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Emerging Market Links + The Week Ahead (November 13, 2023)
Elections & the coming battle between world leaders & bond vigilantes. China pension funds had record low returns, EM convergers & laggards, EM stock picks and the week ahead for emerging markets.
The Financial Times has noted the coming battle between world leaders and bond vigilantes as multiple nations go to the polls next year (a record year of voting since data collection began in the early 1960s - see our election calendar later in this post). This means pre-election spending by governing parties will be punished. Key emerging market countries cited for risks included India (politicians are spending at the state level…), South Africa and Mexico.
Finally, an official Chinese report has noted that basic pension funds’ had record-low returns of 0.33% last year. Such low returns have no doubt helped to contribute to the property mess in China.
$ = behind a paywall / 🗃️ = Archived article
Note: I am Tokyo until Wednesday when I have a long layover in the Taipei airport (where the old computer I travel with has trouble connecting to the airport Internet). The Tuesday post will likely again be later in the week…
📰🔬 Emerging Market Stock Picks / Stock Research
$ = behind a paywall / 🗃️ = Archived article
🇨🇳 EHang: Hollow Order Book And Fake Sales Make This China-Based eVTOL Company Last In Line For Takeoff (Hindenburg Research)
Also see: EHang Responds to Short Seller Report
To summarize, when faced with allegations of suspicious product purchases by a conflicted party, EHang Holdings (NASDAQ: EH) CEO Hu Huazhi seemingly chose to flagrantly mislead shareholders by claiming that the aircraft purchases were arm’s length.
Overall, EHang seems to have a major credibility issue—whether it be by fluffing up its preorder book (which looks to almost entirely be vapor) or by brazenly misleading about early sales that bear all the hallmarks of fake revenue.
Trust is crucial in the aviation industry, both for investors and potential customers who are literally putting their lives at risk. We think the company is a fatal accident waiting to happen, both for investors and for passengers.
We see MEGA taking a meaningful market share from BYD Company (HKG: 1211 / SHE: 002594 / OTCMKTS: BYDDY / BYDDF)’s Denza D9, GM’s GL8, GAC’s Trumpchi M8, all selling ~10K a month. We raise MEGA’s 2024 shipment to 57K;
We raise LI’s TP from US$40 to US$47 and maintain BUY.
The privately owned automaker set a new monthly delivery record last month with sales of 301,095 passenger NEVs, a year-on-year increase of 38.4%, according to a stock exchange filing dated Wednesday. Of the cars sold, about 55% were pure electric vehicles (EVs). The rest were plug-in hybrids.
🇨🇳 NaaS zooms ahead with growing focus on EV infrastructure operators (Bamboo Works)
China’s leading provider of electric vehicle charging services said its revenue rose more than 500% in the third quarter, and added the figure could grow as much as six-fold next year
The Bain Capital-backed company is rapidly expanding outside Mainland China, and expects to get 40% of its revenue from offshore sources next year
🇨🇳 Xiao-I tries to generate buzz in crowded China AI field (Bamboo Works)
The recently listed AI developer has unveiled the nation’s latest large language model ecosystem tool, as it focuses on helping business to automate their processes
Commercializing the product will be challenging in an increasingly crowded field with more than 100 similar products in the market
🇨🇳 Industry woes chip away at ASMPT, with little relief in sight (Bamboo Works)
The chip packaging equipment maker’s profit nearly evaporated in the third quarter, marking its fifth consecutive quarter of declines
The chip packaging equipment maker estimated its fourth-quarter revenue will total between $390 million and $460 million, down 23.2% year-on-year at the midpoint
🇨🇳 New Oriental Education delivers a lesson in business revival (Bamboo Works)
The education giant has sealed its return to financial health with quarterly adjusted profits at a three-year high and revenues back to 92% of their level before a crackdown on the training sector
Since divesting its academic tutoring business, New Oriental Education (NYSE: EDU) has bounced back by developing new education ventures, beating market expectations for both revenue and profit in its latest quarter
The results pushed its share price to a two-year high, prompting major banks to raise their target price for the stock
The read-across for Inner Mongolia Yili Industrial Group Co (SHA: 600887)'s 3Q23 results and briefing to China Mengniu Dairy Company (HKG: 2319 / FRA: EZQ0 / EZQ / OTCMKTS: CIADY / CIADF) was overall positive.
For 3Q23, Yili's sales grew 3% yoy and net profit increased 59% yoy, mainly due to lower raw milk prices, better product mix, cost savings and low base.
China Mengniu Dairy Co (2319 HK) continues to be a good value play, with reasonable valuation (15x 2024E PE), stable growth (above 10% net profit growth), and proactive shareholder returns.
