In this briefing:
- China’s New Semiconductor Thrust – Part 2: Commodities as a Quick Path to Success
- GEM Active Funds: Big Q1 Outperformance
- The Week that Was in ASEAN@Smartkarma – Jakarta’s MRT, Indonesian Sportswear, and Malaysian Telcos
- Telecom Review (April 2019): DTAC Calls for Truce With CAT
- Battery Technology- The Key To An Electric Vehicle Future
1. China’s New Semiconductor Thrust – Part 2: Commodities as a Quick Path to Success
China’s current efforts to gain prominence in the semiconductor market targets memory chips – large commodities. This three-part series of insights examines how China determined its strategy and explains which companies are the most threatened by it.
This second part of the series explains how China chose commodity semiconductors (DRAM and NAND flash memory chips) as the best technology to pursue.
2. GEM Active Funds: Big Q1 Outperformance
Global Emerging Market funds made a strong start to 2019, with just over two-thirds of funds outperforming the benchmark, generating an average alpha above the IShares MSCI Emerging Markets Indx (ETF) (EEM US) of 1.3%.
In this report, we look at the performance of 180 global emerging market strategies over the first quarter of 2019 and analyse the countries, sectors and stocks that helped generate that outperformance. We also take a look at the longer-dated outperformance of active GEM funds.
3. The Week that Was in ASEAN@Smartkarma – Jakarta’s MRT, Indonesian Sportswear, and Malaysian Telcos
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 Kevin O’Rourke on the ongoing Indonesian Presidential Election campaign, some differentiated comment on the upcoming follow-on offering from Map Aktif Adiperkasa PT (MAPA IJ), as well as the 6th and 7th Insights fromJessica Irene andAngus Mackintosh from the ongoing series of Indonesian Property onIntiland Development (DILD IJ) and Kawasan Industri Jababeka(KIJA IJ). I also include in the detailed section some on-the-ground snapshots from a recent trip to Jakarta, with brief highlights from company visits toNippon Indosari Corpindo (ROTI IJ), Sarimelati Kencana PT (PZZA IJ), andAce Hardware Indonesia (ACES IJ), as well as the first take on Jakarta’s brand new MRT.
Macro Insights
In Widodo Withstands Prabowo’s Debate Pressure / BI Hints at Lower 1Q CAD / Gerindra Prepares Dispute, CrossASEAN Insight Provider Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week.
In his global Insight, What Next in the Inflation / Deflation Debate and What Does It Mean for Asset Prices? Stewart Paterson takes a look at this very current subject of debate globally.
Equity Bottom-Up Insights
In the sixth company visit Insight in an ongoing series, Indonesia Property – In Search of the End of the Rainbow – Part 6 – Intiland Development (DILD IJ), CrossASEAN Insight Provider Jessica Irene takes a deep dive into this high-rise and office focused developer. The company is a property developer that focuses on landed residential, industrial estates, high-end condominiums, and offices in Jakarta and Surabaya. DILD has a good track record in building and operating high-end condominiums and offices.
In Indonesia Property-In Search of the End of the Rainbow- Part 7 – Kawasan Industri Jababeka (KIJA IJ) CrossASEAN Insight Provider Angus Mackintosh takes a close look at Indonesia’s oldest Industrial Estate Developer.
In Map Aktif Follow-On Offering – Lace up for a Potential Long Run, Zhen Zhou, Toh runs through the latest details on the proposed follow-on offering for this Indonesian sports retailer.
Sector and Thematic Insights
In the first part in a series of Insights, Quiddity Singapore M&A Guide 2019, Travis Lundy kicks off by taking a look at Singapore from an M&A perspective.
In Company Visits: The Best of March 2019, Thai Guru Athaporn Arayasantiparb, CFA lays out his thoughts on the most interesting company visits he made in the month of March, including Singapore International School of Bangkok (SISB TB), Minor International (MINT TB), and After You Pcl (AU TB) .
In Malaysian Telcos: Look for Improvements to Continue in 2019, our friends at New Street Research revisit the Malaysian Telecoms sector post the recent results.
In Singapore Property – Luxury Segment Leads Price Decline in 1Q; Property Outlook Remains Shaky, Royston Foo revisits the Singapore Property after analysing 1Q19 numbers.
In Singapore REIT – The Draft Master Plan 2019 Boost and Q1 Scorecard, Anni Kum takes a bird’s eye view of the Singapore REIT space after 1Q19 numbers.
4. Telecom Review (April 2019): DTAC Calls for Truce With CAT
On April 4, we attended the DTAC shareholders’ meeting and listened to how management defended their strategic decisions in various areas such as legal settlements, marketing, and spectrum bidding. This is our take on their responses to various issue:
- Settlement with CAT. DTAC plans to do a further settlement worth Bt9.05bn nett with CAT to resolve all past bilateral issues, but will resume paying dividends in H2’19.
- Spectrum. Since they still have less spectrum than both AIS and True Move, we can’t really fault them for bidding for the 900MHz spectrum, especially since competition has come down considerably.
- Marketing. Like AIS, they are looking beyond just voice airtime. Mobile gaming is one area they will look at. DTAC’s subsidy on game-centric iPhones and the data airtime that comes with it is significantly more than both True Move and AIS.
- Others. They also managed to get a raise for the Chairman and do finishing touches on the PaySabai (a payment platform) consolidation. In our view, these are really formalities at this phase, since PaySabai is pretty much wholly owned.
5. Battery Technology- The Key To An Electric Vehicle Future
This Insight has been produced jointly by William Keating at Ingenuity and Mio Kato, CFA and Aqila Ali at LightStream Research.
The Insight is structured as follows:
- A. Key Conclusions
- B. Report Highlights
- C.History of Electric Vehicles
- E. History of Rechargeable Battery Technologies And An In-Depth Analysis on Li-ion Batteries
- F. Batteries Beyond Li-ion
- G. Supply Constraints for Key Raw Materials
- H. The Competitive Landscape
A. Key Conclusions
Global sales of EV’s reached 2m units in 2018. As a base case scenario, we expect a combination of improving EV battery cost-effectiveness, increasingly challenging emissions standards and ongoing incentives by various governments to propel unit sales to 8m units annually by 2025. Against this, we consider battery material price increases, a reduction of EV incentives in the US and China and political and environmental risks from the mining of metals used in batteries as downside risks which could delay the growth of the EV market.
Surprisingly, the EV battery technology that will drive us towards that 8m unit goal is still very much a work in progress. While Lithium Ion is the by far the dominant technology, there are striking differences between variants of the technology, battery pack design, battery management systems and manufacturing scale between the leading contenders. Furthermore, while there’s nothing on the horizon to completely displace Lithium Ion within the next decade, it remains unclear whether the technology will be the one to achieve the $100/kWh price target that would make the EV cost-neutral compared to its internal combustion predecessors.
Quite apart from the technology, the EV battery segment faces other significant challenges including increasing costs for core materials such as Cobalt, increasing safety concerns as the mix of that very same cobalt is reduced in the cathode, the growing risk of litigation amidst a fiercely competitive environment and last but not least, the appetite of various governments to maintain a favourable subsidy framework.
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