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India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Emerging Leaders
Whimpering along
Small caps are underperforming but not collapsing
Since last summer, we have fretted that the massive post-GFC bull run in Asian
Small Caps could end with a bang. In fact, the run ended with a whimper and
small caps have been whimpering along all this year, underperforming the MSCI
Asia-Ex by 4% YTD despite a 2% absolute rise. It has been a stock picker’s
market YTD and we see no reason why that should change for the remainder of
2011. P/BV valuations relative to large caps remain around the long-term
average discount of 27%.
Screening for inflection points
With little momentum in the asset class as a whole and with earnings season
behind us and models updated, we revisit our small cap universe to screen for
inflections in FY11 and FY12: Revenue and EPS acceleration/Deceleration
together with EBIT margin and ROE rising/falling. A number of our top picks
screen well here – amongst them: KNM, Silicon Works and China Glass.
Korea showing life
In a classic mean reversion, Korean small caps, having conspicuously lagged
post GFC, are showing the best small cap performance YTD. But with only 12%
absolute performance YTD, we think the recovery still has legs and as such are
including in our top picks list TechnoSemiChem – an upstream chemical to add
to Seoul Semicon and Green Cross.
US-listed China plays: Looking for value in the wreckage
Volatility has been high amongst US-listed China small caps in the wake of the
SEC announcing a broad investigation into the backdoor listing pipeline that has
been working overtime during the past two years. In this report, we break the
universe down into three categories: a) US-listed small caps that have
undergone the full IPO process and have a Big 4 auditor. This group has held up
better, but still offers a number of inexpensive-looking stocks. b) Companies that
were backdoor listings with non Big 4 auditors but with whom we have met
several times. While we do not cover (most of) these companies and have not
performed full due diligence, most trade on single digit PERs – HOGS US, CNIT
US, HOLI US and YUII US c) The rest – 44 companies that are generally trading
at low single-digit PERs and have been hit hard by the investigation.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Emerging Leaders
Whimpering along
Small caps are underperforming but not collapsing
Since last summer, we have fretted that the massive post-GFC bull run in Asian
Small Caps could end with a bang. In fact, the run ended with a whimper and
small caps have been whimpering along all this year, underperforming the MSCI
Asia-Ex by 4% YTD despite a 2% absolute rise. It has been a stock picker’s
market YTD and we see no reason why that should change for the remainder of
2011. P/BV valuations relative to large caps remain around the long-term
average discount of 27%.
Screening for inflection points
With little momentum in the asset class as a whole and with earnings season
behind us and models updated, we revisit our small cap universe to screen for
inflections in FY11 and FY12: Revenue and EPS acceleration/Deceleration
together with EBIT margin and ROE rising/falling. A number of our top picks
screen well here – amongst them: KNM, Silicon Works and China Glass.
Korea showing life
In a classic mean reversion, Korean small caps, having conspicuously lagged
post GFC, are showing the best small cap performance YTD. But with only 12%
absolute performance YTD, we think the recovery still has legs and as such are
including in our top picks list TechnoSemiChem – an upstream chemical to add
to Seoul Semicon and Green Cross.
US-listed China plays: Looking for value in the wreckage
Volatility has been high amongst US-listed China small caps in the wake of the
SEC announcing a broad investigation into the backdoor listing pipeline that has
been working overtime during the past two years. In this report, we break the
universe down into three categories: a) US-listed small caps that have
undergone the full IPO process and have a Big 4 auditor. This group has held up
better, but still offers a number of inexpensive-looking stocks. b) Companies that
were backdoor listings with non Big 4 auditors but with whom we have met
several times. While we do not cover (most of) these companies and have not
performed full due diligence, most trade on single digit PERs – HOGS US, CNIT
US, HOLI US and YUII US c) The rest – 44 companies that are generally trading
at low single-digit PERs and have been hit hard by the investigation.
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