KGI Research Singapore

Singapore's leading broker offering Futures, FX, Equities and Wealth Management.

KGI Daily Trading Ideas – 10 February 2021

IPO Watch

Bumble (BMBL US) – Love is in the air, and in the markets

  • BMBL repriced their IPO to US$37-39 a share, up from US$28-30 initial range,with 45mn shares now for sale, up from a previously planned 34.5mn offering. Read our prior writeup here.
  • Initial market cap is now set to around US$7.2bn with 12.4x Price/Sales multiple. BMBL is still close to a 30% discount from Match Group’s (MTCH US) Price/Sales multiple, and we think US$45 is an achievable first day target, an 18% first-day pop.

US Trading Ideas

EOG Resources (EOG US): Oiled up for another run

  • BUY Entry – 55.5 Target – 69.9 Stop Loss – 48.8
  • EOG is one of the largest shale oil producers in the US, with over 800,000 barrels of oil equivalent produced back in 2019.
  • Brent crude oil prices have now recovered to pre-COVID levels at US$60/bbl, through measures by US president Joe Biden to restrict new leases on oil and gas drilling, Saudi Arabia’s pledge to reduce production, and reported reductions on oil inventory. However, most Oil & Gas stocks remain below COVID levels 
  • We pick EOG over other O&G exploration & production players given their low net debt and strong free cash flow generation. Given that ConocoPhilips’ (COP US) recent earnings call led to a wave of analyst upgrades, we expect EOG’s earnings call to provide a similar catalyst, especially if brent crude can maintain the US$55-60/bbl price point.
EOG US (Source: Bloomberg)

Crowdstrike Holdings (CRWD US): Don’t get cyberpunked

  • BUY Entry – 214 Target – 260 Stop Loss – 194
  • CRWD is an endpoint security company that uses its cloud platform to detect and stop cybersecurity breaches. Their software is currently used by 49 of the Fortune 100, and the latest subscriber count is 8,416, an 85% year-on-year growth. The company also boasts above 120% net retention rate, implying consistent upselling of services.
  • In the endpoint security market, CRWD displays disruptive growth at over 90% year-on-year from 2018 to 2019, taking market share from incumbents such as McAfee (MCFE US), Symantec and Trend Micro (4704 JP).
  • Following the SolarWinds (SWI US) hack on over 18,000 government and private networks in December 2020, CRWD was hired by SolarWinds for incident response, which positions CRWD to take more market share from peers.
  • The share price of CRWD have consolidated around 220 since late December after a strong run-up. We expect further upside following a string of recent analyst upgrades.
CRWD US (Source: Bloomberg)

HK Trading Ideas

CNOOC Limited (883 HK): Dirt cheap among oil majors 

  • BUY Entry – 8.2 Target – 10.6 Stop Loss – 7.4
  • CNOOC is one of the global oil majors, substantially underperforming its peers even though global oil prices have rallied recently. This was mainly due to the company being included on the US blacklist of military-related enterprises. The company is under selling pressures from foreign funds.
  • The company is one of China’s most important state-owned enterprises. Furthermore, only 6% of its business is exposed to North America.
  • Saudi Arabia announced to cut 1mn bbl/d of output unilaterally starting from February 2021. Brent crude oil price traded above US$60/bbl, and WTI crude oil price rose above US$58/bbl. Both benchmarks are now back to pre-COVID levels. 
  • Updated market consensus of the estimated growth of net profit in FY21 and FY22 are 73% and 29% respectively, which translates to 7.7x and 6.0x forward PE. The current PE is 13.3x. The estimated respective dividend yield in FY21 and FY22 is 6.8% and 8.3% based on the share price of HK$8.8. 
883 HK (Source: Bloomberg)

