# Asian Century Stocks > Get deep-dives on under-followed stocks across 13 Asian markets Public Ghost content for AI and LLM tooling. This file includes a bounded export of public pages first, then recent public posts. Append `.md` to any post or page URL to get the content in Markdown (for example, `/example-post.md`). ## Pages ### Who am I? URL: https://www.asiancenturystocks.com/about/ Last updated: 2026-08-11T06:39:18.000Z My name is Michael Fritzell, and I started Asian Century Stocks in 2021\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/DSCF2988-Edit-1-1.jpg) I’m originally from Sweden but have spent the last 16 years in Asia. Most of those years were spent on the buy side across Hong Kong, China, Singapore, Indonesia, and other markets. For what it's worth, I have a Master's Degree from the Stockholm School of Economics. I'm also a member of Joel Greenblatt’s [Value Investors Club](https://valueinvestorsclub.com/ideas?ref=asiancenturystocks.com). *However, note that I am* not *a financial advisor. Read the full* [*disclaimer*](https://www.asiancenturystocks.com/disclaimer)*.* --- # What is the price of Asian Century Stocks, and what do I get for it? The premium tier costs $50 per month or $350 per year (you'll save 42%). Premium subscribers get the following content: - Over 20 **deep dives** annually on undercovered Asian equities - Monthly **portfolio updates** of my personal Asia-focused portfolio - Monthly report with the top **Asian insider transactions** Here's a 90-second overview: ## Deep-dives My deep dives are typically 40-60 slide PowerPoint decks that help you understand a business thoroughly. My deep dives are typically published on Sunday mornings so that you can read them with your Sunday morning coffee. The information gathering is extensive, going through annual reports, investor presentations, earnings transcripts, sell-side research, independent research, social media commentary, newspaper mentions, etc. In the final report, you'll understand all aspects of each business – not just the surface-level information you might find elsewhere. You can check out a few of my previous write-ups on Hello Kitty licensor [Sanrio Corporation](https://www.asiancenturystocks.com/p/2021-5-sanrio-company-ltd), investment fund [Fairfax India](https://www.asiancenturystocks.com/p/fairfax-india-fihu-cn), and aircraft component maker [AeroEdge](https://www.asiancenturystocks.com/aeroedge-7409-jp/). [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-107.png)](https://www.asiancenturystocks.com/p/2021-5-sanrio-company-ltd) [![](https://substackcdn.com/image/fetch/$s_!9x6P!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffd811b56-790d-4d0a-824e-e56bd25ce78e_1430x796.png)](https://www.asiancenturystocks.com/fairfax-india-fihu-cn/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-108.png)](https://www.asiancenturystocks.com/aeroedge-7409-jp/) For each deep dive, I also record a 10-minute video summarizing my findings. In the emails I send to you, you'll also receive a short summary. These summaries will help you get up to speed quickly. To find the full list of previous deep dives, check out the [Library](https://www.asiancenturystocks.com/library/). --- ## Thematic reports You will also receive thematic reports. Some of these will be free to read, others will be for premium subscribers only. The thematic reports are meant to spark ideas relating to a particular sector or product. You'll broaden your horizons, helping you get to know companies that benefit from a trend and understand what distinguishes them from each other. Here is an example of such a report: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-106.png) --- ## Portfolio updates Finally, I also provide full disclosure of my own, Asia-focused portfolio. Each month, I provide updates on what's happened with each of these companies. I follow them closely and can tell you exactly what's going on. There's full transparency. [![](https://substackcdn.com/image/fetch/$s_!Icy1!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9922a04d-a627-4c74-80c2-f2fc4819d13d_1120x1262.png)](https://www.asiancenturystocks.com/portfolio2021oct/) [Subscribe monthly ($50/month)](https://www.asiancenturystocks.com/#/portal/signup/68ac64cb9c44bd0001fca885/monthly) [Subscribe yearly ($350/year)](https://www.asiancenturystocks.com/#/portal/signup/68ac64cb9c44bd0001fca885/yearly) *However, be aware that even though I disclose my personal portfolio, that disclosure does not constitute investment advice — speak to a financial advisor to understand whether any investment is suitable for your specific needs.* --- In addition to subscriber-only content, you'll also get weekly free goodies like my top 5 links of the week and regular updates on my 500-stock [watchlist](https://www.asiancenturystocks.com/watchlist/). Once you've subscribed and started receiving my emails, you'll get a much better sense of the opportunity set in this part of the world. So consider becoming a premium subscriber. --- # Testimonials ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-191-1.png) Premium subscribers of Asian Century Stocks have been positive: > *"*Great idea generation*, well written."* > > *"Thank you for all the *high-quality, detailed reports*.”* > > *"Love the work you do! Thanks for all the *amazing business deep-dives*."* > > *"Good to see someone covering the *interesting opportunities available in HK*!"* > > *"*Excellent* analysis on less well covered stocks & sectors"* > > *"Thanks for the quick reply and helpful trial! I look forward to reading the articles you *put so much work into*!"* > > *"To be introduced to Asian companies with exciting business models and attractive fundamentals from the perspective of a Western European with 15 years of "local knowledge" is *simply unique in this form*."* --- # Frequently asked questions ## How do I upgrade to a premium account? If you're not logged in, click [Subscribe](https://asiancenturystocks.com/?ref=asiancenturystocks.com#/portal) and choose a plan that works for you. If you are logged in, click [Account](https://asiancenturystocks.com/?ref=asiancenturystocks.com#/portal) at the top right corner of your screen. --- ## Can I invest in the stocks you write about in the newsletter? Sure. I am not a financial advisor, so I won’t recommend particular stocks to you. But in terms of trading access, at least 20x of the companies I cover each year are listed in either Japan, Malaysia, Hong Kong, Singapore, Taiwan (Main Board), South Korea, Australia, and New Zealand. ![](https://substackcdn.com/image/fetch/$s_!pkpB!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F47cfdfea-4e6d-41cc-909d-e88ba7b07275_1034x980.png) --- ## Do I invest in the stocks you write about? Sometimes, yes. But the deep dives are not investment recommendations. They are purely informational, to help us understand particular businesses. Since mid-2026, I have committed to a blackout period of 1 week, which means that I don't invest in any stocks until 1 week after the publishing of new deep dives. --- ## How do I sign in on the website? On a desktop, click **Sign In** at the top right corner of the screen. Or click [sign in here](https://www.asiancenturystocks.com/#/portal/signin). --- ## How do I cancel my subscription? Once signed in on the website, click "Account", then "Change" under your plan details, and finally "Cancel subscription". Or just reply to any of my emails, and I’ll refund you pro rata, no questions asked. --- ## How can I get in touch with you? If there are any issues with your subscription, just send me an email at [michael.fritzell@asiancenturystocks.com](mailto:michael.fritzell@asiancenturystocks.com). --- # Conclusion This is a niche service. It will appeal to investors looking for companies off the beaten track. Asia has over 10,000 publicly listed companies, and there's barely any coverage in mainstream media. This is what I'm trying to address. Once you’ve signed up, you’ll also unlock the entire library and future posts from Asian Century Stocks. I look forward to seeing you as a subscriber! [Subscribe monthly ($50/month)](https://www.asiancenturystocks.com/#/portal/signup/68ac64cb9c44bd0001fca885/monthly) [Subscribe yearly ($350/year)](https://www.asiancenturystocks.com/#/portal/signup/68ac64cb9c44bd0001fca885/yearly) --- *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Welcome to the community… URL: https://www.asiancenturystocks.com/welcome-to-the-community/ Last updated: 2026-04-18T02:56:51.000Z ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/Asia-Map-Cover-Image-2.png) Hi! Thanks for signing up. You have just joined 20,000+ readers who follow Asian Century Stocks to keep abreast of what's happening in the region. My name is Michael Fritzell, and I've lived in Asia for 17 years, focusing primarily on publicly listed equities. I now live in Singapore, where I have been writing about stocks full-time since 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/DSCF2941-Edit.jpg) I started Asian Century Stocks because I felt there wasn't enough coverage of publicly-listed companies in this part of the world. Before starting the business, I had covered individual stocks in East Asia and Southeast Asia across various buy-side roles. I had met with management teams and knew many of the companies inside out. But in the public domain, there was almost nothing available. So I wanted to fix that issue, one stock at a time. My goal isn't to give you hot stock tips. In fact, as an unregulated entity, I'm not allowed to provide investment advice. Instead, I educate you so you can make *your own* informed decisions based on the facts that we discover together. As an independent publication, I provide you with the truth as I see it. There are **no sponsored posts** and **no advertisements**, and I will keep it that way. In return for a subscription, you get: - Over 20 **deep dives** annually on undercovered Asian equities - Monthly **portfolio updates** of my personal Asia-focused portfolio - Monthly report with the top **Asian insider transactions** So what's in it for you? Well, you get smarter about the opportunity set of publicly listed equities in Asia. You save time by having someone else do the work for you. And you get access to a community of like-minded individuals. Here is an example of a deep-dive that I put together recently, on Japanese aircraft component maker AeroEdge (7409 JP): [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/14.jpg)](https://drive.google.com/file/d/1eHOFfChg9cYlBF89jgTkrC4ZR6dBw13W/view?usp=sharing&ref=asiancenturystocks.com) Over the past five years, the number of paying subscribers has been steadily increasing, and the feedback has been positive. Here are a few comments from existing premium subscribers: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-191-1.png) > *"The *best commentary* on Asian markets and a must-read for any investor interested in Asian equities."* \- Sunday's Idea Brunch > > *"*Excellent coverage* and analysis of value stocks throughout Asia"* \- The Anomaly Report > > *"Unique coverage of APAC equities from an *on-field Westerner*."* \- Byron Street Research > > *"*Detailed, useful and independent* stocks analysis."* \- The Kaka by Bernard Hickey > > *"One of the very few publications covering companies and stocks in the APAC region, and at an extremely *high level of quality*."* \- Allocators Asia > > *"A *great way to understand* Asian markets and stocks"* \- The Transcript newsletter > > *"Michael is a *deep thinker* who puts together wonderful deep dives."* \- The Consilience Compass > > *"*Mandatory subscription* for anyone with an interest in Asian equities"* \- Turtles Research A yearly subscription is normally $350\. For the next 72 hours, you can [lock in 20% off](https://www.asiancenturystocks.com/20-discount) ($280/year) for the first year and join the 500+ investors who've upgraded. You'll get immediate access to the full deep-dive library, monthly portfolio updates, and insider transaction reports. [Claim My Discount!](https://www.asiancenturystocks.com/20-discount) Thank you for trying Asian Century Stocks, and I hope you enjoy the content! Sincerely *Michael Fritzell* --- *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Thanks for becoming a subscriber! URL: https://www.asiancenturystocks.com/welcome-paid/ Last updated: 2026-01-03T04:22:44.000Z _This page is for paying subscribers only._ ### Contact details URL: https://www.asiancenturystocks.com/contact-details/ Last updated: 2025-09-30T13:25:27.000Z For any immediate assistance, please email [michael.fritzell@asiancenturystocks.com](mailto:michael.fritzell@asiancenturystocks.com). I'll try to get back to you within 24 hours. ### Asian Century Stocks on Slack URL: https://www.asiancenturystocks.com/the-new-acs-slack-community/ Last updated: 2025-10-01T02:47:43.000Z ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-16.png) I've created a Asian Century Stocks community on the chat program Slack: - This new workspace on Slack has separate channels for each country, providing higher signal/noise if you're only interested in stocks in a particular country. - Those of you who felt shy writing on Telegram to hundreds of people will be much more comfortable writing in smaller channels. It's a lower-stakes form of communication. - Now that ACS is on the Ghost platform, I'm able to automate access so that only paid subscribers have access to it. In my experience, this leads to much higher-quality discussions. Remember: absolutely no pumps-and-dumps or no stock recommendations. Facts only - no personalized financial advice. We also don't share paid research in the Slack group. Links to public websites are fine. And let's be kind to each other. Here is the link to the community: _This page is for paying subscribers only._ ### Overlooked Asian stocks, straight to your inbox URL: https://www.asiancenturystocks.com/landing/ Last updated: 2026-08-07T09:57:55.000Z Independent research on under-followed companies across Japan, Korea, Greater China and Southeast Asia. ## Sign up for Asian Century Stocks Join 20,000+ investors discovering overlooked Asian stocks. Join Free → Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. > *"The *best commentary* on Asian markets and a must-read for any investor interested in Asian equities."* \- Sunday's Idea Brunch Cover Asia without researching 10,000 stocks yourself: 1. **Find overlooked companies**: Research across 13 Asian markets, including stocks most global investors rarely encounter. 2. **Understand the stock quickly**: Clear summaries explaining the business, the thesis and what matters. 3. **Go deeper when an idea interests you**: Detailed research reports on under-followed Asian equities. Recent research: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-15.png)](https://www.asiancenturystocks.com/aeroedge-7409-jp/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-16.png)](https://www.asiancenturystocks.com/deep-dive-nice-information-service-030190-ks/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-17.png)](https://www.asiancenturystocks.com/deep-dive-the-hour-glass-hg-sp/) --- # What subscribers are saying > *"*Excellent coverage* and analysis of value stocks throughout Asia"* \- The Anomaly Report > *"One of the very few publications covering companies and stocks in the APAC region, and at an extremely *high level of quality*."* \- Allocators Asia > *"*Mandatory subscription* for anyone with an interest in Asian equities"* \- Turtles Research ## Sign up for Asian Century Stocks Join 20,000+ investors discovering overlooked Asian stocks. Join Free → Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Disclaimer**: *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Regions URL: https://www.asiancenturystocks.com/regions/ Last updated: 2026-06-04T12:12:22.000Z # Explore Topics Browse all tags across the site. {{#get "tags" limit="all" include="count" order="name asc"}} {{#foreach tags}} [ {{name}} {{count}} posts ]({{url}}){{/foreach}} {{/get}} ### Disclaimer URL: https://www.asiancenturystocks.com/disclaimer/ Last updated: 2026-07-16T05:57:06.000Z *The Asian Century Stocks newsletter is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N), a company that is not licensed or otherwise regulated by the Monetary Authority of Singapore. It is not licensed or regulated to carry on business in providing any financial advisory service.* THE INFORMATION CONTAINED ON THIS WEBSITE IS NOT AND SHOULD NOT BE CONSTRUED AS INVESTMENT ADVICE, AND DOES NOT PURPORT TO BE AND DOES NOT EXPRESS ANY OPINION AS TO THE PRICE AT WHICH THE SECURITIES OF ANY COMPANY MAY TRADE AT ANY TIME. THE INFORMATION AND OPINIONS PROVIDED HEREIN SHOULD NOT BE TAKEN AS SPECIFIC ADVICE ON THE MERITS OF ANY INVESTMENT DECISION. INVESTORS SHOULD MAKE THEIR OWN DECISIONS REGARDING THE PROSPECTS OF ANY COMPANY DISCUSSED HEREIN BASED ON SUCH INVESTORS’ OWN REVIEW OF PUBLICLY AVAILABLE INFORMATION AND SHOULD NOT RELY ON THE INFORMATION CONTAINED HEREIN. Articles published on this website are neither recommendations to purchase or sell shares, securities or other instruments mentioned in this document or referred to; nor can these articles be treated as professional advice to buy, sell or take a position in any shares, securities or other instruments. The information contained herein is based on the study and research of Delante Media and are merely the written opinions and ideas of the author, and is as such strictly for educational purposes and/or for study or research only. Since June 2026, the author has observed a trading blackout with respect to companies featured in deep-dive reports: he does not buy or sell securities of a featured company in the seven days before or after the report's publication. The author may hold positions in companies discussed, as disclosed in the monthly portfolio updates. Every investor has different strategies, risk tolerances and time frames. You are advised to perform your own independent checks, research or study; and you should contact a licensed professional before making any investment decisions. The information contained on this website has been prepared based on publicly available information and proprietary research. The author does not guarantee the accuracy or completeness of the information provided in this document. All statements and expressions herein are the sole opinion of the author and are subject to change without notice. Any projections, market outlooks or estimates herein are forward-looking statements and are based upon certain assumptions and should not be construed to be indicative of the actual events that will occur. Other events that were not taken into account may occur and may significantly affect the returns or performance of the securities discussed herein. Except where otherwise indicated, the information provided herein is based on matters as they exist as of the date of preparation and not as of any future date, and the author undertakes no obligation to correct, update or revise the information in this document or to otherwise provide any additional materials. The author, the author’s affiliates, and clients of the author’s affiliates may currently have long or short positions in the securities of certain of the companies mentioned herein or may have such a position in the future (and therefore may profit from fluctuations in the trading price of the securities). To the extent such persons do have such positions, there is no guarantee that such persons will maintain such positions. Neither the author nor any of its affiliates accept any liability whatsoever for any direct or consequential loss howsoever arising, directly or indirectly, from any use of the information contained herein. In addition, nothing presented herein shall constitute an offer to sell or the solicitation of any offer to buy any security. ### Tip Jar URL: https://www.asiancenturystocks.com/tip-jar/ Last updated: 2025-10-28T00:08:01.000Z _No content available._ ### Advanced User Settings URL: https://www.asiancenturystocks.com/advanced-settings/ Last updated: 2025-10-28T00:08:01.000Z _No content available._ ### Group Subscriptions URL: https://www.asiancenturystocks.com/group-subscriptions/ Last updated: 2025-10-28T00:08:02.000Z _No content available._ ### Buy a Group Subscription URL: https://www.asiancenturystocks.com/buy-group-subscription/ Last updated: 2025-10-28T00:08:02.000Z _No content available._ ### Thank you! URL: https://www.asiancenturystocks.com/loved-it/ Last updated: 2025-12-01T08:04:42.000Z Thanks for voting! If you want to read more, check out my library of previous posts and deep dives: [Table of contents👉 Click here to view a list of all previous posts 👈![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-30.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2fd1214bc7-ef3b-4ea0-b90a-4bd3f1cf3bc4_1336x749.jpg)](https://www.asiancenturystocks.com/library/) ### Thank you! URL: https://www.asiancenturystocks.com/its-okay/ Last updated: 2025-12-01T08:04:57.000Z Thanks for voting! If you want to read more, check out my library of previous posts and deep dives: [Table of contents👉 Click here to view a list of all previous posts 👈![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-30.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2fd1214bc7-ef3b-4ea0-b90a-4bd3f1cf3bc4_1336x749.jpg)](https://www.asiancenturystocks.com/library/) ### Thank you! URL: https://www.asiancenturystocks.com/not-great/ Last updated: 2025-12-01T08:06:12.000Z Thanks for voting! If you want to read more, check out my library of previous posts and deep dives: [Table of contents👉 Click here to view a list of all previous posts 👈![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-30.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2fd1214bc7-ef3b-4ea0-b90a-4bd3f1cf3bc4_1336x749.jpg)](https://www.asiancenturystocks.com/library/) ### Newsletters URL: https://www.asiancenturystocks.com/newsletters/ Last updated: 2026-01-03T04:00:00.000Z _No content available._ ### The ACS Watchlist URL: https://www.asiancenturystocks.com/watchlist/ Last updated: 2026-08-12T09:47:59.000Z - 400 curated listed companies - Coverage across Asia-Pacific markets - Updated regularly - Includes valuation data Get free access by registering [here](https://www.asiancenturystocks.com/#/portal/signup/free). No credit card required. Confirm in the email you receive. [Register for free](#/portal/signup/free) *Latest update: 10 August 2026* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/Gemini_Generated_Image_rwzwtmrwzwtmrwzw-Large-1.jpeg) _This page is for subscribers only._ ### Twitter URL: https://www.asiancenturystocks.com/twitter/ Last updated: 2026-03-12T03:07:15.000Z [Powered by Curator.io](https://curator.io/?ref=asiancenturystocks.com) ### New reader? Start here URL: https://www.asiancenturystocks.com/start/ Last updated: 2026-05-09T23:50:52.000Z Asian Century Stocks is a newsletter focusing on Asian value stocks. I started it in 2021, and after 5 years, it's become one of the biggest finance newsletters in the region. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-91.png) A picture of me at Chijmes heritage building in Singapore **Asian Century Stocks** is read by over 20,000 investors worldwide. You'll get a perspective on Asian equities from an on-the-field Westerner with two decades of experience. You'll get regular free articles on topics as varied as [Japanese SaaS companies](https://www.asiancenturystocks.com/babies-out-with-the-saas-water/), an [El Niño in 2026](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/), and [South Korea's corporate governance reforms](https://www.asiancenturystocks.com/korean-reforms/). As well as updates on the \~500-stock watchlist, plus my top 5 links of each week. --- # What subscribers are saying ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-191-1.png) *"The *best commentary* on Asian markets and a must-read for any investor interested in Asian equities."* \- Sunday's Idea Brunch *"*Excellent coverage* and analysis of value stocks throughout Asia"* \- The Anomaly Report *"Unique coverage of APAC equities from an *on-field Westerner*."* \- Byron Street Research *"*Detailed, useful and independent* stocks analysis."* \- The Kaka by Bernard Hickey *"One of the very few publications covering companies and stocks in the APAC region, and at an extremely *high level of quality*."* \- Allocators Asia *"A *great way to understand* Asian markets and stocks"* \- The Transcript newsletter *"Michael is a *deep thinker* who puts together wonderful deep dives."* \- The Consilience Compass *"*Mandatory subscription* for anyone with an interest in Asian equities"* \- Turtles Research ## Sign up for Asian Century Stocks Join 20,000+ investors reading weekly Join Free Email sent! Check your inbox to complete your signup. By entering your email you agree to the [terms & conditions](https://www.asiancenturystocks.com/disclaimer/) --- # Go deeper with a premium membership For $50/month or $350/year (save 42%), you get: - Over 20 deep dives annually on undercovered Asian equities - Monthly portfolio updates - Monthly report with the top Asian insider transactions [See what's included](https://www.asiancenturystocks.com/about/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Disclaimer**: *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### More links URL: https://www.asiancenturystocks.com/more/ Last updated: 2026-06-21T17:33:41.000Z An **introduction** for new readers: [New reader? Start hereWelcome to Asian Century Stocks![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/Cover-Image-for-Table-of-Contents.png)](https://www.asiancenturystocks.com/asia-is-the-next-frontier-10-000-stocks-yet-to-be-discovered/) --- The **library** of all previous posts: [Table of contents👉 Click here to view a list of all previous posts 👈![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/GettyImages-1450969704.jpg)](https://www.asiancenturystocks.com/library/) --- A list of all previous **deep-dives**: [Deep-dives - Asian Century Stocks![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/size/w1304/format/webp/2026/04/GettyImages-1437625653-Large.jpeg)](https://www.asiancenturystocks.com/tag/deep-dives/) A list of all previous **portfolio updates**: [Portfolio - Asian Century Stocks![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/size/w1304/format/webp/2026/04/Terminal-right-aspect-ratio.jpeg)](https://www.asiancenturystocks.com/tag/portfolio/) --- A list of all Asian **insider transaction** analyses: [Insiders - Asian Century Stocks![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/size/w1304/format/webp/2026/04/Insiders.jpg)](https://www.asiancenturystocks.com/tag/insiders/) --- The Asian Century Stocks **watchlist**: [WatchlistLatest update: 16 April 2026 Sign Up for Free Updates![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/size/w1200/2026/02/GettyImages-1147332210.jpg)](https://www.asiancenturystocks.com/watchlist/) --- Recommendations on the best **pan-Asian retail brokers**: [The best retail broker for AsiaIf you’re looking for an online trading platform with access to most Asian markets, then I believe that Boom Securities is the best option for you. If you don’t mind trading over the phone and are looking for a Singapore-based broker with great market access, then I believe that either KGI Securities or Maybank will do the trick.![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/image/fetch/$s_!FlcP!-w_1200-h_600-c_fill-f_jpg-q_auto:good-fl_progressive:steep-g_auto/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f34960dd3-7037-4a05-9746-67c2dda03665_1000x667.jpg)](https://www.asiancenturystocks.com/the-best-asian-retail-broker/) --- Paid subscribers: if you need to access your **invoices**: [click here](https://billing.stripe.com/p/login/eVq14mdizako9fB9zyeAg00?ref=asiancenturystocks.com). [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ## Posts ### This Week in Asia #42 URL: https://www.asiancenturystocks.com/this-week-in-asia-27/ Last updated: 2026-09-07T04:16:45.000Z Industrial gas supplier [**Air Water**](https://www.asiancenturystocks.com/deep-dive-air-water-4088-jp/)'s stock price rallied +20% after ISS and Glass Lewis backed its governance overhaul ahead of a 22 September EGM. [**FnGuide**](https://www.asiancenturystocks.com/fnguide-064850-ks/)'s professional CEO resigned, leaving the controlling shareholder's son-in-law in charge. And finally, an individual investor bid HK$0.10 for 5% of suspended Chinese cemetery operator [**Fu Shou Yuan**](https://www.asiancenturystocks.com/fu-shou-yuan-1448-hk/), a whopping 96% below the last traded price. --- ## Watchlist update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-11.png) The biggest share price movements of the past week in the [watchlist](https://www.asiancenturystocks.com/watchlist/). Source: Koyfin - The Japanese industrial gas supplier [**Air Water**](https://www.asiancenturystocks.com/deep-dive-air-water-4088-jp/) rallied last week. On 29 August 2026, it released materials for the extraordinary general meeting on 22 September 2026\. The company plans to introduce a new Audit & Supervisory Committee Structure to improve its governance. Investors may finally be willing to see through the accounting problems that have plagued the business over the past year. Though I want to caution that the audit opinion is still qualified. *(Full disclosure: I own shares in Air Water.)* - Korean index provider[**FnGuide**](https://www.asiancenturystocks.com/fnguide-064850-ks/)'s co-CEO Lee Ki-tae suddenly resigned. I have a lot of respect for Lee: he came from Samsung Securities and revitalized the organization. Jeon Min-seok, the son-in-law of the Chairman of parent company Hwacheon Group, will now run the business himself. While he might be talented, I prefer to have a professional with actual industry experience in charge. - [**Best Mart 360**](https://www.asiancenturystocks.com/best-mart-360-2360-hk/)'s 1H2026 results were better than expected, given the share price reaction. I sold my own shares in Best Mart last month, and this has proven to be a poor decision so far. Best Mart reported revenue up +1.0% year-on-year, with gross profit flat and earnings per share down -4%. The slight margin compression came from heavy promotions. On the positive side, private label sales rose +10% year-on-year, and you can argue that its private label products differentiate it from its peers. - Fast-food operator [**Jollibee**](https://www.marketwatch.com/investing/stock/jfc?countrycode=ph&ref=asiancenturystocks.com) took a major step forward with a spin-off and an IPO of its international segment in Hong Kong. Anthony Bourdain once praised Jollibee for being the *"*[*wackiest, jolliest place on earth*](https://www.youtube.com/watch?v=lS-c1oKMJOg&ref=asiancenturystocks.com)*"*. Some investors on Value Investors Club and elsewhere think that the spin-off will unlock value. But I've always felt that the Jollibee brand is weak outside the Philippines. In my personal view, the jewel remains Jollibee's domestic business. - A senior executive at South Korean cosmetics company [**Amorepacific Holdings**](https://sg.finance.yahoo.com/quote/002795.KS/?ref=asiancenturystocks.com) bought US$73,000 worth of shares. The buyer was Ahn Jae-sung, the company's head of compliance. Amore owns brands such as Sulwhasoo, Laneige, Innisfree and ETUDE, mostly through the separately listed operating company [**Amorepacific Corporation**](https://finance.yahoo.com/quote/090430.KS/?ref=asiancenturystocks.com), which is also experiencing insider buying. Amore Corporation's 2Q2026 results showed revenue growth of +17% year-on-year and operating profit +59%. It seems Amore is finally reaching an inflection point, with US and European demand for Korean cosmetics offsetting weakness in Mainland China. That said, one quarter is not enough to guarantee a turnaround and US$73,000 is small in absolute terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-10.png) Insider buying in Amorepacific Holdings. Source: [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com) --- ## Worth your time ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-12.png) Masaki Taketsume at Schroders Japan - Schroders Japan's [**Masaki Taketsume**](https://open.spotify.com/episode/2T4RRTXQqB08OrOxL1otlL?si=a5d35b235b544ffd&ref=asiancenturystocks.com) was on MoneyWeek Talks discussing the bull case for Japanese equities. He argues that Japan has successfully transitioned out of two decades of stagnation into an environment of structurally higher inflation. Corporate governance reforms have improved returns on equity. He sees policy stability under the pro-business Takaichi administration until at least 2028\. However, I'd caution that much of the nominal growth we've seen comes from the post-2022 weakness in the Japanese yen. - Our friends at [**Theoria Capital**](https://theoria137.substack.com/) have started writing weekly updates on Chinese stocks. I really enjoy these. In today's post, Theoria provided context on the recent low-ball offer for Chinese cemetery stock [Fu Shou Yuan](https://finance.yahoo.com/quote/1448.HK/?ref=asiancenturystocks.com), which I wrote about in 2024 [here](https://www.asiancenturystocks.com/fu-shou-yuan-1448-hk/). Its previous CEO, Wang Jishen, was removed as President. Meanwhile, the incoming management team found "questionable transactions", and trading was suspended. Now, an individual investor has launched a HK$0.10 tender offer for 5% of the shares, at a massive 96% discount to the last traded price. Nobody knows what's truly going on, but after reading Theoria's post, I think we may have witnessed a state-sponsored takeover of the business. - I read an old post on [Toumei](https://finance.yahoo.com/quote/4439.T/?ref=asiancenturystocks.com) by [**The Capital Chronicle**](https://amsterdamstock.substack.com/p/what-japans-market-overlooks-part). The company resells fiber lines and electricity to small- and medium-sized enterprises in Japan. What makes Toumei different is that it's run by Fumihiko Yamamoto, a Hikari Tsushin alumnus. Hikari Tsushin takes capital allocation seriously, and I suspect that Toumei does, too. Today, the stock trades at 9.7x P/E and has 90%+ recurring revenue. And note that reselling fiber and electricity is a competitive and low-margin business. - Finally, [**Philipp Haas**](https://investresearch.substack.com/p/digital-grid-tse-350a-the-stock-exchange)'s write-up on [Digital Grid](https://finance.yahoo.com/quote/350A.T/?ref=asiancenturystocks.com) caught my eye. It operates an [energy marketplace](https://digitalgrid-platform.com/en?ref=asiancenturystocks.com) that connects power producers with corporate buyers. It has 79% gross margins and operating margins above 40%. The company IPO'd in 2025 but has performed poorly since then. In the last quarter, contracted capacity rose +25%, but due to a lower fee per transaction, revenue actually fell -7% year-on-year. A potentially moaty business, though with some question marks. --- ## Mizuno ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/GettyImages-1002335536-Large.jpeg) In case you missed it, check out last week's deep-dive on Japanese sporting goods maker [**Mizuno**](https://www.asiancenturystocks.com/deep-dive-mizuno-8022-jp/), prepared for Asian Century Stocks by recent graduate Meera Kapoor. She made the case that Mizuno has seen its margins expand thanks to a shift to direct-to-consumer sales. This has occurred through an improved e-commerce business and greater popularity of its lifestyle ("Sportstyle") products. It also has strength in certain sports, including golf, baseball, and football. Since COVID-19, many of us seem to have become more health-focused. Mizuno might be a beneficiary of this trend. On the other hand, the stock trades at a somewhat elevated 16x P/E. You can read the full update here (free): [Mizuno (8022 JP)Japanese sportswear brand at 16x P/E![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-deb4b484-f679-4bc7-af66-9a82859da2f5.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/GettyImages-2228819168--1--Large-46134422-db93-4e29-9e81-60fb3a4d6062.jpeg)](https://www.asiancenturystocks.com/deep-dive-mizuno-8022-jp/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *This was a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/#/portal/account/newsletters)*.* Get instant access to 149 deep-dives on Asian value stocks: [Unlock the archive ](https://www.asiancenturystocks.com/#/portal/signup) --- ***Disclaimer** *: This post reflects my personal opinions and is for informational purposes only. It is not financial advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. I am not a licensed financial adviser in Singapore or anywhere else, and I don't give personalized advice — including in the comments. As of 7 September 2026, I own shares in Air Water. I hold no position in any other security mentioned or linked in this post, including in any automatically generated recommendation, "Keep Reading" card, or other content appended to it, whether or not that security is named above. I will not trade in any security discussed in this post for seven days after publication. Outside that window, I may buy or sell any security mentioned at any time, without notice, and I won't update this disclosure. I receive no compensation from any company, fund, platform, publication or individual mentioned or linked in this post. My revenue comes solely from reader subscriptions. People I quote or interview may hold positions in the securities they discuss, may operate paid research products of their own, and I don't independently verify their claims. Where past performance is mentioned, it is not indicative of future results. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* ### Deep-dive: Philippine Seven (SEVN PM) URL: https://www.asiancenturystocks.com/deep-dive-philippine-seven-sevn-pm/ Last updated: 2026-09-06T05:52:23.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: I am not licensed or regulated by the Monetary Authority of Singapore, and I am not a financial adviser. This post reflects my personal opinions and is provided for informational purposes only. Nothing in it is a recommendation or an offer to buy, sell or hold any security, and it does not constitute financial, investment or any other form of advice. Nothing here takes into account your investment objectives, financial situation or particular needs. Investing involves substantial risk, including the complete loss of capital. Before making any investment decision, do your own research and consult a financial adviser licensed by the Monetary Authority of Singapore. Any estimates, forecasts or forward-looking figures are my own unless stated otherwise. They rest on assumptions that may prove wrong, and actual outcomes may differ materially. As of 6 September 2026, I do not hold a position in Philippine Seven (SEVN PM). This disclosure reflects my position on the date stated and will not be updated if it changes. I receive no compensation from any company mentioned in this post, nor from any broker, distributor, platform, fund, publication or product issuer. My revenue comes solely from reader subscriptions to Asian Century Stocks. Michael Fritzell, published by Delante Media Pte Ltd.* --- The 7-Eleven convenience store chain was originally created in Dallas, Texas. When the chain faced bankruptcy in the early 1990s, Japan's Ito-Yokado acquired it and later renamed the combined group [**Seven & i**](https://finance.yahoo.com/quote/3382.T/?ref=asiancenturystocks.com) *(3382 JP – US$28 billion)*. Today, there are over 85,000 "7-Eleven" stores worldwide. These stores offer fresh food, beverages and everyday items in areas with high foot traffic and stay open around the clock. While prices in 7-Eleven stores tend to be higher than in typical supermarkets, they do offer added convenience. The vast majority of 7-Eleven stores are not run by Seven & I, however. Instead, area licensees hold country-level rights to run the actual stores. For example, [**CP All**](https://finance.yahoo.com/quote/CPALL.BK/?ref=asiancenturystocks.com) *(CPALL TB – US$13 billion)* is the exclusive 7-Eleven master franchisee in Thailand, and [**President Chain Store**](https://finance.yahoo.com/quote/2912.TW/?ref=asiancenturystocks.com)*(2912 TT – US$7.1 billion)* is the exclusive 7-Eleven master franchisee in Taiwan. In return for exclusivity and the use of the 7-Eleven brand name, they pay royalties to Seven & I's US subsidiary. _This post is for paying subscribers only._ ### Mizuno (8022 JP) URL: https://www.asiancenturystocks.com/deep-dive-mizuno-8022-jp/ Last updated: 2026-09-03T05:46:39.000Z *Hi! I'm Michael Fritzell. Welcome to another *free-to-read edition* of Asian Century Stocks – a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/thailands-stimulus-package/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: I am not licensed or regulated by the Monetary Authority of Singapore, and I am not a financial adviser. This post reflects my personal opinions and is provided for informational purposes only. Nothing in it is a recommendation or an offer to buy, sell or hold any security, and it does not constitute financial, investment or any other form of advice. Meera Kapoor assisted with research for this post. I am responsible for its contents. Neither of us has considered your objectives, financial situation or needs. Investing involves substantial risk, including the complete loss of capital. Before making any investment decision, do your own research and consult a financial adviser licensed by the Monetary Authority of Singapore. Any estimates, forecasts or forward-looking figures are my own unless stated otherwise. They rest on assumptions that may prove wrong, and actual outcomes may differ materially. As of 3 September 2026, neither Meera nor I hold positions in Mizuno (8022 JP). This disclosure reflects our positions as of the date stated and will not be updated if they change. Neither of us receives compensation from any company mentioned in this post, nor from any broker, distributor, platform, fund, publication or product issuer. My revenue comes solely from reader subscriptions to Asian Century Stocks. Michael Fritzell, published by Delante Media Pte Ltd.* --- Over the past decade, the Japanese sportswear brand [**Mizuno**](https://finance.yahoo.com/quote/8022.T/?ref=asiancenturystocks.com) *(8022 JP – US$1.9 billion)* has compounded at a 16.5% annual rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/x0B9n-mizuno-8022-jp---1-.png) Of course, past performance does not indicate future performance. But it still begs the question: why? And what does the future look like? I've been working with recent graduate [Meera Kapoor](https://x.com/meerakapoor88?ref=asiancenturystocks.com) to understand the company from the inside out. This is what she's concluded. Mizuno is a major global sportswear brand. Most consumers associate Mizuno with golf equipment. But it also has strength in baseball and football, especially within Japan, where 61% of its revenue comes from. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image.png) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/Screenshot-2026-09-01-at-6.33.22---PM.png) The company has been around for 120 years, controlled by the Mizuno family through the Mizuno Sports Promotion Foundation. But the actual architect behind Mizuno's recent turnaround has been Takeshi Shichijo, who has been pushing the company towards higher-margin segments such as running footwear and "Sportstyle" lifestyle apparel. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-3-1.png) The business's strength began right after COVID-19\. At the time, club activities were suspended, and stores closed. But from 2022 onwards, structural margin expansion followed a new focus on Mizuno's higher-margin direct-to-consumer business and Sportstyle products. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-4.png) These improvements happened at the same time the Japanese yen was weakening. So it would be tempting to conclude that Mizuno has simply benefited from an FX tailwind. But the story is not that simple. The core margin expansion has come from within Japan itself, which is a net importer and thus, if anything, hurt by the weak yen. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-5.png) Mizuno's strength is more from hero products such as the Wave Rider 10 "Sportstyle" sneaker, the Morelia Neo IV football shoe and the JPX ONE golf club, which applies engineering borrowed from Mizuno's baseball bats. These golf clubs sold about three and a half times the previous model's volume in their first month. Mizuno's revenues from its Sportstyle segment have grown 9.5x since 2019, and revenues from football shoes have tripled. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/image-6-1.png) The company is also benefiting from several long-term trends. For example, consumers have become more health-conscious in recent years. Health has become a mainstream lifestyle priority. Sportswear is increasingly worn in casual settings, driving Mizuno's Sportstyle segment. And finally, Mizuno is selling more online, helping it cut out the middleman. Mizuno has a number of other businesses, for example, building and operating sports facilities within Japan, including its own golf schools and futsal courts. These are low-return-on-equity businesses and probably a drag on earnings growth. What does the future look like then? In the mid-term plan, management targets JPY 330 billion in revenue, up from JPY 267 billion today. This will be driven by a further shift towards direct-to-consumer channels like e-commerce and Sportstyle products. The golf business continues to have momentum. The new cricket business in India and the retail expansion in Vietnam are two other bright spots. One particularly exciting area is pickleball and padel — one of the fastest-growing sports globally, in a relatively unsaturated market. Mizuno does have exposure to these sports, though it's unclear whether they can be real contributors in the near term. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/09/GettyImages-2196802763-Large.jpeg) Source: Getty Images On the negative side, the tax rate will probably climb slightly, and FX translation effects on overseas revenue will slow down if the yen stabilizes. US tariffs on imported goods have dragged on North American margins, and there's no visibility into US tariff policy. Today, the stock trades at 16x FY2027 earnings and 1.5x price-to-book. Management is guiding for relatively modest dividends of JPY 66 per share. A JPY 3 billion buyback is ongoing, but it represents only 1.0% of shares outstanding. So what are the risks? One is that the Mizuno Foundation controls the business with an iron fist through its 17% plus Sumitomo Mitsui Bank's cross-shareholdings. The balance sheet is overcapitalized, and cash has been invested in investment securities rather than reinvested or returned to shareholders. The bigger long-term question is whether Mizuno can ever become as culturally 'hot' as Asics — and that takes sponsorships, distinctive design, real marketing muscle. Areas where the company has not yet demonstrated it can compete. **Slides accompanying the deep dive are available here:** [Mizuno.pdf![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/drive_favicon_2026_32dp-27e695b6-b8bc-4a6a-a345-4448270cf722.png)Google Docs![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/AKGpihbA9hQw73b-0yvpj91VwGi0WlLbkRRCpss59EV0bflZPEbMqE6IsW0edjqRckLoATVlK1AmuN1QxiFgdOsXdt3A8k6OVjPPz1c-s1600-rw-v1-67415f9f-ea18-494a-9276-b7336549a586)](https://drive.google.com/file/d/1yJdrmsdodywF7lfu59IvuXEdyKC1-kJw/view?usp=sharing&ref=asiancenturystocks.com) Further material: - Mizuno's [latest investor presentation](https://corp.mizuno.com/system/files/ir/2026-08/EN%20Mizuno%20FY26.1Q%20Financial%20report.pdf?ref=asiancenturystocks.com) - Mizuno's [FY2025 annual report](https://corp.mizuno.com/system/files/ir/2025-10/Mizuno%20112th%20Annual%20Securities%20Report.pdf?ref=asiancenturystocks.com) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### This Week in Asia #41 URL: https://www.asiancenturystocks.com/this-week-in-asia-41/ Last updated: 2026-09-07T01:16:34.000Z [**Hanssem**](https://www.asiancenturystocks.com/deep-dive-2021-25-hanssem/)'s CEO has been buying stock. [**Verdad**](https://mailchi.mp/verdadcap/the-yen-panic?e=3981bfbcf5&ref=asiancenturystocks.com) argues that the Japanese yen is the cheapest G-10 currency. And my [**portfolio update**](https://www.asiancenturystocks.com/portfolio-update-august-2026/) for August 2026 is finally out. --- ## Watchlist update - Elevator service company [**Hong-Wei Electrical**](https://sg.finance.yahoo.com/quote/4565.TWO/?ref=asiancenturystocks.com) announced it's moving from an over-the-counter listing to a main board listing on the Taiwan Stock Exchange. This will make it easier to access capital. - [**APR**](https://finance.yahoo.com/quote/278470.KS/?ref=asiancenturystocks.com)'s second-quarter results confirmed that its Medicube cosmetics brand continues to grow. Revenues grew +134% year-on-year and operating profit grew +135%. The full-year revenue guidance was raised to KRW 3 trillion with a 24-26% operating margin. - Chinese oil exploration & production company [**CNOOC**](https://www.asiancenturystocks.com/cnooc2022update/) reported its 1H2026 results, with net profit rising +23% year-on-year on the back of higher oil prices. Production growth of +4% also helped, bringing output to 399 million barrels of oil equivalent. The interim dividend was hiked to HK$0.94\. - [**Modern Dental**](https://www.asiancenturystocks.com/q-and-a-modern-dental-3600-hk/)'s 1H2026 was excellent, too. Revenue grew +11% year-on-year, driven by higher order volumes in Europe thanks to digitalization. Gross margin improved, driving net profit up +31%. - South Korean furniture retailer [**Hanssem**](https://www.asiancenturystocks.com/deep-dive-2021-25-hanssem/) has had significant insider buying in the past few weeks. CEO Kim Yu-jin has acquired roughly US$1.7 million worth of shares after the stock hit a multi-year low. Hanssem has confirmed it will cancel its entire treasury block of \~30% of shares outstanding, putting private equity owner IMM at above 50% ownership, and making a control sale far easier. Of course, that's just my own speculation – nothing is guaranteed, and IMM has given no indication they want to sell. Meanwhile, the Korean housing market is still weak. I hold no position. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-145.png) Insider buying in Hanssem. Source: Smart Insider --- ## Worth your time ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-144.png) Andrew McDermott - Long-time Japan bull [**Andrew McDermott**](https://open.spotify.com/episode/5G2LhDn7TZRXk3Iicjv1xI?si=75d354c4c7684d73&ref=asiancenturystocks.com) of Mission Value Partners joined Grant Williams's podcast. He argues that Japan's manufacturing sector is top-notch across defense, semiconductors, robotics, machine tools, etc. He further argues that the Japanese yen is not a driver of corporate profitability, a statement I do not agree with. - [**Verdad**](https://mailchi.mp/verdadcap/the-yen-panic?e=3981bfbcf5&ref=asiancenturystocks.com) wrote a post about the Japanese yen. The yen has reached a multi-decade low, and speculative short positions are now the highest since 2007\. Verdad argues that the yen is now the cheapest G-10 currency on a real effective exchange rate basis. Furthermore, the US and Japan have undertaken a coordinated currency intervention to strengthen the yen. While Japan's gross debt is high, Verdad argues that the government sits on assets equivalent to 171% of GDP. - Substack author IJW at [**Turtles Research**](https://www.turtlesresearch.com/p/some-thoughts-about-incentives-of?ref=asiancenturystocks.com) wrote a very thoughtful post on Korea's corporate governance reforms. He makes the point that listed companies usually face lower inheritance taxes since they're valued at (low) market prices instead of a government-set valuation methodology. And paying out dividends not only triggers dividend taxes but also raises the inheritance tax base on the accumulated cash. - Jakub at [**Numbers Not Narratives**](https://www.numbersnotnarrative.com/p/protia-kosdaq-303360-allergy-diagnostics??ref=asiancenturystocks.com) wrote about a super-interesting South Korean in-vitro diagnostics company, [Protia](https://finance.yahoo.com/quote/303360.KQ/?ref=asiancenturystocks.com). He argues that Protia makes the best allergy tests in the world for the price. It's a typical razor-and-blades business model: the strips only work with Protia's reader. With most costs fixed, Jakub argues that operating leverage should kick in as the company continues to grow. Two question marks: high inventory days and questionable capital allocation. --- ## Portfolio update August 2026 ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/Terminal-right-aspect-ratio-1.jpeg) Yesterday, I published another monthly portfolio review. The portfolio has done well over the past year, which mechanically lowers the forward-looking IRRs I estimate on the same holdings. Japanese stocks have become a bit expensive, so I am now finding more opportunities in South Korea, the Philippines and Indonesia. You can read the full update here: [Portfolio update August 2026A rally in Japanese SaaS stocks![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-7b907d78-63c7-4e38-9079-d2a468f789f7.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Terminal-right-aspect-ratio-df903ee0-b8b1-445c-a299-9e973e2af55b.jpeg)](https://www.asiancenturystocks.com/portfolio-update-august-2026/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *This was a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/#/portal/account/newsletters)*.* Get instant access to 148 deep-dives on Asian value stocks: [Unlock the archive ](https://www.asiancenturystocks.com/#/portal/signup) --- ***Disclaimer** *: This post reflects my personal opinions and is for informational purposes only. It is not financial advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. I am not a licensed financial adviser in Singapore or anywhere else, and I don't give personalized advice — including in the comments. As of 31 August 2026, I own shares in freee. I hold no position in any other security mentioned or linked in this post, including in any automatically generated recommendation, "Keep Reading" card, or other content appended to it, whether or not that security is named above. I will not trade in any security discussed in this post for seven days after publication. Outside that window, I may buy or sell any security mentioned at any time, without notice, and I won't update this disclosure. I receive no compensation from any company, fund, platform, publication or individual mentioned or linked in this post. My revenue comes solely from reader subscriptions. People I quote or interview may hold positions in the securities they discuss, may operate paid research products of their own, and I don't independently verify their claims. Where past performance is mentioned, it is not indicative of future results. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* ### Portfolio update August 2026 URL: https://www.asiancenturystocks.com/portfolio-update-august-2026/ Last updated: 2026-09-04T10:52:46.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article reflects my own views. I am Michael Fritzell, and I write Asian Century Stocks. I am not a licensed financial adviser, and Delante Media Pte Ltd is not licensed or regulated by the Monetary Authority of Singapore to provide financial advisory services. This is not investment advice and does not recommend buying or selling any security. Nothing here takes account of your objectives, financial situation or particular needs. Please do your own research and consult a licensed financial adviser before acting. As of 26 August 2026 — the cut-off date used in this update — I personally held the positions disclosed below, in the sizes shown. Other than those positions, I hold no position in any other company, fund, index, or instrument named anywhere in this post. I will not transact in any security named in this post for at least seven days from the date of publication. Position sizes are disclosed so you can see my conflicts of interest. They are not a model portfolio, an allocation recommendation, or a suggestion that any allocation is suitable for you. Performance figures in this post are historical, unaudited and self-reported. Past performance is not indicative of future results. My only compensation for this newsletter is reader subscriptions. I receive no payment, in cash or in kind, from any company, fund, broker, platform, publication or individual named in this post. Asian Century Stocks is published by Delante Media Pte Ltd, which acts as publisher of record only.* --- ## Market commentary Japan's SaaS stocks have performed extremely well over the past month, in what looks like a short squeeze. The best index measuring their performance, the "One Capital Cloud Index", has now fully recovered from the early 2026 SaaS-pocalypse: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-118.png) One Capital Cloud Index (black line) Part of the outperformance of SaaS stocks can also be the unexpected strength of the Japanese Yen. The US Treasury as well as the Bank of Japan purchased US$5-10 billion worth of yen, causing the currency to strengthen from 163 to 157 against the US Dollar: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-119.png) The JPY/USD exchange rate. Source: Trading View From what I hear, Japanese fund managers have started to sour on the export trade and rotated back into domestic growth stocks like software developers. The underperformance of the export-heavy Nikkei 225 is a testament to that view. Another major event in August was Alibaba's epic US$10 billion follow-on offering — the largest primary issuance by a Hong Kong-listed company ever. Alibaba tried to justify it by saying it needed to fund heavy investments into AI. But the context here is that Alibaba has spent years buying back supposedly undervalued shares, only to reverse at the bottom and hit minorities with massive dilution. Another big question mark has been the AI capex story. SK Hynix has failed to reach a new high since the June 2026 peak, despite strong memory chip prices. Meanwhile, "anti-AI" stocks like Nintendo and Sony are up from the bottom, suggesting that the market is starting to discount future AI capex spend. Here's how each of the markets has performed: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-120.png) Source: Bloomberg The tech-heavy South Korean and Taiwanese benchmark indices have rebounded over the past month. Indonesian stocks have also partially recovered, despite the continued negative headlines. I can feel the animal spirits when it comes to Indonesian equities' return. There's still widespread frustration with President Prabowo Subianto, but macro has surprised to the upside, partially thanks to a surge in government spending. Indonesia's FX reserves bottomed in May 2026, and the IDR/USD exchange rate since mid-July. It remains to be seen whether that was the bottom, or just a pause in a longer-term bear market. --- ## Portfolio update My Asia-focused portfolio rose +10.8% month-on-month in August 2026, measured in US Dollar terms. This is a real portfolio and after commissions and other expenses. Since inception in October 2021, the portfolio's value has increased by +99.8%, equivalent to a +15.2% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-124.png) Much of last month's performance came from a near-doubling in the share price of the Japanese SaaS company [**Freee**](https://www.asiancenturystocks.com/freee-4478-jp/). But Thai stocks, such as cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/) and energy drink maker [**Carabao**](https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/), also contributed. The portfolio as at 26 August 2026 is set out below, along with this month's transactions. This is a disclosure, not a model portfolio and not a suggestion to buy or sell stocks. _This post is for paying subscribers only._ ### Emerging market life cycles URL: https://www.asiancenturystocks.com/emerging-market-life-cycles/ Last updated: 2026-09-03T04:47:07.000Z *This is a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/this-week-in-asia-41/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/this-week-in-asia-41/#/portal/account/newsletters)*.* ***Disclaimer** *: I'm Michael Fritzell. This is my own opinion, written for a general readership and distributed free to anyone who wants to read it. It isn't financial advice and isn't tailored to anyone's circumstances, financial position or objectives. I'm not a licensed financial adviser and I don't hold myself out as one. This post discusses the relative position of national equity markets, not any particular investment product. Commentary of this kind isn't regulated under Singapore's Financial Advisers Act. Please do your own research, and speak to a licensed financial adviser before relying on anything here to make a decision to buy, sell or hold any investment product. Where I've used an exchange-traded fund chart, it's only as a price proxy for the underlying index. The fund itself isn't the subject of any view here. As of 27 August 2026 I hold no position in any security, index fund or exchange-traded fund named in this article, and I have no plans to transact in any of them within seven days of publication. I receive no compensation from any company, fund, platform, publication or individual mentioned. Asian Century Stocks is funded entirely by reader subscriptions. Delante Media Pte Ltd is the publisher of record.