December 29th, 2022 | 09:20 CET
Top Asian Picks for 2023 in place of Tesla: Alibaba, Alpina Holdings, BYD, JinkoSolar: Invest in the best!
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"[...] We have a clear strategy for neutralizing sovereign risk in Papua New Guinea. [...]" Matthew Salthouse, CEO, Kainantu Resources
Born in Munich, he first studied economics and graduated in business administration at the Ludwig-Maximilians-University in 1995. As he was involved with the stock market at a very early stage, he now has more than 30 years of experience in the capital markets.
Alibaba - Hope lies in 2023
The Chinese internet giants have had another bad year on the stock market. The downward trend was set in motion while ex-US President Donald Trump was still in office, as he had set the West-East feud rolling with trade restrictions and punitive tariffs. Later, SEC regulations put pressure on opaque tech companies. Large and successful funds, such as Cathie Woods' ARK Innovation ETF, had to give up 70% at their peak and have now shed almost all Far East stocks.
However, this also means that the ongoing selling pressure should gradually be over for the big tech stocks from China. The largest position in the aforementioned fund is now Tesla, with just under 10%, also a misstep if one considers the 45% slump of the last four weeks. Elon Musk has meanwhile lost over USD 100 billion in assets with his stake in the e-car maker. The billionaire has now "successfully" halved his fortune - well, he still owns a good USD 120 billion. For a few days now, however, there seems to be renewed buying interest in Asian tech stocks. Alibaba has impressively turned around from a low of EUR 59 and gained 40% to EUR 84 in just eight weeks. Tencent even managed a gain of over 50% from EUR 25 to EUR 38. It is, therefore, worth taking a closer look again and making initial allocations.
Alpina Holdings Ltd - Strong growth and low valuation
An emerging region in Asia is offered by the city-state of Singapore, an Asian metropolis with a Western flavour. Clean, safe and highly-priced compared to the rest of Asia, it offers living of the highest standard. The Asian metropolis has an area of only 725 sq km, but the population density is relatively high, with 5.8 million inhabitants. No wonder real estate prices have been rising for years and building land is becoming increasingly scarce. With a GDP of USD 397 billion, Singapore ranks 33rd in the world, and the entire region is booming, especially in the real estate sector.
Local resident Alpina Holdings Limited is a renowned real estate and construction services company with a 17-year track record. Its business model includes integrated building services (IBS), mechanical and electrical (M&E) engineering services, and alteration and addition (A&A) works for public and private sector projects. The Company holds all the necessary licenses from the Building and Construction Authority of Singapore (BCA) to participate in lucrative public tenders. The listing of the newly issued 37 million shares took place in January 2022 at a price of SGD 0.31 on the Catalist Board of the Singapore Exchange (SGX). Through this IPO, Alpina raised approximately SGD 11.5 million.
Commenting on the successful listing, Low Siong Yong, Executive Chairman and CEO of Alpina, said, "Our listing on Catalist serves as a strategic platform to enhance our Group's visibility and image as we accelerate our efforts to expand our existing business and integrated facilities management (IFM) services."
Alpina Holdings Ltd has been listed for almost a year and is currently valued at SGD 19.3 million. Given revenue of SGD 52 million and SGD 9.28 million net profit in 2021, the Company is currently valued at only a P/E ratio of 2. In the first half of 2022, there was a 50% drop in profits to SGD 2.03 million due to cost increases, while the previous year included special income from government COVID subsidies. The 184.34 million Alpina shares are majority-owned by CEO Siong Yong Low (45.5%) and executive director Yoon On Tai (37.2%). The Company currently has SGD 17.2 million in debt, which puts its total enterprise value below its projected 2022 revenue. With an operating margin of over 20%, the Company is clearly undervalued. The share is still relatively undiscovered, so we recommend setting a limit when entering in Frankfurt.
BYD and JinkoSolar - Get in now?
Back to China. The political theme for the coming year is stable economic growth. With that, China's decision-makers are emphasizing the word stability, in particular with conspicuous frequency. Although the commercial housing market will continue to be supported, there will still be no bailouts by the state in troubled situations. The highly indebted real estate holding company China Evergrande had to learn this painfully. Thousands of home buyers lost their down payments, and the real estate market recorded significant declines for the first time.
The two high-tech companies, BYD and JinkoSolar, are among the first-tier "fallen angels." BYD had been carried for years by the investment company Berkshire Hathaway of the value investor Warren Buffet. Last year, however, they drastically reduced the stake and thus realized the billions in profits accumulated over the years. Having risen to highs of over EUR 40 in the course of the year, the e-car and battery expert is now trading at EUR 23.20, an annual loss of over 20%. Fundamentally, however, the Company continues to grow at around 25% per annum, assuming an unbroken boom in e-mobility for the coming years. BYD has been trying its hand in Europe for the first time since September. Meanwhile, its competitor Tesla is currently undergoing a downturn and is one of the top losers of the stock market year 2022.
JinkoSolar is one of the world's largest manufacturers of solar modules. With a narrowly maintained result, the share goes out of 2022 as one of the technology gems. However, the JinkoSolar share recently experienced a moderately severe crash when the value dropped by a flat 50% after reaching a new high of EUR 75.30. However, as high demand for panels is expected to continue in the future in the wake of the energy transition, the stock could prove to be one of the top picks for 2023. Currently, Jinko is suffering from ongoing tensions around Taiwan, where it operates a large production facility. However, with a 2023 P/E of 6.5, the stock is strikingly cheap, assuming the estimated 30% growth next year materializes. With production hampered by power shortages and Corona lockdowns, a normalization of production could lead to a jump in profits.
There is plenty to choose from among the "Fallen Angels." The task now is to separate the wheat from the chaff and invest in long-term growth models, and then portfolio returns will also move back into the green. Alibaba, Alpina, BYD and JinkoSolar are good opportunities and potential outperformers in their respective sectors.
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