Emerging Market Links + The Week Ahead (May 29, 2023)
Macau & Macau casino stocks have upside, South Korea as a stealth EV winner, Saudi banks are safe, Turkey’s election in charts, various EM stock picks and the week ahead for emerging markets.
Macau looks like it will recover much faster than China while Macau casino stocks could soon start paying juicy dividends again. Note that Las Vegas and Singapore casinos were open much sooner than their Macau counterparts.
South Korea could also be a stealth winner for EVs and EV batteries as it becomes a China alternative. The country already has three global battery makers while Hyundai and Kia already have successful EV brands.
Finally, in addition to our Emerging Market Stock Pick Tear Sheets (May 15-28, 2023) for the last two weeks, we have a number of other potentially interesting stock picks from other sources.
Emerging Market Stock Pick Tear Sheets
$ = behind a paywall
PKO Bank Polski (WSE: PKO / FRA: P9O): Poland's Largest Bank That Also Owns a Bank in Ukraine $
Pekao (WSE: PEO / FRA: BP1): Poland's Second Largest Bank Positioned for a Polish Growth Slowdown $
PZU (WSE: PZU / FRA: 7PZ / FRA: 7PZ0): Poland and the CEE's Largest Financial Conglomerate $
GeoPark Ltd (NYSE: GPRK): Positioned for a Latin American Oil Boom
CGX Energy (CVE: OYL / FRA: GXCN / OTCMKTS: CGXEF): A Speculative Guyana Oil Small Cap Stock Improvements
Emerging Market Stock Picks / Stock Research
$ = behind a paywall
SJM Holdings Ltd: Large Refi of Debt Buys Time for Grand Lisboa Palace to Prove Its US$3b Cost (Smart Karma) $
See our Macau ADRs list.
Legacy concessionaire SJM Holdings (HKG: 0880 / FRA: 3MG1 / KRX: 025530 / OTCMKTS: SJMHF / SJMHY) needs a strong performance from its Cotai flagship to create positive cash flow to service debt and keep gains in mass market share.
The company has closed 5 satellite casinos, a move that indicates a shift in strategic goals aimed at building out from its two IRs.
Thus far, SJM has not fully participated in the early Macau recovery cycle to make it a BUY but it needs to build on its 81% of mass revenue.
Dickson Concepts 113 HK: Straight From The Ben Graham Stable, >40% Discount to NCAV (Smart Karma) $
Dickson Concepts (International) (HKG: 0113 / OTCMKTS: DCOHF), an HK distributor of luxury goods, is a classic example of a Graham net-net with a [greater than] 40% discount to NCAV (Net Current Asset Value).
The company has 4.7 bn HKD of cash against total liabilities of 2.3 bn HKD (on a market cap of 1.6 bn HKD), thus representing deep value.
With an economic environment in HK for retail sales improving + an existing 8% dividend yield, we could make a case for higher dividend payments.
Consun Pharmaceutical (1681.HK) - Undervalued. Good Performance Growth Will Continue (Smart Karma) $
NOTE: Consun Pharmaceutical Group (HKG: 1681 / FRA: C1P / OTCMKTS: CPHGF), an investment holding company, researches and develops, manufactures, and sells Chinese medicines and medical contrast medium products in China. The company operates through two segments, Consun Pharmaceutical and Yulin Pharmaceutical.
Despite unfriendly external environment in 2022, Consun Pharmaceutical (1681 HK) still achieved stable performance growth. The Company has maintained a consistently high level of dividend payout, which is commendable.
The rapid sales expansion of commercialized products has laid the foundation for the high-quality growth of Consun, and the continuously improving profitability further confirms its growth certainty.
Based on the current market value, we think Consun is undervalued considering its RMB3 billion cash balance by 2022. It is expected to usher in valuation repair in the future.
Wistron Corp: Valuations Stretched After a 96% Share Price Climb in 6 Months (Smart Karma) $
NOTE: Wistron Corp (TPE: 3231) is one of the world's largest suppliers of information and communications products.