China’s central bank, the Housing Ministry and top financial and securities regulators summoned financial chiefs of six leading property developers Tuesday for briefings on the companies’ liquidity and debt situations, Caixin learned from sources.
The developers are state-owned China Resources Land or CR Land (HKG: 1109 / FRA: CHZ / OTCMKTS: CRBJY / CRBJF), China Overseas Land & Investment (HKG: 0688 / OTCMKTS: CAOVF), Poly Real Estate Group Co. Ltd. (Poly Real Estate Group Co. Ltd. (SHA: 600048)), mixed-ownership developer Vanke (HKG: 2202 / SHE: 000002 / FRA: 18V / OTCMKTS: CHVKF / CHVKY), Gemdale Corp. (SHA: 600383) and private developer Longfor Group Holdings (HKG: 0960) The six are the few big developers that have avoided defaulting amid the widespread liquidity crisis in the real estate sector.
Chinese authorities have asked Ping An (HKG: 2318 / OTCMKTS: PNGAY) to take a controlling stake in embattled Country Garden (HKG: 2007 / OTCMKTS: CTRYF / OTCMKTS: CTRYY), the nation's biggest private property developer, four people familiar with the plan said.
China's State Council, which is headed by Premier Li Qiang, has instructed the local government of Guangdong province, where both companies are based, to help arrange a rescue of Country Garden by Ping An, said two of the sources who have direct knowledge of the matter.
🏴 MGM China eyes more of ‘booming’ Macau biz: Hornbuckle (GGRAsia)
“Business is booming” in Macau, says Bill Hornbuckle, chief executive and president of MGM Resorts International (NYSE: MGM), parent firm of Macau casino operator MGM China Holdings Ltd (HKG: 2282 / FRA: M04 / OTCMKTS: MCHVF / MCHVY).
The group is working to capture as much of that boom as possible, with steps including ugrades to a gaming area at MGM Cotai, and six new villas at MGM Macau, he added on Wednesday, during the call following the third-quarter earnings announcement of MGM Resorts.
🇭🇰 🇹🇼 Asian Dividend Gems: Yue Yuen Industrial (SmartKarma) $
Yue Yuen Industrial Holdings (HKG: 0551 / FRA: YUE1 / OTCMKTS: YUEIY) has a scalable business model with high dividend yield (6.4%). Its sales and net profit are expected to increase by 9.3% YoY and 55% YoY, respectively in 2024.
The company is likely to enjoy higher sales and profits in 2024 due to improved footwear inventory destocking cycle, higher sales and profits at its subsidiary Pou Sheng.
Yue Yuen Industrial is one of the largest footwear and athletic shoe manufacturers in the world. Its major customers include Nike, Adidas, Puma, and Reebok.
🇹🇼 Eclat Textile (1476 TT): Start Of Upcycle (SmartKarma) $
The company just reported 3Q23 results, with sales down 26% yoy and net profit down 28% yoy. Starting the next quarter 4Q23, the company is expected to return to growth.
The company now trades at 23x 2024E earnings. I believe the valuation is reasonable as growth returns, and there are potential upside catalysts.
🇹🇼 Gogoro: Great Growth Story But Not Translating Into Actual Growth (Seeking Alpha) $
Gogoro's financial results have been disappointing despite its growing business reach.
Gogoro has partnerships with multiple motorcycle brands and operates in various countries.
Those partnerships are helping the company's battery business grow but very likely cannibalizing its e-bike business, hurting its growth prospects.
🇹🇼 ASE Technology Holding: Might Be Getting Ready For A Breakout (Seeking Alpha) $
ASX has a number of things in its favor, but none more so than an expected return to YoY growth and an end to the recent downturn.
While there are many who are expecting an imminent end to the downturn, it is possible semiconductor demand could surprise by staying weaker than expected.
ASX is a stock worth holding on to for several reasons, but it may be premature to be putting new money to work.
🇰🇷 Paradise Co posts ‘record’ quarterly op profit in 3Q (GGRAsia)
Paradise Co Ltd (KOSDAQ: 034230), an operator of foreigner-only casinos in South Korea, reported net profit attributable to shareholders of KRW35.26 billion (US$27.0 million) for the three months to September 30, according to a presentation published on Thursday. That was up 19.9 percent from the preceding quarter, but down 10.4 percent from a year earlier.
Brokerage NH Investment & Securities Co Ltd suggested in September that the resumption of Chinese group tours should boost South Korea’s inbound visitor traffic and eventually contribute to a “sharp recovery” in the number of mass-market foreign customers to the latter nation’s casinos.
