STOCK GUIDE 2017...ValueInvestAsia.com Stock Guide 2017 | 06 SWOT Analysis Strength The key strength of Tencent Holdings is its strong user base. Moreover, its platforms are extremely

STOCK GUIDE 2017

TOP 10 ASIAN STOCKSIN OUR CURRENT WATCH LIST

ValueInvestAsia.com Stock Guide 2017 | 01

ABOUT VALUE INVEST ASIA

VisionTo become a key reference website for value investors interested about the Asian Stock Markets.

MissionTo spread the concept of value investing across Asia.

Why are we doing this? And How do we plan to do it?We realized that many blogs and website dedicated to value investing are based on the US market. So, we set out to create a site that produces value investing education information, specifically designed for investors in Asia.

Value Invest Asia creates high-quality and unique contents for investors in Asia. We do that by creating educational content and information about companies listed in Asia, updated every week. If you sign up for our mailing list, you would even be able to receive a FREE monthly Asia-In-Focus Report, where we analyse the major financial news in Asia for you.

Value Invest Asia is a site for you to learn, share and network on how to practice value investing in Asia.

We want to develop a tribe of passionate value investors in Asia. Thus, VIA also provides a blogging platform for Asian investors who want to share their ideas and knowledge with others. We are able to create a writer account for you to post your thoughts while we assist you in editing your posts and maintaining the website for you.

Together, we aspire to be your go-to website in your process of learning value investing and finding potential companies to invest in.

Now, let us begin our journey.

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HELPING YOU KICKSTART YOUR 2017INVESTING JOURNEY

Starting out in investing can be a complicated task. You might have to scrabble through the internet for information on what value investing is really about (and not even sure if the information you obtain is correct). Then you might struggle with finding information about the basics of accounting and financial analysis, just to understand how to start analysing a stock.

Even after all that, you are still struck with tens of thousands of stocks to choose from, where should you start?

We realized that challenge. It is the very same challenge that we face when we started out learning about investing a decade ago. However, over the past decade, we have designed a system to help us generate a smooth investment process, helping us generate strong return on our investments. Part of the process is building up a good number of companies that we monitor constantly on our Stock Watch List.

Starting this year, we decided to create a yearly guide for investors. This is meant to highlight some of the stocks that our team is currently watching. We break it down the facts about their businesses. We will also do a SWOT analysis on each of the company. Hopefully, it would help you kick-start your investment journey as well. Let’s not waste any time.

Here are the top ten Asian companies we are keeping in our Stock Watch List.


• Ticker : HKG:0151

• Exchange : Hong Kong Stock Exchange

• Market Capitalisation : About HK$ 68.0 Billion (April 2017)

• 2016 Revenue : RMB19.7 billion

• 2016 Profit : RMB 3.5 billion

The BusinessWant Want China Holdings is a manufacturer and distributor of kids snack food, dairy products and other beverages in China. It produces popular products mainly under its Want Want Brand. Its products could easily be spotted in most retail outlets across China.

SWOT Analysis

StrengthThe company has a wide distribution network in China, with more than 9000 distributors nationwide in China. This gives the company the ability to push its products throughout the whole country. The company also manufactures its products from 91 factories, meaning that it has a diversified manufacturing and distribution capability.

Additionally, Want Want China has a long history in China and has built a strong reputation as a snacks manufacturer for kids.

FEATURED COMPANY NO. 1

WANT WANT CHINA HOLDINGS LTD


WeaknessThe company does have some weakness. For example, it is still a China-focused company. Although it exports its products oversea, the domestic market is still the largest market for the company.

Secondly, much of its sales and profits are coming from its key segment; the hot-kid milk segment. That could be a weakness as too much of its business is relying on one segment and one market.

More recently, there have been criticisms of its products recently, as they are deemed as unhealthy snacks. As the parents around the world move toward being more health conscience, demand for such unhealthy snacks and drinks might be on the decline.

OpportunitiesFirstly, consumer spending in China is still on an upward trend. Given that Want Want China is in the consumer space, it could grow together with the growing spending pattern of consumers in China.

