market folly

The 2018 Sohn Hong Kong Investment Conference recently took place benefiting the Karen Leung Foundation for gynecological cancer education, prevention, and support.  Fund managers presented investment ideas in a gathering that benefited charity.  Here's a quick summary with notes from the event.


Notes From Sohn Hong Kong Conference 2018

Eashwar Krishnan (Tybourne Capital):  Long: Line (LN).  Dominant messaging platform in Japan and several other countries.  Based on enterprise value (EV) to monthly active users (MAU), Line is the cheapest and most undervalued messaging app in the world.  On this metric, LN trades at $39 while Tencent trades at $207, Naver at $199, Facebook at $180, and Yahoo Japan at $101.  Median number (including others like Kakao, Weibo, Twitter etc) is $67. Sees potential to double your money in three years.  Company can try to take more 'time spent' from other apps and rollout revenue from more advertising, games, financial services and food delivery. Prior to founding Tybourne, he worked at Lone Pine Capital.


Rajesh Sachdeva (Flowering Tree Investment Management): Long: VP Bank (Vietnam Prosperity JSC Bank).  The country has a solid base for an economy and VP Bank is the cheapest bank in Asia yet has the highest returns on equity (ROE).  Largest consumer bank in Vietnam.  5 million customers, around 10% of the labor force of the country.  Has strong underwriting standards.  Thinks the stock can go up 4-5x over the next 3 years as long as there aren't huge economic hiccups.


Avinash Abraham (Torq Capital Management):  Long: Pacific Basin (2343.HK).  Dry shipping company in Hong Kong.  Minor bulks shipping and is "very undervalued."  Company recently became profitable again last year.  Thinks the 10 year bear market in dry bulk shipping is coming to a close.  Company has diversified exposure to products.


Kok Hoi Wong (APS Asset Management):  Short: JD.com (JD).  This has been a consensus long among many managers but argues that it's already priced for perfection.  Thinks impairment losses coming.  Company made bad investments (PaiPai and QQ Wanggou, Bitauto, Tuniu, Yihaodian).  Thinks a big impairment is possible from Yihaodian.  Management is "investing recklessly."  Says to be weary as company can't make a profit in highly competitive Chinese e-commerce market.  Business model is misunderstood. 


Benjamin Fuchs (BFAM Partners):  Long Tencent (700.HK) & Tencent Put Options.  Hedged trade that bets on one of the dominant companies in Asia but allows you to profit from a swing in the stock either direction.  Buy Spring 2019 puts to complement the long equity position. Profitable if shares go more than 15% in either direction


Soren Aandahl (Blue Orca Capital):  Short: Samsonite (1910.HK).  Has previously attacked the company with a recent short report and did so again at the event.  Shares have been halted.  CEO Ramesh Tainwala has been lying about resume & misrepresenting himself as a doctor, calls for his firing.  Company has audit red flags: third auditor in three years.  Pointed out accounting practices and corporate governance.  If you recognize the investor's name he was previously running Glaucus Research which put out a lot of short reports and recently launched an activist fund.


Seth Fischer (Oasis Management): Long Don Quijote Holdings Subsidiary Japan Asset Marketing (8922.JP).  Don Quijote is a retail chain based in Japan that's open 24 hours and sells all kinds of various goods from food to personal care to you name it.  Subsidiary JAM is its real estate segment.  Thinks the company is able to survive "Amazonification of the world" but has been mismanaged.  They've launched an activist campaign, have owned stock since 2017.  Proposed corporate restructuring   Sees 50% upside. Details on their proposal here.


Wesley Wong (Oxbow Capital Management): Long Guangzhou Baiyun Airport (SHA:600004).  Third largest airport in China and 14th largest in the world.  Sees 50% upside in the next year to year-and-a-half.  New terminal coming online will lead to increased number of passenger and rent from retail tenants.  Sees EBTIDA coming in around 20% higher than consensus.


Carl Huttenlocher (Myriad Asset Management): Long MSCI China 2025 Index.  Simple trade, thinks China will be the best global equity market for the next few years.  Chinese A-Shares being included in indexes now will be a catalyst.


Hermes Li (Aspex Management):  Long SJM Holdings (0880.HK).  Likes the casino company as it's poised to benefit from opening the new Lisboa Palace in the back-end of 2019.


Ben Melkman (Light Sky Macro): Thinks inflation in Japan is coming faster than people realize and will yield higher rates.  To bet on this there's two plays: spread trade for bearish exposure on 10-year Japan Commodity Clear House rate or buy banks that will benefit from increased interest rates.


For more investment conference coverage, we've previously posted notes from the Sohn New York Conference and also this week we just posted up notes from the London Value Investor Conference.