nov global investment ideas (combined)...source: tencent, analysys c/o mary meeker’s 2017 internet...

Global Investment IdeasEdison Chen

edisonchen@uobkayhian.com+65 6590 6637

2

Portfolio performance review• Since the inception of our portfolio in September 2017, it has an

average return of 9.8%. The best performing stock within our portfolio is Universal Medical Financial & Technical Advisory Services (+18.3%), followed by Visa (+8.2%).

US & HK Portfolio Performance

Company Name Ticker Cost Price Per Share (lcy)

Current Price as at 13 Nov 17 (lcy)

Gains / (Loss)

Ulta Beauty Inc ULTA US 190.2 198.03 4.1%Universal Medical F&T Advsry Srvcs Co Ltd 2666 HK 6.6 7.84 18.8%Home Deport Inc HD US 152.9 165.35 8.1%Visa Inc V US 103 111.4 8.2%Average Return 9.8%Source: Bloomberg, UOB Kay Hian

Monthly Global Investment Idea

Tencent Holdings(700 HK/BUY/Target: HK$392.03)

3

China’s Digital Economy• China's digital economy surged 18.9% in 2016 to 22.6 trillion yuan

($3.35 trillion), according to a white paper issued by China Academy of Information and Communications Technology (CAICT), Ministry of Industry and Information Technology (MIIT).

• Digital economy accounted for 30.3% of China's total gross domestic product (GDP) over the year, said the white paper. Taking its spillover effect into account, digital economy contributed 69.9% to the GDP in 2016, it added.

• CAICT expects China's digital economy to be valued at 32 trillion yuan and account for 35% of the whole GDP by 2020, before taking up over half of the country's GDP by 2030, according to the white paper.

4

Tencent, the digital economy giant

5

Growth Driver - Community

6

• Largest online community in China

• Active monthly users on WeChat/微信 alone hits close to 1b

Growth Driver - Content

7

Growth Driver – Finance

8

Source: Tencent, Analysys c/o Mary Meeker’s 2017 Internet Trends Report

9

Growth Driver - AI

4 Application Areas

Peer Comparison - Internet Companies with Games

10

Peer Comparison - Internet/E-commerce Companies with Online Ads

11

Peer Comparison - Social Media Companies

12

UOBKH’s Tencent SOTP Table

13

Tencent Holdings(700 HK/BUY/Target: HK$392.03/Market Cap: HK$3,703bn*)

Ongoing migration of advertising dollars fromtraditional media to digital advertising

China’s largest online community spellsimmense monetisation potential

Crafting an online ecosystem that defineslifestyle for everyone

Internet finance moved beyond payment

AI-in-All lead us to the future

A stock which you must own

Target price of HK$392.03. (BloombergConsensus)

14

*Based on last closing price as at 08/11//2017*Share Price at HK$386.86

Key Financials

Source: Bloomberg

Year to 31 Dec (Rmb’m) 2015 2016 2017F 2018F 2019FNet turnover 102,863.0 151,938.0 232,361.2 314,444.7 401,201.3EBITDA 44,702.0 65,676.0 90,291.8 114,856.8 144,272.5Operating profit 38,028.0 52,935.0 78,784.0 99,185.5 123,050.1Net profit (rep./act.) 28,806.0 41,095.0 63,675.0 81,272.2 102,816.5Net profit (adj.) 28,806.0 41,095.0 63,675.0 81,272.2 102,816.5EPS (Fen) 309.7 438.3 673.1 863.2 1,079.9PE (x) 105.7 74.7 48.6 37.9 30.3P/B (x) 25.7 17.8 13.1 9.9 7.6EV/EBITDA (x) 70.7 48.1 35.0 27.5 21.9Dividend yield (%) 0.1 0.2 0.2 0.3 0.4Net margin (%) 28.0 27.0 27.4 25.8 25.6Net debt/(cash) to equity (%) 18.2 21.5 36.1 44.2 58.8Interest cover (x) 29.6 30.3 29.9 27.1 26.1ROE (%) 28.8 27.9 29.7 29.0 28.0

Global Investment IdeaTheme: JP Morgan

Paul De Viernodevierno@uobkayhian.com

+65 6590 6224

Theme: JP Morgan

16

Famous CEO: Jamie Dimon

• Operates in 70 Countries

• US$ 2.6 trillion in assets

Company Overview

17

• Conditions are favorable for US banks• JP Morgan is well run relative to competition • Valuations are reasonable

Investment Thesis

18

Loan Growth

• Good economic growth: US GDP is forecast to grow 2.8% in2018 (IMF)

• Loan growth is a function of GDP growth• Banks (generally) make most of their money revenue from

loans• For JP Morgan, the percentage is 50%

Favorable Conditions

• Banks borrow shortand lend long

• A steepening yieldcurve helps their NIM

19

But the yield curve has been flattening!Source: Bloomberg

Favorable Conditions

20

Banks’ reaction to flattening yield curve

Source: Bloomberg

Favorable Conditions

21

Low unemployment will drive inflation (and interest rates) higher

Favorable Conditions

22

Relaxing regulations

Jerome PowellDaniel Turullo

• New Trump appointees will be grading Fed stress tests• Allowing greater leverage increases return on capital

Favorable Conditions

23

More Trump Appointments

As OCC Chief (office of comptroller of the currency) Joseph Otting is expected to play a key role in rolling back regulations.

Favorable Conditions

24

• JP Morgan is the only large US bank to make a profit in 2008.

• Investors now want to see JP Morgan controlling costs and increasing operating leverage.

