KGI Research Singapore

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

KGI Daily Trading Ideas – 13 January 2021

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IPO Watch

Affirm Holdings (AFRM US) – Further boosts IPO pricing to US$49

  • Affirm’s confirmed IPO price is US$5 above the top of yesterday’s proposed range of US$44, raising at least another US$1.2bn for the company and bringing the initial market cap to US$11.9bn.
  • Affirm is expected to trade later today on NASDAQ. We expect a strong performance on first day trading, given that smaller and lower growth Buy-Now-Pay-Later peers trade at higher multiples.

Market Movers – What’s Hot

Global/Macro

There’s a shortage of semiconductor chips for automakers, as chipmakers are currently allocating more capacity to soaring demand from consumer-electronics makers such as Apple (AAPL US). Chipmakers such as TSMC (TSM US) recently reported a record quarterly revenue, driven by new 5G iPhones. Notable auto-chip players include Infineon Technologies (IFX US) and NXP Semiconductors (NXPI US).

United States

  • Docusign (DOCU US) +9.0% after announcing plans to refinance US$500mn of convertible notes as well as securing up to US$750mn of revolving credit facility loans. 
  • Lemonade (LMND US) -5.6% after announcing plans to offer 3mn new shares of common stock, which is about 5.3% of shares outstanding. LMND has gained almost 50% in the past 3 days of trading.
  • General Motors (GM US) +6.24% after announcing a new business, BrightDrop, that will manufacture electric delivery vehicles with FedEx as their first partner.

Hong Kong

  • Lenovo Group Limited (992 HK) +8.93%, closing at a five-year high of HK$8.05. The board of the company approved a preliminary proposal for the proposed issuance of Chinese depositary receipts (CDR),representing newly issued ordinary shares of the Company as underlying securities, and the application for the listing and trading of CDRs on the Science and Technology Innovation Board of the Shanghai Stock Exchange.
  • Beigene Ltd (6160 HK) +12.88%, closing at HK$184. The company announced that BeiGene Switzerland GmbH, a wholly-owned indirect subsidiary of BeiGene, Ltd. entered into a collaboration and license agreement with Novartis Pharma AG, pursuant to which BeiGene will grant Novartis the right to develop, manufacture and commercialize BeiGene’s anti-PD-1 antibody tislelizumab in the United States, Canada, Mexico, member countries of the European Union, United Kingdom, Norway, Switzerland, Iceland, Liechtenstein, Russia, and Japan.
  • China Taiping Insurance Hldgs Co Ltd  (966 HK) +11.02%, closing at HK$15.52. China domestic insurance stocks jumped without specific news.

Singapore

  • Avarga (AVARGA SP) +22.8% closing at S$0.35, and going beyond our short-term price target of S$0.32. The company announced S$3mn of share buybacks yesterday, adding on the S$6mn worth of buybacks in December 2020. 
  • Sunpower (SPWG SP) +11.7% to close at S$0.955. Following the disposal of its engineering business, we upgraded SPWG’s target price to S$1.45 (cum-dividend). Read our latest report here. 
  • M&A is heating up among Singapore’s technology-related names. Following AEM’s (AEM SP) +4.6% privatisation offer for CEI Limited (CEI SP) +14%, other technology-related manufacturers gained: Valuetronics (VALUE SP) +9.9% to S$0.665; ISDN (ISDN SP) +9.5% to S$0.635; UMS (UMSH SP) +4.4% to S$1.20.

US Trading Ideas

Quantumscape (QS US): Recharged and ready to go

  • BUY Quantumscape (QS US): Entry – 55 Target – 73 Stop Loss – 46
  • QuantumScape is a battery start-up specialising in lithium-metal solid-state battery technology, backed by Bill Gates, Volkswagen and other Silicon Valley venture capitalists.
  • The company has fell more than 50% from its all-time high of S$132.73 on 22 December, and has now consolidated above its 60 EMA.
  • We think there should be a sufficiently sized rebound to break above the 8 EMA and 20 EMA line. 
QS US (Source: Bloomberg)

