Max Hu of Tyee Capital Group presented his in-depth investment thesis on Keyence Corp. (Tokyo: 6861) at Asian Investing Summit 2018.

Thesis summary:

Keyence is the world’s leading factory automation business. Principal products are sensors embedded in devices and equipment ranging from detection and measurement controllers to automation measuring instruments. Keyence, with its unique fabless manufacturing and direct-sales model, monopolistic economics with unmatched profitability (60% operating margin), is the highest-quality business in the global industrial automation space. Keyence should benefit significantly from China’s long-term plan to upgrade its manufacturing base as well as from global shifts toward artificial intelligence and industrial automation. The shares recently traded at a P/E of 30x for 2018E. The company should be able to grow earnings by 25+% for the next few years. While the stock is not cheap, Max believes that Keyence constitutes an underappreciated opportunity and a unique way to gain exposure to the themes of Chinese growth and factory automation.

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About the instructor:

Max Hu serves as a fund manager at Tyee Capital Group, a leading asset management platform with offices in both Hong Kong and Shenzhen. He has been managing the global opportunity fund, an equity-biased, long-biased multi strategy fund with a focus on extraordinary businesses. Previously, Max was the founder and portfolio manager of Tempus Capital Limited, a Hong Kong based investment firm. Max’s investment approach is contrarian, value-driven and concentrated. His investments have been focused on easy to understand, wide-moat businesses with solid long-term growth prospects. He has worked at Deutsche Asset Management and is a CFA Charterholder. Max graduated from Tsinghua University in China, with a degree in physics and mathematics. He has done PhD research in Financial Economics at ETH Zurich and holds a Masters’ degree from University Heidelberg.