NTAsian merging Leaders und2016 · Hanon Systems (018880 KS) 10 Blue Bird (BIRD IJ) 11 Cosmo Lady (2298 HK) 12 Tisco (TISCO TB) 13 ... (5.0) 16.1 13.1 8.2 3.4 2.7 13.1 20.2 21.2

NTAsian Emerging Leaders Fund

March

2016

Investments Mar-16

Contents

Valuation table 3

Company page

Baoxin (1293 HK) 4

Pakuwon (PWON IJ) 5

Minth (425 HK) 6

Luk Fook (590 HK) 7

Puregold (PGOLD PM) 8

Silverlake Axis (SILV SP) 9

Hanon Systems (018880 KS) 10

Blue Bird (BIRD IJ) 11

Cosmo Lady (2298 HK) 12

Tisco (TISCO TB) 13

Disclaimer 14

NTAsian Emerging Leaders Fund March 2016

Page | 3

Valuation table

Ownership PER EPS gr FY16F Valuation

Company Code Mkt

cap % of % of co Price ^ 14A 15F 16F 17F 14A 15F 16F 17F EV/EBITDA Yield PBV DE ROE ROCE

USDm NAV

Paid-

up

capital

Local

curr x x x x % % % % x % x % % %

Top ten holdings

Baoxin 1293 1,922 11.0 1.1 4.90 14.9 14.1 12.7 11.2 (29.8) 5.6 10.7 13.8 6.8 2.0 1.6 72.1 12.9 11.6

Pakuwon PWON 1,871 10.7 1.0 515.00 9.9 19.7 13.1 11.3 122.1 (49.8) 49.9 16.5 9.9 1.5 2.8 31.8 23.5 17.8

Minth 425 3,057 9.1 0.6 18.00 14.9 13.2 10.8 9.4 14.1 12.8 22.9 13.8 7.3 3.1 1.6 NC 16.0 21.0

Luk Fook * 590 1,290 8.3 1.1 17.04 6.2 8.2 8.2 8.1 (13.4) (23.8) (0.3) 1.5 4.6 4.9 1.0 NC 12.9 14.0

Puregold PGOLD 2,202 8.0 0.6 37.00 22.6 21.8 17.9 15.2 14.2 3.7 21.9 17.7 10.0 2.2 2.4 NC 14.3 18.3

Silverlake Axis * SILV 1,182 7.5 1.1 0.61 16.1 17.2 15.0 12.7 13.6 (6.4) 15.0 17.6 11.7 6.7 8.7 NC 60.0 41.1

Hanon Systems 018880 4,292 6.9 0.3 9,400 18.2 21.8 16.2 14.9 (7.1) (16.3) 34.0 8.9 7.7 2.5 2.6 NC 16.7 20.8

Blue Bird BIRD 1,284 6.0 0.8 6,800 20.2 20.0 17.3 14.8 0.9 1.2 15.6 16.6 9.4 1.7 3.3 17.6 20.8 24.2

Cosmo Lady 2298 1,857 5.9 0.5 6.35 21.4 18.8 14.4 11.9 35.4 13.9 30.3 21.7 10.9 1.7 3.2 NC 24.2 31.8

Tisco TISCO 1,083 4.3 0.7 47.75 9.0 9.0 7.8 7.2 (4.4) 0.0 15.3 7.7 n/a 4.6 1.2 n/a 16.5 n/a

Top ten weighted average – reported profit 15.1 16.4 13.3 11.7 17.5 (7.7) 22.1 13.7 8.2 3.0 2.8 14.4 21.4 21.2

Top ten weighted average – core profit 15.4 15.2 11.8 10.3 (2.3) 1.5 15.4 13.2

Portfolio weighted average – reported profit 15.4 16.1 13.1 11.6 14.9 (5.0) 16.1 13.1 8.2 3.4 2.7 13.1 20.2 21.2

Portfolio weighted average – core profit 15.8 17.0 13.0 11.5 (4.2) (0.6) 9.1 12.9

^ As of 25 March 2016

* Year ended Jan-Jun, all valuation are included in Dec in preceding year i.e. valuation of Jun 15 will be included in 14.


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Baoxin (1293 HK)

Share Data (as of 25 Mar 16)

Share price HKD 4.90

2016 high / low price HKD 4.95 / 4.36

Shares outstanding m 2,557

Market cap USDm 1,922

NT's ownership % of NAV 11.0

NT's ownership % of co. 1.1

Top 3 shareholders

1. Baoxin Investment Management 48.6%

2. Yang family 17.1%

3. Capital Group Companies 5.0%

Share Valuation Dec 14A 15F 16F 17F

Revenue CNYm 30,723 29,875 31,469 33,044

Net profit CNYm 707 747 826 940

EBITDA CNYm 1,942 2,041 2,273 2,515

EPS CNY/sh 0.28 0.29 0.32 0.37

Net profit gr % (29.8) 5.6 10.7 13.8

EBITDA gr % (9.6) 5.1 11.4 10.6

EPS gr % (29.8) 5.6 10.7 13.8

PER x 14.9 14.1 12.7 11.2

Yield % 1.0 1.8 2.0 2.3

ROE % 14.5 13.3 12.9 13.3

ROA % 3.8 3.6 3.7 4.0

ROCE % 12.7 11.7 11.6 12.0

EV/EBITDA x 7.2 7.3 6.8 6.1

Net DE (cash) % 68.5 72.5 72.1 66.3

PBV x 2.1 1.7 1.6 1.4

P/OCF x 2.7 4.0 17.3 14.6

FCF/EV % 4.8 9.5 (1.1) 1.0

Source: NTAsset

Revenue breakdown by geographical segment (%)

Source: Company data

Share Price Chart

Source: Bloomberg

Background & investment case

Baoxin is a leading luxury car dealership group in China, having grown from just one Audi dealership in 1999 into its current network of 91 stores, with more stores under construction or authorized. The network includes NCGA’s twenty 4S stores acquired in 2012 from US private equity investors. Baoxin is the largest dealer for BMW and Jaguar Land Rover in China.

