Asia Fund NAV Update July 2014

Screen Shot 2014-07-01 at 12.40.27 pm

Initial Net Asset Value (per unit): $10,000

Net Asset Value as of July 2014 (per unit): $13,248

Screen Shot 2014-07-01 at 12.40.49 pm

The 1H2014 was generally a good period. Our Asia Fund was up 11.14% in the first six months of 2014, against a 2.24% return of our weighted benchmark. The Hang Seng Index was down 0.64% while the Straits Times Index was up 2.55%. The performance of the fund was significantly affected by the drop in UMS Holdings share price due to the sale from the CEO and AMAT. However, it is in our view that fundamentals of the company are still intact and the dividend payout is still sustainable based on current free cash flow levels.

In the 2Q2014, we would observe major changes within the portfolio. We have completely divested our investment in New Toyo. We felt that with our revised calculations, New Toyo does not offer us a wide enough margin of safety as initially calculated especially with the uncertainty of the business operations going forward. Also, we have been reducing our stake in Kingsmen Creative, in attempt to align our overall portfolio’s investment strategy.

At the same time, we took positions in Memtech International and SHC Capital. SHC Capital has recently announced a disposal of all their operations, and if successful would value the company at 37c per share. Current share price remains depressed due to investor’s skepticism of the deal going through and perhaps the lack of coverage on such a small-cap company. However, such a scenario is something similar to what we encountered in 2012 (Elite KSB).

Please feel free to email us if there are any questions regarding our investments.

2 comments

  1. Hi TL,

    May I ask if your valuation of $0.37 for SCH Capital have taken into consideration of $8.4 millions ($0.02) assumed option redemption, 477k director fee, 600k project committee fee and lastly the approved dividend of 850k? Which work out to be roughly $10 millions ($0.03 per share).

    In addition, $11.2 millions will be tie up for 18 months after the completion date as guarantee amount.

    Looking forward to hear from you.

    Thomas

    1. Hi Thomas,

      Indeed, after looking at today’s announcement, management was not really upfront about these additional costs initially. After factoring all of it in, the company would probably come up to approximately SGD0.32. However, given that SHC was more making a quick profit due to special situations. At 0.32 our objective would still be accomplished just that the returns is not as attractive as initially calculated.

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