Results 1 to 5 of 5

Thread: Asian investment themes

  1. #1
    Senior Member kris-one's Avatar
    Join Date
    Apr 2013
    Posts
    1,803

    Asian investment themes

    I get a newsletter called 'The New World' delivered every couple of weeks into my inbox focusing on investment ideas in Asia or South America. I don't follow any of their 'tips' but I usually find it a good yarn all the same.

    Buy the bookie cashing in on Asia’s sports craze
    From Lars Henriksson, in Bangkok

    Dear,

    “What team do you support?”

    I can’t go anywhere in Asia without being asked this question. It doesn’t matter if I am sitting in a taxi in Kuala Lumpur, having lunch with a Thai businessman at the Erawan Hotel in Bangkok, or meeting up with an Indonesian investment professional at the Jakarta Stock Exchange, the most common questions I am asked in Asia are almost always related to what football team I support.

    (Disclaimer: I don’t actually have a favourite, which is probably a reflection of my nomadic nature, and how difficult it is for me to have an emotional attachment to only one place…)

    In recent years a sports craze has swept Asia. And football from the UK and the rest of Europe is king. It’s no wonder that Asia is increasingly seen as a major investment opportunity for European clubs. They are now flocking to the region during the summer season to play promotional matches and participate in marketing events, which are generously covered by local media.

    This new love of foreign sports, of course, is part of a boom in consumer spending. And I think this part of the Asian consumer story will grow exponentially. Today I want to talk about how this will happen, and suggest one way you could profit.

    George Scott, a British explorer and colonial administrator, brought football to Burma (also known as Myanmar) in the late 19th century. Since then, Asia’s infatuation with football has grown to rival the UK’s. When I lived in the region for the first time in the early 1990s, most Asians showed little interest in participating in any kind of sport. But this is not the case anymore.

    At a corporate event recently, I watched with bewilderment as young attendants hit the gym early in the morning. Later, I heard these guys bragging about their weekends, which included cycling for 100 miles and playing football.

    The newspapers here have beefed up their coverage of the sport and health sector. This includes reports on government campaigns to get the general population involved in sports and physical activities.

    These developments suggest that increasing Asian affluence has created a strong demand for sports and related activities.

    If you want proof that the outlook for the Asian sport market is compelling, just look at how well Manchester United is doing in the region.

    Surveys indicate that the club has 659m followers globally, of which 325m are in Asia. This accounts for 50% of the total. If we add the 173m in Middle East and Africa, emerging economies account for a whopping 80% of their total fan base.

    Interestingly, of the approximately two million shirts they sell a year, 50% of the buyers are from the UK. This suggests that there is a huge potential to grow the club’s merchandise business in emerging markets, particularly in Asia.

    Moreover, professional football leagues have started to realise their own true market value.

    Between 2004-10 the pricing of sports rights rose about 10% a year. Over the last few years the prices have jumped 40-50% as Manchester United and other sports rights holders have gained a better understanding of their popularity in emerging markets. Although that growth rate is unsustainable in the long-term, it is probably fair to assume that the long-term rate will remain in the double-digit zone. So what’s next?

    My bet is that the combination of increased personal interest in sport activities and skyrocketing international sport content prices will pave the way for local or regional sport content.

    This trend has already started in Indonesia and Malaysia, where the domestic professional football leagues attract more viewers than the English Premier League.

    The Asian leagues tend to have longer contracts and lower prices, making them attractive for content buyers.

    There are a range of favourite local sports. For instance, Indonesians, Malaysians and Singaporeans, love badminton, while Thais really enjoy Muay Thai boxing, and the Chinese are big fans of basketball.

    Although I think the value of local sport content will grow in leaps and bounds, it will require time before we can get direct exposure. At the moment, there are only proxies available.

    One option is cable TV operators, but it looks less exciting because they have to buy sport content at increasingly higher prices, and they really just use sport to attract fresh subscribers to bundles of programmes.

    A second option would be through merchandise or local sport brands. Around the Beijing Olympic Games in 2008, a number of sport shoe and accessories manufacturers were listed in Hong Kong, Malaysia and Singapore. They had started as original equipment manufacturers to Adidas, Reebok and other sport multinationals and decided to branch out and develop their own brands and franchises.