Moreover, there seem to be still many areas of opportunities for Want Want China. For one, it could expand overseas. With its strong balance sheet and customer base in China, it could support the company as it increases its investment to boost up its market overseas.

Alternatively, it can utilise its existing distribution network in China and add on more products to the pipeline. That could potentially increase its revenue in the future as well.

ThreatE-commerce around the world is getting more and more mainstream. However, e-commerce is already a mainstream channel for shoppers in China. Therefore, if the company does not have a clear e-commerce strategy, it might be threatened significantly in the future.

On the other hand, China is slowly opening up to the world. Chinese consumers are demanding more and more of quality foreign goods as well. This could lead to more international brands coming into China and creating more competition for a company like Want Want China.


TENCENT HOLDINGS LTD


The BusinessTencent Holdings (HKG:0700) is one of the largest technology companies in China. It is the dominant social network in the country with close to a billion users each in its QQ and WeChat platforms. Through its social platform, together with its other portal, the company generates revenue from three mainstream.• By providing services to its users.• Distribute products and services of other companies to its users• Advertising

• Ticker : HKG:0700

• Exchange : Hong Kong Stock Exchange

• Market Capitalisation : About HK$ 2.2 Trillion (April 2017)

• 2016 Revenue : RMB 151.9 billion



SWOT Analysis

StrengthThe key strength of Tencent Holdings is its strong user base. Moreover, its platforms are extremely “sticky” for existing users. Its users can perform a wide range of tasks directly within its platform; from hailing a cab, to watching a movie, shopping and transferring funds.

This creates a business model that generates very strong cash flow. In turn, it allows Tencent Holdings to maintain a stellar balance sheet. This reduced the risk of the company facing liquidity issues during a market downturn.

WeaknessHowever, Tencent Holdings is operating in a very fast-moving industry. The company needs to constantly renew itself or might risk facing obsolesce. Yet, the issue is that it is already one of the largest technology companies in the world. Its size might prevent it from shifting fast enough to market trends.

In addition, it might have already reached a size where it is too big to grow significantly to produce market-beating returns for investors. After all, its platforms have close to a billion users each, which is already close to the entire population of China.

Lastly, Tencent Holdings is still predominately a China-based company. Therefore, it is not certain if the company can replicate its success in overseas markets.

OpportunitiesThe most direct opportunity for Tencent Holdings now is to simply add on new offerings on its platforms for users. The user base is already very engaged within its platforms, the company can distribute additional services and products to them.

Secondly, it is already working in expanding its platform overseas. Its WeChat platform is growing rapidly in markets like Southeast Asia. Once its user bases in these oversea markets reached critical mass as well, it might be able to start replicating its services and offerings to these new users.

One interesting aspect of its business is its venture capital arm. The company has grown to such a large size that it is a key investor in new technology and start-ups all over the world. It is a key investor in business such as JD.com, SuperCell, and Didi Chuxing. Therefore, its future investments might also grow into huge businesses in their own rights.


ThreatBeing a technology company, security threats are always very real. We have seen multiple damaging incidents involving hackers, even with large companies such as Yahoo Inc or Sony Inc. If Tencent Holdings is not able to manage the security and privacy of its users & the company well, it might see its reputation being destroyed.

Furthermore, as China opens, the government might start allowing more foreign companies to compete directly in China. It might lead to stronger competition for Tencent Holdings, with companies that are experienced and well-funded. For example, Facebook Inc has been very eager in promoting itself in China, hoping to be able to enter the market one day.

Similarly, as Tencent Holdings grow, many parts of its business are starting to merge with what its main competitors such as Weibo, Baidu and Alibaba are doing. This might lead to a very nasty battle of the giants.


HSBC HOLDINGS PLC


The BusinessHong Kong Shanghai Banking Corporation, or HSBC, is one of the few truly globalised banks. It has a presence in every continent in the world except Antarctica. It provides a wide range of financial services to individual and corporations worldwide, from retail banking, corporate banking, investment banking to wealth management.