On 28 December 2015, Shanghai-listed China Grand Automotive Services, the largest dealership group in China with 482 stores, approved a partial cash offer for Baoxin at HKD 5.99 per share for up to 75% of total outstanding shares. As of the date of this publication, the deal has received approval by relevant government authorities, and what remains to be obtained are from “qualified banks approved by SAFE for foreign exchange in connection with the Offers”.

China automobile industry had seen a softening of demand conditions and been undergoing an inventory correction since mid-2014, and OEMs have adjusted production to the slower demand growth. Dealerships are relying less on new car sales and focusing more on after-sales services and other fee income, which is a more sustainable long term model similar to developed countries. Structurally there is still significant room for growth with Chinese percentage of car ownership still only in the low teens.

We consider Baoxin’s management as one of the most prudent and focused within the industry, where other listed peers have ventured into automotive financing, car rental, and even production of new energy vehicles. In the first six months of 2015, Baoxin was the first major dealer to stop taking shipments from OEMs and reduced inventory by 17%.

Key developments in 2016-17

“Dealer Revolution” started in 4Q14: China auto dealers formed alliances by brand to negotiate with OEMs for better terms and support. Depending on OEM, dealers will receive benefits such as minimum cash margin, quicker rebate payments, quarterly volume target reviews, and lower store capex requirements.

BMW will have a much stronger product lineup in 2015-2017, with the new generation 7 series in 2016, new generation 5 series in 2017, as well as more local-assembled models by BMW Brilliance. Jaguar Land Rover began local assembly of the Range Rover Evoque in late 2014 and will add the Discovery Sport by 2016, increasing its price competitiveness.

Effective October 2015, China government reduced vehicle purchasing tax from 10% to 5% for models with 1.6L or smaller engines. Entry-level models for luxury brands meet this requirement.

Pre-owned market to grow significantly when replacement cycle starts around 2017, with average passenger vehicle age reaching 5 to 6 years old.

Financials and valuations

2015 revenue and net profit was down 23% and 69% respectively, due to a 25% decline in new car sales and lower gross margin. Management intentionally slowed down its business during 2H15 because of the due diligence process related to the partial cash offer from China Grand Automotive Services, resulting in 2H15 new car sales down 35% YoY.

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Pakuwon (PWON IJ)


Share price IDR 515

2016 high / low price IDR 540 / 427





Top 3 shareholders

1. Tedja Family (through four holding companies) 52.2%

2. JPMorgan Chase & Co 1.5%

3. Allianz SE 1.4%

Share Valuation Dec 14A 15A 16F 17F

Revenue IDRbn 3,872 4,625 5,319 6,117

Net profit IDRbn 2,516 1,262 1,892 2,203

EBITDA IDRbn 2,171 2,422 2,787 3,207

EPS IDR/sh 52.23 26.20 39.28 45.75

Net profit gr % 122.1 (49.8) 49.9 16.5

EBITDA gr % 31.4 11.6 15.1 15.1

EPS gr % 122.1 (49.8) 49.9 16.5

PER x 9.9 19.7 13.1 11.3

Yield % 0.9 1.0 1.5 1.8

ROE % 50.1 18.8 23.5 22.5

ROA % 19.3 7.1 9.6 10.2

ROCE % 21.8 17.5 17.8 18.2

EV/EBITDA x 11.9 11.4 9.9 8.5

Net DE (cash) % 17.9 39.3 31.8 24.4

PBV x 4.0 3.4 2.8 2.3

P/OCF x 12.5 14.6 14.0 11.9

FCF/EV % 5.6 (0.3) 1.0 2.1

Source: NTAsset



Share Price Chart

Source: Bloomberg

Background & Investment case

Pakuwon Jati (PWON) is Indonesia’s leading retail mall developer with presence in Jakarta and Surabaya, Indonesia’s two largest and wealthiest cities. It owns more than 10 years-worth of development land bank in prime areas. The company is well positioned to tap into Indonesia’s rising middle class with rapidly growing income and purchasing power. Recent regulation prohibits new mall openings in Jakarta providing a strong barrier to entry protection for PWON. PWON’s development model combines retail and office developments within its residential developments creating mixed use ‘superblocks’. The company has a well balanced portfolio of development and investment properties, with a near 50:50 split between recurring income and sales of residential/commercial units. PWON is among Indonesia’s most established developers with a 30 year track record and was the first property company to be listed on the Jakarta Stock Exchange in 1989. The founding Tedja family owns 52% of the shares.


PWON is diversifying its recurring income base to office leasing and hotel portfolio to complement existing superblocks. Office NLA is target to increase by 126% to 162k sqm by FY19 (from 73k sqm in FY15) while hotel rooms is target to increase by 174% to 1,887 rooms (from 688 rooms in 2015) by FY17. Retail mall NLA will also increase by 26% to 643k sqm by FY18 (from 512k sqm in FY15).

Management is guiding for flat FY16 presales of IDR3.1tr due to slowdown in Jakarta’s condo market. But we believe that this may be too conservative given the recent run rate of presales at its existing projects is already implying a 10-15% full year presales growth.

Recent positive development in Indonesian REIT law could be another catalyst to PWON as this could pave the way for PWON’s asset monetization and realizing the gain on fair value of its recurring income assets. If PWON investment property assets were to be revalued to the appraised value, its FY15 book value per share (BVPS) could increase by IDR120/sh, which is an 80% upside to FY15A BVPS.