Yidu Tech Inc (2158): Chase the upward momentum 

  • BUY Entry – 52 Target – 70 Stop Loss – 45
  • Yidu Tech Inc. operates a medical data intelligence platform. The Company provides healthcare solutions built on big data and artificial intelligence (AI) technologies. Yidu Tech offers its services in China.
  • Yidu Tech is the only pure Software-as-a-Service (SaaS) company in China’s healthcare industry. 
  • The total amount of informatization investment in China’s healthcare industry was RMB145.6bnin 2019 and is expected to grow to RMB356.7bn in 2024 at a CAGR of 19.6%.The size of the healthcare big data solutions market was RMB10.5bn in 2019 and is expected to grow to RMB57.7bn in 2024 at a CAGR of 40.5%. 
  • The respective YoY growth of revenue in FY19 and FY20 are 349% and 447%. Gross profit margin improved by 20.7ppt YoY to 26.3% in FY20. However, net loss increased by 61.2% YoY to RMB1.5bn in FY20. The total number of active customers grew by 67% YoY to 159 in FY20.
  • Previously, we lowered our entry price to HK$48, but the sell-down of the SasS sector was quickly over and the positive momentum returned. We re-iterate our recommendtion to buy at HK$52, which is equivalent to 80x price-to-sales-ratio (PSR) based on FY20 sales. The average PSR of the SaaS peers is about 60x to 70x. Because the entry level for the application of SaaS in healthcare is higher than other industries, we believe Yidu Tech should be trading at a premium.
2158 HK (Source: Bloomberg)

SG Trading Ideas

Yangzijiang (YZJSGD SP): Keeps on winning

  • BUY Entry – 1.05 Target – 1.35 Stop Loss – 0.95
  • Yangzijiang this week announced that it had won new orders worth around US$1.3 billion. The orders were for a total of 29 vessels, including 22 containerships that are expected to be delivered progressively from 3Q 2022. With the latest order win, it has basically met 65% of its annual target of US$2 billion. 
  • The CEO, Ren Letian, is positive on the company’s outlook and highlighted that the current order book can keep its yards busy for the next two years. 
  • The company’s valuations are attractive trading at only 7.6x forward P/E and sporting a 4.0% dividend yield, all with a strong balance sheet. A perfect combination to ride the industrial upcycle in Asia.  

YZJSGD SP (Source: Bloomberg)

Avi-Tech (AVIT SP): Buy the crash 

  • BUY AVIT Entry – 0.415 Target – 0.500 Stop Loss – 0.370
  • AVIT’s share price plunged 12% this morning on a disappointing 1H 2021 earnings performance. 1H 2021 net profit declined 63% YoY due to semicon supply chain disruption in the automotive industry. 
  • However, management says the recent weakness is only short-term and the long-term growth trajectory for the semiconductor auto market remains strong.
  • AVIT provides semiconductor burn-in testing services for global companies such as Infineon Technologies (IFX US), the world’s largest automotive semiconductor manufacturer and AVIT’s biggest client.  IFX estimates that EV models require 82% higher semiconductor content value compared to traditional models. 
  • AVIT has a huge cash warchest (S$36mn in cash and fixed deposits, making up almost half its current market cap) for earnings-accretive acquisitions, which could provide a much needed catalyst for its share price to finally break above the 2-year high of S$0.475. 
AVIT SP (Source: Bloomberg)

Market Movers – What’s Hot

Global/Macro

  • We analysed the performance of major Asian equity markets for Chinese New Year impact. Generally, we noticed a slight underperformance before and after the holidays as volumes decline. Buying momentum starts around one week when market reopens. See the charts here.

United States

  • Cryptocurrency related stocks extended gains from yesterday, with Marathon Patent (MARA US) +17.2% closing at US$37.59 and Riot Blockchain (RIOT US) +21.6% closing at US$39.86.
  • Weed stocks climbed higher, with AdvisorShares Trust Pure Cannabis ETF (YOLO US) up 6.1% closing at US$29, on the back of double digit gains from Aphria (APHA US) and Tilray (TLRY US). YOLO is up 34% month-to-date as blue wave thematics continue to gain traction. 
  • Lyft (LYFT US) +11.7% at US$59.92 in after hours trading after announcing 4Q20 results that surpassed sales and profit estimates, and expecting growth to begin in 2Q21. 
  • Earnings watch: KO/UBER/EQIX/GM/Z/ Wednesday, DIS/DLR/DDOG/NET/MT Thursday.

