Daily Brief Equity Bottom-Up: Smartkarma Webinar | Three Small Cap Stock Ideas and more

In this next installment of our #webinar Wednesdays, we welcome Smartkarma Insight Provider, Nicolas Van Broekhoven, as he shares his thoughts and insights on three different small cap stock ideas. From Hong Kong to Canada, tune in as Nicolas delves deeper into stock ideas from across the globe.

The webinar will be hosted on Wednesday, 14 June 2023, 17:00 SGT/HKT.

Nicolas Van Broekhoven was on the buyside for 15 years, and most recently at a medium-sized boutique asset management firm. Having grown up in Europe, attending university in the US and living in Singapore for the last 7 years, this has given him a broad scope on the world and investing in general. He considers himself as a generalist investor with a preference for small and mid-cap companies and special situations. However, a large cap that has gone temporarily out of favor might also pique his interest. His style of investing could be categorized as more of value investor, rather than growth at any cost. Learning from Charlie Munger on the importance of quality of a company has been of tremendous value over the years. Nicolas likes businesses with real earnings, cash flows, dividends, book value and insider ownership.

• In this insight, we provided the most recent ranking of the top 100 most popular YouTube channels in Korea (according to Socialblade website).
• The top 100 YouTube channels in Korea have received 390.7 billion in total views as of June 2023. Of these total views, K-Pop channels views accounted for 46.4% share.
• YouTube has been meaningfully taking away market share from Kakao and Naver in the past three years. KakaoTalk’s MAU was 41.5 million in May 2023. YouTube was a close second.

• One of the few long-term success stories in supermarkets is Yaoko, which recently celebrated 34 consecutive years of record operating profits. 
• Thanks to a combination of innovation and attention to detail, Yaoko’s financial performance continues to trounce larger rivals in the highly competitive food market in Kanto.
• With Japan’s supermarket sector about to enter a period of consolidation, Yaoko will be one of the leaders.

• Japan’s newly approved hydrogen strategy has ignited a stock market rally in related names: KHI (+20%) Iwatani (+15%) Kansai Elec (+2%)
• Japan government approved higher supply targets for hydrogen to bring the hydrogen strategy in line with the most recent energy mix targets
• Kawasaki Heavy Industries plays a key role in Japan’s hydrogen supply chain, specializing in liquefied hydrogen and innovative initiatives

• Further evidence of BILI’s user base peaking reinforces our bearish view on its growth outlook.
• BILI’s business model is broken and we believe significant downsizing is unavoidable in the next 12- 18 months to achieve profitability.
• The company will survive as a leaner and slightly profitable business valued at high single-digit P/E. We still see tremendous downside from here and advise investors to avoid the stock.

• Credit quality risks are rising in US commercial real estate (CRE) and specifically in office property; furthermore, the prospect of increasing US Treasury bond issuance may heighten T-bond volatility
• We screen for US banks that have strong capital ratios, that can deliver premium returns and can confront the rising credit quality challenges, especially in CRE
• We maintain buys on M&T Bank and Western Alliance, adding Capital One with its healthy capital ratios and low office exposure; we recommend profit taking on First Horizon

In the next installment of our Webinar Wednesdays, we go live with Smartkarma Insight Provider, Vincent Fernando, CFA. Vincent will be sharing with us his top picks in the Taiwanese Tech space. From trends in the industry, its opportunities, and insights into his top picks, join us as we hear more from Vincent.

The webinar will be hosted on Wednesday, 21 June 2023, 17:00 SGT/HKT.

Vincent Fernando, CFA has 20 years of experience researching capital markets in Asia and the USA. He is currently the Managing Director and founder of Zero One Partners. He has more than 15 years of investment research & capital raising experience working at both boutique firms and larger investment banks such as Citi and Macquarie. He has traveled extensively during his career, having been based in New York, Hong Kong, Thailand, and finally Singapore where he was Director of Equity Research covering Southeast Asia where he originated and marketed multiple investment banking deals.

• Q123 Net Revenue was strong, exceeding Q119 (pre-Covid) levels by over 12%
• Almost six months into recovery, Trip.com (TCOM US) has also managed SG&A expenses well
• A good result for the company, but we see no reason to alter our long-term view

• According to WuXi Bio’s management, the Company’s growth in 23H1 would be challenging. That is to say, investors don’t need to expect too much from the semi-annual report.
• Based on “hedge logic” of CXO, AD drugs cannot bring about the prosperity of entire CXO industry as COVID-19 vaccines/drugs did.But WuXi Bio would be beneficiary if receiving large orders.
• We are not sure where the bottom of share price is, because shareholders could continue to reduce their holdings and CXO’s valuation has not reached the inflection point.