Wistron Corp's share price is up 96% in the past six months. Despite its outstanding results, a lot of the positives have already been reflected in its share price.
We think a more likely scenario for the stock is to undergo a period of share price consolidation in the next several months.
Its valuations also appear stretched, especially in terms of P/E and P/B valuation multiples as compared to their historical valuation multiples.
Classys (214150 KS): Strong 1Q23 Result Lifted by Overseas Performance and Consumables Sales (Smart Karma) $
NOTE: Classys Inc (KOSDAQ: 214150) has established a strong global presence in medical aesthetics technologies - something Korea is known for.
Classys (214150 KS) reported solid performance in 1Q23, with double-digit revenue growth, driven by expansion of domestic consumables sales for Shrink Universe and growth in overseas device and consumables sales.
Operating profit increased 19% YoY to KRW 19.9 billion, leading to 380 basis point margin expansion to 51%. Net profit increased 46% YoY to KRW 18.8 billion.
Classys continues to strengthen its competitiveness through product line and geography expansion. The company has reiterated 2023 revenue guidance of KRW170 billion, representing year-over-year increase of 20%.
Major Cineplex update (MAJOR TB) (Asia Century Stocks) $
COVID-19 earnings recovery on track, with the election unlikely to impact the business much.
Major Cineplex (BKK: MAJOR / MAJOR-F / FRA: MJG1) is the market leader in Thailand’s cinema industry, with 815 screens under management and a market share close to 70%. The company is run by a hungry entrepreneur called Vicha Poolvaraluck, who built it from scratch. Historically, the company has earned a return on equity of close to 20%.
Major Cineplex’s share price was mostly steady throughout 2021 and 2022. In the past few weeks, the share price has slumped. Investors are scratching their heads to figure out why.
But I think the share price slump is more likely related to Thailand’s lower house election, which took place on 14 May 2023. The election result surprised everyone, with the Move Forward Party - led by Harvard-educated Pita Limjaroenrat - gathering the most votes of any party. One of their campaign promises is to break up monopolies, and some fear that Major Cineplex might be one of the companies targeted by a new government.
On the other hand, the Move Forward Party coalition only has 313 seats out of the 376 necessary to gain government control. Campaign promises will have to be diluted. Compromises will need to be made. And it’s not even clear to me that Major Cineplex represents a monopoly in the eyes of the coalition.
The COVID-19 recovery story remains in place, however, with a strong pipeline of movies for the remainder of 2023.
In a full recovery scenario, I foresee a 2025e P/E of 12.9x and a dividend yield of 7.0% — low numbers in the context of an expensive overall Thai stock market.
Chinese supermarket chains hit speed bumps in post-pandemic recovery (Caixin) $
Seven out of the 14 publicly traded supermarket chains reported year-on-year declines in first-quarter sales, according to their financial reports. Four of them posted a net loss during the first three months, compared with nine that were in the red for all of 2022.
Checkout This Brazilian Grocery Chain (ASAI) (Seeking Alpha)
NOTE: Sendas Distribuidora S.A. (NYSE: ASAI) is a major grocery store chain and food wholesaler through the "Assai Atacadista" brand, recognized as Brazil's second-largest retailer.
ASAI is generating strong growth during an accelerated expansion phase.
The company may benefit from a resilient Brazilian economy and solid consumer spending trends.
ASAI looks interesting following the recent selloff.
Further Suggested Reading
$ = behind a paywall
Macau catalysts distinct from other China sectors: MS (GGR Asia)
See our Macau ADRs list and Galaxy Entertainment (HKG: 0027 / OTCMKTS: GXYEF): Macau's Best Casino Stock Positioned for Growth:
Morgan Stanley highlights as positives for the Macau casino sector, first: upward revisions for industry earnings, provided by a number of institutions. Morgan Stanley’s own estimates on operator earnings before interest, taxation, depreciation, and amortisation (EBITDA) are “10 percent to 20 percent higher than Refinitiv consensus for 2023 and 2024, suggesting more upside,” said the banking group.