Financials & valuations

PWON FY15 normalised net profit was IDR1.73bn, up 18% YoY. However, on a reported basis, PWON’s FY15 net profit was IDR1.26bn, down 50% YoY driven by an absence of large one off gains like in FY14 coupled with one off penalty on early redemption of convertible notes (as PWON wanted to reduce its USD liabilities exposure), larger unrealized foreign exchange losses, and larger FX hedging losses in FY15. Its normalised net profit growth was driven by revenue growth of 19% YoY, mainly from full year contribution from Pakuwon Permai’s three malls as well as Grand Pakuwon Township which commenced landed housing presales in late FY14. PWON is trading at an attractive low teen PER and a discount to NAV of 40-50% with a normalised EPS three year CAGR (FY16-18F) of 16% thanks to its healthy development pipeline, rising property price, expansion of rental area/hotel rooms, and rent reversions.

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Minth (425 HK)








Top 3 shareholders

1. Jong Hwa Chin 40.0%

2. Invesco Ltd 11.4%

3. Commonwealth Bank 8.0%


Revenue CNYm 6,684 7,654 8,973 10,271

Net profit CNYm 1,118 1,272 1,550 1,764

EBITDA CNYm 1,416 2,045 2,472 2,784

EPS CNY/sh 1.01 1.14 1.41 1.60

Net profit gr % 15.1 13.8 21.9 13.8

EBITDA gr % 13.4 44.5 20.9 12.6

EPS gr % 14.1 12.8 22.9 13.8

PER x 14.9 13.2 10.8 9.4

Yield % 2.4 2.6 3.1 3.6

ROE % 14.2 14.5 16.0 16.4

ROA % 9.2 9.8 11.1 11.3

ROCE % 17.5 19.0 21.0 21.2

EV/EBITDA x 13.3 9.3 7.3 6.4

Net DE (cash) % (10.7) (8.8) (16.5) (18.0)

PBV x 2.0 1.8 1.6 1.5

P/OCF x 16.0 10.6 7.3 8.9

FCF/EV x (0.2) 2.0 6.9 4.8

Source: NTAsset



Share Price Chart

Source: Bloomberg


Minth is China’s leading supplier of exterior auto body parts including trims, decorative parts, and body structural parts with a 30% share of the domestic market and a 10% share of the global market. Minth is targeting 20% global market share by 2020. With factories in China, Thailand, Mexico, and Eastern Europe, Minth has the capability to support global car platforms and continues to take share from regional players, mostly from Europe. Already 40% of revenue is from global platform models and exports reached 40% of 2015 revenue. 2015 revenue breakdown by OEMs was 39% Japanese, 31% American, 17% European, and less than 10% Chinese. However European OEMs accounted for the biggest portion of new business awarded during 2015, including aluminum decorative strip for Mercedes-Benz A-Class and B-Class models. Top customers are Honda, GM and Nissan each at 15-17% of revenue, followed by BMW 10% and Ford 6%. Volkswagen Group is only 4% but growing, so there is some uncertainty to VW Group’s new Q5 global platform awarded to Minth. In addition to diversifying its customer base, Minth has also expanded into new product categories such as aluminum parts and now automotive electronics.


With multi-year visibility from new business awarded, management expects revenue and net profit to grow by over 15% in 2016. Gross margin will improve from 32% in 2015 to 33-35% as the mix of aluminum products (38-40% gross margin) increases and utilization improves.

Effective October 2015, the Chinese government reduced vehicle purchasing tax from 10% to 5% for models with 1.6L or smaller engines. Most of the models that Minth caters to for the China market have 1.6L versions that would meet the requirement.

Capex peaked in 2014 and was down 11% in 2015. Capex will further decline to RMB1bn in 2016.

In November 2015, Minth announced plans to invest RMB1bn over next few years into the production of automotive electronic products starting with camera modules. This is first step in the company’s development into electronic components for intelligent automobiles.


2015 revenue and net profit were up 9% and 11% YoY respectively. Gross margin improved from 31.2% in 2014 to 31.7%. New business awarded during 2015 was Rmb4.2bn, bringing 2017 order book to over RMB10bn. Minth provided products into 25m vehicles with average content of RMB320 per vehicle. Minth is trading at 9x 2017 PER and 1.3x PBV while generating 15-16% ROE, with 3-4% dividend yield.

PRC62%

North America22%

Europe9%

Asia Pacific7%

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Luk Fook (590 HK)




Shares outstanding m 587




Top 3 shareholders

1. Luk Fook (Control) Ltd 48.6%

2. Silchester Intl Investors 7.0%

3. Franklin Resources 5.0%

Share Valuation Mar 15A 16F 17F 18F

Revenue HKDm 15,923 14,423 13,671 13,458

Net profit HKDm 1,615 1,231 1,227 1,246

EBITDA HKDm 2,150 1,722 1,753 1,810

EPS HKD/sh 2.74 2.09 2.08 2.11

Net profit gr % (13.4) (23.8) (0.3) 1.5

EBITDA gr % (11.9) (19.9) 1.8 3.3

EPS gr % (13.4) (23.8) (0.3) 1.5

PER x 6.2 8.2 8.2 8.1

Yield % 6.5 4.9 4.9 5.0

ROE % 20.0 13.9 12.9 12.2

ROA % 15.3 10.4 9.8 9.5

ROCE % 21.3 14.7 14.0 13.5

EV/EBITDA x 4.5 5.2 4.6 4.1

Net DE (cash) % (4.4) (12.8) (20.5) (24.9)

PBV x 1.2 1.1 1.0 0.9

P/OCF x 24.4 5.7 5.9 6.7

FCF/EV % (0.2) 18.7 20.6 19.7

Source: NTAsset



Share Price Chart

Source: Bloomberg


Established in 1991, Luk Fook is a leading jewelry retailer in Hong Kong and China, with 153 self-operated stores and 1,257 licensed stores. Its own large-scale jewelry processing plant in Guangzhou is focused on the production of gem-set jewelry. The major Hong Kong jewelers are known for their product design and positioned in the mid-end segment between local Chinese brands and foreign brands. Hong Kong accounts for 75% of revenue and 58% of profits, and the rest is from China through self-operated retail, licensing and wholesaling. Gold sales are volatile depending on gold price sentiment, but gem-set accounts for two-thirds of gross profit due to its much higher margin. Per-capita spending on jewelry in China is only half that of Japan and one-fifth of USA, and Chinese consumers spend a disproportionate amount on gold. Penetration rate for gem-set and diamond jewelry should continue to rise as consumers are increasingly influenced by Western culture, so the product mix will be more favorable to jewelers’ margins. Luk Fook has a strong balance sheet with net cash, a consistent dividend payout track record, and room to grow its store network in China.


