Four stocks with exceptional growth prospects

In the final instalment of this collection, our duo of Asian equity managers analyse the companies capitalised on the crisis. Believe it or not, the Asian equity market does not only consist of Alibaba and Tencent. From education to batteries, the Asian equity market is currently presenting a variety of opportunities, with long-term growth prospects. Some of these hidden gems are even listed on Western exchanges. In this wire, our experts provide some stock ideas that you may not have heard of, and that are generally under-appreciated. 

Responses come from: 

• Joohee An, Mirae Asset Global Investments 
• Dr Joseph Lai, Platinum Asset Management 

A Chinese beneficiary and an Indian laggard  

Joohee An, Mirae Asset Global Investments 

New Oriental Education & Technology Group (NYSE:EDU) is one of the largest education brands in China with high brand awareness and loyalty, particularly in the offline market. In saying this, e-learning has been one of the most interesting themes this year; thus the share price of the company has been relatively under pressure by market rotation to online players.

Although we agree that the pandemic is opening new opportunities to the e-learning sector, we still believe that offline classes will remain more important in the K-12 AST(After School Tutoring) market. According to various sources, majority of parents who tried online classes would like to return to offline classes for their children when resumption of classes takes place.

We believe that New Oriental will become a key market consolidator in the very-fragmented domestic AST market in China.

We also anticipate the company’s bottom line growth to be more stable than pure online players who are likely to spend aggressively on marketing and promotion efforts to retain less-loyal students for the next few quarters.

HDFC Bank Limited (NSE:HDFCBANK) is the largest private sector bank in India with a vast national network of 5,103 branches across both rural and urban markets. The bank is on the digital forefront; being the first to provide bot-based social media banking services to its customers.

We believe the company’s strong growth in wholesale lending and improvement in retail loan growth will drive up market share. In addition, the risk of non-performing assets for key banks due to lockdowns has been mitigated due to capital raising where these banks now have strong capital buffers.

The outlook for HDFC Bank is looking positive following the backdrop of India’s recovery story. In our view, the pandemic has led a market correction which offers a good entry point.

Telecommunications and batteries 

Dr Joseph Lai, Platinum Asset Management 

Reliance Industries (NSE:RELIANCE) is a business that may not be well known but offered us the opportunity to capture growth while the market’s focus was elsewhere. Reliance is an Indian conglomerate, which had been dominated by its oil business, however, the most exciting business in its portfolio is telecommunications.

Reliance, via its Jio subsidiary, has grown its user base from scratch to 400 million users in only a few short years. Locals have been enthusiastic adopters of the mobile internet and Reliance is well on its way to becoming the juggernaut of the internet of India. In recent months, we have seen the likes of Facebook and Google both take sizable stakes in this business. The opportunity in this sector is starting to be recognised by some of the world’s market leaders. We took the opportunity to add to our exposure to Reliance Industries during the COVID sell-off, before many others did.

Another company with a conglomerate structure hiding a high-quality, high-growth business from the market’s view is LG Chem (KRX:051910). This Korean company has spent billions of dollars to become the world leader in electric vehicle (EV) batteries over a time period that has seen several competitors lose interest.

There are only a handful of companies that can provide best-in-class batteries for EVs, and LG Chem is one of the leaders. They supply batteries to the likes of Tesla, BMW, Volkswagen and GM to name a few. We believe we are at an inflection point for the adoption of these vehicles with most major producers introducing a wide range of new models. As the EV volume skyrockets, we expect LG Chem to benefit. 

Liked this collection? 

If you're interested in hearing more about Asian markets, you can follow Platinum Asset Management and Joohee An by clicking on their names and hitting the follow button. If you'd like to be updated when I post another collection, you can 'follow' my profile. 

If you'd like to review the collection, you can find part 1 - Neglected Asian markets begging for attention here, and part 2 - Where to turn to catch long-term tailwinds here. 

Like this wire? Let us know by hitting the 'like' button to the left.

Not already a Livewire member? Sign up today to get free access to investment ideas and strategies from Australia's leading investors.