🇰🇷 NCsoft: Launch of Highly Anticipated Throne and Liberty MMORPG Game (SmartKarma) $
NCsoft reported operating profit of 16.5 billion won (down 89% YoY) and revenue of 423.1 billion won (down 30% YoY) in 3Q 2023.
Throne and Liberty has a solid chance to become successful globally through Amazon Game platform, which is likely to drive a strong turnaround of NCsoft's sales and profits.
In 3Q23, Celltrion (KRX: 068270) reported revenue and operating profit of KRW672B (+4% YoY) and KRW268B (+25% YoY), respectively, driven by broad-based growth across biosimilar portfolio and CMO revenue.
Operating profit margin is approaching 40% level, highest level in last two years, driven primarily by sales growth around high margin products. Net profit jumped 33% YoY to KRW221B.
In Oct’23, Celltrion received FDA approval for Zympentra, which is Celltrion's first product approved as a new drug in the U.S., and is expected to receive patent protection until 2040.
The decision by Asia’s richest banker to start his own business was unusual in an economy dominated by family dynasties.
🇹🇷 Turkcell: Masterclass In Managing Inflation (Seeking Alpha) $
The company's Q3/2023 financial results showed revenue growth exceeding inflation, leading to margin expansion and a surge in earnings.
Turkcell's valuation appears cheap compared to the Communications Sector, but macro risks in the Turkish economy remain.
🇵🇱 Allegro – a new cycle for the Polish e-commerce giant? (Undervalued Shares)
For the month of October, Poland was the world's best-performing equity market.
The WIG20 index soared an impressive 13%, even though it's made up of the country's heavyweight companies.
The stock of Allegro reached a high of EUR 21 in 2020, but it has since come down to less than EUR 7. All the while, the underlying business hasn't just grown by leaps and bounds, but it has also evolved in other (sometimes surprising) ways.
🇵🇱 Refining Profits: Why Orlen's Valuation Spells Opportunity (Seeking Alpha) $
The company has the ambitious goal to double its EBITDA by 2030, mainly driven by investments in both renewable energies and gas.
Orlen's state-owned status, with the government holding a 49% stake, reduces regulatory uncertainties.
Despite oil and gas price volatility/cycle uncertainties, Orlen offers a strong value proposition due to its low debt, vertical integration, and growth potential in the enduring oil and gas demand.
🇧🇷 Lojas Renner: Time to Buy Brazil's Largest Clothing Retailer? (Brazil Stocks)
It is known for being the first Brazilian full corporation, a company without a defined controlling shareholder.
The largest shareholder is BlackRock with 10% of the shares.
The Board of Directors holds 0.40% of the shares and, the Management, 0.05%.
The remaining shares are scattered across the market.
🇧🇷 Nu Holdings Q3 Preview: Premium Valuation At Risk With Upcoming Headwinds (Seeking Alpha) $
I expect Q3 revenue and EPS to miss analysts' estimates due to potential growth stagnation and market penetration challenges.
Rising delinquencies and high P/E and P/B ratios indicate a potential decline in customer growth and an overvalued stock.
🇧🇷 Afya: Poised For Growth, But Likely Fairly Valued (Seeking Alpha) $
The company's growth is driven by acquisitions, robust cash flow, and rebounding demand post-pandemic.
Concerns about stock-based compensation, capital expenditures, and macroeconomic risks in Brazil are factors to consider.
Valuation multiples are below historical averages, suggesting a balanced investment stance.
AFYA's outlook is characterized by ambitious growth plans for 2028.
🇧🇷 Itaú Unibanco: Bullish With Multiple Growth Tailwinds Into 2024 (Seeking Alpha) $
An ongoing digital transformation of the bank as a broader theme across Latin America is driving cost efficiencies and supporting margins.
We see shares climbing higher through 2024 alongside a new credit growth cycle as regional Central Banks begin to cut interest rates.
🇧🇷 Gol: The Long And Winding Road (Seeking Alpha) $
The airline has downgraded its guidance due to lower pricing and higher non-fuel costs.
The recent warrant issue and debt for equity swap have negatively impacted minority shareholders and GOL's equity appreciation potential.
🇲🇽 Becle (Jose Cuervo) Company Write Up🥃🌵 (Secret Sauce Investing)
The market leader is Jose Cuervo, whose parent company, Becle SAB de CV (Cuervo) (BMV: CUERVO / FRA: 6BE / OTCMKTS: BCCLF), is the world’s largest tequila producer. Based in Mexico, the company trades on the Mexican stock exchange under the ticker $CUERVO.
Becle is a family owned business in the 11th generation of Cuervo family. The business produces, markets and distributes over 30 spirits, ready-to-drink cocktails and non-alcoholic brands in over 85 countries. Almost two thirds of sales are generated by tequila.