• Ticker : HKG:0005; LON:HSBA; NYSE:HSBC; EPA:HSB

• Exchange : Hong Kong Stock Exchange; London Stock Exchange, NYSE; Paris Stock Exchange

• Market Capitalisation : About HK$ 1.2 Trillion (April 2017)

• 2016 Revenue : USD 48.0 billion

• 2016 Profit : USD 7.1 billion

SWOT Analysis

StrengthHSBC has a long history and a strong brand in the financial sector. With its global reach and a full range of services, the company is a “one-stop shop” for many companies doing international businesses. It is also one of the few foreign banks that has a strong presence in China. This might give it a good position to help Chinese companies expand overseas.

More importantly, its strong branding creates trust in customers, the most critical aspect of any financial firm.


WeaknessHowever, being big might not always be an advantage. HSBC has been targeted by many governments for its role in the global financial crisis or other money laundering charges. Given its size, it becomes an easy target for governments to pursue, in order to put a point across to the whole industry. The firm has been charged multiple times over the last few years and has racked up fines running into the billions. Unfortunately for HSBC, being big can be a weakness too.

Similarly, it is being monitored and regulated by many agencies and government. This might prevent it from moving quickly to address new market trends or to compete with smaller, more flexible competitors.

Lastly, given its huge global footprint and size, it is now part of the “too-big-to-fail” banks. Yet, that might also cause it to be a “too-big-to-grow” bank. The bank might face difficulties in growing significant for its investors.

OpportunitiesGiven its global network, HSBC is very well positioned to help companies, especially China-based companies currently, in expanding overseas. Additionally, due to the current weak interest rates environment and after a long series of facing regulatory fines, HSBC could see a recovery in its business as interest rates rise in the future. This is because, a bank typically earns a spread, called net interest margin between the cost of their funds and the interest rate it charges to customers. With a rising interest rate environment, there is a good chance that the bank would be able to increase that spread as well. Thus, boosting its profit margin.

ThreatAs mentioned above, the regulatory risk would be a key threat for the company. HSBC is being watched closely by authorities around the world. Therefore, it would need to be very careful in running its business.

Additionally, the finance industry is starting to face disruption from technology as well. The recent rise in Fintech, technology companies focusing on the finance industry, might become a threat to the traditional business of banking. This have been witnessed in other industries; similar to how Airbnb and Uber have disrupted the hotel and taxi businesses.


CAPITALAND MALL TRUST

ValueInvestAsia.com Stock Guide 2017 |10

• Ticker : SGX:C38U

• Exchange : Singapore Exchange

• Market Capitalisation : About S$ 7.1 Billion (April 2017)

• 2016 Revenue : S$ 689.7 million

• 2016 Profit : S$479.7 million

The BusinessCapitaLand Mall Trust is a real estate investment trust, or a REIT in short. A REIT is basically an asset owner which manage the properties for its unitholders. In return for a beneficial tax treatment, it must pay out 90% of all its distributable income for the year to its investors.

CapitaLand Mall Trust is the largest mall asset owner in Singapore. It owns 16 properties in Singapore. Most of its malls have premium tenants such as Temasek Holdings, Cold Storage Singapore, Robinson & Co. and NTUC Enterprise.


SWOT Analysis

StrengthThe REIT owns prime assets in Singapore that have large foot traffic. This means that its malls are popular with both tenants and consumers. This allows it to generate very strong cash flow from its properties. Given that most of its income must be distributed out to investors, it has proven to be a popular investment among income investors.

Furthermore, it is sponsored by one of the largest property companies in Southeast Asia, CapitaLand Ltd. The relationship with its sponsor might gives it access to acquire future properties from the sponsor’s development. Thus, this relationship could help enhance its asset base for its investors in the long run.

WeaknessCapitaLand Mall Trust is a REIT. Investor need to understand that a REIT structure is more rigid than a company structure. The trust would need to pay out most of its earnings to enjoy its tax benefits. This leaves only a little cash buffer to help protect the REIT through a downturn or for expansion.

In addition, CapitaLand Mall Trust is part of the CapitaLand Group and therefore it is segmented out as just the group’s mall owner and operator. This might restrict the REIT in term of the opportunities to expand and how it can plan its long-term future.

