Bits & pieces 17 June 2016 Damian Kestel Australian mobile: (+61) 401 362629 [email protected]• Off-piste. Today’s edition takes a brief walk off the beaten path. Following Pakistan’s MSCI upgrade this week I’ve taken a look at what’s inside Asia’s four key frontier markets. Bloomberg numbers indicate there are around 26,500 listed companies in developed and emerging Asia with approximately 8% of them housed within these frontier markets. They are also home to almost 500m people (one-third under 15 years of age) and have a combined GDP of US$700bn. These frontier markets hold much of the same growth and financial market development potential that successful Asian emerging economies displayed 20-30 years ago. It might be a long-wait but it should prove worthwhile. “MSCI will reclassify the MSCI Pakistan Index from Frontier Markets to Emerging Markets. Implementation of this reclassification will happen in one step and coincide with the MSCI May 2017 Semi-Annual Index Review (SAIR)”. Quantitative and Index analyst Rohit Sharma “Roughly twenty years ago, emerging markets were undergoing similar developments that frontier markets are undergoing today. Frontier markets are generally under-owned and less researched than their emerging markets peers ….. (they) also offer greater exposure to domestic demand and some of the fastest growing economies with attractive demographics”. Lazard Asset Management’s Rahwa Senay. On the subject of uncovered stocks in Asia I calculated via Bloomberg there are >800 stocks in (including A- Shares) with a total mkt cap >US$2.3 trillion that are currently covered by 3 or fewer analysts. “Vietnam’s share of US imports is now the highest in Asean; its share of Chinese imports will soon exceed Thailand’s. Vietnam’s challenge to become Asia’s next major manufacturing hub contrasts with Indonesia and the Philippines whose shares of US and China imports have hardly budged”. Economist Tony Nafte. • Off-piste CLSA recommendations and earnings forecasts. Which stocks do CLSA analysts rate a buy when the consensus call is to sell them (and vice versa)? And where do CLSA analyst earnings forecasts deviate significantly from the street? “Medytox’s interests are not aligned with its overseas distributors. Potential delays in the launch of its liquid botox product Innotox, beyond Korea and Japan and the entry of its dermal fillers into China is likely to disappoint investors. We expect these headwinds to weigh on the company’s topline and profit stream and initiate with a SELL”. Analyst Dong Min Kim has the only Sell Rec on the street • A US$88bn under-analysed sector. Ever heard of Saahil “UNIVeRsE” Arora? Well apparently he earned US$2m in prize-money in 2015 as a professional gamer (about what current world #12 men’s tennis player Jo Wilfried Tsonga earned). Gaming in and of itself is a US$88bn market and within that esport revenues are climbing. A new CLSA Blue Book focuses on what is happening in gaming-mad Japan where Naver (another stock with CLSA EPS forecasts way ahead of consensus) off-shoot Line is involved in the battle. “It seems to me that the $88bn global gaming market is relatively under-analysed for its size and growth (projected midterm revenue cagr of 15%), and that would be even more true for the faster expanding mobile segment (30% cagr), where Japan arguably leads the way. This is now an $8bn domestic market, and a topic addressed at our 2016 Tokyo Forum by independent gaming authority Dr Serkan Toto. He has now summarised his thoughts in a Blue Book. The problem for investors is that mobile gaming is a very crowded & competitive space with over 700 new titles launched daily! ….. Dr Toto is bullish about Nintendo and confident they will eventually succeed in mobile gaming, though the better way to play that is via $3.3bn jv partner 2432 DeNA, which is more geared to future hit games and also offers a similarly super-strong balance sheet. Analyst Jay Defibaugh’s preferred name is a slightly smaller 3668 COLOPL, which has more than doubled its sales in the past 3 years and nearly doubled profits. On Jay’s forecasts you’re now paying 12x PER for strong double digit earnings growth, a 9% FCF yield and a strongly net cash b/s. With ADT of $26m, it’s far from illiquid”. Head of Japan Sales (LDN) John Charlton-Jones Plus • The Korean and Taiwanese road to MSCI emerging market status • Off-piste Bloomberg screens searching for little covered low PER/PB & high yielders • Not off-piste – stocks with >10 analysts covering but either zero Buys or zero Sells • Financial crazies – you want what for collateral? + 120% mortgage • A country surrounded by frontier markets – Thai strategy • Last Word: Money
• Off-piste. Today’s edition takes a brief walk off the beaten path. Following Pakistan’s MSCI upgrade this week I’ve taken a look at what’s inside Asia’s four key frontier markets. Bloomberg numbers indicate there are around 26,500 listed companies in developed and emerging Asia with approximately 8% of them housed within these frontier markets. They are also home to almost 500m people (one-third under 15 years of age) and have a combined GDP of US$700bn. These frontier markets hold much of the same growth and financial market development potential that successful Asian emerging economies displayed 20-30 years ago. It might be a long-wait but it should prove worthwhile.
“MSCI will reclassify the MSCI Pakistan Index from Frontier Markets to Emerging Markets. Implementation of this reclassification will happen in one step and coincide with the MSCI May 2017 Semi-Annual Index Review (SAIR)”. Quantitative and Index analyst Rohit Sharma
“Roughly twenty years ago, emerging markets were undergoing similar developments that frontier markets are undergoing today. Frontier markets are generally under-owned and less researched than their emerging markets peers ….. (they) also offer greater exposure to domestic demand and some of the fastest growing economies with attractive demographics”. Lazard Asset Management’s Rahwa Senay. On the subject of uncovered stocks in Asia I calculated via Bloomberg there are >800 stocks in (including A-Shares) with a total mkt cap >US$2.3 trillion that are currently covered by 3 or fewer analysts.
“Vietnam’s share of US imports is now the highest in Asean; its share of Chinese imports will soon exceed Thailand’s. Vietnam’s challenge to become Asia’s next major manufacturing hub contrasts with Indonesia and the Philippines whose shares of US and China imports have hardly budged”. Economist Tony Nafte.
• Off-piste CLSA recommendations and earnings forecasts. Which stocks do CLSA analysts rate a buy when the consensus call is to sell them (and vice versa)? And where do CLSA analyst earnings forecasts deviate significantly from the street?
“Medytox’s interests are not aligned with its overseas distributors. Potential delays in the launch of its liquid botox product Innotox, beyond Korea and Japan and the entry of its dermal fillers into China is likely to disappoint investors. We expect these headwinds to weigh on the company’s topline and profit stream and initiate with a SELL”. Analyst Dong Min Kim has the only Sell Rec on the street • A US$88bn under-analysed sector. Ever heard of Saahil “UNIVeRsE” Arora? Well apparently
he earned US$2m in prize-money in 2015 as a professional gamer (about what current world #12 men’s tennis player Jo Wilfried Tsonga earned). Gaming in and of itself is a US$88bn market and within that esport revenues are climbing. A new CLSA Blue Book focuses on what is happening in gaming-mad Japan where Naver (another stock with CLSA EPS forecasts way ahead of consensus) off-shoot Line is involved in the battle.
“It seems to me that the $88bn global gaming market is relatively under-analysed for its size and growth (projected midterm revenue cagr of 15%), and that would be even more true for the faster expanding mobile segment (30% cagr), where Japan arguably leads the way. This is now an $8bn domestic market, and a topic addressed at our 2016 Tokyo Forum by independent gaming authority Dr Serkan Toto. He has now summarised his thoughts in a Blue Book. The problem for investors is that mobile gaming is a very crowded & competitive space with over 700 new titles launched daily! ….. Dr Toto is bullish about Nintendo and confident they will eventually succeed in mobile gaming, though the better way to play that is via $3.3bn jv partner 2432 DeNA, which is more geared to future hit games and also offers a similarly super-strong balance sheet. Analyst Jay Defibaugh’s preferred name is a slightly smaller 3668 COLOPL, which has more than doubled its sales in the past 3 years and nearly doubled profits. On Jay’s forecasts you’re now paying 12x PER for strong double digit earnings growth, a 9% FCF yield and a strongly net cash b/s. With ADT of $26m, it’s far from illiquid”. Head of Japan Sales (LDN) John Charlton-Jones
Plus
• The Korean and Taiwanese road to MSCI emerging market status • Off-piste Bloomberg screens searching for little covered low PER/PB & high yielders • Not off-piste – stocks with >10 analysts covering but either zero Buys or zero Sells • Financial crazies – you want what for collateral? + 120% mortgage • A country surrounded by frontier markets – Thai strategy • Last Word: Money
OFF·PISII: Frontier Market Stocks with mkt cap >US$1 bn Bangladesh 4~ FCi>liY 1> E41'TI 0 N rlf~F.$ A WAt.JI. oFF 711£ Pakistan 15 B:EArEN 71!A(.Ji. Fot.l.OWIN6 ~~I'I~TAN'.S m.u: . .r CI,.6MJ)E rillS WEE~
S~i Lanka 2 /.r'VIE rAJ<EN A t.oO.I< AT /'11/I~T'.t' !U~IAE AfiA'.J I<EY F.J!()/V"17EI! /IJA~k£71'. Vretnam 10 Rest of World 377 . {)l.f.JPIT€ 9CIA16 1J WAAFE.tl IN S-12/E e'/ CHIN A1S A- S!/A~I£ /YJKT total 408 PAI<!S1'"1W tl/FAT C/II#A ro rilE PUNCH so .J'oi'YIE 1"HIIV65" .4~E 6ollll6
China A-Shares 1 ,529 · A/6/1-r IN FI!O/IITI El<! 11~111.
p~ Cl-/IN A THE WAtr CONrJ/111.1/!FS ,qJ. TIIOtibl/ rf/8 .fi/Ol/10 come: A-' No fVRI"~tsE 611/EIV rifE
Rohit Sharma, CLSA S!>J:I/1£/'ICE OF /(O~EA Al'l!) rAIVVAN. Wednesday, June 15, 2016 5:40AM
From: Sent:
CL SA Index & Corporate Actions Analysis
Brief history of the MSCI Korea and Taiwan Index At the time the MSCI Emerging Markets Index was launched on 1 January 1988, MSCI Korea and MSCI Taiwan Indexes were not constituents of the Index. Accordingly, we think it could take 5 t~years for the China to. be fully included into the MSCIIndex. Note that it took Korea 6 years to get fully included into the MSCI index after a partial inclusion of 20% in 1992. Similarly, Taiwan took 9 years to be fully included into the MSCI index after a partial SO% inclusion in 1996.
MSCI Korea Index was included in the MSCI Emerging Markets Index gradually in three phases: ~----.... • 7 January 1992, MSCI Korea Index at 20% of its weight, ~ V&AIZSJ
• 3 September 1996, MSCI Korea Index increased its weight from 20% to SO%, • 1 September 1998, the MSCI Korea Index was included in the MSCI Emerging Markets Index at its full weight.
For MSCI Taiwan Index, it was included in the MSCI Emerging Markets Index gradually in five phases: • 3 September 1996, MSCI Taiwan Index at 50% of its weight, • 1 June 2000, MSCI Taiwan Index increased its weight from 50% to 6S%, (j_ yE A~ • 1 December 2000, MSCI Taiwan Index increased its weight from 65% to 80%, - ~
• 1 December 2004, the LIF of MSCI Taiwan Index increased from 0.55 to 0.7S, • 1 June~, the LIF of MSCI Taiwan Index increased from 0.75 to 1.
sia/Pacific Japan
• China Hong Kong India Australia South Korea Taiwan Singapore Malaysia Indonesia Thailand Philippines
CI{!UA MU.T Uf,b PER. 0J.00Mfi'E"6 The market capitalization is calculated from all shares outstanding. WCAP data does not include ETFs and ADRs as they do not directly represent
· · companies. It includes only actively traded, primary securities on the country's exchanges
,,.Mid Price 5.732M High on 06/09/15 9.691M Average 2.473M Low on 07/19/05 0.307M
2003 2004 2005 I 2006 2007 L 2008 I 2010 I 2011
lOM
SM
4M
2M
0
- ~-----------------------------------..
