Equity Bottom-Up

• Daniel Zhang’s transition to a less prominent role within Alibaba’s Cloud business, after previously serving as CEO and Chairman of Alibaba Group (9988 HK), could be seen as a demotion.
• We suspect that there could be some government influence on these proposed leadership changes.
• Nonetheless, the situation is not encouraging, especially as the company enters a turbulent phase with multiple units poised to pursue IPOs in the near future.

• AliExpress has prioritized South Korea. We expect AliExpress’ South Korea GMV to increase 150%~ YoY to about US 1bn in 2023, or about 3% of Coupang’s. 
• We found that AliExpress has more overlap with CPNG’s key products rather than Naver. The average price of recommended items on AliExpress was 65%~ cheaper than CPNG in our sample; 
• We lower our CPNG GMV est. by 2%/3% in 2023/2024. We downgrade CPNG to SELL and lower its TP to US$ 15.1. 

• Initial positive study by legislative group completed in 2021. Regulatory follow up could move faster than generally believed igniting a process for market leaders in Asia.
• Initial study recommended Bangkok and 22 regional, smaller scale properties including world famous resort area Phuket.
• Baseline tourism to Thailand in 2019 rated as the 5th largest on the globe.

• Poised for Profitability rebound in FY3/25 putting Nikon on track to meet mid-term plan targets.  
• ArF Unit Expansion as Intel benefits from government fiscal incentives to build fabs in EU and US. 
• Based on the FY3/26 plan for EBIT of Y70b, the stock’s theoretical valuation would reach around Y2,200/share

• During 4QFY03/2023 results release, Nikon announced a medium-term target of revenues of ¥700bn, OPM of 10%+ and ROE of 8%+ by the end of FY2025E (FY ended 31st March 2026).
• Our analysis (with conservative assumptions) suggests that the company could easily achieve its medium-term target despite the company expecting to see its earnings declining in FY03/2024E.
• Nikon is trading at a discount to its Japanese peers Canon and Konica Minolta and we think the market is clearly undervaluing the company as a pure-play Imaging products player.

• A major reason for investors’ disappointment is that the number of new projects in 23H1 were significantly lower-than-expected. The impact of slowdown in financing activity began to show in 23H1.
• Higher revenue growth of non-COVID projects is needed to achieve the performance guidance target.If the management fail to fulfill the commitment to accelerate business recovery in 23H2,they may lose creditability.
• It’s unlikely to receive AD drugs orders this year. The market would react directly to short-term sentiment. Without big catalysts, it’s difficult for WuXi Bio’s stock price to perform well.

• Elastic managed to exceed analyst expectations in terms of revenue as well as earnings.
• In Q4, total revenue increased by 19% year over year in constant currency, while Elastic Cloud increased by 30% year over year in constant currency.
• The subscription revenue was $256 million, increasing 16% year over year or 18% in constant currency, and made up 91% of the overall revenue.

• We held a conference call with the Chief Investment Officer of UMP Healthcare (722 HK), Patrick Cheung, on the 19th of June, 2023. 
• The company continues to forge strategic alliances and collaborations, the latest being Hong Kong Adventist Hospital, in addition to the recent partnerships with Pedder Health/Human Health Holdings (1410 HK).
• The stock represents an excellent opportunity when trading at 6.6x PE FY23E with 44% of the market capitalization in cash and a 7.7% dividend yield on our numbers (50% payout).

• Risks such as potential asset impairments, the stock’s volatility, and industry fragmentation persist.
• However, key valuation metrics coupled with our analysis leaves us with the conclusion that Tesla’s stock remains grossly undervalued.
• The company’s price cuts might be phased out by softening material costs, the company says.

• Large portion of the business is in secular decline and facing pricing pressure
• Ricoh Company Ltd (7752 JP) appears to be losing share in a shrinking market
• Estimates are above overly optimistic guidance making shares look optically inexpensive

• After the market close on 16 June, it was reported in the local media that LG Chem is close to selling about 2 trillion won worth of LG Energy Solution.
• This block deal sale is likely to pose overhang on more stake sales of LG Energy Solution (about 10% stake) in the next 3-5 years.
• Our NAV valuation analysis of LG Chem suggests an implied price of 1,057,770 won per share, which is 41% higher than current share price.

• HUTCHMED developed Fruquintinib has demonstrated positive results in a Phase III FRESCO-2 study which reduced the risk of death by 34% in patients with previously treated metastatic colorectal cancer.
• In addition, Fruquintinib also has been validated and accepted for regulatory review (for marketing authorization) by the European Medicines Agency (EMA) last week.
• In January 2023, Takeda Pharmaceutical (4502 JP) entered into an exclusive licensing agreement with HUTCHMED to further develop and commercialise Fruquintinib outside of Mainland China, Macau and Hong Kong.

