• China Internet (Moving to state-backed cloud)

Tianjin municipal government has asked all affiliated SOEs to move data to a state-backed cloud platform by next year, according to Reuters. The data would move from private operators such as Alibaba, Tencent, Huawei and three telcos. Similar measures were also spotted in Sichuan and other provinces might follow. In our view, local governments will likely set the requirements and security standards and tender the state-owned cloud construction projects to private services providers. These projects will likely favour cloud leaders such as AliCloud, Tencent Cloud, etc. Margin could be lower, but scale will be much larger. Margin improvement could come from larger scale and from upselling PaaS and SaaS applications.

  • Philippines Telecoms (Third growth engine)

PH fintech is accelerating amidst the pandemic. It has widened use cases and transformed the payment platforms into superapps. Collectively, registered users for both GCash and PayMaya have doubled from pre-Covid levels while revenue for the sector tripled in 2020. E-wallets remain in their early days; they should further catapult gross transaction value (GTV) in the long run. While we expect a breakeven scenario in 2022-2023, we expect profit margins to remain muted as players continue to drive adoption. We remain overweight on PH telcos.



  • Malaysia Market Strategy : New report: 34W21 — largest foreign inflow YTD

Foreign institutions were big net buyers (+RM964.3mn) in 34W21. Local institutions’ net selling accelerated (-RM651.0mn) and local retailers turned net sellers (-RM114.2mn).

Key trends: (1) Foreigners net buyers for three consecutive weeks, with 34W21 net inflows the biggest YTD; (2) foreign inflows into banks and telcos hit the highest level YTD, (3) foreigners turned negative on technology (first time in 9 weeks), (4) foreigners turned net buyers of healthcare after 6 consecutive weeks of selling, (5) local institutions turned more positive on energy, construction and property.

Short selling activity +35% WoW to RM100.3mn. The healthcare sector was the focus of short sellers, making up 27.7% or 9.1 mn (RM28.4 mn) shares of total short position.

In the likely event new PM Ismail wins the confidence vote when parliament reconvenes on 6-Sep, we believe there are some key projects and initiatives within the infrastructure, telecommunication and property sectors that can been expedited to stimulate the economy: GAM, ECON, TM, SPSB.

  • Singapore Grocery Retail Sector DFI SE Asia grocery retail investment; DFI’s Yonghui 2Q21 miss

DFI announced a S$40 mn (~US$30mn) plan to revamp all of its 48 Cold Storage grocery retail stores in Singapore by end-22, which we believe is positive for its DFI SE Asia grocery retail turnaround, while H&B and Yonghui continues to weigh on DFI.

Sheng Siong is likely unaffected by Cold Storage’s revamp as it targets different demographics, while its GPM has been holding up (1H21/20 GPM: 28.2%/27.6%) despite Giant’s price cuts and brand refresh. However, new store openings in Singapore are likely delayed.

Separately, DFI’s associate Yonghui reported a 2Q21 net loss of Rmb1,106 mn, as GPM declined to a historical low of 17.0% in 2Q21 (1Q21: 20.2%). Yonghui’s SSS and margins could see continued pressure over the next year, given intensified competition from egrocery and change in consumers’ behaviour post-pandemic.

We are market weight on the sector and lower our DFI FY21-23E EPS by 5-17% and TP to US$3.80 (from US$4.10) as we factor in lower Yonghui forecasts, and Sheng Siong’s FY22-23E EPS by 1-2% and TP to S$1.65 (from S$1.70) on slower new store openings.



  • BYD – Guidance beat – Buy (H on CL). BYD’s 1H21 performance and 2021-2022 guidance provided not only an outlook for its business, but also a vision of the industry direction. The company took an out-of-consensus view on strategic issues, such as battery material (iron > nickel) and achieved market-leading results. The key highlight from the announcement is management’s guidance to deliver 1.5m new energy vehicles in 2022E – 8x the 2020 figure. To contextualize this target: Our global team expects 1.2m units for Tesla in 2022E and we model the Chinese new energy vehicle sales at 3.4mn in 2022. BYD’s 1.5mn will imply a 45% domestic market share, up from 16% in 2020 / 25% in 2021E. We increase GSe and 12m TPs to Rmb366/HK$359 for A/H.
  • Meituan – Robust core business – Buy. Meituan delivered solid 2Q core profits from food delivery, in-store & hotel segments (with adj. EBIT Rmb6.1bn vs. GSe: Rmb5.1bn, 2Q20 of Rmb3.1bn), while investments into New Initiatives, particularly on Meituan Select, brought group adjusted EBIT loss to Rmb-3.1bn (vs. GSe/consensus of Rmb-3.9bn/-4.6bn). The group added 59mn new annual active customers over the quarter to 628mn, a historical high +37% yoy. We also summarize our detailed takeaways from the results call within, especially management commentary surrounding regulations, and conduct a deep dive into new initiatives & highlight fresh trip takeaways. 12m TP of HK$312.


  • Meituan (3690.HK) – Solid 2Q21; Covid Affected 3Q; Manageable Regulatory Headwind

Thanks to a seasonally strong quarter and continued operation efficiency improvement, 2Q21 result was solid with all three business segment revs and profit/loss coming in ahead of expectation. Nevertheless, in light of resurgence of covid cases and flooding disruption, Meituan guided negative impact on in-store/hotel business and food delivery order volume in 3Q21. Mgmt also addressed regulatory concerns by reassuring limited fundamental impact yet believing Meituan will thrive better under a healthier and sustainable orderly operating environment longer term. Given lack of detailed guidelines and uncertainty of implementation timeline, mgmt acknowledges its commitment in providing relevant supportive welfare benefit to its riders and reassures overall cost impact is likely to be manageable thanks to efficiency from order density and autonomous technology. Post estimates revision, our SOTP is adjusted to HK$364 (from HK$357). Maintain Buy and view its local services gateway intact.

  • Thailand Equity Strategy – Lockdown Relaxation: Not Keen to Chase Optimism Rally

SET index has recovered 6% since early-Aug bottom towards pre-Covid level as daily new Covid-19 cases dropped to 18K in past five days vs. 23.4k peak. Vaccination pace also improved in recent weeks to 30% of the overall population with at least one dose (still 9.9% for full doses). Banks rallied by 12% from the recent bottom driven by BOT announcement to allow banks to do more long-term restructuring to help borrowers and extend relaxation on classification until end-2023. While narratives have turned positive, we view SET at above 1,600 as not attractive to chase vs. earnings potential in 2022E. We remain selective on a few stocks that are still below pre-Covid levels. Top picks: SCB, CPALL, CPN, LH, HANA, MTC, BDMS.

  • SingTel (STEL.SI) – Bharti to Raise Additional Capital

Bharti announced that it will raise up to US$2.8bn in capital via a rights issue (Bharti Airtel (BRTI.BO) – Board Approves $2.8bn Rights Issue, More Details Awaited On Conference Call). Moreover, press reports (Bloomberg/Economic Times) indicate the possibility of potential strategic investor Google reportedly eyeing a sizable investment in Bharti. We see limited risk to Singtel’s dividends from a Bharti recapitalization as the rights issue calls for staggered payments with only 25% upfront (Singtel upfront contribution of cUS$229mn). Possibility of special dividends from an Australia tower sale however could reduce. An enhancement of Bharti’s valuations, however, should be positive for Singtel’s NAV with Bharti accounting for ~35% of our SOTP.

  • Indonesia Real Estate/Property – Another Relaxation for Indonesia Malls