Off-piste Asian markets Frontier markets are a group of developing countries that exhibit characteristics similar to emerging markets but are in earlier stages of
macroeconomic and capital markets development. These markets are
excluded from the major emerging markets and global equity indices.
Frontier Markets Are Less Correlated to Other Equity Markets
Correlation of Frontier Markets and Other Equity Universes
MSCIEMSC
MSCIEM
MSCIFM
MSCI FM ex-GCC
MSCIWorld
MSCI EMSC
1.00
0.96
(o.6o
0.68
0.84
MSCI EM
1.00
0.5!£)
0.66
0.87
For the period May 2002 to June 20 15
MSC I FM
MSCI FM MSCI ex-GCC World WHtC/1 ~1-!ovt.b CaM£ IN
fiANIJY -tF rH£ ~~r
1.00
OF rilE JVo~~ 6oE~
p~,.SIIAPEIJ.
!Jvr A woA) ol'l 1.00 CQ~ /!EI..A r/aN
0 0.65 1.00 )
0J L.4ZJ:l1Zb A-.J~ET M/116 T
The standard deviation and correlation statistics must be interpreted with care. Low liquidity in frontier stocks means that there is less frequent trading (i.e., slower price discovery), which can lead to unchanged pricing for extended periods. This issue can bias risk and correlation statistics downward.Q despite this bias, an economic rationale supports the diversification benefits. Frontier markets remain
iJ.IIN~ oF £mER61N6 t-t..tiA IN 1'196- WII-E,eE WA.S ZNiu>,
less integrated to global markets. Therefore, the low level of integration limits capital flows, liquidity, and correlation.
Roughly twenty years ago, emerging markets were undergoing similar developments that frontier markets are undergoing today. Frontier markets are generally under-owned and less researched than their -- '/£7> emerging markets peers. However, many companies in frontier econo-mies are well positioned to benefit from the next wave of economic development and these countries continue to deepen their capital mar-
kets. Frontier markets also offer greater exposure to domestic demand I.! If. I<EY F.RONtJE.l!
and some of the fastest growing economies with attractive demograph- J A! I~ HIWE A POPv~~7loiJ . Ml<t"" ~- or: 11-8..? tnJJ..J.Io/11
Boldly Going: the Exotic 'Frontier' Markets That Intrepid Investors Are Tipping for Take-off 2016-04-18 07:30:35.194 GMT
By Ed Monk, Investment editor IHIAII.t.l/116 Lotv(p - 182,.,_ -
For investors still looking to get in on the ground floor of the next market to take off, even more exotic destinations are required and "frontier" markets provide them.
Be warned, you may be more used to hearing their names in connection with Foreign Office travel warnings than in stockbrokers' notes. Frontier markets are as varied and far-flung as Vietnam, Sri Lanka, Jamaica, Burma, Nigeria, Iran and Mongolia.
None the less, professional investors are becoming excited. Brian Dennehy, managing director of researcher FundExpert.co.uk, said: P.EJ..A17VEt.'l ~m/U . .J.. 111FJ.o~> ;;- ~16 /I'YII'Ac..r
G"l think it can be said that once institutions bite on frontier markets, even with small bites, it could drive these markets a 7 lot higher quite quickly. ll>E ;> j
fYJoRE t/~~ .
"The appeal is the huge potential upside when much of the developed markets are struggling to make investors money. These are countries both large and small which are underdeveloped but have key advantages that can underpin superior economic growth in the years and decades to come."
Depending on which definition you use, there are 23-27 frontier markets around the worl~, and firms such as FTSE and MSCI have developed indices for them. Within these indices are around 5,700 individual stocks, but size and liquiditythe ease with which shares can be traded- mean the range of investable companies comes down to around 500.
------~-----------------------------------,
Asian Frontier Market Stocks with Mkt Caps >US$1 bn
Ticker Bangladesh (4 securities) SQUARE BD Equity LAFCEM BD Equity GRAM BD Equity BATBC BD Equity Pakistan (15 securities) NBP PA Equity OGDC PA Equity UBL PA Equity HBL PA Equity KEL PA Equity PPL PA Equity MCB PA Equity ENGRO PA Equity LUCK PA Equity FFC PA Equity HUBC PA Equity EFOODS PA Equity FML PA Equity PAKT PA Equity NESTLE PA Equity Sri Lanka (2 securities) JKH SL Equity CTC SL Equity Vietnam (10 securities) MBB VN Equity CTG VN Equity BID VN Equity HPG VN Equity GAS VN Equity VCB VN Equity BVH VN Equity MSN VN Equity VIC VN Equity VNM VN Equity Aggregate/Average
Cntry Name
Bangladesh SQUARE PHARMACEUTICALS L TO Bangladesh LAFARGE SURMA CEMENT L TO Bangladesh GRAMEENPHONE L TO Bangladesh BRITISH AMERICAN TOBACCO BAN
NATIONAL BANK OF PAKISTAN OIL & GAS DEVELOPMENT CO L TO UNITED BANK LTD HABIB BANK L TD K-ELECTRIC L TD PAKISTAN PETROLEUM LTD MCBBANKLTD ENGRO CORPORATION L TD LUCKY CEMENT FAUJI FERTILIZER COMPANY L TO HUB POWER COMPANY ENGRO FOODS L TO FEROZE 1888 MILLS LTD PAKISTAN TOBACCO CO LTD NESTLE PAKISTAN LTD
JOHN KEELLS HOLDINGS PLC CEYLON TOBACCO CO PLC
MILITARY COMMERCIAL JOINT VIETNAM JS COMMERCIAL BANK F BANK FOR INVESTMENT AND DEVE HOA PHAT GROUP JSC PETROVIETNAM GAS JOINT STOCK BANK FOR FOREIGN TRADE JSC BAO VI ET HOLDINGS MASAN GROUP CORP VINGROUP JSC VIETNAM DAIRY PRODUCTS JSC
Stock Coverage - Asian Frontier Largest Caps
lndGroup
Pharmaceuticals Building Materials Telecommunications Agriculture
Banks Oil& Gas Banks Banks Electric Oil& Gas Banks Chemicals Building Materials Chemicals Electric Food Textiles Agriculture Food
Commercial Services Agriculture
Banks Banks Banks Miscellaneous Man Oil& Gas Banks Insurance Investment Companie, Real Estate Food
Market Cap EPS -1yr Dvd Est (USDm) PIE growth P/B Yid Gearing
6~0v~ !Ju; AC-Ro£~ A~ lA TH-E..eE~ A ~~6E Analyst LJ~r oF f.INI/VArcHEb sroc/.t.J 7
Ticker Bangladesh (4 securities) SQUARE BD Equity LAFCEM BD Equity GRAM BD Equity BA TBC BD Equity Pakistan (15 securities) NBP PA Equity OGDC PA Equity UBL PA Equity HBL PA Equity KELPA Equity PPL PA Equity MCB PA Equity ENGRO PA Equity LUCK PA Equity FFC PA Equity HUBC PA Equity EFOODS PA Equity FML PA Equity PAKT PA Equity NESTLE PA Equity Sri Lanka (2 securities) JKH SL Equity CTC SL Equity Vietnam (10 securities) MBB VN Equity CTG VN Equity BID VN Equity HPG VN Equity GAS VN Equity VCB VN Equity BVH VN Equity MSN VN Equity VIC VN Equity VNM VN Equity
Name
SQUARE PHARMACEUTICALS L TO LAFARGE SURMA CEMENT L TO GRAMEENPHONE L TO BRITISH AMERICAN TOBACCO BAN
NATIONAL BANK OF PAKISTAN OIL & GAS DEVELOPMENT CO L TO UNITED BANK L TO ' HABIB BANK L TO K-ELECTRIC L TO PAKISTAN PETROLEUM L TO MCB BANKLTD ENGRO CORPORATION L TO LUCKY CEMENT FAUJI FERTILIZER COMPANY L TO HUB POWER COMPANY ENGRO FOODS L TO FEROZE 1888 MILLS LTD PAKISTAN TOBACCO COL TO NESTLE PAKISTAN LTD
JOHN KEELLS HOLDINGS PLC CEYLON TOBACCO CO PLC
MILITARY COMMERCIAL JOINT VIETNAM JS COMMERCIAL BANK F BANK FOR INVESTMENT AND DEVE HOA PHAT GROUP JSC PETROVIETNAM GAS JOINT STOCK BANK FOR FOREIGN TRADE JSC BAO VI ET HOLDINGS MASAN GROUP CORP VINGROUP JSC VIETNAM DAIRY PRODUCTS JSC
Coverage
1 2 2
13 15 19 18 13 16 18 12 16 18 17 10
0 2
7 3
7 5 5 9 6 6 3 7 8
10
Uncovered Asia
US$2.3 trillion in mkt cap over 800+ stocks with around US$1 trillion in Revenue that are covered by 3 or less analysts (Bioomberg data)
{THg 1}/CJ..VIJp.t CHI/IIA
A-£HA#J
ANNUAL PERFORMANCE (%)
Year
2015
2014
2013
2012
2011 2010
2009
MSCI FM MSCI Frontier MSCI ACWI
Asia Index Markets
-13.34 -14.07 -1.84
16.64 7.21 4.71
18.29 26.32 23.44
11.35 9.25 16.80
-31.80 -18.38 -6.86 24.24 13.21
• Last Price 1103.11 High on 12/29/10 1416.41 Average 1152.32 Low on 01/18/12 916.86
2010 2011
@MSC! Frontier Asia!naex·-I) Members 2} Historical Su
{rAiil STIW). Impact on the MSCI Pakistan - RaHrr S HARIVIA
Bangladesh Pakistan Sri Lanka Vietnam total/average
243 98
186 699
(m) (%) 169 199
21 94
483
MSCI will reclassify the MSCI Pakistan Index from Frontier Markets to Emerging Markets. Implementation of this reclassification will happen in one step and coincide with the MSCI May 2017 Semi-Annual Index Review (SAIR). As per the recent MSCI simulated list, the MSCI Pakistan Index will have 9 constituents under Emerging Markets, compared to 16 stocks under Frontier Markets currently. The weight of Pakistan in the MSCI Emerging Markets Index and MSCI Asia ex Japan Index at full inclusion could potentially by 0.20% and 0.24% respectively. This reclassification of the MSCI Pakistan Index could potentially bring US$ 38Sm of inflows from passive asset managers. Figure 2 highlights the potential inflows as a result ofthis reclassification of the MSCI Pakistan Index. Note that Pakistan Petroleum (PPL PA), K-Eiectric (KEL PA) and Pakistan Telecom (PTC PA), currently member of the MSCI Frontier Market Index, will not find any place even in the MSCI EM Small Cap Index as per the Emerging Markets requirements and are likely losers in this reclassification process. National Bank Pakistan (NBP PA), Indus Motor Company (INDU PA), Fatima Fertilizer (FATIMA PA) and Kot Addu Power Company (KAPCO PA), currently member of the MSCI Frontier Market Index, will likely move to the MSCI EM Small Cap Index.