Mainland tourist arrivals to Hong Kong fell sharply in 2015 after Occupy Central protests in October 2014 and China government imposing curbs on day-trippers starting April 2015. This has led to a depressed current operating environment for Luk Fook’s Hong Kong operations.

Hong Kong rental rates are starting to decline after doubling in the past 3 years. The positive impact from lower rental expenses will be seen in 2016 and 2017 which should provide increased operating leverage as and when current depressed revenues start to normalize.

Continued expansion in China: Luk Fook’s store count in China is less than 70% of competitors Chow Tai Fook and Lao Feng Xiang. Luk Fook plans to add 80 stores in 2016.

Wholesale and licensing revenue will grow faster than self-operated retail as China becomes the main growth driver and the Hong Kong store network is further optimized. Wholesale and licensing are also asset-light business strategies that generate higher return-on-equity compared to self-operated retail.


1HFY16 net profit declined by 43% YoY on an 8% decrease in turnover, mainly due to the sharp drop in Hong Kong gem-set sales given a mini “Gold Rush” during September quarter had consumers buying more gold. 3QFY16 sales performance continued to weaken down with same store sales down 25% YoY, mainly due to weakness in Hong Kong. China same stores sales was down 10% YoY due to lower gold price and volume, while gem-set sales recorded the 11th consecutive quarter of growth. Luk Fook is trading at 7x 2016 PER and 0.9x PBV while generating a 12-13% ROE in a depressed operating environment. Dividend yield is attractive at 6% with potential for special dividends.

Hong Kong75%

The PRC25%

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Puregold (PGOLD PM)


Share price PHP 37.00

2016 high / low price PHP 41.00 / 29.00





Top 3 shareholders

1. Cosco Capital 51.0%

2. Lucio L Co 7.0%

3. Susan P Co 6.0%

Share Valuation

Dec 14A 15F 16F 17F

Revenue PHPm 84,697 93,167 106,676 122,144

Net profit PHPm 4,520 4,688 5,717 6,727

EBITDA PHPm 7,692 8,140 9,620 11,067

EPS PHP/sh 1.63 1.69 2.07 2.43

Net profit gr % 14.2 3.7 21.9 17.7

EBITDA gr % 17.1 5.8 18.2 15.0

EPS gr % 14.2 3.7 21.9 17.7

PER x 22.6 21.8 17.9 15.2

Yield % 0.8 1.8 2.2 2.6

ROE % 14.7 13.0 14.3 15.2

ROA % 9.1 8.4 9.5 10.3

ROCE % 17.0 16.3 18.3 19.8

EV/EBITDA x 13.1 12.1 10.0 8.4

Net DE (cash) % (5.8) (9.1) (14.3) (19.2)

PBV x 3.0 2.7 2.4 2.2

P/OCF x 29.5 26.9 17.3 15.3

FCF/EV % 1.8 2.3 4.5 5.5

Source: NTAsset



Share Price Chart

Source: Bloomberg


PGOLD is a prominent food retail group in Philippines and 51% controlled by the Chinese taipan founder Lucio Co via his other listed conglomerate COSCO Capital (72% held by Co Family). The company was set up in mid-90s and first hypermarket store is opened in 1998 to cater for mid to low income consumers with low competitive price concept. Among the key retail formats are mass grocery retail via ‘Puregold’ banner (over 50% of earnings) and member-only high-margin imported grocery under S&R banner (40% of earnings). Through aggressive expansion and impressive execution record, PGOLD has grown its store network to currently 265 stores (9M15) across 4 key retail formats, implying an average growth rate of 16 new stores per year (largely by own expansions and partly by M&A). PGOLD is now the 2nd biggest retail group with annual revenue of over P85bn (vs. long-time incumbent SM Group at P120bn) but biggest in terms of grocery retail operations in the Philippines. With near 100m population (2nd largest in ASEAN), continued growth of Philippines economy, and rising GDP per capita, PGOLD is poised to become one of ASEAN’s food retailing giants.


PGOLD plans to open at least 21-22 new stores per year in the next few years excluding smaller format like QSR and CVS. Its current selling grocery space as of 9M15 stood at 421k sqm and the growth in space is expected to grow at a CAGR of 11% during 2014-17.With more aggressive expansions on S&R concept, we see a continued margin expansion into the future given that S&R commands a much higher net margin (8-10% on average) vs. a low single digit margin at Puregold concept (barring no major changes in P/USD). With more S&R revenue contributions, margin should thus further expand.

We expect the election year in 2016 to provide tailwind for near term earnings at PGOLD and perhaps positive long-term structural growth brought by the new leadership assuming the focus will continue to be pro-growth. GDP per capita in Philippines is expected to grow by 8% CAGR during 2014-20 to surpass USD4k (USD3k currently) according to IMF. Rising disposable income will benefit modern retail, PGOLD included. In fact, the effect is already at work given PGOLD earlier guided its comp growth in 2016 to be a low single-digit but YTD figures have been stronger to the tune of 9-10%.

