Update 29 April on YTL / YTL Power & Bright Smart

US stocks ended with a small gain Monday while Nvidia shares fell more than 2%. Investors will get some clues this week on how much trade turmoil has hit the economy and corporate earnings.

This week will also see the release of the monthly jobs report and data showing how fast the economy grew in the first three months of the year.

Plus, four of the Magnificent Seven tech stocks - Amazon, Apple, Meta Platforms and Microsoft - are set to report earnings later this week.

Google parent Alphabet posted strong quarterly earnings last week, but warned of coming headwinds from the end of the de-minimis trade loophole. The exemption for shipping lower-value goods is due to end Friday.

The 10-year Treasury yields declined to 4.213%.

Nvidia stock falls as China’s Huawei reportedly readies AI chip after Trump’s export ban

yahoo!finance, April 28, 2025

Nvidia stock fell just over 2% Monday following a report that Chinese tech giant Huawei is readying a new advanced AI chip in the wake of President Trump’s export ban on Nvidia chips to China.

The Wall Street Journal reported Monday, citing unnamed sources, that Huawei has approached some Chinese tech companies about testing a new AI chip called the Ascend 910D, which it hopes will be more powerful than Nvidia’s H100 AI chips. The 910D chips are successors to Huawei’s 910B and 910C chips and are still in an early stage of development.

Huawei is set to ship more than 800,000 Ascend 910B and 910C chips to customers, including state-owned telecommunications carriers and AI developers such as TikTok parent ByteDance.

Nvidia stock spiraled after the chipmaker disclosed in a regulatory filing this month that the US government had effectively banned exports of its H20 chips made specifically for the Chinese market to comply with ever-tightening US trade rules. The company said it would record a $5.5 billion loss from the policy change, with JPMorgan analysts estimating the ban would shave $16 billion from Nvidia’s revenue this year.

China accounted for $17 billion, or 13%, of Nvidia’s revenue in its fiscal year 2025, Bernstein noted earlier this year. DA Davidson analyst Gil Luria estimates that share could be higher, telling Yahoo Finance in an email that as much as 40% of Nvidia’s revenue comes from China due to chip smuggling.

Nvidia stock dropped last week after Reuters reported that Huawei’s 910C chips are set to begin shipping as soon as May and are reportedly competitive with Nvidia’s H100 chips. Those Nvidia chips were banned from sale to China in 2022 and are two iterations behind Nvidia’s latest Blackwell chips.

Meanwhile, CEO Jensen Huang visited China and met with trade officials. The company is simultaneously looking to expand its domestic manufacturing footprint, pledging $500 billion to the US Ai supply chain buildout.

Trump tariffs spark severe shortages, leave US retailers scrambling for stock

Bloomberg, April 28, 2025

The escalating US-China trade war, driven by President Donald Trump’s tariff increases, is beginning to affect American consumers and businesses more directly.

Since the tariffs on Chinese goods were raised to 145 per cent in early April, cargo shipments have sharply declined, with one estimate suggesting a 60 per cent drop, Bloomberg reported today.

Though the impact has not been widespread yet, it is expected to hit home soon, particularly for companies that depend on imported goods.

Retail giants like Walmart and Target have warned of potential product shortages and rising prices if the situation does not improve.

Torsten Slok, chief economist at Apollo Management, has predicted shortages and layoffs, affecting sectors ranging from retail to logistics.

Even with signs that President Trump may ease tariffs, experts caution that it could be too late to avoid a significant supply chain disruption.

Jim Gerson, president of The Gersons Companies, which supplies holiday decorations, explained that his company is facing delays with 250 containers awaiting shipment.

The global freight industry has reduced capacity due to lower demand, and a potential surge in orders could overwhelm ports and rail systems.

Experts warn that ports, designed for consistent flow, could face bottlenecks due to the erratic nature of trade volume shifts.

As retailers prepare for back-to-school and Christmas sales, many are in limbo, awaiting products that should be arriving soon but are delayed due to tariffs.

Some companies, like toymaker Basic Fun, are already seeing order cancellations, with CEO Jay Foreman describing the tariffs as a “de facto embargo.”

The slowdown in trade with China, coupled with cancelled sailings and rising costs, has prompted economists to predict a significant slowdown in the economy.

YTL & YTL Power EGM approved the Bonus Warrants Proposal

YTL and YTL Power held the EGM yesterday and secured high approval for their bonus warrants proposal. YTL Power achieved 99.354% approval rate of shareholders present, with 1,220 shareholders holding 6.829 billion shares for and 154 shareholders holding 44.3 million shares against the proposal. Stripping out YTL Corp (holding 52.5% stakes) and EPF (holding 6.5% stakes), there were 1,218 shareholders holding 1.956 billion shares (or 23% stakes) voting for the proposal. These are mostly local funds and big retail investors. The 154 shareholders who voted against the proposal were likely made up of a few small funds and retail investors.

For YTL, it achieved a 98.61% approval rate, with 1,209 shareholders holding 8.985 billion shares (~81% stakes) voting for the proposal.

This shows that besides YTL Corp and EPF, majority of other shareholders of YTL Power approved the proposal. YTL Power MD explained the rationale for making the warrants non-tradeable, but I have not received any feedback from fellow investors here or my contact on the rationale given. But this is not important anymore as the proposal has been approved.

YTL Power MD also shared the optimism for YTL Power to secure good deals with the money raised from the bonus warrants proposal, though no details were given at the EGM.

Hitting the jackpot with Bright Smart

The first stock I bought in Hong Kong, Bright Smart Securities saw its share price jump up by 82% yesterday to close at HKD5.55. It was suspended for a couple of days last week pending a material announcement, the last trading price before suspension was HKD3.05.