• We expect June quarter results to beat consensus and demonstrate a balanced growth across topline and bottom-line.
• During a time when headlines drive BABA share price, it is more important to stay grounded in numbers, see what is in price and make trades accordingly.
• We maintain US$500 billion target market cap on 20x RMB180 billion non-GAAP net profit by FY25.

• Alteogen Inc (196170 KS)‘s partner has submitted marketing application for Herceptin biosimilar in China. Alteogen will be entitled for royalty after the product is approved and sold in China.  
• In April 2023, Alteogen announced that the company will receive additional milestone of $3 million (~KRW4 billion) from its first ALT-B4 technology transfer partner.
• Alteogen has completed patient recruitment for global phase 3 trial for Eylea biosimilar. Marketing application is expected to be filed in early 2024, with marketing expected to start from 1H25.

• Japan’s strong domestic demand and a rebound in China fuel optimistic growth outlook for Fast Retailing (9983 JP) in the short term.
• Furthermore, the markets such as Europe, North America, South East Asia, India, and Australia present promising long-term growth opportunities.
• However, Fast Retailing’s valuation is a cause for concern as it currently trades at a consensus FY27 OP of 20.0x.

• During the weekend, I asked my twitter followers: What do you think Facebook’s DAU to MAU ratio was in 2009?
• The number that got the highest votes was ~80% even though I mentioned the most recent number was ~68%.
• I asked this question a couple of friends in real life too and they too picked the ~80% number.

• In the past few years, the investment business and M&A of Viva accelerated based on a series of financing tools such as IPO/placement/convertible bonds. Thus, Viva’s scale has grown rapidly.
• Continuous decline in stock price ultimately triggered a “redemption crisis” for Viva’s convertible bonds.Although Viva resolved it by transferring equity in its CRO subsidiary, the prospects are still not optimistic.
• Due to the downturn in innovative drug industry and deterioration of financing environment,whether the high valuation of Viva’s CRO business would be recognized by secondary market is a question mark.

1Spatial has won its first two contracts for 1Streetworks, the company’s SaaS-based Traffic Management Plan Automation product. This is an important development for the company in that the potential addressable market for this product is large; management estimates around £250m for low speed roads in the UK alone and 1Spatial looks well positioned to gain a significant market share. 1Streetworks also runs on the company’s newly launched cloud-based platform, representing an important milestone in 1Spatial’s migration to a scalable, SaaS-based model. Both contracts are for a three-month term initially, with the intention to move to annual or multi-year contracts upon successful completion. We are not changing our estimates at this stage. Further deal flow for 1Streetworks (or other SaaS products), together with the continuation of these initial deals to longer engagements, could be the catalyst for stronger growth and margin expansion to become priced in.

• Previously, we criticized CJ Logistics as unfocused, pursuing deals in low-margin segments around the world as if to fill a logistics ‘Bingo!’ card rather than in-line with a rational strategy
• In recent years, investors have punished the company’s shares, which have fallen by more than half since reaching a high of over 184,000 won per share in March 2021. 
• However, with management de-emphasizing its Global segment and focusing instead on the more promising Parcel / E-commerce line of business, there is cause for optimism, in our view

• UOB saw bad loans rise 22% during the GFC where DBS saw bad loans rise 146%
• During oil price collapse at FY16, DBS saw NPLs up 83%, UOB saw NPLs up 41%
• In current downturn, a market capitalization decline may be less at UOB vs DBS

• Recently, there has been more discussion about TikTok’s e-commerce business in Southeast Asia on Chinese media and social networks.
• Many service providers and entrepreneurs in China have also been inspired and hope to take the lead in the market with their domestic experience.
• We estimate that TikTok’s 2023 GMV in Southeast Asia will reach 20%~ of Shopee, and this is one of the key reasons why we are bearish to SE.

• Delta Thailand surged 20% since our last trade monitor piece. This was without any significant news and the company received another query from the stock exchange as a result.
• Delta Taiwan increased by a higher 22%, thus the extreme valuation mismatch between the two has corrected slightly. Delta Taiwan is still only 0.78x the market cap of Delta Thailand.
• Delta Taiwan last week announced the acquisition of a German company that makes components for vehicles. This will strengthen Delta’s battery management product portfolio and add client relationships.

• Celltrion Healthcare (091990 KS) is expected to launch Humira biosimilar, Yuflyma, in the U.S. market in July 2023. Despite heavy competition, as high-concentration citrate-free formulation, Yuflyma has competitive edge.
• In April 2023, Celltrion has launched bevacizumab biosimilar, Vegzelma in the U.S. Vegzelma will be the first product that the company will be directly selling in the U.S.
• Through portfolio expansion, Celltrion increased target market size to $53.7B in 2023 from $20.6B in 2020, representing 161% growth. For 2024, the target market is expected to increase to $91.3B.