Its CVS foray via Lawson franchise is seen as a good hedging strategy on continued modern trade invasion. PGOLD has over 350k mom & pop shops as its customers of which account for 30% of its total sales. Some good 2-3k accounts of these deal with PGOLD for at least P3m per account per year. Should new generations of these small businesses decide to modernize themselves, PGOLD sees them as good candidates for their CVS franchisees providing good synergy. This is a clear comparative advantages that PGOLD has over its other CVS peers.


PGOLD has taken a breather in 2015 due to some restructuring post a strong CAGR of 40% during 2011-14. The subsequent share price weakness allows us a good entry at below 1x sales valuation. We expect PGOLD to renew its growth momentum in the next few years with strong start in 2016. PGOLD is currently priced at less than 1x p/sales, mid-teen PER and single-digit EBITDA with mid-teen ROE. Heftily undemanding considering that Thailand-based food retailer BIGC has changed hand at over 30x PER, 2x sales, and over 5x PBV in early 2016!

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Silverlake Axis (SILV SP)


Share price SGD 0.61

2016 high / low price SGD 0.65 / 0.53





Top 3 shareholders

1. Goh Peng Ooi 66.7%

2. NTAsian Discovery Fund 4.8%

3. Schroder Investment Management 1.0%

Share Valuation

Jun 15A 16F 17F 18F

Revenue MYRm 516 610 731 890

Net profit MYRm 283 265 305 358

EBITDA MYRm 311 305 350 412

EPS MYR/sh 0.10 0.10 0.11 0.13

Net profit gr % 13.6 (6.3) 15.0 17.6

EBITDA gr % 11.3 (1.9) 14.9 17.5

EPS gr % 13.6 (6.4) 15.0 17.6

PER x 16.1 17.2 15.0 12.7

Yield % 8.5 5.8 6.7 7.8

ROE % 45.0 47.0 60.0 64.6

ROA % 36.6 31.0 30.3 30.7

ROCE % 47.0 41.7 41.1 41.9

EV/EBITDA x 13.6 13.7 11.7 9.7

Net DE (cash) % (51.4) (79.3) (87.7) (96.5)

PBV x 7.1 9.4 8.7 7.9

P/OCF x 14.2 9.5 12.6 10.7

FCF/EV % 7.8 11.8 9.1 11.0

Source: NTAsset



Share Price Chart

Source: Bloomberg


Founded in 1989 by current Chairman Goh Peng Ooi, SILV provides state-of-the-art banking solutions via its flagship product, Silverlake Axis Integrated Banking Solution (SIBS), now in its tenth version. SILV’s SIBS has been implemented at leading commercial banks across Asia with over 100 customers and has a leading 50% market share of the top twenty banks in South East Asia. The company also owns a 100% subsidiary in Japan, SBI Card Processing which is market leader for internet-centric financial solutions platform and a 20% stake of China-listed banking software associate, GIT Infotech.

SILV is the only listed IP licensing firm in ASEAN with an unparalleled 100% implementation success track record. Earnings have doubled in the past 3 years and the management targets to repeat that again by FY18. SILV will remain a prime beneficiary given many banks in ASEAN are looking to upgrade its core banking systems. SILV has actively been adding new product suites (via takeover of companies around the region) to prepare itself for forthcoming digital economy and these include mobile payment & insurance claim services.


The transformation from a purely licensing business pre-2010 to a recurring revenue business model has been very successful with high-margin maintenance contracts now accounting for over 50% of revenue providing high visibility of earnings. The successful implementation of CIMB’s 1Platform core banking system in late 2014 which allowed the bank to operate three-market operations and migrate over 10m customer account onto one single platform is one clear testimonial on how successful SILV has been in delivering and implementing large-scale and complicated contracts.

The integrity of SILV’s business model recently came under attack from an anonymous short-sell report accusing the company of inflating its profits via using private entities under major shareholder to subsidize the listed entity. An independent third party report by Deloittes has absolved the company from these allegations. Over the years, we have worked with the major shareholder to improve overall transparency and see this as a further catalyst for a continued restructuring and for better transparency. We expect more progress on the restructuring of the private-public contracts which should ensure further transparency

Despite absence of imminent mega merger contracts, there is high visibility from maintenance and enhancement revenues which should allow the company to enjoy a minimum of high-teen earnings growth in the next few years. The controlling shareholder has indicated a continued flow of licensing opportunities for SILV from his work in China however we have deliberately discounted this in our forecast which are driven by third-party transactions.

SILV continued on its M&A activity with USD12m acquisition of Singapore-based Sungard Ambit which has complimentary product suites largely on the retail banking side. Rebranded to Symmetri, SILV will use this as a platform to penetrate small mid-tier customers in new markets while SILV will continues to focus on existing and bigger markets with big contract values.


SILV reported flattish earnings in its FY1H16 post consolidation of loss-making Symmetri. Revenue grew 18% YoY led by maintenance and enhancements. SILV is taking advantage of weak share price with a buy-back and its net cash can still afford 7-8% yield.

South East Asia91%

North East Asia5%

South Asia1%

Africa2%

Middle East1%

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Hanon Systems (018880 KS)


Share price KRW 9,400

2016 high / low price KRW 10,580 / 8,990





Top 3 shareholders

1. Hahn & Co Auto Holdings 50.5%

2. Hankook Tire 7.0%

3. National Pension Service 6.0%


Revenue KRWbn 5,455 5,558 5,780 6,029

Net profit KRWbn 275 231 309 336

EBITDA KRWbn 550 533 625 667

EPS KRW/sh 516 432 579 630

Net profit gr % (7.1) (16.3) 34.0 8.9

EBITDA gr % (3.7) (3.0) 17.2 6.7

EPS gr % (7.1) (16.3) 34.0 8.9

PER x 18.2 21.8 16.2 14.9

Yield % 2.1 2.1 2.5 3.0

ROE % 17.7 13.7 16.7 16.3

ROA % 8.9 6.9 8.7 9.0

ROCE % 19.0 17.3 20.8 20.4

EV/EBITDA x 9.2 9.3 7.7 7.0

Net DE (cash) % 1.2 (2.9) (11.4) (17.6)

PBV x 3.1 2.9 2.6 2.3

P/OCF x 13.9 11.2 11.3 10.4

FCF/EV % 1.8 4.4 4.9 6.0

Source: NTAsset



Share Price Chart

Source: Bloomberg


Hanon is the third largest global manufacturer of auto climate control parts and is one of only two producers of full auto climate control systems (modules). Currently Hanon has 38 manufacturing facilities in 20 countries, supplying about 20 customers.