Karachi Stock Exchange KSE100 Index D Members 2) Historical
Asian exports remain under pressure. This is no revelation, here we assess to what extent individual countries have maintained market share in these depressed trading conditions. China's share of the US market, while still the largest, has been declining (first chart). Arguably, China's share would be even lower but for the drop in Opec's share of US imports to 3.1% (down 2.5ppt from 2014).
For gauging market share among other Asian economies, both US and China imports (second chart) are relevant in order to take account of Asia's elaborate intermediate supply chain. ~
US import share: Asia breakdown 2016 vs 2014
Vietnam
Taiwan
Malaysia
Thailand
Indonesia
Singapore
Australia
Philippines
D2016
m2014
%share Hong Kong .J!-~--...----...----...----...--
0 5 10 15 20
The much bigger stand out in emerging Asean is @ Vietnam. Vietnam's share of US
imports is now the highest in Asean; its share of Chinese imports will soon exceed Thailand's share. Vietnam's challenge to become Asia's next major manufacturing hub contrasts with Indonesia and the Philippines whose shares of US and China imports have hardly budged.
China's imports from emerging Asean 600 sa, Jan
08=100
500
400
300
200 --Malaysia R.H.S.
--Thailand R.H.S. 100 ~--r--~~~-T~~~~~~---4 100
Apr 10 Apr 11 Apr 12 Apr 13 Apr 14 Apr 15 Apr 16
'"\.Vith our pioneering spil"it we are going to breal{ into some g•·eat new marl{ets."
China import share: Asia breakdown 2016 vs 2014
Korea Japan
us Taiwan
Australia 0
Malaysia 3.0
Thailand 2.3 ~ 2.2 J 8 ~ •2016
Vietnam Singapore .>---~ 1.5 ,;T(I/Yif> 02014
Indonesia 1.3 ~R. Hong Kong V J £.1"A./A M Philippines
9.2 9.1
8.5
10.4
% India -F=-.:.;.:....---~--....----.----.---
0 2 4 6 8 10
As for competitiveness in emerging Asean . Malaysia may be edging ahead of Thailand.
Both economies though, have labour supply constraints and high wages and will ultimately be displaced by Vietnam as Asia's key manufacturer.
~EL.Arlf/Et.Y ro~ HEAvY wtnf ;-He rol> to /l£PRE.i"EN17#6 ~ /. -Ft>tzE16AI CatJ HAVE (]EtfAI
f11!1(/N(:, ST~AF£6/C.. 811CJ
our OF VIETNAM (Air!J or#ER!_)
MNC Investors in Frontier Cos
Ticker Short Name None (146 securities)
• VNM VN Equity VIET NAM DAIRY P • VCB VN Equity BANK FOR FOREIGN
GRAM BD Equity GRAMEENPHONE L TO NESTLE PA Equity NESTLE PAKISTAN
• CTG VN Equity VIETNAM JS COMM PAKT PA Equity PAKTOBACCO BATBC BD Equity BRIT AMER TOBACC
• BVH VN Equity BAO VI ET HOLDING CTC SL Equity CEYLON TOBACCO LAFCEM BD Equity LAFARGE SURMA CE PMPK PA Equity PHILIP MORRIS PA COLG PA Equity COLGATE PALM PAK SCBPL PA Equity STANDARD CHARTER GLAXO PA Equity GLAXOSMITHKLINE
• SSI VN Equity SAIGON SECURITIE HCAR PA Equity HONDA ATLAS CAR
· • Last Price 623.58 High on 03/12/07 1170.67 Average 434.98 Low on 07/31/00 101.55
2011 2012 2013 2014
1000
800
306 Members
VNM VCB GAS VIC CTG BID MSN BVH HPG MBB
MNC relationship
F&N Dairy INizuho Bank Telenor Nestle
ietnam Dairy Products JSC Bank for Foreign Trade of Vietnam PetroVietnam Gas JSC
ingroup JSC ietinBank
Bank for Investment and Develop Masan Group Corp Bao Viet Holdings Hoa Phat Group JSC Military Commercial Joint Stock Ba
Market Cap Percent Held (USDm)
11 7,318 15 5,819 56 4,395 59 3,259
Bank of Tokyo-Mitsubishi 19 2,938 BAT 94 2,419 BAT 73 2,066 Sumitomo Life 18 1,922 BAT 84 1,443 Lafarge 59 1,139 Philip Morris 97 933 Col gate 30 689 Standard Chartered 99 686 Glaxosmithkline 77 622 Daiwa Sec 16 467 Honda 51 433
SL Commerdal Bank of Ceylon PLC 4.208281 SL Dialog Axiata PLC 3.495815 SL Sri Lanka Telecom PLC 2.852518 SL Hatton National Bank PLC 2.787791 SL Distilleries Co of Sri Lanka PLC 2.505330 SL Carson Cumberbatch PLC 2.027067
The CT CLSA South Asia Frontier Forum 2016 was held from 30 May to 1 June at the Cinnamon Grand, Colombo. Organised by CT CLSA in collaboration with Asian Tiger Capital Partners, Bangladesh and BMA Capital, Pakistan, the forum was held under the theme 'Rediscovering Value in the South Asia Frontier'.
CTCLSA John Keells Holdings JKH-N ':" Rs.158.0 ~Ill LAN'.kA 1-'
Jl1 CoNt,to • FI1Vt£,ru Ill/
f.or.J oF PIE'
Operates over 2,000 four star plus city and resort hotel rooms in Sri Lanka and 340 four star plus hotel /
Investmerft Case and Catalysts
rooms in the Maldives, accounting for 31% of PAT in FYlS
o Two properties in Sri Lanka (in Nuwara-Eiiya and Yala) expected to be added to the portfolio over the next five years
Leading player in local real estate sector, given its expertise and proven track record
o Increased demand expected in commercial real estate space, amid the anticipated growth in investments and business environment in the medium term
(!) Major presence in carbonated soft drink, processed meat, ice cream and supermarket businesses in Sri Lanka, with further potential opportunities to expand utilizing the strong brand name 'elephant house'
Growing presence in banking and insurance sectors through 30% stake in a mid sized Licensed Commercial Bank (LCB) and 95% stake in an insurer; may explore inorganic growth options
~Strong balance sheet with a net cash position of Rs.57.0bn as at 31 Mar 2016; known for its skill and track record in M&A activities, with potential to undertake big ticket projects
Group has ventured into US$820mn Integrated Resort (IR) project - the largest private sector investment in Sri Lanka
0 Construction on the project commenced in Apr 2014 with ~25% of total project cost incurred and set to be completed by 2019
t:"-1 No controlling shareholder, meanwhile share owning management has regularly switched focus into V growth areas in the past successfully managing portfolio of businesses
Financials- Year to 31 March
Net Revenue (Rs mn)
Reported Net Profit (Rs mn)
Net Profit (Rs mn)
Earnings per Share (Rs)
Earnings per Share Growth (%)
Price I Earnings Ratio (X)
Price I Earnings Growth (X)
Gross Dividends per Share (Rs)
Gross Dividend Yield(%)
Net Book Value per Share (Rs)
~ Return on Equity (%)
Market Price per Share (Rs)
Z017E
114,710
12,727
12,727
10.7
-7.8
14.8 -NIA 3.5
2.2 -122.1
.2Jl 158.0
lf!JIJN~A! .~~ri rA!-<61 A 9Et..r!A/t, I.: 'I ,.,IJ~ qPcAI< -CoAL ': 8'8"!.. 0~ !Nl>EX IN rop 10.
APU MO pu JSC 41.806491 TTL MO avantolgoi Jsc 10.451727 GOV MO Gobi JSC 8.846745 BAN MO Baganuur Jsc 7.135695 SHG MO ISharyn Gol JSC 5.045865 BUK MO IUB-BUK JSC 4.792389
· · · BDS MO BDSec JSC 2.865748 30000
TCK MO Talkh-Chikher JSC 2.757172 UID MO Ulsiin Ikh Delguur JSC 2.629707 NEH MO Darkhan Nekhii JSC 2.463425 25000
"I don't know if this is such a wise thing to do George"
2006
CLSA Yew Kiang Wong yew .kiang. wong@clsa .corn +65 6416 7885
Singapore Property
Reuters Bloomberg
YOMA.SI YOMA SP
Priced on 1 June 2016 STI @ 2,790.5
12M hi/lo S$0.57/0.32
12M price target S$0.79 :1:% potential +51%
Shares in issue 1,732.9m Free float (est.) 45.0%
Market cap Gs$6ss6)
3M average daily volume S$4.6m (US$3.4m)
Foreign s'holding 50.0%
Major shareholders Pun Serge 37.0% Aberdeen 10.0%
: ,. Last Price 11061.04 HA HA
Yoma S$0.52- BUY
High on 02/28/11 32301.70 Price/Earnings Average 12327.21 Low on 07/03/06 1167.84 · Dividend Yield
2011 2012 2013
~~ y If-~ WEt.lro Yon1A
2o14 .I 2o15
6o rrRAit 11!
Clearing skies Housing market firming up; Upgrade to BUY
2016
Our recent meeting with Yoma management further reaffirms our positive view on Myanmar's housing market, which is on the cusp of a huge structural boom. To capitalize on this, Yoma has planned more launches to capture home buyers who are returning to the market. Incorporating new assumptions for the residential and other businesses, we raise our target from S$0.63 to S$0.79 and upgrade from 0-PF to BUY.