The company is facing the headwinds of inflation and the challenges of increased competition. The share price was down more that 18% after October’s poorly received results, the largest single day decline since it began trading six years ago.
📰🔬 Further Suggested Reading
$ = behind a paywall
China’s basic pension funds entrusted for investment saw a record-low rate of return of 0.33% last year, earning just 5.1 billion yuan ($758.2 million), an official report showed Saturday.
The return rate dropped for the second year in a row from its peak of 10.95% in 2020, according to the report released by the National Council for Social Security Fund (NCSSF).
China should take steps to avoid a hard landing for the distressed property market, such as the government building affordable housing and increasing people’s incomes, former Chongqing Mayor Huang Qifan said Monday in a forum.
He argued that China needs to avoid a 30–50% drop in home prices, land auction prices and home sales — defined as a hard landing —as the sector is undergoing a deep structural adjustment. He is currently executive academic vice president of the China Institute for Innovation & Development Strategy.
Tumbling pork prices undercut growth as consumer confidence lags
Producer prices fell for a 13th consecutive month, dropping 2.6 per cent year on year, against a 2.7 per cent decline forecast by economists and following a 2.5 per cent contraction in September.
Morawiecki unlikely to succeed without overall majority but President Duda’s move is set to delay anticipated return of Tusk
As multiple nations go to the polls next year, pre-election spending by governing parties will be punished
As I noted early this year, ballots in more than 30 nations will offer a say to two out of every three adults in the democratic world — a record year of voting since data collection began in the early 1960s.
India’s risks are partially offset by the fact that it has a higher economic growth rate and showed fiscal restraint through the pandemic. But many state leaders have of late been engaging in a game of competitive populism.
South Africa is also at high risk. It has an unpopular candidate for re-election managing a widening deficit, and a large share of government bonds — 25 per cent — owned by foreigners.
🌐 Convergers and Laggards in Emering Markets (The Emerging Markets Investors)
Convergers in emerging markets can broadly be separated into two categories: first, countries attracting foreign direct investment and participating in the globalization of trade; second, countries starting from a very low base and achieving high growth because of successful economic reforms leading to increases in productivity. Highly successful convergers (e.g., China, Vietnam) have benefited both by launching economic reforms and by integrating into the global economy.
Finally, Latin America is the major outlier in emerging markets in its sustained poor economic performance and lagging GDP per capita growth. This conundrum has been called by economists the “Middle-Income Trap” and is loosely attributed to inconsistent and poorly designed policies and deteriorating “institutions.” Other possible contributors to Latin America’s decline have been extreme wealth concentration and sustained human and capital flight. Also, the region’s excessive and increasing dependence on commodity exports have subjected countries to highly destabilizing boom-to-bust cycles (referred to in economics as the “Natural Resource Curse).
📅 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):
📅 Emerging Market IPO Calendar/Pipeline
We are a holding company, incorporated in the Cayman Islands. We conduct business through our operating subsidiaries – two in Hong Kong and one in mainland China. We represent over 30 years of experience producing personal care electric appliances (principally electrical hair styling products) and toy products for overseas markets. (Incorporated in the Cayman Islands)
Our principal products are curling wands and irons; flat irons and hair straighteners, and other small personal care electrical appliances, including trimmers, nail polishers, pet shampoo brushes and eyebrow tweezers, etc.
We currently act as both an “OEM” (original equipment manufacturer) and and “ODM” (original design manufacturer). Since 2006, we have served as an OEM for Spectrum Brands, a global home essential company, and its sole customer, producing electrical hair styling products under the “Remington” brand. These products are sold in Europe, North America and Latin America.
Our operating history began in 1993 when FIL was founded in Hong Kong by Mr. Li Kin Shing as a toy manufacturer and distributor. As the toy market deteriorated, he founded AIL in 2005 in Hong Kong, and shifted our operations to the manufacturing and sales of personal care electric appliances. Our manufacturing subsidiary, FPPF, located in Guangdong, PRC, was formed in the PRC on Oct. 19, 2010, and is capable of producing over 3 million units per year.
*Note: Net income and revenue are in U.S. dollars (converted from Hong Kong dollars) for the 12 months that ended June 30, 2023.
(Fenbo Holdings Ltd. filed its F-1/A and disclosed the terms for its IPO on Sept. 11, 2023: 1.0 million shares at $4.00 to $6.00 to raise $5.0 million. Fenbo Holdings ltd. submitted confidential IPO documents to the SEC on Dec. 16, 2022.)