Hanon started out in 1986 as Halla Climate Control Corp (HCC), a joint venture between Ford Motor Co. and Mando Machinery Corporation Korea (a part of Halla Group). Visteon Corp, a components producer unit of Ford, acquired stakes from Ford and Mando in 1999 and the company was completely separated from Ford when Visteon was spun off in 2000. In 2013 Visteon’s entire global climate control business was consolidated under HCC and its name was changed to Halla Visteon Climate Control (HVCC). In 2014, HVCC acquired Cooper Standards’ thermal & emissions business to expand its product portfolio. In late 2014, private equity firm Hahn & Co and Hankook Tire purchased 70% of HVCC from Visteon and on completion of this the transaction in mid-2015, the company’s name was changed to Hanon System (Hanon).

The market for climate controls is still relatively fragmented. Hanon is the number 3 player with 13% share of the global market, behind Denso with 23% and Mahle with 15%. Mahle only recently became 2nd largest when it acquired Delphi’s climate control business. Other key players in the market include Valeo with a 12% share, Calsonic Kansei with 5%, Sanden with 4% and other small producers account for the remaining 28%. In the Korean domestic market, the share is skewed to Hanon with 52% share compared to Doowon Climate Control with 27%, Korea Delphi 13% and others 8%.


Sustainable growth: the company’s revenue is expected to grow 7-10% CAGR for the next 5 years driven by expansion of its customer base including GM, VW, BMW and Tesla. Core customers (Hyundai-Kia Motors and Ford) are expected to provide growth of around 3% CAGR and the customer concentration ratio is expected to fall from 70% to 50% over the next 10 years.

Margin improvement: Hanon’s management sees further opportunities for cost optimization through consolidating its global procurement, further labor & overhead cost reductions and discontinuing royalty and other payments to Visteon.

Solid positioning: there is a strong demand on climate control and thermal management technology improvement given the current trend focusing more on fuel efficiency and emissions amongst global automakers and the governments. This is a friendly environment for Hanon as the company has strength in advanced technology.

Corporate governance: Management has also stated quarterly dividend pay-out, and potential M&A in the future using its strong balance sheet. We believe that successful M&A could be a catalyst for a rerating.

Financials and valuations

Hanon generates strong operating cash flow to support R&D and CAPEX. Given the net cash position of its balance sheet, the company is also positioned to capitalise on potential M&A opportunities as the sector further consolidates.

Hanon is currently trading at 16x 16FY PER, 8x EV/EBITDA, fairly valued for a specialty auto parts maker.

South Korea32%

Europe32%

China15%

North Amrrica12%

Rest of the world9%

02,0004,0006,0008,000

10,00012,000


KRW


Page | 11

Blue Bird (BIRD IJ)


Share price IDR 6,800

2016 high / low price IDR 7,300 / 5,400





Top 3 shareholders

1. PT Pusaka Citra Djokosoetono 37.2%

2. Prawiro H Purnomo 9.6%

3. Djokosoetono Sigit Priawan 6.0%

Share Valuation

Dec 14A 15F 16F 17F

Revenue IDRbn 4,759 5,299 5,952 6,686

Net profit IDRbn 735 850 983 1,146

EBITDA IDRbn 1,796 1,889 1,915 2,103

EPS IDR/sh 336 340 393 458

Net profit gr % 3.9 15.7 15.6 16.6

EBITDA gr % 14.7 5.2 1.4 9.8

EPS gr % 0.9 1.2 15.6 16.6

PER x 20.2 20.0 17.3 14.8

Yield % 0.6 0.7 1.7 2.7

ROE % 31.5 21.7 20.8 20.6

ROA % 12.1 11.8 13.1 14.4

ROCE % 25.3 22.5 24.2 24.4

EV/EBITDA x 10.1 9.8 9.4 8.2

Net DE (cash) % 31.1 36.3 17.6 3.6

PBV x 4.8 4.0 3.3 2.8

P/OCF x 13.0 24.9 12.7 11.0

FCF/EV % (4.2) (1.1) 4.3 5.7

Source: NTAsset



Share Price Chart

Source: Bloomberg


From humble beginnings in 1973, the Djokosoetono Family has grown the business from running just a few taxis to becoming a leading transportation service provider in ASEAN. Blue Bird is a well-known trusted taxi brand in Indonesia currently with the biggest fleet size of over 33,000 units (26,000 of which are regular taxis) and over 40,000 drivers. BIRD commands a leading market share of over 35% nationwide and near 50% in Greater Jakarta area. From day one, BIRD has emphasized on services, competent drivers, and well maintained vehicles. To put that into perspective, the recovery rate of lost & found for its customers has been over 94-95% resulting in strong trust in the brand.

The market’s anxiety over the new ‘sharing economy’ invasion with the like of Uber and other app-based taxi concepts has led to BIRD losing over 50% of its market value since 2014 IPO. This is despite continued healthy earnings growth and improving fleet utilization and has provided an excellent entry level for our fund to gain exposure in one of the best franchises and brands in Indonesia.