Financials - --,-----···---·"'"·"-··--·-·-·
Year to 31 March lSA 16A 17CL 18CL 19CL
Revenue (S$m) 111 112 146 202 533
Rev forecast change (%) (5.9) (10.5) (12.6)
Net profit (S$m) 28 37 31 40 136
NP forecast change(%) 56.1 (61.4) (26.2)
EPS (54:) 2.0 2.1 1.8 2.3 7.8
CL/consensus (3) (EPS%) 162 92 115
EPS growth (% YoY) 41.3 7.9 (16.7) 28.4 242.3
PE (x) 26.2 24.3 29.2 22.7 6.6
Dividend yield (%) 0.0 0.5 ~ 0.5 0.5 0.5
ROE(%) 5.4 5.6 4.5 ____;,- 5.6-----;. 17.0
Net debt/equity (%) 2.5 15.2 28.9 58.1 50.8
20000
15000
5000
0
--------------~---------------------------------,
Off-piste Bloomberg screens - stocks with little coverage
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Ticker
1076 HK Equity 6138 HK Equity 3380 HK Equity 1963 HK Equity AIR NZ Equity 003690 KS Equity 165 HK Equity 9501 JP Equity 7186 JP Equity 2128 HK Equity 5105 JP Equity 3996 HK Equity
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IMPERIAL PAC HARBIN BANK-H LOGAN PPT BANK OF CHONGQ-H AIR NEW ZEALAND KOREAN REINSURAN CHINA EVER LTD TOKYO ELECTRIC P CONCORDIA FG CHINALESSO TOYO TIRE & RUBS CHINA ENERGY ENG
Market Cap BEst P/E BEst P/B BEst Oiv ROE Net 0/E BEst Sales Tot Buy Total (USOm) BF12M BF12M Yid BF12M LF LF BF12M Recs (%) Recs
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8341 JP Equity 8377 JP Equity 272 HK Equity 8327 JP Equity 20 HK Equity 8359 JP Equity 8334 JP Equity 45 HK Equity 8385 JP Equity 8369 JP Equity 41 HK Equity 8354 JP Equity 7180 JP Equity 10 HK Equity 8382 JP Equity 8418 JP Equity 148 HK Equity
Short Name
77 BANK LTD HOKUHOKU FINANCI SHUI ON LAND NISHI-NIPPON CIT WHEELOCK & CO HACHIJUNI BANK GUNMA BANK L TD HK&S HOTELS IYO BANK BANK OF KYOTO GREAT EAGLE FUKUOKA FINANCIA KYUSHU FINANCIAL HANG LUNG GROUP CHUGOKU BANK L TD YAMAGUCHI FINANC KINGBOARD CHEM
Market Cap BEst P/E BEst P/B BEst Oiv ROE Net 0/E BEst Sales Tot Buy Total (USOm) BF12M BF12M Yid BF12M LF LF BF12M Recs (%) Recs
SomE W/1.-t.. INCt.t/6£" .SP£4,/A/.,S 0~ ;V6T BE Sf/.S"TAII'IA!Jt/E
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Ticker
PETD MK Equity AIR NZ Equity 200012 CH Equity 511 HK Equity 321 HK Equity JASIF TB Equity 87001 HK Equity 165 HK Equity 2377 TT Equity GNE NZ Equity 2915 TT Equity SPRC TB Equity 1308 HK Equity CMW AU Equity 1528 HK Equity MAGIC SP Equity 3702 TT Equity SPK NZ Equity KIT SP Equity
Short Name
PETRONAS DAGANGA AIR NEW ZEALAND CSG HOLDING CO-B TVB TEXWINCA HLDG JASMINE BROADBAN HUI XIAN REIT CHINA EVER L TD MICRO-STAR INTL GENESIS ENERGY L RUENTEXIND STAR PETROLEUM R SITC CROMWELL PROPERT RED STAR MACAL-H MAPLETREE GREATE WPG HOLDINGS L TD SPARK NEW ZEALAN KEPPEL INFRASTRU
(ott-piste CLSA Calls}~ (j} Consensus likes - CLSA analysts do not
CliA CALl- CoN.f£1/~US. VIEW~
~ Core P/E Div ~ Bberg ticker
CLSA Mkt Cap US$ perf growth (Core) yield ROE Total Buy Company Name Country CLSA Sector Rec (USDm) 1Y 2016 2016 2016 2016 Recs Rec Ofo
3988 HK Bank of China China Financial Services UPF 139,990 (40.1) 2388 HK Bank of China (HK) Hong Kong Financial Services SELL 31,602 (28.3) DBS SP DBS Singapore Financial Services SELL 28,846 (26.3) 1113 HK CK Property Hong Kong Property UPF 23,587 (29.9) 6594 JP Nidec Japan Technology SELL 21,798 (0.9) TNB MK Tenaga Malaysia Power SELL 19,414 (2.4) NTPC IS NTPC India Power UPF 18,328 4.3 005490 KS Posco Korea Materials SELL 15,716 (11.0) 1359 HK Cinda China Financial Services UPF 11,865 (46.4) 914 HK Conch China Materials UPF 11,757 (43.4) 105560 KS KB Financial Korea Financial Services SELL 11,288 (16.9) 670 HK China Eastern China Transport SELL 11,161 (33.6)
BOCHK's multiyear regional expansion story presents risks as well as opportunity. Given the challenging backdrop and experiences of other banks that have made similar transitions, we believe risks are skewed to the downside.
Retaining guidance Management retained 2016 guidance. YoY revenue growth is expected to be ~ at the lower end of 7-8°/o. Costs will be paced to revenue and there will be some deterioration in asset guality. Management expects earnings growth in 2016 but we believe that a contraction in earnings is more likely. We adjusted our figures to incorporate the outperformance in 1Q16 and allow for a higher NII baseline in 2017-2018. There are no changes to DPS.
No change to view The changes to our forecasts flow through into our target price. We reiterate our SELL recommendation with a revised target price of S$13.30. Our fair value PB is 0.8x 17CL BVPS. We remain underweight the Singapore banks.
DBS 7~i. or= JfidUY.sr.J
.{AY /?tJ y , Clill
.(AY~ SEJ.L
Nidec 77% oF ANAt..Y51"! L.II<E N!bEC.. - AfVItr
IS #or O#E OF riiEtn
Amit Garg Not immune to cyclicality Earnings unlikely to grow under cyclical headwinds
+81 3 4578 8049 In this note, we look at some of Nidec's key medium-term opportunities ~
Claudio Aritomi +81 3 4578 8044
highlighted by management. Despite building more generous c assumptions in these new areas, we see subdued growth prospegs given X structural headwinds in 550/o of its business portfolio, where the only i growth products are auto motors and ACIM. We flag further risk of margin erosion as the deprecation burden rises in the next few years and 'highly profitabie markets deteriorate. We reiterate our SELL rating.
Cut EPS 18.50/o for 16CL and 150/o for 17CL; rating lowered to SELL We now believe Posco may fail to capture as much of the spot price gain in its realized prices with long-term customers as we thought on 22 April when we raised our 16CL EPS. Accordingly, we cut our EPS by 18.5%, and there could still be risk of further downside. We lower our old 261,000 won target price on a 10x 16/17CL PE to 211,000 won, on a 9.5x 17CL PE, and lower our rating from Outperform to SELL.
Posco 1/ p£W IIY ltlii1'KJIJ
77115 we~ 11 A
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r------ HF4D OF /<OP£A
---- -------------------------------------,.
• From: Jong M in Kim, CLSA Sent: Thursday, June 16, 2016 7:30AM To: Jong M in Kim, ClSA Subject: MEDYTOX SELL INITIATION
0 DONGMIN KIM Has been working on MEDYTOX and healthcare space in Korea for a while with the view of picking up coverage. Today is her first initiation, and it is quite an eye catcher ·
> SHE IS THE ONLY SELl ON THE STOCK WITH A TARGET PRICE C.SO% lOWER THAN THE MOST BULLISH ON THE STREET
The key difference in view with the street- is her scepticism on their overseas distributors interests are NOT aligned with that of MEDYTOX. Dongmin has some rational arguments as to why both AlLERGAN in Western markets and BLOOMAGE in China are not incentivized to push Medytox products, and in the meantime the price premium Medytox commands in domestic Korea does not appear as high as initially thought.
The export growth potential in fillers is very h-igh, which is why we still apply a strong 26x 2017/18 PE multiple for a W400k/shr ... BUT if her analysis is true that ALlERGAN is not going to be pushing INNOTOX (which we value at W130bn vs street who sees it at well over $1bn) then the downside is going to be a lot more than the 14% she comes up with.
Other side of the table Partner interests not aligned, delays expected · Medytox's interests are not aligned with its overseas distributors. Potential dela¥s in the launch of its liquid botox product Innotox, beyond Korea and Japan and the entry of its dermal fillers into China is likely to disappoint investors. We expect these headwinds to weigh on the company's topline and profit stream and initiate with aSEi:L and 400,000 won target price.
Medytox has signed an exclusive licensing deal with long-standing market leader Allergan for sales of its new botox product, Innotox, outside of Korea and Japan. However, there is little incentive for Allergan to cannibalise its sales without a threat to the status quo and we believe the agreement is liiiiikely to expedite the launch of Innotox globally. 1 )
Vc:I.IIJ.c:t!i~!' l'lis:t.f)r:Y PE bands 600,000 (won)
500,000
. > ) Misalignment with Bloomage WHY HAVE TJIBE.t.l>l£iRI/Jt/TlJ,e! · · · 4oo,ooo
300,000
maxSOx
Bloomage, Medytox's joint venture partner in China is one of the largest hyaluronic acid (HA) filler distributors in the local market. While we expect Bloomage to be fully committed to the launch of Medytox's botox product in 2018 as it does not have such a product in its portfolio, we do not see genuine motivation to promote Medytox's HA fillers iven its existin HA filler
avg23.81x
product line and t e impending launch of a premium HA filler line.
Initiate with SELL Medytox is fully dependent on partners for overseas sales despite strong R&D and innovative· products. The stock has recently corrected but we see further downside as the market has not yet revised down its high expectations for Innotox.
Financials Year to 31 December 16CL Revenue (bn won} 127 Net profit (bn won) 56 EPS (won) 10,587 Cl/consensus (12} (EPS%) 105 EPS growth (% YoY) 33.6 PE (x} 43.7 Dividend yield (%) 0.4 FCF yield (%} 0.6 PB (x} 16.6 ROE(%} 43.1 EV/Ebit (x} 35.1
17CL 157 66
12,458 95
17.7 37.2
0.6 2.1
12.4 38.3 28.4
18CL 199
88 16,482
103 32.3 28.1
0.9 3.3 9.3
37.9
OB{, '!O:a !<$
· · • ilo r c!fEA-~
200,000 sdd15.44x
100,000 mln7.08x
Jan 09 Julll Dec 13 Jun 16
0.6M
0.4M
0.3M
Medytox 0.2M
· -· · · 463,000 won - SELL 0.1M
Market cap US$2,236m
3M average daily volume 13. 7bn won (US$11.8m) 0
2011 2012 2013 2014 2015 2016
OFF-P/rTE CI.SA CA/.t.S {tt~~~T'!J) Chi ne se airlines CONJ£NJ(IJ t./~E~ -ct.~A /)0/ff~,,.
76/. OF ANAJ.'t..f/S SIIY 1111'1 C#/NA EA.Sff~,AJ
Reit~rate non-consensus Underweight call . Cl W1th key earnings drivers volatile and unfavourable, share-price weakness and
sector underperformance may not be over just yet.
-Nor#£~ Cl w_e rei~erate our Underweig_ht sector call with two SELL ratings and an Underperform. CJ Air Chma (U-PF) the best nsk-reward relative play in our view.
Jan van der Schalk jan. va nderschalk@clsa .corn +61 2 8571 4245
Swati Reddy +61 2 8571 4256
IAG
After, QBE's clever use of reinsurance, IAG ups the ante Insurance cycles are the direct products of insurer ill-discipline. This cyclicality creates earnings volatility. Imagine, therefore, an insurer operating in a structurally advantaged market and, simultaneously, using reinsurance to reduce earnings volatility. Do this well and, over time, earnings grow steadily and become dependable. We believe investors reward certainty and the stock trades on a higher multiple. Furthermore, "steady earnings" creates capital efficiency, which means prices can drop but margins can remain. Step up IAG. New CEO Harmer is building a modem insurer. BUY.
220/o and rising ONLY lt ~- QF ANALY.t'fr L/1:£ mu£ ..
I:JAVIb /I o#£ 0~ A ~Ef/1/
Revenue share ahead of expectations, would rise further Though industry revenue growth is below our estimate due to the weak economy, TRUE's 1Q16 results provided evidence the mobile operating unit is gaining revenue share faster than we expected. Costs remain the key to further rerating. We believe risks favour the upside as economies of scale become more likely with share gains and after TRUE raises capital, while AIS would seek to avoid destroying shareholder value. TRUE remains our top Buy among Thai telecoms. We trim our target price from Bt10.6 to BtlOas we integrate a higher cost for future spectrum and slightly higher cash operating costs.