Well Run

25

Operating costs

• 2017 $58 billion • 2016 $56 billion• 2015 $59 billion• 2014 $61 billion

Well Run

26

Price to book could still expand

• Lighter regulation will allow JP Morgan to increase leverage• Control of costs will allow JP Morgan to increase operating leverage• Strong economy will keep bad loans down, and allow loan book to grow

2016 2017F 2018F

P/E P/B P/E P/B P/E P/B

JP Morgan 14.2 1.4 14.2 1.5 12.7 1.4

S&P 500 Banks Industry Group GICS Index 14.7 1.2 14.3 1.3 12.7 1.2

Valuations

Global Investment IdeaTheme: MSCI Europe ex-UKTheme: MSCI Europe ex-UK

Terence Teohterenceteoh@uobkayhian.com

+65 6590 6222

ETF NAME ETF TICKER COST NAV (LCY)

CURRENT NAV (LCY)

UNREALIZED P/L (%)

VanEck Vectors Semiconductor ETF SMH US 87.87 103.29 17.5

iShares MSCI China ETF 2801 HK 26.6 28.45 7.0

Source: Bloomberg, UOB Kay Hian

ETF performance review

28

Feb 2017

German presidential

election

Mar 2017

Netherlands election

UK Article 50 deadline

Apr 2017

French presidential election (round 1)

May 2017

French presidential election (round 2)

Sep 2017

German parliamentary election

European 2017 Political alendar

29

30

Healthy economic indicators:• Purchasing Managers’ Index (PMI)• Consumer Confidence• Business Climate Indicator• Investors Confidence

Continued accommodative monetary policy:• Ensures flush of liquidity in the financial markets

Macro – How’s The Eurozone Doing?

31

Source: Bloomberg

Macro – How’s The Eurozone Doing?

32

2017 a strong year for European corporate earnings• 1Q2017:

Earnings beat: (best in 7 years)

Earnings growth: (best in 2 years)

• 2Q2017:Earnings beat: Earnings growth:

• BlackRock: profitability estimates still about 50% below pre-crisis peaks

70%

65%

54%

66%

Corporate Development - Earnings

33

Yoy capex growth: ~3% (one of the strongest in the world)• European companies sitting on cash over the past few years, but increasingly

willing to spend after the dark clouds passed. • Moody’s:

EMEA companies’ cash pile:€974b (as of end-2016)

Top 5 cash holders in Germany, France and

UK: €514b

• Some companies may plan to act soon to lock-in the low financing costs, especiallywhen the ECB looks set to tighten monetary policy in the coming quarters.

Corporate Development - CAPEX

34

Deal-making volumes in 1H2017:• Globally: +2% yoy• US companies: -17% yoy

• European companies: +33% yoy

• Improving economic climate, conclusion of major elections,- European companies’ large cash hoards reasons for European deal

making volumes to rise.

• Buyout firms have been active in European deal-making- They are the acquirers of half of the ten biggest pending and completed

European domestic deals in Q3.

Corporate Development – Deal - making

35

INDEXES 2017F PE (x) 2018F PE (x)

MSCI Europe Index 16 15

MSCI Eurozone Index 16 14

EURO Stoxx 600 Index 16 15

S & P 500 Index 19 18

MSCI All-Country World Index 17 16

Risks:

1) Any miscalculation of a transition away from loose ECB monetary policy couldbe a shock to markets.

2) An excessively strong euro would affect companies that make a significantproportion of earnings in US dollars.

Corporate Development - Valuations

Recommendation

36

iShares MSCI Europe ex UK UCITS ETF (IEUX LN)

The iShares MSCI Europe ex-UK UCITS ETF aims to track the performance of the MSCI Europe ex UK Index. The MSCI Europe ex UK Index offers exposure to stocks from developed European countries excluding UK.

Source: Bloomberg, iShares

TOP 10 HOLDINGS (%) TOP COUNTRIES (%) SECTOR BREAKDOWN (%)

Nestle SA 3.9 France 22.9 Financials 21.1

Novartis AG 2.8 Germany 20.8 Industrials 15.1

Roche Holding 2.7 Switzerland 17.5 Health Care 13.9

Total SA 1.8 Netherlands 7.9 Consumer Staples 12.0

Sanofi SA 1.7 Spain 7.2 Consumer Discretionary 11.4

Bayer AG 1.7 Sweden 6.2 Materials 7.7

Banco Santander SA 1.6 Italy 5.3 IT 6.0

Siemens N AG 1.6 Denmark 4.0 Energy 3.9

SAP 1.6 Belgium 2.5 Utilities 3.7

Allianz 1.5 Finland 2.1 Telco 3.7

Others 3.6 Real Estate 1.3

Recommendation

37

Source: Bloomberg

Issuer BlackRock

Benchmark MSCI Europe ex UK

Expense ratio 0.40%

AUM €2.65b

30D avg vol 274.1k

Indicated yield 2.17%

Inception date 05-Jun-06

Ticker IEUX

Exchange LSE

TOTAL RETURNS (%) 1M 3M 6M YTD 1Y 3Y 5Y

IEUX LN ETF -0.77 0.80 6.30 18.15 21.89 50.00 96.45

MSCI Europe ex-UK -0.68 0.83 6.14 17.63 21.69 49.00 94.86

Fund Comparison

At constant currency (USD) termsName Ticker YTD TR 1Y TR

iShares MSCI Europe ex-UK IEUX 24.5 29.8

iShares MSCI Europe IEUR 23.1 27.9

SPDR S&P 500 SPY 17.1 21.7

Source: Bloomberg

38

Q & A

39