Brief Thailand: This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks and more

In this briefing:

1. This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks
2. RRG Global Macro Weekly – Political Turmoil in London, Caracas and DC Shakes Markets
3. Don’t Write off Further Aussie LNG Supply Growth: Positive for WPL AU; Negative for US LNG Players
4. The Week that Was in ASEAN@Smartkarma – Vietnam Rising, Indonesian M&A, and Data Pricing
5. 2019 Energy Market Themes & Stocks with Exposure: Focus on Oil, Refining, LNG, M&A & Renewables

1. This Week in Blockchain & Cryptos: Bakkt, Li Ka-Shing, & Starbucks

• If you are a follower of the Asian stock markets, one of the “rules of thumb” is to carefully follow the investments trails of the “superman” Li Ka-Shing, who has recently publicly declared that he supports Bakkt. On December 31st, 2018, Bakkt raised $182.5 million from high profile investors including Li Ka-Shing backed Horizon Ventures, M12 (Microsoft’s venture capital arm), Intercontinental Exchange (owner of the New York Stock Exchange), Alan Howard, and the Boston Consulting Group. 

• Starbucks and Bakkt have yet to mention exactly when Starbucks will allow consumers to use Bitcoin to purchase coffee at their stores. In terms of timing, we believe that the probable time frame is likely to be sometime in 4Q 2019 to 2020 when Starbucks will start allowing their consumers to start using Bitcoin at some of their stores. This will represent a crucial positive tipping point for Bitcoin in the next two years.
• Rakuten & Bitcoin – It has been reported that Rakuten may start to allow Bitcoin as a means of payment as early as April 2019. 

2. RRG Global Macro Weekly – Political Turmoil in London, Caracas and DC Shakes Markets

China: US-China trade negotiations are focusing on the easy parts to avoid truly difficult discussions on thornier structural issues.
Brazil: Early economic numbers have been positive for new president Bolsonaro. Data this week and next will show the way forward.
Thailand: Elections set for March 24th. Constitutional changes may avoid the repeat of the populist/protest /coup cycle that has dominated Thai politics since 2000.

3. Don’t Write off Further Aussie LNG Supply Growth: Positive for WPL AU; Negative for US LNG Players

We think the market is underestimating global LNG supply in the early to mid-2020s from current facilities: initially we look at Australia, which became the world’s largest LNG exporter on a monthly basis in November (~80mtpa or 25% of global supply). Our analysis of Australian LNG supply suggests that production in the early to mid-2020s will be much higher than market expectations of falling production, as fields move into decline. Overall we think this is negative longer-term for the LNG market as supply could supply to the upside but it is a relative positive for the Australian LNG companies. 

We think production could grow to around 95mtpa by the mid-2020s due to substantial upside to the nameplate capacity on existing facilities, tie-backs and new developments keeping existing facilities full and utilizing new brownfield LNG trains. Australia’s key advantages versus LNG projects elsewhere are the low offshore upstream operating costs, cheap shipping costs to Asia, an investor friendly environment and having a huge installed base of LNG infrastructure and associated cashflows.

Relative to its size Woodside Petroleum (WPL AU) should be the biggest beneficiary and it is also positive for Inpex Corp (1605 JP) and Santos Ltd (STO AU) . It is also good news for the larger integrated players such as Chevron Corp (CVX US), Total Sa Spon Adr (TOT US) and Royal Dutch Shell (RDSA LN). We think that the US LNG players are disadvantaged relative to Australian expansions so this is relatively negative for the likes of Cheniere Energy (LNG US) and NextDecade Corp (NEXT US).

4. The Week that Was in ASEAN@Smartkarma – Vietnam Rising, Indonesian M&A, and Data Pricing

Macro Insights

In Vietnam: Economic Prestidigitation, Dr. Jim Walker analyses the GDP growth numbers out of Vietnam and concludes that even if there is some artistic license in the number itself, underlying growth in that country remains strong. 

In Vietnam: Still China Plus One?, Dr. Jim Walker revisits the China Vietnam connection from an economic standpoint and asks whether the “Plus one” is still justified. 

In Vietnam’s Economy Trounces Other Frontier Markets: 2018 Pullback Provides Solid Entry Point, Frontiersman Dylan Waller comments on the prospects for the Vietnamese stock market following the recently recent GDP numbers and a pullback in the market. 