David Beller david. beller@clsa .corn +66 2 257 4642
{j) Where CLSA EPS is significantly below Consensus in 2016 and 2017 (with negative recs)
Core EPS P/E Div CLSA/Consensus Bberg ticker
CLSA Mkt Cap US$ perf growth (Core) yield Gearing ROE EPS Company Name Country CLSASector Rec (USDm) 1Y 2016 2017 2016 2016 2016 2016 2016 2011
• 5 HK HSBC 6505 TT Formosa Petrochem 2888 HK Standard Chartered
• 3 HK HK & China Gas 1326 TT Formosa Chem 4755 JP Rakuten 105560 KS KB Financial
• PTTEP TB PTTEP 1055 HK China Southern 010950 KS S-Oil MPEL US Melco Crown STO AU Santos 000030 KS Woori Bank 2282 HK MGM China 2338 HK Weichai Power PGAS IJ Perusahaan Gas DUE AU DUET 2777 HK Guangzhou R&F UNTR IJ United Tractors LTG PM LTG 880 HK SJM 1072 HK Dongfang 3765 JP GungHo QUB AU Qube 1313 HK CR Cement BANPU TB Banpu 042660 KS DSME 178 HK Sa Sa WHC AU Whitehaven Coal LSIP IJ Lonsum JMEI US Jumei SFR AU Sandfire Res LEJU US Leju MAP! IJ Mitra Adiperkasa UMWOG MK UMW Oil & Gas TEN AU Ten Network
Hong Kong Financial Services Taiwan Petro/Chems Hong Kong Financial Services Hong Kong Power Taiwan Petro/Chems Japan Internet Korea Financial Services Thailand Petro/Chems China Transport Korea Petro/Chems Hong Kong Hotels & Leisure Australia Petro/Chems Korea Financial Services Hong Kong Hotels & Leisure China Capital Goods Indonesia Power Australia Power China Property Indonesia Capital Goods Philippines Conglomerates Hong Kong Hotels & Leisure China Power Japan Internet Australia Transport China Materials Thailand Materials Korea Capital Goods Hong Kong Consumer Australia Materials Indonesia Materials China Internet Australia Materials China Internet Indonesia Consumer Malaysia Petro/Chems Australia Media
HSBC's has achieved 45% of its US$275bn targeted reduction in risk weights. The sale of Brazil in 1H16 its will also be helpful for capital generation. The bank is also making good progress on its cost programme. However the revenue environment, both structurally and cyclically continues to be challenging. This will make it difficult for· HSBC to achieve positive jaws in
1.Q.l§.. And the potential of sizeable one-off items due to past missteps continues to be a threat to overall PBT and BVPS progression. Asset quality is -expected to deteriorate although .we do not expect a sharp rise in NPLs.
We revise our 16-18CL NPAT to incorporate lower revenues, lower associate income and higher interest expense on quasi-equity instruments. The net result is a 5-13% reduction in NPAT. We make no changes to DPS.
HI<+ C/-11/tiA 6A.S-1/o w ~ 20 /. BELOW rHE .rr~ESI
We marginally raise our gas demand growth estimate for 2016 but our earnings remain largely unchanged given both the Rmb and oil are still below their 2015 averages. Our earnings are 9%/11% below consensus estimates for 2016/2017 which we believe will have to be revised down. The stock is expensive at 24x earnings. SELL.
PTTEP (PTTEP TB -Target Bt57 - TSR -31% - SELL) J PTTEP will ~r in the near term reversing the r. ecent rally if oil prices drop VvA Y 8EJ..OW following the June Opec meeting, as there is no progress on production "'Tff£ ~rR££r. control. Also it still faces long-term challenge on reserves and the changing .SC - or 2o17 regulatory regime in Thailand's O&G exploration and production. 0 / •
CoN.J EI./JtJ.!
@where CLSA EPS is significantly ahead of Consensus in 2016 and 2017 (with positive recs) :£, Core EPS P/E Div CLSA/Consensus
Bberg CLSA Mkt Cap US$ perf growth (Core}· yield Gearing ROE EPS ticker Company Name Country CLSA Sector Rec (USDm} 1Y 2016 2017 2016 2016 2016 2016 2016 2017
7751 JP Canon Japan Technology BUY 37,846 (16.1) 9.4 3.5 14.1 5.2 (19.9) 8.08 120.0 115.4 035420 KS Naver Korea Technology BUY 19,628. 10.1 59.9 47.3 25.5 0.5 (33.2) 33.39 123.1 136.0 338 HK Shanghai Petrochem China Petro/Chems BUY 8,122 (5.5) 36.2 11.1 7.7 5.2 (10.1) 21.10 115.4 138.2 2357 TT Asustek Taiwan Technology OPF 6,422 (8.5) 27.9 6.8 9.8 7.2 (33.3) 12.69 115.8 116.3 CPFTB CP Foods Thailand Consumer BUY 6,315 18.2 62.1 12.7 15.4 3.6 106.1 11.55 138.1 126.2 2474 TT Catcher Tech Taiwan Technology BUY 5,897 (34.3) 2.6 27.5 7.4 5.4 (42.9) 21.94 117.3 143.8 2009 HK BBMG China Materials BUY 5,546 (42. 7) 11.2 13.7 4.7 1.7 67.7 6.04 191.0 173.7 4938 TT Pegatron Taiwan Technology BUY 5,453 (24.5) 1.7 18.4 7.7 7.1 (4.2) 15.46 115.2 121.2 4912 JP lion Japan Consumer BUY 4,567 104.1 36.4 20.7 31.7 0.7 (37.7) 10.70 119.5 124.1 000120 KS CJ Korex Korea Transport OPF 4,404 20.5 73.7 55.4 36.3 0.5 53.1 4.54 125.5 153.5 SMGR IJ Semen Indonesia Indonesia Materials OPF 3,948 (29.2) 7.6 10.0 9.8 3.8 21.4 18.91 116.1 122.3 347 HK Angang China Materials OPF 3,904 (45.8) nm nm (30.3) 0.0 60.4 ( 1.54) 352.5 1,575.8 JSMR IJ Jasa Marga Indonesia Infrastructure ·BUY 2,698 (15.4) 35.6 (8.0) 17.6 1.5 124.0 17.50 124.5 116.7 MYOR IJ Mayora Indah Indonesia Consumer BUY 2,647 51.7 22.1 17.3 22.5 1.2 32.2 25.46 123.6 119.0 493 HK Go me China Consumer BUY 2,576 (55.3) 4.6 7.7 9.8 4.1 (29.7) 7.38 119.8 121.6 1530 HK 3SBio China Heaithcare BUY 2,524 (19.5) 59.1 32.5 17.7 0.0 34.7 13.86 119.8 122.1 TBIG IJ Tower Bersama Indonesia Telecoms OPF 2,327 (27. 7) 17.0 17.1 20.4 0.4 655.4 69.38 118.2 115.6 RFMD SP Raffles Medical Singapore Healthcare OPF 2,024 5.2 15.3 21.8 11.2 3.8 1.7 12.73 317.3 340.9 SMRA IJ Summarecon Indonesia Property BUY 1,671 (8.1) 5.1 17.3 16.9 0.2 38.5 19.75 118.7 129.4 IRE AU Iress Australia Technology BUY 1,447 8.9 12.5 12.6 22.5 3.9 39.8 24.89 122.1 115.2 934 HK Sinopec Kantons China Petro/Chems BUY 1,208 (42.2) 34.6 20.6 6.7 1.3 45.8 13.81 115.8 126.5 BTPN IJ BTPN Indonesia Financial Services OPF 1,094 (36.7) 21.1 5.5 5.2 0.0 18.17 158.0 142.2 039030 KS EO Technics Korea Technology BUY 1,017 (9.9) 161.8 69.5 19.0 0.5 1.7 19.37 143.9 157.1 1347 HK ECWMK MRC MK DMPL PM 6166 TT DILD IJ 6094 JP DNAAU ssi PM BEST IJ 1623 HK
Hua Hong Semi Hong Kong Technology BUY 955 (37.2) 22.1 8.9 7.9 2.3 (13.5) 7.41 119.8 118.6 Eco World Malaysia Property BUY 745 (25.1) 161.2 62.6 19.9 0.0 39.8 3.73 130.5 117.9 MRCB Malaysia Property OPF 501 (19.5) 62.4 17.3 15.7 1.9 90.5 5.69 174.0 163.3 Del Monte Pacific Philippines Consumer BUY 490 (7.2) 26.3 8.6 6.2 4.9 493.9 16.49 194.8 177.7 Ad link Taiwan Technology BUY 429 (42.6) 36.0 31.1 16.3 4.6 {24.8) 19.56 116.9 123.2 Intiland Indonesia Property BUY 429 (4.1) 16.4 20.7 11.5 1.9 33.9 10.16 122.0 174.4 FreakOut Japan Internet BUY 393 229.5 617.8 125.9 84.7 0.0 (70.6) 15.84 147.9 149.2 Don a eo Australia Hotels & Leisure BUY 282 (43.0) 431.7 7.1 4.4 0.0 4.1 22.83 137.9 123.1 ss I Philippines Consumer OPF 194 (72.9) 8.2 18.7 8.2 0.0 48.3 10.43 145.1 127.8 Bekasi Fajar Indonesia Hi long China
Biopharmaceuticals leader Solid near-term growth plus strong long-term R&D potential
148.1 158.7
g 3 i
3SBio has demonstrated its leadership in China's biopharmaceuticals ~ space through the successful marketing of the generic version of Amgen's c Epogen, an anaemia medicine. With its strong product pipeline, sales "&. team and manufacturing capacity, it is well positioned to capture g. opportunities from the imminent expiration of global patents for biologic drugs - a market with a high entry barrier and an estimated growth rate in China of 180/o pa over 2016-19. We estimate over 2x three-year returns on the stock. Maintain BUY with a HK$13 target.
than -300/o YTD 35Bio's share price has fallen by more than 30% YTD, which appears to be a reaction to the delay in Ipterbin's approval. It is now at a historical low valuation of 18x one-year forward year PE. We believe the negatives have largely been priced in over the past two months. Management has confirmed that it would re-submit the application within a year after communication from the CFDA. We think the market has over-reacted and thus the current price provides a good opportunity to buy 35Bio.
China Healthcare Reuters Bloomberg
1530.HK 1530 HK
Priced on 13 June 2016 HS CEI@ 8,619.9
Based on the 0.8x industry average PEG and 35Bio's 32% EPS growth Cagr outlook for 16-18CL, we derive our one-year price target of HK$13.00 based on 22x 17CL EPS of HK$0.60. We estimate a three-year fair value of HK$25.00 on HK$0.89 19CL EPS using a similar 28x multiple.