• More Nvidia Takeaways from two conferences the company spoke at — The company highlighted support for Intel’s new Foundry business, Mediatek, and why automakers will absolutely need AI to compete.
• Memory Chip Stocks — Nanya jumps 10% on hopes that AI servers will need 7x the value of DRAM. Micron warns that half of China revenue could be at risk.
• Delta Taiwan and Thailand Surge 20%+, Taiwan outperforms. Delta Taiwan has acquired a German automotive components company to boost its EV powertrain products lead.

• AbbVie’s patent infringement allegations against BeiGene Ltd (6160 HK) is an attempt to obstruct BeiGene through legal means and save Imbruvica’s sales decline in the market. AbbVie came prepared this time.
• BeiGene has a chance to win the lawsuit if without any political factors.But if BeiGene fails to walk away unscathed, any damages/patent royalty would be detrimental to its financial performance/forecast.
• The real key point in determining BeiGene’s future turnaround is not this lawsuit, but the clinical results of TIGIT project. Even with the correction since May, BeiGene is still expensive.

• Our index suggests long-haul rates remained stable in May as carriers approach peak season
• Cleanup of West Coast slowdown, lower fuel prices should both serve as Summer tailwinds
• We believe conditions could improve in H2 2023, and shares remain cheap on Price / Assets

• Q1-4 FY4/2023 results were ahead of revised company guidance and our earnings estimates, highlighting the company’s success in 1) driving demand at both existing and newly acquired customers, and 2) implementing Marketing Technology services that are improving the overall sales mix and driving margin growth.
• On this fundamentally robust basis, the company acquired Net Marketing in April 2023, an advertising agency that will allow access to new customers in which to sell-in profitable Marketing Technology services and replicate its effective model, as well as gain exposure to a more diversified range of market sectors.
• Strong outlook for FY4/2024 – we revise our earnings estimates for FY4/2024 and beyond, reflecting the following: 1) stronger topline growth in Analytics Consulting, 2) a more enhanced trajectory of profitability improvement in the medium term, given the success of Marketing Technology services to date.

• Top 10 S-Reits & property trusts that gained during the week of FOMC June 2023 meeting Key news last week was the US Federal Reserve’s decision to put a pause on interest rates, keeping them unchanged as announced during this month’s Federal Open Market Committee (FOMC) meeting.
• The top 5 gainers among S-REITs & Property Trusts during the week until Thursday’s close were: Keppel REIT (5.9 per cent), Mapletree Pan Asia Commercial Trust (5.6 per cent), Mapletree Logistics Trust (5.5 per cent), CapitaLand India Trust (4.7 per cent), and CapitaLand Ascendas REIT (3.8 per cent).

• Jericho’s O&G JV assets are harvesting record cash flow and growing production steadily. 
• JEV’s wholly owned Hydrogen Technologies has an innovative solution for clean hydrogen boilers.
• This business allows JEV to generate non-dilutive cash flow which can be re-invested in the high multiple hydrogen industry.

• Puradelta Lestari (DMAS IJ) remains one of the most interesting industrial estate developers in Indonesia with a high-quality tenant base across growth sectors including autos, 2W, pharmaceuticals, and data centres.
• The completion of a new AEON Mall will provide a further draw for the estate as a destination and a place to live and work and is increasingly well-connected.
• DMAS had a slower start to the year for revenues but marketing sales are running ahead of schedule having beat last year, with bookings expected to pick up in 2023.

• Viva Biotech Holdings (1873 HK) is raising RMB1.06 billion (~$150 million) through offloading ~24% of its equity interest in Viva Shanghai, the primary entity of the company’s CRO business.
• The consideration implies a revenue ratio and gross profit ratio of 4.90x and 11.04x, respectively. The ratios are at the similar level of the average ratios of other comparable peers.
• Going ahead, Viva Biotech is planning to spin off its CRO business for separate listing in the A-shares market. IPO application is expected to be filed by June 30, 2024.

• Revenue: Digital Media net new ARR $470 Mn ($50 mn higher than guide).

• Gross Margin: Digital Media gross margin remains steady at ~96%, but Digital Experience posted its highest ever gross margin of 67.3% in 2Q’23.

• Cost Structure: 2Q’23 GAAP operating margin was 33.7%, down from 34.9% in 2Q’22.

• Uchi Technologies (UCHI MK), a manufacturer of controllers for coffee machines, has a 23-year track record of operating margins of over 40% and ROCEs of over 20%.  
• Trading at 11.9x trailing PE, with a dividend yield of 9%, and 15% of the market cap in cash, the company has been serially paying dividends (payout > 70%). 
• In its 2022 annual report, for the first time in its history, the company mentioned it has exciting growth plans that will be revealed over the year. 

• In this insight, we provide gap trade opportunities among 30 small cap Korean preferred stocks with market cap of less than 100 billion won and more than 20 billion won.
• Among these 30 companies, there are some in interesting gap trade opportunities, especially among those with relatively high dividend yields (more than 5%).
• We have ranked these 30 stocks in terms of three criteria including market cap, pref/common share price ratio, and dividend yields. 