The second Macau-market upside in the view of Morgan Stanley, is that the city’s recovery is “behind other markets” for gaming such as Las Vegas, Nevada in the United States, and Singapore – both of which eased Covid-19-related restrictions before Macau.
“We expect Macau to catch up over the next few quarters, which is not in consensus numbers, we believe,” added Morgan Stanley.
A third positive, said the institution, was that higher financial leverage in an ‘up’ cycle was actually a positive factor for Macau gaming stocks.
“While Macau gaming stocks stopped paying dividends during Covid, we expect they will start paying after deleveraging,” they added. “Macau gaming could provide one of the highest dividend yields (6.8 percent) if the industry resumes dividends, which could come earlier if recovery momentum continues to hold up strongly.”
South Korea Can Be Stealth Winner In EV Arms Race (Robecco)
The article also includes some good charts.
US geopolitical rivalry with China is complicating the situation with political and legislative moves to onshore manufacturing of key technologies, or at least source from outside China.
This could make South Korea, which boasts three global battery makers, and successful EV brands in Hyundai and Kia, a key swing supplier for the whole EV industry, a possibility we believe has been undervalued by investors.
From January 2023, the Chinese government has ended EV subsidy program which began in 2010 with the value proposition of EVs now well established. EV subsidies in many European counties have also been reduced or eliminated.
This is in contrast with the US market, which is just beginning its electrification subsidy efforts and rolling out tax credits thanks to the Inflation Reduction Act (IRA) which became effective in August 2022.
How Erdoğan beat the odds: Turkey’s election in charts (FT)
President held together a coalition of conservative voters despite problems with economy.
Saudi banks are safe at a time of turmoil in the US and Europe (Macrobond)
We have covered some Saudi banks in our fund posts.
How metrics of capital, bad loans and profitability support a positive outlook for the banking sector.
In summary, don’t look for contagion to spread to Saudi Arabia. Its banks are well-positioned to withstand a potential downturn this year, despite the significant rise in local interest rates and fluctuating oil prices. The sector remains a reliable haven for both depositors and investors, helped by the strong oversight of the central bank and a strong local macroeconomic environment.
Growth and Economic Complexity (The Emerging Markets Investor)
The work of the AEI was summarized in the 2011 book The Atlas Of Economic Complexity: Mapping Paths To Prosperity, By Ricardo Haussman and Cesar Hidalgo, and it is periodically updated by the Harvard Growth Lab (link) and the Observatory of Economic Complexity (link).
Although the list is relatively stable, there are five changes: five entrants, China, Malaysia, Mexico, Taiwan and Romania, replacing Canada, Norway, Spain, Netherlands and Brazil.
All of the new entrants are countries well integrated into regional or global trade value chains that import almost all their commodity needs, while five of the departees (Canada, Brazil, Norway) are commodity producers.
Earnings Calendar
Note: Investing.com has a full calendar for most global stock exchanges BUT you may need an Investing.com account, then hit “Filter,” and select the countries you wish to see company earnings from. Otherwise, purple (below) are upcoming earnings for US listed international stocks (Finviz.com):
Economic Calendar
Click here for the full weekly calendar from Investing.com containing frontier and emerging market economic events or releases (my filter excludes USA, Canada, EU, Australia & NZ).