12M hi/lo HK$11.14/7.16
12M price target HK$13.00 ±% potential +67%
Shares in issue 2,255.3m Free float (est.) 32.9%
Market cap ~$2,56om::J 3M average daily volume HK$83.1m (US$10.7m)
Sinopharm Shanghai Pharm Baiyunshan Sihuan Pharma Sino Biopharm China Medical System Luye Fosun Pharma CSPC SSY GROUP LTD Haohai Biopharm Tong Ren Tang Lee's Pharma China Traditional Med. Hua Han Biopharm Fudan-ZJ Consun Pharma Dawnrays Pharma
Shineway
G Uvzon Ph a rma [!!1 35810
HEC Pharm Average
Mkt cap Ticker CRN Price USD m
1099 HK HKD 35.9 12,796 2607 HK HKD 17.3
874 HK HKD 17.5 460 HK HKD 1.6
1177 HK HKD 5.1 867 HK HKD 10.8
2186 HK HKD 4.6 2196 HK HKD 19.2 1093 HK HKD 6.8 2005 HK HKD 2.5 6826 HK HKD 34.8 1666 HK HKD 12.6
950 HK HKD 5. 9 570 HK HKD 3.1 587 HK HKD 0. 7
1349 HK HKD 7.1 1681 HK HKD 4.0 2348 HK HKD 5.9 2877 HK HKD 8.1 1513 HK HKD 33.9 1530 HK HKD 7.8 1558 HK HKD 16.0
PEG PE PE PE % Price 16E 16E(x) 17E(x) 18E(x) Chg (YTD)
227,069 105,517
18,955 3,167
14,550 3,553 2,562
12,502 11,394
0.9 1.2 1.4 1.1 1.3 0.7 0.7 0.8 1.2
2,222 0.8 664 1.0
3,987 1.7 922 1.3
3,709 0.4 1,821 (3.1)
579 1.1 831 0.5 985 0.6
2,055 (2.8) 6,540 0.9 1,673 0.5
693 0.6
19 13 13
6 18 17 15 14 20 15 15 22 14 10
7 33 11 11
8 15 18 14
17 11 12
6 16 14 13 12 17 13 12 19 12
9 6
23 9 9 8
13 15 11
14 10 11
6 14 12 11 10 16 11 10 18 11
8 6
19 8 8 9
11 11
0.6 15.0 12.8 11.2
15 3
(20) (64) 0.0 {4)
(43) (15) (13)
27 (31)
(1) (38) (42) (38) (14) (19)
0 (15)
(9) (28} -a
(15.5)
r -~ --~-----------------~~----------------------,
1).> S4j.£& 11 From: Philip Utsch, CLSA
Sent: Wednesday, June 15, 2016 9:00 PM To: Philip Utsch, CLSA
19 %I .16/. AIIEA~ OF CIJN.IENC()t
Subject: AECG: SMS- The "Ap" for Old People in Japan with ROE of 30%
AECG
CI.P/ '.! 711£ I sr Fo~E/6/V BRoll.e-li!
"fo Ill l'r/A"!E 0'
SMS 1. There are a lot of old people in Japan and they are still aging by the day.
¥2,078- BUY 2. There are not enough nurses to help care for the old people.
3. Well there's an "ap for that problem" it is called SMS.
This is sort of the LinkdiN for Nurses and Hospitals in Japan. We initiate coverage today with a BUY and 44% upside. It's hugely profitable with an ROE of 30%- not bad for a country where the risk free rate is negative.
(If you haven't noticed Linkdin just got bought for 26x EV/EBITDA and SMS trades at 20x EVIEBITDA)
SMS (2175 JP; Mkt Cap US$819m, ADTO US$6.4m)
Let me start with the chart, it is up and to the right- and in today's markets, I am finding a lot of people like that
Here is our front page, this explains the thesis- 44 pages. ~
We are the first foreign broker to initiate on this J. Robert Purcell robert. purcell@clsa .com +81 3 4578 8037
Health helper Core strength: Nurse recruiting
• Last Price 2287.0 High on 01/28/16 2703.0 Average 1035.8 Low on 12/22/11 171.3
2015 2016
15 June 2016
Japan
SMS is to nurses what M3 is to doctors: a first mover with a leading 25% share in nurse recruiting and 60% of all the hospitals in Japan as clients. The job-to-applicants ratio in Japan is 1.3x for all industries; for the nursing market it is~- The internet is revolutionising job search, while Japan needs as many as 1m more nurses/healthcare workers in the next 10 years. Its career services business is a cash cow with a defined growth profile.
Internet
Reuters Bloomberg
Market cap
2175.T 2175 JP
GS$819-m:J
3M average daily volume ¥698.3m (US$6.4m)
Productivity for home nurses: Kaipoke Japan's ageing society is putting a huge strain on healthcare infrastructure. A scarcity of hospital beds and of healthcare workers mean home care is often the preferred long-term solution. Kaipoke - a software platform which raises productivity for visiting nurses (IT and billing support) - is a second driver, growing 60% YoY last year with a 15% OPM. Packing more functionality at half the price, we expect margins to double over four years.
720,000 won- BUY I! SeE/"'1.! MA/IIA6Em8Jr HA:1 t.l£!=r ,s'OMEr!f!JtiG ON T!l£ /ABJ.E FoR J.//.1£ I,PO·~ IN VE..tro,e.{
45.0
35.0
25.0
15.0 ~~~~-------------
13lune 2016
Korea Technology
Reuters Bloomberg
035420.KS 035420 KS
Priced on 10 June 2016 Korea Kospi @ 2,017.6
722,000 /461,500 12M hi/lo won
12M price target 920,000 won :!::% potential +28%
Shares in issue 29.7m Free float (est.) 81.5%
Market cap US$20,276m
3M average daily volume 62.8bn won (US$54.0m)
Foreign s'holding 57.4%
Major shareholders Treasury 11.6% NPS 11.2%
5.0 -1----===F---..------.-----..-L i n e u p Dec 11 Dec 12 Dec 13 Dec 14 Dec 15 n
IPO reference value of 6.4tn lower than expected ~ Line officially announced its initial public offering (IPO) on the Tokyo i Stock Exchange (TSE) and New York Stock Exchange (NYSE) with its ~ official listing on 15 July. The reference price of 2,800 yen/share implies a -6 6.4tn won market cap. This is lower than 7-10tn won implied in Naver's a. current share price. We believe investors should buy Naver on the dip due i to the removal of IPO uncertainties, Line's strong fundamental outlo~k -::/' and Naver's domestic business could rerate to 13-15tn won. \._...;""'
Financials s:r I$ WAY AHEAA OF CON.JEIJSUS
Year to 31 December 14A 15A 16CL 17CL 18CL
Revenue (bn won) 2,757 3,254 3,974 4,809 5,641
Net profit (bn won) 451 519 831 1,225 1,516
EPS (won) 15,191 17,644 28,215 41,556 51,433
CL/consensus (29) (EPS%)~ 123 136 142
EPS growth (% YoY) (75.2) 16.1 y 59.9 47.3 23.81
PE (x) 47.4 40.8 25.5 17.3 14.0
Dividend yield (%} 0.1 0.2 0.5 0.9 1.4
FCF yield(%) 2.4 3.5 ~ 4.6 6.5 7.9
PB (x) 11.9 10.0 7.4 5.5 4.2
ROE(%) 27.6 26.5 33.4 36.4 33.8
Net debt/equity (%} (14.8) (6.4} (33.2} (53.6) (66.9)
Finally domestic business is also seeing an accelerated growth trend, driven by renewed growth in e-commerce business, mob1le d1splay ad inventory expansion and video advertising potential over the longer term.
Domestic business growth is accelerating
--Naver domestic ad revenue YoY
Get in Line; buy Naver on th~ dip Question marks aside on why management has allowed such a low initial valuation, we continue to believe investors should buy Naver on any dip due · to the removal of IPO overhang, Line's strong earnings growth outlook and Naver's domestic portal valuation gains to 13-lStn won highlighted in our recently published report Teleportai-Advo/ution. We will formally review our numbers with information from its prospectus. BUY.
! 2006 i 2007 2008 2012
,.,. Last Price 0.696M High on 03/10/14 0.853M Average 0.408M Low on 08/21/06 0.136M
2013 2014 2015 2016
0.6M
O.SM
0.4M
0.3M
0.2M
0.1M
----- Original Message -----From: JOHN SEAGRIM (CLSA UK)
"lt seems to me that the $88bn global gaming market is relatively under-analysed for its size and growth (projected midterm revenue cagr of 15), and that would be even more true for the faster expanding mobile segment {30% cagr), where Japan arguably leads the way. This is now an $8bn domestic market, and a topic addressed at our 2016 Tokyo Forum by independent gaming authority Or Serkan Toto. He has now summarised his thoughts in the Blue Book below, which is well worth looking through. The problem for investors is that mobile gaming is a verv crowded & competitive space- with over 700 new titles launched daily!- so controversiai.Nintendo is the only stock of significant size.
Or Toto is bullish about Nintendo and confident they will eventually succeed in mobile gaming, though as mentioned here before the better way to play that is via $3.3bn jv partner 2432 DeNA, which is more geared to future hit games and also offers a similarly super-strong balance sheet.
Analyst Jay Defibaugh's preferred name would be slightly smaller 3668 COLOPL, which has more th~n doubled its sales in the past 3 years and verv nearly doubled profits. On Jay's forecasts you're now paying 12x PER for strong double digit earnings growth, a 9% FCF yield and a strongly net cash b/s. With AOT of $26m, it's far from illiquid." Thanks CJ
1.1/V~ TO !}J..()£ lJOO/(
Jay Defibaugh Senior research analyst
Hundreds of thousands of · games worth billions of
dollars
Figure 1
(Mobile)as a new platform for gaming Gaming on mobile phones has been common since the 1990s. But the market in 2016 isn't what it used to be in 1997 when Nokia shipped the first phone preloaded with Snake, a simple game that let plqyers control a line which grows in length inside a bordered arena.
AI..L 6U~J /?JA21N6 NoW Today's smartphone games feature flashy 3D graphics, sophisticated design and online connectivity. Players can choose between hundreds of thousands of fast-paced action titles, complex strategy simulations, or casual puzzle games. The global mobile gaming industry is estimated to expand to US$37bn this year, according to market-research firm Newzoo.
Proj~ction for the _global gaming marke~ through 2019
PC gaming as a niche PCs contribute a sizable chunk to the game market worldwide, around US$32bn in 2016, according to Newzoo.
Japanese gamers view computers primarily as
work machines
While PC games continue to enjoy popularity on ~ global level, another reason for the dominance of mobile in Japan is the tendency of local gamers to view computers primarily as work machines. Most Japanese players associate the PC with niche genres like dating simulations and unpopular Western titles, such as MMORPGs (massively multiplayer online role-playing games) or firstperson shooters.
Few local developers in Japan focus on PCs
As a consequence, iconic computer game franchises like World of Warcraft, Starcraft or Counterstrike are largely unknown in Japan. To this day, there are hardly any local developers focusing on the PC platform. Based on industry statistics ,published in the Famitsu Game White Paper, it can be estimated that PCs contribute less than 10% to the overall game market.
IMAGE
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The number is a far cry from China, for example, where PC games are said to command over half of the market, according to Newzoo .
2012-2019 CHINESE GAMES MARKET •
$10.0Bn
2012
RANK
2
3
4
5
6
7
$18.0Bn
$13.8Bn
2013 2014
COUNTRY
China
United States of America
Japan
Germany
South Korea
United Kingdom
France
$24.4Bn $21.2Bn
2015 2016
POJ'UlATlON
1,383.837,000
324,432,000
126.427.000
80,754,000
50.555.000
65,173,000
64,725,000
• Mobi!o~t IS Other
$26.5Bn $27.7Bn
2017
INTERNE::T POPULATION
789,252.000
293,871,000
117,648,000
72,410,000
44.591.000
61,157,000
56.791.000
2018
$28.9Bn
2019
TOTAL REVENUES IN US DOLLARS
24.368,794,000
23,543,121,000
12,447,570,000
4,048,498,000
/ 4,047.335.000
3,895,103,000
2,734,468,000
Smairtphones create biggest game market ever
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Japanese smartphone game industry among largest,
most mature
Industry in Japan more competitive than ever
Challenges abound •••
Mobile gaming now dominates
m oBit.£
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Fun on the run Mobile gaming is conquering the world. Smartphones have spawned the biggest market for games ever, with thousands of developers serving billions of players. Years before Apple introduced the iPhone and apps infiltrated everyday life, Japan already had skin in the game. It was first to offer games as services that could be played on feature phones, over the internet, together with friends and for no initial charge - providing a blueprint for the rest of the world. But that world is changing and so must the blueprint. The massive disruption experienced in the Japanese console gaming market is a warning sign for the established console and PC develor:fers in the West.