* --- In 2002, Marc Faber published [Tomorrow's Gold](https://www.amazon.com/Tomorrows-Gold-Asias-Age-Discovery/dp/9628606727/ref=sr%5F1%5F1?crid=32TKNM5BRDA73&dib=eyJ2IjoiMSJ9.Rs1uCkN1xO7qAKa8mh5A3u4c%5F0zgcsIL%5FdGUKVkzp81Mm%5FEidqulfVVgU-D3xohtyVIOi8-j-qS9vGomxoHEgoaLX4v6dh37gNR%5FnSFTp4qEd-VmsI2yJ9ZbxTsW4Shs2ILcIcms2hwrzA%5FPywF9E0VspA7CS66S-mEAI6xKPWcCxclkRusRu90cp9yR8iw8Hf9yq7wSdNZ0%5FI6i33ykFUyGnUXhbcwctqjrskoD9rc.f1S61J6l8bwgu0k6DuR8-zH-kvp2S-6uxU7j3c3gv1w&dib%5Ftag=se&keywords=tomorrow%27s+gold&qid=1787015546&sprefix=Tomorrow%27s+Gold%2Caps%2C345&sr=8-1&ref=asiancenturystocks.com) – a book about emerging market investing. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-80-1-1.png)](https://www.amazon.com/Tomorrows-Gold-Asias-Age-Discovery/dp/9628606727/ref=sr%5F1%5F1?crid=7UVXKR2GV1HN&dib=eyJ2IjoiMSJ9.nzqXlDDXObnh0pOGyfy600hPlBJHeFePAIltCccXQ7z2NFQxpoJwMbGCHgejYBeTk2KitEzEy-fsiBKEyYtHZaAeqNq7DizVO8ZsdVjcBNTTIsArrj5TG0gd6AAzVMLg0MFdoDLUIbBgdA1gnJfLxljvmLpDnBXm6RR-S0m%5FbYutua%5F27o6JEoIb7waNrtqkpWtZEIxoGZAKjCMGaFvBqxMJFiwn0PUjhKBpajc2jdI.kSs2JYjKWjX-HKuGyPuC6zhPTpDSVD0tsTz069zWUuc&dib%5Ftag=se&keywords=tomorrow%27s+gold&qid=1787018298&sprefix=tomorrow%27s+go%2Caps%2C361&sr=8-1&ref=asiancenturystocks.com) One of my favorite chapters discusses the life cycles emerging markets tend to go through. Faber argued that a typical emerging market tends to go through seven phases: zero being the bottom of the cycle and three its peak: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-81.png) The Life Cycle of Emerging Markets. Source: Tomorrow's Gold These phases are characterized by levels of economic conditions, employment, construction activity, credit creation, real estate prices, inflation pressures, trading volumes, valuation multiples, research coverage, IPO activity — and, lastly, sentiment. In this post, I'll go through what each of the seven phases looks like. Then I'll try to fit each Asian stock market to the template to help us understand where it is in its respective cycle. ## Phase 0 – after a crash ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-177466560-Large.jpeg) Jakarta in 1998\. Source: Getty Images In "Phase 0 markets", economic conditions tend to be weak. There's been a crash of some sort, and there's gloom & doom in the investor community. A recession has driven the unemployment rate high, and GDP growth has been weaker than expected. Credit creation remains weak, partly due to bad loans racked up in the previous cycle. And that weakness is reflected in low investor interest. Trading volumes can be incredibly low, often down 90% from the peak. The stock market may have traded sideways for years, building a base. But foreign investors remain absent from local investor conferences. And the disinterest is also reflected in low valuation multiples. While value investors agree that the market is cheap, they lament the lack of liquidity and the absence of an identifiable "catalyst". Even hot IPOs are having trouble finding investors. Examples of such markets, according to Faber, were Thailand, the Philippines and South Korea in the early 1980s. Or Indonesia after the Asian Financial Crisis in 1997, when most foreign investors had already left. --- ## Phase 1 – the spark ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-83.png) The opening of Shenzhen Stock Exchange in 1990 Suddenly, a catalyst drives a shift in the market: what economist Charles Kindleberger called a "displacement". It could be a new invention, a shift to private property rights, a sudden rise in exports, higher commodity prices, discoveries of new resource deposits, lower taxes, removal of foreign exchange controls, looser foreign ownership laws, etc. Anything that can cause profits and productivity to rise. Because of the profits to be had, businessmen slowly return to the country, causing hotel occupancy rates to rise to, say, 70%. In Phase 1 markets, we often see a surprising increase in stock prices. A few contrarian fund managers start to invest. And insiders are buying stocks, or privatizing their businesses at low valuations. As borrowing demand increases, credit conditions finally ease, and capital formation starts to rise. The perfect example is perhaps China in the early 1990s. A few years earlier, the government had just legalized private companies with eight or more employees, causing a boom in entrepreneurship, along with stronger property rights. The result was a boom that lasted for decades. --- ## Phase 2 – the recovery ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-1969795749.jpg) The Tokyo Stock Exchange in the mid-1980s. Source: Getty Images In Phase 2 markets, the economy is doing visibly better. Unemployment falls, and wages are rising. Credit creation is high, and some of that capital eventually flows into financial assets. In this part of the cycle, real estate prices often rise several-fold. According to Faber, the capital city ends up resembling an enormous construction site. Inflation accelerates, and interest rates begin to rise. These improvements are quickly reflected in investor sentiment. Headlines in the international press start to become positive. A number of new country funds launch, and foreign inflows pick up. Hotels suddenly fill up with businesspeople and portfolio managers. Brokers issue thick research reports arguing for investing in that particular country. And as Faber argues, in Phase 2, these countries often become favorite travel destinations. A good example is Japan in the mid- to late-1980s, when credit creation picked up and caused a long-lasting boom in land prices. --- ## Phase 3 – the boom ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-2161166363.jpg) Hong Kong in 1973\. Source: Getty Images Finally, the cycle hits a peak. Overinvestment leads to excess capacity in several sectors of the economy. Wages are rising, and inflation becomes a real problem. During this phase, credit frequently grows much faster than GDP. And for that reason, stock and real estate prices become elevated. The system eventually becomes leveraged and fragile. Phase 3 is when massive new skyscrapers start to get built, as Andrew Lawrence documented in his [Skyscraper Index](https://en.wikipedia.org/wiki/Skyscraper%5FIndex?ref=asiancenturystocks.com). Skyscrapers are expensive to build, and their construction often relies on easy credit. So they tend to be built during the later stages of a bull market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-85.png) High-profile skyscrapers in history. Source: The Economist During this phase, real estate and stock market speculators frequently become folk heroes, as I described in my post on [the late-1980s stock market bubble in Taiwan](https://www.asiancenturystocks.com/boombusttaiwan/). A new airport in the capital is often inaugurated; a second one is in the planning stages. Buzzwords like "LBO", "M&A", "BRICS", and so on, proliferate. Trading volumes hit record levels. Foreign brokers open local offices and start to publish thick research reports in the hope of getting new business. Speculators start calling companies by their ticker symbols and don't even know their names. Amid the frenzy, concerns build up. Perhaps corporate profits are declining. Perhaps there are doubts about the scale of future investment activity. Or perhaps there's a shock of some sort, for example, a rise in interest rates, a major scandal, a business failure, or a margin call by a large speculator. And so we reach a situation where the supply of new shares exceeds the demand for them. Smart investors and insiders take the hint and decide to take profits. Countries that fit the profile include Hong Kong in 1973, oil-producing regions in 1980, and Japan in 1989\. Booms eventually turn to busts. --- ## Phase 4 – downcycle doubts ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-87.png) Headlines from US magazines in 2001\. Source: Cowboy Ventures In phase 4, the downturn begins in earnest. Credit growth slows as banks tighten their lending standards. Corporate profits deteriorate. Excess capacity shows up in certain parts of the economy. And the non-performing loan ratio starts to rise. By now, office rents are falling outright. We might also see a weakening in social conditions, for example, a new political leader causing discontent or even riots. Investors initially brush off the decline as being temporary. Sell-side analysts keep publishing bullish research reports, arguing that the decline represents a lifetime buying opportunity. But the advance-decline line shows weakening breadth. Faber thinks that the United States in 2001 was a perfect example. By this time, the boom was already over, but every rally was powerful enough to seduce skeptics back into the market. --- ## Phase 5 – realization ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-89.png) The Singapore Centrepoint shopping mall after its construction in 1983\. Source: Straits Times Finally, the country is in a full-on recession. Credit becomes tight, bond spreads widen, and bankruptcies soar. Consumption slows noticeably, showing up in new car sales or housing transaction volumes. Meanwhile, corporate profits collapse. And real estate prices are now falling. Large companies come under distress, forcing them to issue shares to survive. At this point, office buildings suddenly become empty, and hotel vacancy rates rise. Unemployment becomes a real issue, and the government is forced to print money to support the economy. With these weaker economic conditions, brokers lay off staff and close down offices. Research reports become thinner. And stock prices fall, as foreigners exit the market one by one. One example could be Singapore in 1985, after its epic construction boom. The economy had benefited from an accelerating HDB building program, accelerated investment in expressways, and the new Changi Airport. That boom eventually turned to bust. --- ## Phase 6 – capitulation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-88.png) The riots in Indonesia in 1998, which marked the bottom of the market. Source: New Mandala Finally, investors more or less give up on stocks. Trading volumes are now down significantly from the peak. Funds often shut down altogether. The currency has already weakened or been devalued. And major headlines turn negative. Media reports how retail investors have lost money in stocks, eventually capitulating and selling to wipe the record clean. A perfect example might be Indonesia in 1998\. Its downturn was short, but eventually led to a complete exit by foreign investors. With the currency down 85% against the US Dollar, and stocks down another 65%, any leveraged investors had already been wiped out. Nobody seemed interested in Indonesian equities any longer. --- # Fitting Faber's template onto 2026 ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-2265363910-Large.jpeg) Kuala Lumpur in 2026\. Source: Getty Images Faber's life cycle template is mostly illustrative. Few booms and busts fit perfectly. And it's not clear whether it has any predictive value for future returns. But just for fun, I've tried to map out where each Asian stock market stands in 2026\. And this is the conclusion I've reached: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/PyDtR---2-.png) In other words, the Philippines, Thailand, Hong Kong, and Malaysia have characteristics of Phase 0-1 markets. And Japan, Australia, Taiwan, and South Korea have characteristics of Phase 3 markets. *Note: The ETF charts below are solely used as price proxies for the underlying index. I don't have a view on these particular funds.* --- ## The Philippines - Phase 0 So why does the Philippines remind me of a Phase 0 market? Because stocks in the country seem to be suffering from post-bear-market neglect. Interest rates are high, causing a slump in the local property market and rising unemployment. At last year's PH Invest conference, hardly any foreigners were present. The market P/E has fallen to around 9x – a record low. Stock trading volumes are down by about half in notional terms since the 2013 peak, despite much higher GDP. The 2025 corruption scandal tainted Marcos Junior's reputation. Last year, there were only two IPOs during the entire year. There's still no catalyst for greater interest, especially as interest rates are rising again. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-101.png) The Philippine PSEi index. Source: TradingView --- ## Thailand - Phase 1 Thailand has had a [two-year downturn](https://www.asiancenturystocks.com/thailands-stimulus-package/), ostensibly due to weak credit creation. Trading volumes are down about 50% from the 2021 peak. The number of IPOs bottomed in 2023 and has picked up again. Tourism came back after COVID-19 but hasn't fully recovered. The property market is weak as well. The Thai stock market is now showing signs of life. Corporate profits haven't recovered, and neither has credit creation. So it's still early days. One reason for optimism might be the [Bhumjaithai Party's election win](https://www.asiancenturystocks.com/thailands-stimulus-package/) in early 2026, which raises the likelihood of a new stimulus package. That might have been the reason for the rally through most of 2026\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-102.png) Thailand's SET Index. Source: TradingView --- ## Hong Kong - Phase 1 After being deemed "uninvestible" back in 2022, Hong Kong property prices have staged a strong comeback. The government's Talent Pass visa has been a success, causing Mainland Chinese to move to the city. There's clearly more buzz than a few years ago, with greater optimism. In 2025, Hong Kong reached the top of the global IPO ranking. Flows from Mainland China through the Southbound Connect have been surprisingly high. Yet Hong Kong P/E ratios are still low. Office vacancy rates remain elevated and have only recently begun to improve, despite strong demand for Mainland Chinese companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-103.png) The Hang Seng Index. Source: TradingView --- ## Malaysia - Phase 1 The Malaysian benchmark index has performed okay over the past two years, yet it trades at 14.7x P/E. The economy is increasingly benefiting from manufacturing moving out of Mainland China, with related heavy foreign direct investment. The Malaysian Ringgit is still cheap on a real effective exchange rate basis. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-115.png) The FTSE Bursa Malaysia KLCI Index. Source: TradingView --- ## Singapore - Phase 2 The Singapore market has performed well since the Equity Market Development Program began in 2025 and expanded in 2026\. The banks have been particularly strong performers. Inflows have continued to date with no signs of stopping. Tech companies moving down to Singapore from Mainland China have breathed life into the country, with the country being seen as a center for innovation. The currency has become expensive from an international perspective. The P/E ratio of 17x is average across the Asia-Pacific, but higher than Singapore's historical level. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-104.png) The Singapore Straits Times Index. Source: TradingView --- ## Vietnam - Phase 2 Vietnam is currently in a clear growth phase, helped by booming exports. It's a clear beneficiary of the diversification away from Chinese manufacturing and low US import tariffs. Future catalysts include FTSE Russell upgrading Vietnam from a frontier to an emerging market in September 2026\. The index has risen rapidly, driven by key constituent Vingroup. The property market is scorching hot, with rental yields as low as 2% in Ho Chi Minh City. MSCI Vietnam now trades at almost 20x P/E. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-112.png) The FTSE Vietnam Index. Source: TradingView --- ## Japan - Phase 3 The Nikkei 225 has reached an all-time high, with obvious enthusiasm among global investors. Tokyo Stock Exchange reforms have also driven pro-market trends, including the dissolution of cross-shareholdings, record share buybacks, and higher dividends. Valuation multiples are now back to where they were before the Great Financial Crisis, around 2006\. Trading volumes have hit an all-time high thanks to foreign inflows, NISA accounts and share buybacks. However, negative signs are now emerging: the Bank of Japan is raising interest rates to the highest level since 1995\. The weak yen has boosted earnings growth since 2022, though the growth seems to be decelerating. A potential shock to earnings would be a stronger Japanese yen, though the exchange rate remains at 159 to the US Dollar. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-105.png) The Nikkei 225 index. Source: TradingView --- ## Australia - Phase 3 The ASX 200 hit a record high in August 2026, and valuation multiples are now stretched at 19x P/E. The major banks trade at close to 30x P/E. However, interest rate hikes are finally starting to hurt, and property prices in the major Australian cities have started to decline. The unemployment rate is still low, but the property market is a question mark. The economy has been straining under weaker demand for industrial commodities since China's construction boom fizzled out. It's as if the market is in a twilight zone where investors haven't recognized this new reality. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-108.png) Australia's S&P/ASX 200 Index. Source: TradingView --- ## Taiwan - Phase 3 The TAIEX hit a record high in July 2026, driven by AI capex beneficiaries like TSMC. Clear signs of speculative frenzy emerged. GDP growth has been ridiculously high at 13% in the second quarter of 2026\. Unemployment has hit a multi-year low. In the summer of 2026, the market wobbled as investors questioned whether record AI capex could continue forever. That said, TSMC accounts for close to half the index, so the market's direction largely depends on one company's earnings profile. Breadth has weakened over the past few quarters, suggesting the market is running out of steam. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-106.png) Taiwan's TAIEX index. Source: TradingView --- ## South Korea - Phase 3 The KOSPI is up over 100% year-on-year due to an epic bull market in memory chip prices, despite a recent crash. The KOSPI now trades at over 3x book, far higher than its historical averages. Retail participation is high, and margin debt hit a record level. Regulators have now clamped down, introducing restrictions on single-stock leveraged ETFs. Beyond KOSPI, stocks are still relatively inexpensive, and the governance reforms are real, suggesting that small-cap Korea sings to a different tune. So while there are clear signs of excess, Korea doesn't map onto Faber's framework perfectly. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-107.png) South Korea's KOSPI Index. Source: TradingView --- ## India - Phase 4 India's reported growth numbers are still strong at 6.5%, but the stock market has come off a bit. The IPO market peaked in 2024\. Investors are still bullish. The booming stock market has created enormous wealth, and investors like Pulak Prasad are revered. Valuation multiples remain high, despite having fallen since peak euphoria in 2024\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-109.png) The Nifty 50 Index. Source: TradingView --- ## New Zealand - Phase 5 New Zealand's property market entered a downturn in 2021, and MSCI New Zealand followed it closely. The unemployment rate is at a decade high. It's currently flirting with a recession. Valuation multiples are still high at almost 30x; however, partly due to the index composition and pension fund flows. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-114.png) The iShares MSCI New Zealand ETF. Source: TradingView --- ## China - Phase 5 China is in a clear downturn, with property prices now falling steadily since the peak in 2021\. Residential new starts are down 70%, mirroring the aftermath of Japan's property boom in the 1990s. China's credit growth continues to decelerate. The 10-year bond is now a mere 1.7%, suggesting weak nominal growth and deflationary pressures. P/E multiples are low but not the lowest in the region. Gleaming skyscrapers on social media and strength in sectors such as electric vehicles and AI make some investors optimistic, but the overall economic picture remains weak. Insiders in the A-share market have been selling for most of the past two years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-110.png) The iShares MSCI China ETF. Source: TradingView --- ## Indonesia - Phase 6 There are clear signs of capitulation in Indonesia. Under President Prabowo Subianto, markets have been unsettled by proposals for plantation land expropriation, reported corruption investigations into the school lunch program and the launch of a new sovereign wealth fund. As far as I can tell, investor confidence is now low. MSCI has announced that it's considering downgrading Indonesia from an Emerging to a Frontier market. Many investors have simply reduced their exposure to zero. FX reserves kept declining through most of 2026 until July, suggesting capital flight to nearby countries like Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-111.png) Indonesia's IDX Composite Index. Source: TradingView --- # Conclusion This exercise should not be taken too seriously. The life cycle template will never fit a single market perfectly. - For example, South Korea's KOSPI and Taiwan's TAIEX have both rallied on the back of the AI bull market. But small caps outside the tech industry in either country still trade at low multiples. - Conversely, the IDX Composite Index has barely fallen from its peak, but Indonesian consumer stocks have suffered a decade-long bear market. Still, tracking cyclical indicators like IPO activity, unemployment rates, real estate prices, fund flows, etc can probably give us a broad picture of the cycle. So what does the life cycle template tell about Asian markets in 2026? As far as I can tell, much of Southeast Asia looks like it's in an early stage of its emerging-market life cycle. And tech-heavy markets in East Asia remind me of past historical peaks. Though who know what the future actually holds. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### Alan: Creek & River (4763 JP) URL: https://www.asiancenturystocks.com/alan-creek-river-4763-jp/ Last updated: 2026-08-26T09:16:51.000Z *Hi! I'm Michael. This is a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/interview-andrei-stetsenko/#/portal/signup/free)*.* [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/signup) **Disclaimer: I'm Michael Fritzell, and this interview — including the video, transcript and summary below — is published by Delante Media Pte Ltd. It is a record of a conversation and is provided for information purposes only. It is not investment advice and is not a recommendation to buy or sell any security. The views expressed by Alan are his own, not mine, and neither of us has considered your objectives, financial situation or needs. Please do your own research and consult a licensed financial adviser before making any investment decision. As of 26 August 2026, I do not own Creek & River but I do own shares in Visional. My only compensation in connection with this publication is subscription revenue from Asian Century Stocks. I receive no fee, referral commission or other consideration from Alan or any of his companies, and no link in this post is an affiliate link. Alan writes the Continuous Compounding Substack and has told me that as of 26 August 2026 he holds shares in Creek & River. His positions may change at any time without notice. I have not independently verified his statements, figures or characterizations of any company or its conduct.* --- Last Thursday, I [sat down](https://www.youtube.com/watch?v=Urw99sHKpNo&ref=asiancenturystocks.com) with Alan from the [Continuous Compounding Substack](https://continuouscompounding.substack.com/) to discuss the Japanese talent agency [**Creek & River**](https://finance.yahoo.com/quote/4763.T/?ref=asiancenturystocks.com) *(4763 JP — US$203 million)*. I tried to ask a wide variety of questions so that you can understand all aspects of the business. The opinions are all Alan's, not my own. In any case, here's a short summary of the discussion, if you prefer to read rather than watch. # 1\. Alan's background Alan is based in Vancouver, Canada. After studying at the University of British Columbia, he spent 3-4 years on the sell-side doing equity research. At the time, he was covering casinos, gambling, tobacco and alcohol stocks – and even adult leisure facilities. So he became known within the company as the "non-ESG analyst". That said, after a few years, he felt that he'd reached a plateau. And part of his frustration was that he covered stocks that were handed to him and were fairly valued, rather than truly overlooked stocks. Eventually, the firm he worked for was sold, and he found himself out of a job, despite strong reviews. So early in his career, he took the risk of starting a Substack and trying to make money writing about stocks. His longer-term goal is to become a portfolio manager, and until then, compound his knowledge and wealth. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-117.png)](https://continuouscompounding.substack.com/) The Continuous Compounding Substack At [Continuous Compounding](https://continuouscompounding.substack.com/), his goal is to know each stock better than most shareholders and give readers enough to reach their own conclusions. --- # 2\. His love for Japanese equities Many of the stocks discussed at Continuous Compounding so far have been Japanese equities. There are two reasons for this. First, he has an affinity for Japanese culture. Second, the competition is much lower in Japanese small- and micro-caps. It's like you're a 2,100 ELO chess player. Do you want to compete with 2,300 players in the United States or 1,000-1,500 players in Japan? The answer is obvious. Unlike many Japanese investors who run diversified stock portfolios, he runs a concentrated portfolio. The screen begins with whether the stock is undervalued. But then the real question becomes: is there an element of growth that the market is missing? Perhaps a revenue segment people are underestimating, operating leverage or an opportunity to allocate excess capital? The classic value trap is a cheap, cash-generative company whose management team sits on the cash for a rainy day, often with a family holding a large stake that just wants stability. The cash never gets deployed, and the multiple never re-rates. You'll want to avoid those. --- # 3\. Creek & River's business model The company was founded in the early 1990s by a TV producer working out of his own apartment. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-116.png) Founder Yukihiro Igawa He served the TV and film industry, finding talent for particular projects. It then moved into the medical industry, reallocating physicians across hospitals and taking a cut of the person's salary. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/mqcZY-creek-amp-river-s-share-price-4763-jp-.png) Today, Creek & River has three main businesses: - The core **agency** business, connecting talent with employers. There's the dispatch service where a client needs a temporary worker for a short period of time. Then there's the placement service, where a client wants a permanent hire, and Creek & River collects a fee scaled to the candidate's salary. - The second business is **production**. For example, if a TV channel like NHK wants a new TV show, Creek & River might assemble a director, a screenwriter, a stage designer and the rest of the crew from its network. It then quotes the client a price for the whole project. The same model also applies to the gaming and marketing industries. - Finally, Creek & River offers **rights management services**, offering owners of intellectual property ways to monetize the value of their assets. Such assets might include manga, webtoons or similar content. --- # 4\. The competitive landscape Creek & River has narrowed down its universe of job types to 50 professional fields. To get there, it's focused on three main criteria: - The expertise must be globally in demand - It must not be easily replaced by machines or AI - And it must be a profession where intellectual property accumulates So the video game industry, animation, and marketing industries are obvious targets. The business can't really be replaced by the gig economy. There's not much overlap there, since those workers sit below the skills threshold. Meanwhile, LinkedIn is an entirely different business model – a professional network where job postings are passive and aimed at permanent hires. No firm looking for a temporary worker starts on LinkedIn. The only real overlap is in the placement industry. There's real competition from online job boards here. But Creek & River still delivers on speed. Instead of posting a job and waiting, say, three months, clients get pre-screened talent immediately. Nobody uses LinkedIn to staff a production project. Agency revenue has been flat despite rising wages. One potential reason is competition and innovation in the human resources industry. [**Visional**](https://finance.yahoo.com/quote/4194.T/?ref=asiancenturystocks.com)'s *(4194 JP — US$1.9 billion)* BizReach is such an innovation, as it allows clients to scout for talent themselves. There's also been a structural decline in some markets like linear television. In 2024, there was also a shock when Microsoft closed a large Japanese video game developer. But despite these headwinds, Creek & River has grown its earnings per share over time: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/lrbht-creek-amp-river-s-earnings-per-share-japanese-yen-.png) Part of Creek & River's raison d'être is that Japan has strict labor laws. A profitable firm cannot simply cut a third of its developers – it essentially has to be losing money, or exit the market entirely. So employers who don't want a permanent cost structure rent expertise instead. --- # 5\. The segment scorecard Here’s how the key segments stack up: - The entire Creative JP segment (the core part of the business excluding medical, accounting & legal and succession advisory) is up 30% since FY2023\. The performance of the sub-segments are as follows: - The TV and movie segment has grown from JPY 8 billion to JPY 12 billion since FY2023\. And now they've moved into the MSC Marunouchi building, whose first eleven floors consolidate Creek & River's "Creative Japan" talent under one roof. - The games segment has grown from JPY 11.5 billion to JPY 16 billion. - The web segment grew from JPY 8.5 billion to JPY 10 billion. - The e-book and YouTube businesses are also up from JPY 900 million to JPY 1.3 billion. - Creative Korea is down about 10% in revenue terms and has consistently lost money. The business model doesn't seem to travel well internationally. - Meanwhile, the Medical segment is up +8% since FY2023 and remains one of the main cash cows. - The Professional field, e.g., accounting and legal, is flat and has been struggling. - AI/DX/IT hasn’t grown much, though shows lots of future promise. So overall, within Creative Japan, growth seems to have been driven by TV and Movies, Gaming, and Web subsegments. Outside of Creative JP, steady growth from the medical field agency business has also been instrumental in the company’s growth. Alan argues some of the "secret sauce" is customer acquisition. Creek & River hosts the Resident Navi fair for medical students seeking placements. IT also publishes magazines sent to anyone in the network with news, updates and skills content. That keeps talent in the network and positions them as a leader within each niche. --- # 6\. The AI threat The AI threat is real. The stock and its peers have sold off on the logic that fewer employees will be needed, and Alan thinks that's why the stock trades at 7x P/E. He takes a different view, for a few reasons: - First, there hasn't been much of a decline in the core fields yet. His read is that AI is currently assisting people rather than replacing them. - Second, he thinks the erosion could be gradual enough that the capital allocation machine diversifies away from it first. - Third, he argues that the AI/DX/IT division could actually benefit from AI transformation projects. AI consulting is a high-margin business, where you can charge clients high hourly rates. And as Creek & River gains transformation know-how, it can deploy those professionals into the legacy businesses it acquires. *(Michael's note: these are forward-looking judgments rather than observations. Just because we haven't seen an impact yet doesn't mean it won't show up in the future. Whether M&A will help remains to be seen. There's also competition in the AI consulting industry. A 7x P/E could simply be consistent with the market being right about the threat.)* --- # 7\. Capital allocation and M&A Some of the cash that has been built up on the balance sheet has been used for M&A. For example, subsidiary CRES / Everlasting Story began a few years ago as an incubation program: investing in intellectual property rights for virtual reality content, doing non-fungible tokens for rights management groups. But today, "CRES / Everlasting Story" is about business succession consulting. It had 240 consultations last year, which Alan thinks is like an organic, proprietary deal flow, acquiring small family companies where there's no obvious successor. He thinks the number of consultations will keep climbing, to perhaps 300, then 500\. The other parts of the business can then help out, sourcing talent from a network of 2,500 former CEOs, CFOs, CIOs and CMOs, who can then be placed into these companies to fill temporary roles. Recently, Creek & River acquired a book publisher called Takahashi Shoten for JPY 9.5 billion or 13-14x EV/EBIT. It dominates the market for physical planners in Japan, and also sells wall and desk calendars and books. It also publishes employment guides, similar to the Vault Guides in the West. 13-14x EV/EBIT was arguably a high price to pay. A JPY 500 million buyback program was announced in January 2025\. Unfortunately, they had to shut it down to finance the Takahashi acquisition, and the buyback was never executed. Today, the net cash position stands at about JPY 6 billion. --- # 8\. Summary Asked to summarize, Alan argued that Creek & River trades at a low multiple against its annual cash flows. But in Japan, cash generation isn't the differentiator, because many companies just accumulate cash on the balance sheet. In Alan's view, Creek & River differs in how it deploys capital into business-succession M&A. He suggested that one reason the stock is priced where it is may be that Creek & River has been basketed with other specialized agency firms trading at 4-6x EV/EBIT – none of which, in his view, have this capital allocation optionality. At the price prevailing when we spoke on 20 August, Alan considered Creek & River to have greater upside than downside. In his view, it could still work even if management pays a fair price, or even slightly overpays, for its acquisitions. *(Michael's note: just because Creek & River has performed well doesn't mean that it will perform well in the future. The AI threat is real, since many of the services can now be replicated through generative AI tools. There's also a question of whether the placement industry will continue to be disrupted through scouting websites like BizReach, allowing clients to find talent quickly at minimal cost.)* --- # 9\. Where people can learn more You can find Alan's work at the [Continuous Compounding Substack](https://continuouscompounding.substack.com/). His full write-up on Creek & River can be found [here](https://continuouscompounding.substack.com/p/my-2nd-highest-conviction-deep-dive). He also posts on X under the handle [@CompoundingUp](https://x.com/CompoundingUp?ref=asiancenturystocks.com). He also has a [YouTube channel](https://www.youtube.com/@continuouscompounding?ref=asiancenturystocks.com) under the same name where he live-streams stock breakdowns and screens for new ideas. He will head to Japan for three months from around October to November for boots-on-the-ground research, so if you're there, feel free to reach out to him. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### This Week in Asia #40 URL: https://www.asiancenturystocks.com/this-week-in-asia-40/ Last updated: 2026-08-24T04:05:09.000Z [**Alibaba**](https://www.asiancenturystocks.com/alibaba-sotp-with-chinese-characteristics/) just announced that it will raise US$10 billion, despite having bought back shares for years. Substack author Tailwind Holdings wrote a fascinating post on Hong Kong contractor [**Baguio Green Group**](https://favonahathaway.substack.com/p/the-hong-kong-governments-garbage?). And I published a deep-dive on Chinese online travel agent [**Trip.com**](https://www.asiancenturystocks.com/deep-dive-trip-com-tcom-us/), whose stock has declined due to an early 2026 antitrust investigation. --- ## Watchlist update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-98.png) Watchlist best and worst performers. Source: Koyfin - After an epic slump in [**Xiaomi**](https://sg.finance.yahoo.com/quote/1810.HK/?ref=asiancenturystocks.com)'s share price, it's now become one of the top recent performers in Asia. Its revenue dropped -6% year-on-year in the last quarter, but management said that memory-price inflation in the second half of 2026 will be slower. Meanwhile, Xiaomi's EV revenue grew +16% year-on-year. - [**Alibaba**](https://www.asiancenturystocks.com/alibaba-sotp-with-chinese-characteristics/) will raise US$10 billion to fund AI infrastructure and development. It had already burned through half of its three-year capex plan, so it needs more capital. This will be the largest primary follow-on offering by a Hong Kong-listed company ever. - [**SK Hynix**](https://finance.yahoo.com/quote/000660.KS/?ref=asiancenturystocks.com) announced a KRW 40 trillion share repurchase program, and committed to returning more than 50% of cumulative free cash flow between 2025 and 2027 to shareholders. However, SK Hynix has already committed to investing KRW 54 trillion in new fabs, so let's see how much remains after its capex. - [**Pop Mart**](https://www.asiancenturystocks.com/has-the-labubu-bubble-popped/) released a first-half report that was sequentially negative. Headline revenue rose +24% year-on-year, but an implied -27% quarter-on-quarter, suggesting weakness in demand for its toys. Founder Wang Ning said that Pop Mart is highly likely to fall short of its 20% full-year growth target. A CNY 2-5 billion buyback was also announced. *(Full disclosure: I am short Pop Mart.)* - Smart Insider data highlighted an insider buy at Thailand's largest refiner and fuel retailer [**Bangchak**](https://finance.yahoo.com/quote/BCP.BK/?ref=asiancenturystocks.com), with CEO Chaiwat Kovavisarach buying an additional US$145,000 worth of shares. [Alexander Eliasson](https://x.com/alexeliasson/status/2009525295741849967?s=20&ref=asiancenturystocks.com) has argued that Bangchak is benefiting from the recent rise in global oil prices. According to TIKR, the stock trades at 3.3x P/E with a 7.5% yield. However, the refining industry is cyclical and oil prices could easily come down. In addition, some investors are voicing concerns about the new 17% shareholder Alpha Chartered Energy. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-99.png) Insider buying in Bangchak. Source: Smart Insider --- ## Worth your time ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-100.png) - [**Vincent Deluard**](https://www.youtube.com/watch?v=T-5HGhkIkBk&ref=asiancenturystocks.com)went on The Market Huddle where he discussed the Japanese yen. He thinks the narrative about the Japanese debt crisis is overblown, and that the depreciation of the Japanese yen since 2011 is near exhaustion. 30-year JGBs are getting close to 4%, so the yield differential at the long end has narrowed. - I loved Bloomberg's [**Big Take Asia**](https://open.spotify.com/episode/5euVL8PHz0LAZm1I4Ar399?si=587531c11d744b34&ref=asiancenturystocks.com) episode on North Korea's economy. It argued that the North Korean economy is booming. The likely explanation is that North Korean troops are sent to help Russia in its war in Ukraine, earning North Korea scarce foreign currency. Pyongyang is becoming increasingly electrified, as can be observed from recent [satellite photos](https://x.com/TheStalwart/status/2085774617591869895?s=20&ref=asiancenturystocks.com). - Ryan Albert at Terton Capital sent a new letter to the board of directors of [**Golfzon Holdings**](https://cdn.prod.website-files.com/68e3b66a238951026023dfa0/6a83db1c3e6568748e425443%5FSecond%20Open%20Letter%20to%20the%20Board%20of%20Directors%20of%20Golfzon%20Holdings%5FEnglish%20%28August%2018%2C%202026%29.pdf?ref=asiancenturystocks.com), criticizing the lack of timely disclosures. He's now encouraging the board to give supporting evidence for the KRW 6,700 valuation that it previously deemed "fair", as well as disclose the status of the Golfzon County sale process. The second tender offer runs to 2 September 2026\. Ryan is a shareholder so he has a financial interest in the outcome. - Demystified Value wrote up [**Cuckoo Holdings**](https://demystifiedvalue.substack.com/p/cuckoo-holdings-192400-kr-a-blue?), a South Korean producer of rice cookers. It's the holding company in the group, with its two operating companies being Cuckoo Electronics and separately listed appliance rental business Cuckoo Homesys. He estimates the stock trading at 6x P/E with a 6% dividend yield. However, it has been [criticized for its corporate governance](https://valueinvestorsclub.com/idea/Cuckoo%5FHoldings/7121463605?ref=asiancenturystocks.com#messages) in the past. - Tailwind Holdings wrote up Hong Kong cleaning, waste management & pest control company [**Baguio Green Group**](https://favonahathaway.substack.com/p/the-hong-kong-governments-garbage?). It employs 11,000 people, keeping local hospitals, universities, airports and streets clean. On Tailwind's numbers, the stock trades at 4x P/E with net cash 50% of the market cap. That said, it's a competitive business highly reliant on the Hong Kong government. Get instant access to 148 deep-dives on Asian value stocks: [Unlock the archive ](https://www.asiancenturystocks.com/#/portal/signup) --- ## Trip.com ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-97.png) Yesterday, I published a deep-dive on Chinese online travel agent [**Trip.com**](https://www.asiancenturystocks.com/deep-dive-trip-com-tcom-us/). The company dominates the online travel agent industry within China, and also has a Singapore-based international arm that's growing quickly. The stock has declined significantly this year due to an antitrust case that led to a CNY 5.2 billion penalty and fears that it will get disrupted by generative AI. Read the full deep-dive here: [Deep-dive: Trip.com (TCOM US)China’s largest online travel agent, now expanding internationally![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-ffc061f9-69d6-43e3-819b-fd42effa245e.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Social-preview-1-705c7532-83b7-4239-9298-f913e3958260.jpg)](https://www.asiancenturystocks.com/deep-dive-trip-com-tcom-us/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *This was a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/#/portal/account/newsletters)*.* --- ***Disclaimer:** **This post reflects my personal opinions and is for informational purposes only. It is not financial advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. I am not a licensed financial adviser in Singapore or anywhere else, and I don't give personalized advice — including in the comments. As of 24 August 2026, I am short Pop Mart. I hold none of the other securities mentioned. I may buy or sell any security mentioned at any time, without notice, and I won't update this disclosure. I receive no compensation from any company, fund, platform, publication or individual mentioned or linked in this post. My revenue comes solely from reader subscriptions. People I quote or interview may hold positions in the securities they discuss, and I don't independently verify their claims. Where past performance is mentioned, it is not indicative of future results. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* ### Trip.com (TCOM US) URL: https://www.asiancenturystocks.com/deep-dive-trip-com-tcom-us/ Last updated: 2026-08-26T09:16:35.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: I am not licensed or regulated by the Monetary Authority of Singapore, and I am not a financial adviser. This post reflects my personal opinions and is provided for informational purposes only. Nothing in it is a recommendation or an offer to buy, sell or hold any security, and it does not constitute financial, investment or any other form of advice. Nothing here takes into account your investment objectives, financial situation or particular needs. Investing involves substantial risk, including the complete loss of capital. Before making any investment decision, do your own research and consult a financial adviser licensed by the Monetary Authority of Singapore. Any estimates, forecasts or forward-looking figures are my own unless stated otherwise. They rest on assumptions that may prove wrong, and actual outcomes may differ materially. As of 23 August 2026, I do not hold a position in Trip.com (TCOM US / 9961 HK). This disclosure reflects my position on the date stated and will not be updated if it changes. I receive no compensation from any company mentioned in this post, nor from any broker, distributor, platform, fund, publication or product issuer. My revenue comes solely from reader subscriptions to Asian Century Stocks. Michael Fritzell, published by Delante Media Pte Ltd.* --- US online travel agent [**Booking Holdings**](https://finance.yahoo.com/quote/BKNG/?ref=asiancenturystocks.com) *(BKNG US — US$158 billion)* built a dominant online travel business across the United States and Europe over the past 20 years. And the business seems to be going from strength to strength. In Asia, we have India's [**MakeMyTrip**](https://finance.yahoo.com/quote/MMYT/?ref=asiancenturystocks.com) *(MMYT US – US$5.7 billion),* which dominates that market and trades at a 5.0x EV/Sales multiple with weak profitability. Then we have China's [**Trip.com**](https://finance.yahoo.com/quote/TCOM/?ref=asiancenturystocks.com) *(TCOM US / 9961 HK – US$28 billion)*, which trades at 12x forward P/E but carries regulatory risk and a VIE structure that's causing some investors to stay away. But let's dig into the story anyway. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-93.png) Trip.com is the company formerly known as "Ctrip". It's a typical two-sided network, where hotels and airlines offer room inventory and airline tickets on Trip's platforms. Meanwhile, users go to the website to browse for tickets and pay through an online checkout process. The company has dominated the Chinese online travel agent market for decades, despite recurring threats from Qunar, Meituan, eLong, Fliggy, and now Douyin. The domestic market share remains over 50%, driven by slick user interfaces and strong customer support. Meituan dominates only the sub-CNY 200 room market, where price matters more than brand. Just like many other Chinese tech companies, Trip.com has invested heavily in its international platform. The website traffic to the international brand "Trip.com" has gone from 1 million monthly users in 2022 to 6 million today. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-92.png) _This post is for paying subscribers only._ ### This Week in Asia #39 URL: https://www.asiancenturystocks.com/this-week-in-asia-24/ Last updated: 2026-08-17T03:26:53.000Z Record DRAM prices continue to hurt the demand for consumer electronics, with Taiwanese e-paper giant [**E Ink**](https://finance.yahoo.com/quote/8069.TWO/?ref=asiancenturystocks.com) cutting its full-year guidance. Many Japanese companies like [**Seiko**](https://finance.yahoo.com/quote/8050.T/?ref=asiancenturystocks.com) and [**ASICS**](https://finance.yahoo.com/quote/7936.T/?ref=asiancenturystocks.com) have reported strong results, partly thanks to the weak yen. Finally, there's been recent insider buying in Malaysian credit bureau [**CTOS Digital**](https://www.asiancenturystocks.com/the-toll-booths-of-lending/). --- ## Watchlist update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-76.png) Watchlist top and worst performers. Source: Koyfin - Japanese accounting software developer [**Freee**](https://contents.xj-storage.jp/xcontents/AS08692/814e4570/0ce3/486a/9881/933240c3a407/20260814111006063s.pdf?ref=asiancenturystocks.com) popped after its FY2026 earnings report, which reported +28% top-line growth. More importantly, Freee guided for a +116% rise in FY2027 adjusted operating profit. The market had been worried about Freee's AI spending spree, which hurt margins from late 2025 onwards. *(Full disclosure: I own shares in Freee.)* - Industrial gas supplier [**Air Water**](https://www.awi.co.jp/en/ir/library/results/main/011/teaserItems2/0111111119/linkList/02/link/FY2025%5FConsolidated%5FFinancial%5FResults%5Fen.pdf?ref=asiancenturystocks.com)posted a net loss in FY2026 due to JPY 108 billion of impairments from the accounting scandal. FY2026 revenues grew +5% and underlying profit +6%. The special-committee report was received on 31 March 2026, and an additional report came out on 22 June 2026 with a restatement of FY2025 net profit by -19%. The number of subsidiaries with improper accounting rose from 37 to 42, and there's proof forged documents had been given to the auditor. The audit opinion is still qualified, stating that the problems are *"material but not pervasive"*. The FY2027 guidance is for "business profit" to reach JPY 76 billion, and net profit well below that number. - On the negative side, the Taiwanese e-paper producer [**E Ink**](https://www.taipeitimes.com/News/biz/archives/2026/08/14/2003862450?ref=asiancenturystocks.com) downgraded its full-year revenue growth from 20-25% to 10-15%. High memory prices have hurt the demand for consumer electronics, making E Ink yet another "anti-AI stock". - Another disappointment was [**Samsonite**](https://corporate.samsonite.com/en/press-releases.html?ref=asiancenturystocks.com)'s 2Q2026 report, which showed -2% constant-currency revenue growth and an -18% drop in net profit, excluding the positive effect from the recent tariff refunds. Management blamed softer travel demand, but even if that's true, Samsonite is clearly underperforming. The US$179 million acquisition of 85% of female-focused luggage/lifestyle bag brand BÉIS will give Samsonite access to a digital-native brand that could help it in its direct-to-consumer efforts. *(Full disclosure: I own shares in Samsonite.)* - Smart Insider data showed that credit bureau [**CTOS Digital**](https://www.asiancenturystocks.com/interview-ctos-digital-ctos-mk/)'s CFO Tan Ming Yew bought almost US$100,000 worth of shares last week. New CEO Ankur Sehgal is targeting the opex/revenue ratio to decline from 46% to 42%. However, CTOS Digital will face a much higher tax rate in 2026\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-77.png) Insider transactions in CTOS Digital (CTOS MK). Source: Smart Insider Get instant access to 147 deep-dives on Asian value stocks: [Unlock the archive ](https://www.asiancenturystocks.com/#/portal/signup) --- ## Worth your time [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-79.png)](https://www.youtube.com/watch?v=gi4YHHJJO14&ref=asiancenturystocks.com) - IMAX Corporation's [**Richard Gelfond**](https://www.youtube.com/watch?v=gi4YHHJJO14&ref=asiancenturystocks.com)joined The Compound discussing the recent bump in the global box office that resulted from the success of [The Odyssey](https://www.imdb.com/title/tt33764258/?ref%5F=nv%5Fsr%5Fsrsg%5F1%5Ftt%5F6%5Fnm%5F1%5Fin%5F0%5Fq%5FThe%20Odyssey&ref=asiancenturystocks.com) and [Spider-Man: Brand New Day](https://www.imdb.com/title/tt22084616/?ref%5F=nv%5Fsr%5Fsrsg%5F1%5Ftt%5F7%5Fnm%5F0%5Fin%5F0%5Fq%5FSpider-Man%3A%20Brand%20New%20Day&ref=asiancenturystocks.com). *(Full disclosure: I own shares in its listed subsidiary IMAX China.)* - A Substack author called [**Eden Bradfield**](https://edenbradfieldresearch.substack.com/p/the-trouble-with-xeros-sukhinder?r=2xe91&utm%5Fmedium=ios)wrote a fun post about accounting software developer Xero's CEO Sukhinder Singh Cassidy, about how she resembles Marissa Mayer. Eden argues that her share sales, recent M&A and weak internal morale are all causes for concern. - [**Acid Investments**](https://acidinvestments.substack.com/p/some-korean-value-global-tax-free?) discussed a few Korean names, including tax refund service provider Global Tax Free and industrial maintenance company Geumhwa Plant. Both are overcapitalized, trade at low multiples and (in Acid's words) could well end up being value traps. - [**Jeremy Raper/Rangeley Capital**](https://www.unlockingdainichi.com/?ref=asiancenturystocks.com) launched a campaign to maximize value at Dainichi, the market leader in kerosene fan heaters. On their numbers, the stock trades at 0.57x Price/Book with a large portfolio of cash and financial investments. They argue that Dainichi should pay a special dividend, buy back shares and adopt a 50% payout ratio target. --- ## China Tower ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-78.png) Source: Getty Images Yesterday, I published a post on monopoly tower operator [**China Tower**](https://www.asiancenturystocks.com/update-china-tower-788-hk/). The company's earnings growth has been strong at 10% annually, but primarily due to falling depreciation charges. The stock trades at 9.4x run-rate P/E. Management is now guiding for a 100% payout ratio. But the next 5-year master pricing agreement will be finalized in December 2027\. Read the full story here: [Update: China Tower (788 HK)China’s telecom tower monopoly![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-0743c6a6-bda5-4617-b937-fad12869cc43.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Social-preview2-33222d0f-a614-4c12-b158-5a3491c567a3.jpg)](https://www.asiancenturystocks.com/update-china-tower-788-hk/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *This was a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/#/portal/account/newsletters)*.* --- ***Disclaimer:** **This post reflects my personal opinions and is for informational purposes only. It is not financial advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. I am not a licensed financial adviser in Singapore or anywhere else, and I don't give personalized advice — including in the comments. As of 17 August 2026, I hold positions in Freee, Samsonite and IMAX China. I hold none of the other securities mentioned. I may buy or sell any security mentioned at any time, without notice, and I won't update this disclosure. I receive no compensation from any company, fund, platform, publication or individual mentioned or linked in this post. My revenue comes solely from reader subscriptions. People I quote or interview may hold positions in the securities they discuss, and I don't independently verify their claims. Where past performance is mentioned, it is not indicative of future results. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* ### Update: China Tower (788 HK) URL: https://www.asiancenturystocks.com/update-china-tower-788-hk/ Last updated: 2026-08-16T03:14:55.000Z ***Disclaimer** *: This post reflects my personal opinions. It is provided for informational and educational purposes only. It is not investment advice and not a recommendation to buy, sell or hold any security, and it does not take into account your objectives, financial situation or needs. Past performance and historical figures are not indicative of future results. Any projections, estimates or forward-looking statements in this post reflect assumptions that may not be realised, and actual outcomes may differ materially. As of 16 August 2026, I do not hold a position in China Tower or in any other security mentioned in this post, and I receive no compensation from China Tower or any other company mentioned; my revenue comes solely from reader subscriptions. This disclosure reflects my position on the date stated and will not be updated. Asian Century Stocks uses information sources believed to be reliable, but accuracy cannot be guaranteed, and opinions are subject to change without notice. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* --- ``` Table of contents: 1. A quick background 2. My 2026 update 3. An updated valuation model 4. Conclusion ``` # **1\. A quick background** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-1376228594-Large.jpeg) Source: Getty Images In 2023, I wrote a deep dive on Chinese monopoly tower operator [**China Tower**](https://www.asiancenturystocks.com/china-tower-788-hk/)*(788 HK — US$21 billion)*: [China Tower (788 HK)State monopoly with rapidly falling depreciation charges![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-530f9b1d-94a3-49ea-a488-fe6092373db9.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f138598193_2f2a6806e9-356e-4495-a48f-a98690907602_2ftranscoded-00000-aff562c5-d1c6-4fb0-9b67-da67d81c9275.jpg)](https://www.asiancenturystocks.com/china-tower-788-hk/) The business was created in 2015 when China's three biggest telecom operators – China Mobile, China Telecom and China Unicom – injected their tower assets into a single entity together with a pile of debt. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-47.png) The rationale was to reduce the duplication of resources, and thereby improve the efficiency in China's telecom industry. Since practically all tower assets in the country had been injected into the entity, it ended up with an almost complete monopoly, with a 97% market share. In addition, China Tower became the world's largest tower company in terms of the number of towers and total revenue. So what does a tower company do? It builds and operates cell towers, which are then used by telecom operators to house their antennas and other network equipment. Such equipment includes: - **Antennas**, used to handle the main radio signals transmitted to and from mobile devices - **Radio units**, placed near antennas to convert digital data into radio frequency signals and amplify them - **Base stations**, used to process call/data traffic and connect to the main network via fiber or microwaves ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-50.png) Below each tower, you'll also have shelters, power systems, backup generators and air conditioning systems to keep the equipment cool. In areas with high population density, there's not enough space for regular towers. Instead, networks will rely on small cell equipment on rooftops, poles, cabinets or other structures in urban areas. And indoors, networks will rely on distributed antenna systems to build coverage. Another source of income for tower operators is placing non-telecom equipment on the sites, for example surveillance cameras, billboards for advertising, weather systems, etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-49.png) The beauty of the tower infrastructure model is that the contracts are long-term in nature, renegotiated every five years. So there's decent visibility into earnings. And in theory, as telecom networks move to higher frequency spectrums through 5G and later 6G, the cell density will keep increasing. In other words, the demand for towers should go up over time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-53.png) Back in 2023, China Tower had 2.1 million towers across the country, housing 3.7 million tenants, leading to an average of 1.79 tenants per tower. There had been a consistent increase in the number of towers as well as the revenue per tower. