"Emerging Markets" - Hong Kong & Singapore

[theasiareport]

Hi everyone, this is my first post here. I've actually been lurking in the background for quite a few years now, and I've profited a great deal from the collective wisdom of everyone on the board, and some great investment ideas like Bank of America and AIG. Just a bit of background info to set up the post.

 

I was actually raised in Asia in Singapore, but I am currently based in London. I started out investing in the US markets before slowly shifting my focus to the "Emerging Markets"in Singapore & Hong Kong. One of the things that I've noticed is that most people regard the emerging markets as a rather homogeneous investment class. But that's really not the case. Its as different as investing in Greece and Germany.

 

While value investing does work in Asia, I think that most people soon realise that applying it without some modification will lead to sub-par results. The corporate governance in China & Hong Kong is startlingly bad, with some unscrupulous owners using their companies as trust funds or piggy banks. Joe Studwell has a brilliant book - Asian Godfathers, that I think anyone considering investments in Asia should really read.

 

I think one of the biggest problems of running pure quantitative screens is that you are going to turn up a lot of companies that simply have questionable accounting numbers. 25% of all China companies listed in Singapore have been delisted or suspended (not taking into account companies are still listed but struggling), which is a pretty startling number if you think about it. I recall how plenty of retail investors were burnt investing in net cash S-Chips (China companies listed in Singapore).

 

That being said, I do think its possible to generate a significant edge in Asia just because competition is so sparse. The markets are dominated by retail investors outside the large cap stocks who love to trade.

 

One thing which most people miss out is that financial statements are available in English in Thailand, Hong Kong, Singapore and Malaysia. That's a universe of under 5,000 companies to look at which lends itself to some incredible investments with little or no coverage on!

 

I've seen some scattered threads here and there on the forum, and I would love to see hear the experiences that people have investing in these countries.

 

Cheers!

 

 

 

[bennycx]

Cool I'm also from Singapore and now in London... :)

[watsa_is_a_randian_hero]

Do you post on http://www.valuebuddies.com/?

 

I'd be curious to hear your thoughts on RC5 and NI3

[theasiareport]

Cool I'm also from Singapore and now in London... :)

 

Glad to meet another Singaporean in London. Did you graduate and decide to settle here?

[theasiareport]

Do you post on http://www.valuebuddies.com/?

 

I'd be curious to hear your thoughts on RC5 and NI3

 

watsa_is_a_randian_hero:

 

I don't actually post there though I frequent it quite it a lot.

 

Triyards has had a really short listing history, with quite a significant debt load especially factoring in the off balance sheet leases (especially in comparison to the average Singapore company). Don't really have much to comment on it as I skipped it.

 

UE E&C's much more interesting in my opinion. They have done quite a few high profile projects. One example is a recent award from one of the three universities in Singapore to the tune of $243.5 Million. Their engineering arm has also done quite a bit of top tier construction work with ION Orchard and the Marina Bay Sands Intergrated Resorts... the equivalent of the top tier retail shopping centres and buildings.

 

I can't find any fault with the board, and there aren't any significant red flags in terms of off balance sheet liabilites and related party transactions too. Company has insignificant borrowings which is a huge plus. No nasty surprises in the cash flow statements either.

 

Unfortunately the company has only 4 years of operating history (paid dividends for 3 out of those 4 years), so you can't really see how it performed during the GFC. That's more a personal preference that I have though. Finally, I think you will see that construction and engineering companies will do pretty well over the next few years with the government projected to ramp up spending on infrastructure. Retail property is a totally different ballgame however.

 

Cheers!

[Guest chai]

What I found intriguing is that there are quite a large number of value fund managers that have consistently delivered 20%+ return over last (two) decades in this part of the world:-

 

Thailand - Dough Barnett of Quest Management (founded in 1994);

Malaysia -  Claire Barnes of Apollo Asset Management  (founded in 1997); Tan Teng Boon of iCapital (founded in 1988)

Singapore - Teng Ngiek Lian of Target Asset Management (founded in 1996);

Hong Kong - Cheah Cheng Hye of Value Partners (founded in 1994)

 

Also more recently you have start-ups like  Wong & Khoo of Lumiere Capital (Singapore); Sergey of Greyhound Capital (protege of Dough)..

 

There is a very decent Youtube clip where Dough Barnett walked through his investments in last 20 years - he delivered something like 30x over 20 years..

http://www.gurufocus.com/news/220336/learn-from-doug-barnett--hedge-fund-manager-who-has-returned-3000-over-20-years

 

There is also a famous philanthropist/entrepreneur/investor in Malaysia who recently started a blog where he exchanges a lot of his ideas freely. His name is Koon Yew Yin, 81 years old - and he's co-founder of three of the largest construction groups in Malaysia..

http://klse.i3investor.com/blogs/koonyewyinblog/

[theasiareport]

What I found intriguing is that there are quite a large number of value fund managers that have consistently delivered 20%+ return over last (two) decades in this part of the world:-

http://klse.i3investor.com/blogs/koonyewyinblog/

 

Hi Chai,

 

Thanks for that incredibly informative post! Some names are new to me.