Election Calendar
Frontier and emerging market highlights (from IFES’s Election Guide calendar):
Turkey Turkish Presidency May 28, 2023 (t) Confirmed May 14, 2023
Kuwait Kuwaiti National Assembly Jun 6, 2023 (t) Confirmed Sep 29, 2022
Singapore Singaporean Presidency Jun 13, 2023 (t) Date not confirmed Sep 23, 2017
Greece Greek Parliament Jun 25, 2023 (t) Confirmed May 21, 2023
Uzbekistan Uzbekistani Presidency Jul 9, 2023 (t) Confirmed Dec 31, 2021
Cambodia Cambodian National Assembly Jul 23, 2023 (d) Confirmed Jul 29, 2018
Zimbabwe Presidency of Zimbabwe Jul 31, 2023 (t) Date not confirmed Jul 30, 2018
Zimbabwe Zimbabwean National Assembly Jul 31, 2023 (t) Date not confirmed Jul 30, 2018
Argentina Argentinian Presidency Aug 13, 2023 (d) Confirmed Oct 22, 2023
Pakistan Pakistani National Assembly Oct 1, 2023 (t) Date not confirmed Jul 25, 2018
Argentina Argentinian Chamber of Deputies Oct 22, 2023 (d) Confirmed Oct 24, 2021
Argentina Argentinian Senate Oct 22, 2023 (d) Confirmed Nov 14, 2021
Argentina Argentinian Presidency Oct 22, 2023 (d) Confirmed Aug 13, 2023
Ukraine Ukrainian Supreme Council Oct 29, 2023 (d) Confirmed Jul 21, 2019
Poland Polish Sejm Oct 31, 2023 (t) Date not confirmed Oct 13, 2019
Poland Polish Senate Oct 31, 2023 (t) Date not confirmed Oct 13, 2019
Emerging Market IPO Calendar/Pipeline
Frontier and emerging market highlights from IPOScoop.com and Investing.com (NOTE: For the latter, you need to go to Filter and “Select All” countries to see IPOs on non-USA exchanges):
ALE Group Holding Limited ALEH, 1.3M Shares, $4.00-6.00, $ 6.3M, 5/29/2023 Week of
We are a holding company incorporated in the BVI with all of our operations conducted in Hong Kong by our wholly owned subsidiary, ALE Corporate Services Ltd., also known as ALECS. (Incorporated in the British Virgin Islands)
We provide accounting and corporate consulting services to small and medium-sized businesses. Our services include financial reporting, corporate secretarial services, tax filing services and internal control reporting. Our business is operated through our wholly owned subsidiary, ALE Corporate Services Ltd. (ALECS), a Hong Kong company incorporated on June 30, 2014. Our goal is to become a one-stop solution for all the accounting, corporate consulting, taxation and secretarial needs of small and medium enterprises operating in Asia and the U.S.
**Note: Net income and revenue figures are in U.S. dollars (converted from Hong Kong dollars) for the fiscal year that ended March 31, 2022.
Emerging Market ETF Launches
Climate change and ESG are clearly the latest flavours of the month for most new ETFs. Nevertheless, here are some new frontier and emerging market focused ETFs:
03/03/2023 - First Trust Bloomberg Emerging Market Democracies ETF EMDM - Principles-based
1/31/2023 - Strive Emerging Markets Ex-China ETF STX - Passive, equity, emerging markets
1/20/2023 - Putnam PanAgora ESG Emerging Markets Equity ETF PPEM - Active, equity, ESG, emerging markets
1/12/2023 - KraneShares China Internet and Covered Call Strategy ETF KLIP - Active, equity, China, options overlay, thematic
1/11/2023 - Matthews Emerging Markets ex China Active ETF MEMX - Active, equity, emerging markets
12/13/2022 - GraniteShares 1.75x Long BABA Daily ETF BABX - Active, equity, leveraged, single stock
12/13/2022 - Virtus Stone Harbor Emerging Markets High Yield Bond ETF VEMY - Active, fixed income, junk bond, emerging markets
9/22/2022 - WisdomTree Emerging Markets ex-China Fund XC - Passive, equity, emerging markets
9/15/2022 - KraneShares S&P Pan Asia Dividend Aristocrats Index ETF KDIV - Passive, equity, Asia, dividend strategy
9/15/2022 - OneAscent Emerging Markets ETF OAEM - Active, Equity, emerging markets, ESG
9/9/2022 - Emerge EMPWR Sustainable Select Growth Equity ETF EMGC - Active, equity, emerging markets
9/9/2022 - Emerge EMPWR Unified Sustainable Equity ETF EMPW - Active, equity, emerging markets
