KGI Daily Trading Ideas – 29 January 2021

IPO Watch

Overseas IPO subscription only for Accredited Investors (AI)

HK: Kuaishou (1024 HK) – Last biggest HK IPO before the year of the Ox

As of Wednesday 27th January 2021, the public tranche subscription rate was 385x, and margin financing was reported at HK$406bn.

Institutional subscription starts on Monday 25th January 2021

Public subscription starts on Tuesday 26th January 2021 and closes on Friday 29th January 2021

Trading starts on Friday 5th February 2021

IPO Performance Review

Qualtrics (XM US) – 52% pop, now 30x Price/Sales

XM opened at US$41.85, peaking at US$45.96 and closing at US$45.50, exceeding our 25x Price/Sales multiple expectations and is up 52% from IPO price.
US$45.5/share indicates US$22.9bn market cap and 30x Price/Sales.
As a market leader, we expect XM to maintain a strong performance in the coming years. We recommend accumulation within the 15-20x Price/Sales range (US$22.4 – 30/share) after the hot IPO sentiment wears off.

Ortho Clinical Diagnostics (OCDX US) – The first major loser of 2021 IPOs

OCDX opened at US$15.50 and closed at US$16.10 with a peak of US$16.86, below the IPO price of US$17 and down 5% on its first day of trading. This is the first US$1bn+ IPO that has underperformed on its first day of trading.

US Trading Ideas

Relx Technology (RLX US): 60x Price/Sales for a super-growth stock

BUY Entry – 22.5 Target – 30.5 Stop Loss – 19
We previously covered RLX’s IPO here, in which the IPO sentiment has cooled down and the shares have now consolidated at the US$22-26 range.
We see the correction as a good chance to accumulate positions in a high growth stock. Despite the 60x Price/Sales price tag, RLX is expected to double its sales next year, and potentially grow 5x in the next 4 years as the Chinese market warms up to e-vapor products.

United States Steel Corp (X US): Pullback a good opportunity for accumulation

BUY Entry – 18.5 Target – 21.3 Stop Loss – 17.4
With iron ore and steel prices continuing to climb, we expect steel businesses to see a revival in 2021, reversing trend from a multi-year downcycle.
The share price of X has found support in its prior trading range around US$17, on the back of better than expected earnings results.
Further upside is supported by infrastructure spend and a weakening dollar, while a removal of steel import tariffs in the US poses downside risk.

HK Trading Ideas

Blue Moon Group Holdings Ltd (6993 HK): The moon is waiting to shine

BUY Entry – 14.6 Target – 18.5 Stop Loss – 13.0
Blue Moon Group Holdings Limited operates as a household care company. The company produces liquid laundry detergents, liquid soaps, concentrated liquid laundry detergents, and other products. Blue Moon Group Holdings markets its products throughout China.
The company has been a market leader in hand wash and laundry detergent in China with a respective market share of 17% and 24% in China as of 2019. Revenue and net profit CAGRs are 12% and 254% respectively from 2017 to 2019. According to Bloomberg, revenue growth in FY21 and FY22 is estimated to be 33.7%YoY and 24.4% YoY, and net profit growth in FY21 and FY22 is estimated to be 45.7% YoY and 21.9% YoY.
Although the house cleaning products market is highly competitive, branding and pricing are the keys to maintain or even expand market share. Blue Moon has both competitive advantages. The company has been upgrading its product series targeting different groups of users and launching new products each year.
The current valuation is relatively cheap as the 12-month forward price-to-earnings ratio (PER) recently dropped to 45x, the lowest since IPO. We believe the fair PER is around 55x to 60x because of its dominant market status.

BUY Xiaomi Corp (1810 HK): Buy-the-dip opportunity

RE-ITERATE BUY Entry – 28 Target – 35.9 Stop Loss – 25
The company is engaged in the research, development and sales of smartphones, Internet of things and lifestyle products, the provision of Internet services, and investment business.
The recent headwinds of being blacklisted by the US Defence Department is expected to be temporary. Foreign investors will comply to gradually liquidate their stakes in the company. However, the fundamentals are still sound, while Chinese investors will likely take stakes from foreign funds who will be selling.
For investors who are at paper losses, we recommend to adopt an average down strategy to lower your entry costs.