We are a developer of advanced robotic technologies focused on transforming labor-intensive services in hospitality and other sectors currently experiencing unprecedented labor shortages. (Incorporated in Nevada)
With a global R&D team based out of China and the United States, we design, manufacture and sell robots to restaurants, hotels, senior living centers, casinos, factories, movie theaters and other businesses. Our robots perform a variety of services, including restaurant running and bussing, hotel room service delivery, floor scrubbing and vacuuming, and beverage and food preparation. We design our robots to be friendly, customizable to client environments, and extremely reliable. For example, our food service delivery robots typically make over 1,000 deliveries every month in busy environments. Our current customer base includes major hotel brands, national chain restaurants, leading senior care facilities, and top casino management companies.
Our mission is to integrate robotics and automation into our everyday lives. We envision ourselves becoming the first robotics “Super-operator,” where thousands of our robots are deployed out in the field and managed by Richtech’s AI Cloud Platform (ACP). As a Super-operator, our robotic fleet will be performing a wide variety of tasks within a business, from completing deliveries and scrubbing floors to cooking noodles and preparing drinks. Our ACP platform will allow businesses to plug in their robots and immediately leverage an immense amount of data to optimize workflows, lower management complexity, and minimize labor dependency.
Our products are categorized into three kinds of service automation: indoor transport and delivery, sanitation, and food and beverage automation. Our target market is the hospitality sector, which includes restaurants, hotels, casinos, resorts, senior care, hospitals, and movie theaters. We also plan to leverage our expertise in food automation to bring services directly to the consumer with the ADAM system which is described below.
The majority of our robots can be characterized as Autonomous Mobile Robots (AMRs), meaning that our robots can understand and move through its environment independently. AMRs differ from their predecessors, Autonomous Guided Vehicles (AGVs), which rely on tracks or predefined paths and often require operator oversight. Our AMRs understand their environment through an array of advanced sensors, with the primary sensor being a LiDAR which stands for Light Detection and Ranging. The LiDAR is able to create a 2D map of the environment by sending out laser pulses and measuring the time it takes to bounce back, similar to sonar but far more accurate. Secondary sensors such as RGBD cameras that detect color and depth of images, ultrasonic proximity sensors, and standard AI machine vision that can recognize objects are used in sync to create an in-depth understanding of the robot’s environment. These sensors, combined with a robust navigation software stack based on AI algorithms, provides our robots the ability to perform dynamic path planning through their environments.
Our ACP service is a business optimization tool that allows customers to benefit from the rich operational data generated by the robots. Each AMR can operate independently in the real world and report data up to the ACP. The ACP can then utilize the data to optimize workflows, enhance guest experiences, and minimize waste. The ACP will store robot utilization metrics for analyses and reporting, providing clients with detailed operational data.
Note: Revenue and net loss figures are for the year that ended March 31, 2023.
(Richtech Robotics Inc. cut the size of its micro-cap IPO by 33 percent to 2.0 million shares – down from 3.0 million shares originally – and changed the price to $5.00 – the mid-point of its previous range of $4.00 tp $6.00 – to raise $10.0 million, according to an S-1/A filing dated Oct. 31, 2023. In that Oct. 31, 2023, filing with the SEC, Richtech Robotics also named Revere Securities as a joint book-runner to replace Pacific Century Securities. Background: Richtech Robotics Inc. filed a Free Writing Prospectus (FWP) dated Oct. 10, 2023, naming R.F. Lafferty & Co. as the book-runner. The deal’s original book-runner was Pacific Century Securities. Background: Richtech Robotics Inc. filed an S-1/A on Sept. 1, 2023, disclosing terms for its micro-cap IPO: 3.0 million shares at $4.00 to $6.00 to raise $15.0 million. Richtech Robotics Inc. filed its S-1 on Aug. 3, 2023, without disclosing terms for its IPO. The company submitted confidential IPO documents to the SEC on Feb. 10, 2023.))
We are an independent oil and gas exploration stage company, led by an experienced management and technical team, which is focused on under-explored regions in Africa. Our current asset portfolio includes an exploration license onshore in the Republic of Benin (“Benin”), as well as an exploration license onshore in the Republic of Namibia (“Namibia”). As of the date of this prospectus, we have not drilled any wells. Additionally, the Company continues to review other potential assets for expansion.