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-51.png) The primary driver behind the higher revenue per tower is so-called "co-location", where a tower has two or more tenants. Since land is becoming more scarce in China's urban environments, a single tower can be used by two or more telecom operators simultaneously. And as you add another tenant, revenues go up with very high incremental margins. On the other hand, the master agreement with the telecom operators forced China Tower to offer discounts to second and third tenants, causing the incremental margins to be weaker than what they might have been in, say, the United States or India. Here's what the discounts looked like: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/RLlfk-china-tower-s-fee-discounts-.png) With the discounts, the economics of a tower with two tenants became around 140% of the single-tenant economics. A tower with three tenants gets closer to 180%. So the economics still looked pretty favorable, especially as the tenants/site kept going up, year after year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-63.png) Tenancy ratio excluding "smart tower tenants". Source: China Tower annual reports I also noted that China Tower's average lease rate per tenant was low in a regional context. Perhaps there could be longer-term upside in how much it charged? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-54.png) When I wrote my initial deep dive, China Tower's EBITDA margins were a massive 68%, compared to an operating margin of just 15%. The difference between the two numbers was due to the depreciation charge from the initial injection of towers back in 2015, when the company was set up. The capex/depreciation ratio was well below 100% at just 58%, suggesting that free cash flows were stronger than reported net profit. The towers were depreciated using 6-10-year schedules, much shorter than their useful lives of 10-25 years. So that explained the disparity between free cash flow and net profit. Most of China Tower's global peers used depreciation schedules longer than 6-10 years: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/ATvvS-.png) Once the injected towers had been fully depreciated by October 2025, I predicted that China Tower's depreciation & amortization would drop by CNY 10-15 billion. For that reason, I saw the potential for China Tower's earnings to go up. At the time of writing in 2023, I expected the P/E to fall to 6x by 2026\. I also projected a dividend yield of 10.6%, assuming that the payout ratio of 60% would be maintained. It turned out to be overly optimistic. One of the problems I pointed out was that there were conflicts of interests between China Tower and its three major shareholders. They were simultaneously controlling shareholders as well as major customers. So they had strong incentives to keep China Tower's prices low. And the government didn't care about its profitability either, since most of its dividends came from the telecom companies — not the China Tower ListCo. Finally, even back in 2023, there was a trend of Mainland Chinese companies not getting paid by their customers in time. China Tower's receivables collection had deteriorated over time, with the receivable days hitting 148 by 2022, compared to American Tower's 34 days. It was an early sign of things going astray. --- # 2\. My 2026 update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GettyImages-2289145907-Large.jpeg) Source: Getty Images After my write-up, China Tower's share price recovered somewhat, before eventually declining through most of 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/DAEuY-china-tower-788-hk-.png) Note the share split in February 2025, as it increased the number of shares by a factor of ten. Source: TIKR _This post is for paying subscribers only._ ### Interview: Ryan Albert URL: https://www.asiancenturystocks.com/interview-ryan-albert/ Last updated: 2026-08-13T14:38:34.000Z *Hi! I'm Michael. This is a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/interview-andrei-stetsenko/#/portal/signup/free)*.* [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/signup) **Disclaimer: I'm Michael Fritzell, and this interview — including the video, transcript and summary below — is published by Delante Media Pte Ltd. It is a record of a conversation and is provided for information purposes only. It is not investment advice and is not a recommendation to buy or sell any security. The views expressed by Ryan Albert are his own, not mine, and neither of us has considered your objectives, financial situation or needs. Please do your own research and consult a licensed financial adviser before making any investment decision. As of 13 August 2026, I do not own any of the securities mentioned and have no plans to transact in them within seven days of publication. My only compensation in connection with this publication is subscription revenue from Asian Century Stocks. I receive no fee, referral commission or other consideration from Ryan Albert or Terton Capital, and no link in this post is an affiliate link. Ryan Albert manages capital at Terton Capital and has told me that as of 13 August 2026 he holds shares in Golfzon Holdings. He has engaged with the company, including through an open letter to its board and a complaint filed to the FSS. He therefore has a direct financial interest in the outcome of the tender offer and in how other shareholders respond to it. A tender offer in the shares is open at the date of publication and closes 2 September 2026\. His positions may change at any time without notice. I have not independently verified his statements, figures or characterizations of any company or its conduct.* --- Today, I'm speaking with [Ryan Albert](https://x.com/ryan%5Fa%5Falbert?ref=asiancenturystocks.com), the founder of Asia-focused hedge fund [Terton Capital](https://www.tertoncapital.com/?ref=asiancenturystocks.com). In this discussion, Ryan talks about his background, what he learned from Todd Combs, how he identifies new ideas, shareholder activism in South Korea and his recent engagement with Golfzon Holdings. Here's a quick summary of the video: # 1\. The background story Ryan was born and raised in Newport Beach, California. After studying economics at Princeton, he worked in investment banking in New York, followed by venture capital in both the United States and Mexico City. He then went to Columbia Business School's Value Investing program. And after that, he worked with both Ben Isaac at Brizo Capital and Todd Combs at Berkshire Hathaway. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-41-1.png) Ryan with Jon Cukierwar from Sohra Peak researching cash & carry businesses in São Paulo What did he learn from Todd? Identifying what actually matters in a case. In other words, distilling a thesis to its simplest form. He'd project earnings a few years out, thinking about the long-term addressable market for the product and the competitive landscape. So he performed deep analysis, but it was eventually distilled into a simple thesis. --- # 2\. Investing at Terton Capital His new hedge fund [Terton Capital](https://www.tertoncapital.com/?ref=asiancenturystocks.com) was launched a few months ago. The focus is on bottom-up fundamental analysis, with a focus on the Asia-Pacific. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-42.png)](https://www.tertoncapital.com/?ref=asiancenturystocks.com) The idea is to target companies with fixable overhangs, for example: a lazy balance sheet, suboptimal capital allocation, poor governance, etc. He thinks that's a better use of his time, rather than trying to fix a broken business model. He likes to participate in markets that are in the early innings of a governance reform cycle, where new regulation creates leverage for minorities. --- # 3\. How he identifies new ideas Ryan's style is to read through every company report from A to Z in a given country. He starts with the latest quarterly and annual reports, plus recent news and their individual websites. He pays attention to the little details: whether there's a presentation, who discloses what, whether the website works, whether there's press coverage, etc. This process often helps surface hidden assets and under-appreciated segments. He'll end up with a force-ranking of what it's worth spending more time on. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-43.png) Todd Combs reading through annual reports Unlike Todd, he doesn't read on paper, but rather digitally. And he reads continuously between active projects. Finally, he looks at comparable businesses in other markets, to check whether an idea is genuinely unique, in terms of its business model, the valuation or the setup of any fixable issue. --- # 4\. Shareholder activism in Korea In Ryan's view, Korea is by far the most exciting market globally for shareholder activism. There are a large number of companies needing change, and not many investors doing the actual work. Plus, we're at a very early stage of the current reform cycle. KOSPI's growth has rested on two pillars: 1) governance reforms, and 2) a strong semiconductor industry. He argues that the governance pillar has been drowned out in the recent media coverage, even though that's where the sustainable non-cyclical growth will have to come from. There are certainly cheap markets elsewhere, like Indonesia. But South Korea fits his style of execution better. Eventually, other markets may be forced to run their own "value-up" playbooks to attract Western capital, following Japan in 2023 and South Korea today. The valuation multiples in Korea are incredibly low. When identical businesses trade at a fifth of US or European companies' trading multiples, the market is telling you something. The problem is usually that cross-shareholdings and **OpCo/HoldCo structures** let owners control assets with very low economic ownership, and minorities can't reach the underlying assets. The result is that as a minority, you can't reliably project your future return. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-45.png) Samsung's ownership structure back in 2022\. Source: Quartz Last year's amendments to the Commercial Act might help, since they now require directors to **take all shareholders' interests into account**. It's too early to tell whether this will have an impact on real-world outcomes. The 2027 AGM season could be the real litmus test: it will put boards under the microscope and give independent directors freedom to dissent. One major distortion in Korea's capital markets is the **inheritance tax**. The rates are up to 50%, and assessed based on the market value of each publicly listed company 2 months before and two months after the transfer date. This removes any incentive to maximize share price prior to any succession. In July, there was a proposal to put a floor on the valuation used in the tax assessment at 0.8x book. But it's a sensitive issue politically, and whether the floor will be implemented remains to be seen. Another positive change is the **3% rule**. From 10 September 2026, minorities will be able to separately propose and elect two audit committee members, with the controlling family and related parties' voting power capped at 3%, regardless of economic ownership. In Ryan's view, this delivers real power over inspecting the books, reviewing transactions and shaping strategy. Mandatory cumulative voting for large listed companies will help minorities of those companies as well. Many investors like to draw a parallel between **Japan and South Korea**. And Japan is probably the best available parallel. But Korean ownership structures are different: companies are typically controlled by a family owning 20-50%, with stakes held over generations. Pressuring professional managers who didn't build the business and don't hold a stake in the company is a different exercise from confronting a family whose identity and livelihood are bound up in the company. So as a shareholder activist, your approach in South Korea has to be different. Ryan thinks that [**DART**](https://dart.fss.or.kr/?ref=asiancenturystocks.com) (the repository of corporate filings) is unappreciated. What many investors don't realize is that even unlisted companies above a the external-audit thresholds have to file to DART, so you can actually check the financials of large privately held subsidiaries. This has helped him to understand the valuation of subsidiaries and their balance sheets. Also note that succession events have to be filed with DART, making it easy to screen for companies with recent shifts from one generation to the next. --- # 5\. The Golfzon Holdings story ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-46.png) Golfzon County Cheongtong Ryan has been involved in [**Golfzon Holdings**](https://finance.yahoo.com/quote/121440.KQ/?ref=asiancenturystocks.com) *(121440 KS – US$183 million)*, the parent company of golf simulator business [**Golfzon Co**](https://finance.yahoo.com/quote/215000.KQ/?ref=asiancenturystocks.com) *(215000 KS – US$160 million)*. His summary of the situation is as follows: Golfzon Holdings owns a broad portfolio of assets: - A 31.6% stake in Golfzon County, Korea's largest golf course operator, together with private equity company MBK Partners - A portfolio of golf courses, headquarters and buildings - A 22.8% stake in publicly listed Golfzon Co, the golf simulator business He points to the Golfzon County sale process, which he says targets an enterprise value of KRW 2 trillion. He also points to the appraised real estate value of KRW 567 billion disclosed in the 2025 annual report. On his ifigures, these components exceed the company's current market cap of approximately KRW 259 billion. *(I have not verified these figures or performed by own valuation, and I express no view on whether the shares are mispriced.)* Ryan notes that on 29 June, with the Golfzon County sale live, a controlling shareholder vehicle launched a tender offer for the minority shares at KRW 6,700, and that the company's book value is above KRW 19,000 per share. *(Of course, book value is an accounting measures and may not represent realizable or intrinsic value.)* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/X2Flo-golfzon-holdings-121440-ks-.png) The share price of Golfzon Holdings. Source: TIKR Ryan wrote an open letter to the board of directors on 22 July requesting a response by 27 July. According to a new 2026 Ministry of Justice guideline, a board should convene promptly, form a special committee independent of the controlling shareholder and commission an independent outside valuation, and review the follow-on price. As well as consider an Article 138 opinion on price and fairness. But these best practices were not upheld. Ryan also asked them to disclose what they knew about the Golfzon County sale process, and to confirm no future acquisition of the remaining shares below KRW 6,700\. There was still no response. He then filed a complaint with the Financial Supervisory Service. A pre-notification of a disclosure violation subsequently appeared on DART. The company then finally issued a clarification on 3 August, 35 days after the tender decision and two days before the offer closed — confirming the KRW 6,700 floor and assessing fairness through a sum-of-the-parts valuation and a discounted cash flow analysis. But they never disclosed any assumptions, or asset values or which discount rate they used in the DCF. *(There's of course no guarantee that the Golfzon County sale closes at the targeted enterprise value, or that Golfzon Holdings sells its stake.)* But Ryan is keeping his legal options open. **Update as of 13 August 2026*: The first tender closed having secured 77% of total issued shares, short of the 90% threshold required for a voluntary delisting. A second tender offer opened on 10 August 2026 for the remaining 13% of the shares at the same KRW 6,700 price, running to 2 September 2026\. (I express no view on the offer price and no view on whether any shareholder should tender or decline to tender.)* --- # 6\. Where can we learn more? Ryan writes publicly about Korean markets. You can find his letters at [https://www.tertoncapital.com/letters-and-materials](https://www.tertoncapital.com/letters-and-materials?ref=asiancenturystocks.com), his X accounts at [@terton\_capital](https://x.com/terton%5Fcapital?ref=asiancenturystocks.com) and his email is [ralbert@tertoncapital.com](mailto:ralbert@tertoncapital.com). ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### Insider activity July 2026 URL: https://www.asiancenturystocks.com/insider-activity-july-2026/ Last updated: 2026-08-12T03:45:04.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer:** **I'm Michael Fritzell. This is my own opinion, written for a general readership. It isn't financial advice and isn't tailored to anyone's circumstances, financial position or objectives. I'm not a licensed financial adviser and I don't hold myself out as one. Please do your own research and speak to a qualified adviser before acting on anything here. As of 12 August 2026 I hold no position in any security named in this article, and I have no plans to transact in any of them within seven days of publication. I receive no compensation from any company, fund, platform or individual mentioned. Transaction data is sourced from Smart Insider, a paid subscription service with no commercial relationship to this publication; I have not independently verified individual filings.* --- ## July insider transactions In Asia, there continues to be twice as much buying as selling numbers-wise, suggesting insider optimism: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/WEHD0-insider-sell-buy-ratio-by-region-.png) The numbers are particularly extreme in **South Korea**, where the number of buys is now ten times the number of sells. For June & July 2026 combined, we had 868 buy transactions, up from just 170 in the same period last year. That could be due to the KOSPI crash, or to Korea's ongoing corporate governance reforms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/GnnSa-insider-sell-buy-ratio-by-country-.png) The sell/buy ratio has also gone below 1.0x for **China** A-shares (Shanghai & Shenzhen), suggesting insider optimism. Conversely, there's net insider selling in **India**. Though be aware that insider buying is just a single data point. Whether it predicts future share price returns is debatable. Insiders buy for a variety of reasons. --- ## Five highlighted situations I'll now go through five of the most significant insider buys in Asia, drawing upon data from [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). I've ranked them from the highest market cap to the lowest: ## 1\. United Laboratories ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-40.png) [**United Laboratories**](https://finance.yahoo.com/quote/3933.HK/?ref=asiancenturystocks.com) *(3933 HK — US$2.3 billion)* is a Chinese drugmaker I've mentioned briefly in the past. It's historically focused on pharmaceutical ingredients. But it has now built a portfolio of finished drugs, e.g., insulin, antibiotics, and animal drugs. Unfortunately, the antibiotics business is subject to the vagaries of supply & demand and to US import rules, which seem to change by the day. United Labs' earnings have been deteriorating recently. What makes United Labs special at this point in time is its new drug R&D. They have 42 drugs under development, including the obesity drug UBT251\. It's very similar to Eli Lilly's new retatrutide, which targets three hormone receptors simultaneously: GLP-1, GIP, and glucagon, which should make it more effective than GLP-1 drugs like Ozempic/Wegovy. United Labs' UBT251 passed its China Phase 2 trial in February 2026 with strong results: 48% of the highest-dose group lost at least 20% of their body weight after 24 weeks vs 2% in the placebo group. In March 2025, United Labs entered a deal with Novo Nordisk, under which Novo Nordisk will have exclusive rights to sell UBT251 in all non-Greater China markets. In turn, United Labs received US$200 million up-front and up to US$1.8 billion in development and sales milestones. These are significant numbers, given that United Labs' entire market cap is US$2.3 billion. United Labs will also receive tiered royalties on all future Novo Nordisk sales of UBT251 outside China. Internationally, United Labs is currently running Phase 1b/2a obesity studies with results expected in 2027\. In July 2026, Chairman Hoi Shan Tsoi purchased US$29 million worth of shares in United Labs: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-32.png) Insider buying in United Laboratories (3933 HK). Source: Smart Insider It might not have been an open-market purchase, because Smart Insider's data doesn't provide a purchase price. So I suspect it's an off-market purchase or a settlement of some sort. The stock currently trades at 9.7x P/E with net cash representing 30% of the market cap. The big question is the likelihood that UBT251 will be successful, and how much it could contribute within Greater China and internationally. Eli Lilly's and Novo Nordisk's obesity drugs are major franchises. Just be aware that the core antibiotics business is highly cyclical with low margins. UBT251 could contribute positively to earnings, but its success is by no means guaranteed. --- **The rest of the post is available for premium subscribers. I go through a four more situations across South Korea, Hong Kong and the Philippines* [Unlock the rest ](http://asiancenturystocks.com/?ref=asiancenturystocks.com#/portal/signup/) _This post is for paying subscribers only._ ### This Week in Asia #38 URL: https://www.asiancenturystocks.com/this-week-in-asia-38-2/ Last updated: 2026-08-11T06:56:33.000Z Last week, Asian semiconductor stocks came under pressure due to reports that Nvidia might [reduce the memory content](https://finance.yahoo.com/technology/ai/articles/nvda-reportedly-weighs-lower-memory-182131317.html?ref=asiancenturystocks.com) in its next-generation GPU. In other news, the US Senate passed a bill imposing [100% tariffs](https://timesofindia.indiatimes.com/business/india-business/100-tariffs-on-india-soon-us-senate-clears-russia-sanctions-bill-10-things-to-know/articleshow/133046387.cms?ref=asiancenturystocks.com) on countries buying Russian energy, including India and China. And finally, Chinese low-cost retailer Shein has now begun premarketing for its [Hong Kong IPO](https://www.bloomberg.com/news/articles/2026-08-05/shein-is-said-to-plan-gauging-investor-demand-for-hong-kong-ipo?cmpid=080526%5Fmorningapac&utm%5Fcampaign=morningapac&utm%5Fmedium=email&utm%5Fsource=newsletter&utm%5Fterm=260805&utm%5Fcontent=7394). In today's email: - Watchlist update - Worth your time - Integral *This is another *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. If you don't want to receive these free weekly updates, you can adjust your e-mail preferences* [*here*](https://www.asiancenturystocks.com/#/portal/account/newsletters)*.* --- ## Watchlist update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-21.png) Watchlist top and worst performers. Source: Koyfin - [**InBody**](https://finance.yahoo.com/quote/041830.KQ/?ref=asiancenturystocks.com) rallied by over 50% after Korean brokers pushed the stock as a GLP-1 beneficiary. InBody's last result was strong, with a 2026 forecast of +23% revenue growth and +43% EBITDA growth. - Second-hand goods trading platform [**Mercari**](https://www.asiancenturystocks.com/mercari-4385-jp/)'s FY2026 result surprised to the upside, with top-line growth of +19% and operating profit growth of +58%. It also announced the first share buyback since its 2018 listing. The beat was driven by a greater number of cross-border transactions, fintech revenues, and the popularity of trading cards. *(Full disclosure: I own shares in Mercari.)* - Video game company [**Nintendo**](https://www.asiancenturystocks.com/deep-dive-nintendo-7974-jp/) reported that its 1QFY2027 operating profit jumped by +151%. Part of the growth came from refunds on US tariffs, as well as from strong sales of software titles. *(Full disclosure: I own shares in Nintendo.)* - Indonesian beer producer [**Multi Bintang**](https://finance.yahoo.com/quote/MLBI.JK/?ref=asiancenturystocks.com) reported strong second-quarter revenue growth of +20% and net profit growth of +30%. The biggest driver was sales to its Bali distributor, including for the new beer brand [Kawan Senja](https://www.multibintang.co.id/en/brands/kawan-senja?ref=asiancenturystocks.com). - Smart Insider data showed a cluster buy in the Indonesian telecom company [**Indosat**](https://finance.yahoo.com/quote/ISAT.JK/?ref=asiancenturystocks.com) by CEO Vikram Sinha and HR head Irsyad Sahroni. Indosat reported strong second-quarter revenue growth of +14%, with significantly higher ARPU, AI Cloud revenues more than doubling, and IDR 12 trillion in proceeds from its recent FiberCo partial divestiture. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-22.png) Insider buying in Indosat. Source: Smart Insider Get instant access to 100+ deep-dives on Asian value stocks: [Upgrade to paid ](https://www.asiancenturystocks.com/#/portal/signup) --- ## Worth your time [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-23.png)](https://youtu.be/4Jy8Zbd%5FZtk?si=X5TEIn83H-1DdNkT&ref=asiancenturystocks.com) - I jumped on a call with investor and Substack author [**Hugo Navarro**](https://youtu.be/4Jy8Zbd%5FZtk?si=X5TEIn83H-1DdNkT&ref=asiancenturystocks.com) to discuss whether the global cinema industry is finally turning around. The bull points: cinemas have survived many technological shifts before streaming, the theatrical exclusivity window is lengthening, and AI will lower barriers to entry for studios. The bear points: cinema tickets are unaffordable, there's hero-movie fatigue, and young people prefer short-form video. - [**Brad Setser**](https://open.spotify.com/episode/4txOz1qk2UNLcXJyBHnXg5?si=09efa92974534604&ref=asiancenturystocks.com) argued in a podcast that the yen is undervalued, even beyond what the US-Japan interest rate differential would normally imply. But he also thinks that higher Japanese interest rates will be needed for the yen to enter a bull market. - Marathon Asset Management's portfolio manager [**Justin Hill**](https://open.spotify.com/episode/2Vt5UDzx8XhWfxDWlqXMiE?si=877d06cb11a444a0&ref=asiancenturystocks.com) spoke with Ed Chancellor about Japanese share buybacks. One example was the 100-yen store [Seria](https://www.asiancenturystocks.com/deep-dive-2023-6/)'s 2025 buyback of 17% of shares outstanding, which lowered its P/E. - [**Smoak Capital Management**](https://drive.google.com/file/d/1oVK3OeSXUbHwYYLY%5FMucdP4RonfeE6Oz/view?ref=asiancenturystocks.com)'s 1H2026 letter was excellent, as usual. It discussed Japanese fan-club platform [m-up](https://finance.yahoo.com/quote/3661.T/?ref=asiancenturystocks.com), Singapore SaaS company [Azeus](https://finance.yahoo.com/quote/BBW.SI/?ref=asiancenturystocks.com), and Korea's [InBody](https://finance.yahoo.com/quote/041830.KQ/?ref=asiancenturystocks.com). - Finally, Substack author [**Price to Tangible Bruce**](https://tangiblebruce.substack.com/p/buying-japans-defence-build-up-on) wrote about a few Japanese small-cap defense stocks: [Rikei](https://finance.yahoo.com/quote/8226.T/?ref=asiancenturystocks.com), [Ryoyu Systems](https://finance.yahoo.com/quote/4685.T/?ref=asiancenturystocks.com), [Hosoya Pyro-Engineering](https://finance.yahoo.com/quote/4274.T/?ref=asiancenturystocks.com), and [Ishikawa Seisakusho](https://finance.yahoo.com/quote/6208.T/?ref=asiancenturystocks.com). --- ## Integral ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-24.png) Yesterday, I published a deep dive on the Japanese private equity firm [**Integral**](https://www.asiancenturystocks.com/deep-dive-integral-5842-jp/). Many investors consider Integral to be Japan's version of KKR, in that it tends to co-invest with its funds. So far, it's raised five private equity funds, with a sixth one due in 2027 or 2028\. Some analysts are projecting the sixth fund will reach JPY 500 billion, equivalent to US$3.2 billion. If successful, it would add to Integral's fee-related earnings. Read the full story here: [Integral (5842 JP)Japanese private equity firm at 10x P/E![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-7692b251-0a0c-40d4-8ef1-42164fc51ca0.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Social-preview-f989ee32-92a5-41de-87f6-f4d57a55ca56.jpg)](https://www.asiancenturystocks.com/deep-dive-integral-5842-jp/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Get the Integral deep dive once you become a premium subscriber: [Unlock the Integral post ](https://www.asiancenturystocks.com/#/portal/signup) ***Disclaimer:** **This post reflects my personal opinions and is for informational and educational purposes only. It is not financial advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. I am not a licensed financial adviser in Singapore or anywhere else, and I don't give personalized advice — including in the comments. As of 10 August 2026, I hold positions in Mercari and Nintendo. I hold none of the other securities mentioned. I may buy or sell any security mentioned at any time, without notice, and I won't update this disclosure. I receive no compensation from any company, fund, platform, publication or individual mentioned or linked in this post. My revenue comes solely from reader subscriptions. People I quote or interview may hold positions in the securities they discuss, and I don't independently verify their claims. Where past performance is mentioned, it is not indicative of future results. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd.* ### Integral (5842 JP) URL: https://www.asiancenturystocks.com/deep-dive-integral-5842-jp/ Last updated: 2026-08-17T01:57:57.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* This post reflects my personal opinions and is provided for general information only. It is not investment advice or a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation, or needs. As of 9 August 2026, I do not hold a position in Integral, and I receive no compensation from Integral or any other company mentioned; my revenue comes solely from reader subscriptions. This post was prompted by an interview with Roderick van Zuylen, CIO of Night Watch Investment Management. He and his firm may hold or trade Integral; I have not independently verified their positions. The same applies to any other third party quoted or linked here. This disclosure reflects my position on the date stated and will not be updated. Asian Century Stocks uses information sources believed to be reliable, but accuracy cannot be guaranteed, and opinions are subject to change without notice. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd* --- Last week, [Roderick van Zuylen](https://www.asiancenturystocks.com/interview-with-roderick-van-zuylen/) mentioned the Japanese mid-market private equity firm [**Integral**](https://finance.yahoo.com/quote/5842.T/?ref=asiancenturystocks.com) *(5842 JP – US$631 million)*. So after the interview, I was keen to dig deeper. You can think of Integral as Japan's version of KKR. It was founded as a spin-off from Unison Capital, led by former banker Nobuo Sayama. Throughout the years, its high-profile deals have included rescuing the fashion brand Yohji Yamamoto and the airline Skymark Airlines from bankruptcy. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-20.png) The recent Yohji Yamamoto collab with Adidas It also hit a jackpot when it took Tekscend Photomask private in 2020, and later relisted it on the Tokyo Stock Exchange. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-19.png) Thanks to deals like this, Integral's Fund I-IV earned a simple average multiple of invested capital of 3.1x and a gross IRR of 30.5%, placing it at the top of Japan's private equity companies. At least so far. _This post is for paying subscribers only._ ### Interview with Roderick van Zuylen URL: https://www.asiancenturystocks.com/interview-with-roderick-van-zuylen/ Last updated: 2026-08-02T13:43:49.000Z *Hi! I'm Michael. This is a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/interview-andrei-stetsenko/#/portal/signup/free)*.* [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/signup) **Disclaimer: I'm Michael Fritzell, and this interview — including the video, transcript and summary below — is published by Delante Media Pte Ltd. It is a record of a conversation and is provided for information purposes only. It is not investment advice and is not a recommendation to buy or sell any security. The views expressed by Roderick van Zuylen are his own, not mine, and neither of us has considered your objectives, financial situation or needs. Please do your own research and consult a licensed financial adviser before making any investment decision. As of 2 August 2026, I do not own any of the securities mentioned and have no plans to transact in them within seven days of publication. My only compensation in connection with this publication is subscription revenue from Asian Century Stocks. I receive no fee, referral commission or other consideration from Roderick van Zuylen, Night Watch Investment Management or KEDM, and no link in this post is an affiliate link. Roderick van Zuylen manages capital at Night Watch Investment Management and may hold positions in the securities discussed. As of 2 July 2026, his stated positions include Marex, Futu, Integral and Macau casinos. His positions may change at any time without notice.* --- Today, I'm speaking with [Roderick van Zuylen](https://x.com/roojoo3?ref=asiancenturystocks.com), the Chief Investment Officer of [Night Watch Investment Management](https://www.nightwatchim.com/?ref=asiancenturystocks.com) and the editor of research publication [KEDM](https://kedm.com/?ref=asiancenturystocks.com). In the discussion, he talks about his background, how he got into investing, what he learned from the Value Investors Club and his previous jobs, and how he approaches portfolio management and screening. We then discuss several Asian equities, including Dream International, DPC Dash, Macau casinos, Futu, and Integral, several of which he currently owns. And then finally, how he recommends investors use KEDM to find new ideas. Here's a quick summary of our discussion: # 1\. Roderick's background Roderick grew up in the Netherlands and worked for 10-15 years at institutional long-only funds. This included a role in managing portfolios at Van Lanschot Kempen, one of the largest private bank in the Netherlands, managing large multi-billion portfolios. But the best learning experience was working for a smaller value shop with €400-500 million of assets under management. During those years, he had the opportunity to travel all across Europe to meet the best companies in each country. Three years ago, he moved to the United States and eventually founded the hedge fund Night Watch Investment Management. Last year, he also took over the responsibility for the research publication KEDM. He's also a long-time member of the [Value Investors Club](https://www.valueinvestorsclub.com/?ref=asiancenturystocks.com). It helped him broaden the universe of stocks he considered. Beyond the pitches, there's also a valuable comments section that allows you to discuss ideas with hundreds of smart buy-siders. --- # 2\. Current investment strategy Night Watch is a value fund, but valuations aren't its only focus. The problem is that cheap stocks often stay cheap – something he's experienced over the past 15 years. Instead, he wants companies that will be better businesses in a few years' time. His ideas usually belong to one of two buckets: 1. **Industries** where earnings are about to inflect, hopefully with multi-year tailwinds. These ideas tend to be tax-efficient. 2. **Stock-specific** change, for example, a new CEO, a spin-off, strategic alternatives or activist involvement. An example of the former is the global aerospace aftermarket. The global airplane fleet is aging, and Airbus & Boeing can't meet production demand for many years to come. So in the meantime, maintenance & parts distribution companies should do well. He's also done work on the American home-building supply chain. When it comes to position sizing, he usually relies on a subjective conviction rating. If he feels strongly about a stock, he might ramp it up to 6-7%. One of his current positions is near 15%, so he's had to trim it when it exceeded that level. One rule of thumb: if one worries too much, then the position is too large. Stock screening is hard, however. There are too many names to choose from, so where should you start? He keeps Excel models for hundreds of companies, and some of these models he hasn't touched for years. Historically, ideas have come from people flagging changes to old names. KEDM now does the work for him, with a team of data analysts scanning the investable universe for new CEOs, spin-offs, strategic alternatives and new activist campaigns. --- # 3\. Dream International ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-4.png) Long-time Asian Century Stocks readers will remember that I wrote about plush toy maker [**Dream International**](https://www.asiancenturystocks.com/deep-dive-2022-16-dream-international/) *(1126 HK — US$601 million)* back in 2022\. Roderick bought shares in Dream during COVID-19, back when Tokyo and Shanghai Disneyland were still closed. Dream makes Mickey Mouse plushes for Disney and other customers. What made him bullish was that Tokyo Disneyland was about to reopen. At that time, the dividend yield was 13%, and while Hong Kong's free-float requirements made it difficult for Dream to buy back shares, he believed the dividend payout ratio would eventually rise from 30% to 40-50%. If correct, the dividend yield could eventually reach 20%. However, he sold the stock during the 2025 Labubu craze. There was a rumor floating around that Dream was about to manufacture Labubu dolls, and the stock doubled in about a week. But as the actual revenue impact was at most a few per cent, he thought the market got ahead of itself. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/scXII-dream-international-1126-hk-.png) The stock is now well below where he sold it, and it has fallen sharply over the past year. So he may revisit it at some point. --- # 4\. DPC Dash ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-5.png) [**DPC Dash**](https://finance.yahoo.com/quote/1405.HK/?ref=asiancenturystocks.com) *(1405 HK – US$667 million)* is Domino's Pizza's master franchisee in China. It operates 1,500 stores and is one of a handful of listed Domino's entities globally. Roderick lived in Beijing in 2008-2009 and remembers Pizza Hut as a place where students would sit for hours, eating chicken wings and studying. And Pizza Hut now has over 4,000 stores in China. The bull case for Domino's is that it'll eventually reach a similar scale. In some ways, Domino's has an even better franchise: it's a high-volume pickup/delivery with high gross margins. He said unit economics seem great: DPC Dash spends US$200,000 to build a store that generates US$100,000 in annual operating profit, for a roughly 50% return on investment. And the store count has been growing 20-30% annually. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/Gm7O8-dpc-dash-1405-hk-.png) However, while he used to own shares in DPC Dash, he eventually sold them. Many Chinese industries are reliably oversupplied. For example, there are hundreds of EV makers. And the restaurant industry is no exception. Management's explanation for declining same-store sales was reasonable – that newly opened stores experienced a honeymoon effect, with subsequent revenue declines. But then there might have been cannibalization as the store count density rose. In addition, margins were hit by wage inflation. A business with 4-5% group margins can't absorb a 200-basis-point decline. Especially when there are fixed costs, such as corporate overhead. He noted that the current valuation of \~US$400,000 per store is low relative to the headline US$100k of store-level operating profit. But same-store sales may worsen before this year's cohort matures. --- # 5\. Macau casinos ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-6.png) He argued that if there's one Chinese industry that isn't oversupplied, it's Macau's casino industry. There are only six licensed operators, and they cannot meaningfully grow their table count. His view is that if and when Chinese consumer incomes rise, some of the increase will leak into Macau. There were regulatory crackdowns in the last 10-15 years because Macau casinos have served as a channel for capital to leave Mainland China. After both crackdowns, VIP revenues fell to 30-40% of their former levels. But the recovery is now in the mass market, which is now stronger than in 2018 and 2019\. The mass market minimum bet is still HK$500\. Roderick was given a tour of [**Sands China**](https://finance.yahoo.com/quote/1928.HK/?ref=asiancenturystocks.com)'s *(1928 HK – US$15 billion)* casino, Sands Macau, where they explained the system. Mainland customers booked through a tour operator who organizes the trip and funds the betting money. Junkets have been severely restricted, but they seem to have emerged under the moniker "agents", which sounds like the exact same thing. Money already offshore can always be bet in Macau. On the other hand, further crackdowns are a real possibility, and the Chinese consumer is weak. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/lYLnC-sands-china-1928-hk-.png) --- # 6\. Futu ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-7.png) Roderick recently bought shares in the Chinese brokerage company [**Futu**](https://finance.yahoo.com/quote/FUTU/?ref=asiancenturystocks.com) *(FUTU US – US$15 billion)*. This company used to be a Chinese broker allowing mainlanders to buy US and other foreign stocks, often with leverage. But Beijing cracked down in 2021 and 2022 to stem capital flight. Accounts would be funded with RMB and then converted by Futu. But over the past five years, both Futu and competitor [**Tiger Brokers**](https://finance.yahoo.com/quote/TIGR/?ref=asiancenturystocks.com) *(UP Fintech; TIGR US – US$872 million)* have built genuine non-China businesses. Hong Kong is the core market, and Singapore is another large market. Both of these firms now run pop-up displays in grocery stores to sign up new accounts. That makes them Hong Kong / Southeast Asian consumer businesses with less regulatory risk. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/89LIb-futu-futu-us-.png) Earlier this year, the stock fell significantly. And it emerged that China had cracked down on them yet again. However, Mainland China accounts for 20% of revenues. In the past, Mainland Chinese could open accounts by showing a Hong Kong ID or an existing foreign brokerage account. But today, verification is moving from IDs to being location-based. In other words, if you're physically in China, you can no longer trade. So it looks like the China business could be a zero. But he thinks that the largest part of the business is now non-China, and that business is growing 30% per year. The stock trades at 8-9x P/E. It's a structural thesis that's very similar to those of [**Interactive Brokers**](https://finance.yahoo.com/quote/IBKR/?ref=asiancenturystocks.com)*(IBKR US – US$40 billion)*, [**Robinhood**](https://finance.yahoo.com/quote/HOOD/?ref=asiancenturystocks.com)*(HOOD US – US$78 billion)*, and [**flatexDEGIRO**](https://finance.yahoo.com/quote/FTK.DE/?ref=asiancenturystocks.com)*(FTK GR – US$3.9 billion)*. He expects low-cost brokerage firms to continue to take market share. The biggest worry is that Futu's customers like to gamble, so you could certainly get blow-ups like with Korean betting on levered SK Hynix ETFs. --- # 7\. Integral ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-8.png) [**Integral**](https://finance.yahoo.com/quote/5842.T/?ref=asiancenturystocks.com) *(5842 JP — US$627 million)* is a Japanese private equity firm. You can think of it as "KKR, but Japanese". He believes Japan's corporate governance reforms are real and a long-term tailwind. However, there are far too many Japanese small caps to track individually, so he thought Integral was another way to bet on the trend. A private equity firm doing buyouts of undervalued listed companies is one way. He rates Integral's deal record highly. For example, it purchased Shinoken at a great price and Tekscend Photomask, which eventually became a 5- to 10-bagger. Thanks to Integral's track record, it has grown from JPY 160 billion to JPY 400 billion in just a year. However, the catch is that growth is very lumpy. A flagship fund comes every three or four years, and AUM steps down in between. The next flagship capital raise should begin at the end of 2027, with a total size of as much as JPY 500 billion. What could happen to Integral is another portfolio IPO. Longer term, the private equity playbook could be extended into credit, real estate, and venture capital. And it has an edge versus foreign private equity companies – locals simply have more trust with Japanese firms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/RQ93x-integral-5842-jp--1.png) He sees the market valuation being 10-20% above net asset value, but with essentially no value assigned to the management business. He acknowledged he can't verify the marks on the underlying funds. One problem is that it's listed on the lowest tier of the Tokyo Stock Exchange, largely due to a limited free float. But once insiders sell after their five-year lock-up, a higher float could eventually qualify it for a Prime listing. There's not much transparency about which funds they've invested in and at what marks. Integral is probably conservative, but you never know. --- # 8\. How he uses KEDM KEDM was founded 6-7 years ago by Harris Kupperman. The idea is to track spin-offs and other special situations early on, before investors catch on. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-1.png)](https://kedm.com/?ref=asiancenturystocks.com) Roderick took over KEDM late last year when Harris shifted his attention to his fund. KEDM has now merged with ToffCap's Monday Monitor, and Roderick is working together with ToffCap to produce the product. An external data team helps develop the product. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/RQ93x-integral-5842-jp-.png) The product has two sides to it: an event-driven monitor, plus a weekly thematic or a macro write-up. Harris Kupperman still contributes the macro ideas, but Roderick and ToffCap produce the rest. It's roughly 100 pages weekly, with screens. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/08/image-2.png)](https://kedm.com/?ref=asiancenturystocks.com) For example, Roderick found [**Marex**](https://finance.yahoo.com/quote/MRX/?ref=asiancenturystocks.com) *(MRX US – US$4.7 billion)* via KEDM. It's a futures commission merchant that IPO'd in the United States over two years ago after a failed UK listing. It's been a multi-bagger, as the industry has consolidated with growing futures volumes. A short-seller wrote a report that pressured the stock, and was eventually proven wrong. Other themes he's picked up from KEDM are aerospace names, nicotine pouches, European defense names, payment companies and for-profit prisons. The newest theme featured on KEDM is US trade schools like [**Universal Technical Institute**](https://finance.yahoo.com/quote/UTI/?ref=asiancenturystocks.com) *(UTI US – US$2.2 billion)* and [**Lincoln Educational**](https://finance.yahoo.com/quote/LINC/?ref=asiancenturystocks.com) . *(LINC US – US$1.3 billion)*. Roderick owned these stocks six years ago and might find it psychologically hard to pay up again. But the thesis is that there's a persistent shortage of welders, mechanics, nurses, dental hygienists, etc. Young people can attend community colleges, but trade schools let students finish in one year rather than two and don't require them to complete general-education requirements. Also, Roderick argued that if AI takes all our jobs, then welding may be the only job left :) --- # 9\. Where can we learn more? Readers can visit [KEDM.com](https://kedm.com/?ref=asiancenturystocks.com) – free trials are available for 4 weeks of content. There are two options: - [KEDM Pro](https://kedm.com/archives/?ref=asiancenturystocks.com), which helps institutional investors track corporate catalysts - [KEDM Lite](https://kedm.com/lite-archives/?ref=asiancenturystocks.com), the publication formerly known as the ToffCap Monday Monitor Roderick also writes quarterly letters for his hedge fund [Night Watch Investment](https://www.nightwatchim.com/?ref=asiancenturystocks.com#contact). Nothing here is an offer or invitation to invest in any fund. You can also find him on X [here](https://x.com/roojoo3?ref=asiancenturystocks.com). ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### Portfolio update July 2026 URL: https://www.asiancenturystocks.com/portfolio-update-july-2026/ Last updated: 2026-07-31T11:40:51.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article reflects my own views. I am Michael Fritzell, and I write Asian Century Stocks. It is not investment advice and does not recommend buying or selling any security. Please do your own research and consult a licensed financial adviser before acting. As of 31 July 2026, I personally held the portfolio positions disclosed in this update, in the sizes shown. Other companies named in the market commentary are discussed for context only and are not held by me. My only compensation for this newsletter is reader subscriptions — I receive no payment from any company mentioned. Asian Century Stocks is published by Delante Media Pte Ltd, which acts as the publisher of record only.* --- ## Market commentary Wow, it's been quite a month. We've had a full-on panic when it comes to Korean semiconductor stocks, causing the overall index to decline: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-181.png) That's what happens at every peak: these value-weighted indices become overly concentrated in individual sectors. And this time around: Korean and Taiwanese semiconductor stocks. It does feel like "the continuity of thought towards higher prices" has been broken, to use a Bernard Baruch term. I question whether Korean retail investors can regain their optimism, even if the squeeze in DRAM prices continues. According to Twitter user fintechgirl, [360,000 accounts](https://x.com/fintergirl/status/2082326983254691932?s=20&ref=asiancenturystocks.com) have been liquidated in Korea. Sadly, the government has been forced to open a [debt-counseling hotline](https://finance.biggo.com/news/190fab44-3bba-47cb-8770-a0fb6989f2b0?ref=asiancenturystocks.com) to prevent suicides. Here's the round-up of year-to-date returns for the major Asian indices: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-182.png) Source: Bloomberg The tech-heavy KOSPI has gone from +99% up year-to-date to just +34%. Over the same time period, the TWSE has gone from +68% to just +43%. We still don't know what caused the crash. Taiwanese research firm Trendforce reports that spot memory prices have been more or less flat over the past few weeks. Some are hypothesizing that it was the SK Hynix and CXMT IPOs that sucked liquidity out of the market. Others believe it was the Korean rate hike on 16 July 2026, which, by the way, helped the Korean Won rise +7% against the US Dollar. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-183.png) Source: TradingView Baskets of "anti-AI stocks" have done surprisingly well. These include: - **Buyers of memory chips**: smartphone makers [**Xiaomi**](https://finance.yahoo.com/quote/1810.HK/?ref=asiancenturystocks.com) and [**Transsion**](https://finance.yahoo.com/quote/688036.SS/?ref=asiancenturystocks.com), console makers [**Nintendo**](https://finance.yahoo.com/quote/7974.T/?ref=asiancenturystocks.com) and [**Sony**](https://finance.yahoo.com/quote/6758.T/?ref=asiancenturystocks.com), as well as Taiwanese PC makers like [**Getac**](https://finance.yahoo.com/quote/3005.TW/?ref=asiancenturystocks.com) and [**MSI**](https://finance.yahoo.com/quote/2377.TW/?ref=asiancenturystocks.com) - **Japanese software developers**: [**OBIC Business Consultants**](https://finance.yahoo.com/quote/4733.T/?ref=asiancenturystocks.com), [**Sansan**](https://finance.yahoo.com/quote/4443.T/?ref=asiancenturystocks.com), [**Money Forward**](https://finance.yahoo.com/quote/3994.T/?ref=asiancenturystocks.com) and [**Freee**](https://finance.yahoo.com/quote/4478.T/?ref=asiancenturystocks.com) Here's a chart of how these stocks have performed over the past month: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-184.png) Source: TradingView Is there any logic to this? I don't really think so. Just because memory chip prices are declining doesn't mean SaaS isn't at risk from Claude. It's more likely that we've simply seen wholesale de-grossing of funds previously long tech hardware and short software. The AI-trade seems to have affected almost all markets in Asia. The Philippine PSEi rose almost +5%, perhaps because it's been seen as a loser in the AI revolution. Hong Kong equities also outperformed, with [**Tencent**](https://finance.yahoo.com/quote/0700.HK/?ref=asiancenturystocks.com) and [**Alibaba**](https://finance.yahoo.com/quote/9988.HK/?ref=asiancenturystocks.com) rising by double digits. They've been out of favor for more than half a year. I spoke at Swen Lorenz's excellent [Weird Shit Investing Online conference](https://www.undervalued-shares.com/events/weird-shit-investing-online-2026/?ref=asiancenturystocks.com). Most of us were focused on value, and I noticed that much of the discussion revolved around small caps in Korea, Hong Kong, and the Philippines. That's probably not a coincidence – these are some of the lowest-P/E markets in Asia right now: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-185.png) Not to say that the MSCI Korea is necessarily undervalued at 4.8x P/E. Because estimates for chipmaker profits well over US$500 billion are hard to fathom, even if hyperscaler capex ramps up further. --- ## Portfolio update The portfolio rebounded strongly in July, up +3.8% month-on-month. Since the portfolio's inception in October 2021, the portfolio's value has increased by +81.5%, equivalent to a +13.1% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-187.png) The biggest contributors were the two software developers [**Freee**](https://www.asiancenturystocks.com/freee-4478-jp/)(accounting) and [**Visional**](https://www.asiancenturystocks.com/visional-4194-jp/) (job board). There was no real company-specific news that could have explained these share price moves. Here's what my Asia-focused portfolio looked like as of 29 July 2026: _This post is for paying subscribers only._ ### Interview: Andrei Stetsenko URL: https://www.asiancenturystocks.com/interview-andrei-stetsenko/ Last updated: 2026-07-29T14:33:22.000Z *Hi! I'm Michael. This is a *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. New to the publication? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*.* [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/signup) --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. As of 29 July 2026, I do not own any of the stocks mentioned in this article and have no plans to transact in these securities within seven days of publication. This is a disclosure, not a recommendation to buy or sell stocks. Michael Fritzell, published by Delante Media Pte Ltd* --- ## 1\. Hi Andrei! Thanks for doing this interview. Can you tell us a bit about your background and how you ended up investing in India? I joined my now-partner Steve Farley as an equity analyst a couple days after graduating from Princeton in 2010\. My first few years working with Steve included trips to visit companies in Brazil, China, Denmark, Germany, India, Mexico, Sweden, Switzerland, and the UK. Shortly after our first visit to India in 2012, we concluded that no other emerging market could come close to rivaling India’s sheer scale, decades-long runway for continued compounding growth, or unmatched opportunity set consisting of >5,000 listed companies characterized by low institutional ownership, sparse professional analyst coverage, substantial long-term outperformance by mid- and small-cap stocks, and limited correlation with global indices. We purchased our first Indian securities in 2013 and only became more enthusiastic about the opportunity over the course of subsequent visits. In 2014, Narendra Modi’s Bharatiya Janata Party (BJP) came to power and embarked upon what in retrospect has constituted the most significant period of economic liberalization in India’s history since the whirlwind of reforms that [followed](https://www.gymkhanapartners.com/dispatches/india-since-1991-tiger-uncaged?ref=asiancenturystocks.com) the country’s 1991 balance of payments [crisis](https://www.gymkhanapartners.com/dispatches/india-before-1991-tiger-caged?ref=asiancenturystocks.com). (As discussed below in further detail, the Modi administration’s prudent economic policies have been icing on the cake of the myriad other powerful factors underpinning India’s long-term growth.) By 2015, 10% of our firm’s capital was invested in Indian companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/GettyImages-487385639.jpg) Narendra Modi back in 2014\. Source: Getty Images As we built deeper expertise in the Indian market and our focus there grew, it became clear that our India holdings warranted their own dedicated structure – one that would let current and future partners invest directly in our India strategy on a standalone basis, while allowing our firm’s two older partnerships to reduce the transaction costs and operational complexity associated with each directly owning Indian securities. To that end, in 2017 we established Gymkhana Partners, and our two other partnerships allocated 15% of their capital to that new vehicle. Today, Gymkhana is a roughly $50 million AUM India-dedicated fund. \~70% of Gymkhana Partners’ capital is attributable to the investments from our other two partnerships, \~15% is attributable to the general partner (i.e., primarily Steve and me), and the remaining \~15% is attributable to a dozen or so limited partners who heard about Gymkhana largely via word of mouth – as it was only within the past year that we began publicly marketing the fund (Gymkhana did not even have a public website until August 2025). --- ## 2\. Tell us about Gymkhana’s investment strategy. How do you gain an edge in a market like India? And what do you think most investors get wrong about the market? Many investors glance at the typically high price/earnings ratios of India’s largest-capitalization stocks (which also constitute its best-known equity indices) and conclude that India’s high P/Es discount these companies’ future earnings so much as to make them uninteresting as prospective investments. The mistake many investors then make is to “tar with the same brush” and never take the time to research the rest of India’s vast equity market, which is home to more listed companies (>5,000) than the NYSE and NASDAQ combined. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-167.png) Source: World Federation of Exchanges I agree with the conclusion that much of the future earnings growth of many of India’s largest-cap stocks is already priced into their valuations. Yet most India-dedicated capital is still crowded into various combinations of those same blue chips: e.g., [**Infosys**](https://finance.yahoo.com/quote/INFY/?ref=asiancenturystocks.com) *(INFY US — US$47 billion)*, [**HDFC Bank**](https://finance.yahoo.com/quote/HDB/?ref=asiancenturystocks.com) *(HDB US – US$118 billion)*, [**Reliance Industries**](https://finance.yahoo.com/quote/RELIANCE.NS/?ref=asiancenturystocks.com) *(RELIANCE IN – US$179 billion)*, and [**Tata Consultancy Services**](https://finance.yahoo.com/quote/TCS.NS/?ref=asiancenturystocks.com) *(TCS IN – US$91 billion)*. Meanwhile, smaller-cap Indian companies are simply not on the radars of most foreign investors, barely followed by professional securities analysts, and owned primarily by insiders and retail (rather than institutional) Indian investors. U.S. investors, especially, seem to have been conditioned in recent years by the dominance of the “Magnificent 7” tech titans to believe that smaller-caps aren’t worth spending any time on. As a result, opportunities abound for investors willing to do the work of learning about, visiting, and appraising overlooked and often mispriced Indian businesses. Most of Gymkhana’s portfolio companies are not covered by any sell-side analysts whatsoever, and >95% of our holdings do not overlap with the disclosed positions of any major India-dedicated mutual fund or ETF. Our portfolio’s position weighted-average market cap is well under $1 billion – compared to the multi-billion USD average market caps of India funds such as the [**iShares MSCI India “Small-Cap” ETF**](https://www.ishares.com/us/products/239660/ishares-msci-india-smallcap-etf?ref=asiancenturystocks.com) *(SMIN US – US$697 million)* and [**JPMorgan India “Smaller Companies” unit trust**](https://am.jpmorgan.com/hk/en/asset-management/per/products/jpmorgan-india-smaller-companies-acc-usd-mu0204u00022?ref=asiancenturystocks.com) *(JFINDSM MP – US$22 million)*. Continual on-the-ground research is the only way to keep up with this opportunity set, particularly as it expands continually thanks to India’s steady pipeline of new listings (2025 saw a [record number of IPOs](https://internationalbanker.com/finance/india-is-undergoing-an-unprecedented-ipo-boom/?ref=asiancenturystocks.com) and a record amount of capital raised). While many U.S. IPOs result from a private equity firm needing an exit at the end of a fund lifecycle, the typical Indian IPO more closely resembles the kind of initial public offering you might read about in a macroeconomics textbook: a high-quality, growing business that needs capital to fund a new factory big enough to support an anticipated doubling or even tripling of sales within the next few years. Over the course of my and Steve’s 38 combined trips to India since 2012, we’ve visited hundreds of management teams across the country – not just in the major hubs of Bengaluru, Delhi, and Mumbai, but also in smaller cities such as Coimbatore, Kolhapur, Mysuru, and Vadodara. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-178.png) Mumbai in 2024 Most of the >700 meetings we’ve held with Indian management teams over the years didn't lead to a purchase. But from almost every meeting we’ve gleaned some useful piece of information that we then added to a proprietary database that may be the single most valuable piece of proprietary work I've produced in my sixteen years as a securities analyst. That database contains quantitative metrics covering more than 2,000 companies – both those we've met and those we hope to meet down the road. More importantly, our database also compiles qualitative notes on scuttlebutt, rumors, news items, offhand remarks, and other informal intelligence gathered over countless conversations with managers, journalists, fellow investors, and other local contacts – covering not only prospective investments, but also their suppliers, customers, and competitors. Steve and I occasionally split up on these trips to cover more ground, but we make a point of spending part of each one working side-by-side with Nireeksha Makam, our full-time India-based analyst. Doing so lets the three of us compare notes and decide what to dig into next during the stretch between Steve's and my return to the U.S. and our next videoconference together. We also set aside time on every trip to reconnect with – and expand – our circle of businesspeople, investors, financial journalists, and other contacts in India. That network has been indispensable over the years, especially in helping us vet companies and controlling shareholders on governance, management quality, and basic integrity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/data-src-image-a3d5fce7-c541-4d7d-8072-1bf5875573a9.png) --- ## 3\. What’s the top-down bull case for India in your view, and what do most investors get wrong about the market? Do you expect India to eventually follow China’s steps in becoming a manufacturing superpower? I regularly encounter people with hopelessly outdated mental pictures of India, and don’t let them escape the clutches of conversation with me until I’ve brought them up to date on the facts about modern India: a burgeoning industrial powerhouse that is a huge net exporter of food, a major global player in sectors including chemicals, pharmaceuticals, precision engineering, and business services, and the [world’s biggest market by daily users](https://economictimes.indiatimes.com/tech/artificial-intelligence/india-now-largest-market-in-world-in-ai-model-adoption-bofa/articleshow/126033187.cms?from=mdr&ref=asiancenturystocks.com) for ChatGPT, Claude, Gemini, Instagram, WhatsApp, and YouTube. With the possible exception of outer space, there is simply no other emerging market today that compares to India. Even many investment professionals don’t seem to appreciate the pace of India’s economic development, the durability of the factors that can be counted on to sustain rapid growth for decades to come, or the ways in which investors can profit from that compounding growth. First, India’s economy is growing at roughly double the rate of global GDP. India’s nominal USD per capita income is [up sevenfold](https://www.imf.org/external/datamapper/NGDPDPC@WEO/IND?zoom=IND&highlight=IND&ref=asiancenturystocks.com) over the past three decades to \~$2,800\. Even at today’s still-low level of average income, India is already the world’s 3rd\-largest economy on a purchasing power parity basis, and [will soon eclipse Japan](https://www.nytimes.com/2026/02/27/business/india-economy-gdp.html?ref=asiancenturystocks.com) as the 4th\-largest in nominal terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-168.png) GDP per capita in India (thousands of US Dollars per year). Source: The World Bank On an inflation-adjusted basis, India’s current per capita GDP implies that, in terms of its development trajectory, India is roughly a generation behind [Mainland China](https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=IN-CN&ref=asiancenturystocks.com) or half a century behind [South Korea](https://data.worldbank.org/indicator/NY.GDP.PCAP.KD?locations=IN-KR&ref=asiancenturystocks.com). In those and other now-wealthier economies, when GDP per capita reached the level around where India’s GDP per capita is today, it heralded the start of a boom in discretionary spending. A newly urbanized Indian worker who doubles his household’s *overall* income (say, from $2,500 to $5,000) typically facilitates even faster expansion in his household’s consumption of non-essential goods and services. Such a household will tend to boost its spending on bare necessities such as housing and food, but at a pace slower than its increase in overall income (say, from $2,000 to $3,250), resulting in drastically faster growth in the disposable income that remains available for non-essential spending (in this case, from $500 to $1,750). Indians’ burgeoning disposable incomes mean that growth in certain industries, from apparel to financial services to healthcare to travel, is outpacing even the world-leading growth in India’s overall GDP. Second, while GDP growth in China and other emerging markets has not translated well into corporate earnings growth, India [exhibits](https://www.franklintempleton.lu/articles/2023/equity-markets/india-economic-growth-and-earnings?ref=asiancenturystocks.com) the highest correlation between GDP and earnings growth of any large emerging market. The Indian economy’s basic structure is much more comparable to the U.S. than China in that, despite its vast scale and significant participation in global trade, it is [primarily driven](https://www.eastspring.com/insights/thought-leadership/why-indias-consumer-boom-may-be-the-next-big-thing-for-investors?ref=asiancenturystocks.com) by growth in domestic consumption and consequently [largely insulated](https://www.gymkhanapartners.com/dispatches/india-largely-insulated-from-trade-wars?ref=asiancenturystocks.com) from trade wars. The earnings growth of India’s listed companies is driven by simultaneous and complementary macro factors including [exceptionally favorable demographics](https://www.gymkhanapartners.com/dispatches/demographics?ref=asiancenturystocks.com) (with the youngest median age among the world’s 30 largest economies), [accelerating urbanization](https://www.worldbank.org/en/news/opinion/2024/01/30/gearing-up-for-india-s-rapid-urban-transformation?ref=asiancenturystocks.com) (India’s <40% [urbanization rate](https://data.worldbank.org/indicator/SP.URB.TOTL.IN.ZS?locations=IN&ref=asiancenturystocks.com) is roughly analogous to 1968 South Korea or 1895 America), and [market-friendly governance](https://manufacturing.economictimes.indiatimes.com/news/industry/gst-2-0s-calm-breeze-how-tax-simplification-will-drive-manufacturing-growth-through-consumer-spending/123922037?ref=asiancenturystocks.com) (recent years have seen transformative reforms to taxation, interstate commerce, bankruptcy proceedings, and state-owned enterprises) – a combination of tailwinds that was, and remains, [unique among the world’s major economies](https://www.gymkhanapartners.com/dispatches/the-indian-century?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-169.png) India's demographic pyramid as of 2026\. Source: Wikipedia Third, a largely overlooked but [transformative shift in the allocation](https://www.gymkhanapartners.com/dispatches/the-equitization-of-indian-savings?ref=asiancenturystocks.com) of Indian household wealth is helping to drive a virtuous cycle that is deepening India’s equity markets, channeling record capital to the businesses underpinning the nation’s world-leading GDP growth, and (by[ increasing](https://timesofindia.indiatimes.com/business/india-business/market-divide-widens-domestic-investors-extend-lead-over-foreign-funds-ownership-gap-hits-25-year-peak/articleshow/125122881.cms?ref=asiancenturystocks.com) the share of India’s equity market that is domestically owned) further decoupling Indian stocks from global volatility. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/data-src-image-175cc3ed-3b2c-4236-aec6-84c808b9ce0a.png) Fourth, India is *already* following China’s steps toward becoming a manufacturing powerhouse. Malaysia, Thailand, Vietnam, and other economies in the region are also benefiting from multinationals’ diversification of supply chains away from China. India, however, offers an unrivaled combination of attractions, most notably a vast, booming domestic market, a concerted government effort to incentivize the establishment of new factories, and an abundance not only of cost-competitive low-skilled labor but also of English-speaking graduates with engineering and other technical skills. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/data-src-image-8cc40978-bbda-440f-bd80-40db17469137.png) Source: Gymkhana India [now supplies](https://www.moneycontrol.com/news/business/india-to-assemble-28-of-global-iphones-in-2026-as-apple-deepens-supply-chain-shift-beyond-china-13920170.html?ref=asiancenturystocks.com) \>25% of the world’s iPhones (up from 0% a decade ago), and is also expanding its share of global supply chains for pharmaceuticals, industrial equipment, semiconductors, LCD displays, data storage devices, and EV batteries. Finally, its youthful [digital-native](https://www.linkedin.com/pulse/raising-digital-natives-indias-evolving-landscape-sanjay-shukla-kxupc/?ref=asiancenturystocks.com) citizenry, ubiquitous [low-cost mobile broadband](https://indiasworld.in/the-architecture-of-digital-india-the-jio-story/?ref=asiancenturystocks.com), robust [digital infrastructure](https://www.forbesindia.com/article/thought-leadership/iim-bangalore/transforming-indias-dpi-shift-from-scale-to-ecosystem-impact/2994639/1?ref=asiancenturystocks.com), and [tech-friendly](https://www.pmindia.gov.in/en/news%5Fupdates/india-should-be-among-the-top-three-ai-superpowers-globally-pm-modi-sets-2047-vision/?ref=asiancenturystocks.com) government make India fertile ground for digital innovation, including deployment of artificial intelligence. --- ## 4\. The Indian market has traded at relatively high multiples over the past few years, before coming off since 2024\. What’s the reason for these valuation multiples, and how have you dealt with them as a professional investor? Unless we restrict our definition of “the Indian market” to mean the benchmark indices comprised of the largest 50 or 100 Indian companies by market capitalization, then I’d challenge the premise of this question. Yes, India’s largest companies (and the indices they comprise) tend to trade at rich P/Es. But move down the market-cap table past the top 50 or 100 names, and there's no shortage of high-quality, well-run businesses selling at far more modest multiples, though they also sit squarely in the path of India's broader growth story. This group includes companies serving fast-growing domestic demand across categories like financial services, pipes and fittings, and agrochemicals; businesses supporting the country's nationwide infrastructure buildout; and exporters whose cost advantages are wide enough that an occasional tariff increase barely moves the needle. Smaller-cap Indian stocks tend to be mispriced due to being overlooked, and many are overlooked because the most interesting things about them are buried deep in the annual report notes, or comprehensible only to someone with an understanding of the historical/economic context. For example, companies such as [**Bharat Bijlee**](https://www.bharatbijlee.com/company/about-us/company-overview/?ref=asiancenturystocks.com) *(BIJL IN – US$298 million;* an electric equipment manufacturer that owns roughly 30 acres of unutilized land in Mumbai’s fast-developing eastern suburbs) and [**Century Textiles**](https://finance.yahoo.com/quote/ABREL.NS/?ref=asiancenturystocks.com) *(ABREL IN – US$1.6 billion;* a former textile mill operator [recently rebranded](https://www.hindustantimes.com/real-estate/century-textiles-officially-rebranded-as-aditya-birla-real-estate-101728994855702.html?ref=asiancenturystocks.com) as [Aditya Birla Real Estate](https://www.adityabirla.com/businesses/companies/aditya-birla-real-estate/?ref=asiancenturystocks.com)) are, in our view, significantly undervalued given that conservatively-estimated market values of land they acquired decades ago represent a meaningful percentage of the companies’ current market capitalizations. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-176.png) Compared to Indian equity indices and listed India mutual funds/ETFs, Gymkhana is “underweight” pricey financial and consumer stocks, and “overweight” agricultural, chemical, and industrial businesses. We don’t own any of India’s 250 largest companies by market cap, and on a position-weighted basis, our portfolio trades at <15x forward earnings – a significant discount relative to the Sensex, MSCI India, S&P 500, and other major indices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/data-src-image-d8702f3c-3238-4963-a17e-7466391ebada.png) Our archetypal investment enters the portfolio as an underappreciated small-cap, is held for many years as earnings compound, and is ultimately profitably divested when we observe share price appreciation being driven primarily by multiple expansion (i.e., overdue recognition by other market participants) rather than by growth in underlying earnings. That diligence with respect to paring/divesting maturing positions, in turn, provides us with capital that we may re-deploy into comparatively lower-P/E investment candidates. --- ## 5\. How do you deal with corporate governance, as India has historically been plagued with scandals like with Satyam Computer Services back in the 2000s? Evaluating the quality of corporate governance is the single most important step in our research process. Growth rates and valuation multiples mean little if the people running the business are dishonest or unethical. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-175.png) Ramalinga Raju, the former Chairman of Satyam Computer Services before its downfall Early on, Steve and I made the mistaken assumption that the listed Indian arms of blue-chip multinationals would rank highly on measures of corporate governance. These MNC subsidiaries – names like [**ABB India**](https://new.abb.com/indian-subcontinent/investors?ref=asiancenturystocks.com) *(ABB IN — US$16 billion)*, [**Colgate-Palmolive India**](https://www.colgateinvestors.co.in/about-us?ref=asiancenturystocks.com) *(CLGT IN — US$6.1 billion)*, [**Maruti Suzuki India**](https://www.marutisuzuki.com/corporate/about-us?ref=asiancenturystocks.com) *(MSIL IN – US$45 billion)*, and [**Nestlé India**](https://www.nestle.in/about-us?ref=asiancenturystocks.com) *(NEST IN — US$30 billion)* – exist because of [foreign-ownership restrictions](https://dash.harvard.edu/server/api/core/bitstreams/7312037d-dec9-6bd4-e053-0100007fdf3b/content?ref=asiancenturystocks.com) dating back to the 1970s. Those restrictions were largely lifted after India’s [post-1991 economic liberalization](https://www.gymkhanapartners.com/dispatches/india-since-1991-tiger-uncaged?ref=asiancenturystocks.com), but the mechanics of buying out minority shareholders in these units have remained cumbersome enough that many delisting efforts have failed (SEBI, the market regulator, has [in recent years introduced reforms](https://www.cnbctv18.com/market/sebi-volunatry-delisting-rules-introduces-fixed-price-framework-for-promotersintroduces-fixed-price-framework-for-promoters-19483208.htm?ref=asiancenturystocks.com) aimed at easing this). As a result, a number of these multinationals now view their Indian units less as businesses to grow and more as sources of cash – pulling out an [increasing](https://www.livemint.com/companies/royalty-payments-to-parent-firms-evoke-calls-for-frequent-shareholder-approvals-sebi-11732525187355.html?ref=asiancenturystocks.com)[ share](https://economictimes.indiatimes.com/news/company/corporate-trends/like-royalty-its-how-indian-arms-treat-the-parents/articleshow/113972397.cms?ref=asiancenturystocks.com) of profits by arbitrarily increasing the [royalty percentages](https://finshots.in/archive/why-investors-hate-royalties-that-indian-subsidiaries-pay-foreign-mncs/?ref=asiancenturystocks.com) paid to the parent, leaving less for reinvestment or equitable distribution to all shareholders. By contrast, some of the *best* governance we've come across in India sits with family-run businesses led by first- or second-generation founders. These owner-operators tend to allocate capital far more carefully – and deliver better outcomes for minority shareholders like Gymkhana – than many "professionally" managed boards at companies with such diffuse ownership that key decisions get made with the indifference of people spending someone else's money. Many of the management teams we meet aren't accustomed to institutional investors, let alone foreign ones, and often aren't fluent in Wall Street terminology – which isn't necessarily a bad sign. We've sat across from founder-CEOs who knew every detail of their ball-bearing or polymer-masterbatch businesses but hadn't yet learned to express that knowledge in terms like return on equity, simply because no one had asked them to before. On the other hand, we've learned to be wary of managements that are unusually polished, since that kind of veneer often reflects a focus on generating investor enthusiasm rather than on improving the fundamentals of their business. As far as best practices for detecting and avoiding governance red flags, a decade ago governance problems were often visible right in the annual report – an unlisted affiliate quietly collecting large related-party payments for vague services, for instance. More recently, even founders with looser ethics seem to have generally figured out that growing their market cap serves them better than crude extraction. That doesn't mean red flags have disappeared – they've just gotten harder to spot. We have developed a process for identifying governance red flags that pairs our own diligence with input from a local expert ecosystem we’ve put enormous time and effort into building. Accordingly, any would-be Gymkhana rival could not replicate our approach without spending the years and years we did cultivating an on-the-ground network of Indian executives, financial journalists, local investors, and other contacts spanning public and private markets, domestic and foreign institutions, and a cross-section of investing philosophies and vantage points. If even one contact within our network is apprehensive about a prospective investment’s governance, that’s our sign to stop wasting time and move on. Conversely, we generally want to hear good things from multiple authoritative sources about both the ethics and intelligence of a company/management before we accumulate a substantial position in its shares. Finally, one simple rule has served us well in India: steer clear of industries where success depends more on political connections than on operating ability. That rules out mining, telecoms, and utilities – and, perhaps less obviously, dairy, which years of research convinced us is too often [entangled with Indian politics](https://www.forbesindia.com/article/take-one-big-story-of-the-day/n-chandrababu-naidu-the-dairy-king-emerges-as-the-kingmaker-in-indian-politics/93306/1?ref=asiancenturystocks.com) to invest in comfortably. --- ## 6\. Tell about SEBI’s reform agenda, and how it impacts the case for owning Indian holding companies? Gymkhana holds stakes in over a dozen listed Indian holding companies (a.k.a. “holdcos”) trading at discounts to the market values of their stakes in listed operating affiliates that range from \~45% to as high as \~85%. Of course, just because an Indian holdco sells at a discount to its sum-of-the-parts value is not enough to make it a good investment. We own the ones we do because they allow us to gain exposure to high-quality, earnings-compounding operating businesses at effective P/Es drastically lower than what we would have paid buying those underlying stocks directly. Notable examples include Gymkhana portfolio companies [**Maharashtra Scooters**](https://www.mahascooters.com/about-us.html?ref=asiancenturystocks.com) *(MHSC IN – US$1.5 billion)* and [**Chola. Financial Holdings**](https://www.cholafhl.com/about-us?ref=asiancenturystocks.com) *(CHOLAHLD IN – US$3.0 billion)*, whose \~50%-60% discounts to their respective sum-of-the-parts values allow us to indirectly gain exposure to outstanding underlying businesses including [**Bajaj Finserv**](https://www.bajajgroup.company/core-companies/bajaj-finserv-limited/?ref=asiancenturystocks.com) *(BBJFIN IN — US$32 billion)* and [**Chola. Investment and Finance**](https://www.cholamandalam.com/about-us?ref=asiancenturystocks.com) *(CIFC IN – US$16 billion)* at effective P/Es drastically lower than what we would have paid buying those underlying stocks directly. India’s markets regulator SEBI recently unveiled multiple reforms aimed specifically at narrowing the very wide gaps between listed holdcos’ market and book values. While such a narrowing is *not* integral to our investment thesis, we wouldn’t be surprised if it happened sooner than many other Indian market participants seem to expect. These SEBI reforms include newly-introduced annual [special call auctions](https://www.sebi.gov.in/legal/circulars/jun-2024/introduction-of-a-special-call-auction-mechanism-for-price-discovery-of-scrips-of-listed-investment-companies-ics-and-listed-investment-holding-companies-ihcs-%5F84319.html?ref=asiancenturystocks.com) intended to improve “price discovery” of otherwise illiquid holdco stocks, [streamlined procedures](https://www.sebi.gov.in/media-and-notifications/press-releases/jun-2024/sebi-board-meeting%5F84448.html?ref=asiancenturystocks.com) by which holdcos can distribute to their stockholders their (the holdcos’) stakes in other listed companies, and simplified offer/counter-offer processes by which holdcos can attempt to buy out minority shareholders. --- ## 7\. On a recent podcast, you discussed the potential value unlock in Maharashtra Scooters. Could you give us a brief overview of that case? As discussed on [that podcast](https://www.youtube.com/watch?v=LicKoq7LyoY&t=1s&ref=asiancenturystocks.com) and in a [research memo](https://www.gymkhanapartners.com/dispatches/maharashtra-scooters-a-consortium-of-great-businesses-at-a-discount?ref=asiancenturystocks.com) accessible on Gymkhana’s website, [**Maharashtra Scooters Limited**](https://www.mahascooters.com/about-us.html?ref=asiancenturystocks.com) *(MHSC IN/ MAHSCOOTER IN – US$1.5 billion)* is part of the century-old Bajaj Group. Its legendary founder Jamnalal Bajaj somehow managed not only to establish what remains to this day one of India’s most universally-respected business groups, but also to play a sufficiently important role in the Indian independence movement that Mahatma Gandhi [reportedly](https://www.indiatoday.in/magazine/news-makers/story/20170925-jamnalal-bajaj-mahatma-gandhi-nationalism-simon-commission-salt-satyagraha-1044644-2017-09-16?ref=asiancenturystocks.com) referred to him as his “fifth son.” Ever since the 2024 wind-down and divestment of its legacy manufacturing operations, MAHSCOOTER has been a “pure-play” holdco. As of July 2026, it trades at a \~60% discount to its sum-of-the-parts (SOTP) value, the key components of which are the following stakes in listed Bajaj affiliates: - \~3.1% of [**Bajaj Finance**](https://www.bajajgroup.company/core-companies/bajaj-finance-limited/?ref=asiancenturystocks.com) *(BAF IN / BAJFINANCE IN – US$1.5 billion)*, India’s largest private-sector non-banking financial company (NBFC), with a >100 million-strong [customer base](https://www.bajajfinserv.in/finance-digital-annual-report-fy25/chairman-letter.html?ref=asiancenturystocks.com) and an [exceptionally capable](https://www.businesstoday.in/magazine/cover-story/story/indias-best-ceos-2015-rajeev-jain-bajaj-finance-into-fastest-growing-nbfcs-54964-2015-12-29?ref=asiancenturystocks.com) management team; - \~2.4% of [**Bajaj Finserv**](https://www.bajajgroup.company/core-companies/bajaj-finserv-limited/?ref=asiancenturystocks.com) *(BJFIN IN /BAJAJFINSV IN – US$32 billion)*, a holdco for the Group’s financial services businesses that as of this writing trades a slight discount to the market value of its most valuable asset, a \~51.3% equity stake in BAJFINANCE; in addition to its majority interest in BAJFINANCE, BAJAJFINSV also directly owns a profitable set of growing businesses spanning insurance, asset management, and securities brokerage; - \~2.5% of [**Bajaj Auto**](https://www.bajajgroup.company/core-companies/bajaj-auto-limited/?ref=asiancenturystocks.com) *(BJAUT IN / BAJAJ-AUTO IN – US$33 billion)*, one of the world’s leading manufacturers of motorcycles, scooters, and auto-rickshaws; and ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-173.png) A Bajaj three-wheeler on the streets of Manila, the Philippines - \~3.0% of [**Bajaj Holdings & Investment**](https://www.bajajgroup.company/core-companies/bajaj-holdings-and-investment-limited/?ref=asiancenturystocks.com) *(BJHI IN / BAJAJHLDNG IN — US$13 billion)*, the Bajaj Group’s larger listed holdco, which relative to MAHSCOOTER currently trades at a slightly narrower discount to the market value of its stakes in BAJAJFINSV, BAJAJ-AUTO, and other Bajaj businesses *(see chart below).* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/data-src-image-8eb42252-29f5-4a3a-b44f-fcd6b8bbcf85.png) Maharashtra Scooters’ stakes in the two financial services firms (BAJFINANCE and BAJAJFINSV) account for the overwhelming majority of MAHSCOOTER’s SOTP value. Aggregate underlying earnings attributable to MAHSCOOTER have, by my math, compounded at \~25% over the past five years in INR terms, or \~19% in USD terms. MAHSCOOTER’s stock has compounded at an even faster rate over that period, as implied by the narrowing of its discount to SOTP. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-171.png) Another way of viewing MAHSCOOTER’s \~60% discount to sum of the parts value is that it enables an investor to gain exposure to underlying Bajaj operating businesses at a P/E significantly lower than one would pay to own those businesses directly. Buying MAHSCOOTER at today’s share price allows an investor to own the Bajaj operating businesses discussed above at a position size-weighted multiple of less than 9x those underlying businesses’ N12M earnings – *substantially lower* than the position-size weighted multiple of \~21x one would pay as of July 2026 to buy those stocks directly. In addition to the aforementioned SEBI reforms, potential value unlock catalysts include recent Bajaj-specific developments indicative of a gradual but substantial shift in mindset within the group. When I first visited Bajaj back in 2015, BAJAJHLDNG and BAJAJ-AUTO shared key managerial personnel, who told me that they viewed BAJAJHLDNG as the group’s “de facto central bank” and insisted that the holdco would “never sell” its shares in the group’s underlying operating businesses. A decade later, BAJAJHLDNG [sold](https://www.reuters.com/world/india/indias-bajaj-holdings-sells-stake-worth-234-million-bajaj-finserv-via-block-deal-2025-06-06/?ref=asiancenturystocks.com) 10.4 million shares of BAJAJFINSV and, in a separate transaction, the Bajaj family’s unlisted Jamnalal Sons holdco offloaded 18.2 million shares of BAJAJFINSV. Perhaps most importantly, the Bajaj holdcos’ dividends have increased significantly in recent years: in MAHSCOOTER’s case, more than quadrupling from ₹50 per share five years ago to ₹220 per share over the past 12 months. --- ## 8\. You’ve recently increased your exposure to India’s defense/aerospace industry. What’s been the catalyst for this shift and what are you particularly bullish on within the sector? As discussed on another [recent podcast](https://www.youtube.com/watch?v=b-cGX2h73S8&ref=asiancenturystocks.com) and summarized in a [research memo](https://www.gymkhanapartners.com/dispatches/major-sector-inflection-india-defense-and-aerospace?ref=asiancenturystocks.com) accessible on Gymkhana’s website, India is the world’s fifth-largest military spender and (depending on how one values the flow of weaponry into Ukraine) either the 1st\- or 2nd\-biggest arms importer. India’s annual defense budget has roughly doubled over the past decade, and is on course to exceed $100 billion within the next couple years. Moreover, the composition of those outlays is changing. India is systematically shifting its defense procurement away from its decades-long supplier Russia and toward Western countries eager to deepen their security partnerships with New Delhi. Indian government policies [incentivize](https://breakingdefense.com/2025/02/india-budget-boosted-9-5-but-analysts-say-pensions-hindering-weapons-spending/?ref=asiancenturystocks.com) the development of locally-built substitutes for imported systems, sub-systems, and components. Foremost among these are minimum thresholds (typically at least 50%) for the share of content that [must be sourced indigenously](https://www.legal500.com/developments/thought-leadership/indigenization-and-self-reliance-in-defence-procurement-a-legal-analysis-of-the-defence-acquisition-procedure-2020/?ref=asiancenturystocks.com) for any contracts awarded as part of the nation’s defense procurement. Foreign defense and aerospace companies looking to meet these thresholds generally team up with an Indian offset partner capable of manufacturing critical parts domestically. For example, [**Hindustan Aeronautics**](https://hal-india.co.in/our-history?ref=asiancenturystocks.com)' *(HNAL IN – US$32 billion)* [HAL Tejas](https://en.wikipedia.org/wiki/HAL%5FTejas?ref=asiancenturystocks.com) fighter jet is >60% [locally sourced](https://defence-blog.com/india-orders-97-tejas-mk1a-jets-in-7-billion-deal/?ref=asiancenturystocks.com), with the remainder, including [F404](https://en.wikipedia.org/wiki/General%5FElectric%5FF404?ref=asiancenturystocks.com#F404-GE-IN20) jet engines from [GE Aerospace](https://www.geaerospace.com/company/about-us/history?ref=asiancenturystocks.com) *(GE US – US$377 billion),* imported. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-170.png) India’s indigenously-developed Tejas Mk1A jet As part of the same 2020 procurement [reforms](https://www.legal500.com/developments/thought-leadership/indigenization-and-self-reliance-in-defence-procurement-a-legal-analysis-of-the-defence-acquisition-procedure-2020/?ref=asiancenturystocks.com) that hiked local-content minimums, the Modi government also lifted the cap on foreign ownership of Indian defense companies from 49% to 74%, a change meant to encourage joint ventures and technology transfer with foreign partners. The Indian government has also prioritized speeding up defense procurement, including by facilitating more direct channels between the Indian military and contractors below the “Tier 1” of listed but state-controlled incumbent firms such as [**Bharat Dynamics**](https://bdl-india.in/company-profile?ref=asiancenturystocks.com) *(BDL IN — US$4.9 billion)*, [**Bharat Electronics**](https://bel-india.in/history/?ref=asiancenturystocks.com) *(BHE IN — US$30 billion)*, and the aforementioned [Hindustan Aeronautics](https://hal-india.co.in/our-history?ref=asiancenturystocks.com). This is significantly broadening opportunities for smaller and scrappier private-sector defense/aerospace firms, including many mid- and small-capitalization companies specializing in high-value components that go into aircraft (e.g., aerostructures, avionics, radars, aero-engine parts, etc.) and/or are integral to their production (e.g., machine tools). Gymkhana portfolio companies such as [**Dynamatic Tech**](https://dynamatics.com/about-us?ref=asiancenturystocks.com) *(DYTC IN – US$734 million)* and [**Astra Microwave**](https://astramwp.com/about-ampl/?ref=asiancenturystocks.com) *(ASTM IN – US$1.7 billion)* are evolving from mere component suppliers into partners trusted by leading aerospace multinationals to develop, integrate, and reliably deliver expanding shares of increasingly sophisticated systems. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-174.png) Astra’s indigenously-developed AESA radar India’s intensified efforts to “indigenize” a greater share of the supply chain for India’s defense equipment is a particular boon to the select few Indian defense/aerospace firms that have already invested years into building partnerships with Western counterparts, such as [**DCX Systems**](https://dcxindia.com/company/about/?ref=asiancenturystocks.com) *(DCXINDIA IN – US$208 million)*, a Bengaluru-based firm long linked with Israeli manufacturers that more recently began winning significant business from [**Lockheed Martin**](https://www.lockheedmartin.com/en-us/who-we-are.html?ref=asiancenturystocks.com) *(LMT US – US$134 billion)*. Because of India’s aforementioned minimum thresholds for the India-made shares of defense procurements, DCX is positioned to win contracts not on the basis of price, but rather on the basis of helping customers hit made-in-India targets without compromising quality and reliability. Gymkhana’s defense/aerospace portfolio companies are also benefiting from India’s increasing attractiveness both as a [burgeoning source of *civil* aerospace demand](https://www.boeing.co.in/news/2024/india-will-lead-south-asia-to-become-fastest-growing-commercial-aviation-market?ref=asiancenturystocks.com) and as a [manufacturing hub](https://www.reuters.com/business/aerospace-defense/global-aerospace-firms-turn-india-amid-western-supply-chain-crisis-2025-02-17/?ref=asiancenturystocks.com) for multinational supply chains. India [recently became](https://www.iata.org/en/iata-repository/publications/economic-reports/indias-drive-to-leverage-air-transport-for-economic-development/?ref=asiancenturystocks.com) the world’s 3rd\-largest aviation market in terms of passenger traffic (behind only the U.S. and China) – up from 8th just a decade ago. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-172.png) The new Terminal 2 at Bangalore International Airport in Bengaluru, Karnataka Even after recent years’ rapid growth, Indians today [take](https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/indias-domestic-air-passenger-traffic-to-touch-300-mn-by-2030-naidu/articleshow/114006222.cms?from=mdr&ref=asiancenturystocks.com) just \~0.14 yearly flights per capita – equivalent to less than a quarter of the \~0.6 [global average](https://www.iata.org/en/iata-repository/pressroom/fact-sheets/industry-statistics/?ref=asiancenturystocks.com). Despite its status as one of the world’s largest and fastest-growing markets for aircraft, maintenance services, and parts, India [still accounts](https://www.reuters.com/business/aerospace-defense/global-aerospace-firms-turn-india-amid-western-supply-chain-crisis-2025-02-17/?ref=asiancenturystocks.com) for less than 2% of global aerospace supply chains. India’s nascent [maintenance, repair, and overhaul](https://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/indias-aircraft-maintenance-repair-overhaul-market-to-be-worth-4-bn-by-2031-govt/articleshow/125581435.cms?from=mdr&ref=asiancenturystocks.com) (MRO) industry [currently captures only a small fraction](https://www.kearney.com/industry/aerospace-defense/article/unlocking-the-7-billion-prize-in-india-s-aviation-mro-market?ref=asiancenturystocks.com) of its addressable market, with the vast majority of Indian-owned aircraft/aero-engines relying on overseas servicing. Even as Indian demand pulls them in, aerospace multinationals are also being “pushed” to accelerate their shift toward Indian suppliers by frustration with [labor](https://www.reuters.com/business/aerospace-defense/major-boeing-customer-avolon-sees-impressive-progress-production-following-2025-02-13/?ref=asiancenturystocks.com) and [supply chain](https://www.reuters.com/business/aerospace-defense/airbus-ended-2024-better-shape-than-feared-ceo-tells-staff-2025-01-21/?ref=asiancenturystocks.com) disruptions constraining output at their existing, relatively high-cost plants. As India’s share of the market’s supply side converges with its rapidly-expanding share of demand, we expect direct beneficiaries will include Gymkhana portfolio companies such as [**Azad Engineering**](https://azad.in/about-us/?ref=asiancenturystocks.com) *(AZAD IN — US$1.6 billion)*, [**Dynamatic Tech**](https://dynamatics.com/about-us?ref=asiancenturystocks.com) *(DYTC IN – US$734 million)*, [**Sika Interplant Systems**](https://www.sikaglobal.com/overview.html?ref=asiancenturystocks.com) *(SIKA IN – US$246 million)*, and [**Unimech Aerospace**](https://www.unimechaerospace.com/company/?ref=asiancenturystocks.com) *(UNIMECH IN – US$627 million)*, each of which supplies critical components to some subset of [**Airbus**](https://www.airbus.com/en/about-us?ref=asiancenturystocks.com) *(AIR FP – US$190 billion)*, [**Boeing**](https://www.boeing.com/company?ref=asiancenturystocks.com) *(BA US – US$167 billion)*, [**Honeywell**](https://www.honeywell.com/us/en/company/about-us?ref=asiancenturystocks.com) *(HON US – US$78 billion)*, [**RTX**](https://www.rtx.com/who-we-are/we-are-rtx?ref=asiancenturystocks.com) *(RTX US — US$295 billion)*, and/or [**Rolls-Royce**](https://www.rolls-royce.com/about.aspx?ref=asiancenturystocks.com) *(RR/ LN – US$155 billion)*. --- ## 9\. Are there any good books that can teach us about investing in Indian equities, or get to know India as a country more generally? For anyone totally new to India, I’d recommend Gurcharan Das’s 2002 [*India Unbound*](https://www.penguinrandomhouse.com/books/36931/india-unbound-by-gurcharan-das/?ref=asiancenturystocks.com) and Edward Luce’s (former head of the *Financial Times’* New Delhi bureau) 2007 [*In Spite of the Gods*](https://www.amazon.com/dp/0385514743?ref=asiancenturystocks.com). For those wanting more of a deep dive into modern India’s economic and political history, I recommend starting with chronicles of India’s fight for independence such as the lengthy but excellent [*Freedom at Midnight*](https://www.amazon.com/dp/0006388515?ref=asiancenturystocks.com), followed by more contemporary economic histories such as [*India: The Emergent Giant*](https://www.amazon.com/India-Emerging-Giant-Arvind-Panagariya/dp/0195315030?ref=asiancenturystocks.com) and [*India after the Global Crisis*](https://www.amazon.com/India-Global-Crisis-Shankar-Acharya/dp/8125045090?ref=asiancenturystocks.com)*,* and topped off with simply wading through the digital archives of high-quality Indian newspapers such as *Business Standard*, *The Economic Times*, *India Today*, *Mint*, and *The Times of India*. And if you don’t want to do all that, check out the two-part blog series I wrote a decade ago on the [lead-up to](https://www.gymkhanapartners.com/dispatches/india-before-1991-tiger-caged?ref=asiancenturystocks.com) and [aftermath of](https://www.gymkhanapartners.com/dispatches/india-since-1991-tiger-uncaged?ref=asiancenturystocks.com) India’s 1991 balance of payments crisis, as well as a [follow-up discussing](https://www.gymkhanapartners.com/dispatches/indias-unfinished-revolution?ref=asiancenturystocks.com) the areas in which the economic liberalization unleashed post-1991 remains a work in progress. More recent books worth checking out include [*Backstage: The Story Behind India’s High Growth Years*](https://asiasociety.org/india/backstage-story-behind-indias-high-growth-years?ref=asiancenturystocks.com) by the economist and former civil servant Montek Singh Ahluwalia, which provides a fresh look at how the 1991 crisis enabled the reforms that followed and examines what it will take to sustain rapid growth. Another is [*Breaking the Mold: India’s Untraveled Path to Prosperity*](https://press.princeton.edu/books/hardcover/9780691263632/breaking-the-mold?ref=asiancenturystocks.com) by economists Raghuram Rajan (who led India’s central bank from 2013 to 2016) and Rohit Lamba, which argues that India’s path to prosperity lies not in replicating China’s manufacturing prowess, but rather by capitalizing on its comparative advantages related to high-skilled services and scrappy, entrepreneurial small/medium-sized businesses. Finally, [buried within Harvard Business School’s website](https://www.library.hbs.edu/special-collections-and-archives/collections/collection-areas/oral-histories/creating-emerging-markets/interviews?geography=India&ref=asiancenturystocks.com) are freely-available transcripts of a bunch of excellent interviews with icons of Indian business such as [Rahul Bajaj](https://www.library.hbs.edu/special-collections-and-archives/collections/collection-areas/oral-histories/creating-emerging-markets/interviews/rahul-bajaj?ref=asiancenturystocks.com), [Adi Godrej](https://www.library.hbs.edu/special-collections-and-archives/collections/collection-areas/oral-histories/creating-emerging-markets/interviews/adi-godrej?ref=asiancenturystocks.com), and [M.V. Subbiah](https://www.library.hbs.edu/special-collections-and-archives/collections/collection-areas/oral-histories/creating-emerging-markets/interviews/mv-subbiah?ref=asiancenturystocks.com). Those pair well with [*The Unusual Billionaires*](https://www.amazon.com/dp/B06XXZ6C6S?ref=asiancenturystocks.com), Saurabh Mukherjea’s excellent book examining seven iconic Indian companies. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-177-1.png)](https://www.amazon.com/dp/B06XXZ6C6S?lv=shuf&channelId=500&plpRedirect=mhFallback&ref=asiancenturystocks.com) --- ## 10\. Thanks for doing this, Andrei! Where can people go to learn more about you and Gymkhana Partners? They can check out our website at [gymkhanapartners.com](https://www.gymkhanapartners.com/?ref=asiancenturystocks.com). Our recently-published [Q2 2026 investor letter is accessible here](https://www.gymkhanapartners.com/investor-letters/gymkhana-partners-q2-2026-quarterly-letter?ref=asiancenturystocks.com). You can follow our commentary on India’s economy and stock market by signing up for the [*Dispatches from India*](https://www.gymkhanapartners.com/dispatches-from-india?ref=asiancenturystocks.com)blog. To receive fund updates including Gymkhana’s monthly returns, you’ll need to complete the form on [our website’s *Contact* tab](https://www.gymkhanapartners.com/contact?ref=asiancenturystocks.com). Additionally, Gymkhana is active on both X/Twitter and LinkedIn; you can also follow my personal accounts on both those platforms. - [Gymkhana X/twitter](https://x.com/GymkhanaFund?ref=asiancenturystocks.com) - [Gymkhana LinkedIn](https://www.linkedin.com/company/gymkhanapartners?ref=asiancenturystocks.com) - [My X/Twitter](https://x.com/astetsen?ref=asiancenturystocks.com) - [My LinkedIn](https://www.linkedin.com/in/astetsen/?ref=asiancenturystocks.com) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Upgrade to paid](https://www.asiancenturystocks.com/#/portal/subscribe) ### Hidden Champions of South Korea URL: https://www.asiancenturystocks.com/hidden-champions-of-south-korea/ Last updated: 2026-07-26T09:48:12.000Z ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. As of 26 July 2026, I own shares in NICE Information Service but none of the other stocks mentioned in this article. I have no plans to transact in these securities within seven days of publication. This is a disclosure, not a recommendation to buy or sell stocks. Michael Fritzell, published by Delante Media Pte Ltd* --- In mid-2026, US and Chinese online trading platforms Interactive Brokers and Moomoo opened up access to South Korean equities. And since then, the interest in the market among international investors has skyrocketed. To help you make sense of the market, I've dug into the universe of publicly listed stocks and picked out 30 "hidden champions". The concept is from German author [Hermann Simon](https://www.amazon.com/Hidden-Champions-Twenty-First-Century-Strategies/dp/0387981462/ref=sr%5F1%5F1?crid=2BXKFRPYNJZ7S&dib=eyJ2IjoiMSJ9.NoimzavRQVzwGpZIqrRI%5FC9clwqfjPYNCMPVYVNJqZwvp0%5Fswa1UwkJNgs6GR6g2iXhF1Wtwz%5FJRqKWS5WtlEGfHp9iToLII3BugrAcU9MmGAdZf80IpCqSt%5FdgoyJm0OUxJnqbndcMos-bHUe-bSn0a9j3BdD6LaoI7mrc7TBE.buGlLzxJkQsSU%5FRTtxDqvyvJGA9Sb%5FbWKvjHl8DLWWQ&dib%5Ftag=se&keywords=hidden+champions+of+the+21st+century&qid=1754183948&sprefix=hidden+champions+of+the+2%2Caps%2C425&sr=8-1&ref=asiancenturystocks.com) and refers to companies that dominate their niches and compound their capital at high returns on equity. I've done similar write-ups on hidden champions in [Malaysia](https://www.asiancenturystocks.com/hidden-champions-of-malaysia/), [Taiwan](https://www.asiancenturystocks.com/hidden-champions-of-taiwan/), [Indian ADRs/GDRs](https://www.asiancenturystocks.com/hidden-champions-among-indias-adrsgdrs/), [Chinese ADRs](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/), [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/), [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/), [Australia](https://www.asiancenturystocks.com/hidden-champions-of-australia/) and [Thailand](https://www.asiancenturystocks.com/hidden-champions-of-thailand/). Do not take the following discussion as investment advice. I've paid zero attention to share prices and instead focused on the inherent qualities of these businesses. ``` Table of contents: 1. A top-down view of South Korea 2. Screening for candidates 3. Hidden champions of South Korea 4. Conclusion ``` --- # **1\. A top-down view of South Korea** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-92.png) Source: Google Maps Let's start with some context. South Korea is an export juggernaut. It's a small country, sitting right in between China and Japan. And their influence on Korea has been massive throughout history. For example, Confucianism spread from China to Korea from the 14th century onwards. Until the creation of the Korean alphabet, classical Chinese was the written language. Even to this day, almost 2/3 of the Korean vocabulary has a resemblance to Chinese words. From 1910 to 1945, Korea was a Japanese colony. Modern state infrastructure was introduced, including legal codes, land registries, administrative systems, etc. After 1945, the United States proposed dividing the country into Soviet and US zones. In 1950, Soviet-backed North Korea invaded the South, which led to the Korean War. And instead of a resolution, the country remains divided between a communist north and a capitalist south. And the growth trajectory of the two countries could not have been more different: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-93.png) South Korea vs North Korea GDP per capita. Source: Our World in Data As I've [argued in the past](https://www.asiancenturystocks.com/the-east-asian-development-model/), South Korea followed the development trajectory of the other "Asian tigers". Like Japan and Taiwan, - The Korean government broke up large estates and transferred farmland to tenant farmers, raising productivity and weakening the rural elite - Companies received cheap loans, tariff protection, tariff advantages, import licenses, and access to foreign currency - Household savings were funneled through the banking system to industrial development, rather than consumer loans or speculation The development accelerated after the 1961 coup, when General Park Chung-hee took power. However, development wasn't exactly fair. Businessmen who teamed up with the government received certain favors, and grew to become the massive conglomerates ("chaebols") that dominate Korea today. The 1997 Asian Financial Crisis caused a financial collapse, as many Korean companies had borrowed overseas. Their debt burdens rose alongside a weakening Korean Won. Several chaebols such as Hanbo, Sammi, and Kia went bankrupt. But as South Korea was an export-focused economy, the weaker currency helped the export economy grow even faster. Within South Korea, Seoul is the center of advanced industries, and the Southeast, including Busan, is the center of heavy industry, shipbuilding, and trade. Jeju Island, on the other hand, is a major tourist destination. The ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-157.png) Source: Google Maps The US military continues to have 28,500 active army personnel on the ground in South Korea, meant to protect the country from any communist incursions from the North. Meanwhile, North Korean influence activities within South Korea try to sway public opinion against the US presence on Korean soil. It also tries to undermine conservative politicians and divide the country so as to reduce morale. One major event over the past decade was when US-made THAAD missiles were installed on South Korean soil in 2017\. Within weeks, North Korean ally China responded with economic retaliation, and many Korean companies suddenly encountered regulatory roadblocks there. Lotte and Hyundai had to retreat. And there was even an unofficial ban on South Korean pop culture, also known as [hallyu](https://www.asiancenturystocks.com/hallyu-everywhere/). The back-and-forth conflict between the left-leaning Democratic Party (DPK, also known as "Minjoo" and the conservative People's Power Party (PPP) is another source of concern for some investors. But politics has rarely had much impact on the success of Korean companies. Entrepreneurship is alive and well. The Korea Stock Exchange has been around since 1956, and the KOSPI since 1983\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-158.png) The benchmark KOSPI Composite index. Source: Trading View Note that foreign ownership of Korean equities was heavily restricted until the 1990s. That's also when KOSDAQ opened up as a secondary market for high-growth – but often unprofitable – equities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-159.png) The KOSDAQ Composite Index. Source: Trading View Oddly enough, MSCI still regards South Korea as an emerging market, despite its US$40,000+ GDP per capita. Part of the issue has been a lack of access to offshore trading in Korean Won, poor English-language disclosures, and recurring short-selling bans. But the currency trading issue will soon be resolved, and it looks like South Korea is on track to achieve MSCI developed market status in the near future. South Korea's aggregate market cap is now US$4.6 trillion, just below that of India and Hong Kong. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-96.png) However, the market cap number has been boosted by a speculative bubble in semiconductor stocks, which have benefited from a squeeze in the supply of memory chips. Bellwether stock SK Hynix has risen by more than 500% in less than a year. And while the margin debt-to-market cap ratio isn't as high as in 2021, there's speculative activity in many of the AI related stocks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-94.png) Source: Jefferies Evidence of speculative activity can be found in an index of search queries on Naver.com for the keyword [stock price](https://datalab.naver.com/keyword/trendResult.naver?hashKey=N%5F02da9435a90ad522a55e9ad7cd313c01&ref=asiancenturystocks.com) (주가). Everyone in Korea seems to be speculating in stocks these days. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-97.png) Source: Naver Datalab The broader small-cap universe continues to lag Korea's semiconductor stocks. Historically, Korea has had a low return on equity, mostly due to poor capital returns to shareholders: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-95.png) It's also a fact that many Korean entrepreneurs have adopted holdco/opco structures to maintain control, presumably at the expense of minorities. Many companies have also issued [preference shares](https://www.asiancenturystocks.com/koreanprefs/) — essentially non-voting common shares — that raise capital without diluting the founder's control. As I've [argued in the past](https://www.asiancenturystocks.com/korean-reforms/), the issues in Korea have been threefold: - A high inheritance tax of 50% based on the market value of your holdings, causing controlling shareholders to try to minimize share prices - High dividend taxes of up to 49.5%, causing companies to minimize payout ratios - Related party transactions, with few penalties and only ex-post disclosures But change is finally taking place. The dividend tax has been reduced for high-payout-ratio companies. Related party transactions have been addressed through the mid-2025 law, which imposed legal liability on independent directors who fail to take minority interests into account. And for low-Price/Book companies, the inheritance tax may eventually be based on the book value of equity rather than the company's market value. This would partially take away the incentive to minimize share prices. In South Korea, there are currently 1,489 publicly listed companies with market caps above US$50 million. Among these, 57% of tech companies, 17% industrials (many of which are tech-adjacent), 8% financials, 6% consumer discretionary, 5% healthcare, and 2% materials companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-99.png) Source: TIKR Beyond tech, Korea has also had massive success in the defense industry and shipbuilding. Its missiles and tanks are far cheaper than those produced in other developed markets. And Korean pop music, Korean dramas, and Korean cosmetics continue to be popular worldwide. To give you a flavor of what types of companies are listed in Korea, the largest companies include search engine [Naver](https://sg.finance.yahoo.com/quote/035420.KS/?ref=asiancenturystocks.com), automakers [Hyundai](https://finance.yahoo.com/quote/005380.KS/?ref=asiancenturystocks.com) and [Kia](https://finance.yahoo.com/quote/000270.KS/?ref=asiancenturystocks.com), tobacco company [KT&G](https://finance.yahoo.com/quote/033780.KS/?ref=asiancenturystocks.com), biotech CDMO [Samsung Biologics](https://finance.yahoo.com/quote/207940.KS/?ref=asiancenturystocks.com), semiconductor companies [Samsung Electronics](https://finance.yahoo.com/quote/005930.KS/?ref=asiancenturystocks.com) & [SK Hynix](https://finance.yahoo.com/quote/000660.KS/?ref=asiancenturystocks.com), steel-maker [POSCO](https://finance.yahoo.com/quote/047050.KS/?ref=asiancenturystocks.com), and utility [KEPCO](https://finance.yahoo.com/quote/130660.KS/?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-101.png) Source: TIKR So to summarize, South Korea is a tech-heavy export powerhouse. Corporate governance has been poor but is improving year by year. Semiconductor and AI-related names have re-rated sharply over the past twelve months. Margin debt as a share of market cap remains below 2021 levels, but Naver search interest in stocks has spiked. Most of the smaller listed companies have not participated in the move. So it does look like it's a stock picker's market. --- # 2\. Screening for candidates I'll now do some screening. I'm looking for companies with "hidden champion-like" characteristics: - A high historical average **return on equity** - High historical **growth in earnings per share** - Strong **share price performance** So I've ranked the entire list of 1,489 companies above US$50 million market cap across these three metrics. To start with, here are the top ten companies in South Korea in terms of a *high return on equity*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-107.png) Source: TIKR Many of these are electronics or power companies like memory chip makers [**SK Hynix**](https://finance.yahoo.com/quote/000660.KS/?ref=asiancenturystocks.com), [**SK Square**](https://finance.yahoo.com/quote/402340.KS/?ref=asiancenturystocks.com), or suppliers [**Sungho Electronics**](https://finance.yahoo.com/quote/043260.KQ/?ref=asiancenturystocks.com)and [**Sunic System**](https://finance.yahoo.com/quote/171090.KQ/?ref=asiancenturystocks.com), or distributors like [**SAMT**](https://finance.yahoo.com/quote/031330.KQ/?ref=asiancenturystocks.com). But then you have K-beauty and medical device companies like skincare brand [**APR**](https://finance.yahoo.com/quote/278470.KS/?ref=asiancenturystocks.com)**,** [**Genic**](https://sg.finance.yahoo.com/quote/123330.KQ/?ref=asiancenturystocks.com), and [**d'Alba Global**](https://sg.finance.yahoo.com/quote/483650.KS/?ref=asiancenturystocks.com). Finally, there's the IT services company [**ITCEN Global**](https://finance.yahoo.com/quote/124500.KQ/?ref=asiancenturystocks.com), which owns Korea Gold Exchange, the country's largest gold distributor, which has benefited from the past bull market in gold. Next, here are the top ten companies in terms of *share price CAGR*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-103.png) Source: TIKR When it comes to share price return CAGR, the semiconductor complex has also done well. Examples include semicap [**Hanmi Semiconductor**](https://sg.finance.yahoo.com/quote/042700.KS/?ref=asiancenturystocks.com), memory chip maker [**SK Hynix**](https://sg.finance.yahoo.com/quote/000660.KS/?ref=asiancenturystocks.com), testing companies [**TSE**](https://finance.yahoo.com/quote/131290.KQ/?ref=asiancenturystocks.com)and [**Doosan Tesna**](https://finance.yahoo.com/quote/131970.KQ/?ref=asiancenturystocks.com), MLCC name [**Samsung Electro-Mechanics**](https://finance.yahoo.com/quote/009150.KS/?ref=asiancenturystocks.com)and switchgear maker [**LS Electric**](https://finance.yahoo.com/quote/010120.KS/?ref=asiancenturystocks.com). On the pharma side, Merck supplier [**Alteogen**](https://sg.finance.yahoo.com/quote/196170.KQ/?ref=asiancenturystocks.com) has been a major biotech success story. [**Sam Chun Dang Pharma**](https://finance.yahoo.com/quote/000250.KQ/?ref=asiancenturystocks.com)makes eye drops and has exposure to GLP-1 drugs. In the list is also battery materials company [**Ecopro**](https://finance.yahoo.com/quote/086520.KQ/?ref=asiancenturystocks.com)and buldak ramen maker [**Samyang Foods**](https://sg.finance.yahoo.com/quote/003230.KS/?ref=asiancenturystocks.com), which I wrote about [here](https://www.asiancenturystocks.com/samyang-foods-003230-ks/). Finally, here are the top ten companies in South Korea in terms of *EPS CAGR*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-104.png) Source: TIKR Here, you'll find greater diversity in the types of companies that have done well. You'll find consumer companies such as conglomerate [**Lotte**](https://finance.yahoo.com/quote/004990.KS/?ref=asiancenturystocks.com), buldak ramen maker [**Samyang Foods**](https://finance.yahoo.com/quote/003230.KS/?ref=asiancenturystocks.com), outerwear maker [**TP Inc**](https://finance.yahoo.com/quote/007980.KS/?ref=asiancenturystocks.com), and live-streaming platform [**SOOP**](https://finance.yahoo.com/quote/067160.KQ/?ref=asiancenturystocks.com), which relies on perhaps an unsustainable tipping model. Defense contractor [**SNT Dynamics**](https://finance.yahoo.com/quote/003570.KS/?ref=asiancenturystocks.com) is one of many companies that have benefited from the post-Ukraine global arms build-up. Biotech company [**Alteogen**](https://sg.finance.yahoo.com/quote/196170.KQ/?ref=asiancenturystocks.com)benefited from its contract with Merck. And in tech, cathode material maker [**L&F**](https://finance.yahoo.com/quote/066970.KS/?ref=asiancenturystocks.com) has done well, as has thermal power plant catalyst maker [**NANO**](https://finance.yahoo.com/quote/187790.KQ/?ref=asiancenturystocks.com), semicap [**Wonik**](https://finance.yahoo.com/quote/030530.KQ/?ref=asiancenturystocks.com), and power transmission component maker [**DAE-IL**](https://finance.yahoo.com/quote/092200.KS/?ref=asiancenturystocks.com). I don't want to draw too many conclusions from these screens. Many of the stocks are cyclical, including semiconductor companies like SK Hynix. And many of the consumer names, including the K-Beauty stocks, have relied on TikTok to grow. But as I've noticed in the past, easy come, easy go. To distill the 1,489-company sample into something more manageable, I've spent the last week identifying companies that qualify as hidden champions. The full list has been ranked by return on equity, historical share price performance, and earnings per share growth. Here is the entire spreadsheet: _This post is for paying subscribers only._ ### Avia Avian (AVIA IJ) URL: https://www.asiancenturystocks.com/deep-dive-avia-avian-avia-ij/ Last updated: 2026-07-19T05:51:36.