(Bloomberg) — Chinese steel producers, a cryptocurrency platform, Japanese lasers and parking lots and a Vietnamese jeweler were among bets pitched by Asia hedge funds at the Sohn Investment conference in Hong Kong.
Keita Arisawa, founder and chief investment officer of Seiga Asset Management, is bullish on Tokyo-listed QD Laser Inc. Marshall Wace Asia Chief Executive Officer Amit Rajpal is backing digital broker Monex Group Inc. Rajesh Sachdeva, founding partner of Flowering Tree Investment Management, is betting on Vietnam’s Phu Nhuan Jewelry JSC, while Oasis Capital Management called for a merger of two of China’s biggest steel makers.
Here’s a selection on notable calls on Thursday from the event in support of the Karen Leung Foundation:
Japanese Eyewear
Arisawa at Seiga is bullish on QD Laser, a spinoff from Fujitsu Laboratories Ltd. It boasts 87 patents with just 50 staff, using lasers for electronics and eyewear. Arisawa says the company’s two most exciting products include its quantum dot laser technology, which could transform how chips are manufactured, and its eyewear product that can help the vision-impaired see by directly projecting digitized information onto the retina. He estimates as many as 32 million people in the U.S., Europe and Japan have low vision, meaning loss of sight that can’t be corrected with glasses or surgery.
QD Laser has soared about 370% since its trading debut in February.
Blockchain Revolution
Marshall Wace’s Rajpal is bullish on Monex Group, owner of Coincheck, one of the largest crypto trading platforms in Japan. Future areas of investment include a non-fungible tokens platform, activist asset management and blockchain. He believes the stock’s fair value is 1,700 yen, up from its current price of 767 yen.
The pick is to capitalize on the theme that blockchain, decentralized finance and crypto can potentially redefine finance, including money, payments and investable asset classes. The total addressable market will expand from crypto trading to remittances, supply chains, payments and eventually become a round-the-clock market with instant clearing across all capital markets. Part of that expansion will be driven by third-generation blockchain, he said.
Even with the recent sell off in Bitcoin and other digital currencies, Monex is up 99% this year in Tokyo.
Vietnam Jewelry
Sachdeva at Flowering Tree is betting on Phu Nhuan Jewelry. He estimates that between 60% to 70% of Vietnam’s jewelry purchases are “unorganized” through individual stores rather than chains, but the trend is flipping. Phu Nhuan has 30% to 40% of the “organized” market share, Sachdeva says. The stock is up 23% this year, and while it’s at 2018 levels, earnings have grown 50% since then.
Jewelry sales tend to pick up after countries surpass $2,000 in per capita gross domestic product, he said, adding that Vietnam is at about $2,500. He predicts a double-digit growth rate in sales over the next few years.
China Steel
Seth Fischer, founder and chief investment officer at Oasis Management, is long on Bengang Group convertible bonds. His thesis is based on long-term trends and a potential acquisition of the company. China wants to cut pollution from steel manufacturing to achieve its goal of carbon neutrality by 2060. He foresees consolidation in the industry and expects China’s demand for steel will soon outgrow its supply. He estimates that a 1% drop in steel production could lead to 5% to 8% increase in prices.
Fischer expects and supports a merger between Bengang and rival Angang Steel Co. Bengang recently disclosed that its parent received interest in its stake from Angang. While discussions between the two first emerged in 2005, those talks could come to fruition now that the Liaoning government said it would push for steel consolidation in the province.
Japan Parking
Anand Madduri, founder and chief investing officer at ApaH Capital Management, highlighted Park24 Co. People need to find a parking space when they buy a car in Japan. The company has secured about 750,000 spots in 20,000 locations, as many as four times its largest competitor.
Parking lots in Japan contribute to 50% of revenue and operating profit. Car sharing accounts for 27% of its business, but 40% of profit.
The company could use its significant cash pile to buy the lots operated by mom-and-pop firms that faced significant hardship during the pandemic. Those parking lots also aid its ride-sharing business. Park24 has spent heavily to go after corporate Japan customers, which are trying to cut their fixed costs.
Madduri likens Park24 to a convertible bond: The parking business is the bond floor, while the newer, more profitable car-sharing business is like a warrant. He sees a potential 50%-plus upside to the stock, which has jumped 27% this year.
Sea Ltd.
Rashmi Kwatra, founder of Sixteenth Street Capital, is bullish on Sea Ltd. Hardly a hidden gem, Southeast Asia’s most valuable company could triple its shares with expansion in e-commerce, fintech and gaming, she says. Sea Money could grow 17 times in the next five years and its franchises are undervalued with gaming tailwinds here to stay, she said. The recent share price retreat — down 12% from its February peak — is a great buying opportunity.
SPAC Bets
Manoj Jain, co-chief investment officer of Maso Capital, is a big advocate for SPACs, the blank-check investment vehicles that have been talk of the town. His main point is that there’s something for everyone in SPACs. There are different payout profiles for different types of investors. He added that it’s incumbent on sophisticated exchanges to consider listing these special purpose acquisition companies. Asia boasts ample capital and companies willing to go public via this route, he said.
Among the attractive opportunities cited by Jain are Climate Change Crisis Real Impact I Acquisition Corp., which is in a $2.1 billion merger with EVgo, operator of a charging network for electric vehicles; RMG Acquisition Corp. II’s $8 billion combination deal with India’s ReNew Power; and ACE Convergence Acquisition Corp., which agreed to a $1.8 billion merger with Achronix Semiconductor Corp. All three are creating market leaders and trading at significant discounts to peers, Jain said.
China Golf Wear
Michelle Leung of Xingtai Capital is backing Biem.L.Fdlkk Garment Co., a China golf-wear brand. It’s an example of how Chinese companies are taking advantage of the demand for highly tailored, high-end products from young, wealthy consumers. The Shenzhen-listed company has seen its shares climb 29% this year. Leung said the stock could at least double in three years, adding there’s an upside of up to 250%.
She’s predicting revenue to double in the next three years as it plans to open 300 new stores a year, adding to the 900 it already has in high-end malls and heavy-traffic locations like airports.
(Adds Jain’s picks for SPAC deals in 18th paragraph; updates shares throughout)
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