Companies that require capital have various sources to access it, and overseas listing is one of them. Since ADR and GDR were introduced in capital markets, growing companies have increasingly opted for overseas listings for capital.
Ideally, companies often look for secondary listing in overseas markets. However, few like Alibaba Group Holding (NYSE:BABA) have used overseas bourses as primary listing back in 2014, making the listing the largest US IPO.
Emerging markets (EM) have underperformed the global markets in a big time. Over the past 10-year, 5-year, and 3-year, the MSCI Emerging Markets index has delivered annualised returns of 3.18%, 2.73% and 4.89%, respectively.
Over the same period, the MSCI World and MSCI ACWI indices delivered superior returns compared to MSCI Emerging Markets index and outperformed the MSCI Emerging Markets indices (above figure, as of February 2020).
MSCI EM index has some of the largest names from the EM world. As on 28 February 2020, its top weightage was allocated to Alibaba Group, followed by Tencent Holdings, Taiwan Semiconductors, Samsung Electronics, China Construction, Naspers and Ping An Insurance.
Since the beginning of this new decade, global markets have demonstrated quite a lot of correction, especially since February 2020. Fundamental valuations have come down drastically, and experts believe that the we are in bear market.
When will this bear market bottom out? – is the question currently asked by most investors. At this juncture, it seems that news flows are likely to bring additional ramifications to the markets, thus inviting more volatility.
In bear markets – you should take a long-term view.
Major emerging markets have substantial room for monetary policy actions, and the latest interest rate cuts by the US Federal Reserve is likely to alleviate some pressure from the EM currencies.
It is noteworthy that some emerging market countries have the propensity to grow at least 4% in the periods of economic recovery. Investors should therefore vigilantly assess the ongoing developments in the global markets in an effort to find value amid a broader market mayhem.
(In the article- All figures in USD, unless or otherwise stated)
Dr. Reddy's Laboratories (NYSE:RDY)
Dr, Reddy’s Lab was established 1984. It is an Indian company with a portfolio of generic formulations, over the counter products, Active Pharmaceutical Ingredients, biologics, differentiated formulation and custom pharma services.
In the 3Q ended 31 December 2019, the company recorded revenue of $614 million against $540 million in the previous year, depicting a growth of 14%. RDY recorded a gross profit of $332 million for the period compared to $291 million in the pcp, demonstrating an increase of 14%.
Source: RDY Quarterly Presentation (amounts in INR)
In 3Q, the company recorded an EBITDA of $150 million compared to $121 million in the previous corresponding period. The company posted a loss after tax of $80 million for the period, on account of impairment expense of $185 million related to its products forming part of Global Generics and Proprietary Products segments.
Gross margins for the period was 54.1% as against 53.9% in the previous corresponding period and 57.5% in the previous quarter. Its R&D expenses stood at ?3.9 billion in Q3, equating to 9% of the Q3 revenues.
At the end of period, the company had loans and borrowing worth of $229 million – both current and non-current, cash and cash equivalents of $287 million.
On 12 March 2019, RDY last traded at $37.51. At the beginning of the year, the stock was available at $40.47, having touched highs around $45 in February.
Azure Power Global (NYSE:AZRE)
Azure Power is an independent power producer and developer of solar energy. In India, the company supplies renewable energy on long term fixed price contracts to customer, having developed the country’s first private utility scale solar project.
For the 9-month FY20 period ended 31 December 2019, the company had recorded cumulative revenue of $130 million. In 3Q, it was noted that electricity generation during the quarter was 685.1 million kWh, an increase of 57% over the pcp.
Increase in power generation was driven by additional operating capacity through new projects. AZRE’s print load factor quarter ended 31 December 2019 was 17.1% as against 17.9% in the pcp. Having said this, the power curtailments in state and subdued PLF in the rooftop segment led to lower revenues.
Source: AZRE 3Q Presentation
The company posted a net loss of $19 million, having posted profit of ?165.3 million in the previous corresponding period. It was noted that higher losses were a result of higher provisioning for accounts receivable, management transition and write offs related to our solar green bonds issued in the previous quarter.
On 12 March 2019, AZRE last traded at $15.69. At the beginning of the year, the stock was available at $12.61, and it has touched highs of around $16 in March.
China Unicom (Hong Kong) Limited (NYSE:CHU)
Incorporated in 2000, China Unicom (Hong Kong) Limited was ranked at number 273 in the fortune 500 companies in 2018. CHU is a full-scale communications business in China having capabilities in fixed line, mobile broadband (including 5G), data communications, GSM, ICT and more.
In January, the company provided an update related to its business and profit. It was said that the company has been devoted in implementing ‘Speed Upgrade and Tariff Reduction’ policy in 2019.
Source: Interim Results Presentation
The industry has been going through execution of new policies, implementation and transformation to internet-oriented operations. CHU noted that the innovative businesses continued to show growth momentum, thereby adding to stable service revenues of the group.
However, the company’s mobile service revenue softened in 2019 on account of new policy implementation, market competition, market saturation and diminishing 4G data bonus. It expects that the rate of decline would be slower than the rate seen in the initial three quarters of 2019.
CHU noted that the fixed-line service revenue has exhibited decent growth in 2019. Moreover, the overall group revenue is expected to rebound slightly. CHU expects a profit of around RMB11.3 billion, an increase of 10.8% on 2018.
On 12 March 2019, CHU last traded at $6.43.