Asia Ex-J Consumer/ Transport analyst

Valerie Law, CFA

Equity Bottom-Up

JD.com's share price rose &gt;20% after reporting a profitable 1Q17. Although the second-largest e-commerce player in China has big ambitions, it is skating on skinny margins, dependent on suppliers' credit and growth in the sector to sustain. In this article, I address a few myths that could be supporting the firm's rich valuations of FY18 EV/EBITDA of 37X :<ol><li>JD's profitable quarter is a precursor for a profitable year</li><li>It is the second largest e-commerce player in China and margins will improve eventually</li><li>JD's investments could pay off some day</li><li>It may spin off its logistics unit and unlock some value</li></ol>

JD.com's share price rose &gt;20% after reporting a profitable 1Q17. Although the second-largest e-commerce player in China has big ambitions, it is skating on skinny margins, dependent on suppliers' credit and growth in the sector to sustain. In this article, I address a few myths that could be supporting the firm's rich valuations of FY18 EV/EBITDA of 37X :JD's profitable quarter is a precursor for a profitable yearIt is the second largest e-commerce player in China and margins will improve eventuallyJD's investments could pay off some dayIt may spin off its logistics unit and unlock some value

JD.com: Rich Valuations on Razor-Thin Margins & Negative ROIC

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Exposure to <a href="https://www.smartkarma.com/entities/1088" target="_blank" data-smartkarma-citation="entities:1088:1">Vipshop Holdings Ltd Adr (VIPS US)</a> continues to be scaled back by global emerging market equity funds.  The percentage of EM funds holding any exposure to Vipshop has fallen from a peak of 32% in late 2015 to just 12% today (from 127 global EM actively managed equity funds).  The peak coincided with Vipshop's entry into the MSCI EM Index in November 2015, but since then funds have consistently cut positions.  The average holding weight among all funds stands at just 7bps…

Exposure to Vipshop Holdings Ltd Adr (VIPS US) continues to be scaled back by global emerging market equity funds.  The percentage of EM funds holding any exposure to Vipshop has fallen from a peak of 32% in late 2015 to just 12% today (from 127 global EM actively managed equity funds).  The peak coincided with Vipshop's entry into the MSCI EM Index in November 2015, but since then funds have consistently cut positions.  The average holding weight among all funds stands at just 7bps…

Vipshop Holdings Loses Appeal with EM Funds.  Netease Exposure Snowballs.

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

Thematic (Sector/Industry)

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for <a href="https://www.smartkarma.com/entities/472" target="_blank" data-smartkarma-citation="entities:472:1">MGM China Holdings Ltd (2282 HK)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/182" target="_blank" data-smartkarma-citation="entities:182:1">Sands China Ltd (1928 HK)</a>, HKD 14 for <a href="https://www.smartkarma.com/entities/473" target="_blank" data-smartkarma-citation="entities:473:1">Wynn Macau Ltd (1128 HK)</a>, USD 17 for <a href="https://www.smartkarma.com/entities/810" target="_blank" data-smartkarma-citation="entities:810:1">Melco Crown Entertainment ADR (MPEL US)</a>, HKD 36 for <a href="https://www.smartkarma.com/entities/806" target="_blank" data-smartkarma-citation="entities:806:1">Galaxy Entertainment Group Limited (27 HK)</a>, HKD 6.6 for <a href="https://www.smartkarma.com/entities/805" target="_blank" data-smartkarma-citation="entities:805:1">SJM Holdings Ltd (880 HK)</a>, $133 for <a href="https://www.smartkarma.com/entities/606" target="_blank" data-smartkarma-citation="entities:606:1">Wynn Resorts Ltd (WYNN US)</a>, $56 for <a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807:1">Las Vegas Sands Corp (LVS US)</a>, and $29.50 for <a href="https://www.smartkarma.com/entities/16227" target="_blank" data-smartkarma-citation="entities:16227:1">MGM Resorts International (MGM US)</a>. We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in casinos effective on Jan. 1, 2019, one year later than our existing expectation. Our current forecasts across our narrow moat coverage universe already factor in a negative mid-single-digit percentage point impact to VIP play in 2018, and postponing that one year is not expected to have any significant impact to our fair value estimates. Our current fair value estimates per share are HKD 17 for MGM China Holdings Ltd (2282 HK), HKD 36 for Sands China Ltd (1928 HK), HKD 14 for Wynn Macau Ltd (1128 HK), USD 17 for Melco Crown Entertainment ADR (MPEL US), HKD 36 for Galaxy Entertainment Group Limited (27 HK), HKD 6.6 for SJM Holdings Ltd (880 HK), $133 for Wynn Resorts Ltd (WYNN US), $56 for Las Vegas Sands Corp (LVS US), and $29.50 for MGM Resorts International (MGM US). We continue to see Wynn trading at an attractive margin of safety.The revised bill creates a level playing field for casino operators. We have confirmed with a Macau legislative assembly member that the revised bill outlines that all VIP smoking gaming areas will be closed and that all casinos will be able to establish smoking lounges on both VIP and mass gaming floors. Therefore, under the proposed bill newer casinos will be able to establish smoking lounges in VIP gaming areas, while the older casinos will lose the smoking premium mass and VIP smoking area. As a result, Cotai casinos as a whole stand to gain market share at the expense of Macau peninsula casinos.Analyst: Chelsea Tam