In Widodo Prevails in 1st Debate / Reform Discussed / BI Holds Rate / Poll Margins Steady / PSI Emerges, Kevin O’Rourke comments on the most important political and economic developments in Indonesia over the past week. 

In Indo Politics: Key Takeaways from First Presidential Debate, Johannes Salim, CFA lays out his takeaways from the first Presidential debate in Indonesia.

In The Bull Case for 2019: If Household Spending Stands Out (And Funding Finally Flows In), Kevin O’Rourke analyses the prospects for the Indonesian economy and stock market in light of a potential tailwind from domestic household spending. 

Equity Bottom-Up Insights

In Ramayana Lestari Sentosa (RALS IJ) – The Changeling, former Jakartan Angus Mackintosh comments on this leading Indonesian low-end department store operator and remains convinced that this time, its transformation will yield positive results. 

In Golden Agri:  Reduced Risk of El Niño Pushes Out CPO Price Recovery into 2020, Commodities specialist Charles Spencer circles back to this leading Crude Palm Oil plantation company and remains positive in the longer term. 

In Thailand – KTC Defies the Sceptics, Daniel Tabbush circles back to this leading Thai Finance company, which continues to show strong growth prospects. 

In AFFIN Bank: To Affinity and Beyond, Paul Hollingworth zeros in on this Malaysia lender and comes away with a positive view. 

In BDMN/BBNP Merger Leads to BDMN Buyout Arb, Travis Lundy circles back to this ongoing Indonesian M&A situation.

In Keppel-KBS US REIT – Positioned for Defensive Growth. Still Attractively Priced., Royston Foo circles back to this REIT following some better than expected results. 

In REIT Discover: Frasers Commercial Trust (FCOT SP) At Inflection Point, Anni Kum zooms in on Frasers Commercial Trust (FCOT SP), which she suggests is at an inflection point, after seven consecutive quarters of falling net property income stemming from a downward trending occupancy rate. 

Sector and Thematic Insights

In Singapore Property – 4Q18 Residential Statistics Support View of Weakness in High-End Segment, Royston Foo circles back to the sector following the releases of residential numbers. 

In Indonesian Telcos: Mobile Pricing Should Continue to Recover. Telkom Remains Our Top Pick, our friends at New Street Research revisit the sector and update their views.  

In Thai Telcos: Outstanding Liabilities to CAT/TOT Loom Post DTAC’s Partial Settlement, our friends at New Street Research zero in on the Thai Telco sector following the settlement of numerous outstanding court cases but still see further liabilities along the line. 

In StubWorld: Intouch Gains On Possible Sale of Thaicom, David Blennerhassett takes a look at this potential M&A transaction in Thailand. A sale of Thaicom, Thailand’s only satellite operator, by Intouch Holdings (INTUCH TB) potentially to CAT (Communications Authority of Thailand) would make sense given political sensitivities. 

5. 2019 Energy Market Themes & Stocks with Exposure: Focus on Oil, Refining, LNG, M&A & Renewables

We examine some of the key drivers of the oil price and on the whole we are relatively bullish as although we see some risk to demand growth forecasts in 2019, in the absence of a recession we think that supply has more room to surprise to the downside. Geopolitics and financial markets will play a huge role in prices. We think that US oil supply growth will be lower y/y in 2019, OPEC+ compliance with cuts will be high and maybe helped by unplanned disruptions and base production will decline more rapidly than forecast. Companies will accelerate the sanctioning of new projects in 2019 and also will increase exploration spending, despite a number of years of poor success rates – overall the trend should be positive for the offshore oil service companies. We expect strong LNG supply growth in 2019 to hit spot pricing but still expect a large number of projects to be sanctioned helping the LNG engineering and construction companies. It will be a very interesting year for the refining industry as new regulations limiting shipping sulphur emissions should lead to a spike in diesel and to some extent gasoline margins towards the end of the year, helping complex refiners. Major oil companies will continue to embrace renewables as investors continue to push for companies to plan for the energy transition.

The main stocks that we come out positive on are Hess Corp (HES US), Valero Energy (VLO US), TechnipFMC PLC (FTI FP), Kosmos Energy (KOS US), Transocean Ltd (RIG US), Golar Lng Ltd (GLNG US) and Galp Energia Sgps Sa (GALP PL).

We are more negative on Cenovus Energy Inc (CVE CN) , Royal Dutch Shell (RDSA LN) , Cheniere Energy (LNG US); Eog Resources (EOG US) and Ecopetrol SA (ECOPETL CB) .