We believe in portfolio concentration where we conduct deep dive due diligence into each of the target companies. We shortlist target companies on a trifecta of factors:
Competitive Moat. Businesses that have moats against its competitor’s especially robust barriers of entry such as pricing, technology, patents, supply chain advantage.
Competent Management. Transparency and integrity are of the highest ethos in our selection of an ethical management. On top of that, we value hands-on management from operational background.
Attractive Valuation. We seek alpha returns and uncover gems that have yet to be discovered by the market. Aside from value investment, we are eager to participate in the emerging growth stocks.
BYD, started out as a battery maker in 1995, is now the largest new energy vehicle (NEV) manufacturer in China. It has strong capabilities in NEV manufacturing with 20% market share in NEV market in China at a time when most NEV players are merely clocking low single digit market share. It is also the world's first fully vertically integrated NEV maker with capabilities to manufacture battery cells and IGBT transistors, the two most expensive components in a NEV.
NEV industry plays a crucial role in combating climate change and enhancing energy security for countries that have heavy reliance on oil imports. Given the low NEV penetration, dwindling ASP of NEV and governments around the world phasing out internal combustion vehicle (ICV), these act as strong secular tailwinds in the NEV market for a foreseeable future.
On R&D front, BYD has been consistently coming out with new revolutionary technology such as blade battery, DM-i technology and e-Platform 3.0, which will spur multiyear growth. We are of the view that BYD will continue to be a leader in the NEV market and is well-positioned to capitalize on the long-term growth runway of NEV industry.
L.K. Technology Holdings Limited is one of the largest die-casting machinery (DCM) manufacturers in the world and the largest in China. It monopolises about 60% of China’s DCM market share. Other than DCM, the Company has two other product lines, plastic injection moulding machine and computerised numerical controlled machining centre. These machines have a wide range of application downstream, including but not limited to automotive, electronics, fashion accessories and household products.
We see potential in the Company and industry, namely the DCM market and expect that the high-pressure DCMs to be a key growth driver for the Company in the coming years. Currently, the Company is the sole supplier to Tesla for the high-pressure DCMs used in its Model Y and upcoming Cybertruck. The unibody design used in the Model Y was only made possible with a high-pressure DCM and this new method of production is expected to disrupt the conventional chassis manufacturing process.
As a market leader in the manufacturing of DCMs, the Company is ahead of its competitors in terms of innovation.
Meituan is a mega Chinese shopping platform that offers an all-in-one multi-service
ecosystem that offers food delivery services, in-store, travel & hotel booking services
and retail services i.e. entertainment, discounts and ticketing, grocery shopping, bikesharing. Meituan is the market leader in various markets in China such as food delivery with a staggering 67% market share (2020) and has also risen to the top in
the hotel booking market in China with a 52% market share (2020).
Meituan’s continued capture of the food delivery business market share starting from
31.7% in 2015 to 68.2% in 2020 is no fluke as it has more than doubled during the
period, ahead of its competitors Ele.me. We expect Meituan to keep the competitive
advantage ahead of its peers as it is seen that Meituan have more services and
customer retention/stickiness than its competitors, according to a Trustdata report,
which would keep Meituan as the market leader in this segment for years to come.
Meituan’s new initiatives segment is also experiencing strong growth in its community e-commerce businesses, which is Meituan’s largest invested segment in the recent years. The investment ensured the successful expansion of Meituan Select, Meituan Instashopping and Meituan Grocery, which seeks to leverage on Meituan’s vast delivery network.
Ganfeng Lithium is one of the world’s largest lithium metal producers in terms of production capacity. According to Statista, Ganfeng ranked fourth worldwide in lithium production, controlling 12% of the world’s lithium supply in 2019. Its key competitors include Albermarle, SQM, Tianqi Lithium and Livent. Ganfeng started out as a midstream lithium compounds and metals manufacturer and have expanded their operations both upstream and downstream.
