Emerging Market Stock Pick Tear Sheets (May 15-28, 2023)

Airtel Africa, OCBC, DBS, UOB, PKO, Pekao, PZU, Investec Group, Americana Restaurants, GeoPark, Vista Energy, Gran Tierra Energy, Frontera Energy, CGX Energy and more emerging market stock picks.

May 28, 2023

This post is a compilation of links and briefs for our short EM Stock Pick Tear Sheets (separate section) for the the last two weeks covering emerging market stock picks for Africa (LSE listed stocks), Latin America (mostly Canada based oil stocks with Toronto or NYSE listings), Malaysia (a well regarded bank), Mexico (a NAFTA-nearshoring play), the Middle East (a huge restaurant operator), Poland (financial services stocks), and Singapore (big 3 banks).

We also have short threads covering the annual rankings list for the safest banks in the world and an EV battery maker market share chart and linked stock list (covering China, Japan & South Korea EV stocks)

The Financial Times recently noted how Singapore’s big 3 banks have been breaking earnings record after record as Hong Kong wanes and money continues to flow to the city-state:

Singapore: foreign billionaires drive record profits for banks (FT) (New money inflows should benefit wealth management services which sprawl from banks into niche funds and family offices)

Both Hong Kong and Singapore have been historically important as places to ~~launder~~ “store” capital. Just don’t ask where the stored capital comes from…

As Joe Studwell wrote in Asian Godfathers: Money and Power in Hong Kong and Southeast Asia (emphasis mine):

The regional offshore roles of Hong Kong and Singapore have been absolute constants since their founding, and show no sign of change. In the aftermath of the Asian financial crisis Michael Chambers, head of research in Indonesia for Credit Lyonnais Securities Asia (CLSA), estimated – based on information from banking sources – that some US$200 billion of Indonesian capital was sitting in Singaporean banks.⁵⁸ That compared with an Indonesian GDP of US$350 billion. Some money in city state banks is legitimate expatriated capital and some is ill-gotten gains; Hong Kong and Singapore show little interest in separating the two. Indeed, in recent years, as the European Union finally brought pressure to bear on Switzerland and other European private banking centres to block tax evasion and introduce withholding tax for some non-nationals, Singapore moved to fill a global – as well as its regional – niche. The city increased account secrecy provisions and changed trust laws in a manner designed to attract the kind of money Switzerland had dealt in; the number of foreign private banks in Singapore almost doubled between 2000 and 2006.⁵⁹ After Singapore hosted an IMF conference in September 2006, there was a rare and highly entertaining insight into how some – normally reticent – investment bankers really view the island state. Exasperated by the ‘nauseating pleasantries’ of the conference and a dinner with prime minister Lee Hsien Loong at which foreigners ‘fawned [over] him like a prince’, Morgan Stanley’s chief economist in Asia, Andy Xie, fired off a missive to colleagues [Andy Xie's e-mail on Singapore]. People at the meeting, he said, ‘were competing with each other to praise Singapore as the success story of globalization … Actually, Singapore’s success came mostly from being the money laundering centre for corrupt Indonesian businessmen and government officials … To sustain its economy, Singapore is building casinos to attract corruption money from China.’ When the email was leaked, a flustered Morgan Stanley spokeswoman said its content was ‘aimed at stimulating internal debate’ in the firm; Mr Xie resigned.⁶⁰[Morgan Stanley's Xie Quit After Singapore E-Mail]

Meanwhile, Poland is often overlooked by investors as it’s economy is overshadowed by neighboring Germany’s. Nevertheless, the country has some of the largest and strongest banks or financial services players in Central and Eastern Europe.

However, two of the Polish bank or insurance stocks in our tear sheets do have subsidiaries in Ukraine (albeit they are only a small part of their business). Poland is also experiencing an influx of Ukrainian refugees while sanctions intended to hurt Russia are boomeranging back and hurting Eastern European countries even more (see: PKN Orlen (WSE: PKN / FRA: PKY1): Russian Oil Sanctions Bite But Looks to Expand in Germany Plus Pays Record Dividends). Nevertheless, one bank we profiled expects a Polish slowdown, but no local recession for the country.

Finally and as with banks, now may or may not be the right time in the oil price cycle to get into oil stocks. Nevertheless and despite all the EV battery and “clean” energy hype, oil and other “dirty” fossil fuels are NOT going away any time soon. After all, windmills and solar panels are NOT going to power all those new EVs.