Hong Kong

  • Remegen Co Ltd (9995HK) +18.58%, closing at a new high of HK$142.3. Its industry peer Bio-Thera Solutions (688177 CH) announced the termination of the clinical trial of ADC BAT8001, a conjugate of recombinant human anti-HER2 monoclonal antibody and Madden for injection, in HER2-positive breast cancer.
  • GCL-Poly Energy Holdings Limited. (3800 HK) +17.61%, closing at HK$3.74. Previously, the company and its wholly-owned subsidiary Jiangsu Zhongneng Polysilicon Technology Development Co., Ltd. as sellers, entered into the long-term polysilicon purchase and sale cooperative framework agreement with Tianjin Huanrui Electronic Technology Co., Ltd., a subsidiary of Tianjin Zhonghuan Semiconductor Co., Ltd.(002129 CH) as purchaser. Pursuant to the agreement, Jiangsu Zhongneng shall sell a total of 350,000 metric tonnes of polysilicon to Tianjin Huanrui during the period from January 2022 to December 2026.
  • Kuaishou Technology Co Ltd (1024 HK) +15.71%, closing at a new high of HK$350.6.  Hang Seng Index, Hang Seng China Enterprise Index, Hang Seng Tech Index, and Hang Seng Internet and Information Technology Index will include Kuaishou as one of the components effective from 22nd February 2021. UBS initiated coverage with an OVERWEIGHT rating and a TP of HK$430. Kuaishou is at the early stage of monetisation of advertisements and E-commerce. Revenue CAGR from 2020 to 2023 is estimated to be 41%, driven by online advertisements, E-commerce, and live broadcasting. Monthly active users CAGR from 2020 to 2023 is estimated to be 11%.
  • China Youzan Limited (8083 HK) +12.13%, closing at HK$3.79. The whole SaaS sector jumped again, as another new IPO, Cloopen Group Holding Ltd (RAAS US) debuted on NASDAQ on Wednesday night. 
  • Hua Hong Semiconductor Limited (1347 HK) +11.43%, closing at HK$51.2. The company announced 4Q20 results. Revenue grew by 15.4% YoY to US$280mn. GPM dipped by 1.4ppt to 25.8%. Net profit grew by 66.5% YoY to US$43.6mn. The management guided that 1Q21 revenue is estimated at US$288mn, and GPM is expected to range from 23% to 25%.

Singapore

  • Thomson Medical (TMG SP) +20.4% to S$0.059 as the group posted a net profit of S$8.1mn in 1H FY2021, a reversal from the S$1.9mn loss in 1H FY2020. 
  • HPH Trust USD (HPHT SP) +8.9% to S$0.245 after posting a 79% YoY increase in 2H 2020 DPU to 7.70 HK cents (1.3 Sing cents). THis was on the back of a 57% YoY rise in net profit to HK$831mn as outbound cargoes to the US and Europe grew at a faster pace in 4Q 2020. 
  • REX International (REXI SP) +8.0% to S$0.175 as it continued to benefit from rising oil prices. REXI is the only pure-play oil producing company listed on SGX that has a healthy balance sheet and expansion plans this year. 
  • Yangzijiang (YZJSGD SP) +6.7% to S$1.04 after the shipbuilder won new orders worth around US$1.3 billion. The orders were for a total of 29 vessels, including 22 containerships that are expected to be delivered progressively from 3Q 2022. The CEO, Ren Letian, highlighted that the current order book can keep its yards busy for at least two years. 
  • DBS (DBS SP) +0.5% to S$26.1 in early trade today after it reported 4Q20 profit fell 33% YoY to S$1.0bn due to lower net interest margin (NIM) and higher total allowances. 

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