Another point to note is that most of its earnings are coming from its Singapore assets. That might cause it to be too exposed to the Singapore retail economy.

Lastly, even as it is the largest mall operator in Singapore, it does not have full pricing power over its tenants. The rental rate it charges is still subjected to the market condition, including supply and demand for retail space in Singapore.

OpportunitiesSingapore has been voted for many years as one of the best places to live and work globally. This has led to a growth in the population and tourism in Singapore. Ultimately, these two trends are in favour of CapitaLand Mall Trust.

The REIT could expand overseas. In fact, it owns a 14.11% stake in its sister-REIT, CapitaLand Retail China Trust, which focuses on retail properties in China. Likewise, as its sponsor, CapitaLand Ltd expands to other markets, CapitaLand Mall Trust could end up becoming the mall operator for other assets overseas. These could become a growth catalyst for the trust in future.


ThreatThe entire retail sector is under threat from E-Commerce. Not surprisingly, it might affect the mall operators as well. CapitaLand Mall Trust has already started changing its tenant mix to match the emerging trends. It recently closed one of its most valuable properties, Funan IT Mall. It wanted to transform Funan Mall into a lifestyle mall that emphasizes more on the experiences of shoppers, rather than just being a shopping destination.

Lastly, Singapore is a global city, therefore the health of the global economy would have a direct impact on its economy. If the global economy is to slow down or faces another recession, its operation might be impacted.


CAPITALAND COMMERCIAL TRUST


• Ticker : SGX:C61U

• Exchange : Singapore Stock Exchange

• Market Capitalisation : About S$4.8 billion (April 2017)

• 2016 Revenue : S$ 298.6 million

• 2016 Profit : S$ 260.6 million

The BusinessCapitaLand Commercial Trust is another REIT sponsored by CapitaLand Ltd. It is one of the largest commercial property owners in Singapore, owning prime grade An office buildings like the Capital Tower and Raffles City Singapore. The REIT currently owns 10 commercial properties in Singapore and hold a 17.7% stake in MRCB-Quill REIT, another commercial REIT listed on Bursa Malaysia.


SWOT Analysis

StrengthThe REIT owns many prime commercial buildings in Singapore which demand premium rental rates. Singapore, being a key regional hub, continue to show strong demand for commercial space. Its grade A assets allow the trust to have strong cash flow and a high yield for its investors.

Again, due to its close relationship with CapitaLand Ltd, the company has a strong backing from its sponsor in term of financing and future pipeline.

WeaknessSimilar to CapitaLand Mall Trust, CapitaLand Commercial Trust is a REIT. As discussed previously the rigid structure of a REIT means that the trust might have little buffer cash to help protect itself from a downturn.

CapitaLand Commercial Trust is focused mainly on commercial properties such as office buildings. This restriction might be a weakness for the trust. This is because the trust would be subjected to the supply and demand of commercial properties in the Singapore market and has little control over its pricing power.

OpportunitiesThe trust could tap on Singapore’s reputation as a regional hub. As businesses expand in Singapore, so would the demand for commercial space. This would, in turn, benefit the trust.

Its sponsor, CapitaLand Ltd has expanded overseas, CapitaLand Commercial Trust could be the REIT to take control the group’s commercial properties. This would give the REIT a good pipeline of growth opportunities in the future.

Another area of opportunity is that CapitaLand Commercial Trust could improve on existing properties, boosting their value and yield. This is commonly known as Asset Enhancement Initiatives, or AEI. AEI could potentially raise the value and rental of its properties for CapitaLand Commercial Trust.


ThreatOne key threat to CapitaLand Commercial Trust is the rise of business parks. Companies are turning to cheaper space for some of their back-office functions. In recent years, many multi-national companies in Singapore started placing some of their back-office employees in business parks outside of the cities. These business parks give these companies the ability to save on significant rental compared to having all their workforce in the central business district.

Furthermore, companies are opening up to the idea of having remote employees in their organisation. If the trend of having remote employees continues, the demand (per company) for prime office space might diminish in the future. This is also a possible threat for the REIT.


