In today’s briefing:
- Nexteer (1316): Unjustly Punished and Bounce Soon?
- China Stimulus: These Are the Key Beneficiaries
- Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
- JAPAN ACTIVISM: Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips
- LRT Capital Management June 2022 Investor Update
Nexteer (1316): Unjustly Punished and Bounce Soon?
- Nexteer Automotive (1316 HK) share price fell 50% in Q1 22 due to the China lockdown scare although it has manufacturing facilities all over the world.
- It traded below book value at some point and rallied alongside other Chinese names in the past month to currently at book value.
- Most of the new business won is from EV OEMs thus the company deserves a higher multiple given the high growth in the EV sector.
China Stimulus: These Are the Key Beneficiaries
- China may bring ahead quota for special purpose bond issuance in 2023 to 2H22. This may potentially at Rmb1.5trn (US$220bn), which will provide big boost to the economy.
- For 5M22, the three most important areas of spending of local government bond proceeds are urban construction and industrial park, social services and transport infrastructure.
- China State Construction Int’l (3311 HK), Anhui Conch Cement (914 HK), China Railway Group (390 HK), China Conch Venture (586 HK) and Anta Sports (2020 HK) are the top picks.
Index Rebalance & ETF Flow Recap: MSCI STD, FTSE AW/AC, HSI, KBANK, MDKA
- Most changes expected at the MSCI August QIR are in China. This will be the last QIR using the current methodology. The Feb 2023 QIR will use the comprehensive methodology.
- There are a lot of changes expected to the FTSE All-World and All-Cap indices at the September SAIR and we list out potential inclusions and exclusions.
- Inflows to the KraneShares CSI China Internet ETF (KWEB US) continue as sentiment around China stocks, especially tech, improves.
JAPAN ACTIVISM: Silchester AGM Effort Fails But Bank of Iwate (8345) Is Cheap As Chips
- Silchester aimed at four mid-sized regional banks and one tiny one. All four efforts failed, but two of the four banks are probably worth looking at.
- Bank Of Iwate (8345 JP) is the small one (tiny) worth looking at. It is 0.17x book, <7x earnings, 1.2x market cap in equity holdings, and better-than-average NIM.
- Over time, value will out. And while not multi-bagger compelling, the mechanical value arithmetic is interesting.
LRT Capital Management June 2022 Investor Update
- LRT Capital is a fundamental investment hedge fund. We invest only in companies with durable competitive advantages, i.e. “moats.”.
- June’s strong results were driven primarily by our hedges, with our portfolio companies declining much less than the market as a whole.
- What is likely to determine the directions of stocks over the short-term (the next 6 months), is the outlook for inflation and interest rates over the coming year.
- We will happily own many technology companies if their valuations become more attractive.
Before it’s here, it’s on Smartkarma