The WSJ recently mentioned some smaller oil stocks in an article (As Oil Giants Retreat Globally, Smaller Players Rush In) about how the oil majors are still developing a handful of big oil and gas fields in Latin America. But increasingly, it is smaller, little-known oil firms who are moving into risky lesser explored regions and getting the fossil fuels out of the ground. These smaller oil players have lower costs and can quickly recoup their investment before the next oil price downturn.

And since they are lesser known (e.g. their names are not on gas stations), they are less subject to the types of green or human rights activist campaigns or scrutiny the better known oil majors would be subjected to when operating in more dicey environments like Colombia that are not good for ESG scores.

EM Stock Pick Tear Sheets Region/Country TAGS

Africa, Argentina, Chile, China, Colombia, Eastern Europe, Guyana, Hong Kong, India, Japan, Latin America, Macau, Malaysia, Mexico, Middle East, Nigeria, Poland, Singapore, South Africa, Southeast Asia, South Korea, Turkey & United Arab Emirates (UAE)

EM Stock Pick Tear Sheets Sector TAGS

Alcohol Stocks, AI Stocks, Auto Stocks, Bank Stocks, Battery Stocks, Casino Stocks, Consumer Stocks, Financial Services Stocks, Food & Beverage Stocks, Gaming Stocks, Health Care Stocks, Industrial Stocks, Insurance Stocks, IT Services Stocks, Meme Stocks, Oil Stocks, Property Developer Stocks, Real Estate Stocks, REITs, Restaurant Stocks, Retail Stocks, Tech Stocks & Telco Stocks

PAYWALLED

NON-PAYWALLED

(NOTE: Forward P/Es and dividend yields are from the time of publishing and have likely changed while charts are from Friday, MAY 26th):

Airtel Africa (LON: AAF / FRA: 9AA / OTCMKTS: AAFRF): A Telco Who's Performance Rides on Oil Prices

Airtel Africa (LON: AAF / FRA: 9AA / OTCMKTS: AAFRF) is a UK-based MNC providing telecommunications and mobile money services in 14 African countries. The Financial Times has recently noted how much oil prices matter to the Company’s performance (Nigeria accounts for about 40% of revenues and ebitda) as cell phone towers in Africa tend to run on diesel generators: Airtel Africa: weak oil creates cheap telecoms play on Nigeria (FT) (Stock price fall belies a brightening outlook)

P/E (Google Finance): 8.12 / Forward P/E (Yahoo! Finance): 5.84
Dividend Yield (Google Finance): 3.81% / Forward Dividend & Yield (Yahoo! Finance): 3.80%

World's Safest Banks Rankings & List (From Late 2022)

Global Finance’s annual ranking of the World’s Safest Banks (From November 2022) shows “the finance sector has recovered better than many economies, and looks set to prosper in recovery” (Also see our growing list of Bank Stock tear sheets)

OCBC Bank (SGX: O39 / FRA: OCBA / OCBB / OTCMKTS: OVCHY): Record Profits as Money Flows to Singapore

Oversea-Chinese Banking Corp (SGX: O39 / FRA: OCBA / FRA: OCBB / OTCMKTS: OVCHY) is one of the largest banks in SE Asia and has consistently ranked highly as one of the "safest banks in the world."

P/E (Google Finance): 9.58 / Forward P/E (Yahoo! Finance): 8.07
Dividend Yield (Google Finance): 5.61% / Forward Dividend & Yield (Yahoo! Finance): 6.53%

DBS Group (SGX: D05 / FRA: DEVL / DEV / OTCMKTS: DBSDY / DBSDF): Record Earnings But Profit Margins From Higher Rates Have Peaked

Singapore headquartered DBS Group (SGX: D05 / FRA: DEVL / DEV / OTCMKTS: DBSDY / DBSDF) operates in the three key Asian axes of growth (Greater China, Southeast Asia and South Asia) and it’s credit ratings are among the highest in the world.

P/E (Google Finance): 9.66 / Forward P/E (Yahoo! Finance): 8.70
Dividend Yield (Google Finance): 5.12% / Forward Dividend & Yield (Yahoo! Finance): 5.50%

United Overseas Bank (SGX: U11 / FRA: UOB / UOB0 / OTCMKTS: UOVEY / UOVEF): Betting on ASEAN Growth With 2M New Citibank Clients

Singapore headquartered United Overseas Bank (SGX: U11 / FRA: UOB / UOB0 / OTCMKTS: UOVEY / UOVEF) is rated as one of the world's top banks with 500 branches and offices across 19 countries in Asia Pacific, Europe and North America. In addition, UOB Bank has already completed the integration of their acquisition of Citibank’s retail business (2 million clients) in Thailand, Malaysia and Vietnam and will complete Indonesia by the end of this year.