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* This post reflects my personal opinions. It is provided for informational and educational purposes only — it is not investment advice and not a recommendation to buy or sell any security, and it does not take into account your objectives, financial situation or needs. As of 19 July 2026, I do not hold a position in Avia Avian, and I receive no compensation from Avia Avian or any other company mentioned; my revenue comes solely from reader subscriptions. This disclosure reflects my position on the date stated and will not be updated. Asian Century Stocks uses information sources believed to be reliable, but accuracy cannot be guaranteed, and opinions are subject to change without notice. Do your own research and consult a licensed financial adviser before making any investment decision. Michael Fritzell, published by Delante Media Pte Ltd* --- Indonesian equities are clearly out of favor. Our friends at Variant Perception recently noted a [negative bubble signal](https://x.com/MikeFritzell/status/2072323457946394866?s=20&ref=asiancenturystocks.com) in MSCI Indonesia, suggesting recent panic selling. One of the stocks that has declined a fair bit is Indonesian paint manufacturer [**Avia Avian**](https://finance.yahoo.com/quote/AVIA.JK/?ref=asiancenturystocks.com) *(AVIA IJ – US$1.1 billion)* ("Avian"). This company is often seen as a proxy for the Indonesian consumer. And the consumer is weak right now, hurt by the high interest rate environment and rising import costs. In June 2026, President Commissioner Hermanto Tanoko purchased US$2 million worth of shares. Insider purchases have mixed predictive value, but the transaction prompted me to take a closer look at the company. _This post is for paying subscribers only._ ### Insider activity June 2026 URL: https://www.asiancenturystocks.com/insider-activity-june-2026/ Last updated: 2026-07-30T03:22:41.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. As of 15 July 2026, I hold no position in any stock mentioned in this article. I have no plans to transact in these securities within seven days of publication. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## June insider transactions Okay, so we had a 70% month-on-month increase in Asian insider transactions in June - the greatest number of buys since 2020\. However, there's a pattern in which insiders tend to buy right after a major share price slump. And I think that could be partly what's happened, especially when it comes to Korean large caps. The overall sell/buy ratio for Asia is now 0.64x, on par with Canada's and Europe's and still bullish. In contrast, the United States' ratio remains bearish. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/WEHD0-insider-sell-buy-ratio-by-region---1-.png) Sell/buy ratios by region (lower is bullish). Source: Smart Insider By country, we saw continued bearish signals for **China** and **India**. Meanwhile, **South Korea**'s insider sell/buy ratio reached an incredible 0.12x, suggesting 8x more buying than selling. **Hong Kong**, **Malaysia**, and **Thailand** remain in the middle at about twice as many buys as sells. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/GnnSa-insider-sell-buy-ratio-by-country-.png) Sell/buy ratios by country (lower is bullish). Source: Smart Insider **The rest of this article is available to all premium subscribers. Welcome:* [Unlock the rest ](http://asiancenturystocks.com/?ref=asiancenturystocks.com#/portal/signup/) _This post is for paying subscribers only._ ### Air Water (4088 JP) URL: https://www.asiancenturystocks.com/deep-dive-air-water-4088-jp/ Last updated: 2026-07-12T04:06:59.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in Air Water at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- While the world is obsessing about AI, there's been a quiet bull market in the world's industrial gas companies. Stocks like [**Linde**](https://finance.yahoo.com/quote/LIN/?ref=asiancenturystocks.com) *(LNA US – US$245 billion)* and [**Nippon Sanso**](https://finance.yahoo.com/quote/4091.T/?ref=asiancenturystocks.com) *(4091 JP – US$16 billion)* have both been ten-baggers since the early 2000s: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/VNx8v-global-industrial-gas-stocks-.png) Stock price performance of industrial gas companies, normalized from the starting year 1997 _This post is for paying subscribers only._ ### Thailand's stimulus package URL: https://www.asiancenturystocks.com/thailands-stimulus-package/ Last updated: 2026-07-08T02:35:44.000Z *Hi! I'm Michael Fritzell. Welcome to another *free-to-read edition* of Asian Century Stocks – a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- In his latest [Gloom, Doom & Boom report](https://www.gloomboomdoom.com/mm-commentary/public-archive/detail/the-greatest-global-investment-mania-in-modern-history/?ref=asiancenturystocks.com), Marc Faber revealed that he is accumulating Thai property stocks, which tend to be sensitive to the credit cycle. Thailand has been suffering from a multi-year downturn in credit growth: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-48.png) Year-on-year growth in bank loan issuance. Source: Bank of Thailand However, there are signs that the credit cycle is finally turning. The new Bhumjaithai government is pushing for a THB 400 billion stimulus package. And loan growth finally turned positive in the first quarter of 2026\. I'll discuss the Thai macro backdrop, why the cycle might be turning and what type of companies might be benefitting from a turnaround. --- # 1\. The Bhumjaithai victory Historically, Thai business has been dominated by an elite closely connected to the royal family and the **Thai military**. In 2001, a businessman called **Thaksin Shinawatra** became Prime Minister by appealing to rural voters through cash handouts and other populist policies. But the elite eventually struck back. Thailand had several military coups, with riots between military-backed "Yellow Shirts" and Thaksin-backed "Red shirts. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/GettyImages-91750268.jpg) "Red shirt" supporters of Thaksin Shinawatra Thaksin fled to the UK and spent more than a decade in exile. In his absence, his Pheu Thai party has served as a proxy for him. And several of his family members served as Thailand's Prime Minister. Since 2018, Thailand's elite has been further challenged by a new party called Move Forward, later renamed the **People's Party**. This party became popular on the back of its promises to break up Thailand's monopolies, including the companies that make up a large portion of the Stock Exchange of Thailand. A People's Party victory would not be positive for stocks in the short run. In February 2026, Thai voters went to the polls again. The election was a fight between these three forces: the military-aligned Bhumjaithai party, Thaksin-connected parties and the reformist People's Party. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-57.png) The Bhumjaithai Party won in a landslide, taking 192 out of the 500 seats in the House of Representatives. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-50.png) Source: Bloomberg So Thailand now has a new government controlled by the Bhumjaithai party and its supporters, including the military and the tycoons that are running many of Thailand's publicly-listed companies. And that should actually be positive for stocks, as the government is now pro-business. --- # 2\. The Thai credit picture For over two years now, Thailand has been in a long, messy, bad-debt clean-up cycle. Household debt is close to 90% of GDP, of which a significant portion is unsecured non-mortgage debt. And nominal GDP growth has been so slow that the debt burden has not declined materially. So we've seen a decline in credit growth, especially in auto loans and small and medium-sized enterprise loans: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-52.png) A big decline in auto loans and SME loan issuance. Source: Bank of Thailand When it comes to auto loans, the decline is due to a price war initiated by Chinese electric vehicle manufacturers like BYD, causing second-hand prices to plummet. Keeping loan-to-value ratios fixed, lenders have had to reduce ticket sizes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-53.png) The assault of Chinese car brands in Thailand. Source: KPMG In the SME segment, credit growth has weakened due to general economic malaise. It could be due to competition from Chinese imports. In early 2026, Chinese imports grew +42% year-on-year, according to strategist Chris Wood at Jefferies: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-54.png) Source: Jefferies In addition, while tourism from Europe has recovered, tourism from China has not. And there's plenty of anecdotal evidence that small businesses like local restaurants are suffering. They never fully recovered from the COVID-19 pandemic. The property sector has been weak as well. The government has tried to help with 100% loan-to-value ratios, but developers are still facing weak demand with high mortgage rejection rates. It's ultimately due to poor creditworthiness among borrowers. The property market should have benefited from the recent decline in Thai interest rates: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-51.png) Thailand's policy rate. Source: Trading Economics But we haven't seen much of an impact on either credit growth or property transaction volumes. That's why I think it's encouraging to see the Bhumjaithai party now push for economic stimulus. Most importantly, it's targeting a THB 400 billion (US$12 billion) stimulus program, equivalent to 2% of GDP. This program includes: - A so-called **SME Credit Boost** scheme is meant to support new loan issuance through 2026 - The **Clear Debt, Move Forward Plus** program to restructure non-performing loans - **Khon la khrueng** ("half-half") consumption subsidies to 30 million people The Thai government has been constrained by its 70% public debt ceiling. But new Finance Minister Ekniti Nitithanprapas is pushing for the debt ceiling to be raised to 75%. That would be negative for the Thai Baht, but certainly positive for credit growth. --- # 3\. Stocks affected by the reforms Thai stocks continue to trade at low multiples. This chart from Pon at [Thaicapitalist.com](https://www.thaicapitalist.com/market-update-06-07-2/?ref=asiancenturystocks.com) shows that while the SET Index has recovered nicely, that recovery has been driven mostly by tech stocks like Delta Electronics Thailand and financials: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-55.png) SET performance by sector. Source: Thai Capitalist Consumer stocks remain depressed, as do many industrial stocks. So who will benefit from the stimulus program? First, SME-focused lenders such as [**Thai Credit Bank**](https://finance.yahoo.com/quote/CREDIT.BK/?ref=asiancenturystocks.com) should see their credit growth accelerate. As noted by banking analyst [Daniel Tabbush](https://www.asiancenturystocks.com/12-questions-with-daniel-tabbush/), many of Thailand's finance companies including [**TISCO**](https://finance.yahoo.com/quote/TISCO.BK/?ref=asiancenturystocks.com) and [**Thanachart Capital**](https://finance.yahoo.com/quote/TCAP.BK/?ref=asiancenturystocks.com) benefit from this lower interest rate environment as they primarily rely on wholesale financing rather than zero interest bank deposits. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/Gm0aK-tisco-financial-tisco-tb-.png) The same is true for credit card lenders like [**Krungthai Card**](https://x.com/RecoveryTrade/status/2074277723959423041?s=20&ref=asiancenturystocks.com). They enjoy fixed, regulated yields, while benefiting from lower interest rates. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/hpSTM-krungthai-card-ktc-tb-.png) The new consumer subsidies should benefit companies like 7-Eleven store operator [**CP All**](https://finance.yahoo.com/quote/TCPD.SI/?ref=asiancenturystocks.com), energy drinks company [**Carabao**](https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/), seaweed snack company [**Taokaenoi**](https://finance.yahoo.com/quote/TKN.BK/?ref=asiancenturystocks.com), home improvement retailer [**HomePro**](https://finance.yahoo.com/quote/HMPRO.BK/?ref=asiancenturystocks.com), cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/), and so on. Though I doubt the subsidies will really move the needle for any of them. *(Full disclosure: I own shares in both* [*Carabao*](https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/) *and* [*Major Cineplex*](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/)*)* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/0kpNw-home-product-center-hmpro-tb-.png) There will also be support for the property market. The government just extended 0% transfer and mortgage registration fees (usually 3%) through mid-2027\. That should help on the margin. A restructuring of non-performing loans, consumption subsidies and lower interest rates will help too. Especially for mass-market developers like [**Supalai**](https://finance.yahoo.com/quote/SPALI.BK/?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/83LXz-supalai-spali-tb-.png) On the negative side, I think the restructuring of non-performing loans will be unfavorable to distressed-debt buyers like [**JMT Network**](https://finance.yahoo.com/quote/JMT.BK/?ref=asiancenturystocks.com) and [**Bangkok Commercial Asset Management**](https://finance.yahoo.com/quote/BAM.BK/?ref=asiancenturystocks.com). And since there will be fewer vehicle repossessions, [**Union Auction**](https://finance.yahoo.com/quote/AUCT.BK/?ref=asiancenturystocks.com) will be hit, too. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/r5Ns6-union-auction-auct-tb-.png) --- # 4\. Conclusion It's still possible that Thailand's constitutional court will rule the emergency decree illegal, in which case the THB 400 billion stimulus program will have to be shelved. But the new government seems determined to stimulate the economy. I expect the debt ceiling to be raised and for government borrowing to counteract the negative effects from weaker auto and SME borrowing. That should be positive for liquidity, and positive for stocks. I do think the headwind from Chinese imports is structural. The Thai government has responded by removing the de minimis threshold for e-commerce packages. And the EV subsidies have been partially removed. But I expect the proportion of Thailand's imports from China to continue to go up. I am not convinced that the Thai housing market has turned. Developer [**Supalai**](https://finance.yahoo.com/quote/SPALI.BK/?ref=asiancenturystocks.com)'s forward guidance has not yet turned positive. But finance companies that rely on wholesale financing, including [**Krungthai Card**](https://x.com/RecoveryTrade/status/2074277723959423041?s=20&ref=asiancenturystocks.com), should benefit from government support and the ongoing decline in Thai interest rates. And since non-performing loans will likely be restructured, vehicle repossessions will be pushed forward, causing the recovery for [**Union Auction**](https://finance.yahoo.com/quote/AUCT.BK/?ref=asiancenturystocks.com) to be delayed another year or two. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Update: Saramin (143240 KS) URL: https://www.asiancenturystocks.com/update-saramin-143240-ks/ Last updated: 2026-07-06T06:44:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Saramin at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only – not a recommendation to buy or sell shares.* --- South Korean online recruitment platform Saramin is highly unusual. It operates in an oligopoly together with private equity-owned JobKorea. It has high margins and a high return on capital. Despite all this, Saramin trades at a discount to its net cash position. This will be the subject of today's post. # 1\. Quick recap I wrote about South Korean HR-tech company Saramin (사람인, formerly known as "SaraminHR") back in 2023: [Deep-dive 2023-2Watch now (9 min) | Niche Korean software developer![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-cc02f9fe-d78c-43ee-b608-f30dd2264579.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2fe859ceac-0b14-47b1-9e3d-c3f0fd759959_728x524-b4be7df7-e725-41cb-bb86-2e7a97298d1b.jpg)](https://www.asiancenturystocks.com/deep-dive-2023-2/) The background is this: - Saramin runs the largest online job board in Korea, with 2.5 million monthly active users. Users upload their resumes to the database, and employers use the search engine or matching algorithms to find potential hires. Its business model is very similar to Japan's Recruit or Australia's Seek. - On the [saramin.co.kr](https://www.saramin.co.kr/?ref=asiancenturystocks.com) website, you can search for jobs via profession, region, through personality-based AI matching, etc. You can also find graduate events and intakes. You can also find company reviews, anonymous salary information and a community where you can ask career-related questions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-17.png) - The revenue comes from employers who place ads on the platform. To get your job posting higher up in the search results, employers need to pay. Prices range from KRW 182,000 (US$120) to KRW 6 million (US$3,900) depending on the visibility tier. Meanwhile, basic postings are free. The average active employer has paid a little over US$1,000 per year, lower than in many other developed markets. - In addition to the job board, Saramin also runs a headhunting arm that helps companies and government agencies find employees. As well as a staffing agency that's closer to a company like Manpower. But these segments have not been particularly profitable. Almost 100% of Saramin's operating profit has come from the online job board. - Within South Korea, Saramin has had a roughly 25% market share. Its domestic peer JobKorea had similar user numbers and engagement rates. Network effects would normally dictate a winner-takes-all market. But I pictured the two companies coexisting. Saramin had carved out a niche for itself through a focus on small-and medium-sized enterprises, and that consumer mindshare has proven difficult to beat. - An online job board can be incredibly profitable. Back in 2022, Saramin had an operating profit of 30%, which I pictured was thanks to its network effects, the scale of its company review database and the scale of its R&D. - The trailing 5-year top-line compound annual growth rate was +12%, and EPS growth was +25%. I expected growth to slow down, but the historical numbers were high: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-42.png) Source: TIKR - Outside the country, Saramin owns a 70% stake in the Vietnamese recruitment portal TopDev, one of the leading job portals in that country. And since 2021, it has also held a stake in Remember, a newer app sometimes referred to as the LinkedIn of South Korea. - Saramin is a part of the broader Korean technology group Daou Technology, which also owns Kiwoom Securities. The Kim family controlled Saramin through a pyramid structure, enabling them to maintain absolute control despite historically holding only 1.5% economic interest. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-31.png) Saramin's organizational structure back in 2022 - Saramin's then-CEO Lee Jeong-geun had come from Korea Credit rating, then NICE Dun & Bradstreet and finally NICE Credit Rating. He was seen as a safe pair of hands. - There were early signs that the industry backdrop had weakened, however. The number of job openings had turned lower. Revenue growth had also deteriorated along with a weaker Korean economy. The demand for consumer electronics was hurt during the COVID-19 recovery, and I couldn't see any light at the end of the tunnel. - The stock, however, traded at a low multiple of around 8x forward P/E. And I noted that the company had instituted its first share buyback since 2015, suggesting a focus on capital returns. - A key risk was that South Korea's job market would continue to deteriorate. Some investors worried about competition from the newly listed Wanted Labs. There had also been claims that Saramin had copied job postings from JobKorea back in the mid-2010s, but I could not find any evidence either way. But ultimately, Saramin was a cyclical story. I believe that the economy would eventually turn, though the timing was certainly hard to judge. And indeed, the recovery took longer than I had expected. --- # 2\. A recovery in Korea's job market First, let me just say that there are clear headwinds in the Korean economy. The demographics are poor, with a total fertility rate of just 0.7\. Interest rates have been elevated since 2022, causing households to deleverage and consumers to pull back. However, after four years, the job market is finally recovering. This chart from [East Asia Econ](https://eastasiaecon.com/?ref=asiancenturystocks.com) shows that the labor market started to become tighter from early 2026 onwards: _This post is for paying subscribers only._ ### Portfolio update June 2026 URL: https://www.asiancenturystocks.com/portfolio-update-june-2026/ Last updated: 2026-07-02T03:26:52.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## Market commentary Last month, there was a decline in the MSCI All Country Asia-Pacific: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image.png) Source: Investing.com In a talk with Max from [Monetary Matters](https://open.spotify.com/episode/6INLIDC6H0tSuqzM12jNF2?si=3732b7527dbb4d42&ref=asiancenturystocks.com), I argued that speculative activity in South Korea and Taiwan might be nearing a crescendo. Naver search queries for stocks ("주식") are at a higher level since 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-16.png) Source: Naver Datalab Technicals are [now deteriorating](https://x.com/sunchartist/status/2072297668936708134?s=20&ref=asiancenturystocks.com), and smart newsletter writers ([Citrini](https://x.com/citrini/status/2072160062588530822?s=20&ref=asiancenturystocks.com), [Cluseau](https://x.com/blondesnmoney?ref=asiancenturystocks.com)) are having second thoughts about their exposures to memory chip stocks. The biggest surprise over the past month has been the strength in Thai equities: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-1.png) Source: Bloomberg There's been an equity market rally following the Bhumjaithai Party's win in February's General Election. [Marc Faber](https://www.gloomboomdoom.com/mm-commentary/public-archive/detail/the-greatest-global-investment-mania-in-modern-history/?ref=asiancenturystocks.com) started buying Thai equities mid-last year, with exposure to interest-rate-sensitive sectors like homebuilding. In mid-June, I wrote a post on what constitutes a [great business model](https://www.asiancenturystocks.com/toll-bridge-investing/). I argued that the best businesses can be compared with toll bridges, benefiting from flows of demand. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-12.png) I've had some losses in companies selling commodity products (notably in Malaysian glove maker Hartalega), and I'm now trying my best to move towards toll bridge-like near-monopolies. My focus on [Asian credit bureaus](https://www.asiancenturystocks.com/the-toll-booths-of-lending/) is part of this theme. In early June, I returned to Hong Kong to attend Swen Lorenz's [Weird Shit Investing conference](https://www.asiancenturystocks.com/travel-notes-hong-kong-2/). It felt like optimism had returned to the city, with talent from Mainland China flowing in. Property prices have started rising again, too. I continue to think that [Hong Kong's death has been exaggerated](https://www.asiancenturystocks.com/hong-kongs-death-has-been-exaggerated/). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-11.png) Singapore-based fund manager Lyall Taylor at the Weird Shit Investing conference MSCI China has come off quite a bit since October last year. It seems to have been driven by investors moving away from China's tech platforms to AI-related tech hardware. The PRC government's crackdown on Trip.com and the higher gaming taxes have not helped either. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-2.png) The iShares MSCI China ETF. Source: Investing.com Indonesia remains the black sheep of Asian equity markets. Indonesia-focused fund managers are now [visibly under pressure](https://www.linkedin.com/posts/james-hay-a50ba4166%5Fhaving-50-of-the-pangolin-asia-fund-invested-ugcPost-7470038954247938048-COV9/?utm%5Fsource=share&utm%5Fmedium=member%5Fios&rcm=ACoAAAAdCJQBAuecDD%5Fzwz2CZ%5Fs7jARvHbKhqcM). In late June, ex-education minister [Nadiem Makarim](https://asia.nikkei.com/spotlight/society/crime/indonesia-s-gojek-co-founder-nadiem-makarim-jailed-for-10-years-for-graft?ref=asiancenturystocks.com) was sentenced to 10 years in prison, along with an IDR 1 trillion fine. I've had multiple people tell me he's clean and that the anti-corruption case has no merit. [One Twitter user](https://x.com/bonsaiquant/status/2071879037971296712?s=20&ref=asiancenturystocks.com) noted that Nadiem will probably be unable to pay the fine, and that the government will take his Gojek shares instead. If so, the verdict could simply be akin to a dirty, hostile takeover of Gojek by the people in charge. So the headlines about Indonesian equities continue to be nothing but doom and gloom. That said, our friends at Variant Perception recently experienced [total capitulation in MSCI Indonesia](https://x.com/MikeFritzell/status/2072323457946394866?s=20&ref=asiancenturystocks.com) with LPPL exhaustion signals across intraday, daily and weekly timeframes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/07/image-14.png) Source: Variant Perception However, models like these are not always accurate and should perhaps only serve as a tentative indicator of potential crowding. --- ## Portfolio update June was a weak month for the portfolio. The portfolio declined by -1.5% month-on-month. Since the portfolio's inception in October 2021, the portfolio's value has increased by +73.6%, equivalent to a +12.4% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-168.png) Japanese SaaS company [**Freee**](https://www.asiancenturystocks.com/freee-4478-jp/) declined due to a deceleration in revenue growth. Malaysia's [**Hartalega**](https://www.asiancenturystocks.com/p/hartalega-update-hart-mk) also came down due to glove ASP pressures. Asian currencies such as the Japanese Yen and the Korean Won have also been weak. Here's what my Asia-focused portfolio looked like as of 30 June 2026: _This post is for paying subscribers only._ ### Toll Bridge Investing URL: https://www.asiancenturystocks.com/toll-bridge-investing/ Last updated: 2026-06-25T09:36:00.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- ## The Ambassador Bridge In 1979, the American entrepreneur Matty Moroun purchased the [Ambassador Bridge](https://x.com/TheIcahnist/status/2058477698180071849?s=20&ref=asiancenturystocks.com) for US$30 million, buying a large stake from Warren Buffett, who had also expressed an interest in it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-140.png) Matty Moroun This was the deal of the century. US$30 million was nothing compared to the potential profits of owning one of the only border crossings between the United States and Canada. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-121.png) The bridge is now earning over US$60 million per year, as there are few substitutes in the immediate vicinity. There are almost 6.5 million border crossings annually, accounting for 25% of all trucks entering and exiting Canada. And in addition, passenger tolls rose from US$0.75 to US$10 today. In real terms, the tolls have increased roughly three times. The pricing power has been almost unrestricted. Later on, Buffett commented that a business like the Ambassador Bridge is almost the perfect business model: > "In an inflationary world, a **toll bridge would be a great thing** to own because you've laid out the capital costs. You built it in old dollars, and **you don't have to keep replacing it**." In other words, zero capital requirements and a growing annuity that could potentially last forever. --- ## The problem with "economic moats" ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/GettyImages-1405187737-Large.jpeg) Source: Getty Images When most of us think about business quality, we borrow Warren Buffett's concept of an "economic moat": > "A truly great business must have an **enduring ‘moat’** that protects excellent returns on invested capital." The idea is that he wants to buy a great business and make sure it stays great. A valuable castle needs a "moat" to protect it from potential invaders. In Buffett's writing, he mentioned some sources of such moats, including owning a valuable brand name, network effects, switching costs, economies of scale, and regulation. The problem with the economic moat concept, however, is that it doesn't necessarily predict future returns. The return from any investment must necessarily come from either: 1. Higher **revenues** 2. Higher **margins** 3. Lower **share count** 4. Higher **valuation multiple** 5. **Dividend yield** during the period of ownership The moat concept doesn't really predict any of these. Moats tell you whether returns will be protected on the downside, but they don't tell you much about the direction and acceleration of demand. For that, we need to compare the product or service with its substitutes. --- ## The Toll Bridge Investing Model Instead, I propose what I call the **Toll Bridge Investing Model**: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-142.png) According to this model, an investment can be seen as having four component parts: an attractive destination that a flow of traffic is moving towards, potential substitute roads, and the cost of operating the toll booth. While Matty Moroun's Ambassador Bridge might have been the ultimate asset, the model can be generalized to any business. Simply judge any investment by how it fits the profile of a **scarce, unavoidable chokepoint** that benefits from an **ongoing flow of traffic**. Let's discuss each of the four parts: 1. First, there needs to be an **attractive destination**. By purchasing the product or service, you'll get somewhere. They can be functional, serving a specific problem, like taking you to Canada. They can entertain by offering something novel that evokes excitement. They can offer a sense of community, as in social media apps. They can reduce risk through well-known brand names. They can signal status, as in Veblen goods. The buyer will usually be able to tell you why he's attracted to it. 2. Second, we'll need **traffic**. The flow of traffic can accelerate due to innovations, new consumer preferences, improved infrastructure, and other factors. 3. Look out for **bypass risk**. Can the car bypass the chokepoint somehow? In other words, are there substitutes to the toll bridge that get customers to the same destination? 4. Finally, consider the **operational costs**. A toll booth costs almost nothing to operate. But if variable costs are high, the chokepoint might not be worth much. Or if the bridge requires a concession from the government, then its bargaining power will be limited. --- ## Toll bridge investing in practice If this sounds theoretical, let me provide a few examples of companies. These all fit the profile of a scarce, unavoidable chokepoint in an ongoing flow of traffic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-124.png) [**Texas Pacific Land Trust**](https://sg.finance.yahoo.com/quote/TPL/?ref=asiancenturystocks.com) *(TPL US – US$27 billion)* is a remnant of an US railroad that went bankrupt in 1888\. Thanks to this history, it happens to have accumulated 873,000 acres of land in one of the most oil-rich areas of the world: the Permian Basin. Now, we all know how **attractive** oil is: it has an unbeatable energy density, is stable at room temperature, is easy to transport and can be used for a variety of applications, including plastics, textiles, medicines, asphalt, gasoline, etc. What caused **traffic** to speed up was the invention of horizontal drilling and fracking. Suddenly, crude oil and natural gas trapped in shale deposits became unlocked. Wildcatters then flocked to the Permian Basin to lease land from Texas Pacific Land Trust, and later even buy water from it. Since Texas Pacific Land sits on freehold land, there's no way to reach the oil & gas sitting on its acreage without it. In other words, the **bypass risk** is minimal. Finally, the **cost** of selling rights to its land or collecting royalties is virtually zero. These factors have made Texas Pacific Land one of the prime beneficiaries of the fracking boom. And a perfect example of a toll bridge business model in practice. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/kvoOX-texas-pacific-land-trust-s-share-price-.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-143.png) Another example is Europe's [**Amadeus IT Group**](https://finance.yahoo.com/quote/AMS.MC/?ref=asiancenturystocks.com) *(AMS SM – US$27 billion)*. This company is the world's largest global distribution system for airline tickets, serving as a middleman between buyers and sellers. Every time a travel agent books a flight, Amadeus takes a small cut. In this instance, the **attractive destination** is where the plane physically lands. We'll want to travel for business, or to bring our families on vacation. The **flow of traffic** was primarily sped up by the invention of the jet engine in the 1930s, and popularized after the Second World War. But the cost of air travel has continued to decline as technological innovations have advanced. Today, low-cost airlines have brought down ticket prices to almost nothing. While airlines could in theory **bypass** Amadeus, network effects give it an edge in practice. Travel agents will want to search and book across hundreds of airlines simultaneously. Amadeus sits on that database. Finally, the **cost** for Amadeus to arrange another transaction is virtually zero. And so, as you can imagine, Amadeus has performed quite well, except for certain periods when air travel was restricted. Despite technological innovation, it remains a toll for air travel bookings globally. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/lSEzt-amadeus-it-group-share-price---1--1.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-144.png) A third example is the monopoly stock exchange [**Hong Kong Exchanges and Clearing**](https://finance.yahoo.com/quote/0388.HK/?ref=asiancenturystocks.com) *(388 HK — US$64 billion)* ("HKEX"). The exchange is one of the key ways for Chinese companies to access foreign capital. And its Stock Connect program is the primary way that overseas investors are able to get exposure to equities listed in Shanghai and Shenzhen. That's what's **attracting** investors to HKEX. While Chinese indices have not performed that well, Hong Kong Exchanges has benefitted from the rising market cap of Chinese equities, catalyzed by the Deng Xiaoping's reforms and other permissible regulation. This has caused the **flow of traffic**, measured in terms of dollar trading volumes, to rise. There's very little **bypass risk**: HKEX is the sole stock exchange, derivatives exchange, and clearing house in Hong Kong. While Chinese companies can access foreign capital in the US, it seems like that window is finally closing. And while foreign investors can invest directly in Shanghai and Shenzhen stocks, they need a scarce QFII license to do so. So the Stock Connect program remains almost a monopoly. Meanwhile, the **cost** of arranging yet another trade is minimal. Which explains why its gross margins are currently 97%. It's the toll bridge for capital flowing in and out of China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/XcURt-hong-kong-exchanges-amp-clearing-388-hk-.png) --- ## Toll Bridge-adjacent business models ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/GettyImages-2205744292-Large-1.jpeg) The Toll Bridge Investing Model can be generalized to other businesses as well. In my view, every company has some degree of toll bridge characteristics. For example: - **Enterprise software** is so embedded in companies' daily operations that it's not practical to migrate away from it, even if it could, in theory, be replaced. Examples include Australia's [Xero](https://finance.yahoo.com/quote/XRO.AX/?ref=asiancenturystocks.com). The software helps companies solve practical problems, such as creating financial statements or managing customer relationships, so it's a "destination" worth paying for. - **Testing & inspection companies** like Taiwan's [Sporton](https://finance.yahoo.com/quote/6146.TWO/?ref=asiancenturystocks.com) have an edge in approving electronic devices for import to the United States. Customers could, in theory, switch to another testing provider, but the cost is small relative to the shipment value. So these testing & inspection companies tend to act as chokepoints in the global trade of consumer electronics devices. - **Razor-and-blade models**, such as [ResMed](https://finance.yahoo.com/quote/RMD/?ref=asiancenturystocks.com)'s sleep apnea machines, ensure that once the installed base has been built (the bridge), consumables such as face masks (tolls) will continue to be sold with no practical alternatives. - **Distribution bottlenecks**, such as [Haad Thip](https://www.asiancenturystocks.com/haad-thip-htc-tb/)'s control of Coca-Cola beverage distribution in southern Thailand, or [Ginebra San Miguel](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/)'s control of the Luzon gin market. - **Data-driven lock-in**, such as when a credit reporting company like [NICE Information Service](https://www.asiancenturystocks.com/deep-dive-nice-information-service-030190-ks/) accumulates data on millions of borrowers, makes switching to another credit score provider unlikely. - **Standard-setters** such as [Nvidia](https://finance.yahoo.com/quote/NVDA/?ref=asiancenturystocks.com), through its CUDA programming language, benefit from having engineers learn the code and incorporate it into their products. The emphasis here is on businesses that serve as **practical** chokepoints. With enough effort, any business can be bypassed. But sometimes, the bridge solves the problem neatly, or finding the closest alternative bridge incurs real or perceived costs. Talking to customers will help you understand how likely they are to try to bypass your Toll Bridge. --- ## What can go wrong? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/GettyImages-1487884408-Large.jpeg) Source: Getty Images The return from any investment must come from higher revenues, higher margins, a lower share count, a higher valuation multiple, or dividends during the period of ownership. A key risk is that revenues decline due to lower **traffic volume**. There could be technological shifts that have made the destination a lot less attractive. Perhaps lower battery costs has made internal combustion engines less useful than before. Perhaps a credit reporting company suffers from a decline in mortgage lending. Or perhaps the airline ticket industry suffers from a drop in airline traffic due to a pandemic like COVID-19\. The **bypass risk** can also change. Even the Ambassador Bridge seems to be facing tougher competition these days, with the [Gordie Howe International Bridge](https://en.wikipedia.org/wiki/Gordie%5FHowe%5FInternational%5FBridge?ref=asiancenturystocks.com) opening in 2026 and charging just half the Ambassador Bridge's toll rates. Asking buyers why they choose one bridge over another will help you understand their psychology. Then there's the question of who actually signs the cheque. Finally, do they consider the toll fee to be significant or a rounding error in the grand scheme of things? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-161.png) The location of the new Gordie How International Bridge, opening up in 2026 There's always a risk of **government interference**. Governments can easily cap rates, as the Chinese government did for its toll roads during COVID-19\. Or require operators to pay a recurring concession fee to the government, taking away some of the economics of the business. Finally, the strongest toll bridge won't help unless you're actually getting rewarded as an investor. For that, you need **dividends** on top of well-timed share buybacks. A toll bridge can easily become a value trap if it never shares the economics with minorities. --- ## The Toll Bridge Checklist I've put together a [checklist](https://drive.google.com/file/d/1pu2HLUXgxhwBex26LhTZMD8hXVfxTews/view?usp=sharing&ref=asiancenturystocks.com) to think through how well a business fits the profile of a toll bridge that can't easily be bypassed: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-150.png)](https://drive.google.com/file/d/1pu2HLUXgxhwBex26LhTZMD8hXVfxTews/view?usp=sharing&ref=asiancenturystocks.com) --- ## Conclusion Matty Moroun purchased the Ambassador Bridge for US$30 million. It's now worth several billion US Dollars. This is a perfect example of a business model: owning a scarce, unavoidable chokepoint and benefiting from an ongoing flow of traffic. On the other hand, the opening of the new nearby Gordie Howe International Bridge underscores the need to remain vigilant about substitutes that may pop up along the way. In this post, I've argued that the business model for operating a toll bridge can be generalized to other industries. For example, [Texas Pacific Land](https://finance.yahoo.com/quote/TPL/?ref=asiancenturystocks.com), [Amadeus IT Group](https://finance.yahoo.com/quote/AMS.MC/?ref=asiancenturystocks.com), and [Hong Kong Exchanges & Clearing](https://finance.yahoo.com/quote/0388.HK/?ref=asiancenturystocks.com) carry some of the same characteristics. I picture that the best investments will be found where there's no viable alternative. Where the costs of serving another customer are practically zero. And where traffic speeds up due to a technological shift that has made the destination much more attractive. Where the government is permissive. And where management acts in the best interests of all shareholders. If we find such a business, we might end up with a long-term winner. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Share post](https://www.asiancenturystocks.com/#/share) ### Interview: CTOS Digital (CTOS MK) URL: https://www.asiancenturystocks.com/interview-ctos-digital-ctos-mk/ Last updated: 2026-06-21T08:18:54.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in CTOS Digital at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only – not a recommendation to buy or sell shares.* --- I recently had the great pleasure of speaking to Malaysian credit bureau [**CTOS Digital**](https://finance.yahoo.com/quote/5301.KL/?ref=asiancenturystocks.com)'s *(CTOS MK - US$353 million)* new CEO, Ankur Sehgal, in a call organized by independent research platform [Smartkarma](https://www.smartkarma.com/?ref=asiancenturystocks.com). He comes from a banking background. And he's provided a vision for the future that promises a higher return on equity than in the past. The call also emphasized the growth potential in the Philippine and Indonesian operations, as well as cost cuts. ## 1\. CTOS Digital is a Malaysian credit bureau First, let's talk about what CTOS does. It's a Malaysian credit bureau, a sector that I wrote about back in May: [The toll booths of lendingAsia’s publicly listed credit bureaus![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/GettyImages-2252288156-1b7a2eed466e349df3150079de0fc938d83bce1a235031979d339c6975e67777.jpg)](https://www.asiancenturystocks.com/the-toll-booths-of-lending/) In short, credit bureaus aggregate data on the creditworthiness of borrowers, whether individuals or corporations. They then sell this data to lenders, which typically include banks and other financial institutions, as well as companies that extend trade credit. CTOS's business model fits the profile of a typical credit bureau. It's accumulated 30+ years of data on over 5 million consumers and over 20,000 companies. Its customers buy credit reports for loan origination, to track the quality of a loan portfolio, to assess counterparty risk, to comply with know-your-customer (KYC) regulations, etc. It also offers fraud/identity solutions. The company has made two major investments. One is a 49% stake in the Experian-linked company JurisTech, a software platform for loan origination. The other one is a 25% stake in Thai corporate credit bureau [**Business Online**](https://finance.yahoo.com/quote/BOL.BK/?ref=asiancenturystocks.com) *(BOL TB – US$123 million)*, a partner to Dun & Bradstreet. Yet, CTOS's exposure remains almost completely Malaysian: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-133.png) By product segment, CTOS focuses on the following: - The **credit reports** segment is about selling credit reports on individuals. Banks buy them before extending loans, and individuals sometimes purchase them themselves. - The **business information** segment is about selling credit reports on companies to other companies. Counterparties will want to know whether the company they're extending trade credit to can repay the receivable, for example. - Then, CTOS provides **decision analytics**, including CTOS consumer credit scores, predictive scoring models, and other decision tools, which customers use to make better decisions. - Finally, CTOS provides **identity and fraud solutions**, including know-your-customer checks, identity verification, and fraud screening for companies and individuals. As you can see, CTOS is no longer just about providing data on historical payment behavior or corporate accounts. It's incredibly helpful to provide customers with credit scoring models based on its own data that help them make faster, better decisions, as well as comply with stringent financial regulations. --- ## 2\. CTOS Digital's competitive advantages The beauty of the credit bureau model is its scalability. Producing and selling another credit report costs practically nothing, which means that incremental margins tend to be high. As such, they can end up with incredible operating margins, as high as Singapore's Credit Bureau Asia's \~50%. _This post is for paying subscribers only._ ### Interview: Tian Yang URL: https://www.asiancenturystocks.com/interview-tian-yang/ Last updated: 2026-07-01T22:31:30.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- ## 1\. Hi Tian! Thanks for doing this interview. Can you tell us a bit about yourself and how you ended up at Variant Perception? I started my career as an equity derivatives trader at Bank of America Merrill Lynch after studying economics at Cambridge. I joined [Variant Perception](https://www.variantperception.com/?ref=asiancenturystocks.com) in 2014\. Even before I joined the firm, I had read [Jonathan Tepper’s books](https://www.amazon.com/stores/Jonathan-Tepper/author/B004R610KM?ref=sr%5Fntt%5Fsrch%5Flnk%5F1&qid=1781318478&sr=8-1&shoppingPortalEnabled=true&ccs%5Fid=7220337e-1710-4ace-916b-757c21eb5487) and I was keen to work with and learn from him. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-117.png)](https://www.amazon.com/stores/Jonathan-Tepper/author/B004R610KM?ref=sr%5Fntt%5Fsrch%5Flnk%5F1&qid=1781318478&sr=8-1&shoppingPortalEnabled=true&ccs%5Fid=7220337e-1710-4ace-916b-757c21eb5487) Some of Jonathan Tepper's books After Jonathan started his own hedge fund in 2020, I transitioned into a leadership role at Variant Perception, with a focus on combining fundamental analysis with advanced quantitative modelling. Today, we offer a macro-quant research service and recently launched our first investment product, the [VPX US Equity ETF](https://finance.yahoo.com/quote/VPX/?ref=asiancenturystocks.com). --- ## 2\. What does your research tell you about the top-down macro conditions right now? And on that note, where do you see credit growth and liquidity potentially improving? Our macro work relies heavily on our adaptive leading indicators, where we model out the growth, inflation, policy and liquidity outlook over the next 6-12 months. We then abstract down all of this complexity into an overall macro risk regime. We have been in a “risk on” regime since the summer of 2025 and still remain in that regime today. At the margin, we are seeing some deterioration across growth, inflation and policy components, but I would describe the shift as the removal of previous tailwinds, not yet big headwinds. Given the inflationary impulse from the Iran war, we are seeing a pretty synchronized hawkish shift in global monetary policy pricing. These headwinds will build as the year goes on. --- ## 3\. Can you talk about the broad macro picture for China? What does the government want to achieve, and what does that imply for exchange rates and asset prices? The global investing landscape will continue to be dominated by the primacy of sovereignty, on which we wrote a [big thematic report](https://blog.variantperception.com/p/thematic-the-primacy-of-sovereignty?ref=asiancenturystocks.com) last year. The short version is that we live in a G2 US-China world and sovereignty and security of food, energy, supply chain etc is now the primary driver of policymaking. As a result, expect governments to prioritize these aspects over traditional economic growth previously centred on the consumer. This does not mean that there won’t be a reactive stimulus to buffer the economy during big downturns, but it means that investors need to ask if their portfolio holdings directly support national security and sovereignty. The Chinese economy remains in a “new normal”, where the household/consumer are no longer the priority, with resources and capital diverted towards geopolitically important industries linked to critical resources, technology and manufacturing. FX is tricky. The most clear trend is that China’s need to diversify away from USD reserves will continue to weigh on the USD and create a bid for hard assets such as gold. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-118.png) Source: MacroMicro.me --- ## 4\. What’s your take on the US interest rate cycle, and what would a weaker US Dollar mean for Asian asset prices overall, and in specific countries? The markets are pricing in hikes across most major economies fearing a 2022 repeat. However back in 2022, interest rates were only just coming off the zero bound and there was still a lot of Covid-stimulus working its way through. Today, the starting level of real yields is much higher and the Fed is NOT obviously behind the curve. So the odds of a 2022 repeat crashing bonds and equities is low right now. I think interest rates markets are pretty fairly priced at the moment. The US dollar is probably going to be stuck for a while, caught between the structurally bearish outlook of countries diversifying away from USD reserves, and the cyclically bullish terms of trade shock due to the Iran energy shock. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-119.png) Source: MacroMicro.me In terms of the impact on Asia, you need to differentiate between which countries are exposed to the terms of trade shock and which countries will benefit. Not only do you have the Iran-linked energy shock, but you also basically have a semi supply chain shock too. So if your country needs to import energy and import chips or semi equipment, then your currency is much more vulnerable. --- ## 5\. What’s your view on the Japanese Yen? It seems incredibly cheap on a real effective exchange rate basis. How do you expect interest rate differentials to develop, and what does that mean for the exchange rate? What do you think about the Japan carry trade narrative? Japan’s problem is that its impossible trinity problem has not been resolved leaving a weaker JPY as the natural adjustment mechanism. This has been the case for a number of years and up until the end of 2025, this was the primary reason we were consistently skeptical of the bullish arguments for a strong JPY. However this year, things seem to be changing. Prime Minister Takaichi is firmly committed to her expansionary fiscal agenda and they are allowing long-end yields to rise. Yet, at the same time, the BoJ is still not willing to normalize policy rates at the speed the market demands, but the MoF is still happy to burn reserves intervening in the FX markets again. This shows that we are near breaking point and Japan will be forced to make a choice. My guess is there is a non-negligible chance of a US-Japan Plaza Accord style FX intervention to strengthen the JPY. US Treasury Secretary Bessent has visited Japan multiple times and a weaker USD is also in the Trump administration’s interest. My bias is to now be long JPY. --- ## 6\. You expressed optimism about Indonesian equities recently. What’s your thinking there? I think this is more one for the Asian bottom-up specialists such as yourself who can find the babies thrown out with the bathwater. The crisis of confidence among investors in Indonesia is reaching a crescendo and the MSCI review of Indonesia’s EM status could mark the final capitulation. Yet leading indicators are still holding up for Indonesia and there are high quality non-bank non-commodity stocks in Indonesia trading at very reasonable valuations. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-121.png) Source: MacroMicro.me --- ## 7\. I know you’ve done a lot of work on capital cycles. What’s the theory behind that work? How do you actually spot where industries are in their capital cycles, and which industries are currently turning upwards? We were inspired by Marathon Asset Management's [capital cycle framework](https://www.variantperception.com/insights/the-burger-joint-effect-why-the-capital-cycle-matters?ref=asiancenturystocks.com). The basic idea is very intuitive, too much capital flowing into a particular industry creates too much competition, reducing future profits and vice versa. We have quantified the capital cycle across global industries. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-122.png) Source: Variant Perception We track net investment (capex, R&D spend net of D&A) across industries and the marginal operational ROIC generated above WACC for that investment. Which then allows us to compare across industries. The best times to invest are when net investment has been low, yet ROIC is inflecting higher and vice versa. How you define your industries and profit pools matter. On our models semiconductors remain capital scarce, but software and communication services have poor capital cycle scores. Alongside semis, energy and financials are also capital scarce, so we like a barbell of semi secular growth alongside the more traditional cyclical value from energy and financials. In terms of how we turn the capital cycle into an equity portfolio, we actually use it alongside quality and crowding when we are coming up with our fair value estimates. Nobody knows how long the current semi bottlenecks and secular demand shift can carry on for, but the pace at which Anthropic’s revenue is surging is a reminder of the unique nature of AI and the speed at which Jevon’s paradox is having an impact vs any traditional commodity cycle. Our mindset is much more to observe marginal changes in our models across all these factors and react accordingly rather than make deterministic predictions on how things will look. --- ## 8\. You’ve mentioned Didier Sornette’s Log-Periodic Power Law (LPPL) model in your research. Could you explain what the model does, and why it can be helpful for investors? Any asset classes that are exhibiting late-stage bubble behavior right now? The LPPL model is a very good way to model stop-loss behavior, when a stop-loss sell order drives down the price and triggers 3 more stop-loss sell orders which crash the price further and sets off 9 more stop-loss sell orders. It is not enough just to observe a parabola in the price, you also want to see the wave pattern within the parabola speed up, which reflects this dynamic of accelerating stop loss behavior. I.e. during the sell-off you observe each dead-cat bounce being weaker and lasting for a shorter period of time before the next sell-off. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-134.png) An LPPL climax in ICLN. Source: Variant Perception We use this model to help with tactical timing and to flag when these cascading sells or buys are exhausting. For example at the end of March we saw a cluster of LPPL crash exhaustions (i.e. buy signals) across tech and growth names. Today, we are seeing a cluster of LPPL crash exhaustions across China tech, suggesting we have already seen a disorderly stop-out there and that this is a good time for contrarian investors to step in or at least sharpen pencils. --- ## 9\. Thanks for doing this, Tian! Where can people go to learn more about you, your writing and Variant Perception? [www.variantperception.com](https://www.variantperception.com/?ref=asiancenturystocks.com) or [@VrntPerception](https://x.com/VrntPerception?ref=asiancenturystocks.com) on X. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Travel notes: Hong Kong URL: https://www.asiancenturystocks.com/travel-notes-hong-kong-2/ Last updated: 2026-06-14T05:53:04.000Z ***Disclaimer** *: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* I just came back from two days in Hong Kong, where I visited Swen Lorenz's excellent [Weird Shit Investing](https://www.weirdshitinvesting.com/conference/?ref=asiancenturystocks.com) conference. My last time in Hong Kong was [back in 2024](https://www.asiancenturystocks.com/travel-notes-hong-kong/) – another trip organized by Swen. Compared to 2024, Hong Kong felt a lot more vibrant this time around. Bars were full, and people seemed to be enjoying themselves. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/IMG_0020-Large.jpeg) Elgin Street, Hong Kong Hong Kong has of course changed, on the margin. There's a lot more talent from Mainland China, replacing some of the expats and locals who left. Some of the waitresses and shopkeepers I interacted with didn't speak English at all, which is a break from the past. Another change is the large number of Chinese electric vehicles on the street. From the airport, we took a roomy electric taxi made by China's Geely, and it felt comfortable and modern. While I knew that Claude and ChatGPT had been banned, it still surprised me. So I installed Chinese LLMs like Deepseek, which worked just fine. Though still lagging behind its Western counterparts, in my view. Otherwise, Hong Kong remains a pleasant experience. The density of Hong Kong Island is unmatched anywhere in Asia, and that makes it a perfect place to do business. You can meet up with people within minutes, as long as their workplace or home is close to Central. As I've argued in the past, [Hong Kong's death has been greatly exaggerated](https://www.asiancenturystocks.com/hong-kongs-death-has-been-exaggerated/). While I only spent two days in Hong Kong, I did visit a [Best Mart 360](https://www.asiancenturystocks.com/best-mart-360-2360-hk/) store, and it was fine. 0.5kg of Kirkland dried blueberries cost me HK$87 (US$11) and 90g of Ferrero chocolate cost me HK$22 (US$2.8). Certainly cheaper than what it would cost in Singapore, at the very least. I also walked by a Pop Mart store, and was surprised to see that it front display had mostly non-Labubu items. The store was almost completely empty, with 4 staff serving a single customer. It does look like the [Labubu craze is over](https://www.asiancenturystocks.com/has-the-labubu-bubble-popped/). That said, many bulls continue to think that the current downturn for Pop Mart is [just a blip](https://open.spotify.com/episode/7wMFuze3Nyw8teP9EvmNqu?si=259d0aac0c3b4cac&ref=asiancenturystocks.com) in a longer-term growth story. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/IMG_0043-Large.jpeg) A Pop Mart store at HKIA --- The conference itself took place at Eaton Club in Citibank Plaza. We were close to 20 participants, and a dozen of us held presentations on specific stocks. I presented on Korean terminal operating software developer [**Total Soft Bank**](https://www.asiancenturystocks.com/deep-dive-total-soft-b/)*(045340 KS – US$36 million)*, which I first saw mentioned by hedge fund manager [Ryan Albert](https://x.com/ryan%5Fa%5Falbert/status/2055817568120922274?s=20&ref=asiancenturystocks.com) in mid-May 2026\. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-124.png)](https://www.asiancenturystocks.com/deep-dive-total-soft-b/) _This post is for paying subscribers only._ ### Insider activity May 2026 URL: https://www.asiancenturystocks.com/insider-activity-may-2026/ Last updated: 2026-06-10T08:25:01.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## May insider transactions There was a slight increase in insider buying in May. The total number of buys rose +6% month-on-month to 786, adding up to US$1.2 billion, according to [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). In contrast, there were 804 sales transactions totaling US$4.6 billion. I believe the explanation for this disparity is that buying is concentrated in small caps and selling in large caps. The sell/buy ratio by continent is now neutral across the board, including for Asia (lower is bullish): ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/iIPNW-insider-sell-buy-ratio-by-region---4-.png) Sell/buy ratios by region (lower is bullish). Source: Smart Insider We continue to see high sell/buy ratios for **China** and **India**, and lower ratios for Southeast Asia. The sell/buy ratio is particularly low (theoretically bullish) for **South Korea**, **Hong Kong**,and **Thailand**. A low sell/buy ratio is remarkable for South Korea, given that the index has performed well. But Korean small caps have certainly lagged the rally. