In today’s briefing:
- Taiwan Dual-Listings Monitor: TSMC Historically Extreme Premium Continues; CHT at Short Level Again
- Elon Set to Lose $56B Incentive? If So, Will Tesla’s AI Shift to XAI?
- Chow Tai Fook (1929 HK): Disappointed
- The Beat Ideas: Aegis Logistics: Fueling India’s LPG Market
- AEM Holdings: New CEO = One Final Kitchen Sink in 2Q24?
- [Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat
- Luckin’s Small Step into Non-Coffee Drinks Is a Big Step of Its Future Directions
- Takeda (4502 JP)– Avoid
- Tech Supply Chain Tracker (14-Jun-2024): India limits Chinese participation, woos Taiwanese investments.
- Why an Israel-Hamas Ceasefire Probably Wouldn’t Lead to Lower Container Rates in Short-Term
Taiwan Dual-Listings Monitor: TSMC Historically Extreme Premium Continues; CHT at Short Level Again
- TSMC: +21.3% Premium; Trading at New +15-25% Range This Year
- ASE: +12.7% Premium; We Continue to View 14%+ as Fresh Short Level
- CHT: +1.2% Premium; Good Level to Short Relative to History
Elon Set to Lose $56B Incentive? If So, Will Tesla’s AI Shift to XAI?
- Crucial Vote: Shareholders are voting on Musk’s $56 billion compensation deal and Tesla’s reincorporation in Texas, pivotal decisions for the company’s direction.
- High Stakes: The outcome will determine Musk’s commitment to Tesla, potentially shifting his focus to other ventures and impacting Tesla’s operations.
- Institutional Opposition: Significant resistance from institutional investors and logistical issues for global shareholders create uncertainty. Abstaining from voting counts as a vote against, hindering Elon-supporting retail investors.
Chow Tai Fook (1929 HK): Disappointed
- Chow Tai Fook Jewellery (1929 HK) reported a weaker-than-expected FY24 net profit. Despite having HK$2.2bn net cash, the lack of a special dividend is even more disappointing.
- Surge in unrealised loss on gold loans and a YoY contraction in margin have contributed to the poor 2H24 result. Apr-May operating figures showed a deteriorated operating environment.
- Lacking a special dividend, CTF no longer looks attractive at the current level. Overoptimistic FY25 and FY26 consensus forecasts mean earnings downgrade pressure.
The Beat Ideas: Aegis Logistics: Fueling India’s LPG Market
- Aegis Logistics (AGIS IN) is significantly expanding its LPG and liquid logistics infrastructure across India with rising demand.
- Currently, Aegis has a 15.5% market share in LPG imports in India which they plan to take to 25% in the next few years.
- Surpassed INR 1,000 crores in normalized EBITDA for FY ’24, planned capex of 4500 Crores by FY27.
AEM Holdings: New CEO = One Final Kitchen Sink in 2Q24?
- AEM (AEM SP) announced a new CEO as of 30th of May 2024. The new CEO officially starts 1st of July 2024.
- Amy Leong will take over from Chandran Nair as she leaves her Chief Commercial Officer role at Formfactor Inc (FORM US).
- Given the weak business results and inventory management issues it should be expected that Mrs Leong would want to clean the proverbial house before she starts in her new role.
[Blue Lotus Multi-Sector Sector Update]: Consumer Spending Weakened During Dragon Boat
- Travel and box office data in the past three-day Dragonboat Holiday showed worrying weakness despite sharp price cuts by hotel and airlines.
- Removing travellers from Hong Kong, inbound travel was also quite bad;
- E-Commerce sales backed by trade-in stimulus outperformed regular merchandises, indicating consumer confidence is still low. We believe the weak travel data boded ill for consumption throughout the year.
Luckin’s Small Step into Non-Coffee Drinks Is a Big Step of Its Future Directions
- Luckin launched lemonade drinks with raging success of 5.08 mn cups sold for the first week, ~10% of store sales. Market cheered to send the stock higher;
- We view it with mixed feelings. While it is margin accretive and sales enhancing, is not conducive to improving coffee penetration and cultivating consumers’ habit for drinking coffee;
- We see Luckin as increasingly one of, instead of the, street drink company, because lemonade is actually the top selling SKU of all milk tea vendors in China.
Takeda (4502 JP)– Avoid
- Given the high number of pipeline dropouts, and the potentially disappointing $6 bn psoriasis drug acquisition, we question Takeda’s recent investment track record.
- A big restructuring, high expectations from new/recently launched drug portfolio, and punchy company guidance reduces the probability of upside surprises.
- Unless you are limited from investing outside Japan and you want exposure to an innovative pharma company, we believe that there are better and cheaper options elsewhere.
Tech Supply Chain Tracker (14-Jun-2024): India limits Chinese participation, woos Taiwanese investments.
- India is limiting Chinese participation in Indian subsidiaries while seeking investments from Taiwan, diversifying its economic ties.
- AWS is committing significant funds to establish data centers in Taiwan, anticipating obstacles in securing renewable energy sources.
- Elephantech is seeking collaborators to scale up their eco-friendly PCB manufacturing operations to meet the escalating demand. Join the sustainable production movement.
Why an Israel-Hamas Ceasefire Probably Wouldn’t Lead to Lower Container Rates in Short-Term
- Its unclear whether Yemen-based Houthis would end attacks after ceasefire
- We’ve entered peak Summer shipping season from Asia to US, Europe
- Higher spot rates have already lifted contract rates in Q2 2024
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