• Electric-vehicle maker Nio Inc. ended its holdout in China’s car price war and slashed base prices on all of its vehicles by 30,000 yuan ($4,200) in hopes of bolstering sales amid escalating competition in China, the world’s largest auto market.
• Nio also pulled the plug on its free battery-exchange service for car buyers and introduced a pay-as-you-go system and a 30,000 yuan lifetime swap service.
• The vehicle price cuts announced Monday will reduce the starting price of Nio’s new electric SUV ES6 to 338,000 yuan. The price of the mid-size electric sedan model ET5 will be lowered to 298,000 yuan. The changes take effect immediately, Nio said.

• First of all, Apple is the most valuable company on the planet with a $2.8 trillion market capitalisation and eying for the whooping $3 trillion: +41% in 2023 alone.
• And that equates to a total return in the last 10 years of a whooping 1,266%! Note also it was not a smooth run with some big drawdowns which even they had: 2016: 32%, 2019: 39%
• Key take-away: business ownership vs stock ticker mentality is key …

• ECVT has experienced a series of block trades over the past year after its largest shareholder decided to liquidate its position.
• The block sales overshadow the second quarter that is expected to show a rebound in ECVT’s ecoservices
• For second quarter 2023 we are raising our sales and adjusted EBITDA estimate

Immix Biopharma has completed its $5.0m at-the-market (ATM) offering program. The funding is as a result of the initial share sales agreement in March 2023 and is anticipated to further support Immix’s pipeline activities with the development of its key assets: the CAR-T treatment, NXC-201, and the tissue-specific therapeutic, IMX-110. We view the ATM offering as a positive, especially in light of the current macro funding environment for biotech companies.

• Kimberly-Clark’s disappointing performance in recent years is hardly a surprise and does not make the company a bargain.
• The short-term perspective on margins remains mixed, in spite of the management’s optimism.
• KMB could no longer support these activities, according to the company’s management.

• Applied Materials managed to surpass the revenue expectations as well as the earnings expectations of Wall Street.
• Despite weaknesses in consumer electronics, the company sees robust demand driven by technology inflections and regional supply chain investments.
• Applied Materials noted that leading-edge foundry logic customers have adjusted their spending plans but remain committed to their long-term roadmaps.

• Marvell managed to exceed analyst expectations in terms of revenue as well as earnings.
• The company sees significant opportunities in the AI sector, as AI data centers require high-capacity, low-latency connectivity, driving demand for Marvell’s PAM4 optical DSP platform.
• Marvell expects the AI trend to continue growing, with plans to double revenue in fiscal 2024 and at least double it again in fiscal 2025.

• There has been a big divergence in the share prices of Hanmi Science and Hanmi Pharm in the past two months. 
• This divergence in share price appears to be a bit too excessive and we believe this gap is likely to narrow in the coming weeks.  
• We like a pair trade between going long Hanmi Science and going short on Hanmi Pharm. 

• FY 2023 was a record year for Richemont with double-digit growth, confirming the Company’s best-in-class fundamentals (pricing power and high barriers to entry), and resilience to challenging market conditions
• Coming out of the pandemic, Richemont Jewellery Maisons have been one of the clear market share winners in the sector
• The Company’s strong sales, profit and cash flows confirm the strong appeal for its Maisons and relevance for long-term growth

• M3’s share price dropped around 9% after 4QFY03/2023 earnings, however, it went up by more than 8% since then following the announcement regarding the acquisition of Kantar’s healthcare research businesses.
• Our estimates suggest that new acquisition would not contribute to any meaningful growth in the near term. Despite having large no. of M&A deals, growth rates have started to fall.
• We think there is further downside to M3 Inc (2413 JP) ‘s consensus FY+2 earnings estimates and we would recommend shorting the stock.

• CSL Ltd (CSL AU) has reduced its profit projection for FY23 due to higher-than-anticipated adverse impact from Fx. The company now expects a Fx headwind of $230–250M from $175M earlier.
• After considering modest recovery of CSL Behring gross margin and generic competition for Ferinject in Europe, CSL expects FY24 NPATA to grow 13–18% to $2.9–3.0B at constant currency.
• All eyes are now on the U.S. launch of the one-time gene therapy Hemgenix for Hemophilia B. CSL expects the first patient to take Hemgenix within the next few weeks.

• Recently, there has been an increase in discussions about Wechat Video Accounts (known as “ShiPinHao”) on local Chinese media and social networks. 
• Overall, merchants acknowledge the potential of Video Accounts and are willing to give it a try, but the results vary significantly among different businesses.
• We expect that Wechat Video Account will remain to have a high speed growth in the next several quarters, but the market expectation is also high.

• Hello from Kyoto! If there was a single big story from VLSI this year, it had to be Backside Power Delivery (BSPDN). VLSI is one of the premier conferences for semiconductor design and has been held since the 1980s.
• Today it’s one of the best places to present cutting-edge research in circuit technology.
• The key revolutionary announcement at VLSI this year was BSPDN. Let’s discuss.