FRASERS CENTREPOINT LIMITED


• Ticker : SGX:TQ5

• Exchange : Singapore Stock Exchange

• Market Capitalisation : About S$5.4 billion (April 2017)

• 2016 Revenue : S$ 3.4 billion

• 2016 Profit : S$ 597 million

The BusinessFraser Centrepoint Limited is one of the few fully integrated property companies in Singapore. The company gained its listing status after a successful spinoff from Fraser and Neave Ltd in 2014. The company currently has a presence in Singapore, Malaysia, Thailand, Vietnam, the United Kingdom and Australia.

It has businesses from property development, ownership and property management. It is the sponsor of 4 REITs in Singapore, namely Frasers Centrepoint Trust, Frasers Commercial Trust, Fraser Hospitality Trust and Frasers Logistic and Industrial Trust.

SWOT Analysis

StrengthFrasers Centrepoint has the ability to offer the complete range of services in the property sector. It can develop properties across different types; from residential, retail, commercial, hospitality to industrial. This allows the company to not just be a developer, it can be a town planner as well. It is highly advantageous compared to a competitor who can only focus on one type of property.


WeaknessThe company has expanded very aggressively over the past few years. Its largest acquisition was made in 2014, when it bought out Australand Property Group, a large property company in Australia, for USD2.46 billion.

Thus, all that expansion has led to a highly geared balance sheet. According to Morningstar, the company has a debt to equity ratio of 125% at the end of its financial year 2016. Its weak balance sheet is a worry as the company face a higher liquidity risk.

Lastly, the property markets in its key markets such as Singapore and Australia have not been very bright in recent years. The property market in Singapore is dampened by government cooling measures. Unfortunately, there is still no sign of recovery in the Singapore property market till now.

Major cities in Australia have also seen property prices shooting up to record levels due to huge foreign purchases. The prices are now at such high levels that many experts are seeing a possible bursting of the housing bubble. If that is the case, it might affect the company directly.

Apart from that, it also has a very strong branding and a long history, especially in Singapore. Moreover, it has a strong backing from its main shareholder, the TCC Group from Thailand, managed by the Sirivadhanabhakdi family.

OpportunitiesThere are still opportunities for the company. There is still a long pipeline for the company to recycle some of its existing assets into its REITs. This will free up some capital for the company and gives the opportunity for its REITs to increase its earnings and asset base.

Moreover, the group can still expand more into its overseas market, especially in Thailand, given the strong network of its main shareholder.

ThreatThe government cooling measures in Singapore has largely work to decrease the possibility of a housing bubble in Singapore. Therefore, many other countries, like Australia, facing such an issue might copy the strategy taken by the Singapore government. Any government intervention in the property markets might threaten the business of Frasers Centrepoint directly.

On top of that, the landscape for retail, commercial and hospitality is changing, with more and more disruption to the industry coming from technology companies. How that might shift the entire industries are yet to be seen. Nonetheless, it means that Frasers Centrepoint would need to change with the time or risk having its business model taken obsolete in the near future.


CARLSBERG BREWERY MALAYSIA BHD


• Ticker : KLSE:CARLSBG

• Exchange : Bursa Malaysia

• Market Capitalisation : About MYR 4.6 billion (April 2017)

• 2016 Revenue : MYR 1.7 billion

• 2016 Profit : MYR 205.0 million

The BusinessCarlsberg Brewery Malaysia is one of the two main breweries licensed to operate in Malaysia. It was founded in 1969 and started producing alcoholic beverages in the country since 1972. Currently, the company manufactures and distributes alcoholic beverages in Malaysia and exports to markets like Singapore and Brunei. The company distributes popular brands like Carlsberg, Corona, Jolly Shandy and seven other brands.

Given its unique position, it has been able to enjoy a duopolistic-like environment with its main competitor, Heineken Malaysia Bhd, for the past 45 years. It also has a 25% stake in Lion Brewery, the largest brewery in Sri Lanka.


SWOT Analysis

StrengthCarlsberg Brewery Malaysia has a strong branding in the country. It also has a long proven track record of growth. Today, the business is relatively stable and very defensive in nature for investors.

