I was surprised by the imposition of martial law in South Korea last week. I’m not sure what to make of it. A power struggle is clearly taking place, and we don’t know who will succeed President Yoon. In any case, some South Korean companies, such as chip and smartphone giant Samsung Electronics (005930 KS — US$251 billion), now trade at a low Price/Book ratios. I’m personally inclined to buy the dip.
Post of the week
On Saturday, I published a write-up on The Hongkong & Shanghai Hotels (45 HK — US$1.3 billion) － a family-owned operator of luxury hotels under “The Peninsula” brand name. The company’s hotels in Hong Kong, London and elsewhere are trophy assets. Customers love The Peninsula experience. The stock trades at less than 0.3x book due to weak capital allocation over the past 10-20 years. However, governance may improve now that a new CEO and Deputy Chairman will take over in early 2023. There’s a great deal of value in the company’s assets － it’s just a question of whether that value will ever be unlocked to the benefit of minority shareholders. You can find the full post here.
Tweet of the week
In a tweet, Arena Man Capital drew our attention to Hong Kong-listed discount retailer International Houseware Retail (1373 HK — US$99 million). The store has begun introducing wine and non-perishable food to their stores. I’ve long liked the management team, but as the company benefitted from the face mask craze during COVID-19, earnings have weakened following the end of the pandemic. The stock price has fallen from almost HK$3 to just above HK$1. It now trades at 7.7x P/E and an 11% dividend yield. And perhaps this shift in the company’s strategy can finally attract new customers to its stores. You can find the tweet here.
Podcast episode of the week
Check out Analyse Asia’s interview with former banker Ken Wilcox. After being the CEO of Silicon Valley Bank from 2001 to 2011, he was invited to start up the bank’s local subsidiary in China. In this interview, Ken talks about what he learnt from those years. For example, he claims that since Chinese banks rarely fail, they’re much less risk-averse than in the United States. Bribery is commonplace, and contracts are not always adhered to. He was also surprised that the bank’s internal communist party committee was frequently more powerful than the board. He believes that the purpose of inviting Silicon Valley Bank to acquire a bank license was for local banks to learn and replicate its unique business model.
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