Morgan Stanley Recommends Three Asian Investment Opportunities

Overview

This report is one of Morgan Stanley's 'Three Feasible Ideas' series, focusing on investment opportunities in the Asian market. The report recommends three companies with investment value over the next 12-18 months: Food & Life (3563.T), NAURA Technology (oo2371.SZ), and Aspeed Technology (5274.TWO). It provides detailed analysis of their growth drivers and potential risks. Additionally, the report introduces the stock selection methodology, valuation framework, and relevant market performance data.

Core views

In this report, Morgan Stanley recommended stocks of three Asian companies as follows: 1. **Food & Life (3563.T)**: This company is described as the best pick within the food service sector due to its favorable position in both domestic and overseas operations. Potential catalysts include earnings upgrades, the release of a new mid-term management plan, and expansion into the U.S. market. 2. **NAURA Technology (oo2371.SZ)**: The report reiterated the 'Overweight' rating for this company, noting that its upside potential is primarily driven by accelerated memory capital expenditure and Huawei's breakthrough in 3D IC technology. 3. **Aspeed Technology (5274.TWO)**: Benefiting from stronger BMC demand, the launch of the new product AST1840, easing supply constraints, rapid growth in AST2700 sales, and improving gross margin prospects, the company is expected to maintain strong performance over the coming years. The report also pointed out that Taiwan has delivered the best investment performance over the past period, with an average holding-period relative return of 2.9%, while South Korea performed the worst, with an average holding-period relative return of 0.0%. Furthermore, the report emphasized the importance of analysts’ confidence tests, requiring analysts to explain the uniqueness of their views and identify recent catalysts.

Analysis framework

Morgan Stanley screened these three companies' investment opportunities through the following steps: 1. **Stock Selection Process**: Each week, the Asia research team—including those based in Japan—selects the most actionable high-confidence recommendations, which are based on analysts’ research reports and deep market insights. 2. **Confidence Test**: Analysts must explain the uniqueness of their views and identify short-term catalysts to support their recommendations. 3. **Relative Benchmarking**: Each investment idea is compared against a local benchmark index over a 13-week period. If an analyst adjusts the rating during this period, the idea will be closed the following Tuesday. 4. **Performance Tracking**: The cumulative excess return tracker started on April 26, 2016, calculating weekly the average excess return rate of all ideas and evaluating overall performance accordingly. The report also employed a DCF model for valuation analysis, highlighting its ability to capture revenue streams from the bottom up to profitability.

Methodology notes

• Valuation MethodDCF Discounted Cash Flow

  The DCF model is used to estimate a company’s intrinsic value by forecasting future cash flows and discounting them to the present time.

  The report uses the DCF model as its core valuation tool, believing it effectively captures how revenue streams from the bottom up translate into profits and valuations. Key assumptions include a WACC of 8.4% (beta 0.82, risk-free rate 3.5%, equity risk premium 6.0%), and a terminal growth rate of 1%.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  For NAURA Technology and Aspeed Technology, the report focused on supply-side factors such as accelerated memory capital expenditure and Huawei’s technological breakthroughs, as well as demand-side factors like stronger BMC demand.

  The report assessed the companies’ growth potential by analyzing changes on both the supply and demand sides—for example, NAURA Technology’s increased memory capital expenditure and Huawei’s technological breakthroughs, as well as Aspeed Technology’s growing BMC demand.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Food & Life (3563.T)

  Outstanding domestic and overseas operational capabilities in the food service industry, potentially benefiting from earnings upgrades, the release of a mid-term management plan, and expansion into the U.S. market.

  Strengths

  Balanced domestic and overseas business presence, strong market competitiveness.

  Comparison

  Compared to other food service companies, Food & Life performs strongly in both domestic and overseas markets.

  Risks

  Slower-than-expected recovery of the Chinese business or obstacles in new market expansion.

• NAURA Technology (oo2371.SZ)

  Benefiting from accelerated memory capital expenditure and Huawei’s 3D IC technology breakthrough, driving stock price appreciation.

  Strengths

  Order growth driven by accelerated memory capital expenditure and Huawei’s technological breakthroughs.

  Comparison

  Leading position in China’s semiconductor equipment industry.

  Risks

  Slower pace of memory capital expenditure growth or Huawei’s technological progress falling short of expectations.

• Aspeed Technology (5274.TWO)

  Benefiting from stronger BMC demand, new product launches, and expectations of improved gross margins.

  Strengths

  Strong BMC demand, rapid growth in sales of new products AST1840 and AST2700.

  Comparison

  Competitive advantage in the server management chip sector.

  Risks

  New product promotion falling short of expectations or persistent supply chain issues.

Key data

• WACC8.4%Weighted Average Cost of Capital, based on beta 0.82, risk-free rate 3.5%, and equity risk premium 6.0%
• Terminal Growth Rate1%Long-term growth rate assumption in the DCF model
• Cumulative Excess Return9,428 bpsCumulative excess return of all ideas as of May 26, 2026
• Average Holding Period Total Return4.2%Absolute return; relative return is 2.0%
• Hit Rate54%Proportion of ideas achieving positive returns

Impact & implications

The recommendations for these three companies reflect Morgan Stanley’s bullish outlook on specific industries in the Asian market. The recommendation for Food & Life highlights recognition of its domestic and overseas operational capabilities in the food service industry; the recommendation for NAURA Technology demonstrates confidence in the growth potential of China’s semiconductor equipment sector; and the recommendation for Aspeed Technology underscores the strong demand in the server management chip segment. Investors can capture alpha returns within these industries through these recommendations.

Risks

• Slower-than-expected recovery of the Chinese business.
• New product promotion falling short of expectations.
• Persistent supply chain issues.
• Slower pace of memory capital expenditure growth or Huawei’s technological progress falling short of expectations.

What to watch

• The dynamics of memory capital expenditure at NAURA Technology.
• Sales performance of Aspeed Technology’s new products.
• The timing of earnings upgrades and the release of a mid-term management plan for Food & Life.