Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Samir Mehta, manager of JOHCM Asia ex-Japan Fund.
With muted economic growth in the West, Asia rightly stands out as a more attractive region for investors. It is home to a number of quality companies delivering sustainable, long-term growth. These firms operate scalable businesses capable of growing five or tenfold over the next few years without needing the same amount of capital. That will generate high returns on capital. Such firms also have a strong emphasis on cash-flow generation and can grow in most economic conditions. Here are three I like.
Singapore is enjoying rising consumer incomes and robust corporate earnings. It offers a number of promising stock opportunities. ARA Asset Management (Singapore: ARA) is a Singapore-listed, Asian real-estate fund-management company that manages listed Reits (real-estate investment trusts) and private real-estate funds.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The Reits are listed in Singapore, Hong Kong and Malaysia, and invest in a diversified portfolio of retail, industrial/office and logistics properties. The company also provides real-estate management services. It generates revenues from management fees calculated as a percentage of assets and performance fees for meeting fund return targets.
The assets under management for ARA have increased from US$9.5bn in December 2007 to US$21.8bn in June 2012, while revenues and profits have nearly doubled since 2007. The company trades on a 2013 p/e of 15.5x, with a stable and steady earnings growth outlook for the next couple of years.
My next choice is NetEase (Nasdaq: NTES). Founded in 1997, it is a leading China-based online game services company with a focus on the massively multi-player online role-playing games (MMORPGs) that are hugely popular in Asia.
It licenses World of Warcraft', one of the most popular games in the world. It also has self-developed games like Fantasy Westward Journey' and Westward Journey2'. These have seen user numbers grow by more than 60% and 80% respectively over the last four years.
The company derives close to 90% of its revenues from these MMORPG games and hence is less dependent on more cyclical advertising revenues. It currently has about US$2bn in cash and time deposits, generates about US$200m in operating cash flow per quarter, while earnings in 2012 are expected to be more than double the US$271m generated in 2009. The stock is cheap on an earnings multiple of 11.7x for 2012 and 10.3x for 2013.
My final choice LG Household & Healthcare (South Korea: 051910), has three main business divisions. The largest is cosmetics. Its domestic market share is close to 26.5%, neck and neck with its closest competitor, Amorepacific. The household and personal-care division accounts for about 30% of LG's revenue and 22% of its operating profits.
The company enjoys the highest market share in this sector (more than 30%) and is continuously expanding into new areas such as diapers to take advantage of its distribution network. Finally, the beverage division accounts for about 32% of LG's sales and 30% of its operating profits. This part of the business has benefited from the purchase of Coca-Cola Beverage in 2007, an operation LG has turned around.
The company plans to launch two to three Coca-Cola brands currently not available in South Korea to increase its number of products. Overall, LG is well placed to tap into Korea's growing consumer demand.
-
Widow’s warning: Are you missing out on up to £11,000 in inherited state pension?If your late spouse built up contributions under the old state pension, you could be entitled to inherit a portion of it. What are the rules and are you eligible?
-
How much should I have in savings? Average savings by ageWe look at how much you should aim to have in your savings at every decade of your life, and how you can go about achieving this.
-
Somero: trading this overlooked bargainFeatures Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
-
How to find big profits in small companiesCover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
-
The hidden gems on Aim, London's junior marketFeatures Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
-
Three Aim-listed firms that will thrive in a post-Brexit worldOpinion Matt Tonge and Victoria Stevens of the Liontrust UK Smaller Companies Fund pick three Aim-listed firms that will survive Brexit turmoil.
-
Fetch! The Chinese small-cap stocks to buy in the Year of the Dog
Opinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
-
Get cheap, reliable growth from smaller companiesFeatures One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
-
Now the bitcoin bubble’s burst, what’s the next big thing?Features Forget bitcoin, if you want to increase your wealth faster than most other people, you need to find the next big thing. Merryn Somerset Webb suggests some places to look.