P/E (Google Finance): 10.35 / Forward P/E (Yahoo! Finance): 9.38
Dividend Yield (Google Finance): 4.87% / Forward Dividend & Yield (Yahoo! Finance): 5.46%

EV Battery Maker Market Share Chart & Stock List (China, Japan & South Korea Stocks)

Chinese battery makers are becoming increasingly competitive in overseas markets, in the first quarter cornering nearly 30% of the traditional stronghold of South Korean and Japanese rivals.

GeoPark Ltd (NYSE: GPRK): Positioned for a Latin American Oil Boom

Colombia based GeoPark Ltd (NYSE: GPRK / LON: 0MDP / FRA: G6O) is a leading independent Latin American oil and gas explorer, operator and consolidator with exceptional assets across Colombia, Ecuador, Chile and Brazil plus a track record of operational growth. However, GeoPark’s two founders had a messy falling out in 2021 with the ousted Chairman and Company making various claims or statements about each other.

P/E (Google Finance): 2.73 / Forward P/E (Yahoo! Finance): 2.66
Dividend Yield (Google Finance): 5.16% / Forward Dividend & Yield (Yahoo! Finance): 4.93%

Vista Energy (NYSE: VIST): Has the Largest Shale Oil and Gas Play Under Development Outside North America

Mexico based Vista Energy (NYSE: VIST / FRA: 1CIA / BMV: VISTAA)’s main asset in Argentina is the largest shale oil and shale gas play under development outside North America. Shares have risen from the $3 level in 2021 to the $20 level as of May 2023.

P/E (Google Finance): n/a / Forward P/E (Finviz): 4.70 / Forward P/E (Yahoo! Finance): 4.90
Dividend Yield (Google Finance): n/a / Dividend Yield (Finviz): n/a / Forward Dividend & Yield (Yahoo! Finance): n/a

Gran Tierra Energy (NYSE: GTE): Still Has Plenty of Exploration Opportunities in Colombia and Ecuador

Calgary based Gran Tierra Energy (TSX: GTE / NYSE: GTE / LSE: GTE) is an independent international exploration and production company with onshore oil production focused in Colombia and Ecuador. Recent earnings and concerns about risk in Colombia have sent share prices downward, but the Company has plenty of long term development opportunities and is focused on using technology to get every last drop of oil.

P/E (Google Finance): 17.10 / Forward P/E (Finviz): 16.06 / Forward P/E (Yahoo! Finance): 2.31
Dividend Yield (Google Finance): n/a / Dividend (Finviz): n/a / Forward Dividend & Yield (Yahoo! Finance): n/a

Frontera Energy (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF): Hit By Colombia Unrest But Sees Coming Profitability and Operational Improvements

Canada based Frontera Energy Corporation (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF) is focused on oil and natural gas (plus related investments) in Colombia, Ecuador, and Guyana. Recent unrest in parts of Colombia where the Company operates has impacted some operations or exploration efforts there. However, recent Guyana exploration efforts could be promising as the country has vast natural resources (forestry, mining and oil and gas) - albeit it’s uncertain whether the Company’s recent discoveries there are commercially viable.

P/E (Google Finance): 4.07 / Forward P/E (Yahoo! Finance): 7.70
Dividend Yield (Google Finance): n/a / Forward Dividend & Yield (Yahoo! Finance): n/a

CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF): A Speculative Guyana Oil Small Cap Stock

Toronto based CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF) is focused on the exploration of oil in the Guyana-Suriname Basin and the development of a deep-water port in Berbice, Guyana. However and despite having an oil joint venture with larger Canadian group Frontera Energy Corporation (TSE: FEC / FRA: 3PY3 / OTCMKTS: FECCF), CGX Energy would be a highly speculative a small cap stock with considerable “going concern” uncertainty.

Nevertheless, Guyana has vast natural resources (forestry, mining and oil and gas) and is the only English speaking country in South America with a legal system based on English common law and its corporate system based on the Canada Business Corporations Act. Since 2015, oil companies operating off its coast have found more than 10 billion barrels of recoverable oil and gas - a tenth of the world's conventional discoveries (Guyana Is Becoming A Top-Tier Oil Producer and Factbox: Offshore discoveries turn tiny Guyana into oil hotspot).

P/E (Google Finance): n/a / Trailing P/E (Yahoo! Finance): 5.95 (no forward P/E)
Dividend Yield (Google Finance): n/a / Forward Dividend & Yield (Yahoo! Finance): n/a

Emerging Market Skeptic

Discussion about this post