At about US$8bn tod_ay, the Japanese smartphone game industry is one of the biggest and most mature globally. Console-game powerhouses like Nintendo or Sony lost their dominance at home in a matter of years to names like Mixi or GungHO, companies whose very first mobile games turned out to be superhits that have generated billions of dollars in revenue. Millions of Japanese . users are spending money on microtransactions inside apps. The..Q idea of paying US$60 upfront for boxed video games is becoming obsolete. r:cJ
The industry in Japan is more competitive than ever. Growth is slowing as consolidation begins. And as consumers become more demanding, developers are spending million-dollar budgets on titles that regularly flop. Users stick to their favourite games, causing permanent stagnation in the grossing charts.
Even in the smartphone era, Japan's mobile-gaming industry remains a "Galapagos", a space largely isolated from the rest of the world. Most aevelopers focus on the home market, operating distribution platforms and developing games with no thought of compatibility in other regions. However, competition is increasing as foreign studios enter the market with the hope of attracting high-spending local users. The industry is also in constant fear of regulation of monetisation techniques in response to public criticism.
_!aean's market for on line and console sam~---~· --~-~---~~···~··-~····"···· ....
• Special look at Line as platform and game provider <@f). Much like Gree and DeNA on the browser, messenger service operator Line is · L/11/£ doubling a5a gameamlPiatform provider on the native app side. Launched in 2011 as a bare-bones chat app by Naver Japan, the local subsidiary of Korea's largest internet portal provider, Line went on to become a superhit. Similar apps such as WhatsApp or Kakaotalk from Korea failed to catch on in Japan.
In July 2012, Line opened its gaming business, which is the biggest source of revenue today. In order to capture as many players as possible, most of the first wave of Line-connected games came from parent company NHN Entertainment and were very casual in nature.
--7- But fast forward to today, and Line is failing to maximise its potential as _a distribution channel for mobile games. As it turned out, Line Game was and IS
overcurated. There are currently fewer than 50 titles available worldwide, compared with the thousands of games on Korean rival Kakaotalk's platform.
Line is regularly forced to substantially purge its already limited game catalogue. In November 2015, for example, a total of nine unsuccessful titles were closed on a single day. At the moment, the only hit running on Line Game is Disney Tsum Tsum, a puzzle app that has been constantly charting high in the grossing rankings since its launch in 2014.
SEEMS 70 /lE .Srf2CI6 6 I.. I t1l tr
e Special look at Nintendo-DeNA as platform and game providers Alliance between DeNA Since its announcement in March 2015, the capital alliance between
and Nintendo since March DeNA and Nintendo has been subject to heated discussion and a wealth 2015
Nintendo waited for years before entering
mobile space
Nintendo handles "frontend", DeNA "back end"
Nintendo (7974 JP)
of speculation.
After all Nintendo, one of the world's most iconic game makers, waited for years before entering the mobile space. According to Nintendo's late president Satoru Iwata, he was first approached by his, counterpart at DeNA, Isao Moriyasu, as early as June 2010.
Nintendo handles the "front-end", providing the actual games, intellectual property and art, for example. DeNA focuses on "back-end" tasks such as infrastructure building, data analytics or quality assurance.
Nirite-l1Cio Co Ltd (7974 JP)
12M forward PE 12M forward PB
GICS sector GICS industry Last price 12M Hi/Lo CLSA target CLSA rec
Software and services Software
(x) 100.0
(x)
~ 2.8
/·7x ¥15,355 90.0 2.3
¥25,010 I ¥14,350 ¥14,000
80.0
70.0
60.0 1.8
Sell Analyst Jay Defibaugh Last model updated 26 May 2016 Mkt cap (US$m) 20,338 3M ADTO (US$m) 95.8 Free float(%) 67.2 Total stock return(%) (7.9)_
Partnership makes sense on paper
Execution of partnership disappointing so far
Much too early to count out Nintendo
50.0 1.3
40.0
30.0 0.8
Feb 12 Feb 13 Feb 14 Feb 15 Feb 16 Feb 12 Feb 13 Feb 14 Feb 15
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On paper, the partnership makes sense. DeNA has a long history of operating the back-end for millions of users, a field Nintendo in which has no experience. As all titles would be developed by Nintendo, DeNA's string of failed releases on the native game side is irrelevant under the partnership.
l)JtA-P/"0/1./r~ From the start, expectations were high. However, the execution of the partnership has been disappointing so far. Nintendo and DeNA delayed the launch of both the platform and first codeveloped app from 2015 to March 2016. In addition, the debut title was not starring Super Mario - it was not
even a game.
® However, it would be much too early to count out Nintendo, for a whole range of reasons. It is not so much about Nintendo's lP catalogue, which is arguably the richest of any developer and includes brands such as Super Mario, Pokempn, Zelda or Donkey Kong. The portfolio also covers essentially all genres, from action to RPGs.
Portable pioneer Nintendo ~ The company's craftsmanship, creativity and openness to innovation need to needed in mobile-gaming transfer to the mobile gaming arena. Nintendo has not invented mobile but
arena undoubtedly is the one company that popularised portable gaming worldwide.
DeNA (2432 JP)
The Game & Watch handhelds Nintendo started producing in 1980 were followed by such iconic devices as the Game Boy or the DS series.
GICS industry Software Last price ¥2,450 12M Hi/Lo ¥2,718 I ¥1,724 CLSA target ¥3,400 CLSA rec Buy Analyst Jay Defibaugh Last model updated 28 Apr 2016 Mkt cap (US$ m) 2,892 3M ADTO (US$m) 23.1 Free float ( 0/o) 36.6 Total stock return (Ofo) 39.9
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CLSA lay Defibaugh jay .defibaugh@clsa .corn +81 3 4578 8040
Playing key roles Final Fantasy, Deus Ex underlie bright outlook
Dec 15
n ::r m :I ea
As noted in our CLSA U Blue Book Fun on the run, Square Enix offers an tD
attractive balance of blockbuster console games and popular mobile-app 3" game~. Both businesses benefit from Square Enix's structural advantage i .a of owning two of the most popular role-playing franchises, Final Fantasy ~ and Dragon Quest. We introduce our quarterly forecasts with this report.
"a In 2QFY3/17, the long-awaited Final Fantasy XV (30 September) and ~· Deus Ex: Mankind Divided (23 August) are slated for release. We lift our tD
target for Square Enix from ¥3,900 to ¥4,600 and remain BUYers.
Ill PI.AYER IN 2oiS Tool( HoME Us/zm f~:,~':J::fWE~.~J Esports possible new
engine for growth
Esports The game industry in Japan and elsewhere is betting on a relatively new phenomenon as a possible new engine for growth. Esports, a form of sports where professional garners play video games in competition with others, is an ecosystem by itself.
It includes elements such as:
o Game developers,
~-- o Teams consisting of professional players,
o National and international leagues,
o Organisers of tournaments,
o Platforms (to broadcast matches online) and
o Sponsors.
Poised to grow to Competitive gaming as its own market is likely to grow from US$325m US$1.1bn in 2019 2015 to US$1.1bn in 2019 worldwide, according to Newzoo.
,p .I The 1 0 highest-paid professional garners in the world LUCY ENGLAND TECH
lt may sound too good to be true, but people actually do play video games for a living. And they make an absolute killing.
e-Sports Earnings has ranked the 100 players with the highest overall earnings from competitive gaming. Over 100 garners have earned more than $250,000 in prize money alone, without counting the sponsorship deals and income that many of these players receive from streaming their practice games on services like Twitch.
But they pale in comparison to the top 10 players, who have earned more than $10 million for their gaming prowess alone.
10. Zhang "Mu" Pang- $1,193,811.11 from 37 tournaments -China's Zhang Mu Pang plays Valve's "Data 2," which started out as a battle arena "Wi:ucraft" mod called "Defense of the Ancients." He also used to play "DatA: Allstars."
9. Wang 'SanSheng' Zhaohui- $1,205,274.33 from 45 tournaments- Zhaohui is another Chinese "Data 2" player who used to play "DotA: Allstars." He was much more successful last year, bringing in $1,112,280.99 to this year's $377,286 in winnings.
8. Jiao 'Banana' Wang- $1,211,250.16 from 42 tournaments- Operating under the Player ID "Banana," China's Jiao only made around $25,000 from five tournaments in 2015 so far, but won $1,112,280 last year. He plays "Data 2," and used to play "DotA: Allstars."
7. Chen 'Hao' Zhihao- $1,562,946.23 from 47 tournaments- China's Chen used to be a "DatA: Allstars" player, and now plays Data 2 for team Newbee. According to his bio, he has been nicknamed General Hao by the Chinese community, is known to be one of the most aggressive players in the scene.
6. Sumail Hassan- $1,640,777.34 from 8 tournaments - Hassan is a Pakistani "Data 2" player, and only started playing professionally this year at just 15. Now 16, he's already won three tournaments.
5. Zhang "xioa8" Ning - $1 ,662,202. 73 from 44 tournaments - Ning captains team Newbee, which won the "Data 2" Tl4 Grand Finals in Seattle last year. His team includes Zhang "Mu" Pang, Wang "SanSheng" Zhaohui, Jiao "Banana" Wang and Chen "Hao" Zhihao.
4. Clinton "Fear" Loomis- $1,735,983.84 from 44 tournaments- American gamer Loomis plays "Data 2" on the Evil Geniuses team, and made $1,326,932.14 from this year's The International -the biggest "Data 2" tournament in the world.
3. Kurtis "Aui_2000" Ling- $1,881,147.04 from 47 tournaments- Ling is a Canadian "Data 2" player. At just 22, he's the second youngest in e-Sports earning's top ten.
2. Peter "ppd" Dager- $1 ,961,183.29 from 33 tournaments.
1. Saahil "UNIVeRsE" Arora - $1 ,964,038.64 from 39 tournaments - Arora is an American "Data 2" player who came first with Loomis and the Evil Geniuses this year in The International 2015. He took home a whopping $1,326,932.14 from
the tournament. l AN6 ~£ rEAM £/JRNI/116lj
-------------------------------,
The 10 highest earning eSports teams of 2015 Make no mistake, 2015 ~as a record year for eSports in almost every aspect. Viewing figure records have been smashed on multiple occasions, investment in teams has hit an all-time high and perhaps most importantly prize pools have skyrocketed. Again.
In August, the International 5 became the biggest eSports prize pool in history with $18,429,613 to divvy up, most pooled from crowdfunding. The Dota Asia Championships and the Frankfurt Major both gave away around $3 million and Smite's World Championships became the biggest ever non-Dota 2 event with $2,612,259.00 in prize money. Of course somebody has to win all this money, so let's take a look at which organisations have performed the most in 2015, according to esportsearnings.com.
10. Cloud9- $1,461,315.12
9. SK Telecom T1- $1,531,484.02
8. EHOME - $1,565,688.11
7. COGnitive Gaming- $1,768,958.39
6. Virtus.Pro- $2,131,185.40
5. Team Secret - $2,231,114.09
4. Vici Gaming- $2,581,954.91
3. LGD Gaming $3,045,517.23
2. CDEC Gaming - $3,229,600.78
1. Evil Geniuses - $8,952,675.05 "We're very worried that John's homework has <> /WJRE rH lVI rHE started to interfere with his computer gaming." SAJ..Ail.1 CA~ tJF A /lfl.tT!!/IJ..IA-1<1 R.VJ..EJ Ru;rPA.t.J.. "TEA/11
Here's the crazy training schedule of young guys who make a huge salary playing video ·games
WHAT fJ (cMP) t..IF£ rJ-/QI/6ll HARruSONJACOBSTECH
Ruiz's two Korean teammates, Chae "Piglet" Gwan-jin and Kim "Fenix" Jae-hun, are notorious for pushing the physical boundaries for how much a person can practice. They often sleep only four hours a night and practice between 12 and 14 hours per day.