**Note: Net loss and revenue figures are for the year that ended June 30, 2022.
(Note: Elephant Oil Corp. revived its IPO in early November with plans to price the micro-cap deal in mid-November: 1.67 million shares at $4.00 to $5.00 to raise $7.52 million. These are the same terms from the July 21, 2023, filing with the SEC. Background: Elephant Oil Corp. postponed the pricing of its IPO, which had been tentatively expected for sometime during the week of Aug. 14, 2023, or the following week. Previously: Elephant Oil Corp. slightly increased the size of its IPO in an S-1/A filing dated July 21, 2023, to 1.67 million shares from 1.56 million shares and kept the price range at $4.00 to $5.00 to raise $7.52 million. Previously: Elephant Oil Corp. increased the size of its IPO again in an S-1/A filing dated June 1, 2023: The IPO was increased to 1.56 million shares (1,555,556 shares) and the price range was kept at $4.00 to $5.00 – to raise $7.0 million – an increase of about $120,000 in the IPO’s estimated proceeds. Background: Elephant Oil Corp. increased its IPO’s size in an S-1/A filing dated March 30, 2023, to 1.53 million shares (1,527,778 shares) and kept the price range at $4.00 to $5.00 to raise $6.88 million ($6,875,001). Elephant Oil Corp. cut its IPO’s size by about 24 percent and changed the IPO’s structure by removing the warrants in an S-1/A filing dated March 9, 2023: The IPO now consists of 1.44 million shares at $4.00 to $5.00 to raise $6.48 million. Previously, the IPO’s terms were 1.83 million units – with each unit consisting of one share of common stock and one warrant to buy one share – at a price range of $4.15 to $5.15 – to raise $8.5 million. The IPO’s terms have been revised numerous times – see background note below. The S-1 was filed March 25, 2022; confidential IPO documents were filed on Dec. 21, 2021.)
(Background: The IPO has been on hold since mid-February, when the deal did not get done after tentatively setting a pricing date during the week of Feb. 13, 2023. Elephant Oil Corp. filed an S-1/A on Dec. 6, 2022, to cut the size of its unit IPO – to 1.83 million units (1,827,957 units) from 2.58 million units (2,580,645 units) – and kept the price range at $4.15 to $5.15 – to raise $8.5 million. In terms of estimated IPO proceeds, the new terms represent a cut of 29.2 percent. The company updated its IPO plans with a placeholder filing dated Jan. 6, 2023. The IPO’s initial terms were 3.23 million units at $4.15 to $5.15 to raise $15.02 million, disclosed in an S-1/A filing on Aug. 12, 2022.)
We are an integrated solar energy company. (Incorporated in Nevada)
We were founded in 2008 to conduct business in the United States and subsequently commenced operations in China following two acquisitions in 2015. We operate in two segments – the United States operations and the China operations. We are a holding company, with our United States operations conducted by our United States subsidiaries and our China operations by our Chinese subsidiaries, which operate separately from our United States operations. We are a Nevada corporation that operates through its subsidiaries, all of which are wholly owned.
Our United States operations primarily consist of the sale and installation of photovoltaic and battery backup systems for residential and commercial customers, and sales of LED systems and services to government and commercial users. Since early 2020, because we did not have the capital to support such operations, we suspended financing our solar customers’ purchase of our systems, but we may resume lending if we have sufficient funds, including from the proceeds of this offering. Our finance revenue for the years ended December 31, 2022 and 2021 and the three months ended March 31, 2023 and 2022 relates to revenue from our existing financing portfolio.
Our China operations, which are conducted by our wholly-owned subsidiaries, consist primarily of identifying and procuring solar farm projects for resale to third parties and performing engineering, procuring and construction (“EPC”) services primarily for solar farm projects. Although we are a Nevada corporation with significant operations in the United States, through our PRC subsidiaries, we conduct business in China and our China business is subject to Chinese law. There are legal and operational risks associated with having operations in China. See “Risk Factors — Any change of regulations and rules by Chinese government may intervene or influence upon our operations in China at any time and any additional control over offerings conducted overseas and/or foreign investment in issuers with Chinese operations could result in a material change in our business operations and/or the value of our securities and could also significantly limit or completely hinder our ability to offer, or continue to offer, our securities to investors and cause the value of such securities to significantly decline or be worthless” and “Business – PRC Government Regulations.” Further, the only customer of our China segment since the middle of 2019 has been a large state-owned enterprise. As of the date of this prospectus, we do not have any agreement for the China segment to perform any ongoing services and we did not generate any revenue from our Chinese operations in 2022 through the date of this prospectus. The primary business of our China segment is the construction of solar farms and related services. Each solar farm requires a permit from a government agency, and there are a limited number of permits. We are dependent upon our ability to generate business from a large state-owned enterprise and obtaining the necessary permit from a local government agency. Our failure or inability to obtain contracts or permits would materially impact our business and may result in a significant decrease in the value of our common stock.