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/17f8d-insider-sell-buy-ratio-by-country---1-.png) Sell/buy ratios by country (lower is bullish). Source: Smart Insider **The rest of this article is only available to premium subscribers* [Unlock the rest ](http://asiancenturystocks.com/?ref=asiancenturystocks.com#/portal/signup/) _This post is for paying subscribers only._ ### Update: IMAX China (1970 HK) URL: https://www.asiancenturystocks.com/update-imax-china-1970-hk/ Last updated: 2026-06-08T06:19:20.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold any position in IMAX China when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* --- Last year, IMAX Corporation's Richard Gelfond was accused of [excessive drinking and cocaine use](https://nypost.com/2025/09/13/us-news/imax-boss-uninsurable-because-of-drug-use-excessive-drinking-lawsuit/?ref=asiancenturystocks.com). And this year, he took [two months of medical leave](https://variety.com/2026/film/news/imax-ceo-richard-gelfond-medical-leave-pneumonia-1236702987/?ref=asiancenturystocks.com), supposedly to treat pneumonia. In a normal year, I wouldn't have paid much attention to the [latest rumors](https://www.wsj.com/business/media/imax-is-exploring-a-sale-7d01c45a?ref=asiancenturystocks.com) about a coming takeover. But given Richard Gelfond's poor health, a takeover suddenly seems plausible, though as one of many possible scenarios. # 1\. Quick recap I first wrote about [**IMAX China**](https://finance.yahoo.com/quote/1970.HK?.tsrc=fin-srch&ref=asiancenturystocks.com) *(1970 HK - US$353 million)* back in early 2024: [IMAX China (1970 HK)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in IMAX China at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/140865348/f056ac5a-f610-42a3-9055-20bd7ffe8e9d/transcoded-1705813040.png)](https://www.asiancenturystocks.com/imax-china-1970-hk/) - It's a publicly listed subsidiary of cinema equipment company [**IMAX Corporation**](https://finance.yahoo.com/quote/IMAX?.tsrc=fin-srch&ref=asiancenturystocks.com) *(IMAX US - US$2.1 billion)*. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-80.png) - While the parent company, IMAX Corporation, manufactures the equipment, IMAX China has the exclusive right to sell it in the Greater China region, including Mainland China, Hong Kong, Macau, and Taiwan. - IMAX Corporation was acquired by a group of investors in 1994 in a leveraged buyout. That group included Richard ("Rich") Gelfond, who remains the company's CEO. - IMAX's core product is equipment for high-end cinemas. These cinemas use special IMAX standards for screen sizes, an unusual 1.43:1 aspect ratio, steep seating arrangements, high-resolution images, and top-tier sound systems. - Movies made for IMAX – including the movie "Dune" – are shot on large-format digital cameras that provide greater detail for the viewer: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-14.png) Movies shot on IMAX compatible cameras provide greater detail - Note that IMAX doesn't own any cinema screens. It simply provides the equipment and receives recurring income from maintaining it, as well as fees for converting movies into the IMAX format. - Given that an IMAX ticket costs around 50% more than a normal ticket, it ends up being a profitable deal for all parties involved, including the exhibitor. And IMAX China itself has been profitable, with operating margins above 40% and strong free cash flows. - The IMAX brand name is incredibly strong, especially in Mainland China. It's almost become synonymous with a high-end cinema experience. - IMAX serves about 800 screens in Greater China — more than twice as many screens as in the United States. This critical mass drives studios to produce IMAX-compatible movies – or else they'd lose out on a big chunk of the market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-67.png) - At the time of publishing my first report, the share price had been on a long downward trajectory since the 2015 IPO. At that time, a large part of IMAX China's revenues were construction-related. And as construction declined, all that remained were recurring revenues such as revenue-sharing agreements, film conversion fees, and equipment maintenance revenues. - In 2024, I was hopeful that China's movie industry would recover from COVID-19\. I felt that a big part of the issue was that Hollywood movie production had slowed down during the pandemic. And that once the output recovered, we would see people return to cinemas. - IMAX China traded at 7.5x P/E at the time, with net cash equivalent to 20% of the business's market capitalization. And that was with a share price almost identical to today's. --- # 2\. The failed takeover ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-82.png) Source: CFP In 2023, IMAX China's parent company, IMAX Corporation, bid HK$10 per share in a proposed privatization. But as more than 10% of minorities opposed the deal — a key hurdle for Hong Kong privatizations — it ultimately failed. In response, IMAX Corporation's CEO Richard Gelfond expressed disappointment but emphasized that it remained fully committed to the Chinese market. However, corporate governance issues began to emerge. IMAX China soon announced it would cut its dividend. And the already-high net cash position in IMAX China continued to build. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/vUKto-imax-china-net-cash-us-million-.png) The lack of dividends was unfriendly to minorities, to say the least. In an update, I hypothesized that a second bid could come as early as October 2024, given the 12-month moratorium on placing new bids: [IMAX China (1970 HK) － mid-2024 update“Play it again, Sam”. Estimated reading time: 17 minutes![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-dd51c212-2f37-4ac5-8c64-b2e9b0b5bd58.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2fe02f66a0-3643-4df0-bca2-ecc18beb62f1_2560x1707-4ad279f4-2965-4064-9c2c-d28f9964072c.jpg)](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/) There were plenty of reasons to think that a new bid could be forthcoming. Most importantly, Gelfond said in an early 2024 earnings call that "it would be nice" to take IMAX China private: > “Are we going to try and privatize it? Again, and we can't go back until much later this year. But **we haven't made a decision yet what to do**. I think it will depend on China's financial performance, what IMAX's liquidity looks like and then how the Chinese shareholders feel about \[it\]. I'll make the decision just reminding everyone that wasn't had to do. That was – **it would be nice if we could do it**. But even though we didn't get it done in the way we want it, we've realized some of those savings along the way by being strategic about how we manage our costs there.” So the situation seemed unsustainable. Cash kept building on IMAX China's balance sheet, while Gelfond clearly wanted to take the company private. Would his wishes eventually come true? Or would another suitor emerge to eventually acquire the entire group, including IMAX China? --- # 3\. The post-COVID recovery ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-79.png) Chinese blockbuster movie Ne Zha 2\. Source: China.org _This post is for paying subscribers only._ ### Japan SaaS earnings season URL: https://www.asiancenturystocks.com/japan-saas-earnings-season/ Last updated: 2026-06-05T08:15:14.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- The Japanese software-as-a-service (SaaS) benchmark [ONE Capital Cloud Index](https://onecapital.jp/cloudindex?ref=asiancenturystocks.com) is starting to show signs of life: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/iCGzQ-one-capital-cloud-index-.png) Source: ONE Capital This is despite the negative news flow that continues to weigh on the sector. The index is still down roughly 16% year-to-date, due to fears that software will be disrupted by generative AI tools. ## What sparked the sell-off The announcement that initially sparked the sell-off was the launch of Anthropic's Claude Cowork on 12 January 2026: I described some of the features of Cowork in my guide to Claude: [Claude for Equity ResearchClaude Projects, Claude for Microsoft Office, Cowork and Dispatch![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-0e1b2124-0651-4576-898b-ca52312592dd.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Ghost-feature-images--8--992cfffd-d5bf-4eaa-9182-bd81a0d88940.jpg)](https://www.asiancenturystocks.com/how-to-use-claude-for-equity-resear/) In short, Cowork is a chatbot that can control your computer. It can create and edit files on your hard drive. It can search the web and complete tasks. And it can autonomously carry out scheduled tasks without your input. The sell-off accelerated on 30 January 2026 when Anthropic released a set of open-source enterprise plug-ins, including a legal automation suite. The software could now draft legal contracts, generate briefs and templated responses. Investors felt that Claude Cowork could make corporate workers more productive, threatening the typical seat-based pricing model that has been used for cloud software. Some predicted [mass unemployment](https://www.citriniresearch.com/p/2028gic?ref=asiancenturystocks.com). If AI agents can take over seemingly any task, why is there a need for traditional software at all? In Japan, fund managers panicked, apparently told [not to touch anything even remotely software-related](https://x.com/InvestInJapan/status/2030636838982189177?s=20&ref=asiancenturystocks.com). People around also sold their software stocks, thinking that the uncertainty had become too high. --- ## The actual evidence of AI disruption is thin ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/GettyImages-2236931819-Large-1.jpeg) Source: Getty Images While investors became nervous about Japanese software stocks, their earnings actually came in pretty strong. Here are the earnings reports that I think you should pay attention to: ### OBIC Business Consultants ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-12.png) Let's start with the bellwether stock [**OBIC Business Consultants**](https://finance.yahoo.com/quote/4733.T/?ref=asiancenturystocks.com) *(4733 JP — US$3.0 billion).* That company did report a deceleration in growth from +12% in FY2025 to +9% in FY2026 ending March. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/Q6ZH6-obic-business-consultants-4733-jp-.png) OBIC's enterprise resource planning (ERP) system, Bugyo, is used for accounting, payroll, and HR. It's been transitioning from on-premises to the cloud, but that transition has slowed. That's what caused the deceleration in earnings growth – not generative AI tools like Claude. The stock now trades at 6.3x EV/Sales and 13.5x EV/EBIT. The operating margin is already 50%, so I don't expect much further margin potential. --- ### Rakus ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-11.png) Next, we have SME expense claim, invoice management and attendance system software developer [**Rakus**](https://finance.yahoo.com/quote/3923.T/?ref=asiancenturystocks.com) *(3923 JP – US$1.8 billion)*, whose stock price has recovered somewhat: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/0sxP6-rakus-3923-jp-.png) Rakus's FY2026 top-line growth decelerated as well, but from a high +27% to a still-high +23%. The churn from its core Raku Raku Seisan expense claim software keeps falling, now at just 0.17% per month. The group-wide operating margin hit a very comfortable 29%, up almost eight percentage points compared to last year's level. So this was a strong result. Rakus's FY2027 operating profit guidance is for +18% growth. The stock now trades at 5.7x EV/Sales, which is high in a Japan SaaS context. There's no official margin guidance, but Rakus targets a "Rule of 50", which means that they want the revenue growth rate plus the operating margin to exceed 50%. --- ### Money Forward ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-8.png) Accounting software company [**Money Forward**](https://finance.yahoo.com/quote/3994.T/?ref=asiancenturystocks.com) *(3994 JP — US$1.1 billion)* reported an astoundingly strong 1Q2026 report, and the stock price reacted positively: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/nIUJe-money-forward-3994-jp-.png) Quarterly like-for-like revenues grew +42% year-on-year. That was partly driven by the September 2025 price hike. But the number of corporate paying customers also increased rapidly by 21% year-on-year. I think it's the modular structure of its software suite that makes it attractive. Corporate customers can just pick the modules they want, and they're easy to cross-sell. The market was also very excited about the new Claude-powered autonomous task assistant, Money Forward AI Cowork, which is set to be released in July 2026\. The stock now trades at 3.7x EV/Sales, which is broadly in line with the sector. The growth is higher than that of the average Japanese SaaS stock. --- ### Sansan ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-10.png) Business card management software [**SanSan**](https://finance.yahoo.com/quote/4443.T/?ref=asiancenturystocks.com) *(4443 JP — US$902 million)* also saw a partial rebound in its share price since the early January slump: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/9NALH-sansan-4443-jp-.png) It reported 3QFY2026 numbers in April, beating expectations as well. The company's net sales rose +25% year-on-year, driven by the business card management tool Sansan and the invoice management tool Bill One. There's been no obviously negative impact from Claude or other generative AI tools so far, and churn rates remained flat during the quarter. Instead, management is arguing that AI tools should increase the value of Sansan's business card database. The full-year growth forecast was upped from +24% to +25%, suggesting momentum in the business. The near-term operating margin target was also revised upwards from 20% to 23%. The stock now trades at 3.2x EV/Sales, with a very long-term operating margin target of 30%+. --- ### Freee ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-7.png) One disappointment last quarter was the 3QFY2026 result of accounting software company [**Freee**](https://www.asiancenturystocks.com/freee-4478-jp/) *(4478 JP – US$825 million)*, causing its share price to slump: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/aYXoX-freee-4478-jp-.png) I wrote a deep dive on Freee back in late 2025: [freee (4478 JP)Japanese SME business platform at 3.7x EV/Sales![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-c83681b3-f633-418b-8dd9-af17bd7af754.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/Social-preview-e47f3c83-bbec-48fc-9546-e23663cbd906.jpeg)](https://www.asiancenturystocks.com/freee-4478-jp/) Its quarterly top-line growth was decent at +27% year-on-year, but the annualized recurring revenue growth disappointed at just +23% year-on-year. The number of users on the platform rose by +14% year-on-year to 712,000, and ARPU rose by +9%. Management said that it's now developing tools that will help users navigate the accounting and payroll features through AI prompts. AI will help automate tasks like submitting expense reports from receipts. Like Money Forward, it has developed an integration for Claude that will allow users to access Freee's data more easily. As a system of record, Freee thinks it will be a net beneficiary of generative AI tools. And that the AI fears had *"not yet materialized"*. The stock now trades at 2.3x EV/Sales with 30% long-term operating margin guidance. --- ### Plus Alpha Consulting ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-13.png) Talent management software developer [**Plus Alpha Consulting**](https://finance.yahoo.com/quote/4071.T/?ref=asiancenturystocks.com) *(4071 JP – US$715 million)* has rallied since the early 2026 slump, partly thanks to new generous dividends and share buybacks: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/oygPo-plus-alpha-consulting-4071-jp-.png) Plus Alpha Consulting's 2Q2026 result was okay, with net sales growing +14% year-on-year and operating profit +32%. The result was driven by its core HR product, Talent Palette, whose operating margin just expanded to 50%. The churn rate for Talent Palette remained stable at just 0.36% per month. Plus Alpha Consulting did see some pressure in its marketing solutions segment, though the new tool AI TalkTra has apparently caused active users to rebound. Management commented that Talent Palette is highly insulated from AI replacement, as it relies on proprietary data. If anything, PAC thinks generative AI should serve as a tailwind for its enterprise products. The stock trades at 4.8x EV/Sales and 11.9x EV/EBIT. It targets a 30%+ operating margin in the longer term. --- ### Broadleaf ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-6.png) Auto aftermarket software developer [**Broadleaf**](https://finance.yahoo.com/quote/3673.T/?ref=asiancenturystocks.com) *(3673 JP – US$513 million)* saw a massive spike in its share price following strong earnings and a stock split: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/O75c7-broadleaf-3673-jp--1.png) The company offers an auto parts inventory database and a marketplace that connects buyers and sellers of auto parts. It's been transitioning to a SaaS pricing model, and that transition is now halfway through. Broadleaf's 1QFY2026 results showed middling top-line growth of +16% year-on-year, but the cloud transition has proven highly margin-accretive. Its operating profit grew +142% year-on-year. Broadleaf's cloud rate reached 37%, with still some way to go before the transition takes place. The full-year guidance was left unchanged. Management said it's now implementing AI features to help users search its database more effectively. Since Broadleaf relies on proprietary data and maintains an industry-standard "BL code" database, it cannot be easily disrupted. The stock now trades at 6.4x EV/Sales and targets a 41% long-term operating margin. --- ### Smaregi ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-5.png) Payment solutions company [**Smaregi**](https://finance.yahoo.com/quote/4431.T/?ref=asiancenturystocks.com) *(4431 JP – US$296 million)* has been range-bound since the early part of 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/Ubfxx-smaregi-4431-jp-.png) Smaregi sells point-of-sale hardware connected to a software platform that helps retailers manage their businesses. This platform includes an app store, and Smaregi takes a 30% cut, just like Apple and Sony PlayStation. The latest 3QFY2026 quarterly result ending January was okay, with revenue +22% year-on-year, and net profit +25% year-on-year. However, the full-year revenue growth guidance was raised to +30% year-on-year. The churn rate stayed flat at 0.47%. The reason Smaregi's share price has come down has less to do with generative AI and more with the recent data leak, in which the personal information of 100,000 users on one of its apps in its app store was stolen. That could be why the 3QFY2026 hardware sales declined by -9%, which might pose a problem in the future. Smaregi is a nimble company, however, and management is arguing that they'll benefit from generative AI. The company is now using OpenAI and Gemini integrations to analyze transaction data to provide better analytics to its merchants. Coding efficiency has apparently improved as well. The only question is whether the data leak will affect the company's future growth. Smaregi now trades at 2.6x EV/Sales and 11.8x EV/EBIT but no operating margin guidance has been provided yet. --- ### Hennge ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image.png) Japanese identity-as-a-Service company [**Hennge**](https://finance.yahoo.com/quote/4475.T/?ref=asiancenturystocks.com)*(4475 JP – US$229 million)* has seen a partial rebound in its share price since early 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/WD0YX-hennge-4475-jp-.png) Hennge competes with Microsoft Entra ID. It can best be thought of as Japan's answer to Okta, the US cloud security business. The core service is to provide secure log-ins for employees to other software platforms, without the need for additional passwords. The company uses Hennge to control what software employees have access to. Hennge also has an email security feature that automatically encrypts all email attachments. The company reported a just-okay 2QFY2026 in May, with 1H2026 revenues up 18% year-on-year and operating income up 13% year-on-year. The number of customers increased by +17%. The churn rate fell 6 basis points to just 0.26%. There's been some pressure on ARPU, as larger clients have opted for cheaper, single-function plans. There's no indication that Hennge has been negatively affected by generative AI. Management is still projecting 20% CAGR for its core Hennge One product through FY2029\. And it targets JPY 20 billion in annualized revenues by FY2029\. The website traffic trends still look positive: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-1.png) The stock now trades at 4.6x EV/Sales, slightly below Okta's 6.8x. Longer-term, the company believes it will hit an operating margin of 50%, though that will be far into the future, perhaps by the mid-2030s. --- ### CYND ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-4.png) [**CYND**](https://finance.yahoo.com/quote/4256.T/?ref=asiancenturystocks.com)*(4256 JP – US$38 million)* owns a software suite called Beauty Merit, which you can think of as a reservation management tool for beauty salons. It acquired its second-biggest competitor, Pacific Porter, in 2023\. Since that time, the stock price nearly doubled, before coming off earlier this year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/eUlpt-cynd-4256-jp-.png) A primary reason for the recent decline was a data leak when unauthorized access to Beauty Merit was discovered. It's not clear whether any data was compromised. But CYND couldn't rule it out either. The latest earnings results for FY2026, ending March, showed top-line growth of +13% year-on-year, slightly below estimates. The operating profit grew by +40%, driven by customer wins and operating leverage. But with an annualized recurring revenue growth of +11%, there doesn't seem to be a great deal of momentum in the business. The churn rate remained flat at 0.65% per month. I don't think generative AI tools can easily synchronize bookings across point-of-sale systems and booking sites. CYND launched an AI-driven machine learning tool for dynamic pricing strategies within the Beauty Merit app, which could eventually help its customers. The stock now trades at 1.8x EV/Sales, but the company does not have a formal operating margin target. --- ### Poper ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-3.png) [**Poper**](https://finance.yahoo.com/quote/5134.T/?ref=asiancenturystocks.com)*(5134 JP – US$12 million)* is a Japanese nanocap software developer serving the local tutoring industry. I wrote about it here: [Update: Poper Co (5134 JP)Software developer for Japanese cram schools at 1.0x EV/Sales![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/88I0348-scaled-90c31ecbc464fb657de344259fe86c5c7fe4eb90d46b632c086fa0bb24c69d07.jpg)](https://www.asiancenturystocks.com/update-poper-co-5134-jp/) The core software suite, Comiru, allows students to communicate with parents, provide them with updates on how the students are progressing, whether they're attending their classes, etc. Students can also pay via the app. Teachers also use Comiru to manage their schedules. Comiru's share price came off significantly in late 2025 and early 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/0qRBj-poper-5134-jp-.png) The reason was a large number of customized software projects being recognized as revenue in 2025, and then a complete shutdown of such projects. The latest 1QFY2026 report ending January was weak. Net sales grew only +1% year-on-year, and operating profit declined by -42%. However, the annualized recurring revenue did grow 8.5% year-on-year, and the number of paying clients actually grew with +15% with student numbers +13%. The churn rate remains decent at 0.5%. The problem seems to be Poper moving to less lucrative non-cram schools. Its customized software development projects last year are also forming a high base, causing growth to slow down. The slowdown in growth is almost definitely not due to generative AI tools, but rather competitors that existed before ChatGPT, including LINE. Poper is now moving away from customized software to standardized cloud service platforms. And Poper is guiding to a sequential recovery in 2Q2026, as several larger customers have recently joined Comiru. The stock trades at 1.9x EV/Sales with no operating margin target. --- ## Conclusion So as you can tell, there's practically zero evidence of any disruption from Claude or even other generative AI tools. Churn rates have remained stable or continued to fall. And while growth has declined in some cases, it's almost always due to competitive pressures or one-off events such as cybersecurity incidents. Here's how the latest results stack up against their EV/Sales multiples: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/sQ6VF-japan-saas--4.png) Historical market metrics. Source: TIKR As you can tell from the table, many of these stocks trade at margin-adjusted EV/EBIT below 10x, despite continued growth. That's the case for accounting software developers Money Forward and Freee. Both Hennge and Smaregi are guiding for relatively high top-line growth going forward. The former could be facing competitive pressure from Microsoft. And the latter has seen its growth slow down due to a data leak. But the guidance seems to suggest that growth will continue. One cannot completely rule out the risk of AI-native software companies popping up and posing a direct threat to these companies. But so far, the evidence is thin. And Japan's SaaS sector continues to trade at rock-bottom valuation multiples. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Total Soft Bank (045340 KS) URL: https://www.asiancenturystocks.com/deep-dive-total-soft-b/ Last updated: 2026-06-04T05:36:38.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in Total Soft Bank at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- _This post is for paying subscribers only._ ### Portfolio update May 2026 URL: https://www.asiancenturystocks.com/portfolio-update-may-2026/ Last updated: 2026-05-30T00:49:51.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## Market commentary MSCI All Country Asia-Pacific rose to an all-time high in late May 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-95.png) Source: Investing.com So it's been a strong market. Then again, indices have become [highly skewed](https://x.com/scottcharts/status/2059346655955071464?s=20&ref=asiancenturystocks.com). In the MSCI Emerging Markets Index, Taiwan now has a greater weight than China. And the memory chip names Samsung Electronics and SK Hynix now have greater weight than India. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-105.png) Source: Morningstar So we're living in unusual times. The outperformance has almost entirely come from beneficiaries of AI capex, including South Korea, Taiwan, Japan, and, to some extent, Singapore. Otherwise, Asia has been a mostly dead market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-106.png) Source: Bloomberg I try to stay away from overly popular themes. But I am researching stocks previously hurt by rising memory prices, including [**Nintendo**](https://www.asiancenturystocks.com/deep-dive-nintendo-7974-jp/) and [**Getac**](https://www.asiancenturystocks.com/five-companies-on-my-radar/). On that note, I saw that memory chip maker Micron just hit a US$1 trillion market cap and is projected to make US$113 billion in net profit in FY2027: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-107.png) Source: TIKR UBS analysts are now slapping on a 15x P/E multiple to peak FY2027 earnings to reach their target price of US$1,652\. Obviously, memory is a cyclical market. And if there's something Chinese companies are good at, it's scaling up production. Both Yangtze River Memory and Changxin will be ramping up capacity in early 2027\. According to smart people like [DaBao](https://x.com/DaBao%5F?ref=asiancenturystocks.com) and [Gavin Baker](https://www.youtube.com/watch?v=Mmj%5FG9RlW-I&ref=asiancenturystocks.com), [**TSMC**](https://finance.yahoo.com/quote/2330.TW/?ref=asiancenturystocks.com)'s capex is more sustainable and will continue to grow. So perhaps all those speculators in Taiwan are not entirely wrong in trying to find the next "bottleneck stock". So perhaps the speculators in Taiwan are not completely wrong in trying to find the next [bottleneck stock](https://x.com/MikeFritzell/status/2059206052772778080?s=20&ref=asiancenturystocks.com). I continue to pay attention to [Japanese SaaS companies](https://x.com/MikeFritzell/status/2059084441537130584?s=20&ref=asiancenturystocks.com). I see them as almost the inverse of the hardware names, with the prevailing narrative being that generative AI tools will commoditize all software. I believe investors will eventually realize the limitations of probabilistic computing. And that enterprise software is best developed- and run with deterministic tools. Japanese SaaS companies trade at low multiples. A friend suggested I take a look at the Japanese SaaS company [**TeamSpirit**](https://x.com/MikeFritzell/status/2057072582462189756?s=20&ref=asiancenturystocks.com). I was surprised by its EV/EBIT: low single digits a few years out. In May, I wrote a [guest post](https://kedm.com/gangnam-style/?ref=asiancenturystocks.com) in [KEDM](https://kedm.com/?ref=asiancenturystocks.com) about Korea's equity market reforms. I argued that the reforms are real and that the governance in individual companies will improve materially over the next few years. Now that Interactive Brokers offers full market access, I also expect price discovery to occur. So I spent part of last month writing about golf equipment maker [**Misto**](https://www.asiancenturystocks.com/deep-dive-misto-081660-ks/) and credit bureau [**NICE Information Service**](https://www.asiancenturystocks.com/deep-dive-nice-information-service-030190-ks/). And Korean small caps trade at low multiples. Just check out the companies recently mentioned on Twitter: [**T&L Co**](https://x.com/ksmetrics/status/2056907748139573520?ref=asiancenturystocks.com), [**Total Soft Bank**](https://x.com/ryan%5Fa%5Falbert/status/2055817568120922274?ref=asiancenturystocks.com) & [**Tovis**](https://x.com/ryan%5Fa%5Falbert/status/2053992972199628821?ref=asiancenturystocks.com). On Twitter, I've been voicing my frustrations about Indonesia's new [resources monopsony](https://x.com/MikeFritzell/status/2058752627891109939?s=20&ref=asiancenturystocks.com). The state will now become the sole buyer of all commodities for exports – at whatever price it deems fair. The market responded negatively, with the broad index down -29% year-to-date. Policy-wise, Indonesia seems to be reverting to the old Suharto-era days of crony capitalism. Prabowo was a military official under Suharto, so I guess we shouldn't be surprised. I don't dabble in Indonesian resources stocks. But I imagine that a monopsony of this scale will eventually cause distortions, leading to higher international commodity prices, especially for nickel, coal, and crude palm oil. I also picture the Indonesian Rupiah heading even lower than today. On the other hand, my sole Indonesian holding, [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/), just reported a fantastic first-quarter result, suggesting that the Indonesian consumer is stronger than generally recognized. Multi Bintang trades at 10.5x P/E and has a 9.0% dividend yield. --- ## Portfolio update My portfolio recovered further in May, rising +2.9% month-on-month thanks to blowout earnings at [**Mercari**](https://www.asiancenturystocks.com/mercari-4385-jp/) and peace talks between Thailand and Cambodia. Since the portfolio's inception in October 2021, the portfolio's value has increased by +76.3%, equivalent to a +13.1% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-94.png) Here's what my Asia-focused portfolio looked like as of 25 May 2026: _This post is for paying subscribers only._ ### NICE Information Service (030190 KS) URL: https://www.asiancenturystocks.com/deep-dive-nice-information-service-030190-ks/ Last updated: 2026-05-24T04:55:39.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in NICE Information Service at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- On Wednesday, I published a [guide to Asia's publicly-listed credit bureaus](https://www.asiancenturystocks.com/the-toll-booths-of-lending/). In that guide, I argued that credit bureaus were essentially toll booths on lending. Before granting a loan, a bank will request a credit report. And the credit bureaus will then send over a credit report at almost zero marginal cost. That's why I paid special attention to South Korea's [**NICE Information Service**](https://finance.yahoo.com/quote/030190.KS/?ref=asiancenturystocks.com) *(030190 KS — US$564 million)* ("NICE IS"). Its margins remain lower than its peers, yet they're moving steadily higher. NICE IS holds a 71% market share in Korea's consumer credit scoring industry, owning the so-called "NICE Score". This credit score is the closest you'll get to a FICO score in South Korea and helps banks assess a borrower's creditworthiness. Banks can also purchase more comprehensive credit reports on the borrower, allowing them to better understand payment behavior with more granular data. The consumer business is clearly the jewel. But NICE also has a corporate credit information business that sells reports on 4.2 million Korean businesses. Competition is greater in this segment, but NICE remains dominant domestically. In addition, NICE IS owns a debt collection and credit investigation business, included in its asset management segment. It also owns a bond valuation business, an advertising business, and a capital markets information business that's now ramping up to compete with [FnGuide](https://www.asiancenturystocks.com/fnguide-064850-ks/). NICE IS's historical track record has been impressive. In the past decade, its revenues have compounded at a 6% annual rate, and its earnings per share at 14%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-83.png) _This post is for paying subscribers only._ ### The toll booths of lending URL: https://www.asiancenturystocks.com/the-toll-booths-of-lending/ Last updated: 2026-05-21T10:23:19.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- We're living in an uncertain world. To manage risks, banks and companies gather information on their counterparties. And one way to do so is to buy data from so-called "credit bureaus", also known as "credit reporting agencies". These credit bureaus gather information on borrowers' creditworthiness. These include consumers, corporate borrowers, and trade counterparties. The data is then used to support lending decisions, ensuring that each lender is comfortable with their exposures. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-63.png) One of the current giants of the industry, Dun & Bradstreet, was set up in 1841 to provide credit information to its subscribers. Suppliers wanted to know whether they should sell on credit. And it quickly became a major business. Fun fact: [four US presidents](https://eaglepointcapital.substack.com/p/dun-and-bradstreet-bill-foleys-latest) worked at Dun & Bradstreet: Abraham Lincoln, Ulysses Grant, Grover Cleveland and William McKinley. In Asia, the first credit bureau was Tokyo Shoko Research, founded in 1892, soon after the Meiji Restoration. Teikoku Databank was set up shortly thereafter, and these two continue to dominate the Japanese credit bureau industry. Taiwan's credit bureau industry developed in the 1960s, and Korea's in the 1980s. More recently, it's become more developed in Singapore and Malaysia, too. On the **corporate** side, credit bureaus collect all sorts of data on private businesses: business registration numbers, legal addresses, ownership data, the executive leadership, name changes, etc. And more importantly, they collect data on revenues, profitability, and leverage from public filings, interviews, payment data, etc. They also cooperate with debt collectors to understand whether each business has had payment issues in the past. All this data then ends up in credit reports, which you can purchase for US$150 each. Historically, these credit bureaus made money by selling credit reports a la carte. But today, the entire industry has moved towards subscriptions that generate much higher-quality, recurring, and sustainable revenue. If you're an ongoing subscriber, you'll get alerts if there are any changes to the creditworthiness of any particular counterparty. The global market leaders on the corporate side include Dun & Bradstreet, Experian and Equifax: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-64.png) Dun & Bradstreet, in particular, owns the **DUNS number**: an identifier that allows you to check a company's creditworthiness. If you want to deal with a multi-national, or sell to the US government, or become a developer for the Apple software ecosystem, you'll need a DUNS number. It's almost become a prerequisite for international trade. Several local credit bureaus in Asia have therefore cooperated with Dun & Bradstreet through various joint ventures, as it gives customers access to data on international counterparties: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-74.png) Dun & Bradstreet's local Asian partners Buyers of corporate credit data tend to be small- and medium-sized enterprises that want to know whether they extend favourable credit terms to their counterparties. Or banks that want to know how to extend credit to. The local Asian credit bureaus have almost impenetrable market positions, as they've gathered detailed information on millions of businesses. And the reports can be purchased for **very little money**, while costing almost nothing to produce. No serious lender would skip a US$50 credit check before extending a half-million loan. The **consumer** side has an even stronger moat. The global leaders within this niche include Experian, Equifax and TransUnion: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-76.png) And because collecting consumer data is sensitive, it is **highly regulated** and therefore protected. The buyers of credit data tend to be financial institutions that want to know whether to extend a mortgage or consumer loans. There are clear **network effects**: in many cases, credit bureaus get data on consumer borrowers from their bank customers, who willingly provide the information in exchange for data on other banks' borrowers. So the bureaus almost become central exchanges that become difficult to displace. On the other hand, the heavy regulation also means that pricing power tends to be limited. So it's a scale business, with significant operating leverage if credit growth for whatever reason starts to accelerate. And this is the exact bull case for Asia's credit bureaus: the **credit penetration** in this part of the world remains low, especially in emerging Asian nations like Indonesia and the Philippines: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-67.png) Private sector credit / GDP. Source: The World Bank Several of these countries have had significant informal economies, with unbanked individuals only recently opening bank accounts. That should mean natural growth for the credit bureaus operating in the region. Another bull case is that fact that standardized **credit scores** haven't become popular yet. Americans use FICO scores to judge consumer creditworthiness, and PAYDEX scores to judge corporate creditworthiness. But outside of South Korea, such credit scores are rarely used in lending decisions, perhaps because of a lack of data. And that's bullish for the providers of more sophisticated scoring models, especially on the consumer side. A complicating factor is that some countries, such as China, the Philippines and Malaysia, have state-backed public credit registries that compete directly with the private bureaus. Although when it comes to credit scoring models, there's still room for the private sector, as we've seen in Malaysia, where private-sector credit bureau CTOS Digital now reigns supreme. Here's a map of the four biggest publicly-listed credit bureaus in Asia: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-70.png) These are all small caps, but still worth paying attention to. Let's start with Singapore's [**Credit Bureau Asia**](https://finance.yahoo.com/quote/TCU.SI/?ref=asiancenturystocks.com) *(CBA SP – US$223 million)*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-77.png) This consumer-focused credit bureau absolutely dominates the Singapore market. It aggregates credit information from banks, repackages it into credit reports, and sells it back to its key bank customers. The consumer segment represents roughly half of revenues. Corporate business is conducted through a partnership with Dun & Bradstreet, serving SMEs that need credit reports. While the company has new entities in Cambodia and Myanmar, Singapore still accounts for 96% of revenues. What separates Credit Bureau Asia from many others is that it has historically been very generous with dividend payments, paying out at least 90% of profits. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-78.png) The market leader in Malaysia is called [**CTOS Digital**](https://finance.yahoo.com/quote/5301.KL/?ref=asiancenturystocks.com) *(CTOS MK – US$386 million)*, and is similarly focused on the consumer market. The top five Malaysian banks are its biggest customers, and also the major providers of credit data. It also has a corporate business representing more than a third of revenues, also primarily serving SMEs. It's not affiliated with Dun & Bradstreet, however. CTOS also has a direct-to-consumer business where individuals can buy their own credit reports. CTOS apparently has a 71% market share, with 15 million consumer profiles and 8 million business records. Note that CTOS has a 25% market share in Thailand's Business Online. And it also has separate data-scoring operations in Indonesia and the Philippines, using alternative data sources to assess creditworthiness. Finally, CTOS has a license to use the FICO score in the ASEAN region, though it hasn't yet had much success scaling this business. Optimism about CTOS's growth prospects is likely what drove Mobius Capital Partners to take a position in CTOS back in 2024, according to its [FY2024 annual report](https://data.fca.org.uk/artefacts/NSM/Portal/NI-000114523/NI-000114523.pdf?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-79.png) CTOS's Thai associate, [**Business Online**](https://finance.yahoo.com/quote/BOL.BK/?ref=asiancenturystocks.com) *(BOL TB — US$124 million)*, has a more corporate focus. Its core platform, [Corpus X](https://corpusx.bol.co.th/?ref=asiancenturystocks.com), allows customers to check 1.6 million Thai company records. It's used by both local banks and SMEs to understand corporate creditworthiness. In addition, Business Online has a joint venture with Dun & Bradstreet, serving local customers dealing with international counterparts. Business Online's stock price has been hurt by the weak Thai economy since 2023, though it returned to growth in 2025\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-82.png) In South Korea, you have [**NICE Information Service**](https://finance.yahoo.com/quote/030190.KS/?ref=asiancenturystocks.com)*(030190 KS — US$559 million)*. It's a subsidiary of [**NICE Holdings**](https://finance.yahoo.com/quote/034310.KS/?ref=asiancenturystocks.com)*(034310 KS – US$309 million)* that focuses primarily on the consumer segment. It was formed in 2010 through the merger of Korea Information Service and "National Information & Credit Evaluation", hence the name. 70% of revenues come from the consumer credit-scoring business, which calculates a FICO-like "NICE score" for consumer borrowers. The company also has a corporate business, and a debt collecting agency. Dun & Bradstreet's Korean partner [**NICE D&B**](https://finance.yahoo.com/quote/130580.KQ/?ref=asiancenturystocks.com)*(130580 KS – US$56 million)* is a joint venture between parent NICE Holdings and Dun & Bradstreet. Just like its Southeast Asian peers, NICE D&B sells corporate credit information to Korean companies and allows them to access Dun & Bradstreet global credit reports. It's somewhat odd that D&B continues to be a separately listed entity from NICE Information Service, but it is what it is. I will admit that these companies are all relatively mature. I expect CTOS Digital to grow slightly faster, given Malaysia's low credit penetration and its new Indonesia / Philippines business. The other companies are probably high-single-digit growers. On the positive side, valuation multiples have now fallen to surprisingly low levels, in some cases below 10x P/E. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-73.png) Source: TIKR Business Online, in particular, has been beaten down, mostly due to macroeconomic reasons beyond its control. And there's a good chance that Thai credit growth will eventually pick up. The biggest question, in my mind, is to what extent these businesses will be threatened by the advent of generative AI tools. The consensus view is that the consumer is well protected because the data is nonpublic. It's fed into the system by the customers themselves. So CTOS Digital, NICE Information Service and Credit Bureau Asia should probably not be materially affected by generative AI. There might be a bigger problem on the corporate side, where some of the data comes from the public domain: corporate registries, filings, litigation records, etc. If a competitor can scrape the data effortlessly and offer it at a lower price, then they could certainly lose market share. If so, Business Online and NICE D&B would be at risk. However, I question that narrative. Even on the corporate side, credit bureaus get at least some of their data from financial institutions and corporations. While some public data is available, it's not always easy to access. And scraping websites was possible even before generative AI. So my personal view is that these credit bureaus will probably not be affected much by AI and will continue to grow at a high single-digit rate, if not higher. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **If you enjoyed this post, consider becoming a premium subscriber:* [Get Full Access ](#/portal/signup) ### TOA Paint (TOA TB) URL: https://www.asiancenturystocks.com/deep-dive-toa-paint-toa-tb/ Last updated: 2026-05-17T05:54:22.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in TOA Paint at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**TOA Paint**](https://finance.yahoo.com/quote/TOA.BK/?ref=asiancenturystocks.com) *(TOA TB — US$713 million)* is Thailand's biggest paint manufacturer, with a 49% market share. The company has been around since 1964, and has been run by second-generation leader Jatuphat Tangkaravakoon since 2001\. Its market share has been stable, with TOA dominating the mass market, leaving the premium segment to Nippon Paint and AkzoNobel. The business is straightforward. Mix ingredients in one of TOA's 9 factories across Southeast Asia, and then distribute them to its 8,600 retail partners. Many of them are equipped with TOA's automatic tinting machines, which help ensure customer loyalty, as customers often want to mix paint themselves. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-52.png) It's challenging to judge paint quality, and the downside risks are clear, especially for health. So many contractors and consumers default to tried-and-tested brand names. And that gives TOA pricing power, explaining its current 20% return on equity. The stock has now come off 70% since 2019, despite its earnings per share rising by half: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/lHafX-toa-paint-toa-tb-.png) Why? There have been three main reasons: _This post is for paying subscribers only._ ### Insider activity April 2026 URL: https://www.asiancenturystocks.com/insider-activity-april-2026/ Last updated: 2026-05-13T00:00:41.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## April insider transactions The number of insider transactions fell in April 2026, according to [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). The number of buys declined by about -43% month-on-month, as markets recovered and more companies entered their blackout periods. Remarkably, South Korea accounted for 37% of all the buying volume, with bullish sentiment remaining. We saw elevated buying across Korea's tech, banking, and consumer discretionary sectors. The overall Asia sell/buy ratio deteriorated from 0.6x last month to 0.8x. But Smart Insider continues to view Asia's insider sentiment as more bullish than for the other regions: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/iIPNW-insider-sell-buy-ratio-by-region---3-.png) Sell/buy ratios by region (lower is bullish). Source: Smart Insider The sell/buy ratio remains high in **China**, suggesting that insiders are bearish. **India**'s sell/buy ratio was high too, but mostly due to April trading restrictions with an unusually small sample size. The other markets, **Hong Kong**, **South Korea**, **Thailand**, **Malaysia,** and **Vietnam**, all saw more buy- than sell transactions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/17f8d-insider-sell-buy-ratio-by-country-.png) Sell/buy ratios by country (lower is bullish). Source: Smart Insider There were insider buying clusters in **auto stocks**, including [**Geely**](https://finance.yahoo.com/quote/0175.HK/?ref=asiancenturystocks.com), [**Astra**](https://www.asiancenturystocks.com/astra-international-asii-ij-2024/), and [**Minth**](https://finance.yahoo.com/quote/0425.HK/?ref=asiancenturystocks.com). Another one in **Korean financials,** such as [**KB Financial**](https://finance.yahoo.com/quote/KB/?ref=asiancenturystocks.com) and [**Hana Financial**](https://finance.yahoo.com/quote/086790.KS/?ref=asiancenturystocks.com). And finally, another cluster of **food producers** like amino acid company [**MeiHua**](https://finance.yahoo.com/quote/600873.SS/?ref=asiancenturystocks.com), Vietnamese consumer staples business [**Masan**](https://www.investing.com/equities/masan-consumer-corp?ref=asiancenturystocks.com), and Malaysian cocoa grinder [**Guan Chong**](https://finance.yahoo.com/quote/5102.KL/?ref=asiancenturystocks.com). --- ## Five highlighted situations I've gone through Smart Insider's entire list of Asian insider transactions in April. And I've chosen to highlight five of them, ranked from the highest market cap to the lowest: _This post is for paying subscribers only._ ### Misto (081660 KS) URL: https://www.asiancenturystocks.com/deep-dive-misto-081660-ks/ Last updated: 2026-05-13T15:29:41.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in Misto Holdings at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- Few people know that the golf brand Titleist and the fashion brand FILA are actually controlled by the Korean company, [**Misto Holdings**](https://finance.yahoo.com/quote/081660.KS/?ref=asiancenturystocks.com) *(081660 KS — US$1.4 billion)*. It was created by superstar Korean entrepreneur Gene Yoon back in 1991\. Initially, it served as FILA's distributor in South Korea. But after FILA encountered financial difficulties in the mid-2000s, Gene teamed up with a private equity firm to take the entire global FILA business private. And he's been running it ever since. In 2011, Gene used the same playbook to acquire a stake in the US golf equipment company Acushnet – the owner of the famous Titleist brand. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-14.png) In the late 2010s, the FILA brand had a resurgence, as consumers took a liking to retro-style shoes. However, the fad proved short-lived, and FILA lost market share to more fashion-forward brands such as Hoka, On, and ASICS. After the share price came down, Gene took advantage of the low price to increase the family's stake from 20.1% to 40.5%. And the family is now firmly in control of a business that owns 50.4% stake in Acushnet, along with a 100% stake in FILA's global, ex-China business. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-12.png) Ihina, Misto runs its business through a 15%-owned joint venture called "Full Prospect", together with local partner Anta Sports. In addition, Misto receives a 3% royalty fee on any revenue generated in China. This set-up has been enormously successful, with FILA now being the third-most-popular foreign sportswear brand in Mainland China. In any case, it looks like Misto's fundamentals are turning positive. Our friends at TickerTrends recently made the case that [consumer interest in Acushnet's brand Titleist has turned up](https://x.com/tickerplus/status/2008660800207212871?s=20&ref=asiancenturystocks.com) and that it's [gaining market share from Callaway](https://x.com/tickerplus/status/2041896528126546286?s=20&ref=asiancenturystocks.com). This improvement could be related to new product releases, such as the T-Series irons or the success of Titleist ambassador Rory McIlroy. FILA's 1990s-style "ugly-chic" sneakers have been out of fashion for a while now. But from early 2026 onwards, I've been encouraged to see low-profile, slim silhouette sneaker releases such as the Ritmo Sleek and GLIO models. These are a clear step in the right direction. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-13.png) Korean actress Han So-hee wearing FILA Ritmo Sleek sneakers An index of Google search queries for the keyword "FILA" bottomed out in early 2026 and seems to be improving, on the margin. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/bD9aP-google-search-queries-for-fila-and-titleist-.png) Perhaps even more important is the fact that Gene has finally stepped down. He's been a master deal-maker, but also unable to grow the key FILA brand internationally. With his son Kevin Yoon taking over, I am hopeful that he can bring new life to the business. The major shift we've seen recently is the December 2025 cancellation of 7 million treasury shares, equivalent to 11.7% of shares outstanding. In addition, Kevin has designed a new Value Up plan that targets capital returns of up to KRW 500 billion per year between 2025 and 2027, roughly 25% of the current market cap. Today, Misto trades at 9.1x current-year P/E with a clean balance sheet. There is some debt in its US golf subsidiary, Acushnet, but with a very comfortable EBIT interest coverage ratio of 5.1x. A sum-of-the-parts valuation of Misto with a 25% holding company discount puts the intrinsic value per share at KRW 86,000 – more than double the current share price. A question mark for some investors is whether the recent increase in golf rounds played in the United States will eventually revert to pre-COVID levels, hurting Acushnet's golf ball business. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-15.png) Source: NGF On the other hand, baby boomers are now retiring, and golf is an obvious leisure activity for increasingly health-conscious Americans. And it seems like Titleist is now gaining market share. Another question mark is the succession risk. Kevin seems to be focused on improving Misto's capital allocation. But on the other hand, he recently acquired an expensive new headquarters building in the fancy Gangnam district in central Seoul. Some are now questioning his priorities. I've spoken to investors and noticed that there's not much excitement about Misto so far. While Interactive Brokers has opened up access to Korean equities, most international investors remain focused on momentum stocks. So whether there'll ever be any excitement about Misto will probably depend on the success of FILA's ongoing turnaround. And that turnaround is still early in the making. But it's certainly one I will track closely over the next one or two years. **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the link below:** [Misto.pdf![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Google Docs![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/AKGpihYA6F6zKCRKi5XueJMGo9RZoFC5I7Q9vu1HuiDa1XWvsIUHuh5W5eDNqfOZ_DRU08rIAY1MXgEC6MFNeBovs8chyz6zsrxOUfE-s1600-rw-v1)](https://drive.google.com/file/d/1CUBAYzTamrtgrE3yNqPtcMXa3nnnGIZ0/view?usp=drive%5Flink&ref=asiancenturystocks.com) Further material: - Misto's [2025 annual report](https://www.mistoholdings.com/user/view/pd/%5BMisto%20Holdings%20Corporation%5DAnnual%20Report%282026.03.18%29.pdf?ref=asiancenturystocks.com) - Misto's March 2026 [Value-up plan](https://www.mistoholdings.com/user/view/pd/Corporate%20Value-up%20Plan%20%28Voluntary%20Disclosure%29.pdf?ref=asiancenturystocks.com) - Substack writer Alex Morris's take on [Acushnet](https://thescienceofhitting.com/p/the-ball-that-turned-golf-upside?ref=asiancenturystocks.com) ($) - A [2022 write-up](https://valueinvestorsclub.com/idea/Fila%5FHoldings/3412898579?ref=asiancenturystocks.com) by Sextant on Value Investors Club ($) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Travel Notes: Omaha URL: https://www.asiancenturystocks.com/travel-notes-omaha/ Last updated: 2026-05-19T01:11:06.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- I just came back from a week in Omaha, Nebraska. This was my first annual general meeting (AGM) as a Berkshire Hathaway shareholder. And the first visit to the United States in many years. The purpose was to meet US-based investors and exchange ideas. But I also wanted to gain fresh perspectives on my writing and investing. Omaha is an incredible city. I think there's a reason that Warren Buffett chose Omaha when he wanted to settle down. And almost every person I spoke to said they were grateful to live in Nebraska, and especially grateful to be able to raise a family there. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/telegram-cloud-photo-size-5-6325688663630615319-y.jpg) From the Blackstone area in mid-town Omaha I was lucky enough to sign up for Tilman Versch's [Good Investing Plus community](https://www.good-investing.net/plus-good-investing-community/good-investing-omaha-experience/?ref=asiancenturystocks.com). He organizes events around the Berkshire meeting each year, allowing investors to connect with one another. I didn't know many people attending the AGM, so it was great to meet people naturally through Tilman's events. One of the highlights was a mingling event where we shared our top investment ideas. A common theme was bullish views on software stocks hurt by last year's SaaS-pocalypse. One tech-focused investor made the case that the way to "play" the AI story has been to invest in companies involved in data center construction, then chipmakers. And now, he's made the case that we're better off looking at software developers who can use AI tools to better serve their customers. One of the ideas that stayed with me was US-listed [GoDaddy](https://finance.yahoo.com/quote/GDDY/profile/?ref=asiancenturystocks.com), whose main business of domain registration is now helping it distribute its in-house AI-powered website builder. Tilman's group also got together for the AGM itself. We got seats close to the main podium, allowing us to see Buffett, Tim Cook, and the other Berkshire board members and executives. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/2026-05-05-15.26.28.jpg) To be honest, the AGM itself was not as exciting as I had hoped for. Greg Abel lacks charisma and seems less focused on public-market investing than Buffett once was. The absence of Ted Weschler was noteworthy, prompting me to question how deep Berkshire's talent bench really is. I enjoyed Bob Robotti's talks at Creighton University and at the Fordham Gabelli School gathering. Robotti is a straight-talker who's becoming increasingly bearish on US equities. I asked him what asset class he thinks will outperform over the next ten years. He thinks the FTSE 250 will outperform NASDAQ. He also argued that the Canadian oil & gas industry will be a great growth story, without providing any specifics. And finally, he argued that US access to low-cost natural gas will give its industrial sector a long-term competitive advantage. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/telegram-cloud-photo-size-5-6325688663630615325-y.jpg) Bob Robotti at the Fordham Gabelli School gathering On Sunday morning, Li Lu's Himalaya Capital organized a stock picking competition for Peking University students. The kids were enthusiastic, with slide decks packed with information that would probably take days to read through. The stocks pitched included [Xiaomi](https://finance.yahoo.com/quote/1810.HK/?ref=asiancenturystocks.com), [CNOOC](https://finance.yahoo.com/quote/0883.HK/?ref=asiancenturystocks.com), [Foshan Haitian](https://finance.yahoo.com/quote/3288.HK/?ref=asiancenturystocks.com), [Tencent](https://finance.yahoo.com/quote/0700.HK/?ref=asiancenturystocks.com), and [Vipshop](https://finance.yahoo.com/quote/VIPS/?ref=asiancenturystocks.com). Among these, I was most impressed by [CNOOC](https://finance.yahoo.com/quote/0883.HK/?ref=asiancenturystocks.com) and [Tencent](https://finance.yahoo.com/quote/0700.HK/?ref=asiancenturystocks.com). The Sunday afternoon IdeaHouse event was another highlight of my week in Omaha. Some 40-odd investors, including Whitney Tilson, attended a five-hour session in which we pitched stocks to one another. Again, many of us pitched software stocks. I found the pitch on [Duolingo](https://finance.yahoo.com/quote/DUOL/?ref=asiancenturystocks.com) particularly compelling. The presentations on [OTC Markets Group](https://finance.yahoo.com/quote/OTCM/?ref=asiancenturystocks.com), [Rayonier](https://finance.yahoo.com/quote/RYN/?ref=asiancenturystocks.com), [Kimberly-Clark](https://finance.yahoo.com/quote/KMB/profile/?ref=asiancenturystocks.com), and [Fairfax Financial](https://finance.yahoo.com/quote/FFH.TO/profile/?ref=asiancenturystocks.com) also made perfect sense to me. The only Asia-focused stock that caught my eye was the closed-end fund [China Merchants China Direct Investments](https://finance.yahoo.com/quote/0133.HK/profile/?ref=asiancenturystocks.com) (CMCDI). This fund has been the target of Hong Kong-based activist investor Argyle since 2024\. But what makes the situation potentially compelling to some investors is its 0.86% ownership of Moonshot AI, the owner of the Chinese large language model Kimi, which is now valued at US$18 billion and is targeting a 2026 IPO on the Hong Kong Stock Exchange. I'm now on a flight back to Singapore. Was the trip worth the effort? I think it was. The Berkshire AGM is a rare opportunity to meet US-based investors, and I've made many new friends that I hope to stay in contact with. But at the same time, visitor numbers were significantly down from last year's event. And once Buffett passes away, I imagine the number of visitors will decline further. Perhaps the Berkshire week will be replaced by regional conferences organized by Ira Sohn, the Milken Institute, LongRiver, Weird Shit Investing, and FatAlpha. If you're planning to visit next year, I can highly recommend joining Tilman Versch's Community Plus group, as I found it to be the best way to connect with other investors. And that's really what the Berkshire AGM has been – and continues to be – all about. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-11.png) Me shopping at the exhibition hall of the Berkshire Hathaway AGM ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ### Interview: Ruchir Desai URL: https://www.asiancenturystocks.com/interview-ruchir-desai/ Last updated: 2026-05-03T14:52:19.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- ## 1\. Hi Ruchir! Thanks for doing this interview. Can you tell us a bit about yourself and your journey to managing the AFC Asia Frontier Fund? Hi Michael, it is very nice speaking with you. I have been with Asia Frontier Capital since its inception in June 2013, managing our AFC Asia Frontier Fund alongside our Founder and CEO, Thomas Hugger. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-4.png) AFC Asia Frontier Fund Performance (US Dollar) I have been in Hong Kong for almost 15 years. I arrived in August 2011 to study for my MBA in Finance at the Chinese University of Hong Kong. After my MBA, I joined Thomas at Asia Frontier Capital because frontier markets like Bangladesh, Pakistan, Sri Lanka, Kazakhstan, and Uzbekistan really excite me. Not only do I get to learn more about various companies and industries, but I also gain a good grasp of the region's macroeconomic and geopolitical trends. As part of managing our AFC Asia Frontier Fund, I cover markets like Bangladesh, Georgia, Jordan, Kazakhstan, Oman, Pakistan, Sri Lanka, and Vietnam, besides also broadly looking at Iraq and Uzbekistan since we also have our AFC Iraq Fund and AFC Uzbekistan Fund. Prior to arriving in Hong Kong, I was based in Mumbai, where I am originally from and worked as a sell-side research analyst covering Indian software companies and I also worked at a private equity firm making investments in business process outsourcing companies. --- ## 2\. Why do you think investors should pay attention to frontier markets, as opposed to investing in, say, the United States or Europe? That is a great question. The argument for investing in frontier markets is not that an investor should avoid investing in the U.S., Europe, or other developed markets, but rather that frontier markets offer a very good diversification tool. For example, our AFC Asia Frontier Fund has a low correlation of 0.50 with the MSCI World Index since the fund’s inception. Furthermore, individually, many of our markets have very low correlations with the MSCI World Index – Iraq has a negative correlation of -0.09, while Bangladesh’s correlation is only 0.04\. Hence, in our country universe, what happens in Vietnam does not impact Bangladesh, and what happens in Pakistan does not impact Sri Lanka. In addition to this, the annualized volatility of our AFC Asia Frontier Fund is a low 10.6% since the inception of the fund. This is also low compared to the annualized volatility of 13.6% for the MSCI World Index and 16.7% for the MSCI Emerging Markets Index. Therefore, frontier markets and our AFC Asia Frontier Fund offer both solid return and sound diversification for any sophisticated investor. The annualized total USD return in the last three years for the AFC Asia Frontier Fund is +20.9%. --- ## 3\. What are your biggest insights from all these years of investing in Asian frontier markets? What advice would you give to a younger investor who’s just started out picking stocks in frontier markets? I think the two major insights about investing in Asian frontier markets are that there are many large, well-run companies with sound fundamentals, which are completely ignored compared to large companies in China, India, or Thailand. This gives investors an opportunity to generate an outsized long-term return in Asian frontier markets. The other key insight especially which I have noticed in the last five or six years, is that any major market correction because of any macroeconomic or geopolitical events is an excellent buying opportunity as companies in Asian frontier countries are used to operating in a challenging environment while the countries itself are very resilient and stock markets in our universe usually bounce back in a very strong way post any market correction. Hence, I believe that when there is a lot of fear in our markets, it is an excellent buying opportunity – the pandemic in 2022 and the war in Ukraine in 2022 were fantastic buying opportunities, as returns for our AFC Asia Frontier Fund post both events were greater than 20%. --- ## 4\. How do you think about FX, given that many of the companies you invest in earn revenue in local currencies? What are the metrics you look at to become comfortable with a currency, and how does FX affect the stocks you ultimately pick? Since it is sometimes not possible or too expensive to hedge currency risk, we begin our investment process with a top-down approach to get our country’s allocation right. We give countries with a stable or improving macroeconomic position a higher weight, and we give countries with a weak or deteriorating macroeconomic position a lower or no weight. In this, we can reduce the risk of currency losses. In the past, we have had very low weightings to Pakistan and Sri Lanka in 2022 and 2023 due to a weak macroeconomic environment, which led to currency weakness. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image.png) Pakistani Rupee/US Dollar exchange rate. Source: Trading View Since getting the top-down country allocation right, we look at key indicators such as foreign exchange reserves, the current account balance and its impact on currency movements, a government’s budget deficit, inflation, and the interest rate cycle. --- ## 5\. What are some of the secular trends in frontier markets that you like to bet on right now? And how do you typically express those bets? Our Asian frontier markets have a lot of structural trends going for them. Our universe of countries has a combined population of almost 770 million people who are young. The median age in our country universe is only 27, and this sizeable young population is growing. A young, growing population is a very exciting trend for Asian frontier markets as it offers long-term secular growth trends for various industries like consumer goods, financial services, telecommunication, and also for infrastructure development, as the increasing urbanization process in our universe drives demand for better and more modern infrastructure. In addition to a young, growing population with rising disposable incomes, Asian frontier countries are also benefiting immensely from the global shift in supply chains. The two major beneficiaries of this trend are Bangladesh and Vietnam. Bangladesh is now the second-largest garment exporter globally, after China, as many garment manufacturers have moved production there due to lower costs and access to a well-established garment export ecosystem. Vietnam has been one of the key beneficiaries of the trade and geopolitical tensions between China and the U.S. For example, Vietnam’s exports to the U.S. have tripled in size from USD 42 billion in 2017 to USD 153 billion in 2025. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-1.png) Vietnam exports over the past ten years. Source: Trading Economics --- ## 6\. What markets do you invest in at AFC? And where do you see the greatest opportunities right now? Our AFC Asia Frontier Fund is currently invested in 15 countries, with the top 5 country allocation being Pakistan 13.9%, Uzbekistan 13.0%, Sri Lanka 12.6%, Bangladesh 10.6%, and Iraq 9.9%. Broadly, besides the very favorable demographic backdrop in our markets and many of our countries benefitting from the global supply chain relocation, valuations in our markets are extremely attractive. Bangladesh and Pakistan trade at a P/E ratio of 8.2x and 8.9x, respectively, while our AFC Asia Frontier Fund trades at a P/E ratio of only 7.3x, which is close to its all-time low, while the fund’s NAV is at its all-time high. More importantly, our markets faced a challenging period between 2017-2023 because of macroeconomic and political headwinds, however all our countries are now on a reform path leading to both political stability and economic momentum which has led to robust returns for the AFC Asia Frontier Fund and we expect this momentum to continue as the governments in our country universe are very focused on achieving stable long term economic growth backed by political stability. --- ## 7\. Let’s talk about Bangladesh. Sheikh Hasina was ousted in 2024, and the stock market took a beating. What’s your outlook today, and what do you think it will take for stocks to rerate? Bangladesh is currently one of my top country picks. The country’s economy and stock market have not delivered performance over the last five to six years due to macroeconomic or political issues that have hampered any recovery. However, valuations in Bangladesh are now at multi-year lows with the index trading at a P/E of only 8.2x compared to 16.0x in 2018/2019\. I believe all the important catalysts are in place to drive a sustained re-rating of stocks on the Dhaka Stock Exchange. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-2.png) The Bangladesh Dhaka Stock Exchange Index. Source: Trading Economics Macroeconomic indicators have improved substantially in the last two years in the form of higher foreign exchange reserves, a more stable current account and increasing exports and worker remittance as the Bangladeshi Taka was devalued in 2023 and 2024 taking the currency to a more realistic value. Much more importantly, parliamentary elections were held in February 2026, leading to the formation of a stable and majority government led by the Bangladesh Nationalist Party (BNP). In my view, Bangladesh now has both the macro and political platform set for a period of higher economic growth and a strong stock market returns which will be led by both valuation re-rating upwards as well an earnings growth recovery. --- ## 8\. How has the political situation in Sri Lanka developed since the 2022 debt default? Is the market now investable, in your view? Sri Lanka, according to me, is now a structural growth story as it has overcome immense political and economic challenges since 2022\. Sri Lanka now has a significantly stronger political platform to drive growth. Parliamentary elections were held in November 2024, leading to a sweeping majority victory for President Anura Dissanayake’s party. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-3.png) Anura Dissanayake This was an inflection point for the country as it now has political stability after many years, and the new government is extremely committed to reforms and not repeating the mistakes of the past. On the economic front as well, Sri Lanka has made a roaring recovery with GDP growth in 2024 and 2025 coming in ahead of expectations at +5%. Furthermore, the tourism industry is booming, and Sri Lanka recorded its all-time high tourist arrivals of 2.5 million in 2025, and there is a huge scope to grow this number much more, given the tourist attractions in Sri Lanka. In the last three years, the Colombo All Share Index has generated a total return of approximately +180% in USD terms. Hence, Sri Lanka is not only investable, but its stock market is thriving. --- ## 9\. At the FatAlpha Value conference in Vietnam, you pitched Pakistani cement company Lucky Cement. What’s the story there, and why do you think it’s attractive at this point in time? Lucky Cement, in my view, is one of the best ways to play the Pakistan story. Lucky Cement is leveraged to the Pakistani economy in various ways. It is the largest and lowest cost cement producer in Pakistan, it has a joint venture with Kia Motors to assemble and distribute passenger cars in Pakistan, it also has a joint venture with Samsung to assemble smartphones, and it has investments in the chemical and power sector in the country. Lucky Cement is therefore well-positioned to benefit from greater demand for construction materials, automobiles, and power in the country, as a large and young population drives demand for these products and services. Furthermore, Lucky Cement also has a very profitable cement operation in Iraq and D.R. Congo, where it has, in fact, increased capacity in both countries in the last year. In my view, this diversified nature of Lucky Cement’s business not only offers a leveraged play on Pakistan’s economy but also offers stable earnings in the event of a slowdown in one of the business segments. Valuation wise I still see a lot of upside for Lucky Cement as the stock trades at P/E ratio of only 5.2x and its cement business trades at an EV/Ton of USD 44/Ton compared to regional peers who trade at and EV/Ton of USD 175-200/Ton. Lucky Cement has been a multi-bagger for the AFC Asia Frontier Fund, returning almost +460% in USD terms since 31st March 2023\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/05/image-5.png) The stock price of Lucky Cement in Pakistani Rupee. Source: Trading View This stock pick is also an example of the long-term view we take in our stock picking, letting the story and returns play out. --- ## 10\. Thanks for doing this, Ruchir! Where can people go to learn more about the fund and the work you do at Asia Frontier Capital? We have a very informative website, which has information on our AFC Funds, our markets, and our excellent monthly newsletter, which your readers can subscribe to on our website. Our website address is [www.asiafrontiercapital.com](http://www.asiafrontiercapital.com/?ref=asiancenturystocks.com). Your readers can also reach me at [rd@asiafrontiercapital.com](mailto:rd@asiafrontiercapital.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ### Portfolio update April 2026 URL: https://www.asiancenturystocks.com/portfolio-update-april-2026/ Last updated: 2026-05-30T00:47:04.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## Market commentary MSCI All Country Asia-Pacific had a significant rebound in April 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-162.png) However, under the hood, many of the small caps feel like they've lagged the rally. And East Asian hardware stocks and Southeast Asian value stocks have continued to diverge. It's clear that the vast majority of speculators are now focused on semiconductor stocks. KOSPI is now up +53% year-to-date, driven by memory chip stocks like Samsung Electronics and SK Hynix. Trendforce expects DRAM prices to rise another 58-63% quarter on quarter, so it's not clear that this trend is going to change anytime soon. One of the major news stories over the past few days is that Interactive Brokers has finally started offering its customers [trading access to Korean equities](https://x.com/MikeFritzell/status/2049140612763668765?s=20&ref=asiancenturystocks.com). So I'm planning to ramp up my coverage of Korean equities, probably starting with the stock mentioned [here](https://www.asiancenturystocks.com/five-companies-on-my-radar/). On Twitter, I found this chart from Jeff Weniger shows that the dividend yield on Philippine equities has almost reached a multi-decade high: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-163.png) From a top-down point of view, it's hard to ignore the fact that the Philippine is the only major market with a sub-10x P/E. In the past month, I've been focused on Thai equities. I've mentioned [Samart Aviation](https://www.asiancenturystocks.com/deep-disamart-aviation-sav-tb/) and [Carabao](https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/), but there are a half dozen others on my watch list that I can't wait to dig into. Most of them trade around 10x P/E and have traditionally been seen as blue-chip stocks. Another compelling theme is the potential for a strong [El Niño in 2026](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/). Dryer weather in Asia will be bullish for makers of air conditioning equipment, and bearish for buyers of agricultural commodities, including Indonesian coal mines. In April, luxury watch prices took another leg up, which should probably be positive for watch retailers around the region: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-164.png) Source: WatchCharts Insider sentiment deteriorated a bit after the recent rally, and is now neutral: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-165.png) Source: Smart Insider However, the regional differences continue to be there. Mainland China continues to stand out as a region with a large amount of selling. And Southeast Asian markets continue to see a significant amount of buying. So today, my major focus is on Southeast Asia, along with Korean names that I think will attract greater interest in the next few years. --- ## Portfolio update My portfolio had a nice little rebound of +3.0% month-on-month in April 2026, driven by strength in my Japanese software stocks. Since the portfolio's inception in October 2021, the portfolio's value has increased by +71.3%, equivalent to a +12.6% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-160.png) Here's what my Asia-focused portfolio looked like as of 29 April 2026: _This post is for paying subscribers only._ ### Coupang's Cyber Security Incident URL: https://www.asiancenturystocks.com/cyber-se/ Last updated: 2026-04-28T14:18:44.000Z *Hi! I'm Michael Fritzell. Welcome to another *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- On 29 November 2025, South Korean e-commerce company [**Coupang**](https://finance.yahoo.com/quote/CPNG/?ref=asiancenturystocks.com) *(CPNG US — US$37 billion)* reported a cybersecurity breach, with personal information of millions of customer accounts leaked to third parties. The stock price dived, eventually falling almost 50% from the peak: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/b10fy-stock-price-of-coupang-cpng-us-.png) The day after the announcement, Coupang's CEO Park Dae-jun publicly apologized and provided details about the leak. It exposed names, email addresses, phone numbers, delivery addresses, and even door codes. It turns out the breach was caused by a 43-year-old former employee who hacked into the system from Mainland China and scraped data from internal servers. Coupang's behavior during the scandal became heavily criticized: - Coupang failed to meet the 24-hour legal deadline for reporting a breach to authorities - When reporting the breach to the Korean government, Coupang initially said that only 4,536 accounts were affected, not the actual number of 34 million - In the public announcement, Park characterized the incident as a "data exposure" rather than a leak - Coupang never disclosed the fact that the breach came from an inside employee, a whopping 147 days after the employee had resigned, and that the downloads took place over a period of five months - Furthermore, Coupang removed its apology banner from the website after just 3 days and replaced it with a Christmas sale ad. This angered the general public. - CEO Park Dae-jun eventually resigned, leaving new interim CEO Harold Rogers to deal with the fallout from the cybersecurity breach. However, he does not speak Korean, and he had a limited role in the company prior to his appointment. So many concluded that he was simply used to shield the US-based founder, Bom Kim, from any criticism. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-158.png) Coupang's new interim CEO Harold Rogers in a parliamentary hearing When an established company's stock price declines by almost 50%, my first instinct is to investigate whether the decline will result in a permanent impairment of capital. I've seen cybersecurity breaches many times before. For example, here are some of the most recent ones: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/8INac-cyber-security-incidents-in-asia-.png) I downloaded the stock prices for each publicly listed company on the list, covering 14 calendar days before each incident and 365 calendar days after. This is what the distribution of returns has looked like: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-157.png) Source: TIKR The data is noisy, but on average, there has been a \~10% decline in the two months following each incident, followed by an almost complete recovery six months later. These are tentative numbers and not statistically significant, so take them with a grain of salt. But my main takeaway is that cybersecurity incidents tend not to be that serious in either customer perception or investor sentiment. So it's surprising that Coupang's stock price sold off this much in response to its cybersecurity incident. I suspect politics is involved, as the scandal has now blown up to unprecedented proportions. It's a huge contrast to when subscription platform Substack reported a leak in early 2026 – nobody batted an eye. I spoke with [Eugene Teo](https://www.linkedin.com/in/eugeneteo/?ref=asiancenturystocks.com), Microsoft's Chief Security Advisor for Southeast Asia, and asked him what it was about Coupang's case that made the market reaction so severe: > "The Coupang case underscores the importance of maintaining basic cyber hygiene to reduce the likelihood of a cyber incident. > > There are two critical control deficiencies we must learn from this case: first, the importance of robust employee offboarding, **ensuring access is promptly revoked for departing employees**, especially those with privileged access to internal systems. The second is using a **Hardware Security Module (HSM) to safeguard digital keys**. Because Coupang did not do this, their former employee was able to retain access to their internal systems for months after their departure." You can find Eugene's take on the Coupang case [here](https://www.linkedin.com/pulse/insider-risk-redefining-trusted-eugene-teo-msid-ad-qte-iurhc/?ref=asiancenturystocks.com). So it seems like Coupang's internal processes were lacking, to say the least. The fact that Coupang's security budget accounted for only 0.2% of revenue is another warning sign. In contrast, Amazon spends more than 1.0%. Will the impact be long-lasting? Well, judging from high-frequency website traffic data, Coupang's website traffic did decline in early 2026\. But there's already a nascent sign of a recovery: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-159.png) Source: TickerTrends I think the bottom line is that people's memories are short. And when a service fulfills customer demands far better than the competition, even major cybersecurity incidents are unlikely to permanently impair a business like Coupang. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ### Five Companies on my Radar URL: https://www.asiancenturystocks.com/five-companies-on-my-radar/ Last updated: 2026-04-27T12:29:57.000Z *Hi! Welcome to a *subscriber-only edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- I spent much of the past week moving houses, so the deep dive that I hoped to present to you is not as polished as I had originally hoped for. Instead, I've decided to give you a rundown of the five companies that are currently at the top of my watchlist. ## Link REIT (823 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-153.png) The first one is a real estate investment trust that I originally wrote about in early 2025: [**Link REIT**](https://www.asiancenturystocks.com/link-reit-823-hk/) *(832 HK — US$13 billion)*. [Link REIT (823 HK)Internally managed blue-chip REIT offering an 8% yield with a catalyst![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/image/fetch/$s_!QBm1!-w_1200-h_600-c_fill-f_jpg-q_auto:good-fl_progressive:steep-g_auto/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f158203192_2fb57f6601-40f2-4d85-b422-db8bba04a5b8_2ftranscoded-1740887286.jpg)](https://www.asiancenturystocks.com/link-reit-823-hk/) A friend of the publication over at [Smartkarma](https://www.smartkarma.com/?ref=asiancenturystocks.com) made the case for the REIT a few days ago. In short, it owns 130 retail properties in Hong Kong, 12 in Mainland China, and another 12 overseas. Its assets are mostly neighbourhood malls, with a large exposure to tenants providing daily services, including grocery stores, wet markets, restaurants, parking garages, etc. The REIT is unusual in that it's internally managed. Unlike most other REITs, it doesn't have a sponsor injecting assets into it. Instead, it was created when the Hong Kong government decided to carve out all public housing retail properties into a single entity. The malls are truly unique, interacting with 2 million Hong Kong residents daily. As I explained in my original deep dive, Link's distribution per share track record was very impressive. From its IPO in 2005 to the COVID-19 pandemic, Link's distribution per share rose at a 10% compound annual growth rate, thanks in large part to ongoing asset enhancement initiatives. However, in the late 2010s, its growth increasingly relied on debt. It was then hurt by Hong Kong's 2019 pro-democracy protests, then COVID-19, and then the 2020 National Security Law, which caused 4% of the population to move overseas. In addition, it faced headwinds from a crackdown on [daigou purchasing agents](https://www.asiancenturystocks.com/winners-of-chinas-daigou-crackdown/), which led to a decline in the number of Mainland shoppers in Hong Kong. Finally, Link has been hurt by the success of e-commerce companies like Taobao and Pinduoduo. However, positive news is starting to emerge. First, Hong Kong's retail sales has surprised to the upside this year, including in the key supermarkets category: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-140.png) Source: Cushman & Wakefield Second, supermarket chain Wellcome recently reported positive growth in Hong Kong food sales in the first quarter of 2026\. Meanwhile, 7-Eleven Hong Kong reported like-for-like growth of +3% in the same quarter. Third, Hong Kong's residential property market is finally recovering: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-141.png) Source: Micro Macro That's perhaps thanks to Hong Kong's Interbank Offered Rate halving from 5.0% at the peak in 2023 to just 2.5% today. Fourth, we've recently had a shift in management. CEO George Hongchoy retired in late 2025\. I think he was behind Link's aggressive overseas expansion. Many of the properties purchased in the UK and Australia were transacted at record-low cap rates and caused Link REIT to accumulate debt. The 2023 rights issue diluted minorities. So while George has a strong reputation, it seems Link's capital allocation deteriorated in the late 2010s. The new interim CEOs, John Saunders and Kok-Siong Ng, both come from investment management and finance backgrounds. And it seems like they understand capital allocation. Since they took over, we've seen a large number of positive news stories out of Link: - The divestment of **Thomson Plaza** in Singapore for SG$250 million at 1.2x book value — demonstrating that many of its properties can be realized at book value. - The launch of a HK$200 million **cost-saving program**, which should help margins from FY2027 onwards. - Public statements that they'll avoid **diworsification** (a Peter Lynch term), instead doubling down on community malls and car parks in Hong Kong and other parts of Asia-Pacific — exactly what Link does so well. - The move to an asset-light **fund management model**, allowing Link to earn management fees without the need to deploy capital. They're essentially following the CapitaLand playbook. On LinkedIn, Link now calls itself [Link Asset Management](https://www.linkedin.com/company/link-asset-management-ltd/?ref=asiancenturystocks.com) — probably a sign of what's coming. While the REIT is now focused on paying down debt, share buybacks will probably be back on the table soon. The new management team has said that if their own stock yields, say, 7%, it will be difficult to justify acquisitions at cap rates much below that. This type of mindset is rare in Asia and should be encouraged. Finally, Link is likely to be included in the Hong Kong Connect program as early as the second half of 2026, allowing Mainland Chinese to invest in the company. On the Mainland, retail REITs typically trade at 3-5%. Link REIT itself trades at a headline dividend yield of 6.5%. The Price/Book ratio is currently 0.65x, below the historical multiple of 1.0x. Pre-COVID, Link consistently traded at a yield below 5%. Finally, I note that in [January 2026](https://www.asiancenturystocks.com/insiders-january-2026/#link-reit), non-executive director Keith Griffiths purchased US$375,000 worth of Link shares. Not a huge amount, but it coincided with the shift to a new management team. More details: - The 16 March 2026 [operational update](https://www.linkreit.com/-/media/linkreit/investor-relations/financial-reports-and-presentations/presentations/2025-2026/presentation/20260316%5F9m202526-operational-updates.pdf?rev=6dfe7ead1d464ed9a96d2bcb5ab238aa&hash=339B9B342E8777530E579C41E51C9815&ref=asiancenturystocks.com) - The 20 November 2025 [interim report presentation](https://www.linkreit.com/-/media/linkreit/investor-relations/financial-reports-and-presentations/presentations/2025-2026/presentation/20251120-ir202526-interim-results-presentation.pdf?rev=f521cd59bf2742c68caeb73d3a88515a&hash=7466C60B5CB402D3BA775BDC79F6CB8B&ref=asiancenturystocks.com) --- The rest of this post covers four more names. Subscribe to unlock: [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ## Nitori (9843 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-144.png) _This post is for paying subscribers only._ ### Claude for Equity Research URL: https://www.asiancenturystocks.com/how-to-use-claude-for-equity-resear/ Last updated: 2026-08-25T02:39:02.000Z *Hi! I'm Michael Fritzell. Welcome to another *free-to-read edition* of* [*Asian Century Stocks*](https://www.asiancenturystocks.com/) *– a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- 2026 has been the year of Anthropic. They are the creator of the large language model Claude, which has taken the world by storm: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/RUmiq-google-search-queries-for-claude-.png) The company was founded by a group of ex-OpenAI executives, who purportedly set out to create a more ethical generative AI tool. The result was [Claude.ai](https://claude.ai/new?ref=asiancenturystocks.com) – a chatbot that functions much the same way as ChatGPT and Google Gemini. However, the popularity of Claude did not take off until late January 2026\. At the time, Anthropic released [Claude Cowork](https://x.com/claudeai/status/2010805682434666759?s=20&ref=asiancenturystocks.com) — an AI colleague that can work with files on your computer using natural language prompts. And since then, Anthropic has been on an epic run of product releases, including [Claude Design](https://x.com/claudeai/status/2045156267690213649?s=20&ref=asiancenturystocks.com), [Claude Marketplace](https://x.com/claudeai/status/2029966517497122886?s=20&ref=asiancenturystocks.com), [Claude for Excel](https://x.com/claudeai/status/2010805682434666759?s=20&ref=asiancenturystocks.com), [Claude for PowerPoint](https://x.com/claudeai/status/2024550844998570324?s=20&ref=asiancenturystocks.com), [Claude for Word](https://x.com/claudeai/status/2042670341915295865?s=20&ref=asiancenturystocks.com), [Claude for Chrome](https://claude.com/claude-for-chrome?ref=asiancenturystocks.com), and [Claude Mythos](https://x.com/DeepLearningAI/status/2045264926751572195?ref=asiancenturystocks.com). In this post, I'll explain exactly how I use Claude to analyze stocks. And hopefully, you'll learn something in the process. ## Personalized instructions First, go to [claude.ai](https://claude.ai/new?ref=asiancenturystocks.com) and create an account. There's a free plan that gives you access to the basic model (Claude Sonnet) with up to 100 messages per day. There's also a Pro plan for US$20/month that gives you access to the reasoning model Opus 4.7, with 5x more usage than the free tier, access to Claude for Microsoft Office, and Claude Cowork. I suggest buying the Pro plan. When you first go to the website, Claude won't know much about you. So I suggest going to your profile (in my case, "MF") and then "Settings". You'll now be able to provide context on what you're looking for from Claude. In my case, I tell Claude that: > "I am Michael Fritzell, an equity research analyst. Whenever I ask about a particular company, I want to understand the fundamentals of the business model – in other words, how it makes money. I also want to understand what makes the company unique in comparison to its competitors. Be brief and to the point." ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-84.png) If you've used Claude for a while, it will have saved a memory of past discussions. You can access that memory by clicking "Memory from your chats": ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-115.png) If you want to add anything to the memory, click the pen button at the lower-left corner of the screen and add things you'll want Claude to keep in mind. You can also import the memory from other generative AI tools. Just click "Settings" and then "Capabilities", and follow the instructions after clicking "Start Import". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-114.png) Claude will now have much greater context on who you are and what you're looking for. --- ## Managing the main prompt window While visiting the website, you can reach Claude's main prompt window by clicking "Ctrl/⌘ + Shift + O". You'll then be presented with the following window: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-117.png) To add files, click the "+" sign, type "/" or drag and drop a file from your computer. If it's a picture, you can also just paste it by typing "Ctrl/⌘ + V". Use Sonnet 4.6 for routine questions and tasks and Opus 4.7 for complex, multi-step analysis (if you're on the Pro plan). If you click the sound button in the lower-right corner of the screen, you'll get to Claude's voice mode, where you can talk to the AI model using your computer's microphone. I've found Claude's live mode better than Gemini's but worse than ChatGPT's. See what you think. --- ## Save AI prompts in Claude Projects In the past three years, I've been saving my AI prompts in Apple's Notes app. This has forced me to copy the prompt text each time and then manually paste it into the prompt window. This is obviously a poor use of time. These days, I've instead automated the process by switching to Claude's Projects feature. You can think of it like a workspace for particular tasks. The way I use Claude Projects is to save generative AI prompts, such as the following ones: #### Company overview Explain the company’s business model in simple terms. What are its key products and services? Who are its main customers, suppliers, and competitors? What are the contracts and key payment terms? #### Bull vs bear “Act as an institutional-grade equity analyst. Perform a deep-dive, adversarial analysis of the company. Start with the bull case (competitive advantages, moat sustainability, growth levers including secular tailwinds or potential earnings surprises, capital allocation). Then the bear case (2-3 risks that could permanently impair the business, potential margin compression or revenue deceleration, high expectations). Perform a pre-mortem. Consider whether current valuation multiples are too high. Finally, generate a contrarian view of what the market is currently refusing to see." #### Competitive advantages I want to understand the strength of the company's products and business. How do the products compare with competitors' in terms of perceived value, branding, marketing, etc.? What competitive advantages does the company have that will protect it from future competition, so-called economic moats? And what is the company's bargaining power over other stakeholders? #### Supply chain Explain the supply chain that the company operates in and where the company sits within it. I want the output to be a map from upstream inputs all the way to the end customer, with all stakeholders accounted for. Make sure to capture the names of all the companies interacting with the company. #### Segments Give me a breakdown of revenue, EBITDA, and earnings by segment. Describe how each of these numbers has changed over time and why. Discuss both product segments and geographical segments. #### Earnings result Analyze the company's latest earnings result. Revenue & profit vs. expectations. Did the company beat or miss consensus? By how much? Key segment drivers. Which business lines drove the result? Any notable acceleration or deceleration? Margin trends. What happened to gross/operating margins and why? Guidance & outlook. What did management guide for next quarter/full year? Any change in tone? Balance sheet flags. Anything notable in cash flow, inventory, receivables, or debt? Market reaction. How did the stock react and what does that signal about what was priced in? Flag anything that looks unusual relative to the company's recent history. #### Earnings calls Create a summary of the company's recent earnings calls and tell me what management is focused on. Perform sentiment analysis and describe how sentiment has shifted over time. #### Management For the company, give me a brief assessment of the CEO and key executives: 1) Track record: What have they actually built, turned around, or delivered in prior roles? Quantify where possible. 2) Tenure & insider ownership — How long in the role, and how much skin in the game? 3) Capital allocation history — Do they reinvest wisely, acquire disciplined, or destroy value? ROE/ROIC trend under their watch. 4) Red flags — Related-party transactions, excessive comp, frequent strategy pivots, or promotional behavior. 5) Founder vs. professional manager — Which archetype, and what does that imply for this stage of the business? #### Stock price analysis Help me understand historical catalysts behind the company's stock price. What news or events moved the stock up or down more than 5% in the last 5 years? #### Comps Generate a comparables table with the company and its key global peers within the industry. Include the Bloomberg ticker, USD market cap, and the following valuation multiples: EV/Sales, EV/EBIT, P/E, and dividend yield. Also include the 5-year average return on equity for each peer. #### Forward projection Estimate the company's earnings per share in the following three years from 2025 to 2027\. Consider industry growth, market share gains, price increases, cost pressures, operating leverage, financing costs and share count dilution in your final earnings per share estimates. #### Red flags "You are a forensic equity analyst. Identify red flags and accounting risks in the financial statements of the company, including revenue recognition, segment reporting, leases, related parties, contingencies, stock-based comp, goodwill/intangibles across the income statement, balance sheet and cash flow statement." #### Management questions Create 15 precise questions for the CEO about the company's long-term strategy, competitive advantages, capital allocation and risks that they see on the horizon. Order by information value. #### Devil's advocate "You are a skeptical short-seller analyzing the company. Your job is to dismantle the bull case. What could structurally break the way this company makes money? Where is the revenue concentrated, and what happens if that concentration shifts? Why might the moat be weaker than bulls think? Who is the most dangerous competitor that bulls are underestimating, and why?What are the worst ways management has allocated capital? Any related-party transactions, aggressive accounting, or misaligned incentives? What assumptions need to hold for the current price to be justified? What happens to the valuation if growth disappoints by 20-30%? What is the single scenario that would permanently impair this business, and how plausible is it?" Create a separate Project for each of these prompts. Then click "Set project instructions" for each of them. Tell it to use each of the above prompts. For example, for the "Company overview" prompt above, I input the following and then click "Save instructions". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-118.png) What this does is allow us to analyze a stock without having to enter the entire prompt. Instead, I just click the Project name "Company overview", enter the ticker and then press Enter: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-120.png) I then get an excellent reply with minimal effort: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-137.png) If you don't like the reply from any of the prompts, just go to its Project and adjust it accordingly. To streamline the process even more, click the Star sign for each of these Projects. They'll now appear in the sidebar on the left side of your window. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-121-1.png) Any time you want to perform analysis, just click each Project, then type in the ticker. Some investors use Claude Projects the same way you might use NotebookLM: to save files for particular stocks, including annual reports, earnings call transcripts, etc. But I prefer NotebookLM when it comes to analyzing a large number of documents. NotebookLM has a richer feature set. For example, it can generate podcasts, connect to YouTube and Gmail, and easily handle hundreds of sources. --- ## Claude for Word/Excel/PowerPoint Now let's install Claude for Word/Excel/PowerPoint. Go to [Microsoft's Marketplace](https://marketplace.microsoft.com/en-us/search/products?search=claude&page=1&ref=asiancenturystocks.com), click "Get it now" for the app plug-ins you want, then follow the installation and login process. Next time you open any of these apps, you can ask Claude to analyze or modify the file directly from the associated chat window. For example, you can open the Word file with notes from a previous conference call, and ask for the greatest risks mentioned by management in the call: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-132.png) Another example from my personal workflow is to open Microsoft Excel, drag and drop Coupang's 4Q2025 earnings presentation into the Claude sidebar and perform a segment analysis: > "Find 2025 revenues by product segment and geographical segment and summarize them in pie charts" You're then presented with the following output: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-133.png) Other use cases include checking an Excel sheet for formula mistakes, summarizing long documents, and checking for factual or spelling mistakes in my Asian Century Stocks PowerPoint presentations. --- ## Claude Cowork for automating tasks Next, we'll [download Claude's desktop app](https://claude.com/download?ref=asiancenturystocks.com). It's only available for MacOS right now, but it will probably be available on Windows soon. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-122-1.png) Inside the app, there are three modes to choose from 1. Claude Chat 2. Claude Code 3. Claude Cowork In short, Chat is for thinking through problems. Code is for building software. And Cowork for running tasks on your computer. Once you've installed the Claude desktop app and have it running in the background, you can access it anytime by double-clicking the Options key on your Mac. You'll then be presented with the following pop-up window: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-126.png) In my view, this is the fastest way to get an answer to a question, much faster than opening your web browser and searching on Google. I also have the Caps Lock button connected to Claude's voice mode. If you click Caps Lock at any time, the voice mode will be activated, and you can simply speak into your microphone to get an answer: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-138.png) But let's dig into Claude Cowork specifically. You can find the Cowork button at the top-left corner of the Claude desktop app: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-139-1.png) Every time you deal with Cowork, you'll want to give it access to a folder on your computer. Just click the "Work in a project" button and then click "Choose a different folder" ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-127.png) With that file access, Claude Cowork can now view, create and modify files. You should allow the app to modify files in the folder, but don't grant it access to your entire hard drive. Here's an example of how I might use Cowork. Yesterday, I downloaded the latest eight earnings call transcripts for the Korean e-commerce company Coupang into a folder, and then asked it to analyze the recent trend in its earnings call sentiment. It then gives me the following output, which is saved in a separate Microsoft Word document called "Coupang earnings sentiment analysis.docx": ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-129.png) If you click "Instructions", you can tell Cowork exactly how you'll want the output for any particular task to look. These instructions will be saved in a separate file called "Claude.md" in your chosen folder. Other than earnings call sentiment analysis, I might use Cowork for finding obscure data, translation tasks, summarizing documents, conducting forensic analysis on financial statements, etc. But, in my view, where Claude Cowork really shines is where you need to create or modify existing files. In the Coupang folder mentioned earlier, I have an Excel file called Coupang.xlsx as well as its recent annual reports. Knowing this, I can ask Cowork to take Coupang's income statement and insert it into a new Excel sheet: > "Create a new sheet in Coupang.xlsx where you paste the last 3 years of Coupang's income statement from its annual reports into a nicely formatted table" This is what I'm then presented with, inside my Coupang.xlsx Excel file: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-130.png) Pretty impressive. Just be aware that generative AI tools sometimes make mistakes. So always double-check the output. You can also connect Claude Cowork with other apps. To do so, click "Customize" in the sidebar on the left-hand side of the app and then click "Connect your apps". I suggest adding Google Calendar, Google Drive (which includes Google Sheets), Slack and Notion. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-131.png) You'll also want to search for "Control Chrome" and install that connector. On top of installing the Claude extension inside Google Chrome. By doing this, you'll allow Claude Cowork to browse the web for you to download documents, scrape data off websites, etc. With connections, you can automate processes using each of these apps. For example, I have a [400-line watchlist](https://www.asiancenturystocks.com/watchlist/) in Google Sheets that I track weekly. To automate that process, I enter the following prompt: > "Read my watchlist from the Google Sheet "Asian Century Stocks Watchlist". Find the stocks that have moved more than 10% in the last 7 days. For those stocks, scan the Internet for earnings results, guidance changes, regulatory actions, analyst upgrades/downgrades, and material corporate events. Summarize the findings in a markdown report grouped by market (ASX, HKEX, SET, PSE, etc.), with a one-line summary per stock and a 'Notable' flag for anything that warrants deeper analysis. Skip stocks with no material news. Save the report as weekly-scan-\[date\].md to /Documents/Watchlist/." Claude Cowork then saves a file on my computer called "weekly-scan-2026-04-21.md", containing the following information: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-134.png) What the text file looks like in a typical note-taking app (in this case, Obsidian) Since I will want to run this task periodically, I save the routine in what Claude calls a "skill", so that Claude knows what to do each time: > "Create a skill from this workflow called /weekly-watchlist-scan that captures the process, format, and output location we just refined." Finally, I schedule the task to be repeated on each Monday morning at 9:00am by typing "/schedule the weekly watchlist scan every Monday morning at 9:00am SGT". As long as the computer is turned on and Claude Cowork is open, it'll perform the task and save each week's output as another "weekly-scan" file in my Watchlist folder. --- ## Claude Dispatch Next, we'll learn how to control your computer using your phone. Open the Claude Desktop app, click Cowork and then "Dispatch" in the sidebar to your left: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-135-1.png) With Dispatch, you'll be able to control your computer using the Claude app on your phone, as well as all the apps that are connected to it: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-136-1.png) Every time you want to control your computer, just open the Claude app on your phone and click "Dispatch" to open the window where you give instructions to your computer. When I'm on the run, I might want to retrieve a document from my computer. So I asked Dispatch to retrieve the Coupang earnings sentiment analysis document that I just created: > "Retrieve the Coupang Earnings Sentiment Analysis saved in my Coupang folder" I'm then presented with the following output within Dispatch: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/telegram-cloud-photo-size-5-6285197790728097816-y-2-1.jpg) So it's very useful, as you can see. With Dispatch, you can work remotely from just your phone using natural language. --- ## Conclusion Claude isn't perfect. It's a little slow at times, and if you're a heavy user, you'll quickly exceed your usage quota. Many of us will feel compelled to upgrade to the US$100/month plan. But I think the Google Chrome plug-in, Microsoft Office plug-ins, Cowork, Dispatch and the other Claude tools will fundamentally change the way we operate. It's time for us to learn these tools to automate some of our daily work. In practice, organizing my most-used prompts through Claude Projects might be the one trick that has saved me the most time. Today, when I'm interested in a company, I just click each Project, enter the ticker and voila — I get exactly the output I want. I've also found it helpful to throw a document into Claude for Excel and have it present the data in a nicely formatted table in a spreadsheet. I still haven't used Cowork much, as I prefer working with files in the cloud. But I can see why others find it helpful. Now that I've gone through my usage habits, I'm interested in hearing how you're finding Claude. What tricks are you using to automate your research process? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) [Get Full Access ](https://www.asiancenturystocks.com/#/portal/signup) ### Update: TravelSky (696 HK) URL: https://www.asiancenturystocks.com/update-travelsky-696-hk/ Last updated: 2026-04-19T04:47:36.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in TravelSky at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **A quick background** Chinese aviation tech company [**TravelSky**](https://www.asiancenturystocks.com/deep-dive-2021-17-travelsky/) *(696 HK — US$3.7 billion)* was one of the first companies I ever wrote about on Asian Century Stocks: [Deep-dive 2021-17: TravelSkyTravelSky Technology (696 HK) is a Chinese travel technology company owned by state holding company SASAC and the Chinese airlines.![](https://static.ghost.org/v5.0.0/images/link-icon.svg)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f0ea7776a-dbc9-4ae9-a96c-f301e39cf351_2438x1372.jpg)](https://www.asiancenturystocks.com/deep-dive-2021-17-travelsky/) In short, it's a state-owned monopoly that handles the bookings and inventory of almost all Chinese airlines. The company was initially formed by the Civil Aviation Administration of China. This was back in 1979 when the opening-up reforms were just getting started. A few years later, TravelSky launched China's first air ticket inventory control system. Technically, the software is known as a global distribution system (GDS). You can think of them as the backbone of the air travel industry, linking airlines with travel agents and other buyers of airline tickets. The airlines provide the system with seat inventory, pricing, etc. The GDS then aggregates the content and sends it to offline and online travel agents, corporate buyers, hotels, etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/GettyImages-2268133838-Large.jpeg) Source: Getty Images A global distribution system like TravelSky's has the following key features: - An air ticket **inventory control system**, helping airlines disseminate flight information, fares, availability, client details, etc. Roughly 40 local airlines and 350+ foreign airlines are using the system. - An air ticket **computer reservation system**, helping travel agents book flights across airlines. TravelSky has 70,000+ software terminals spread across 8,000+ agencies, both domestically and overseas. - A **departure control system** that helps airports with check-in, boarding pass issuance and load planning at the airport gate Revenues from these features are reported as part of TravelSky's **aviation information technology** segment, which in a normal year has represented 50% of revenues. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-98.png) In addition, TravelSky has an **accounting, settlement and clearing system**, in which it acts as a payment processor or a clearing house. Then, there's a **system integration** business where TravelSky installs hardware and software for airports, airlines and cargo operators on a project-by-project basis. And finally, TravelSky has a segment called **data network** where travel agents, hotels, and other travel companies pay TravelSky for real-time access to its inventory data. But its global distribution system remains the core of its business. Here's a diagram of TravelSky's position in China's airline industry as a provider of air ticket inventory control systems, booking systems, airport software, and related services: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-109.png) So why can't airlines send their ticket information directly to the likes of Expedia and Trip.com? Because there are thousands of smaller travel agents and aggregators that rely on a single source of information when searching for all available flights. Airlines do not have an incentive to facilitate such comparisons. TravelSky is essentially a monopoly, and it enjoys the full support of the Chinese government. Its biggest shareholder is the government's State-owned Assets Supervision and Administration Commission of the State Council (SASAC). Other shareholders include China's major airlines Air China, China Southern and China Eastern, making TravelSky entrenched in the local airline industry. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-85.png) Globally, there are several competitors, including [**Sabre**](https://finance.yahoo.com/quote/SABR/?ref=asiancenturystocks.com) *(SABR US — US$747 million)* in the United States and [**Amadeus**](https://finance.yahoo.com/quote/AMS.MC/?ref=asiancenturystocks.com) *(AMS SM – US$28 billion)*. But unlike these companies, TravelSky has virtually zero competition in China, with a 95% domestic market share. The monopoly has been fraying at the edges. In 2012, a rule change allowed foreign airlines operating in China to use TravelSky's global GDS competitors. For domestic flights, however, TravelSky remains the only GDS provider. When I first wrote about TravelSky, I noted that its earnings growth had been volatile. Part of the reason was its new operations center in Beijing, which came with massive data centers and weighed on the income statement with approximately CNY 200 million in extra expenses. However, that was a one-off hit that would become less important over time. While hit hard by the COVID-19 pandemic, I felt TravelSky would eventually recover. The main issue was that China's borders were closed. But I predicted that the borders would eventually open. The international border reopening was important for TravelSky, because it charged international airlines more than 4x that of domestic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-110.png) The border reopening would also help Chinese tourism close the gap with that of other countries. At the time of writing, only 10% of Chinese citizens owned a passport, compared to roughly half of Americans. And China's air travel penetration rate was only 0.4x trips per capita compared to 1.7 in South Korea. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-89.png) Source: Bernstein The beautiful thing about TravelSky's business model is the fact that additional transactions are highly margin-accretive. But with almost 10% yearly growth in air traffic, TravelSky could easily defend its margins, or even see them expand. At around HK$13/share, I foresaw a 2024e P/E ratio of 10x, at the lower end of TravelSky's historical trading range. Peers such as Amadeus traded at twice the P/E multiple. The main issue with TravelSky was that, despite being a monopoly, it had been unable to raise its fees. There was a cap of CNY 10 per passenger for booking fees and airport passenger processing fees taken together. And the airlines sitting on its board would also object to any price increases. That's why the domestic booking charge remained less than US$1 per transaction – much lower than the US$5 charged by international competitors. Another frequent concern is that online travel agents like Trip.com would replicate TravelSky's inventory control or booking systems. Apparently, they had tried, but smaller travel agents tend not to want to use competitors' systems. So, for completeness, everyone has continued to use TravelSky to offer their customers the best flight combinations at the lowest cost. The balance sheet was clean with a solid net cash position. However, the dividend payout ratio was weak at just 35%, with zero share buybacks: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-104.png) And there had been several asset injections, including the current accounting, settlement & clearing software, which was purchased from the parent back in 2018\. In 2018, it also entered into a joint venture with China Merchants Group to create and sell insurance products. Several investors, including Terry Smith's Fundsmith, saw these transactions and decided to sell their stakes. However, there's more to the story. --- ## An update to my original post ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/TravelSky_headquarters_-20231017130045--Large.jpeg) The TravelSky building in Donggezhuang Village, near Beijing. Source: Wikipedia Since my initial write-up in 2021, TravelSky's stock price has drifted lower by another 20%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/UFxs3-travelsky-696-hk---1-.png) _This post is for paying subscribers only._ ### Insider activity March 2026 URL: https://www.asiancenturystocks.com/insider-activity-march-2026/ Last updated: 2026-04-27T08:50:17.