9/8/2022 - Emerge EMPWR Sustainable Emerging Markets Equity ETF EMCH - Active, equity, emerging markets, ESG
7/14/2022 - Matthews China Active ETF MCH - Active, equity, China
7/14/2022 - Matthews Emerging Markets Equity Active ETF MEM - Active, equity, emerging markets
7/14/2022 - Matthews Asia Innovators Active ETF MINV - Active, equity, Asia
6/30/2022 - BondBloxx JP Morgan USD Emerging Markets 1-10 Year Bond ETF XEMD - Passive, fixed income, emerging markets
5/2/2022 - AXS Short CSI China Internet ETF SWEB - Active, inverse, thematic
4/27/2022 - Dimensional Emerging Markets High Profitability ETF DEHP - Active, equity, emerging markets
4/27/2022 - Dimensional Emerging Markets Core Equity 2 ETF DFEM - Active, equity, emerging markets
4/27/2022 - Dimensional Emerging Markets Value ETF DFEV - Active, equity, emerging markets
4/27/2022 - iShares Emergent Food and AgTech Multisector ETF IVEG - Passive, equity, thematic [Mostly developed markets]
4/21/2022 - FlexShares ESG & Climate Emerging Markets Core Index Fund FEEM - Passive, equity, ESG
4/6/2022 - India Internet & Ecommerce ETF INQQ - Passive, equity, thematic
2/17/2022 - VanEck Digital India ETF DGIN - Passive, India market, thematic
2/17/2022 - Goldman Sachs Access Emerging Markets USD Bond ETF GEMD - Passive, fixed income, emerging markets
1/27/2022 - iShares MSCI China Multisector Tech ETF TCHI - Passive, China, technology
1/11/2022 - Simplify Emerging Markets PLUS Downside Convexity ETF EMGD - Active, equity, options strategy
1/11/2022 - SPDR Bloomberg SASB Emerging Markets ESG Select ETF REMG - Passive, equity, ESG
Emerging Market ETF Closures/Liquidations
Frontier and emerging market highlights:
06/23/2023 - Invesco PureBeta FTSE Emerging Markets ETF - PBEE
3/30/2023 - Invesco BLDRS Emerging Markets 50 ADR Index Fund - ADRE
3/30/2023 - Invesco BulletShares 2023 USD Emerging Markets Debt ETF - BSCE
3/30/2023 - Invesco BulletShares 2024 USD Emerging Markets Debt ETF - BSDE
3/30/2023 - Invesco RAFI Strategic Emerging Markets ETF - ISEM
2/17/2023 - Direxion Daily CSI 300 China A Share Bear 1X Shares - CHAD
1/13/2023 - First Trust Chindia ETF - FNI
12/28/2022 - Franklin FTSE Russia ETF - FLRU
12/22/2022 - VictoryShares Emerging Market High Div Volatility Wtd ETF CEY
8/22/2022 - iShares MSCI Argentina and Global Exposure ETF AGT
8/22/2022 - iShares MSCI Colombia ETFI COL
6/10/2022 - Infusive Compounding Global Equities ETF JOYY
5/3/2022 - ProShares Short Term USD Emerging Markets Bond ETF EMSH
4/7/2022 - DeltaShares S&P EM 100 & Managed Risk ETF DMRE
3/11/2022 - Direxion Daily Russia Bull 2X Shares RUSL
1/27/2022 - Legg Mason Global Infrastructure ETF INFR
1/14/2022 - Direxion Daily Latin America Bull 2X Shares LBJ
Check out our emerging market ETF lists, ADR lists (updated) and closed-end fund (updated) lists (also see our site map + list update status as some ETF lists are still being updated as of Summer 2022).
I have changed the front page of www.emergingmarketskeptic.com to mainly consist of links to other emerging market newspapers, investment firms, newsletters, blogs, podcasts and other helpful emerging market investing resources. The top menu includes links to other resources as well as a link to a general EM investing tips / advice feed e.g. links to specific and useful articles for EM investors.
Disclaimer. The information and views contained on this website and newsletter is provided for informational purposes only and does not constitute investment advice and/or a recommendation. Your use of any content is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the content. Seek a duly licensed professional for any investment advice. I may have positions in the investments covered. This is not a recommendation to buy or sell any investment mentioned.
Emerging Market Links + The Week Ahead (May 29, 2023) was also published on our website under the Newsletter category.