Heliad Equity Partners (HEP) saw a decline in its NAV per share between end-2021 and end-March 2023 of c 48% to €7.35, mostly on the back of the de-ratings of listed holdings (in particular flatexDEGIRO), as well as an NAV dilutive share issue in March 2023. That said, the valuations of HEP’s private holdings have remained largely resilient during recent funding rounds, and Enpal even carried out a new round in Q422 at a significant uplift to its previous valuation. Moreover, flatexDEGIRO’s share price has rebounded by c 32% in the year to date. HEP recently announced its intention to enter into merger negotiations with FinLab (its major shareholder and owner of HEP’s investment manager).

Games Workshop Group’s (GAW’s) FY23 trading update indicates an improvement in underlying trading in the latter months of the period and the expected easing of cost pressures. The strength of the improvement is evident in the fact that FY23 PBT is greater than both our previous FY23 and FY24 estimates. We upgrade our FY24 PBT estimates by c 4%, which incorporates an underlying upgrade offset by a new foreign exchange headwind.

• Japan’s inflation hit a 41-year high at 4.3% in January, but gradually slowed down in the following months, reaching 3.3%, 3.2%, and 3.5% in February, March, and April 2023, respectively.
• Although Fuel, Electricity, and Water prices declined, other items excluding fresh vegetables, maintained inflation at a similar pace, suggesting that cost-push inflation continues to impact the overall economic environment.
• This insight examines the recent quarterly performance of Yakult, Nissin, and Seven & I, our top picks in the Japan Consumer Staples Sector Smartkarma Original.

• If there is no relief on yield curve control (YCC) anytime soon, seek banks with low JGBs
• Chiba Bank is one of few banks in Japan where JGBs are nearly a rounding error vs assets
• A pure play on an improving Japan, focused next door to Tokyo, with falling NPLs

• This is our first report on ASP Isotopes and we look to provide a detailed account of the various assets owned by the company and the drivers that will be responsible for the company’s growth in the coming years.
• ASP Isotopes’ proprietary isotope enrichment technology should enable the company to produce many of these isotopes, as shown in the diagram below.
• When combined with the company’s second manufacturing plant, scheduled to start production during 2H 2023, ASP Isotopes should generate substantial free cash flow during 2024.

• Paramount Bed Holdings Co Lt (7817 JP) reported all-time high revenue and profit in FY23, driven by increased demand and price revision effect. The company has announced dividend of ¥59/share.
• For FY24, Paramount expects revenue growth of 6% to ¥105B, driven by expanding recurring revenue. Operating and net profits are expected to increase 4% and 6%, YoY, respectively, in FY24.
• Through business expansion and new product launches, the company is on track to achieve mid-term target of revenue of ¥120B and operating income of ¥17B in FY27.

• Metrodata Electronics released a mixed set of 1Q2023 results, as its ICT distribution slowed as consumers held back from new purchases but this was offset by stronger Solutions&Consulting revenues.
• Solutions&Consulting saw strong growth from financial services, with the ongoing boost from BIFAST plus there was strong growth from telcos and the government segment, as it focuses on digitalisation. 
• Metrodata Electronics management remains optimistic for 2023, with an expected recovery in distribution revenues in 2H2023 with the guidance of 8% growth for both revenue and net profits for FY2023. 

• Takuma presents an undervalued investment opportunity with strong financials, and a robust balance sheet. The focus on environmental solutions position it to capitalize on the demand for carbon neutrality.
• The recent involvement of AVI Japan as activist investors adds an exciting catalyst to Takuma’s investment case. We expect AVI to work with management to unlock further value.
• Takuma’s management is targeting enhanced profitability by transitioning from a more volatile EPC model to a recurring revenue-driven approach centred on O&M. Attractive valuations underpin our bullish view.

• Our aggregate analysis of the 1Q23 earnings season showed a more balanced beat/miss ratio than 4Q22 likely due to already-downgraded forecasts presenting a lower expectations hurdle.
• Semiconductor’s inventory situation overall appeared to get worse in 1Q23… Excess inventory digestion is still a few quarters away for many semiconductor companies. Margins fell to the last cycle lows.
• Hardware showed small signs of overall inventory improvement. Margins fell further but remained pretty high relative to the previous cycle.

• China Railway Signal & Communication (3969 HK) (CRSC) has achieved good share price performance YTD, but we think there is more room to go for the rest of the year.
• We like its steady domestic growth, exposure to overseas recovery, strong order backlog, and net cash position. 1Q23 new contracts reached Rmb13.7bn, an impressive 35.8% YoY growth.
• Unlike the highly-geared infrastructure construction peers, CRSC’s net cash equals 52% of the share price. On such basis, its P/B of 0.7x relative to ROE of 9-10% is inexpensive.