We finance our China operations and our United States operations separately. We do not use funds from either segment to provide funds for the other segment. Our equity structure is a direct holding structure, that is, SolarMax Technology Inc., a Nevada corporation, directly controls its U.S. subsidiaries and its subsidiaries in its China segment including: (i) Golden SolarMax Finance. Co. Ltd, a PRC subsidiary, (ii) SolarMax Technology Holdings (Hong Kong) Limited, a Hong Kong subsidiary which directly holds SolarMax Technology (Shanghai) Co., Ltd, a PRC subsidiary (together with its subsidiaries thereunder, “ZHTH”); (iii) Accumulate Investment Co., Ltd, a British Virgin Islands subsidiary which directly holds Accumulate Investment Co., Limited, a Hong Kong subsidiary that directly holds Jingsu Zhonghong Photovoltaic Electric Co., Ltd (“ZHPV”); a PRC subsidiary and (iv) SolarMax Technology Holdings, a Cayman Islands subsidiary. Our business in China is conducted through ZHPV and ZHTH. See “Business – Our Corporate Structure” on page 100 of the prospectus for additional details.
*Note: Net loss and revenue figures are in U.S. dollars for the 12 months that ended June 30, 2023.
(Note: SolarMax Technology cut the size of its IPO to 4.5 million shares – down from 7.5 million shares – and kept the assumed IPO price at $4.00 – to raise $18.0 million, according to an F-1/A filing dated July 6, 2023. The downsizing of SolarMax Technology’s IPO represents a 40 percent cut in the IPO’s size.)
*Note: DDC Enterprise is also known as DayDayCook. (Incorporated in the Cayman Islands)
Our mission is to promote Asian cooking to the world.
We are a leading content driven (i.e. using content to reach and engage target customers) consumer brand offering easy, convenient ready-to-heat (“RTH”), ready-to-cook (“RTC”), ready-to-eat (“RTE”) products. Convenience is at an all-time high with ready-to-eat prepared food. They reduce the time and energy needed to prepare a meal at home while never compromising on food safety, variety, and taste. Our brands and products promote healthier lifestyle choices to our predominately Millennial and Generation Z (“GenZ”) customer-base. We are also engaged in the provision of advertising services.
We were founded in Hong Kong in 2012 by Ms. Norma Ka Yin Chu, a highly regarded entrepreneur and a true cooking enthusiast, as an online platform which distributed food recipes and culinary content. Subsequently, we further expanded our business to provide advertising services to brands that wish to place advertisements on our platform or video content. In 2015, we entered the Mainland China market through the establishment of Shanghai DayDayCook Information Technology Co., Ltd (“SH DDC”) to engage in technology development of computer software, food circulation and advertising production in China. In 2017, we started expanded our business from content creation to content commerce. Later in 2019, we extended our business to include the production and sale of, among others, own-branded RTH, RTC convenient meal solution products.
As of March 31, 2023, our main product categories include (i) own-branded RTH products — typically semi-cooked meals with some but minimal preparation required ahead of serving, (ii) own-branded RTC products — ready to be consumed within 8 to 15 minutes with some additional cooking preparation, (iii) own-branded RTE products — typically pre -cooked meals that are ready to serve with minimal level of additional preparation, which includes our plant-based meal products localized for the palate of an Asian consumer, and (iv) private label products (i.e. third-party branded food products).
As of March 31, 2023, we had 24.5 million paid customers. Around 69% of our followers on social media & video platforms are GenZ. 50% of customers are from the Eastern & Southern parts of China, and 86% are female. In particular, we believe that our products appeal to GenZ because (1) when compared to older age groups, GenZ generally do not want to spend a long time cooking at home and they value cost effective options like RTC, RTH and RTE meals due to the ease of cooking that RTC, RTH and RTE products provide; (2) we promote our products mainly through social media, the audience of which are mainly the GenZ population; (3) we mainly sell our products through e-commerce platforms, including livestreaming e-commerce, the customers demographics of which are dominated by GenZ; (4) plant-based diets have progressed from a food trend to a globally recognized lifestyle which GenZ is more willing to embrace. The average age of a viewer engaging with our products or marketplace is younger than 30 years old. From 2018 to March 2023, we have a content library with more than 247,874 minutes of in-house created content.
*Note: Net loss and revenue are for the year that ended Dec. 31, 2022.
(Note: DDC Enterprise Limited filed an F-1/A dated Nov. 8, 2023, in which it disclosed the terms and the proposed stock symbol for its IPO: 4.25 million Class A ordinary shares at $9.50 to $11.50 to raise $44.63 million. Background: DDC Enterprise filed its F-1 dated June 15, 2023, without disclosing a stock symbol or IPO terms. The IPO’s estimated proceeds are $50 million.)