Moreover, the company is 51%-owned subsidiary of Carlsberg A/S, a mega player in the brewery business globally. This means that the company has a very strong support coming from its parent company. This reduced the liquidity risk for the company as the parent company would most likely support the company if it falls into hard times.

Lastly, the company operates in a duopoly-like environment with its competitor, Heineken Malaysia Bhd in Malaysia. This gives the company a huge advantage as it raised the barrier of entry in the Malaysia market.

WeaknessSome of the weakness for the company includes slowing economy in Malaysia, its restriction on geographic reach and the volatile Malaysia Ringgit.

Carlsberg Brewery might also be restricted in selling outside its key market of Malaysia, Singapore and Brunei. This is because it is part of Carlsberg A/S and the parent company might prefer its 51% subsidiary to remain as a three countries distributor.

If that is the case, the company has to face the slowing economy in Malaysia and its currently weak & volatile currency. As it would still need to import most of its raw material, currency risk is very real for the company.

OpportunitiesThe brewery has some clear opportunities at hand now. As it already has a very strong distribution network in its key markets, it can add new brands to its portfolio quite easily. It only distributes about 10 brands currently while its parent company has a portfolio of more than 400 products.

In addition, the company can tag on to the growth of its business in Sri Lanka. Its 25% stake in Lion Brewery is quite significant given that Sri Lanka has a population more than 20 million people, which is more than its current addressable market.


ThreatThere are still threats lying ahead for the company. As it operates in a highly regulated industry, it is at the mercy the regulators. If and when regulators decide to tighten the rules surrounding its operations, Carlsberg Brewery Malaysia would still be deeply affected.

The recent rise in duties and excise in Malaysia is one clear example of how the regulators can affect its business. The hike has led to increase in contraband products in Malaysia and thus impacting its sales volume slightly.

Apart from control from the regulators, the company is also in the control of its main shareholders. Carlsberg A/S might at times have a different agenda globally compared to its Carlsberg Malaysia’s local plans. Therefore, there is a chance that the company might make a decision that is damaging for its minority shareholders.


VITROX CORPORATION BHD


• Ticker : KLSE:VITROX



• 2016 Revenue : MYR 234 million

• 2016 Profit : MYR 65 million

The BusinessViTrox Corporation is a Malaysia-based company that designs and manufactures products for the semiconductor and electronics packaging industries. ViTrox Corporation has a global client base.

It focuses on automated vision inspection equipment and system-on-chip embedded electronics devices. Some of its products include Machine Vision System (MVS), Automated Board Inspection (ABI) and Electronics Communication System (ECS).

SWOT Analysis

StrengthViTrox Corporation has a very strong company culture, formed by its founders. In addition, its founders are all still managing the company and have a long track record of growing the company over the past decade.


WeaknessViTrox Corporation produces very niche products for a specific type of customers. Therefore, its fate would be highly dependent on how well the industry is doing. If the semiconductor industry falls into a recession and cut back on capital expenditure, it would affect the company directly.

The company also has a very strong commitment to research and development. Management has stated as a policy to spend about 15% of yearly revenue on research and development purposes. This is an extremely high figure and has led to the company creating very competitive products in the market. It is also reflected by the ViTrox Corporation’s high net margin of more than 25% in the last few years.

OpportunitiesManagement is very farsighted in spotting opportunities for the company. The management is already looking at how its vision technology can be utilised in other industry. It is building an incubator lab to attract other entrepreneurs in finding more applications for its technology.

Thus, the company is looking at becoming more than just a supplier to the semiconductor industry. It is looking at becoming a vision technology powerhouse globally.

ThreatViTrox Corporation is still a very small company by the world’s standard. Therefore, there is more risk for a small company to compete successfully in the global market. Moreover, the company has a high revenue risk as a handful of customers contribute to a large portion of its revenue. This is because its products are high-value equipment which is typically purchased by large multinationals corporations. Therefore, there is a risk of sharp loss of revenue if and when one customer decides to switch supplier.