• The SPDR® S&P 500 ETF Trust is primed to receive support from lower implied risk premiums amid an interest rate slowdown from the Federal Reserve.
• However, a broad-based analysis suggests that the S&R 500 and the SPDR S &P 500ETF Trust are potentially undervalued.
• The S&P 500’s (SP500) year-to-date surge might have surprised many, as the talk of the town at the turn of the year was geared toward a sustained market drawdown until an interest rate pivot occurred.

• We maintain Techcombank as our top pick in the Vietnamese banks, given its attractive valuations, solid pre and post provision returns and its fortress balance sheet
• We add MBBank to the buy list with its attractive valuations, premium ROE and sound balance sheet metrics; we are neutral on Vietcombank
• VP Bank remains one to watch; its NPL ratio has worsened further to March 2023 and it is the negative outlier of the peer group on credit quality

• 1983 was the year both TMNT and Mario Bros were created by two different animation studios
• Mario Bros latest movie has now grossed $1.3 billion in box office receipts YTD, entering the all-time top-3 of animated movies 
• TNMT will see its debut in US theatres on the 2nd of August 2023. Will the turtles get the same reception as Mario Bros?

• We conducted fundamental analysis on Link REIT, the largest REIT In Asia, who owns and operates retail assets, office buildings and logistics in the APAC region
• Link REIT has strong track record for capital management, we expect that to continue.  In the LT, Link REIT is on the path to grow its fund management business
• Link REIT is currently trading at 0.64x P/B and 6% dividend yield, which is attractive from a historical perspective

For our next Corporate Webinar, we are glad to welcome UMP Healthcare’s  Chief Investment & Project Officer, Patrick Cheung. 

In the upcoming webinar, Patrick will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Sameer Taneja. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Monday, 19 June 2023, 17:00 SGT/HKT.

About UMP Healthcare

Founded in 1990, UMP Healthcare is a medical group listed on the main board of the Hong Kong Stock Exchange (stock code 722.HK) and is one of the leading comprehensive healthcare service platforms in the Hong Kong market. We have been committed “To provide comprehensive, diversified and coordinated care for everyone” by creating a network of high-quality and effective medical services for patients, payers, providers and partners.

Along with providing healthcare services that address a wide range of individual needs, UMP closely works with more than 2,000 local and international businesses and insurance organizations to establish and administer corporate healthcare benefit programs for members. The medical service network spans over 1,000 self-owned and affiliated institutions across Hong Kong, Macau, and Mainland China, offering services such as family medicine, specialist consultation, dental care, diagnostic imaging and laboratory testing, preventive medicine and health examination, physical therapy, day surgery, and endoscopy, among others. In 2022, the annual volume of outpatient visits under UMP exceeded 1.1 million.

• Secom’s share price has surged by 8% following shareholder proposals submitted by Dalton Investments, raising expectations for potential approval of a 10% share buyback and its impact on stock price.
• Secom, operating in a mature industry with limited growth prospects, faces challenges in deploying capital and maintaining consistent earnings growth, leading to an accumulation of capital on its balance sheet.
• While Dalton’s proposals may not gain sufficient support to pass at the upcoming AGM, the potential involvement of other activists warrant a bullish outlook.

• GSI Technology (GSIT US) share price is up ~5x in the past month fuelled by the fact that they have an AI Accelerator (APU) called Gemini-I
• Launched in 2020, Gemini-I was 3 years late, has never been properly benchmarked and has thus far attracted just one customer, the Israeli military
• We remain wholly unconvinced that GSIT is on the cusp of a breakthrough in the world of Accelerated AI

• IPL 2023 concluded recently with record streaming views and TV viewership. This bodes well for the valuation of the IPL Lucknow franchise owned by RPSG Ventures Limited (RPSGVENT IN) [“RPSGV”]. 
• FMCG business is currently doing a run-rate of INR 400cr+ revenue, however, needs to scale up faster. To drive this, Too Yumm! has entered into a new category, traditional Namkeens.
• The Firstsource Solutions business seems to be bottoming out. Operating margin has stabilized in the 11.5-12% range. FY23 revenues de-grew at -1.1% YoY as guided at -1% to -2%.

• Recruit’s share price been up +13% YTD and gained more than 22% over the last 30-days with the US Dept of Labour releasing job data for April 2023.
• Job openings were 10.1m in April 2023 vs estimates of c. 9.4m which created positive sentiment over labour market’s resilience to economic turmoil. However, April numbers were 13.5% down YoY.
• Recruit Holdings (6098 JP) is currently trading at a lofty FY+2 EV/EBIT multiple of 17.9x despite earnings expectations deteriorating, we are set to benefit nicely on the short side.

