value investment strategies in the asean capital market · value investment strategies in the asean...
TRANSCRIPT
Value investment strategies in the
ASEAN capital market
Roshan F Padamadan, CFA, FRM, CAIA
Fund Manager, Luminance Global Fund
July 29, 2015
Bangkok, Thailand
Agenda
• The trend of key ASEAN capital markets
• Interesting sectors for value investors: ASEAN
case studiescase studies
• An outlook
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• We are in the middle of this incredible region, which can
cooperate more, economically, for mutual benefit
– 600mn people : larger than EU / N. America
– GDP of over USD 2.4tn
The rise of ASEAN
– GDP of over USD 2.4tn
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• The markets are at different stages of development. (3 largest
sectors of GDP):
–Singapore (Manufacturing, Trade, Business Srvs)
–Thailand (Mfg, household goods, Transport)
ASEAN Exchanges
–Thailand (Mfg, household goods, Transport)
–Malaysia (Services, Mfg, Trade)
– Indonesia (Trade, Food/Bev/Tobacco, Food crops)
–Vietnam (Services, Construction, Agr/fishery)
–Philippines (Mfg, Motor vehicles, Real Estate)
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• We will not discuss:
– Brunei (exchange may open in 2017)
– Cambodia (2 stocks)
Other ASEAN countries
– Laos (4 stocks)
– Myanmar (2 stocks)
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• Labour productivity is driving growth
ASEAN Trends (1)
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• GDP growth rate is still robust
Real GDP growth 2000-13
China 10.0%
ASEAN Trends (2)
Source: IHS, International Monetary Fund, World Economic Outlook, McKinsey Global Institute Analysis
India 7.0%
ASEAN 5.1%
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• …while still being underlevered
Real GDP growth
2000-13
Debt to GDP
(2013)
China 10.0% 22%
ASEAN Trends (3)
Source: IHS, International Monetary Fund, World Economic Outlook, McKinsey Global Institute Analysis
China 10.0% 22%
India 7.0% 67%
ASEAN 5.1% 47%
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• Rising global competitiveness
• ~ 200 companies with more USD 1bn in revenues
– Total crossed USD 1trn revenues by 2010
ASEAN Trends (4)
– Average of USD 4.7bn
• This makes ASEAN 7th in the world
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• Companies with over USD 1bn in revenues
Rising Global Presence
Country Company count
Singapore 42
Thailand 32Thailand 32
Malaysia 31
Indonesia 31
Vietnam 25
Philippines 25
Source: FT Stock Screener, 28 July 2015
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• Buying at a price well below intrinsic value
• Intrinsic value is based on reasonable assumptions
• I typically use a horizon of 3 years to give enough time for
the company to deliver on its re-rating and/or the business
What is Value Investing?
the company to deliver on its re-rating and/or the business
cycle to turn
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• Is the country earning enough?
– Current account (Exports – imports)
– Capital account (Inflows – outflows)
• Is the country rich?
Analysing a country
• Is the country rich?
– Average income level
– Average education level
– Average health level
• Is the currency open or managed?
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Comparing Across Countries
• Take a note of the respective 10-year government bond
yield
• Subtract this from the local currency earnings yield to get
equity risk premiumequity risk premium
• You can now compare the equity risk premium across
countries
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• Different stages of development and inflation
Risk-free Rates are Different
Country 10-year Government bond yield
Singapore 2.7%
Thailand 2.8%Thailand 2.8%
Malaysia 4.0%
Indonesia 8.3%
Vietnam 6.8%
Philippines 4.4%
Source: tradingeconomics.com (28 July 2015)
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• Ideas are composed of Knowledge, Observation and Logic.
– Know what is normal
� Compare with peers
� Compare with history
Spotting Investment opportunities
� Compare with history
– Observe everything around you
� News; walking down the supermarket aisle
– Logically deduce the future
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• Sign up for Investor Alerts on Company website
• Sign up for alerts on company and its peers on the Stock
Exchange website. All listed companies have obligations to
release news to the exchange in a timely manner.
Following a company
release news to the exchange in a timely manner.
– SGX.com for Singapore
– www.set.or.th/SET for Thailand
– Etc.