 

Just to add to the list, Fosun International is trying to emulate itself with Berkshire as a role model but the jury is still out on whether the are succeeding.

 

Relative to the universe of stocks that are available, we seem to a disproportionately smaller number of known value investors... but I am not sure whether its attributable to a lack of publicity or the fact that our financial markets are relatively new compared to our western counterparts.

 

Cheers!

[yadayada]

look out for growing company's that are about to pay dividends in Asia. A lot of these things trade on what they pay out to shareholders. Lot's of stocks with low PE's. And a lot of them could stay low for a long time. But if you find the ones that will have a catalyst in the form of returning capital, you could make v nice returns.

[cubsfan]

Chai - thanks for posting the Barnett you-tube clip - really enjoyed that.

[king888]

I am from Thailand and currently live here. I have been investing in stock market for about 12 years already both in Thailand and overseas.

 

I know many retail investors who have done extremely well in Thailand's stock market . One of my friend made like 35x return since 2008 ( $4-5 million portfolio now).  The market was very inefficient that time.    But right now , Thai market is very expensive even after the coup happened. It looks like every domestic investors both retails and funds keep putting money into market.  And domestic money is 60-65% of total trading volume now. Japan market has only 30-35% trading volume from local. 

 

About Singapore market, last year I bought Mermaid Maritime and sold for a nice double after 4 months.  This year i had a position in Hong Leong Asia but not anymore because the turnaround might take loner than I expected and I want to put money to another idea.

 

Malaysia has some interesting stock as well . Zhulian , one of leading MLM in this region looks cheap due to revenue decline in Q1 . But I heard that it is due to price lifting of the product that causes the revenue to decline ( Members bought more in advance before this Q after they knew that the price would rise).

[theasiareport]

I am from Thailand and currently live here. I have been investing in stock market for about 12 years already both in Thailand and overseas.

 

I know many retail investors who have done extremely well in Thailand's stock market . One of my friend made like 35x return since 2008 ( $4-5 million portfolio now).  The market was very inefficient that time.    But right now , Thai market is very expensive even after the coup happened. It looks like every domestic investors both retails and funds keep putting money into market.  And domestic money is 60-65% of total trading volume now. Japan market has only 30-35% trading volume from local. 

 

Hi there, nice to meet someone who's actually based in Thailand! Agreed that valuations look quite expensive despite the coup, especially compared to the rest of the Asian countries. Is there any particular reason for that.

 

Also, are there sites to pull the 10 year financials like Morningstar or Valueline (free or paid)?

 

Thanks!

[cubsfan]

Also, are there sites to pull the 10 year financials like Morningstar or Valueline (free or paid)?

 

 

For the 10 yr financials, I use Morningstar and GuruFocus. GuruFocus does a decent job with

Asian companies:

 

http://www.gurufocus.com

 

For the 10 year data, you need a premium membership with an add on for Asia.

 

But I'm pretty happy with it.

 

[Guest chai]

King888, just curious -do you mind describing your friend's approach that's up 35x since 08? Concentrated bet on some small cap?

 

[theasiareport]

Also, are there sites to pull the 10 year financials like Morningstar or Valueline (free or paid)?

 

 

For the 10 yr financials, I use Morningstar and GuruFocus. GuruFocus does a decent job with

Asian companies:

 

http://www.gurufocus.com

 

For the 10 year data, you need a premium membership with an add on for Asia.

 

But I'm pretty happy with it.

 

Good stuff. Thanks for sharing!

[king888]

 

Also, are there sites to pull the 10 year financials like Morningstar or Valueline (free or paid)?

 

Thanks!

If you meant to data of Thai companies, you can use setsmart.com.  There are some fee but very cheap. And if you open a trading account with Maybank kimeng online, you can access it for free.

 

King888, just curious -do you mind describing your friend's approach that's up 35x since 08? Concentrated bet on some small cap?

 

My friend approach is very simple. High concentration and leverage.  In the investment community, someone even claim a higher return than this. But they are not my friend so I am not sure if the performance is really legit.  But in Thailand, if you bought the stock more than 5% of the company you have to report . And if you hold more than 0.5% of total share, when the book closed ,your name will be shown in major shareholder list.  So it is traceable in some way but someone use a lot of leverage to buy stock so we don't know the total net worth exactly.

 

There is another famous retail investor in Thailand who wrote a book for more than 10 years. He has a compound return of 40% per year for 15 years .And his track record seem to be legit. because I saw his name appeared in many major shareholder list in Thailand. Last time, I checked he has a portfolio of around $70-80 million.  Last year, there is an English book published about him. The book is "The world's 99 greatest investor"  http://www.valuewalk.com/2013/11/the-worlds-99-greatest-investors/

 

I don't won the book ,just found this pic from another forum

http://f.ptcdn.info/847/012/000/1385979725-IMG0422JPG-o.jpg

 

His approach is value plus growth .  And most of his success is from Retail sector. The retail stock such as CPALL ( 7-11 operator in Thailand)  has made 10x return in last 6 years. His holding period is very long as he said he has no intention to sell as long as the business is still good.  He use almost zero leverage and purely his own money to invest.

 

 

[king888]

From his Thai book with my translation

http://i.imgur.com/7RHfnl7.jpg