• 2022 saw Light and Wonder make a major strategic pivot from legacy units to focus on three core businesses: Gaming equipment and systems, social online gaming and IGaming.
• Recent move to acquire the 17% of SciPlay social gaming platform it does not own has evoked investor interest in the sector due to a 29% premium on offer.
• After taking a big tax hit related to the sale of two of its legacy verticals the company is well positioned to compete for rising Asia-Pacific gaming equipment business.

• We think by adopting the new strategy to unbind vehicle sales with battery swapping, NIO could broaden its customer base to non-Yangtze-Delta regions and regain price competitiveness.
• We upgrade to BUY and raise TP to US$ 10.5, due to 1) recovered growth outlook brought by widened customer base, more competitive pricing and intact model cycle
• And 2) smaller-than-feared margin pressure. Our TP implies 2x PS. 

• In 1Q FY23/12, CARTA Holdings posted a 23.3% YoY increase in transaction volume for programmatic TV commercial service TELECY, and a 2.8-fold increase in gross sales in the retail domain, showing steady performance in the mass retail domain, which the company has positioned as a priority area in its medium-term management plan.
• On the other hand, the weak macro environment continued to weigh on double-digit sales declines in reservation-based ads, resulting in a 7.7% YoY drop in sales and a 59.3% drop in operating profit overall. 
• YoY comparisons will ease off from the next quarter, but with 2Q usually being a slow period for advertising and the lack of activity from advertisers in the new fiscal year from April onward, earnings are expected to recovery smoothly rather than sharply.

For our next Corporate Webinar, we are glad to welcome KTMG Limited’s Chief Executive Officer, Damien Lim. 

In the upcoming webinar, Damien will share a short company presentation after which, he will engage in a fireside chat with Smartkarma Insight Provider, Angus Mackintosh. The Corporate Webinar will include a live Q&A session.

The webinar will be hosted on Tuesday, 20 June 2023, 17:00 SGT/HKT.

About KTMG Limited

KTMG Limited (“KTMG” and together with its subsidiaries, the “Group”) is an integrated textile and apparel manufacturer.

KTMG is a contract manufacturer of apparel specialising in athleisure wear, casual wear, loungewear, and pyjamas for various ages, with facilities in Malaysia and Cambodia. The Group manufactures apparel for retailers in the United Kingdom, United States, European Union, and Canada, who then sell apparel products under their own brands. The Group has a co-creation business model through which it collaborates closely with its customers during the product initiation process, thereby offering customers a one-stop value-added platform.

In 2019, KTMG expanded upstream into the knitting, dyeing, and finishing of fabric, with its very own textile manufacturing facility in Johor, Malaysia.

• Nikkei reported last week that NTT (Nippon Telegraph & Telephone) (9432 JP) is developing a generative AI and plans to offer services to the company’s corporate clients by Next March.
• Over the recent years, NTT has been extensively investing on AI, robotics and other data-driven products and services to boost its top line growth as its core business is saturating.
• AI and semiconductors are two key policy areas of Japanese government for development as the country is dealing with population and other demographic changes.

• Oil is down dramatically from USD83.26 in April this year to USD67.37 now
• DBS saw a surge in NPLs in FY16 from the oil price decline in that time
• There appears to be some correlation between DBS and oil prices

• Hon Hai shares have broken out to near-term highs after news flow regarding its investment agreement in Lordstown Motors.
• PC makers Acer & Asustek’s share prices remain subdued since Nvidia results despite AI’s potential to accelerate the PC upgrade cycle.
• TSMC’s ADR premium went even higher just today; Also, Realtek is suing Mediatek in the U.S., adding to our Long/Short watchlists.

• Nippon Shinyaku (4516 JP)‘s FY24 revenue guidance is 3% below mid-term target, while operating and net profits guidance are 20% and 17% below the target, respectively.  
• Revenue growth of Viltepso is expected to decelerate to 28% in FY24 from 85% in FY23, dragged by the U.S. sales, which contributes 74% of Viltepso revenue.
• Rival Sarepta Therapeutics (SRPT US) is expected to receive FDA approval for its next DMD gene therapy drug this month, leading to a new competition for Viltepso.

• Indian Energy Exchange Ltd (IEX IN)  is a market leader among power exchanges. However, the company’s market share might be delicate, especially with the developments of market coupling.
• The company might be a market leader, however there are some aspects accounting wise that are unique to IEX as compared to other exchanges like MCX and BSE.
• This includes settlement guarantee fund, accounting of software license, etc.

• Target Corporation delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• Target’s focus on building trust and delivering affordable products to consumers led to three consecutive years of traffic growth, with a 0.9% increase in comparable traffic in Q1.
• We give Target Corporation a ‘Buy’ rating with a revised target price.

• Motorola Solutions managed to exceed the revenue expectations as well as the earnings expectations of Wall Street.
• Revenue increased by 15%, and earnings per share increased by 31% over the preceding year, exceeding the company’s guidance.
• We give Motorola Solutions a ‘Hold’ rating with a revised target price.