The company announced that its major shareholder and founder family has agreed to sell their majority stakes of 50.55% in the company to a subsidiary of Ant Finance Group for HKD3.28 per share.

The share price of Bright Smart gapped up at HKD4.90 yesterday morning upon resumption of trading. In Monday session, the share price dipped to as low as HKD3.80 then surged up after lunch to as high as HKD6.00 before closing at HKD5.55.

Recall that I first purchased Bright Smart last October at HKD2.20, attracted by its high dividend payouts of HKD0.30 for FY2024. I was getting dividend yield of 13.6% at my entry price. The share price did go up to as high as HKD2.90 in mid March and I took profit by selling some 10% of my holdings.

As it surged past HKD4.00 this morning, I started selling bit by bit from HKD4.08 all the way to HKD5.50, but I missed out on the all-time high prices near HKD6.00 just after lunch at 1.15pm as I was out for lunch. But I am still happy with an average selling price of over HKD4.60 yesterday, for a gain of almost 110% in 6 months.

Bright Smart earnings are expected jump up by about 30%-40% to around HKD800 million in FY2025, from about HKD600m in FY2024 due to much higher daily trading volume of above HKD200 billion in YTD 2025, compared to average of HKD120 billion in FY2024. Dividend payouts are expected to increase from HKD0.30 last year to at least HKD0.40 in FY2025.

As the share price shoots past HKD5.00, the prospective dividend yield is coming down to below 8%, still attractive by all means. But some analysts in Hong Kong are rather skeptical of the near term business prospects of Bright Smart, as the founder, who is a great entrepreneur who has steered the company to new highs in past decades, will leave the board of directors. Ant Finance will appoint new directors to lead the company, and analysts fear that there may be some cultural differences in the management style and company directions.

Bright Smart has about 580k retails investor accounts, mostly from Hong Kong. The founder is a Hong Kong family, not a China mainlander, hence the current top management of the company is all from Hong Kong professionals.

Anyway, more investors are betting on potential business injection by Ant Finance group of some of its subsidiaries into Bright Smart after taking over the company. Very likely the online brokerage business and commodities / forex trading platforms will be injected in. And Ant Finance will introduce more advanced technology and better trading app for Bright Smart clients. Bright Smart may be able to broaden its client base to cover Ant Finance Group’s own 1.5 million customer accounts.

But to me, these remain speculative. And there is no certainty that the deal can close very soon, as it still requires HK Stock Exchange regulators’ approval. Hence, I decided to dispose off most of my holdings in Bright Smart yesterday, leaving a small holding for any remote chance that the share price can be chased up to beyond HKD6.00 in coming days.

I was lucky to have picked Bright Smart as my first entry into the Hong Kong stock market, lucky in the sense that the stock gets re-rated sooner than expected. Even if there were to be no acquisition from Ant Finance, Bright Smart would still see its share price rising to above HKD5.00 for a 8% prospective dividend yield but it might take another few months to one year for the share price to achieve HKD5.00 level. But now it is Christmas come early for me.

The take-away point is: an undervalued stock will sooner or later get re-rated to reflect the company fundamentals and values. And in Hong Kong stock market, the values of the company can get reflected fast onto the share price, as the stock market there is more efficient than Bursa. Stock prices can rise 100% or more in a trading day, to immediately reflect on the good news. Bursa stocks have a limit-up constraint of 30% a day. Bright Smart is a relatively small company in Hong Kong stock exchange, and does not attract much foreign funds to buy in. But it does not stop the stock from getting the re-rating it deserves. Strong buying from China funds and Hong Kong retail investors alone are enough to chase up the stock by 82% in a single trading day with over 800 million shares (or ~50% of the company outstanding share base) traded.

Hence, I believe the undervalued stocks that I hold in Bursa - YTL, YTL Power, AEON, IOIPG, Genting & VTC - will sooner or later get the deserved re-rating. For instance, YTL Power, a big cap stock with resilient utility businesses and a potential 100% earnings growth in next 3-4 years, will not be trading at 8x PER on FY25 earnings (dropping to 6x PER on FY2026 earnings and 5x on FY2027 earnings) for long. AEON, a double consumer and property play that will see a 33% earnings growth in FY2025 and almost 150% growth in earnings by FY2030, will not be trading at prospective PER of 10x for long (its 10-year mean is 17x PER).

As the foreign funds holdings in these counters are at years low, even if foreign funds do not come back to Bursa in a big way in near term, local institutional funds such as EPF and LTAT will be able to drive up the share price. As of latest Bursa posting, EPF bought another batch of YTL Power shares on 23 April, bringing its stakes in YTLP to 6.648%. EPF could buy another 275 million shares to bring its stakes to 10%.

EPF last purchased AEON shares on 9 April 2025, bringing its stakes in AEON to 6.225%. With the bright prospects of AEON and high dividend payouts from FY2028, EPF could raise its stakes in AEON to the previous high of 13%, meaning another 95 million shares of purchase by EPF in coming months.

EPF last purchased IOIPG shares on 20 March 2025, bringing its stakes in IOIPG to 8.34%. There is not much more room for EPF to increase its stakes in IOIPG as the major shareholder CEO Lee is also buying back IOIPG shares in the open market, raising his stakes to almost 65.8%. EPF could only buy another 0.86% or 47 million shares of IOIPG before the counter hits the minimum 25% free float requirement. What that also means is that there are not many free float shares out there, and any aggressive buying from EPF or CEO Lee will drive the share price higher.

Net short positions on YTL Power decreased by about 1.0 million shares to 26.1 million shares at close Monday. Net short positions on IOIPG also dropped by 1m to 19m shares.