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

Asia Frontier Capital Travel Report: Laos

Global Gaming and Casinos Industry Specialist, Casino Business Review LLC

Howard J Klein

Global Gaming and Casinos Industry Specialist

<ul><li><a href="https://www.smartkarma.com/entities/807" target="_blank" data-smartkarma-citation="entities:807">Las Vegas Sands Corp (LVS US)</a>  Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly believing it could fetch "a hefty price". Observers believe his number for the entire property is US$5.5 billion.</li><li>Proceeds from such a sale could more than double the LVS cash position of $2.13bn shown on the balance sheet as of December 31, 2016, arming the company with an immense war chest to either finance a potential mega integrated resort in Japan's coming market or declare a special cash dividend.</li><li>LVS shares now trading around US$52 do not reflect any deal yet but could be headed for a big bump later this year if the company gets the licensing nod from Japan officials.</li></ul>

Las Vegas Sands Corp (LVS US)  Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly believing it could fetch "a hefty price". Observers believe his number for the entire property is US$5.5 billion.Proceeds from such a sale could more than double the LVS cash position of $2.13bn shown on the balance sheet as of December 31, 2016, arming the company with an immense war chest to either finance a potential mega integrated resort in Japan's coming market or declare a special cash dividend.LVS shares now trading around US$52 do not reflect any deal yet but could be headed for a big bump later this year if the company gets the licensing nod from Japan officials.

Proposed Sale of 49% of Singapore Mall Could Bring $3.3 Billion in Cash to LVS Japan War Chest

China

Vipshop Holdings Ltd. retails branded products at discount over the Internet. The Company retails through flash sales, in which limited quantities of an item are sold at deep discount for a specified period of time.

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Vipshop Holdings (VIPS US)

JD.com: Rich Valuations on Razor-Thin Margins & Negative ROIC

JD.com's share price rose >20% after reporting a profitable 1Q17. Although the second-largest e-commerce player in China has big ambitions, it...

Valerie Law, CFA

Vipshop Holdings Loses Appeal with EM Funds. Netease Exposure Snowballs.

Exposure to Vipshop Holdings Ltd Adr (VIPS US) continues to be scaled back by global emerging market equity funds. The percentage of EM funds...

Steven Holden

Expected Macau Smoking Ban Creates a Level Playing Field for Operators

This week the Macau government proposed to the Second Standing Committee of Macau Legislative Assembly to allow smoking only in smoking lounges in...

Morningstar, Inc.

Asia Frontier Capital Travel Report: Laos

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos...

Asia Frontier Capital

Proposed Sale of 49% of Singapore Mall Could Bring $3.3 Billion in Cash to LVS Japan War Chest

Las Vegas Sands Corp (LVS US) Chairman Sheldon Adelson has put the sale sign up on The Shoppes at Marina Bay Sands Mall in Singapore, strongly...

Howard J Klein

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