• Take-Two Interactive Software delivered a mixed set of results in its most recent result, with revenues above Wall Street expectations but below-par earnings.
• Moving forward into fiscal 2024, Take Two expects full-year net bookings from $5.45 billion to $5.55 billion, considering the challenging consumer backdrop.
• We give Take-Two Interactive Software a ‘Hold’ rating with a revised target price.

• The TJX Companies delivered a mixed set of results for the previous quarter, with revenues well below analyst expectations but managed an earnings beat.
• TJX experienced an increase in pretax profit margin and earnings per share, surpassing last year’s figures.
• The company’s divisional performance also showcased positive results for Marmaxx, with sales and traffic consistency across regions.

• TSMC is back to an 11.8% ADR premium after dropping to 8%… potentially another good Long/Short point.
• UMC has flipped to a -0.6% ADR discount, from a 5.6% Premium. If the discount ticks slightly more negative then a good setup level will open up.
• ASE, ChipMOS, and CHT spreads have also experienced significant swings since our last dual-listings piece.

• Oriental Watch is a prominent luxury watch retailer in the Greater China region.
• While the company offers various brands, the majority of its sales, over 80%, come from its core brands, particularly Rolex and Tudor, a sister brand of Rolex.
• Over the past two years, Oriental Watch has benefited greatly from the strong popularity of Rolex watches and has rewarded its shareholders with a dividend payout of over 100%.

• Share price performance has been strong in spite of pressure on margins from heavy investment in power semiconductors for electric vehicles. 
• Management’s medium-term targets are ambitious, but could be achieved in a reasonably favorable economic environment.
• Projected valuations compare favorably with historical ranges. The primary risk to investors appears to be  over-optimism. 

• We explored the primary share price drivers for HKL, the prime office landlord in Hong Kong, including share buybacks, HK office recovery and as a reopening/ESG thematic play. 
• HKL has been constantly evaluating its capital management strategy.  Despite interest rate environment has changed substantially, HKL still sees buyback (7% earnings yield) as a good option
• Valuation remains attractive.  Part of the risks is priced in.  Although it can remain as a value trap, it can unlock its value and re-rate over the long term.

• Anhui Conch Cement (914 HK) has been facing numerous challenges, but at 0.5x P/B (2SD below average) and 36.4% of share price is net cash, it pays not overly bearish. 
• Government stimulus measures may not be effective immediately, but should pave the way for better cement demand. A 16.5% increase in special purpose bond issuance in 4M23 is positive.  
• Depressed cement price is bad, but this will drive small and inefficient players out of the market. This will bring more orderly competition and allow Conch Cement gain market share. 

• Benesse Holdings (9783 JP) share price has fallen 18% annually since 4 years ago with PER going from 55x to 14x
• The structural decline in the main business remains although the smaller business has shown some improvement.
• Japan has received a lot of investors interest recently and Benesse could pick up some investor interest too. 

• Thomson Medical Group Limited (TMG SP) has updated its future growth plan in Southeast Asia. The company is currently in preliminary confidential discussions to explore a potential transaction.
• Media reports suggest, Thomson Medical is eyeing a controlling stake in Vietnam-based leading multi-specialized tertiary care provider, FV Hospital for $300–400M.  
• Thomson Medical has a strong balance sheet, with cash reserve of S$143M, against debt of S$626M. Last month, the company has issued S$120M 5.5% notes due 2028.

• 2022 was a turning point for China Resources Pharmaceutical (CRP), because performance of core subsidiaries saw a historic improvement.After China reopens, CRP is expected to achieve double-digit growth in 2023.
• CRP’s development history indicates that its current scale/industry position are mainly due to continuous M&A based on SOE resource advantages/background, but holding platform companies have valuation discounts in secondary market.
• Different business models lead to different valuation logic. But Sinopharm/SH Pharma/CRP all enjoy SOE background dividends+valuation system with Chinese characteristics. If investors mainly focus on industry trend, they can all be invested.  

• Edelweiss reported a decent Q4FY23. Across businesses, Edelweiss reported strong growth. The credit business is also now scaling up with Q4FY23 disbursements at INR 400cr in housing finance.
• The demerger of Nuvama Wealth Management is now complete with record date as Jun 2 2023. Nuvama is on track to list on the exchanges by the end of July.
• Based on our sum-of-the-parts valuation, Edelweiss can be valued at INR 15000cr+. At the current market cap of INR 4400cr, it is trading at a huge discount of 70%+.

• The evolution of the digital age over the last two decades has seen an uninterrupted growth trajectory for the data center market, with demand being driven by increasing storage and computing requirements, as well as the widespread shift from on-premises infrastructure to cloud solutions.
• Developments in software applications and IT have reshaped the way clients interact with data, instigating a significant expansion of data center inventory.
• As the wheel of progress spins inexorably forward, Fortune 500 companies are turning their gaze toward the vast and uncharted frontier of Artificial Intelligence (AI) and its applications.