In this briefing:
- IPO Stalker: SISB’s Growth Plans
- RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
- SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
- Golden Land: Less An Offer, More A Consolidation Of Interests
- The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
1. IPO Stalker: SISB’s Growth Plans
SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:
- positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
- expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
- Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
- favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.
2. RRG Global Macro Weekly – Election Volatility Expected in India, Indonesia and Thailand
- Volatility set to rise as Thailand, Indonesia and India all Face ElectionsRussia: Michael Calvey, a US citizen and one of Russia’s most prominent foreign investors, has been detained.
- Indonesia: Incumbent President and his challenger from the military are trying to outdo each other in spending largesse targeting rural poor ahead of the May election.
- South Africa: Recent inflation readings have been the lowest in a long time on lower fuel expenses. Expected to stay low.
3. SYNEX: New Smartphone Launches Help Drive Earnings Momentum in 2019
SYNEX’s 4Q18 net profit was at Bt190m (+16%YoY, +18QoQ), in-line with our expectation
- Record-high level of sales at Bt10.38bn is the major contributor to impressive 4Q18 performance. Meanwhile , gross margin drops below 4% in the first time due to changing product mix towards more on device segment
- SYNEX post 2018 net profit of Bt721m (+15%YoY) driven by 18% increase in revenue
- We maintain our positive view toward FY19-20E earnings outlook driven by (1) number of flagship smartphone model launches and new brands for low budget users, Neffos, and, (2) higher sales contribution from high-margins product such as gaming desktops and post-sales services.
We maintain our BUY rating with a new target price of Bt16.80 (previous target price at Bt15.0) derived from 17xPE’2019E, which is the average of the World information and technology sector
4. Golden Land: Less An Offer, More A Consolidation Of Interests
Frasers Property (Thailand) Pcl (FPT TB) has announced a conditional voluntary tender offer for Golden Land Prop Dvlp (GOLD TB) at Bt8.50/share, ~2.4% premium to last close.
Frasers Property Ltd (FPL SP) owns 40.95% in FPT and also 39.92% in GOLD. FPT’s director Panote Sirivadhanabhakdi (the son of Charoen Sirivadhanabhakdi), via his majority-controlled vehicle Univentures Public (UV TB), holds 39.28% in GOLD. Panote is also the vice-chairman of GOLD.
Presumably, both FPL and Univentures will tender into the Offer giving FPT a minimum holding of 80.2%. There were no specific minimum acceptance conditions attached to the tender offer mentioned in the announcement.
Should FPP secure 90% of GOLD in the tender offer, it may proceed with its delisting. A voluntary delisting is still achievable with ~80% in the bag, but that is conditional on <10% of shareholders not voting against.
Preconditions to the commencement of the tender offer include the approval from disinterested shareholders in FPP, approval from “relevant contractual parties of GOLD and GOLD’s subsidiaries” and the approval from the Office of Trade Competition Commission.
The fact the Sirivadhanabhakdi family already holds, directly/indirectly ~80% in GOLD, such regulatory approvals should be forthcoming.
This appears a done deal. The only apparent risk is the expected shareholder vote of Univentures wherein Panote will likely need to abstain.
Currently trading at a gross/annualized spread of 1.8%/4.3% assuming early August payment. Very tight, suggesting investors are more likely angling for the back-end.
5. The Week that Was in ASEAN@Smartkarma – Indonesian Property, XL Axiata, and Singapore’s Economy
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.
Highlights this week include the first individual company report in a Smartkarma Originals series on Indonesian Property from CrossASEAN Insight Provider Jessica Irene on Ciputra Development (CTRA IJ) and the potential for a strong data-driven turnaround over the coming few quarters for Xl Axiata (EXCL IJ) in an Insight from our friends at New Street Research. On the Macro front CrossASEAN economist Prasenjit K. Basu presents some insightful thoughts on the Singapore Economy.
Macro Insights
In Mildly Expansionary, but Socially Magnanimous While Staying Focused on Long-Term Competitiveness, CrossASEAN Economist Prasenjit K. Basu zooms in on the Singapore economy and despite expectations of slower growth this year, sees ample room for fiscal stimulus should the global economy weaken further.
In US Dollar Demand – Fading Appetite, Dr. Jim Walker discusses the less than voracious appetite for the US Dollar.
In Prabowo Errs Again; Widodo Lead Intact; Riady’s Mei-Egg-Karta; BI Holds; Repsol’s Find; Debate Text, Kevin O’Rourke provides his value-added commentary on political and economic developments in Indonesia over the past week.
In Philippines: Institutional Reforms that Promote Macro Stability, Phipillines economist Jun Trinidad zeros in on institutional reforms which he sees are providing a stable platform for growth.
Equity Bottom-Up Insights
In the first insight on a company in a Smartkarma Originals series, Indonesia Property – In Search of the End of the Rainbow – Part 1 – Ciputra Development (CTRA IJ), CrossASEAN Insight Provider Jessica Irene takes a detailed look at this leading developer and finds significant upside to the stock.
In XL Axiata Results Show a Strong Turnaround Underway in Indonesia, our friends at New Street Research revisit Xl Axiata (EXCL IJ) post its most recent results and see the potential for a strong data-driven turnaround over the coming few quarters.
In Singtel’s Weak 3Q18 Results but Dividend Looks Sustainable and Long Term Upside from Associates, New Street Research circle back to Singtel (ST SP) post results and remains constructive on the stock.
In M1 Offer Unconditional as Axiata Tenders, Events Specialist Travis Lundy revisits the ongoing M1 Ltd (M1 SP) deal which seems to have reached a conclusion following Axiata Group (AXIATA MK) ‘s acceptance.
In Best World (BEST SP): Not the Best Financials to Disprove The Business Times Allegations, Arun George takes a look at the company following an article in the local press casting dispersions on its China sales.
In Delta Thailand’s Tender Offer: Updated Timetable, David Blennerhassett circles back to the ongoing tender offer for Delta Electronics Thai (DELTA TB).
In Sing Holdings – Surge in Full-Year Earnings with a Surprise Hike in Dividend. 67% Upside. BUY., Royston Foo comments on the company following a strong set of results.
In MAJOR: Impressive 4Q18 Earnings, our friends at Country Group comment on Major Cineplex Group (MAJOR TB) following stellar numbers. MAJOR’s 4Q18 net profit was Bt259m (+247%YoY, +26%QoQ).
Sector and Thematic Insights
In this week’s REIT Discover: The Three R’s Driving Starhill Global REIT (SGREIT SP), Anni Kum zeros in on Starhill Global Reit (SGREIT SP) and finds an interesting story.
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