In this briefing:
- Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
- The Week that Was in ASEAN@Smartkarma – Thailand’s Election, Philippine Banks, and Data Junkies
- Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
- Singapore Real Deals (Issue 5): The Largest Condominium in Singapore
1. Leong Hup Pre-IPO – Hard to Pinpoint What’s Going to Be the Revenue Driver Going Forward
Leong Hup International (LEHUP MK) (LHI) plans to raise up to US$400m in its Malaysian IPO. LHI is one of the largest integrated poultry producer in Southeast Asia.
LHI was listed on Bursa Malaysia from 1990 to 2012. Since delisting, it has consolidated its Southeast Asia operations under a single entity and is now looking to relist the larger entity.
While revenue has been growing steadily, margins have been volatile. In addition, its difficult to pinpoint which products are performing well in which geographies. The feedmills business seems to be a more consistent performer as compared to the livestock business. It’s also a larger revenue contributor in the faster growing regions.
2. The Week that Was in ASEAN@Smartkarma – Thailand’s Election, Philippine Banks, and Data Junkies
This 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.
This week’s highlights include value-added comment from CrossASEAN insight provider Prasenjit K. Basu and Dr Jim Walker on the potential impact of Thailand’s elections, an in-depth look at Summarecon Agung (SMRA IJ) fromJessica Irene in part 5 of a Smartkarma Originalsseries on Indonesian property, as well as insights from Daniel Tabbush onPhilippine National Bank (PNB PM) and Tisco Financial Group (TISCO TB), as well as an update onXl Axiata (EXCL IJ)from Angus Mackintosh following a meeting with management.
Macro Insights
In Thailand: Elections Are Not Irrelevant; This One Too Pits Faster Growth Vs. Military “Stability”, Cross ASEAN Insight provider Prasenjit K. Basu discusses the implications of the result of Thailand’s election, which will likely see the incumbent Prime Minister retain his position, this times as a democratically elected leader (result covered in the discussion stream).
In Widodo Lead Intact / VP Debate Lacks Impact / Trade Slows / Permitting Impediment / PPP Chair Arrest, Kevin O’Rourke looks at the most important political and economic developments over the past week and provides his value-added comment.
In Thailand’s Election – Growth Story Plays Wait and See, Dr. Jim Walker discusses the recent monetary moves by the Bank of Thailand and what the result of the election might mean for growth.
In Philippines: El Niño’s Comeback – How Bad? , Jun Trinidad looks at the potential impact from the predicted comeback of El Nino in the economy.
In Asian Credit Monitor: The Pad Thai Election, Warut Promboon looks at the potential impact of the results from the Thai election and the implications for credit in that country.
Equity Bottom-up Insights
In Part 5 of a Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 5 – Summarecon Agung (SMRA IJ), CrossASEAN Insight Provider Jessica Irenelooks in detail at this leading township developer. The company has over 40 years of track record and a combined development area of over 2,700ha. The company benefits from its exposure to the popular Serpong district, but an over-expansion, coupled with tightening property regulations caused its balance sheet to suffer in the following years. Earnings have declined by -19% Cagr over the past five years as a consequence of lower margins and burgeoning debt levels. The company has plans to divest its retail mall division, which can serve as a positive catalyst in the near term. Improving sentiment and better interest rate environment, as well as positive regulatory tailwinds, should be a driver to SMRA’s share price this year. We see a 44% upside to our target price of IDR1,408 per share.
In XL Axiata (EXCL IJ) – The Crown Prince of Data, CrossASEAN Insight Provider Angus Mackintosh circles back to Indonesia’s most direct play on the rising consumption of mobile data, as pricing in that market starts to look more favourable.
In Golden Agri: El Nino Back on the Front Burner; Bullish Catalyst for GAR, commodities specialist Charles Spencer zeros on the potential positive impact from an impending El Nino.
In Philippine National Bank – The Beginning of Recognition, Daniel Tabbush circles back to this leading but unappreciated Philippines lender, where he sees greater appreciation from investors starting to transpire.
In Tisco – A Bright Bank in a Dim Rate World, Daniel Tabbush revisit one of his top financial picks in Thailand.
In SUTL: Puteri Harbor Construction Started Last Week, Membership Sales to Follow, Cash = 84% of MktCap. CrossASEAN Insight Provider Nicolas Van Broekhoven circles back to this small-cap marina play and finds it to be one of the cheapest stocks listed on the SGX.
In Delta Electronics (DELTA TB): Thoughts on the IFA’s Valuation RangeDelta Electronics Thai (DELTA TB), Arun George circles back to this ongoing tender offer, which he recommends minorities should accept.