The global demand of lithium has been forecasted to reach 2mn tons of Lithium Carbonate Equivalent (LCE) in 2030, equivalent of RMB 380bn at current price of RMB 190,000/ton. Macquarie Bank estimates that the deficit in supply of lithium in the market to widen to 63k tons in 2023, while Credit Suisse stretched its forecasts and estimates the lithium deficit to widen to 248k tons in 2025. Fastmarkets estimated 2020’s global lithium supply to be 345k tons LCE, while Ganfeng sold about 63k tons LCE, implying about 18.3% of the market share
WuXi Biologics (formerly a subsidiary of WuXi Apptec) is the no. 1 biologics outsourcing service provider in China (78.6% market share in 2019) and no. 3 (5.1% market share in 2019) globally (after Lonza, Boehringer-Ingelheim and Samsung Biologics). It is the only contract development manufacturing organisation (CDMO) in the world offering end-to-end solutions to discover, develop and manufacture biologics from concept to commercial manufacturing, and such services will result in high consumer stickiness. It is also the first and only biologics company in China to pass FDA (U.S.), EMA (Europe) and ANVISA (Brazil) inspections.
WuXi Bio works with 14 of the 20 largest pharmaceutical companies in the world and 32 of the 50 largest pharmaceutical companies in China as their customers. It boasts marquee customers such as Pfizer, AstraZeneca, GSK and Eli Lily.
Over the years, outsourcing of drug discovery to late-stage development and manufacturing has become a commonplace among drug companies as they look to reduce cost and improve efficiency. Such phenomenon provides a strong backdrop for WuXi Bio to continuing having a sustainable high growth. Additionally, according to IQVIA, biological drug market has become more prominent, and China lacks behind on biological drugs. With a strong technological and manpower advantage, this presents the perfect opportunity for WuXi Bio to capture the market and become a monopoly in China.
Pentamaster International Ltd is an innovative manufacturing and technology solutions provider listed on Hong Kong Stock Exchange. It is founded in Penang, Malaysia .
With over 25 years of extensive experience and proficient skills in providing integrated and customized solutions, Pentamaster serves customers across worldwide industries sectors ranging from semiconductor, computer, electrical & electronics, pharmaceutical, medical devices, automotive, food & beverage, consumer electronics to general manufacturing.
The company provides Automated Testing Equipment (ATE) and Automated Manufacturing Solutions (AMS) to multinational manufacturers mainly in the semiconductor, telecommunications and automotive sectors spanning APAC, North America and Europe. It has won the highly acclaimed title of Forbes Best Under A Billion 2018 and 2017, and Malaysia's Growth Champion 2021.
Sunny Optical Technology engages in designing, researching, developing, manufacturing, and selling optical and optical related products, and scientific instruments. It operates through three segments: Optical Components, Optoelectronic Products, and Optical Instruments. The company’s products include optical components, such as glass spherical and aspherical lenses, plane products, handset lens sets, vehicle lens sets, security surveillance lens sets, and other lens sets; optoelectronic products, such as handset camera modules, three dimensional optoelectronic products, vehicle modules, and other optoelectronic modules; and optical instruments comprising microscopes and intelligent equipment for testing.
Its optoelectronic-related products are used in handsets, digital cameras, vehicle imaging and sensing systems, security surveillance systems, and virtual reality/augmented reality, which are combined with optical, electronic, software, and mechanical technologies. In addition, the company engages in the research and development of infrared technologies; trading of optical instruments and optoelectronics products; property leasing activities; and development, service, and consultation of technology, as well as provision of financing services.
It operates primarily in the People’s Republic of China, Vietnam, Korea, Japan, India, and the United States. The company was founded in 1984 and is headquartered in Yuyao, China.
Crowdstrike, founded by George Kurtz (ex-CTO of McAfee) is a best-in-class next-gen cloud native cybersecurity software that specialises in end point protection (EPP) and endpoint detection and response (EDR). Its flagship product - Falcon is built with single lightweight-agent architecture that leverages artificial intelligence (AI) and offers real-time protection and visibility across the enterprise, making it the top CISO choice in EPP/EDR software.
With the proliferation of cyber hacking and ransomware incidents, we see a strong secular tailwind in the cybersecurity space for a foreseeable future. Crowdstrike operates in a huge market with a total addressable market of $36bn (estimated by the management), and it’s expected to grow to $43.6bn/$106bn by 2023/2025.
By having superior products & services, Crowdstrike has been able to eat the lunches of the legacy players like McAfee and Symantec as customers switch side. Even in the next-gen cybersecurity software, Crowdstrike has been successfully replacing other players like SentinelOne and winning deals from Microsoft. We are of the view that Crowdstrike will continue to be a leader in the EPP/EDR space.
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