In this briefing:
- The Festive Week the Was in ASEAN@Smartkarma – Thailand Rising, Frail DBS, and Small Cap Picks
- 2019 Asia Selected Gaming Stock Outlook: Headwinds, Tailwinds and Our Top Picks for Entry Levels Now
- Are US Stocks Still Expensive?
- Business Happenings in the Americas that May Be “Below the Radar” – Week Ending December 22, 2018
- Micron’s Guidance Bombshell Signals Troubled Times Ahead For Beleaguered Semiconductor Segment
1. The Festive Week the Was in ASEAN@Smartkarma – Thailand Rising, Frail DBS, and Small Cap Picks
This past Festive week’s offering of Insights across ASEAN@Smartkarma is filled with another eclectic mix of differentiated, substantive and actionable insights from across South East Asia and includes macro, top-down and thematic pieces, as well as actionable equity bottom-up pieces. Please find a brief summary below, with a fuller write up in the detailed section.
The top Macro Insight this week comes from Dr Jim Walker who zeros in on Thailand, where he sees an economy that is about to take off. In the equity bottom-up space, Daniel Tabbush revisits DBS GroupHoldings (DBS SP) in light of falling oil prices, which he sees as potentially leading to higher credit costs. I would also highlight Nicolas Van Broekhoven ‘s overview of his winners and losers over the past year, as well as his top picks for 2019.
Macro Insights
In Thailand: The Sandbox Economic Insight provider Dr Jim Walker circles back to the Thai economy, which he suggests is about to take off.
In The Philippines: Reform Impetus Gives Way to Politicking, Manu Bhaskaran explores the risks ahead for the Philippine Economy.
In IDR, CPI, Oil, Trans-Java & Freeport Strengthen Widodo / Lippo Case Escalates / Efta Cepa / Debates, Kevin O’Rourke provides his value-added comment on economic and political developments in Indonesia over the last week.
In Malaysia: Implosion of Former Ruling Party Could Create Tensions in Ruling Coalition, Manu Bhaskaran zeros in on rising political risks in Malaysia.
Equity Bottom-Up Insights
In Global Banks – DBS Frail Against Global PeersDaniel Tabbush looks at DBS Group Holdings (DBS SP) in light of falling oil prices and assesses the potential impact in credit quality.
In AALI (AALI IJ): Indonesian Biodiesel Mandate to Support CPO PriceDr. Andrew Stotz, CFA works his magic on Astra Agro Lestari (AALI IJ) and comes back with a positive view.
In SPH REIT Nibbles at Blackstone’s PortfolioAnni Kum revisits SPH REIT (SPHREIT SP) in light of its recent acquisition in Australia.
In CKP (CKP TB): Powerful Expansion to Drive Earnings GrowthDr. Andrew Stotz, CFA takes a close look at CK Power Pcl (CKP TB) which offers stronger growth relative to its peers.
In UTP (UTP TB): Continued Gain from Tight Global Paper Supply, Dr. Andrew Stotz, CFA zeros in on paper manufacturer United Paper (UTP TB) and sees an improving picture.
In BAUTO (BAUTO MK): New Models to Keep Strong Sales Momentum, Dr. Andrew Stotz, CFA takes a close look at this Malaysian and Philippines auto player. BAUTO sells Mazda vehicles in Malaysia and via its subsidiary Bermaz Auto Philippines Inc (BAP) in the Philippines.
In COM7 (COM7 TB): Acquisition to Support Aggressive Expansion, Dr. Andrew Stotz, CFA looks at this Thai retailer and finds it an attractive prospect.
Sector and Thematic Insights
In Overview of My Winners and Losers in 2018…and 5 High Conviction Ideas Going into 2019, CrossASEAN Insight Provider Nicolas Van Broekhoven looks back over his stock ideas over the past year and lays out his picks for 2019.
In Small Cap Diary: MEGA, Eastwater, Thai Guru Athaporn Arayasantiparb, CFA looks at a number of interesting better know small caps in Thailand, including Mega Lifesciences (MEGA TB) and Eastern Water Resources Dev (EASTW TB).
In Sathorn Series M: TMB-Thanachart Courtship, Athaporn Arayasantiparb, CFA investigates talks if a merger between Thanachart Capital (TCAP TB), Krung Thai Bank Pub (KTB TB), and TMB Bank PCL (TMB TB) and gives us his views.