As seen across Asia, the still regulated Indonesia taxi market has similarly experienced disruptive changes brought about by ‘sharing economy’ app-based services with the likes of Uber, Grab, and Go-Jek. These new digital players have not complied with the public transportation laws and the conflict has intensified up to the point of arousing near 10,000 taxis out on the street to protest in Mar 2016. Such aggravated situation has prompted the government to seriously consider resolutions on this. We view this development as only positive given the upcoming resolution should clear overhang and allow players to complete on a level playing field. This is undeniably good for BIRD as competition should then focus more on services rather than irrational subsidies and digital players punching below the belt. We expect BIRD to continue to thrive with its strong financials, cost efficiency, and unrivalled service quality.

BIRD is diligently reinventing itself as well. The management acknowledges that the digital players have technology edge on reservation systems and are only cheaper during off-peak hours via subsidies. BIRD has earmarked over USD100m CAPEX including a major IT upgrade since 2015 and now ready to roll out its new booking app to allow more flexible fares and new features to match those of its digital competitors. BIRD believes taxi services is not only about making easy booking but also providing good services of which BIRD has an unrivaled track record in Indonesia.

BIRD continues to expand into new cities on the back of available 8,000+ new licenses on hand (5k for Jakarta & greater Jakarta). YTD, BIRD has added nearly 1,000 new taxis and 7 new depots (now 76 in total) in new cities including fast growing Bandung and Makassar. On top of expansion-led growth, the distant no. 2 player has fallen into financial difficulty with a failed business model. This will likely lead to BIRD gaining additional market share.


BIRD showed a healthy 17% earnings growth in 9M15 with continued fleet size growth (+7% YoY), stable utilization (75%) & stable revenue per car (RP630k) and 35% EBITDA margin. Balance sheet remains sound with a mere 0.4x net gearing.

BIRD is trading on a mid-teen PER and single-digit EBITDA multiple with good ROE generation – and is trading at a hefty discount to regional peers.

Domestic100%

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IDR


Page | 12

Cosmo Lady (2298 HK)








Top 3 shareholders

1. Harmonious Composition Investment 61.7%

2. Capital Today Investment 7.0%

3. Capital Group 5.1%

Share Valuation

Dec 14A 15A 16F 17F

Revenue CNYm 4,008 4,953 6,119 7,363

Net profit CNYm 425 540 704 857

EBITDA CNYm 601 709 995 1,218

EPS CNY/sh 0.25 0.28 0.37 0.45

Net profit gr % 54.3 27.0 30.3 21.7

EBITDA gr % 51.7 18.0 40.3 22.5

EPS gr % 35.4 13.9 30.3 21.7

PER x 21.4 18.8 14.4 11.9

Yield % 1.1 1.2 1.7 2.1

ROE % 29.1 22.1 24.2 24.7

ROA % 20.9 17.3 18.5 18.8

ROCE % 39.9 29.1 31.8 32.4

EV/EBITDA x 18.4 15.7 10.9 8.6

Net DE (cash) % (48.3) (36.4) (40.0) (43.9)

PBV x 4.5 3.9 3.2 2.7

P/OCF x n/a 24.2 14.7 12.9

FCF/EV % (1.8) 2.4 5.5 7.5

Source: NTAsset



Share Price Chart

Source: Bloomberg


China’s largest intimate wear brand with 1,483 self-managed outlets and 7,126 franchised outlets. Cosmo Lady’s market share was 3.3% in 2015, equivalent to the combined market shares of the 2nd through 5th players. In developed markets like US, Victoria’s Secret and Hanes each have 20-30% market share. Management targets opening approximately 700, 300 and 100 outlets respectively for Cosmo Lady, Freeday and Ordifen brands. Chairman was a sales manager in a Shenzhen Walmart store, before starting his own business in the late 1990s. The core Cosmo Lady brand has expanded at a pace of more than 1,000 outlets per year from 2011 to 2015, and in 2015 the company launched independent stores for its new Korean styled “Freeday” brand. The 2015 acquisition of Ordifen adds several high-end brands into its portfolio. Cosmo Lady should easily exceed its target set in 2014, to reach 10,000 outlets by 2018.

Cosmo Lady’s 37m members accounted for 40% of revenue in 2015, and by adding men and children products to its social community stores, consumer have increased the frequency of visits. This is a key advantage of Cosmo Lady’s standalone stores compared to Embry’s department store concessions. Cosmo Lady’s stores can easily add product lines to help grow same-store sales, as opposed to department store concessions which would likely be located in the women’s product area.

E-commerce grew +136% YoY and accounted for 3% of 2015 revenue, and Cosmo Lady is already amongst the top 3 intimate wear retailer on TMALL. Major shareholders placed out 3.5% shares in 2015 at HKD6.43, and still own 61.7% of the company. They have been buying shares since October 2015.


2016 target to open over 1,100 new outlets, increasing penetration into tier 3&4 cities.

Store rental rates have been declining thus franchisees are more inclined to open new stores. The introduction of 5th generation store format should provide boost to same-store-sales.

Bargaining power continues to strengthen leading to lower procurement cost and better payment terms.

New Tianjin logistics center will cut delivery time for Northern China by half to 3 days, helping Cosmo Lady further penetrate the region.

Strong IT system allows Cosmo Lady to help franchisees with store life cycle management, and improve the success rate of new stores. New mobile app allows franchisees to manage members for their own stores, reducing potential conflict of interest between Cosmo Lady and it franchisees.


2015 revenue and net profit were up 24% and 27% YoY respectively. 2H performance was impacted by warmer weather that hurt sales of seasonal products, but sell through recovered in early 2016 after weather turned cold.

Cosmo Lady can deliver greater than 20% net profit CAGR over the next 3 years, and trades at 12x 2017 PER.

