Brief Industrials: Snippets #18: Naughty CEOs, Southern Crusades and more

In this briefing:

1. Snippets #18: Naughty CEOs, Southern Crusades
2. Rides War Has Shifted To Share of Wallet
3. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks
4. RRG Proprietary Corporate Governance Scoring System Identifies Poor Governance in Korea
5. Japan Post Holdings Basing Cycle with Clear Sell and Buy Levels

1. Snippets #18: Naughty CEOs, Southern Crusades

In this review, we highlight five new unrelated developments that might impact the Thai stock market if you happen to hold the affected stocks.

• Skeletons in the closet. CIMB’s Thai CEO went on voluntary leave to clear his name regarding a legacy case back in his KTB days, while one of Thailand’s highest profile tycoon Dr. Prasert has been implicated in a stock manipulation case of Bangkok Airways from way back in 2015.
• Religious wars? As the southern insurgency spreads to economically vibrant province of Songkhla, insurgents attack a Buddhist temple and kill two monks, possibly in an effort to turn the crisis into a religious war. Doesn’t sound great for overall stability.
• A rare bump in the Baht. Despite QE unwinding, the Baht has risen almost 3% against the greenback. Bad news for exporters (eg. TUF, DELTA) good news for serial acquirers (think Thai Beverage, Banpu).
• Government-inspired deals. Is the government driving M&A in Thailand these days? They certainly had a hand in the TMB-Thanachart deal and now are rumored to be buying Thaicom, the country’s only satellite operator.
• Air quality takes a dive thanks to diesel and aggressive skytrain construction programs. Stores selling face mask and companies that substitute ethanol to diesel are set to benefit, while BTS might hit headwinds as government forces them to slow down construction.

2. Rides War Has Shifted To Share of Wallet

Grab is not just challenging the usual passengers-ride and taxi market; it has upped its game by selling monthly subscription plans, which can build recurring users. It is also looking to take bigger slices of business trips, traditionally the more lucrative pie for local taxi companies and niche car rental companies.

This report explains why Grab has gone into this promotional strategy, and is divided into five parts:

1. Monthly Subscription Plans 

2. Better Allocation of Resources 

3. The Juicy Corporate Pie

4. Fare comparison between Grab, Go-Jek, CD

5. Conclusions

3. China Kepei Edu (科培教育) Post-IPO – Tepid Demand Means Little Support if IPO Price Breaks

Kepei Education (1890 HK) has raised US$112m at HK$2.48 per share, just slightly above the mid-end of the IPO price range. We have previously covered the insight in: 

• China Kepei Edu (科培教育) Pre-IPO Review – A Well Run Private Higher Education Company
• China Kepei Edu (科培教育) IPO – Regulation Poses Significant Near-Term Risks

In this insight, we will update on the deal dynamics, implied valuation, and include a valuation sensitivity table.

4. RRG Proprietary Corporate Governance Scoring System Identifies Poor Governance in Korea

• Our proprietary corporate governance scoring system now covers over 1,985 stocks including over 200 in Korea.
• We recently added a coverage of 28 new names in Korea.
• The two lowest scores in this group are Samsung Electro-Mechanics and Advanced Process Systems both with scores of 40/100.
• The involvement of a former executive at Samsung Electro-Mechanics in the Park scandal and ouster highlights the governance risk.
• Companies with good governance include LS Corp, and Lotte Shopping. Past issues with the founding family of Lotte should be noted and taken into consideration.
  We welcome requests from clients of names they want to see added to the universe.

5. Japan Post Holdings Basing Cycle with Clear Sell and Buy Levels

Japan Post Holdings (6178 JP) rise is moving into an exhaustive resistance zone and due for a hard give back cycle.

Tactical buy supports are compelling for a bigger upside drive given the successful macro backswing support test and ascent that very often opens the way for the macro cycle to make headway, once a corrective cycle terminates. It is this corrective cycle that shows promise for an entry point.

Japan Post Holdings (JPH) does have a short history of volatile swings and will be the challenge within an ongoing basing cycle. We have well defined levels to trade this range tactically while aligning some strong risk pivot supports to reign in risk.

Macro pivot support will define the long term trend for JPH.