TUNE PROTECT GROUP BHD


• Ticker : KLSE:TUNEPRO



• 2016 Revenue : MYR 364 million

• 2016 Profit : MYR 65 million


SWOT Analysis

StrengthIts strong link with AirAsia provides Tune Protect Group with a stable source of travel insurance business. The link allows the company to tag on to the growth of AirAsia's business.

It also shares the low-cost business philosophy of the AirAsia Group and has a unique business model of focusing on digital distribution. It has an integrated digital insurance service for its customer from pricing, buying, processing and claiming.

WeaknessHowever, its relationship with AirAsia might also be a weakness for the company. It might defer other airlines which are competing with AirAsia to work with Tune Protect in the future. Currently, its travel insurance is still largely dependent on AirAsia, which contributes about 86% of its travel insurance business.

On its general insurance front, the business has long been a highly regulated industry. This means that it requires a general insurer license to operate in a certain market. Till now, the company is only able to obtain licenses (through acquisitions) in Malaysia and Thailand. It has attempted a few times to acquire an Indonesia-based general insurer but has yet to succeed.

OpportunitiesOpportunities for Tune Protect Group is bountiful. The company can form a new partnership with other airlines to grow its travel reinsurance business. It has since then formed partnerships with airlines like Air Arabia and Cebu Pacific.

The company can expand together with AirAsia. As AirAsia expands and grows its routes, Tune Protect could tag on that growth.

Moreover, it can also grow its general insurance business through improving its digital distribution and adding new products into its platform.

The BusinessTune Protect Group Berhad runs a travel reinsurance and general insurance business. Its travel reinsurance business is distributed with partners such as airlines and travel agencies. Its largest partner in this segment is the AirAsia Group, as they have common main shareholders.

The company also sell general insurance in its key market of Malaysia and Thailand.


ThreatAlthough Tune Protect Group is very innovative in its marketing and distribution approach, it is still considered a small insurer in the entire insurance industry. There are many larger and better-funded insurers that are also pursuing a digital strategy. The competition might heat up for Tune Protect going forward.

Another threat is government intervention. As previously mentioned, it requires a general license before it can operate in a certain country. And if it is unable to obtain the license (as in the case in Indonesia), it might see itself being lockout for their market and unable to expand overseas.

ALIBABA GROUP

- NEW YORK STOCK EXCHANGE -



• Ticker : NYSE:BABA

• Exchange : New York Stock Exchange

• Market Capitalisation : About USD 285 billion (April 2017)

• 2016 Revenue : RMB 101.1 billion


The BusinessWhen we talked about Asian companies, we are not limiting ourselves to just companies listed on the Asian stock exchanges. Many Asia-based companies do and would continue to list on major exchanges such as the New York Stock Exchanges and NASDAQ. These companies offer great value to investors interested in the Asian market and we would not be disregarding them. Our last featured company is one such example.

Alibaba Group is one of the largest technology companies in the world. It is most well-known for its E-commerce platforms in the China. The company started out with creating a successful B2B (Business-to-Business) platform, Alibaba.com. It went on to create other successful platforms such as taobao.com and Tmall.

However, the Alibaba Group today can be considered as a technology conglomerate, with businesses in E-commerce, cloud computing, digital media & entertainment and other strategic investments.


SWOT Analysis

StrengthAlibaba has a very strong user base, especially in China. It is also the most popular e-commerce platform in the country. The company has a long and successful track record of creating popular digital platforms. It has enabled Chinese businesses to sell to the world through Alibaba.com. And it has helped many small businesses in China to sell countrywide with Taobao. It has also helped brands reached the whole of China through Tmall.

Today, Alibaba is still the largest e-commerce site in China and command a strong market share. This gives it strong bargaining power over both its suppliers and customers.

WeaknessThere are still doubt about the level of corporate governance within the Alibaba Group. The company is operating in a complex structure with its associates and investments. Moreover, foreign investors questioned the legality of its VIE structure, (read more about it here), and whether it is sufficient to protect their rights. Most importantly, the sudden transfer of Alipay from the Alibaba Group during the IPO process caught many people by surprised, and casted a bad reputation on the company.