In After You Looks Beyond Thailand For Opportunities, our Thai Guru Athaporn Arayasantiparb, CFA writes on After You Pcl (AU TB) and Amata Corp Public (AMATA TB) following recent meetings with management. The meetings with the two companies whose industries could not have been more different.
Sector and Thematic Insights
In Thai Telecoms: Slowdown in Mobile Business Continues., our comrades and collaborators at New Street Research circle back to the Thai Telco sector post 4Q18 results.
In Snippets #21: Bremen, TMB Rights Issue, Thai guru Athaporn Arayasantiparb, CFA highlights five developments/news flows/trends and their potential impact on Thai equities over the past week or so.
In Phillippine Gaming Tug of War Disguises Vibrant Sector Potential for 2019-2020, gaming specialist Howard J Klein zeros in on the Philippines gaming sector, which currently flies under investor’s radar but has a lot of future potentials, and more especially Bloomberry Resorts (BLOOM PM).
In Singapore Real Deals (Issue 5): The Largest Condominium in Singapore, Anni Kum presents a fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, she looks at the launch of Treasure at Tampines in District 18, the largest condominium in Singapore to-date. (Official launch last weekend).
3. Gold May Rise on Lower Real Ylds; Canada Leads Fall in Real Ylds; Aust Inflation Expectations Slump
- The broad decline in global bond yields and curve flattening suggest that the market has become more concerned about weak global economic growth.
- The fall in yields is at odds with the rise in equity and commodity prices this year, but the later may have lost upward momentum.
- Safe haven currencies, gold and JPY, have strengthened this week and are likely to perform well if yields remain low.
- US real yields have fallen more than nominal yields this year, with a partial recovery in inflation expectations from their fall in Q4 last year. Lower real yields point to weaker fundamental support for the USD, and further support safe havens like gold.
- Canadian real long term yields have fallen more abruptly than in the USA, into negative territory, suggesting the outlook for the Canadian economy has deteriorated more than most. This may relate to concern over a peaking in the Canadian housing market. The fall in real yields suggests further downside risk for the CAD.
- Long term inflation breakevens have fallen in Australia sharply since September last year to now well below the RBA’s 2.5% inflation target.
- Australian leading indicators of the labour market have turned lower, albeit from solid levels, and may be enough, combined with broader evidence of weaker growth, for the RBA to announce an easing bias as soon as April.
- Asian trade data and flash PMI data for major countries point to ongoing and significant weakness in global trade.
4. RRG Weekly – Fed Highlights Headwinds – Greece Greases Growth – Thai Election Sun Too Close to Call
- US: Fed Sees Tailwinds from Global Growth Shifting to Headwinds from China and Europe.
- Greece: Growth supported by ‘Golden Visa’ (5-year visa for investing 250,000 Euro) and strong tourism arrivals. 2.3% GDP in 2020.
- Thailand: Sunday election between Shinawatra-linked Pheu Thai Party and military backed Palang Pracharat Party. Too close to call.
- Brazil: Former Brazilian President Michel Temer has been arrested in São Paulo as part of the Car Wash corruption investigation. Brazil stocks fell on the news.
5. Singapore Real Deals (Issue 5): The Largest Condominium in Singapore
Singapore Real Deals is a fortnightly property digest that takes you through the peculiarities of Singapore’s real estate market. In this issue, we look at the launch of Treasure at Tampines in District 18, the largest condominium in Singapore to-date. (Official launch this weekend)
Treasure at Tampines is a 99-year leasehold development by Sim Lian Group, to be built on the site of former Tampines Court, a 560-unit privatized HUDC. Sim Lian Group acquired Tampines Court in a collective sale in August 2017 for S$970mn (or S$676 psf ppr).
The 2,203-unit Treasure at Tampines features one- to five-bedroom units and is priced affordably at indicative S$1,280 psf on average. The sales gallery of the condominium opened for preview to a strong turnout last weekend. Prospective buyers deposited blank cheques with property agents for the priority to choose their preferred units this weekend. However, it remains to be seen if there is enough demand to fully take up this massive project within five years.
Competition is keen as several “mega condominiums” had been launched since a year ago and there are a few more in the pipeline in 2019.
Developers have to sell all of the units within 5 years of acquiring a site to avoid paying a hefty 25% additional buyer stamp duties (ABSD) rate. Effectively from July 2018, there is also a new 5% rate that is not to be remitted.
There are 110 five-bedroom units in the Treasure at Tampines. These units are the usually the last to move and can remain unsold for a very long time. Sim Lian Group had better be ready to pay the ABSD.
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