Their regimen is more extreme than most North American players, but it's common for those from Korea, the epicenter of competitive gaming.
For a time, this past season, the Korean players' schedule worried other players on the team, who felt their intense schedule was making them less effective.
"[Chae and Kim] don't stop practicing. They are crazy like that," says Team Liquid teammate Alex "Xpecial" Chu, a 22-year-old California native who has played in the pro leagues for four years.
He says his Korean colleagues practice "25 hours a day," but the two Korean teammates have their reasons for trying to practice harder than everybody else.
"If someone [in the US] plays 30 games a week- that's just a random number- a Korean would play 70-80 games. Take that difference over a week, over a month, over years, and that's going to be a huge difference," Chae told Business Insider, through a translator.
From: Philip Utsch, CLSA Sent: Thursday, June 16, 2016 2:04AM
AECG:
I could not make this up if I tried ..... truth is stranger than fiction ..... .
Chinese borrowers told to post nude photos as collateral 2016-06-15 17:44:14.546 GMT
By Lucy Hornby in Beijing
(Financial Times) -- Chinese loan sharks are demanding nude photos as collateral from female borrowers which can be used for blackmail if they fall behind on their repayments.
The aggressive tactics are an example of the drastic debt recovery measures that are being employed in the slowing Chinese economy.
The democratisation of finance in China via peer-to-peer lenders and the vast shadow banking system, with interest rates sometimes topping 30 per cent, have proved an inflammatory mix and fuelled a surge in souring loans.
Female college students in the southern province of Guangdong were told to hand over naked photos of themselves holding their ID cards, with lenders threatening to make them public if they failed to repay their microloans, according to the Nandu Daily, the local newspaper.
The market is unsettled by SHKP's offer of a 120% mortgage for its Yuen Long project, Park YOHO. Are Hong Kong developers having to take on a huge amount of potential non-performing loan in order to shift just some inventory?
The answer is no. This is gimmick. Strictly gimmick. I will explain the key tricks of the mortgage offer.
First, to get the 120% mortgage, you need to be someone who has an existing property that is worth no less than 60% of the value of the Park YOHO unit you plan to buy. So what SHKP is offering is effectively, a chance to remortgage. But who would want to remortgage their first property in this sort of market, where return on cash is so low? The 120°/o mortgage is designed to advertise!
Second, SHKP also offers a 90% LTV ratio mortgage but only for "designated customers". The small prints explain "designated customers": "customers who are registered with relevant professional bodies in Hong Kong as architect, accountant, surveyor, veterinarian, dentist, doctor, registered nurse, actuary, lawyer, Chartered Financial Analyst, airline pilot, staff of Hospital Authority of Hong Kong (with salary at Hospital Authority General Pay Scale Point 34 (33A) or above) or civil servants of the government of HKSAR (with salary at Civil Services Master Pay Scale Point 34 (33A) or above)."
People with CFA like people in our industry will qualify but the next question is, how many will actually be interested? below is a map showing where the project is. I am afraid middle-of-no-where may be a pretty precise description of the project, being 3km from both side of the nearest train station. And reportedly, because of the "wilderness" surrounding it, the area has one of the highest "mosquito count" of Hong Kong. The Kam Tin River in front, which is a little polluted, does not really help.
So it is understandable why the developer feel this is a project that needs some waves to get sailing.
r · su/lROUNbU ey D~·PISTE mitTS CLSA Thai strategy
( CIUI'IBO.!JIA,L.AOJ, PIYAH~ V/ Er) Market outlook
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The SET forward PE multiple has rerated to 13.6x this year, above its fiveyear average of lli· While the outperformanCeTsimpressive, we believe it is unsustainable. Continued earnings downgrades, resumed US rate-hike expectations and richer multiples than Asian peers point to volatility and sideways performance until the public-infrastructure-project bidding and private-sector activities gain momentum.
Imminent downside S t<eY P!(aBJ..Ehi.S As powerful tailwinds subside, near-term downside appears unavoidable. The main problems are continued export weakness, a muted private response to fiscal-stimulus measures, delays in large public-infrastructure-project bidding, challenging farm income and ineffective monetary policy.
Brighter long-term outlook 2.ol? EI..EC...17 ot>J ? Despite the short-term difficulties, long-term growth potential remains promising. A positive referendum result could allow the government to put the draft charter to work, leading to a general election next year. Continued commitment to public infrastructure spending to offset weak private demand, and tax incentives to promote private-investment could be added boosters.
Eclectic approach We maintain our year-end SET target at 1,550 (1.84x, the five-year historical average forward PB) but expect imminent market volatility. For stockpicking, we adopt an eclectic approach, picking a cheap beta bank, Kasikornbank; select consumer names CP All and MC; a Chinese tourism play, Asia Airways; and public infra bidders Siam Cement and Unique E&C. We· would SELL commodities and names with weak business models: Banpu, PTTEP, Robinson Department Store and Thai Airways.
• Last Price 1419.25 High on 01/03/94 1682.85 Average 842.00 Low on 09/14/98 211.34
Strategy's top picks We apply the Z-score approach to our strategy theme: consumer, Chinese tourists and public-infrastructure bidding. Our BUY list includes KBank, CP All, MC Group, Asia Aviation, Siam Cement and Unique E&C.
Our SELL list focuses on commodity-related names and those with weak business models that have had a good share-price rally this year, namely: Banpu, PTTEP, Robinson Department Store and Thai Airways.
Kasikornbank (KBANK TB -Target Bt215 - TSR 29% - BUY) We maintain KBank as a top pick because Thai banks are one of the cycle's cheapest sectors in this cycle based on the Z-score screen. It is trading around -l.sd to its historical average PB, reflecting that the NPL situation has been largely priced in. Its fee income is also solid as an earnings source, while its loan business remains challenging.
Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 Jun 11 Jun 12 Jun 13 Jun 14 Jun 15 Jun 16 2.0
{JJ CP All is the strongest franchised chain grocery
operator in Thailand
14A 15A 16CL 17CL 18CL
CP All (CPALL TB - Target Bt60 - TSR 26% - BUY) Our top consumer name based on its strong franchise and dominant new outlet rollouts and plans. CP All's same-store-sales (SSS) growth has gradually improved, as has its gross margin, despite the weak economy.
AN.I> rHE Interest expense will start declining from this year thanks to debt repayment.
6 11.. t..tl/e6EST CoNSUME~ Sro~ IN AliA EX-.rA/>A/11 0/'1 ENrERP~I~ VAt.VE Largest Asia ex-Japan Consumer stock Enterprise Values
Core EPS P/E Dividend Ent Bloomberg Mkt Cap growth (Core) P/8 yield Gearing Value
ticker Company Name Country CLSA Sector (USDm) 2016 2016 2016 2016 2016 2016
ITC IB ITC India Consumer 42,260 2.3 28.7 8.6 2.4 (51.5) 39,048 HMSP 1J HM Sampoerna Indonesia Consumer 33,465 11.6 38.5 13.4 2.3 (17.0) 32,990 HUVR IB Hindustan Unilever India Consumer 28,271 5.1 46.4 47.1 1.8 (130.0) 27,406 UNVR IJ Unileverindo Indonesia Consumer 24,678 13.0 49.6 58.7 1.8 0.6 24,680
@ 090430 KS Amorepacific Korea Consumer 21,051 34.3 37.5 6.9 0.4 (20.1) 23,818 CPALL TB CPAII Thailand Consumer 12,295 13.0 28.0 9.7 1.8 298.8 16,582 051900 KS LG H&H Korea Consumer 14,237 29.0 30.1 6.7 0.6 21.8 15,778 288 HK WH Group China Consumer 11,286 5.5 13.3 1.8 2.3 27.7 14,536 APNT IS Asian Paints India Consumer 14,215 25.1 53.5 17.0 0.8 (36.8) 13,853 023530 KS Lotte Shopping Korea Consumer 5,999 nm 14.9 0.4 0.9 57.8 13,104
MC Group (MC TB- Target Bt17.6 - TSR 48% - BUY) MC is a cheap way
to play an upcountry spending recovery
Key product Me jeans has nearly a 40% market share of Thailand's branded jeans market. MC has enjoyed a SSS growth recovery, selling to its own outlets and has started slashing inventory to more conservative levels. It is trading at 10.3x 17CL PE, providing inexpensive exposure to an upcountry spending recovery.
Siam Cement (SCC TB- Target Bt585- TSR 25% -BUY) ®/YORE Siam Cement has done well in its petrochemical business with falling oil prices and resilient Asian petrochemical demand having driven ethylene spreads to a cycle high. Next we expect Siam Cement to catch up on its cement sales when infrastructure projects begin. It is also a long-term Asean infrastructure play, given its presence in the region.
Unique E&C (UNIQ TB -Target Bt22.50 - TSR 34% - BUY) As one of the top-four Thai contractors with expertise in large transport infrastructure projects, Unique E&C is ready to benefit from related ongoing project bidding over the coming years.
1 High-Conviction BUV. ~
Asia Aviation (AAV TB- Target Bt7.40 - TSR 25% - BUY) We view Asia Aviation as an inexpensive play on sustained Chinese tourist growth, instead of richly valued Airports of Thailand or other listed hotel names that operate mainly in luxury-hotel segment.
Banpu (BANPU TB- Target Bt10.20 - TSR -12% - SELL) Banpu has suffered from falling coal prices over the past year and recently raised capital to invest in a US shale-gas project and other power business instead of paying down debts. It is still exposed to high debt and would suffer if the coal price corrects again along with other commodities if the US-dollar resumes its appreciation with the US policy-rate hike.
PTTEP (PTTEP TB- Target Bt57- TSR -31%- SELL) PTTEP will ~in the near term reversing the recent rally if oil prices drop following the June Opec meeting, as there is no progress on production control. Also it still faces long-term challenge on reserves and the changing regulatory regime in Thailand's O&G exploration and production.
Robinson DS (ROBINS TB- Target Bt48- TSR -19%- SELL) While seeing its business recover, Robinson Department Store has enjoyed an impressive 35% YTD share-price rally, thanks partly to inclusion in the MSCI Thailand. However, the format is facing a fragile near-term upcountry income recovery and long-term e-commerce threat.
Thai Airways (THAI TB - Target Bt8 - TSR -53% - SELL) Thai Airways will enjoy its first profit this year after three consecutive years of losses. However, the share price has nearly doubled year-to-date, ignoring its unsustainably high net-debt-to-equity of 4x and a possible capital call.
ticker Company Name Country CLSA Sector (USDm) 2016 2016 2016 2016 2016 2016
1848 HK Calc China Financial Services 610 49.2 8.0 1.8 4.4 (83.9) 902.9 SYDAU Sydney Airport Australia Transport 11,668 5.6 53.3 16.3 4.2 2.4 837.2 ADANI IB Adani Power India Power 1,479 nm (14.0) 1.6 0.0 (49.7) 754.0
TBIG IJ Tower Bersama Indonesia Telecoms 2,390 17.0 20.4 10.8 0.4 (1.1) 655.4
ASTRO MK Astro Malaysia Media 3,625 18.4 24.0 -.24.5 4.2 8.6 618.4
DMPL PM Del Monte Pacific Philippines Consumer 490 26.3 6.2 1.0 4.9 (12.1) 493.9
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