In this briefing:
- Overview of My Winners and Losers in 2018…and 5 High Conviction Ideas Going into 2019
- RRG Global Macro – US Fed Positive Outlook – Stocks Fall. Politics Take Over from Fundamentals
- Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- India Politics: Long Before 2019 Results, Fight Begins for PM Candidate in Opposition = Good for BJP
- Anmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
1. Overview of My Winners and Losers in 2018…and 5 High Conviction Ideas Going into 2019
In a follow up to my note from last year Overview of My Winners and Losers in 2017…and 5 High Conviction Ideas Going into 2018 I again look at my stock ideas that have worked out in 2018, those that have not and those where the verdict is still pending.
Last year I provided 5 high conviction ideas and here is their performance in a brutal year for Asian Stock Markets:
Company | Share Price 27 Dec 2017 | Share Price 20 December 2018 | Dividends | % Total Return |
0.70 HKD | 0.88 HKD | 0.01 HKD | +27% | |
0.20 SGD | 0.27 SGD | 0.0 SGD | +35% | |
2.39 HKD | 2.82 HKD | 0.147 HKD | +24% | |
0.84 SGD | 0.85 SGD | 0.02 SGD | +3.5% | |
1.44 MYR | 0.32 MYR | 0.0 MYR | -79% |
4 out of 5 had a positive performance.
Below I will make a new attempt to provide five high conviction ideas going into 2019.
2. RRG Global Macro – US Fed Positive Outlook – Stocks Fall. Politics Take Over from Fundamentals
- US: Stocks fall on political turmoil despite positive noises from the Fed with a dovish rate hike, a reduction in expected 2019 hikes and positive trends on employment and inflation.
- Russia: Unexpected 25 bps rate hike in the face of higher inflation in Nov. Watch for impact of lower oil prices in coming quarters.
- Turkey: Economic developments remain negative. The outlook for retail sales is poor as the economy in general is faltering.
- Indonesia: Trade deficit in November. Exports down 3.3%; imports up 11.68%. This disappointing performance could be the beginning of a trend.
3. Universal, SegaSammy & Dynam Sit Best Positioned Among Japan Companies in Race for IR Partnerships
- We’ve reviewed 10 companies in the sector. Of those, three are the consensus favorites of our Tokyo based panel of industry, financial and economics observers of the IR initiative over many years.
- Based on pachinko alone, the stocks of these companies are fully valued. Based on potential tailwind from a license award within 6 months, they could be vastly undervalued.
- Each of the three noted here brings strength to a bid less based on financials than corporate focus, outlook and experience in the field.
4. India Politics: Long Before 2019 Results, Fight Begins for PM Candidate in Opposition = Good for BJP
The Opposition parties discussing who will be their Prime Minister after 2019 elections is not just premature, it is also a distraction from their main objective which is to defeat the BJP first in the next Lok Sabha elections. Notwithstanding some recent reversals and visible signs of nervousness in the BJP, Prime Minister Narendra Modi is still miles ahead of any other candidate and even BJP is still the dominant force, both in absolute terms and as compared to any other political party in India today. Without any significant threat to his popular appeal and personal charisma, Mr. Modi remains the best bet for leading the NDA (National Democratic Alliance) in the next Lok Sabha elections.
However, this discussion that who should be the PM candidate for Opposition in next elections began when M K Stalin who is a prominent leader from Tamil Nadu and chief of DMK (the party not in power in the state today but clearly one of the two most powerful political forces in this Southern state) proposed Rahul Gandhi (leader of Congress, the other national party apart from BJP) for PM’s job next year. Almost immediately, several other Opposition parties opposed the proposal and said it is best decided after the elections.
There are several reasons why it will work better for BJP if Opposition has a joint candidate for Prime Minister’s post next year, a) It will harm the fragile Opposition unity because there are several contenders but there is no one who will be acceptable to all the Opposition parties, b) If Rahul Gandhi is the PM candidate and his party takes this decision unilaterally, Congress will become less acceptable to other parties. As things stand today, Congress is far away from becoming a strong force in the next Lok Sabha, c) The voters will get more polarized and it will help BJP in winning over even neutral voters who may not have been really happy with BJP.
5. Anmol Industries Pre-IPO Quick Take – No Growth, Generous Payments to Founders
Anmol Industries (ANMOL IN) plans to raise US$100m+ in its India IPO via a sell-down of secondary shares. As per Frost & Sullivan, Anmol is the fourth largest biscuit manufacturer in India, behind the likes of Britannia Industries (BRIT IN), Parle and Sunfeast (owned by ITC Ltd (ITC IN)).
In FY17, the company undertook a restructuring wherein it merged three of its operating entities and demerged its treasury operations. Owing to this one can’t really come up with a clear picture of its past performance.
The picture on the demerger is a lot clearer though, as it led to the founders getting US$38m worth of liquid investments. Furthermore, the founder’s employment arrangements seem to be designed in such a way to let them take 12% of the PATMI each year, with no strings attached and additional 13% of FY17 PATMI as salary.