• Read leading newspaper of the country
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• Banks are becoming regional plays
• Likely to grow through acquisitions
• Banks are a usual way to get “beta” of the economy
Singapore Banks
• Banks are a usual way to get “beta” of the economy
Disclosure: The fund may be long or short to express a view, or to hedge
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Singapore Banks
CompanyMarket Cap
(USD billions)P/B (x)
Dividend
Yield
% of Assets
outside SG
DBS 38.5 1.34 2.76% 35.0%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
OCBC 30.4 1.26 3.53% 45.9%
UOB 26.9 1.28 3.05% 40.0%
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• SingTel is a multicountry play
• StarHub is a pure play
• Entry of 4th operator spells uncertainty
Singapore telecom
• Entry of 4 operator spells uncertainty
Disclosure: The fund may be long or short to express a view, or to hedge
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Singapore telecom
CompanyMarket Cap
(USD billions)P/E (x)
Dividend
Yield
% of Revenue
outside SG
Singtel 49.7 18.0 4.22% 57.3%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
Starhub 5.0 18.8 5.08% 0.0%
M1 2.2 16.9 5.85% 0.0%
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• Regional hub for managing wealth
• Large players have expanded into China with homes, malls,
offices
• Listed Real Estate Investment Trusts give you the “beta”
Singapore real estate
• Listed Real Estate Investment Trusts give you the “beta”
Disclosure: The fund may be long or short to express a view, or to hedge
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Singapore REITs
CompanyMarket Cap
(USD billions)Dividend Yield Debt to Capital
CapitaMall Trust 5.28 5.26% 30.3%
Ascendas REIT 4.25 4.96% 36.2%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
Ascendas REIT 4.25 4.96% 36.2%
CapitaCom Trust 3.12 6.21% 16.9%
Suntec REIT 3.13 5.87% 36.2%
Keppel REIT 2.49 6.54% 37.5%
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• Commodity play, but represents a global competitive
advantage
• Sustainability concerns have to be addressed, so look
before you invest
Malaysian, Indonesian palm oil
before you invest
Disclosure: The fund may be long or short to express a view, or to hedge
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Malaysian, Indonesian Palm Oil
CompanyMarket Cap
(USD billions)P/E (x)
Dividend
Yield
Debt to
Capital
Sime Darby 13.9 22.0 4.0% 37.4%
Kuala Lumpur Kepong 6.0 28.0 2.5% 26.1%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
Kuala Lumpur Kepong 6.0 28.0 2.5% 26.1%
Astra Agro Lestari 2.4 17.2 3.5% 31.2%
Batu Kawan 1.9 17.0 3.3% 27.5%
Felda Global Venture 1.6 30.8 6.1% 34.0%
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• Vast reserves of thermal coal have a competitive advantage
of being close to end-markets of India and China
• Corporate governance is still developing
Indonesian Mining
Disclosure: The fund may be long or short to express a view, or to hedge
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Indonesian Mining
CompanyMarket Cap
(USD billions)
EV/EBITDA
(x)
Dividend
Yield
Debt to
Capital
Adaro Energy 1.3 2.8 4.65% 36.2%
Bukit Asam 1.1 5.8 5.05% 23.0%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
Bukit Asam 1.1 5.8 5.05% 23.0%
Indo Tambangraya
Megah0.8 2.2 0.0% 0.0%
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• First way to serve the customer is to improve infrastructure.
Time saved and resulting productivity might help drive
consumption.
Filipino consumer
Disclosure: The fund may be long or short to express a view, or to hedge
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Filipino conglomerates
CompanyMarket Cap
(USD billions)
EV/EBITDA
(x)
Dividend
Yield
Debt to
Capital
San Miguel Corp 3.0 8.8 1.19% 64.1%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
San Miguel Corp 3.0 8.8 1.19% 64.1%
Ayala Corp 10.7 21.0 0.60% 44.8%
JG Summit 11.5 16.7 0.52% 40.8%
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• Drought risk and weak currency brings down consumer
confidence
• Lack of regional ambition – or lack of delivery- should be
next steps to address
Thai Consumer
next steps to address
Disclosure: The fund may be long or short to express a view, or to hedge
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Thai Consumer
CompanyMarket Cap
(USD billions)
EV/EBITDA
(x)
Dividend
Yield
Debt to
Capital
CPALL 12.1 23.4 1.55% 83.0%
Source: Bloomberg. Data as of 28th July, 2015, using last available quarterly filing.
CPALL 12.1 23.4 1.55% 83.0%
Land & Houses 2.8 18.6 7.13% 39.4%
Home Product
Center2.3 17.8 1.18% 47.1%
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• The store of global capital has no relation to
population – recognise that surplus capital belong to
the advanced Western nations for the most part, and
more recently the petro-states.
Outlook (1)
more recently the petro-states.
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• When global risk appetite cools, Asia and ASEAN will fall
in price – this does not mean a fall in value per se
Outlook (2)
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• Domestic capital is limited - best invested in improving
domestic productivity.
• Possibly insufficent surplus to be contrarian, except some
cases:
Outlook (3)
cases:
– E.g. Singapore (Temasek, GIC)
– E.g. Malaysia (Khazanah, Employee Provident Fund)
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• ASEAN prices can be volatile while it remains a
region of tremendous growth
• Your returns will depend on the themes you pick,
In Summary
• Your returns will depend on the themes you pick,
the stocks you select and the price you get in at
• Keep learning, and prosper
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Questions
Roshan F Padamadan, CFA, FRM, CAIA
Email: [email protected]: [email protected]
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Disclaimer
The views are not meant to be taken as investment
recommendations. Nothing in this document constitutes an
offer for the Luminance Global Fund. The fund may have long offer for the Luminance Global Fund. The fund may have long
or short positions in any stocks/sectors/countries mentioned.
The author does not undertake to update you of any change
in his views.
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Q & AQ & A
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