Beyond Meat (BYND US): Partnerships for post-pandemic push

  • BUY Beyond Meat (BYND US) Entry – 121.4 (BUY STOP) Target 141.4 Stop Loss – 110
  • Beyond Meat develops plant based protein food products such as burgers and sausages as an alternative to meat produce.
  • Despite COVID-19, Beyond Meat has pivoted product distribution successfully into grocery channels over food service restaurants, with 9M20 sales at +53% YoY.
  • While Beyond Meat has formed various partnerships with Chinese restaurants, we think further partnerships with China’s grocery sector can drive further tailwinds.
  • US$120 has formed a support from prior trading patterns. Recent 3 day trading also forms a bullish doji star pattern, indicating that a turnaround is likely.
BYND US (Source: Bloomberg)

HK Trading Ideas

Fosun Tourism Group (1992 HK): Chinese New Year seasonality boost

  • BUY Fosun Tourism Entry – 8.3 Target – 9.8 Stop Loss – 7.8
  • Fosun Tourism Group operates as a leisure focused integrated tourism group. The Company provides resorts management, tourism destinations development, and other related services. Fosun Tourism Group offers its services worldwide.
  • On 22 December 2020, the company reported that revenue of its domestic resort recovered strongly. Club Med China resorts booking volume grew by more than 30% YoY and Club Med Asia-Pacifc capacity recovered to 70% of the level during the same period last in 2019.
  • China is adopting the most draconian measures to contain the recent upsurge COVID cases in the northern part of China, especially Hebei province. However, most tourist cities and resorts are at a low risk of COVID outbreak. We believe China will manage to clamp down the sporadic outbreak of COVID new cases before Chinese New Year in order to gain the economic growth from tourism during the long holiday.
  • The stock recently formed a double bottom, signaling a bullish sign. 
1992 HK (Source: Bloomberg)

YTO Express (International) Holdings Ltd (6123 HK): Double bonanzas

  • RE-ITERATE BUY YTO Express Entry – 5.5 Target – 7.0 Stop Loss – 4.8
  • YTO Express (International) Holdings Limited engages in the provision of freight forwarding services from major airlines and other carriers.
  • The company announced a profit guidance that net profit in FY20 is expected to jump by more than 600% YoY. The phenomenal growth is due mainly to the upsurge demand for healthcare and medical products from Europe and US driving the air and ocean freight business.
  • Freightos Baltic Index (FBX) China/East Asia to North America West Coast remained at a year highs, and FBX China/East Asia to North Europe arrived at a new high. This will benefit international logistics and transportation operators.
6123 HK (Source: Bloomberg)

SG Trading Ideas

Sunpower (SPWG SP): Proposed M&S disposal & special dividend – a win-win deal for shareholders

  • BUY SPWG Entry – 0.96 Target – 1.18 Stop Loss – 0.86
  • The disposal of its Manufacturing and Services (M&S) segment values the business at RMB2.29bn. Total net proceeds are estimated to be RMB2.021bn, of which RMB1.34bn is intended to be declared as a special dividend (equivalent to S$0.2359), RMB551mn to fund existing GI projects and general working capital, and RMB130mn to repay existing payables owed by GI to M&S.
  • M&S segment is priced at 12.2x price-to-earnings ratio (PER) based on its FY19 net profit, valuing it at more than 100% premium to our previous valuation.
  • We maintain our fundamental OUTPERFORM recommendation with an upgraded target price of $$1.45 (ex-dividend S$1.22) based on GI projects’ discounted cash flows and the intended special dividend of S$0.2359 per share.
  • Read our full report here, published on 12 January 2021. 
SPWG SP (Source: Bloomberg)

INNOTEK (INNOT SP): A well-run ship weathers all storms

  • BUY INNOT Entry – 0.65 Target – 0.73 Stop Loss – 0.62
  • We have an initiation report on INNOT. We assign an OUTPERFORM recommendation and a fundamental-driven target price of S$0.73 based on a conservative 5.0x EV/EBITDA, which is at a discount to peers. 
  • InnoTek will see its businesses recover to near pre-pandemic levels, with a Chinese-driven tailwind for its automotive business.
  • Apart from the restructuring back in 2014/2015, InnoTek was able to manoeuvre around a weak COVID-induced 1Q20 performance and produce a resilient 2Q20 result that saw YoY performance improvement.
  • We expect continued recovery in 2H20 and 2021, with catalysts to come from the eventual production ramp-up in Thailand and the kickstart of new automotive parts production by its partners. 
  • Read our full initiation report here, published on 12 January 2021. 
INNOT SP (Source: Bloomberg)