SG Trading Ideas

ThaiBev (THBEV SP): Cheers to a potential spin-off

BUY Entry – 0.83 Target – 0.93 Stop Loss – 0.78
Bloomberg yesterday reported that THBEV plans to list its brewery business on the Singapore Exchange as soon as next week, with a valuation of around US$10bn. This would make it one of Singapore’s biggest IPO in a decade.
THBEV produces the well-known Chang Beer. In 2017, its associate bought a controlling stake in Saigon Beer Alcohol Beverage, Vietnam’s largest brewer. THBEV’s other assets include a 28% stake in SGX-listed F&N.
THBEV trades at favourable valuations when considering its market share and current P/E multiples below the 5-year average. We remain positive on THBEV’s longterm fundamentals and dominant market share in both Thailand and Vietnam. THBEV is well-positioned given that its key markets are ranked among the top alcohol consuming countries in Asia.
We have an OUTPERFORM call with a target price of S$0.93. Read our full report here.

Riverstone (RSTON SP): A short-term bet if we were to experience our very own short squeeze in Asia

BUY Entry – 1.52 Target – 1.89 Stop Loss – 1.38
Malaysian listed glove makers Top Glove (TOPG MK), Kossan Rubber (KRI MK) and Hartalega (HART MK) were the three most shorted stocks on Bursa Malaysia as of 27 January. Meanwhile, TOPG is dual listed both on Bursa and SGX.
While RSTON itself is not highly shorted, we think it’s stock would benefit if the other highly shorted glovemakers were to experience a short squeeze.
From a fundamental perspective, we also prefer RSTON over the other glove makers. Regardless of the short squeeze dynamics, RSTON’s upcoming earnings and better dividends should already justify a higher share price. Bloomberg consensus has a S$2.62 target price for RSTON, implying a 70% potential return from the current share price.
RSTON is expected to report its full-year results in the last week of February.

Market Movers – What’s Hot

United States

The overall US market rebounded while short squeeze stocks plunged as more trading restrictions were enacted on retail traders. Headliners Gamestop (GME US, US$193.60, -44.3%) and AMC Entertainment (AMC US, US$8.63, -56.6%) recorded the highest loss % with others falling between 5% to 42%. However, after-market prices for the stocks have rebounded, indicating that the saga is yet to end.
Amidst major names, Microsoft (MSFT US) carved a new high, closing at US$238.93, +2.6%, 2 days after its 4Q20 earnings beat.
Earnings watch: Visa (V US) and Mastercard (MA US) announced earnings that beat expectations, a positive for the global economy, with after hours trading at a slight positive to their close prices. McDonald’s (MCD US) missed expectations, hurt by weak Europe results.

Hong Kong

China Literature Ltd (772) +11.43%, closing at HK$71.65. Stock price continued to jump after the announcement of the establishment of strategic partnership of the company, COL Digital Publishing Group, and Baidu Qimao.
Country Garden Services Holdings (6098HK) -7.12%, closing at HK$61.95. The whole property management sector was sold off as market sentiment further weakened.
Jiangxi Ganfeng Lithium Co.,Ltd. (1772) -7.94%, closing at HK$117.1. The stock fell in three consecutive trading days after peaking at HK$139.4. Price doubled in the past three months and jumped 40% in January.

Singapore

ThaiBev (THBEV SP) +1.8% to S$0.835 in early trading today news that it plans to list its brewery unit on Singapore Exchange as soon as next week, according to reports by Bloomberg. It is seeking a valuation of around US$10bn (S$13bn) for the unit, which is best known for producing Chang Beer.
Keppel Corp (KEP SP, -2.2%, S$5.46), dropping a further 5.3% in early trading today after it announced a FY2020 loss of S$506mn, its biggest full-year loss since the Asian Financial crisis, due to S$952mn of impairments in its Offshore & Marine business.
Tech stocks bore the brunt of selling yesterday. Leading the losers were UMS (UMSH SP), ISDN (ISDN SP), Nanofilm (NANO SP) and AEM (AEM SP), which all dropped between 4% and 5%.
Earnings Watch: It’s REITs reporting day as CapitaLand Retail China Trust (CRCT SP), CDL HTrust (CDREIT SP) and Mapletree Industrial Trust (MINT SP) report their earnings. For the week ahead, Ascendas REIT (AREIT SP) reports its FY2020 on 2 Feb, SIA (SIA SP) reports 3Q 2021 on 4 Feb and iFAST (IFAST SP) reports its FY2020 earnings on 5 Feb.