    After initially surging in price, with help from glowing broker reports, they have been creamed over the last two years. Stupendous expansions proved unsustainable, with problems ranging from managing the distribution network, to the cost of store openings, as well as inventory and brand management.

    A third option is the gaming market. Take Rexlot Holdings (555 HK) for example. It provides lottery related systems, machines and services to the Chinese lottery market. While the majority of earnings are derived from the Welfare Lottery (China’s version of the National Lottery), Rexlot also have exposure to sport betting.

    Sports betting accounts for only 10% of total lottery spending in China vs. 30% in Hong Kong, according to estimates by BoA Merrill-Lynch.

    But sports betting is taking off. According to China’s Ministry of Finance, the country’s sports lottery rose 32% vs. 25% for the overall lottery market in August. And over the January to August period, the growth rate was 22% vs. 18% for the overall lottery market, with a total value of RMB85.2bn ($14bn).

    Rexlot trades on a price to earnings ratio (PE) for 2013 of 6.4 and offers a dividend yield of 3.7%, according to Bloomberg. Pretty cheap for a stock with exposure to a theme that is ready to explode…

    Until next time,

    Lars Henriksson

    The New World




  2. #2
    Super Moderator LivinLOS's Avatar
    Join Date
    Mar 2013
    Posts
    14,153
    Heres one I was told of and notice.. A good buddy of mine is involved in the highly lucrative sports surfaces and line marking gig.

    A few years back, when we were both resident on Phuket he was trying to raise capital to put in an indoor 5 a side football stadium over near chalong.. He said these were gangbusters in singapore, he knew an ex pro player who did coaching and there was a whole bunch of revenue streams to it you wouldnt have thought of.. It had a startup cost but low running fees.. At the time Phuket had some sports pitches but I was leary as it felt too advanced, I had never seen them play 5 a side with the smaller ball locally, and I felt he was repeating a pitch he had been sold.

    Now up here in CNX for the last 3 years.. I have seen no fewer than 4 of these pitches installed (outdoor but with false turf) just on my side of the city and they are busy... Evenings and weekends theres guys playing, under floodlights often, car park full, drinks being sold, etc etc.. He was right it is a popular activity, it is growing and it maybe would have worked.

  3. #3
    Senior Member marc26's Avatar
    Join Date
    Mar 2013
    Location
    Vancouver BC
    Posts
    10,632
    Quote Originally Posted by LivinLOS View Post
    Heres one I was told of and notice.. A good buddy of mine is involved in the highly lucrative sports surfaces and line marking gig.

    A few years back, when we were both resident on Phuket he was trying to raise capital to put in an indoor 5 a side football stadium over near chalong.. He said these were gangbusters in singapore, he knew an ex pro player who did coaching and there was a whole bunch of revenue streams to it you wouldnt have thought of.. It had a startup cost but low running fees.. At the time Phuket had some sports pitches but I was leary as it felt too advanced, I had never seen them play 5 a side with the smaller ball locally, and I felt he was repeating a pitch he had been sold.

    Now up here in CNX for the last 3 years.. I have seen no fewer than 4 of these pitches installed (outdoor but with false turf) just on my side of the city and they are busy... Evenings and weekends theres guys playing, under floodlights often, car park full, drinks being sold, etc etc.. He was right it is a popular activity, it is growing and it maybe would have worked.
    mm....sounds like someone i know 555

    but you are right, you never see any sporting surfaces.....it is actually surprising
    now i don't know if they'd be used in everyday thai neighbourhoods for payment
    the one place they seem to have surfaces are at schools, but not many

  4. #4
    Senior Member Dodger's Avatar
    Join Date
    Mar 2013
    Posts
    1,161
    They opened one in Kamala over a year or so ago, two 5 aside pitches, floodlit, which can double up as a full size pitch. Not used day time as too hot, but evenings into the small hours of the morning, full a lot of the time and its not cheap, but nearly always Thais.
    Custard should be a colour...cos I could then paint over the mess I've just made!!!

  5. #5
    Senior Member kris-one's Avatar
    Join Date
    Apr 2013
    Posts
    1,803
    Here is one on Thailand's solar energy

    In December, the temperature in London is set to drop to 7°C with only 3 hours of daily sunshine.