PRC100%

02468

10

Jun-14 Oct-14 Feb-15 Jun-15 Oct-15 Feb-16

HKD


Page | 13

Tisco (TISCO TB)


Share price IDR 47.75

2016 high / low price IDR 47.75 / 40.25





Top 3 shareholders

1. Thai NVDR 10.0%

2. CDIB & Partners Investment 10.0%

3. Krungsri Asset Management 9.9%

Share Valuation

Dec 14A 15A 16F 17F

Net interest inc THBm 9,540 10,130 9,467 9,643

Non interest inc THBm 4,976 5,057 5,298 5,695

Pre provision profit THBm 9,744 10,566 9,831 10,073

Net profit THBm 4,250 4,250 4,899 5,276

EPS THB/sh 5.31 5.31 6.12 6.59

EPS gr % (4.4) 0.0 15.3 7.7

PER x 9.0 9.0 7.8 7.2

PBV x 1.5 1.4 1.2 1.1

Yield % 4.2 4.4 4.6 5.0

ROE % 17.4 15.8 16.5 15.9

ROA % 1.3 1.4 1.7 1.8

Tier 1 ratio % 12.6 13.9 14.7 14.8

NPL coverage ratio % 101.2 80.1 100.0 100.0

Loan growth % (8.6) (9.3) 0.1 5.0

NIM % 2.9 3.4 3.4 3.3

Source: NTAsset



Share Price Chart

Source: Bloomberg


Tisco Financial Group (TISCO) is one of Thailand’s leading auto hire purchase lenders and is actively expanding into collaterised consumer loans. Key segments of its loan portfolio include auto loans, corporate loans, small and medium enterprises (SME) loans, and consumer loans. TISCO also generates non-interest income from insurance broking, asset management, brokerage, and investment banking business. The company was established in 1969 as Thailand’s first investment bank and was initially listed on the Stock Exchange of Thailand in 1983 as Tisco Finance. It was later relisted as Tisco Financial Group in 2009 following the restructuring into a holding company structure. Management long term strategy is to focus on optimal capital utilisation to generate strong risk adjusted returns with a minimum required ROE of 15%. Return in equity is management’s primary focus, ahead of asset growth and market share. Our key investment thesis is TISCO’s down cycle valuation which was driven by both the slow total vehicle sales following the pent up demand from the government’s one off tax rebate program in 2011/12 combined with weakening of auto loan’s asset quality. Market sentiment toward TISCO was further depressed by its major write off related to corporate loan exposure to Sahaviriyah Steel Industries (SSI), Thailand’s leading steel company, due to the plunge in global steel price.


Management expects the contraction in its auto loan portfolio to end in mid/late FY16 with growth to resume in FY17 as auto sales will start to rebound driven by the replacement demand.

Collateralised consumer loan is expected to be the key growth area with 10% target growth in FY16. Management guided that this segment provides high yield and low NPL as the loan is mostly collateralised by the borrower’s car or motorcycle.

Having spent eight years building its credit knowledge on the collateralised consumer lending market and recognizing that this market segment is still underserved, TISCO is expanding its nationwide network of loan offices from 100 to 300 branches over the next 3-4 years to capture this opportunity. TISCO has no plan to expand into uncollateralised consumer lending given a less attractive combination of yield and risk.

For non-interest income, we expect at least 10% growth from bancassurance fee that is non-loan related and a 20% growth in AUM for its asset management business in FY16/17.


TISCO reported 2015 net profit of THB4.25bn, flat YoY. Pre provisioning profit (PPOP) was up by 8% YoY driven by net interest margin expansion. But the increase in PPOP was offset by an increase in loan loss provisions driven by SSI loan. The stock is trading at an undemanding FY16F PBV of 1.2x on ROE of 15-16% with a good dividend yield of 4-5%.

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THB


Page | 14

Disclaimer

The contents of this message are intended for informational purposes only and are not for distribution to and does not constitute an offer to sell or the solicitation of any offer to buy or sell any securities to any person in any jurisdiction. While NTAsset has done its best to verify the accuracy of all information contained herein, no reliance should be placed on the information or opinions in this communication or their accuracy or completeness, for the purpose of making any investment or any other purpose. No representation, warranty or undertaking, express or implied, is given as to the information or opinions in this communication or their accuracy or completeness, by NTAsset or by their respective directors, officers, partners, employees, affiliates or agents, and no liability is accepted by any of the foregoing as to the information or opinions in this communication or their accuracy or completeness. Any investment information is intended for use by professional investors only. An offer to buy or sell any securities may only be made through offering documents in compliance with the Securities Act of 1933 or exemptive provisions there under. Past performance is not a guarantee of future returns. All investment strategies entail some risk. When an investment involves a transaction denominated in a foreign currency, it may be subject to currency fluctuations that will have an impact on the value of the investment in another currency. In addition complex tax structures and delays in distributing important tax information, differences in regulatory requirements and fees. Investments in the emerging markets involve risks not normally associated with investments in more developed and economically stable jurisdictions with more sophisticated capital markets and regulatory regimes. Such risks include political, economic and currency risks and the risk associated with investing in underdeveloped legal, regulatory and accounting environments. In addition, investments are volatile, and have limited liquidity, transparency and depth, which may make it difficult to achieve a desired purchase or sale price for investments or to purchase or sell investments at any particular time. Any investment should not be made without careful reference to the relevant Prospectus. Nothing herein shall constitute an investment recommendation or investment, accounting, tax or legal advice. All content is for informational purposes only. Index MSCI AC (All Country) Asia ex Japan Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of Asia, excluding Japan. As of December 2012 the MSCI AC Asia ex Japan Index consisted of the following 10 developed and emerging market country indices: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. The Fund is an actively managed portfolio as compared to the index which is unmanaged. In addition there may be significant differences between the Fund and the indices including liquidity and volatility.

Documents

NTAsian merging Leaders und2016 · Hanon Systems (018880 KS) 10 Blue Bird (BIRD IJ) 11 Cosmo Lady (2298 HK) 12 Tisco (TISCO TB) 13 ... (5.0) 16.1 13.1 8.2 3.4 2.7 13.1 20.2 21.2