Another weakness for the company is that it is still predominately in China. Although it is a massive company which most people know globally, its business is generated mainly in China. It is aggressively expanding in its oversea markets, such as Southeast Asia with its acquisition of the Lazada Group and many more acquisitions related to the logistic industry. Nonetheless, it is still too early to know how well it will perform in its oversea markets.

Lastly, Alibaba group is a USD280 billion company, making it one of the largest companies in the world. There is a risk that it might have reached a size that is “too big to grow”.

http://www.nasdaq.com/article/alibabas-business-structure-does-it-involve-risks-analyst-blog-cm397135


OpportunitiesAs mentioned, it is expanding very aggressively in the overseas markets. There is a huge opportunity for Alibaba if it can duplicate what it has achieved in China to the world. Moreover, it is looking at connecting small businesses around the world and bring them through a platform to sell to the Chinese population. That could be a huge potential for it as well.

Apart from its e-commerce business, its cloud computing and media & entertainment segment are growing extremely fast as well. In the last quarter ending December 2016, its cloud computing revenue more than doubled. Its digital media segment saw its revenue boosted 273% over the same period. This shows that it might still be early days for these two segments for Alibaba Group.

ThreatThreats are lying all over the place for Alibaba Group. As its business grew big, they are overlapping with the businesses of many other technology giants. Alibaba now has to compete with the likes of Amazon Inc, Tencent Holdings, even Alphabet Inc (Google) and Microsoft Corporation on certain segments of its business. This means competition would not be easy.


WHAT IS A STOCK WATCH LIST?

It is important to note that NONE of our featured companies here are stock recommendations for you. Instead, we want to highlight to you ten companies that we find interesting in the current market and want to share with you why we are following them.

We hope it would give you an idea of how to go about looking at possible investment and how to build up your own personal Stock Watch List. This is important as building up your Stock Watch List is a key part of our investment process.

Notice that in all our discussion on the ten companies, we did not touch on the valuation of the companies. This is by design. We hope you will look at companies and investment in the same way too. Benjamin Graham once said “Investing is most intelligent when it is most business-like”. And that is what we are doing here when building up our first Watch List. We should always focus on the BUSINESS of the company first. We want to find companies with good business models and strong managements that we want to invest in.

Once we find these companies, we should keep monitoring their progress and see how they developed over time. Only when we are comfortable with them, will we consider their valuation and find a suitable price point to start investing in them.

We must be clear in our mind whether we want to be an investor or a speculator in the stock market. If we are committed to being a value investor in the stock market, we should create a logical and smooth investment process flow in which we discover, evaluate, monitor and value companies for our portfolio.

Do keep a lookout on your email every month for our Asia-In-Focus report where we share with you more insights on what is happening in the Asia markets and how to be a better investor. We hope you find this E-Book valuable in your investing journey.

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Disclaimer: All information is provided by ValueInvestAsia.com, an investment publishing andeducationwebsitemanagedbySlimhawkPartnersPte.Ltd. (ASingapore-registeredCompany-201708804Z). Any information, commentary, advices or statements of opinion provided hereare for general information and educational purposes only. It is not intended to be any formofinvestmentadviceora solicitation for thepurchaseor saleof securities.Beforepurchasingany discussed securities, please be sure actions are in line with your investment objectives,financial situation and particular needs. International investors may be subject to additionalrisks arising from currency fluctuations and/ or local taxes or restrictions. The informationcontained in thispublicationareobtained from,orbaseduponpubliclyavailable sources thatwe believe to reliable, but we make no warranty as to their accuracy or usefulness of theinformation provided, and accepts no liability for losses incurred by readers using research.Content, information, commentary andopinions are subject to changewithoutnotice. Pleaserememberthatinvestmentscangoupanddown,includingthepossibilityastockcouldloseallofitsvalue.Pastperformanceisnotindicativeoffutureresults.

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STOCK GUIDE 2017...ValueInvestAsia.com Stock Guide 2017 | 06 SWOT Analysis Strength The key strength of Tencent Holdings is its strong user base. Moreover, its platforms are extremely