    Bangkok, in contrast, will have an average temperature of 26°C, with 9 hours of daily sunshine.

    I suppose this helps to explain the snarling queues of British and Europeans at the immigration counters of Suvarnabhumi Airport.

    They are not alone.

    North Asian tourists - particularly Chinese - are lining up with them. I fault them not. A few years ago, I travelled in a taxi from downtown Beijing to the airport with hardly any visibility due to smog, snow and darkness.

    The good weather is pulling everyone towards Thailand and it’s also had a healthy influence on the agricultural sector.

    But beyond these two sectors, is there a way to make money from the sunny weather?

    I believe so.

    For the past couple of years Thailand has been developing a multi-billion dollar infrastructure-spending programme to allow it to bring its railway and road system to the 21st century, tap the Mekong region and access China and India. There is also a huge demand to build factories, hospitals, schools, offices and houses – all energy dependent.

    Given the long-term energy demand and the ever-present sunny weather, this could be a great opportunity to harness the potential of solar power.

    Thailand needs a new energy source

    In late October, the Thai Prime Minister Prayuth Chan-ocha chaired the National Energy Policy Council which endorsed a new programme to beef up renewable energy – with a particular focus on solar energy.

    The tilt towards solar power is due to the dependence on natural gas, (liquid natural gas, LNG). 65% of the country’s electricity is generated via natural gas, of which 14% comes from neighbouring Myanmar and the other 4.5% from other international markets.

    What's more, the demand is set to accelerate over the next decade. Much of this will have to be imported due to dwindling domestic reserves. By 2023, a 1/3 to 2/3 of natural gas demand will have to be met by imported LNG.

    Thailand needs to switch to an alternative – and quickly.

    Why solar energy is the best option

    The problem is that alternatives are hard to find. Thailand has a strong and vocal environmental lobby, making it tough to rely on coal-fired projects or going nuclear.

    Renewable energy sources look the most promising – specifically solar power.

    Thailand already has more solar power and biomass power capacity than every other Southeast Asian country combined.

    The sharp fall in the price of solar panels and input costs will also help push people towards solar power. The price of solar panel prices has dropped from an average of $5/W in 20105 to $0.5/W – equivalent to 90% cost saving.

    Meanwhile, the Thai government provides subsidies to companies investing in solar power energy.

    It is hoped that that the private solar rooftop segment will take off over the next few years. Consultants estimate that the payback period is currently around 6-8 years.

    A major catalyst for growth would be a metering system that would allow sales of unused power to the grid.

    So what’s the best way to invest?

    Here are five companies that look promising

    A handful of Thai solar-related companies offer direct exposure:

    Gunkul Engineering PCL is a power generation and engineering company that supplies hardware and accessory products used in electrical power transmission and distribution systems.

    Energy Absolute PCL engages in the research, development, and production of biodiesel products in Thailand.

    Demco PCL designs and builds electrical transmission lines, substations, and low-voltage systems, installs underground cables, builds telecommunications towers, manufactures low-voltage hardware and equipment, and distributes power transformers and other electrical products.

    SPCG PCL is an alternative energy company that is developing solar farms in the Northeastern region of Thailand.

    CK Power Ltd. develops and generates power in Thailand.

    All of these stocks have done fantastically well and are trading at high double-digit PE multiples. This raises the question of whether there is any further potential upside.

    The quick answer is “probably”.

    Here’s why.
    Three reasons to be excited


    1. Most investors haven’t spotted these stocks yet. These stocks have scarcity value and enjoy – in broker jargon – ‘price discovery’. This means that a lot of investors are yet to learn/understand fully what they are up to.


    1. The companies could expand. These stocks have a domestic track record which can be successfully applied internationally. Already, some of them are eyeing expansion to Japan, Saudi Arabia and neighbouring countries in Southeast Asia.


    1. The companies could draw attention from a new investor class. There is also potential to transfer operating assets into more tax-generous structures. This will help to attract attention from a new class of investors (large institutions with long-term liabilities like pension and insurance funds) and higher fair value.



    I’ll be watching this theme closely going forward.






Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •