Global Emerging Market Equities, Propitious Research

Wium Malan, CFA

Global Emerging Market Equities

Independent, Fundamental Quantitative Research

Propitious Research

Fully independent, fundamental and quantitative equity research, focused on companies in the Telecommunication, Media, Technology, Internet and Healthcare sectors in the Global Emerging Markets. Idea generation focused on Quality stocks, trading below their intrinsic Value, with sound Corporate Governance.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/mediatek-inc" target="_blank" data-smartkarma-citation="entities:772:1" rel="noopener">Mediatek Inc (2454 TT)</a> is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: <a href="https://www.smartkarma.com/insights/screening-for-gems-june-2021" target="_blank" data-smartkarma-citation="insights:52406" rel="noopener">Screening for GEMs: June 2021</a>.

Mediatek Inc (2454 TT) is the world’s 4th largest global fabless semiconductor company and powers more than 2 billion devices a year. Global smartphone shipments are expected to grow at a 6.9% cagr to 1.7 billion units in 2025. With MediaTek’s leading market share in 5G SoC, they are likely to experience an outsized benefit from the replacement trend brought by technology upgrades to 5G and Wi-Fi 6, Bluetooth, and ARM-based SoCs that integrate wireless communication. 
This is a high-quality global technology company that is expected to expand its ROE to above 20% driven by increased asset turns and margin expansion whilst the net cash on the balance sheet has nearly doubled to roughly $5.9bn over the past 2 years. 
Given the lack of meaningful acquisitive growth opportunities over the past 5 years, MediaTek has allocated nearly half of its Free Cash Flow generated toward dividend payments. Following their 1Q21 results, the company’s board of directors approved raising the dividend payout ratio to 80-85%, up from 60-70%, with the policy to take effect next year. On top of that, MediaTek has budgeted NT$100 billion over the next four years for special cash dividends. MediaTek currently trades on a forward dividend yield of 5.2%, which should continue to provide share price support, especially considering a continued low-interest-rate environment. 
This insight is also a natural follow up from an idea generated through our, machine learning-driven, proprietary GEM screening model, which takes a three-pronged approach to find the best medium-term long ideas within the top100 largest stocks in the MSCI GEM Index: Screening for GEMs: June 2021.

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

Semiconductors, Memory and SSDs Specialist, Objective Analysis

Jim Handy

Semiconductors, Memory and SSDs Specialist

Objective Analysis

Objective Analysis offers third-party independent market research and data for the semiconductor industry and investors in the semiconductor industry.

Semiconductors, Memory and SSDs

Thematic (Sector/Industry)

WSTS has forecast for both 2021 and 2022 semiconductor revenues to break records.  While three years of strong back-to-back revenue growth has occurred in the past, there are reasons, which we explain here, to take this forecast with a good measure of skepticism.

WSTS has forecast for both 2021 and 2022 semiconductor revenues to break records.  While three years of strong back-to-back revenue growth has occurred in the past, there are reasons, which we explain here, to take this forecast with a good measure of skepticism.

WSTS Forecast: Record Semiconductor Revenues in Both 2021 & 2022

On June 9 the SIA and WSTS reported April semiconductor revenues of $48.1 billion, which sets year-to-date revenue growth at 16.8%.  This Insight examines that figure in light of current shortages and DRAM's recent price decline.

On June 9 the SIA and WSTS reported April semiconductor revenues of $48.1 billion, which sets year-to-date revenue growth at 16.8%.  This Insight examines that figure in light of current shortages and DRAM's recent price decline.

April Semiconductor Sales Released - YTD Growth 16.8%

SGX Market Strategist, Equity & Fixed Income, Singapore Exchange Ltd (SGX)

Geoff Howie

SGX Market Strategist, Equity & Fixed Income

Asia’s leading multi-asset exchange

Singapore Exchange Ltd (SGX)

Singapore Exchange is Asia’s leading and trusted market infrastructure, facilitating the exchange of capital and ideas to create value for people, businesses and economies. As a multi-asset exchange operating equity, fixed income and derivatives markets to the highest regulatory standards, SGX is a vertically integrated business that provides listing, trading, clearing, settlement, depository and data services.

With about 40% of listed companies and over 80% of listed bonds originating outside of Singapore as well as established linkages across the region and in Europe, SGX is Asia’s most international and connected exchange. Offering a full suite of derivatives products across Asian equity indices, commodities and currencies, SGX is the world’s most liquid international market for the benchmark equity indices of China, India, Japan and ASEAN.

As Asia’s pioneering central counterparty, SGX is globally recognised for its risk management and clearing capabilities, and was one of the first globally to adopt the Principles for Financial Market Infrastructure.

Headquartered in AAA-rated Singapore, SGX has over 800 employees including offices in Beijing, Chicago, Hong Kong, London, New York, Mumbai, San Francisco, Shanghai and Tokyo.

Taiwan Semiconductor (TSMC) / Equity Bottom-Up

SGX Asia Currencies and Commodities Insights

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

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

Fuyao Glass Industry Group / Equity Bottom-Up

<div class="content-remarks">
<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/210/904/original/image_62803801921622698789619.png?1622698789" class="editor-image img-responsive" data-smartkarma-image-id="210904"></figure>source: Reuters
</div>The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass's largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities.


source: Reuters
The above chart indicates that the correlation between Fuyao and Xinyi Glass broke in Q1 2021 as the former hit a break while the latter kept on accelerating further. The initial reaction is that Fuyao Glass will surely play catch up to Xinyi Glass and the trade is to go Long Fuyao Glass and Short Xinyi Glass. However, the fundamental tells a different story. Xinyi Glass has a small part of their business in the energy-saving architectural glass that ticked the ESG box while Fuyao Glass's largest exposure is in auto glass, which has suffered due to the chip shortage but may soon bounce if the semiconductors ramp up their production activities. 

Taiwan

Taiwan Semiconductor Manufacturing Company Ltd. manufactures integrated circuits based on its proprietary designs.  The Company offers a comprehensive set of integrated circuit fabrication processes to manufacture CMOS logic, mixed-mode, volatile and non-volatile memory and BiCMOS chips.  Taiwan Semiconductor is an affiliate of Philips Electronics N.V.

Taiwan Semiconductor (TSMC) - ADR (TSM US)

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Taiwan Semiconductor (TSMC) - ADR (TSM US)

MediaTek: High-Quality 5G Beneficiary with a Tremendously Attractive Dividend Yield

MediaTek, the world’s 4th largest global fabless semiconductor company with a leading market share, should benefit from technology upgrades to 5G,...

Wium Malan, CFA

WSTS Forecast: Record Semiconductor Revenues in Both 2021 & 2022

The semiconductor industry's statistics body, WSTS, released a very bullish Spring forecast, predicting revenues to break records in both 2021 and...

Jim Handy

April Semiconductor Sales Released - YTD Growth 16.8%

April Semiconductor revenues are 21.7% higher than last April, resulting in 16.8% year-to-date growth. Is this sustainable? This Insight looks at...

Jim Handy

SGX Asia Currencies and Commodities Insights

By Macro Hive SGX Asia Currencies Insights Higher FX reserve requirements insufficient to prevent continued yuan strength. Firmly...

Singapore Exchange Ltd (SGX)

Fuyao Glass Vs Xinyi Glass: Which One?

The short-term outlook for Fuyao Glass Industry Group (3606 HK)is much more positive compared to Xinyi Glass as it has exposure to the auto sector,...

Henry Soediarko

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