In Singapore REIT – Preferred Picks 2019, Anni Kum provides us with her top picks for 2019 in the Singapore REIT space.
2. 2019 Asia Selected Gaming Stock Outlook: Headwinds, Tailwinds and Our Top Picks for Entry Levels Now
Our review of ten Asian gaming companies forward prospects for 2019 yielded our top five picks. Two of those comprise this insight. Three more will follow in Part Two. There is, in our opinion, some disconnect between continuing macro headwinds in both the VIP and mass sectors and a more bullish tone based on a recent upside trend in Macau, strong results in the Philippines and Cambodia. Given the battering of the market in general, the already 8 month old bearish tone to the sector and the current pricing of the two stocks noted here, we see significant upside opportunity as we near the beginning of 2019.
3. Are US Stocks Still Expensive?
There are striking parallels between 1929 and 2018.
The 1929 crash put a halt to a nine-year bull run on the market.
Up until October 1929, same as this year, market consensus was that asset prices could only go up from their current level.
As we mentioned in When the Tide Goes Out, Dominoes Fall, a decade of building up excesses meant a painful burst, back 79 years ago: between October of 1929 and September of 1932, eighty-nine percent of the value of stocks was erased and the market didn’t recover to its former peak until 25 years later.
Are we in a similar situation right now?
4. Business Happenings in the Americas that May Be “Below the Radar” – Week Ending December 22, 2018
Highlights of significant recent happenings include:
- Feeding the Dragon – Sumitomo Corp (8053 JP) buying into massive Chile copper project; Mitsui & Co Ltd (8031 JP) and Tokyo Gas (9531 JP) announced plans to be long-term buyers of Mexican LNG.
- Local News on Global Companies – Huawei Technology (40978Z CH)‘s to do “whatever is required” to meet Canada’s 5G security standards; Ant Financial (1051260D CH)’s Sesame Credit be used to apply for Canadian visas; Facebook Inc A (FB US) offered data to Netflix Inc (NFLX US) and Royal Bank Of Canada (RY CN); BlackBerry Ltd (BB CN)‘s high-security reputation increasingly valuable; Fedex Corp (FDX US) and United Parcel Service Cl B (UPS US) deny negative impact from Amazon.com Inc (AMZN US)‘s Amazon Air operations; and Anheuser Busch Inbev Sa (Adr) (BUD US) and Tilray Inc (TLRY US) are doing “joint” product development.
- Trade Deals & No Deals – Bosideng Intl Hldgs (3998 HK) got an unexpected boost, while Canada Goose Holdings (GOOS CN) took an unexpected hit as a consequence of the U.S.A. Government’s problems with Huawei Technology (40978Z CH) .
- Outliers – Another “silver lining” to global warming? The Warming Arctic Opens the Northwest Passage as a Potential Maritime Superhighway
5. Micron’s Guidance Bombshell Signals Troubled Times Ahead For Beleaguered Semiconductor Segment
After months of skirting around inventory build-up and a weakening demand outlook, Micron used their latest earnings report to call closing time on a revenue and profitability party that began in Q4 2016 and just got better and better with each passing quarter.
Micron reported Q1 FY2019 results on December 18’th and while revenues were largely in line with recently lowered guidance from the company, their outlook for both Q2 and 2019 as a whole was worse than even the most bearish of expectations.
Citing high inventory levels at key customers, Micron guided Q2 FY2019 revenues for $6 billion at the midpoint, down a staggering $1.9 billion, 24% QoQ and 18% YoY. At the same time, Micron revised down their CY2019 bit demand growth forecast for both DRAM (from 20% to 16%) and NAND (35%, the bottom of the previously forecasted range). The company plans to adjust both CapEx and bit supply output downwards to match.
In the wake of their guidance bombshell, Micron’s share price closed down almost 8% the following day to end the session at $31.41, a level last seen in August 2017. Micron is unique in reporting out of sync with its industry peers, making it the proverbial canary in a coal mine. The company’s gloomy outlook and clarion call for further CapEx reductions in a bid to rebalance supply and demand spells troubled times ahead for an already beleaguered semiconductor segment ahead of the upcoming earnings season.