We are the largest technology-driven online agent-centric human capital management service provider targeting professionals based on Platform-as-a-Service, or PaaS, in China in terms of the number of active users in the human resources industry as of June 30, 2022, and total net revenues for the year ended Dec. 31, 2021. (Incorporated in the Cayman Islands)
As a company empowered by artificial intelligence, or AI, data analytics, and blockchain technologies, we are committed to digitalizing and intellectualizing the entire human capital management process. We provide a platform to support trusted private social networks of professionals, through which we provide services consisting of recruitment services, outsourcing services, and other services such as information technology services and training services. Our users are primarily professionals who work in human resources-related functions. Our corporate customers are corporations with recruitment, training, sales lead generation and outsourcing demands. As of June 30, 2022, we had approximately 382,650 active registered users on our proprietary platforms, Star Career and Columbus, through which the users of our platforms will receive customized job recommendations and work as talent scouts to source suitable candidates for our corporate customers through their own trusted private social network, as well as receive trainings and other value-added services.
Our proprietary human capital management PaaS is developed based on patented, novel and advanced AI and machine-learning algorithms which are based on unparalleled access to big data assets that can derive actionable insights and knowledge for recruitment and other services such as training. In order to upgrade themselves with knowledge in human resources and basic labor law and financial skills, users on our platform are able to receive trainings and obtain the Certified Career Resources Planner Certificate, or CCRP Certificate, which will certify the user’s possession of fundamental knowledge in human resources, labor law and finance.
We have achieved rapid growth since the launch of our platforms. For the years ended December 31, 2020 and 2021, our total net revenues increased by 183.3% from RMB230.2 million to RMB652.2 million (US$97.2 million). For the six months ended June 30, 2022, our total net revenues were RMB302.8 million (US$45.1 million). For the years ended December 31, 2020 and 2021, our net income increased by 759.7% from RMB4.6 million to RMB39.8 million (US$6.0 million). For the six months ended June 30, 2022, our net income was RMB18.5 million (US$2.8 million). For the years ended December 31, 2020 and 2021, our net cash provided by operating activities increased significantly from RMB2.4 million to RMB60.6 million (US$9.0 million).
(Note: Lucas GC Limited increased the size of its IPO, changed underwriters and updated its financial statements to include the year ended Dec. 31, 2022, in an F-1/A filing dated May 31, 2023: The IPO’s size was increased to 3.07 million shares – up from 750,000 shares – and the price range was cut to $6.00 to $7.00 – down from $8.00 to $9.00 – to raise $20.0 million. The new estimated IPO proceeds of $20.0 million represent an increase of 213.5 percent from the previous estimate of $6.38 million under the IPO’s original terms. Prime Number Capital was named the new sole book-runner, replacing The Benchmark Company and Valuable Capital. Background: Lucas GC Limited filed an F-1/A dated March 22, 2023, in which it disclosed terms for its micro-cap IPO: 750,000 shares at $8.00 to $9.00 to raise $6.38 million ($6,375,000). The stock in the IPO will be offered by the Cayman Islands-incorporated holding company and not by the underlying business in China. Lucas GC Limited filed its F-1 on Feb. 28, 2023; it had submitted confidential IPO documents to the SEC on Nov. 21, 2022.)
🏁 Emerging Market ETF Launches
Climate change and ESG are some recent flavours of the month for most new ETFs. Nevertheless, here are some new frontier and emerging market focused ETFs:
08/25/2023 - KraneShares Dynamic Emerging Markets Strategy ETF KEM - Active, equity, emerging markets
08/18/2023 - Global X India Active ETF NDIA - Active, equity, India
08/18/2023 - Global X Brazil Active ETF BRAZ - Active, equity, Brazil
07/17/2023 - Matthews Korea Active ETF MKOR - Active, equity, South Korea
05/18/2023 - Putnam Emerging Markets ex-China ETF PEMX - Value + growth stocks
05/11/2023 - JPMorgan BetaBuilders Emerging Markets Equity ETF BBEM - Large + midcap stocks
03/16/2023 - JPMorgan Active China ETF JCHI - Active, equity, China
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:
09/20/2023 - VanEck China Growth Leaders ETF - GLCN
08/28/2023 - Asian Growth Cubs ETF - CUBS
08/01/2023 - VanEck Russia ETF - RSX
07/07/2023 - Emerge EMPWR Sustainable Emerging Markets Equity ETF - EMCH
06/23/2023 - Invesco PureBeta FTSE Emerging Markets ETF - PBEE
06/16/2023 - AXS Short China Internet ETF - SWEB
04/11/2023 - SPDR Bloomberg SASB Emerging Markets ESG Select ETF - REMG
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
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