BDO is amongst the most trusted banks in the Philippines and ASEAN, and this certainly calls into question what competitor loan and securities portfolios look like; and *Capital Raise Potential: Assuming that our provision analytics are correct, we find that BDO’s CET1 ratio would decline 13.2% to under 11.0% - raising concerns of a capital raise given BDO’s unrealized losses at hefty restructured loans, BDO Life, decelerating loan growth, narrowing margins, and trading volatility.

BDO Unibank – With This Level Of Risk, A Capital Raise Can’t Be Too Far Behind

United Kingdom

Standard Chartered PLC is an international banking group operating principally in Asia, Africa, and the Middle East. The Company offers its products and services in the personal, consumer, corporate, institutional and treasury areas.

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Standard Chartered (STAN LN)

Emtek (EMTK IJ) - Bukalapak Eyeing a SPAC Listing But Jakarta May Be First?

Emtek is an interesting way to play the burgeoning digital economy in Indonesia and would be a key beneficiary should subsidiary Bukalapak choose...

Angus Mackintosh

Linklogis Pre-IPO - The Positives - Fast Growing Blockchain Driven Supply Chain Financier

Linklogis, a technology solution provider for supply chain finance in China, is aiming to raise around US$500m in its Hong Kong IPO. Its investors...

Sumeet Singh

Credit Suisse – Greensill Goes BK

CREDIT SUISSE: Greensill has filed for insolvency. Lawyers for Greensill cited its inability to repay a USD 140 mn bridge loan from Credit Suisse...

Thomas J. Monaco

Bank Credit Weekly: One Size Does Not Fit All

Performance attributes varied amongst bank credit classes. Short duration in IG financials combined with high credit spreads in HY and more...

Hank Calenti, CFA

BDO Unibank – With This Level Of Risk, A Capital Raise Can’t Be Too Far Behind

BDO UNIBANK: BDO reported a 4Q20 net income decline of 8.5% linked quarter. The level of net new NPLs increased 116% with reserves light by PHP 66...

Thomas J. Monaco

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