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/r/3a7ec08e?m=2031c863-c699-4684-80a3-1d259c143b19)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## March insider transactions March 2026 was an incredible month for insider transactions. Insider buys tend to be followed by outperformance, especially when the positions are **new** and **large**, in **small firms**, held by people with **CFO** or investment management backgrounds, coincide with share **buybacks**, or when they occur in large **clusters** of individuals. The number of buy transactions jumped from 544 to a whopping 1,275 in March, worth US$995 million. According to [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com), this was the most buys in a single month since March 2020\. Insider sentiment became very bullish by the end of the month, with a sell/buy ratio of just 0.6\. Causing Asia's insider sentiment to rank among the best globally after Europe: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/vrXHz-insider-sell-buy-ratio-by-region---1-.png) Source: Smart Insider By country, we saw a dramatic improvement in insider sentiment in **China and Hong Kong**. However, in China, there's still more selling than buying. There's also been heavy insider buying in **South Korea** and **India**. Meanwhile, the sell/buy ratio was essentially flat month-on-month in **Thailand** and **Malaysia**. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/G48T9-insider-sell-buy-ratio-by-country-.png) Source: Smart Insider By sector, there's been a massive cluster in **technology hardware** stocks such as [VSTECS](https://finance.yahoo.com/quote/0856.HK/?ref=asiancenturystocks.com), [Hana Microelectronics](https://sg.finance.yahoo.com/quote/HANA.BK/?ref=asiancenturystocks.com), [Suzhou Jinfu Tech](https://sg.finance.yahoo.com/quote/300128.SZ/?ref=asiancenturystocks.com) and [National Silicon Industry](https://sg.finance.yahoo.com/quote/688126.SS/?ref=asiancenturystocks.com). There's been another very positive cluster in **leisure & personal goods companies** like [Shenzhou International](https://sg.finance.yahoo.com/quote/2313.HK/?ref=asiancenturystocks.com) and sneaker brand owner [Anta Sports](https://sg.finance.yahoo.com/quote/2020.HK/?ref=asiancenturystocks.com). As well as a positive cluster in **Chinese auto stocks** like [Geely](https://sg.finance.yahoo.com/quote/0175.HK/?ref=asiancenturystocks.com) and [Minth](https://sg.finance.yahoo.com/quote/0425.HK/?ref=asiancenturystocks.com). --- ## Five highlighted situations I've gone through Smart Insider's entire list of Asian insider transactions in March. And I've chosen to highlight five of them, ranked from the highest market cap to the lowest: _This post is for paying subscribers only._ ### The coming El Niño of 2026 URL: https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/ Last updated: 2026-04-14T01:37:11.000Z *Hi! I'm Michael Fritzell. Welcome to another *free-to-read edition* of Asian Century Stocks – a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- ***Disclaimer** *: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- A person called [Investor X](https://x.com/cryptoinvesttwx/status/2041885216336388475?s=20&ref=asiancenturystocks.com) told me on Twitter that we'll likely see an El Niño in 2026\. After going through the data, I've concluded that he's right. An El Niño will have broad ramifications for asset prices in Asia. Beneficiaries include home appliances companies and coal miners. Meanwhile, plantation companies are going to have a tough year. But first, let me explain what El Niño is. It's essentially a climate pattern that drives global temperatures to rise, leading to droughts across Asia and Africa. In normal years, winds blow from the eastern Pacific Ocean near South America to the western Pacific Ocean near Asia. These winds push warm water towards Asia. In normal years, this warm water causes clouds to form and rain to fall in Asia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-49.png) Normal trade winds pushing warm water from South America towards Asia. Source: Met Office And since the warm water moves away from South America, the remaining water close to South America tends to be cool. The so-called El Niño weather cycle disrupts this pattern. Instead of winds moving west, the warm water stays in the middle of the Pacific, or even moves east. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-50.png) Weather patterns during an El Niño year: droughts in Asia and more rainfall in the America. Source: Met Office This causes: - Less rainfall in Asia, leading to droughts in Australia, Southeast Asia and even parts of Africa - More rainfall in the Southern United States and South America, leading to flooding in those regions Here are the regions that experience wet vs dry weather during El Niño years: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/telegram-cloud-photo-size-5-6264599935030333099-y.jpg) Source: [Yet Another Commodity Guy](https://x.com/tleilax%5F%5F%5F/status/2043622794500493347?ref=asiancenturystocks.com) In addition, since a large part of the entire Pacific Ocean heats up, huge amounts of energy are released into the atmosphere. This causes global temperatures to rise during El Niño years. Investor X's point is that 2026 is shaping up to be an unusually strong El Niño year: - The [US National Oceanic and Atmospheric Administration](https://www.cpc.ncep.noaa.gov/products/analysis%5Fmonitoring/enso%5Fadvisory/ensodisc.shtml?ref=asiancenturystocks.com) gives a 61% chance of El Niño emerging by July 2026\. - Roughly half of the team at the [European Centre for Medium-Range Weather Forecasts](https://yaleclimateconnections.org/2026/04/a-powerhouse-el-nino-event-appears-to-be-brewing-for-2026-27/?ref=asiancenturystocks.com) expect temperatures in the main El Niño region in the Pacific Ocean to exceed 2.5 degrees Celsius above the seasonal average by October 2026\. Making it one of the most intense El Niños of the past century. Global temperatures are already rising to an extreme, with sea surface temperatures in March 2026 hitting near-record levels: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-48.png) Source: Climate Reanalyzer Meteorologists expect temperatures in the middle of the Pacific Ocean to rise by anywhere from +0.2 to +3.3 degrees Celsius. Importantly for us, this will have broad ramifications for asset prices across various sectors. First, droughts will negatively impact palm oil yields for Malaysian and Indonesian **plantation companies**, perhaps by as much as 10-20%. That's how much output was impacted by the unusually strong El Niño of 1997\. Spot crude palm oil prices are likely to rise due to a temporary supply shortage. These are some of the companies that will be affected: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-60.png) Source: TIKR Droughts will also push up the prices of other **agricultural commodities** such as sugar, wheat, vegetable oil and cocoa. It doesn't look like futures have priced in much of an El Niño event yet: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-59.png) Futures for key agricultural commodities: crude palm oil, wheat, sugar and cocoa. Source: Trading View Higher prices for agricultural commodities will likely hit **consumer packaged goods** companies. With higher cocoa prices, chocolate makers like [Delfi](https://www.asiancenturystocks.com/delfi-delfi-sp-2025-update/) and [Orion](https://sg.finance.yahoo.com/quote/271560.KS/?ref=asiancenturystocks.com) are likely to get hit. With higher wheat prices, [Indofood](https://sg.finance.yahoo.com/quote/INDF.JK/?ref=asiancenturystocks.com)'s and [Tingyi](https://sg.finance.yahoo.com/quote/0322.HK/?ref=asiancenturystocks.com)'s margins are likely to suffer. It's also plausible that energy drink makers like [Carabao](https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/) and ice cream sellers like [RFM Corporation](https://www.marketwatch.com/investing/stock/rfm?countrycode=ph&ref=asiancenturystocks.com) will benefit. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-54.png) Source: TIKR Droughts in Asia tend to reduce hydroelectric output, boosting the demand for coal in India and Indonesia. So coal prices could be heading higher, all else equal. And Indonesian **coal miners** stand to benefit. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-53.png) Source: TIKR Finally, I suspect that warmer weather will boost the sales of **air conditioners**. Such companies include [Daikin](https://finance.yahoo.com/quote/6367.T/?ref=asiancenturystocks.com) in Japan, [Midea](https://www.asiancenturystocks.com/midea/) and [Gree](https://sg.finance.yahoo.com/quote/000651.SZ/?ref=asiancenturystocks.com) in China, and [Concepcion Industrial](https://www.asiancenturystocks.com/concepcion-industrial-cic-pm/) in the Philippines. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-52.png) Source: TIKR There have been a few instances, such as 2017, when key weather agencies forecasted an El Niño, yet none materialised. However, I think there's an asymmetry here, given that investors are not yet prepared for the potential of a super-El Niño, which could rival the one we saw in 1997\. So things could get rocky, especially for buyers of agricultural commodities. And warm weather should be bullish for air conditioner sellers in Asia and beyond. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Update: SUTL Enterprise (SUTL SP) URL: https://www.asiancenturystocks.com/sutl-enterprise-2026-update/ Last updated: 2026-04-12T14:57:58.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in SUTL Enterprise at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **A quick background** In late 2023, I published a deep-dive on Singapore marina operator [**SUTL Enterprise**](https://www.asiancenturystocks.com/sutl-enterprise-sutl-sp/)*(SUTL SP – US$63 million)*. You can find the link to it here: [SUTL Enterprise (SUTL SP)Asia’s best marina in a growing city at a P/E of 7x![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-57.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f138751320_2f967bce41-fd78-48e5-965a-c9b2853d8999_2ftranscoded-00000.jpg)](https://www.asiancenturystocks.com/sutl-enterprise-sutl-sp/) The company is the marina subsidiary of the unlisted conglomerate SUTL Group, which is known locally as a consumer goods distributor and retailer. Here's what the corporate structure looks like. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-18.png) Patriarch Tay Choo Hye established SUTL back in 1968\. Initially, the group focused on supplying goods and services to ships passing by Singapore. But it also began distributing cigarettes and Nike products across the Asia-Pacific. After Tay Choo Hye passed away in 2002, his son Arthur Tay took over the business. He had spent time in SUTL's finance division, so he's widely seen as a "numbers guy". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-19.png) Arthur Tay at the One°15 Sentosa Cove marina Back in the early 2000s, the Singaporean island of Sentosa was being redeveloped into a mecca for international tourism and luxury housing. Arthur saw an opening and bid for the contract to develop, own and manage a marina, right on Sentosa. SUTL won the bid. And in the following few years, it developed the marina that's now known as the "One°15 Sentosa Cove" — named that way because it's just 1 degree and 15 minutes north of the equator. It became an instant success. Just a few months after opening in 2007, membership subscriptions reached overflow levels, and the occupancy rate of the marina quickly reached its limits. What made One°15 Sentosa Cove special was that it was one of the very few marinas in Singapore able to accommodate vessels up to 200 feet. It was also close to several residential areas on Sentosa, allowing the ultra-rich to have easy access to their yachts. Later, it also added a customs and immigration facility, enabling yacht owners to enter and exit the country directly through the marina. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-45.png) Source: Google Maps The marina has a capacity for 270 yachts. And following a 2021 reconfiguration, it can now accommodate 32 super-yachts of up to 220 feet. Having your yacht in the marina can cost up to SG$50,000 per year. But that hasn't deterred customers, given that the marina has a 97% occupancy rate. There's no space left, as you can tell from the following photos: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-21.png) Connected to the marina is the One°15 Marina Sentosa Cove clubhouse, which you can get access to if you're a member. You don't have to be a member to berth your yacht in the marina, but you do get a discount if you're a member. The membership also gives you unrestricted access to all One°15 marinas across Southeast Asia. The membership entrance fee has been SG$60,000 per person, with a monthly fee of around SG$200\. The membership gives you access to all facilities, including: - Playgrounds and a game room for children - Dining privileges at the on-site restaurants, overlooking the marina - Fitness center - Spa - Swimming pool - Private members lounge I get the feeling that many of Singapore's well-heeled buy memberships to gain access to a location where they can hold business meetings in quiet, beautiful surroundings. Finally, there's a hotel operation, with 26 rooms right next to the marina. It's often used for wedding banquets and corporate events. Members get preferential prices on the rooms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-23.png) It's an exceptional marina. The Google reviews are positive, almost across the board, with an average rating of 4.5/5\. Here are a few highlights from the reviews: > "One of the **best marinas** in Singapore" > "**Very impressed** to how it have grown over the years" > "An experience that **I'll remember for life**" > "**Nice place** to go for yachting and many more holiday activities" So it's no surprise that One°15 Sentosa Cove has won prizes, including the MIA award for "International Marina of the Year" in 2023\. And it was selected as the best marina in Asia for 8 separate years between 2009 and 2019\. Plus, there aren't many alternatives. Especially not if you own a super-yacht, as those tend to be too big for the other marinas, and for Sentosa houses that come with waterfront berths. The main competitor, **Marina at Keppel Bay**, sits just across the bridge from Sentosa, and is about to be taken over by SUTL, though subject to an ongoing anti-trust review. The **Republic of Singapore Yacht Club** is member-owned. Then there's the **Raffles Marina** up in Tuas, close to Malaysia, which has deep berths but is mostly used for smaller sailing boats. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-33.png) I consider ONE°15 Sentosa Cove to be the clear market leader, followed by Marina at Keppel Bay, and then Republic of Singapore Yacht Club. Partly because they're close to central Singapore, and partly because of their water depth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-46.png) To conclude, I think that the One°15 Sentosa Cove is in a league of its own. SUTL has previously guided for 7-10% yearly price increases, with unconstrained pricing power. In other words, there's no limit to how high prices can eventually go. In addition to SUTL's Singapore marina business, SUTL also operates marinas on Nirup Island and Jakarta through long-term contracts with the owners. And it's in the process of setting up a 60:40 joint venture for a marina in Phuket. These do not materially contribute to SUTL's EBITDA, but there might be network effects. The company has previously described its strategy of building a "string of pearls", with members being able to sail from marina to marina, without ever leaving the One°15 service umbrella. Some investors have expressed concerns about SUTL Enterprise's status as part of a larger group. But the company has historically treated minority shareholders well, paying out 50% of earnings and a SG$10-cent special dividend back in 2021\. The bigger question mark in investors' minds is that the One°15 Sentosa Cove marina's concession is set to expire in 2034\. SUTL has been trying to extend the lease, but the outcome remains uncertain. If the lease expires, SUTL's SG$70 million+ investment in the marina might eventually prove worthless. On the other hand, SUTL has a cash pile of SG$69 million, against a market cap of SG$81 million. The company has vowed to use the cash pile to expand the business, most importantly through the SG$40 million acquisition of Marina at Keppel Bay. Another mitigating factor is that the One°15 Sentosa Cove marina is seen as one of the best in the world. Many investors question whether the Sentosa Development Corporation would want to get rid of SUTL and risk Sentosa's reputation. When I wrote my deep-dive in 2023, I judged that the lease would probably be extended, but with strings attached. SUTL will likely be forced to invest additional capital in the marina, which, on the positive side, could also improve the asset's quality. --- ## An update to my original post ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/IMG_5010-Large.jpeg) A picture of the marina from the perspective of the club house, when visiting One°15 together with a subscriber last year Since my initial write-up in 2023, the stock price has slowly inched upwards: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/LJqT9-sutl-enterprise-sutl-sp---1-.png) _This post is for paying subscribers only._ ### Analyze Websites like a Pro URL: https://www.asiancenturystocks.com/analyze-websites-like-a-pro/ Last updated: 2026-04-08T02:11:05.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- Alternative data has become table stakes for investors who want to understand a business. But in Asia, competition is lower, and alternative data can still give you an edge. In this article, I will discuss website analytics. Website behavior can predict customer acquisition and, therefore, revenue growth. Analyzing website data is particularly useful for consumer-facing businesses whose transactions occur on the website itself. There are three main website traffic analysis tools: [Similarweb](https://www.similarweb.com/?ref=asiancenturystocks.com), [Semrush](https://www.semrush.com/?ref=asiancenturystocks.com), and [Ahrefs](https://ahrefs.com/?ref=asiancenturystocks.com). These tools use data they retrieve from partnerships with Internet Service Providers as well as device-level traffic data. The data is not definitive, so we should be careful about drawing definitive conclusions. But if we find that the website traffic is on an upward trajectory, that's probably a good sign for the business. A few weeks ago, I published a deep-dive on Japanese HR-tech company [Visional](https://www.asiancenturystocks.com/visional-4194-jp/), which owns the recruitment website BizReach. This is how I would analyze BizReach's main website. The first step is to [Similarweb](https://www.similarweb.com/?ref=asiancenturystocks.com) and type in "BizReach.jp". We'll need to log in with our Google account. After typing in the URL, we're then shown the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-7.png) It shows that BizReach.jp had 6.15 million website visitors in February 2026, higher than mid-career headhunting website doda-x.jp but lower than the mainstream job board Recruit.co.jp. This is exactly what I would have expected. Lower down on Similarweb's dashboard, we also find engagement metrics for BizReach. The website has an average visit duration of 2:45 minutes, with 3.4 pages per visit and a bounce rate of 49.4%. A visit duration of less than 3 minutes is not particularly long, but it probably reflects users landing on a specific job posting and then leaving quickly. Interesting, but it's hard to draw any definitive conclusions from the data. If we scroll down a bit further, we get the following "Channels overview" chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-8.png) This chart shows us that most of BizReach's traffic is organic. That's usually good news, since BizReach isn't reliant on paid ads for traffic. While paid traffic can be profitable, I prefer that the website has enough "mindshare" that customers are happy to visit the website on their own volition. If a large part of the traffic comes from social media channels, you can go to X.com and type in [site:bizreach.jp](https://x.com/search?q=site%3Abizreach.jp&src=typed%5Fquery&ref=asiancenturystocks.com). We'll then find all the instances where links to a website are being shared. This helps understand exactly how the website is growing on social media. When doing this for BizReach, I get the impression that the links shared on X are mostly for individual job ads or BizReach's own blog. Next, go to [Semrush](https://www.semrush.com/?ref=asiancenturystocks.com) and type in BizReach.jp. We're then presented with the following chart, which helps us understand the traffic that it receives from Google search: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-11.png) Here, we learn that the main organic search competitors to BizReach are recruitment consultancy JAC-Recruitment and En-Japan's mid-career website Mid-tenshoku. I therefore get the impression that BizReach is seen and used as a website for professionals to change jobs mid-career. Semrush's dashboard also shows you the keywords that BizReach is paying for, including "ビズリーチ" (BizReach), "てんしょく" (job change), and 職務履歴書 (resume/CV). Next, let's go to [Ahref's Website Authority Checker](https://ahrefs.com/website-authority-checker/?ref=asiancenturystocks.com) and type in BizReach.jp: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-12.png) An authority rating of 74/100 indicates that the website is credible in the eyes of search engines. The authority reflects a large number of backlinks from other websites linking to it. With such a high rating, it's highly likely that BizReach will appear in Google search results. Competitor doda-x.jp's website authority is only 60/100, a significant difference given the logarithmic scale. If you pay for Similarweb's standard plan, you'll get access to historical website traffic data. A cheaper alternative is to use alternative data platform [Tickertrends](https://tickertrends.io/?ref=asiancenturystocks.com) instead. Paying subscribers to TickerTrends can search for Visional 4194 JP and then click "BizReach.jp" under the Web Traffic Trend heading. They'll then be presented with the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-13.png) Source: TickerTrends It shows a big jump in website traffic in early 2026\. I know that Visional has just launched a new series of TV commercials to attract new job seekers, which could explain the jump. But the strong website traffic could also be due to a strong hiring market, seasonality, or online referral campaigns. Next, let's talk about generative AI tools. Such tools are still not sending much traffic to specific websites, but search behavior has shifted. Informational search queries are moving away from search engines toward Google's "AI mode" and generative AI tools like ChatGPT and Gemini. To see whether a brand appears in the answers from generative AI tools, I suggest going to the [HubSpot AEO Grader](https://www.hubspot.com/aeo-grader?ref=asiancenturystocks.com) and typing in the brand you want to analyze. For BizReach, we get the following result: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-14.png) The brand sentiment is strong, suggesting that these tools view BizReach as a quality brand. The share of voice for Gemini is high, indicating it's frequently mentioned in search results. And it's mentioned more frequently than competitors Doda X and Recruit Direct Scout. Then again, we don't know how much a mention in generative AI tools helps BizReach add resumes to its database or add employers to its customer base. So I'd be careful interpreting the results. So to summarize, we can use Similarweb, Semrush, and Ahrefs to understand the user journey from search engines, social media, or other channels, and what they do once they land on the website. We can also use TickerTrends to plot website traffic over time and get a sense of its trend. It's not necessarily true that higher website traffic translates into higher profits. That depends on customer acquisition costs, paid conversion rates, retention rates, etc. But if a company has almost no website traffic, I'd start to consider the possibility that it's a fraud. If you want to use website traffic to predict earnings beats, I suggest using subdomain URLs like [login.salesforce.com](https://x.com/pradeeepk/status/2036647189515206809?s=20&ref=asiancenturystocks.com) or [cart.coupang.com](https://cart.coupang.com/?ref=asiancenturystocks.com), as those tend to be directly correlated with actual revenues. And make sure to back-test the data to gauge the correlation with the company's historical revenues. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Samart Aviation (SAV TB) URL: https://www.asiancenturystocks.com/deep-disamart-aviation-sav-tb/ Last updated: 2026-04-23T08:52:42.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I hold a position in Samart Aviation at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Samart Aviation**](https://finance.yahoo.com/quote/SAV.BK/?ref=asiancenturystocks.com) *(SAV TB — US$216 million)* is the exclusive air navigation service provider for Cambodia. Such service providers use control towers, radio systems, and surveillance systems to keep air traffic safe and orderly. Such companies use control towers, radio systems, surveillance systems, etc to keep air traffic safe and orderly. Its 360 staff help sequence flights and grant clearance for takeoff and landing. It also manages all en-route traffic flying through Cambodian airspace — so-called "overflight" traffic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-3.png) In return, the company receives a US$400-700 fee per flight, with tariff rate regulated by the Cambodian government. Takeoffs and landings cost more, and overflights less. But in any case, it's a virtual toll road booth for air travel through Cambodia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-2.png) The initial concession lasted from 2002 to 2017\. But thanks to several extensions, the current concession is now set to continue until 2051\. And the concession may be extended yet again. What's unique about the concession is that Cambodian air traffic is booming. Back in 2002, total flight movements in Cambodia were just 31,000 per year. In 2019, that number had risen to 134,000\. There was a temporary dip in traffic during COVID-19, but we're now almost back to the pre-COVID level. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-6.png) Third-party research firms estimate that air traffic will continue to grow at a 9-10% annual rate. Cambodia Airways, as well as Vietjet and Vietnam Airlines, are set to grow their fleets by 30-40% over the next few years. And the construction of completely new state-of-the-art airports in Phnom Penh and Ho Chi Minh City in 2025 and 2026 will further increase capacity. The company has confirmed to me that they can handle up to 200,00 flight movements per year, without hiring any additional staff. That means that any incremental revenue will be margin accretive, pushing the operating margin somewhat closer to the gross profit margin of 50%. Despite the outlook, the share price has been on a downward trajectory: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/CLVHL-samart-aviation-sav-tb-.png) _This post is for paying subscribers only._ ### Portfolio update March 2026 URL: https://www.asiancenturystocks.com/portfolio-update-march-2026/ Last updated: 2026-05-30T00:49:15.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## Market commentary I feel like a kid in a candy store. Stock prices came down significantly in March due to the US and Israel attacks on the Iranian government. I'm not an expert on the conflict. But what I do know is that most of my holdings have zero exposure to the Middle East, or even to oil prices. And sentiment is now extremely weak, judging from the CNN Greed & Fear Index, which just reached 9/100: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-97.png) Low reading tend to correlate with bottoms in the stock market, according to research from Sentimentrader. The MSCI Asia Ex-Japan ETF is now down about 13% from the peak: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-98.png) Several smart investors, such as Bill Ackman, seem to believe that it's now a [decent time to enter](https://x.com/BillAckman/status/2038431513964916978?s=20&ref=asiancenturystocks.com). It does feel like a non-consensus call. Also, check out the Asia insider selling/buying ratio, courtesy of Smart Insider. It measures the number of insiders selling vs buying. A low ratio means that buyers outnumber sellers. Today, the ratio has come down to an almost unprecedented level of 0.16x: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-104.png) In other words, buyers outnumber sellers by a factor of six. Are they seeing something we don't? In terms of sectors, one interesting trend is that Asian DRAM spot prices have begun to decline. DRAM spot prices tend to be coincident indicators for memory chip makers like Micron and SK Hynix. [Robeco](https://robeco.substack.com/p/korean-chips) argued that Korean memory chip export volumes dropped from October to February due to retooling of fabs for high bandwidth memory chips, causing a squeeze in the market for memory chips. But supply is now coming back to the market. SK Hynix's new M15X fab will primarily make high-bandwidth memory, but not entirely. So the commodity DRAM market will benefit as well. And it won't take much to correct the ludicrously overpriced commodity DRAM market. This has implications not just for memory chip makers and the KOSPI, but also consumer electronics companies – the buyers of DRAM and NAND chips. I'm therefore becoming interested in companies such as [Micro-Star International](https://finance.yahoo.com/quote/2377.TW/?ref=asiancenturystocks.com), [Logitech](https://finance.yahoo.com/quote/LOGI/?ref=asiancenturystocks.com) (which just initiated a new share buyback), [Lenovo](https://finance.yahoo.com/quote/0992.HK/?ref=asiancenturystocks.com), [Sony](https://www.asiancenturystocks.com/deep-dive-2022-17-sony/), and [Nintendo](https://www.asiancenturystocks.com/deep-dive-nintendo-7974-jp/). I'm also noting that through this market carnage, Japanese SaaS companies have held up very well. [Poper](https://finance.yahoo.com/quote/LOGI/?ref=asiancenturystocks.com), for example, rose +6% this morning on no news. Who's buying and why? So given this backdrop, I'm keen to be fully invested. I see plenty of opportunities across Thailand, the Philippines, consumer electronics companies, Japanese software developers, and sellers of wristwatches, among others. I see no reason to stay cautious. --- ## Portfolio update My portfolio declined by -5.1% month-on-month in US Dollar terms in March 2026\. Since the portfolio's inception in October 2021, the portfolio's value has increased by +66.3%, equivalent to an +11.6% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-95.png) Part of the decline was currency-related, with the US Dollar Index (DXY) rising by +2.8%, indicating that the US Dollar appreciated against other currencies. But we also saw broad-based declines in e.g. Thai stocks in late February and early March, hitting Major Cineplex and Carabao. Fairfax India also declined as India is exposed to higher oil importers. Here's what my Asia-focused portfolio looked like as of 30 March 2026: _This post is for paying subscribers only._ ### Travel Notes: Vietnam URL: https://www.asiancenturystocks.com/travel-notes-vietnam/ Last updated: 2026-03-30T13:32:13.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- I just came back from a five-day trip to Vietnam. Vietnam was the location of this year's FatAlpha Value (Asia) conference, organized by Cypriot Sophocles Sophocleous. A fantastic event that brought together 40 investors from around the world to meet, share investment ideas, and learn about Vietnam. I've been to Vietnam several times before. But even so, I was pleasantly surprised by the buzz of activity across the streets of Ho Chi Minh – the commercial center that was formerly known as "Saigon". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/GettyImages-121041829.jpg) Source: Getty Images Vietnam's growth took off after its entry to the WTO in 2007\. Foreign direct investment poured in, and textile and electronics plants sprang up across the country. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-91.png) Net foreign direct investment into Vietnam vs other Asian countries However, a stock market bubble popping and malinvestment in the property market caused a bust that lasted through the mid-2010s. I remember visiting an investor conference in 2014, when a Vietnamese fund manager told me he had lost all faith in the country. He recommended me to stay away from Vietnamese equities. This memory has stayed with me, because in hindsight, it proved to be almost the bottom of the Vietnamese stock market, at least in terms of sentiment: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-92.png) From the WTO entry until today, Saigon's GDP per capita has risen from just about US$2,000 to almost US$10,000\. In a global perspective, it's now a middle-income city. And on the ground, you can certainly feel that the city has grown wealthier. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/IMG_5784-Large.jpeg) Central Saigon at night That said, the country is still controlled by the Communist Party of Vietnam. And in recent years, there's been significant political infighting. In 2016, the previous General Secretary, Nguyen Phu Trong, launched his "Blazing Furnaces" anti-corruption campaign, which seemed to target anyone who wasn't ideologically aligned with him. In 2024, the previous head of public security and the executor of the Blazing Furnaces campaign, To Lam, became the party's new General Secretary. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-93.png) Nguyen Phu Trong to the left and To Lam to the right Several fund managers I spoke to said they had initial skepticism about To Lam. But so far, To Lam has proven surprisingly market-friendly, with a host of reforms that have helped private-sector entrepreneurship. He wants the private sector share of the economy to rise from 50% today to 70% by 2030\. So To Lam is now seen more as a Deng Xiaoping-type reformer than a socialist ideologue. And as VinaCapital's Michael Kokalari told us, the outlook for Vietnam is positive. He calls the country the last country to follow the [East Asian Development Model](https://www.asiancenturystocks.com/the-east-asian-development-model/): financial repression channelling savings into infrastructure, combined with foreign direct investment leading to technological spill-over effects and a general improvement in productivity. Vietnam also benefits from the ongoing US-China trade spat, as China now faces an effective tariff rate 25 percentage points higher than Vietnam's. I heard of entire towns being created close to Vietnamese transhipment hubs, dominated by entrepreneurs from Mainland China. Vietnam is booming. Across Saigon's suburbs, I saw massive housing blocks popping up everywhere, many developed by the country's largest conglomerate, Vingroup. Speculation is everywhere. Residential property cap rates can be as low as 2%, with individual luxury apartments often costing more than US$1 million. Home prices in Saigon have risen almost 50% in the past two years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/IMG_5836-Large.jpeg) An apartment complex in Thao Dien, six stations away from central Saigon And there are still many low-hanging fruits. The highway between Ho Chi Minh City has still not been completed, perhaps due to local interests diverging from the national interest. Once the highway has been built, factories will likely be built even farther from the main ports in Hai Phong and Saigon. One Vietnam-focused fund manager told me that Vietnamese equities have become incredibly hot. Retail investors now account for 90% of trading volume. Just in the past year, they've been pushing up the price of the main index constituent Vingroup, a politically connected conglomerate. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-88.png) The stock price of Vingroup. Source: Trading View A positive development will be Vietnam's September 2026 upgrade to Emerging Market status by FTSE Russell. That will likely lead to several billion USD in inflows to Vietnamese equities. But then again, MSCI still considers Vietnam to be a frontier market. The country still has foreign ownership limits. And the country still has capital controls. Getting money in is not a problem, but getting it out often requires a lot of paperwork. I was asked about the current opportunity set in Vietnamese equities. So I dug deeper into Vietnam's largest publicly listed equities. These are the top 50 stocks on the Ho Chi Minh Stock Exchange and Hanoi Stock Exchange: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/NWsUD-the-50-largest-publicly-listed-vietnamese-companies---1-.png) Phillip Securities in Singapore and Saigon Securities in Vietnam both offer Vietnamese market access to international investors. More information [here](https://www.asiancenturystocks.com/the-best-asian-retail-broker/). After the trip, I've added several Vietnamese stocks to my [watchlist](https://asiancenturystocks.com/watchlist?ref=asiancenturystocks.com). These include state-owned dairy giant [Vinamilk](https://www.investing.com/equities/vietnam-dairy-products-jsc?ref=asiancenturystocks.com), [Saigon Beer](https://www.investing.com/equities/saigon-beer-alcohol-beverage-corp?ref=asiancenturystocks.com), duty-free retailer [Taseco](https://www.investing.com/equities/taseco-air-services?ref=asiancenturystocks.com), retailer [Phu Nhuan Jewelry](https://www.investing.com/equities/phu-nhuan-jewelry-jsc?ref=asiancenturystocks.com), and the tech giant [FPT Corporation](https://www.investing.com/equities/fpt-corp?ref=asiancenturystocks.com). Other ways to access Vietnam include the [VanEck Vietnam ETF](https://finance.yahoo.com/quote/VNM/?ref=asiancenturystocks.com) (VNM) or [Jardine Cycle & Carriage](https://finance.yahoo.com/quote/C07.SI/?ref=asiancenturystocks.com), which owns several successful Vietnamese companies, including [REE Corporation](https://www.investing.com/equities/refrigeration-electrical-engineerin?ref=asiancenturystocks.com), [Vinamilk](https://www.investing.com/equities/vietnam-dairy-products-jsc?ref=asiancenturystocks.com) and local conglomerate THACO. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/IMG_5825.jpeg) East72's Andrew Brown As for the conference itself, it was great. We focused almost entirely on international stocks, with each person presenting their best idea. I discussed the Japanese enterprise SaaS company [Freee](https://www.asiancenturystocks.com/freee-4478-jp/). Others pitched bombed out alcohol producers, cheap Hong Kong-listed dividend plays, and even gold miners and the case for uranium. If you're interested in joining the FatAlpha Value (Asia) conference next year, keep an eye out for updates on the [FatAlpha website](https://fatalphavalue.com/asia/?ref=asiancenturystocks.com). From what I understand, next year's conference will either take place in Kuala Lumpur, Malaysia, or Shenzhen, China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Digging through Korean Value-Up plans URL: https://www.asiancenturystocks.com/digging-through-korean-value-up-plans/ Last updated: 2026-03-23T04:43:57.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- In early 2024, South Korea's Financial Services Commission decided to emulate Japan's shareholder reforms by launching its own "Corporate Value-Up" program. At the center of the program were voluntary disclosures by Korea's listed companies. Just like in Japan, listed companies were encouraged to publish long-term "Value-Up plans" that outlined how management would improve capital allocation and the company's valuation. The best-scoring companies were included in a new "Korea Value-Up Index" sponsored by the Korea Exchange. Scores were calculated based on profitability and whether companies are actively improving their corporate governance. It became a bigger success than I had expected. If you go to the Korea Exchange website today, the first number you'll see is the Korea Value-Up Index, and only then, KOSPI. So it shows you how seriously the exchange is taking the new program. The Value-Up Index is now used as a benchmark for many ETFs and financial products bought by Korean pension funds and other institutional investors. So if a company is included, its valuation is likely to rise. Today, the top 10 constituents include SK Hynix, Shinhan Financial, and Hanwha Aerospace: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-78.png) Separately, the Korea Exchange also built [a website](https://kind.krx.co.kr/valueup/disclsstat.do?method=valueupDisclsStatMain&ref=asiancenturystocks.com) where listed companies are ranked on Price/Book, Price/Earnings, return on equity, and dividend payout ratios. The same website also has a list of the companies that received [Excellent Value-Up Company Awards](https://kind.krx.co.kr/valueup/excntcorp.do?method=valueupExcntCorpMain&ref=asiancenturystocks.com) in 2025: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-77.png) Source: KRX To receive this award, companies needed strong disclosures, a feasible plan to improve corporate returns, and key performance indicators that beat their sector peers. Long-time readers of Asian Century Stocks probably remember Samyang Foods, the buldak ramen maker [I wrote about in 2024](https://www.asiancenturystocks.com/samyang-foods-003230-ks/). Samyang Foods issued its first Value-Up plan on [26 March 2025](https://kind.krx.co.kr/external/2025/03/26/002088/20250326004410/%5B%EC%82%BC%EC%96%91%EC%8B%9D%ED%92%88%5D%20%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%EC%A0%9C%EA%B3%A0%EA%B3%84%ED%9A%8D.pdf?ref=asiancenturystocks.com), outlining ambitions to expand its production capacity and drive higher returns on equity through higher sales volumes and factory automation. Being curious about the plans that have been announced, I went to the Korea Investors' Network of Disclosure (KIND) website to get the [full list of recently announced Corporate Value-Up plans](https://kind.krx.co.kr/valueup/disclsstat.do?method=valueupDisclsStatMain&ref=asiancenturystocks.com). Within the KOSPI, I found 304 announcements of Corporate Value-Up plans since May 2024\. Out of those, I managed to download 132 companies that released full Value-Up investment decks. You can download my full list here: [Korea Value UpKorea Value Up.xlsx32 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2026/03/Korea-Value-Up.xlsx "Download") I only included each company's latest Value-Up plans, ignoring the originals. Many are in Korean language, so if you don't speak Korean you will have to use [Google Translate](https://translate.google.com/?sl=auto&tl=en&op=docs&ref=asiancenturystocks.com) or [NotebookLM](https://notebooklm.google/?ref=asiancenturystocks.com) to understand their content. I went through the list today, and narrowed it down to five stocks worth highlighting. Some of these stocks have also been mentioned by [Douglas Kim](https://www.smartkarma.com/profiles/douglas-kim/research?ref=asiancenturystocks.com) over at Smartkarma. ## KT&G (033780 KS) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-83.png) First, let's talk about KT&G, or [**Korea Tobacco & Ginseng**](https://finance.yahoo.com/quote/033780.KS/?ref=asiancenturystocks.com) *(033780 KS — US$11 billion).* It's South Korea's largest tobacco company, holding a 68% market share. It used to be an absolute monopoly, but it still has a distribution advantage. KT&G also has a global operation with sales in 50 countries and manufacturing hubs in Indonesia and Kazakhstan. Cigarettes are the mainstay product, but they also sell heat-not-burn devices in a partnership with Philip Morris. What makes KT&G's [Value-Up plan](https://kind.krx.co.kr/external/2025/09/23/000350/20250923000346/2025%20KT%26G%20%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%EC%A0%9C%EA%B3%A0%EA%B3%84%ED%9A%8D%20%EC%9D%B4%ED%96%89%ED%98%84%ED%99%A9.pdf?ref=asiancenturystocks.com) unique is its aggressiveness. Its 2025 target was to achieve a total cash return of over 100%, including a dividend above KRW 6,000\. Such a payout ratio is unusual in South Korea. Consensus estimates the dividend to reach 6,345 per share in 2026\. In addition to these shareholder returns, KT&G is now targeting returns from the sale of non-core assets. In 2026, KT&G targets a KRW 300 billion share buyback. And in March, KT&G announced that it will cancel its entire Treasury stock, equivalent to 9.5% of shares outstanding. After the share cancellation, it will have just north of 100 million shares outstanding. Against the 2026 consensus net income, KT&G will then trade at 12.7x P/E. If capital returns hit 100%, we could see an almost 8% dividend/buyback yield. ## Nongshim (004370 KS) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-80.png) [**Nongshim**](https://finance.yahoo.com/quote/004370.KS/?ref=asiancenturystocks.com) *(004370 KS KS — US$1.5 billion)* is a Korean packaged food company, most known for its ramyeon noodles. But it also makes chips, crackers, bottled water, and ready-to-eat food. 72% of revenue is domestic, and 28% is from overseas customers. It also has a holding company with a similar name that the family uses to control the operating business. The company is currently building a new factory in Busan serving the export market. International businesses are growing by +14% per year, and it looks like they're benefiting from the broad popularity of Korean food overseas. Nongshim's [Value-Up plan](https://kind.krx.co.kr/external/2025/05/22/000214/20250522000724/%EB%86%8D%EC%8B%AC%5F%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%EC%A0%9C%EA%B3%A0%EA%B3%84%ED%9A%8D.pdf?ref=asiancenturystocks.com) targets KRW 7.3 trillion in revenues and an operating margin of 10% by 2030\. What's fascinating about the plan to me is that they want to increase the overseas share to 61%, up from only 28% today. Capital returns are more modest, targeting only 25% and a return on equity of only 10%. Still, KRW 730 billion in operating profit implies an EV/EBIT of 3.0x. Against today's earnings, the P/E is a more normal 12.4x. We have seen some modest insider buying this year, including a cluster buy in January 2026\. ## Paradise (034230 KS) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-81.png) Casino operator [**Paradise**](https://finance.yahoo.com/quote/034230.KS/?ref=asiancenturystocks.com) *(034230 KS — US$1.1 billion)* is almost a monopoly in the market for foreigner-only casinos. It owns four casinos across Seoul, Incheon, Busan, and Jeju Island. Its flagship, Paradise City, is a joint venture with Japan's Sega Sammy and an integrated resort featuring 5-star hotels, a theme park, exhibition centers, and other facilities. Many of its customers come from Japan and China. It should therefore benefit from the easing of Korean visa rules and the rerouting of Chinese tourism away from Japan to South Korea. Paradise's [Value-Up plan](https://kind.krx.co.kr/external/2025/03/28/001607/20250328003124/2025%20%ED%8C%8C%EB%9D%BC%EB%8B%A4%EC%9D%B4%EC%8A%A4%20%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%EC%A0%9C%EA%B3%A0%20%EA%B3%84%ED%9A%8D.pdf?ref=asiancenturystocks.com) targets KRW 1.5 trillion in sales and an operating margin of 20% by 2027e. That would imply an EV/EBIT of 8.3x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-86.png) ## NICE Information Service (030190 KS) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-84.png) [NICE Information Service](https://finance.yahoo.com/quote/030190.KS/?ref=asiancenturystocks.com) *(030190 KS — US$665 million)* operates South Korea's largest credit bureau, collecting data on borrowers and selling it to banks and corporations. The company has scoring models that help banks figure out which borrowers are likely to default. Their market share is about 70% for individuals and 34% for the corporate market, where it's competing with Korea Ratings. The [Value-Up plan](https://kind.krx.co.kr/external/2025/04/23/000164/20250423000595/%5BFY2025%5D%20NICE%20Information%20Service%20Value%20Up%20Plan.pdf?ref=asiancenturystocks.com) targets a 5% annual increase in dividends. It's committed to paying out 35% of earnings as dividends and reducing the share count by 1% per year. NICE has also mentioned revenue and operating profit targets of KRW 690 billion and KRW 110 billion, respectively, for 2027\. The stock currently trades at 11.2x P/E. If the operating profit target is reached, however, it will end up at 7.7x EV/EBIT. ## Muhak (033920 KS) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-85.png) South Korea's [**Muhak**](https://finance.yahoo.com/quote/033920.KS/?ref=asiancenturystocks.com) *(033920 KS — US$162 million)* is the leading soju brand in the Southeast. While HiteJinro dominates Korea overall, Muhak's "Good Day" soju brand has its loyal fans across Busan, Ulsan and surrounding areas. The product portfolio includes fruit-flavored soju, distilled soju and traditional rice wine. Muhak's [Value-Up Plan](https://kind.krx.co.kr/external/2025/12/29/000518/20251229001578/0.%28%EC%A3%BC%29%EB%AC%B4%ED%95%99%20%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%20%EC%A0%9C%EA%B3%A0%20%EA%B3%84%ED%9A%8D%20%EB%B3%B4%EA%B3%A0%EC%84%9C.pdf?ref=asiancenturystocks.com) aims to resolve its chronic undervaluation by improving its return on equity to 10%. It's also introduced a target Price/Book of 0.7x. And while Muhak's products are primarily domestically oriented (I can't find its soju in Singapore), it's now trying to increase the export share to 15%. While the annual dividend of KRW 520 is modest, Muhak is also committed to allocating 5% of net income to share buybacks and cancelling the shares purchased. The stock now trades at 9.1x and 0.4x book. If they ever reach their 10% return on equity target, the P/E multiple would compress significantly. While the company isn't growing much, Muhak now offers a 6.3% dividend yield, which is high by Korean standards. But there are tons of other Value-Up plans on my list. If you've identified any other companies with ambitious targets, I'd be very curious to hear about them. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Visional (4194 JP) URL: https://www.asiancenturystocks.com/visional-4194-jp/ Last updated: 2026-03-31T11:14:57.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in Visional at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Visional**](https://finance.yahoo.com/quote/4194.T/?ref=asiancenturystocks.com) *(4194 JP — US$1.9 billion)* is a Japanese HR-tech company run by Soichiro Minami, also known as "Swimmy". Minami grew up in Japan but moved to Canada at age six. He grew up in a non-Japanese environment and always felt like an outsider. To ease his nerves, a teacher in Canada gave him a book about a fish called Swimmy, who overcame the challenges of being a minority. Feeling like an outsider, he eventually adopted "Swimmy" as his middle name. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-75.png) Visional's founder Soichiro ("Swimmy") Minami That outsider mentality has served him well in a career where he's challenged existing business practices. His first job after graduating from college was as an M&A analyst for Morgan Stanley in Tokyo. After that job, he helped Hong Kong telecom company PCCW set up its Japan operations. Followed by a period during which he helped set up the Japanese professional baseball team Tohoku Rakuten Golden Eagles. In 2009, back in the job market, he was frustrated by how headhunters operated like black boxes. So he set out to disrupt the industry by forming BizReach, the predecessor of Visional. BizReach is a typical 2-sided network. Over 3 million job-seekers have submitted their resumes to the platform. Employers and headhunters then search this database for the roles they're hoping to fill. The revenues from BizReach come from subscription fees and a 15% cut of the first annual salary of any person hired through the platform. Submitting your resume doesn't cost anything, but if you subscribe for about US$30/month, you'll get greater visibility. What makes BizReach unique is that the database is completely private. One peculiarity of Japanese culture is that they're not comfortable sharing personal information online, such as on LinkedIn. Another unique selling point is the high signal-to-noise ratio. The pay-to-play model ensures that both employers and job-seekers are serious. The industry is moving away from traditional job boards toward BizReach's direct scouting model. Employers can now find job seekers who perfectly match their criteria. If employers were to list a job on Indeed.com, they'd have to sort through thousands of applications, which would cost them time and money. _This post is for paying subscribers only._ ### Emerging market indices are flawed URL: https://www.asiancenturystocks.com/emerging-market-indices-are-flawed-2/ Last updated: 2026-03-16T12:42:49.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- Here's why investors should be cautious about emerging-market indices. In the past ten years, MSCI Emerging Markets has seriously underperformed the S&P 500: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-65.png) The iShares MSCI Emerging Markets fund (red) vs the most popular S&P 500 ETF (blue). Source: Trading View And this is despite the fact that MSCI Emerging Markets traded at just 11.5x P/E at the starting point – much lower than the S&P 500's 17.1x. The primary reason, in my view, is that almost all emerging-market indices are **market-cap weighted**: the biggest firms get the biggest weight. That's great for innovative countries such as the United States, where winners tend to keep on winning. But in smaller markets, it's not necessarily the case. If the index covers a cross-section of countries, some will be experiencing a boom and some a bust. But if you construct a market-weighted index across all of them, you'll end up overweighting the overvalued market and underweighting the undervalued one. Even within specific countries, the largest companies are often state-owned enterprises or run by some tycoon with political connections, rather than an exceptional business like Apple. So if you buy a market-cap-weighted index, you'll end up allocating more capital to such businesses, rather than smaller, more dynamic private sector enterprises. There are a few exceptions, of course. Both TSMC and Tencent are obviously very well-run businesses that also enjoy large index weights. Some indices are also quite **concentrated**. In 2015, for example, the MSCI Emerging Markets Index had a 69% weight in Asian equities. China alone represented 26%, and South Korea and Taiwan another 27.6%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/SERKN-msci-emerging-markets-regional-split---1-.png) With this type of profile, you end up with a great degree of tech exposure and a great degree of China exposure. Unfortunately for MSCI Emerging Markets investors, the Communist Party had a crackdown on its tech platforms in 2020\. And with falling property prices, deflation pushed down the net interest margins of the nation's state-owned banks. More recently, the index has rallied thanks to a bull market in AI-related stocks. The concentration problem is even worse in smaller emerging markets like Indonesia. Because the MSCI Indonesia index has a whopping 49% weight in financials: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/SlPsF-msci-indonesia-sector-weights---1-.png) Investors may think they're getting good exposure to the Indonesian economy. In reality, they're buying a few banks with coal exposure on the side. Another issue is that indices go for stocks with **high liquidity**. But over an emerging market cycle, trading volumes can easily go up 10x. For example, just look at this chart of trading volumes in Taiwan between 1986 and 1990: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-67.png) ETFs will typically exclude stocks that are too illiquid to buy, or just buy a stock with similar risk factors. So in 1986, indices would probably have excluded Taiwan, and then been more likely to buy at the peak in 1990\. The next issue with emerging-market indices concerns **share count dilution**. This chart from Gerard Minack shows the issue very clearly: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-66.png) Despite record-breaking earnings growth in China, the growth in earnings *per share* has disappointed. Why? Because the share count keeps going up. Unlike in the United States, Asian companies tend not to buy back shares. Instead, state-owned companies and large caps tend to issue new shares. An index fund will be forced to buy the newly issued shares to maintain its weight. The implication is that becoming an index constituent almost becomes a license to print money: the index funds become permanent ATMs. Another explanation for the poor performance in the MSCI Emerging Markets is that some of these countries have **poor minority protections**. Capital is accumulated on the balance sheet. Related-party transactions are then used to funnel capital out of the listed company and into the hands of insiders. Finally, I think there might also be a problem with hedge funds **front-running** indices. Index inclusions and exclusions are typically announced before index funds execute their trades. This gives hedge funds an opportunity to bid up the prices of stocks added to the index before selling shares to the index funds. The bottom line is this: emerging market companies are typically old-economy stocks whose valuations can vary a great deal through the economic cycle. Market-cap weighted indices will typically buy these stocks when they're the most liquid, i.e., at their peak. And the problem will be exacerbated by the issuance of shares by companies in markets where minority protections are weaker. So what's the solution? I think the solution is to pick yourself. That way, you can ensure that the corporate governance is decent, that insiders are unlikely to dilute your shareholdings, and that you're buying the shares at a reasonable price. There are high-quality stocks in every market, so by including the emerging market universe, you'll get a much greater opportunity set. If you insist on buying index funds, you could adopt Verdad's strategy of only buying emerging markets when they're emerging from [serious crises](https://static1.squarespace.com/static/5db0a1cf5426707c71b54450/t/60537a485d98a2151537a5bb/1616083545087/Emerging+Markets+Crisis+Investing+vNew.pdf?ref=asiancenturystocks.com). Just be aware that country ETFs are often liquidated right at the bottom — which is exactly what happened to [Global X's Nigeria fund back in 2023](https://www.prnewswire.com/news-releases/global-x-etfs-to-liquidate-msci-nigeria-etf-nge-301858690.html?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Nintendo (7974 JP) URL: https://www.asiancenturystocks.com/deep-dive-nintendo-7974-jp/ Last updated: 2026-03-16T12:40:30.000Z *Hi! I'm Michael Fritzell. Welcome to a *free-to-read edition* of Asian Century Stocks – a newsletter about Asian value stocks. First time reading? Sign up* [*here*](https://www.asiancenturystocks.com/#/portal/signup/free)*. For a complete list of all previous posts, check out the* [*Table of Contents*](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I hold a position in Nintendo at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Nintendo**](https://finance.yahoo.com/quote/7974.T/?ref=asiancenturystocks.com) *(7974 JP — US$74 billion)* is a Japanese video game developer, best known for its Zelda and Super Mario franchises. It's an old business. It was founded in 1889 by Fusajiro Yamauchi, initially focused on Japanese "Hanafuda" playing cards. In fact, its initial name "Nintendo Koppai" meant "trading cards," and this was the primary focus of Nintendo over its first few decades. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-59.png) Founder Fusajiro Yamauchi (left) and his great grand-son Hiroshi Yamauchi (right) In 1949, Fusajiro's great-grandson, Hiroshi Yamauchi took over. He was only 22 years old at the time and quit his studies at prestigious Waseda University to take over Nintendo after a family death. Hiroshi's only condition was that no other member of his family could take leadership roles within the company. And over the next 53 years, he ran the business with an iron fist – firing any managers who dared question his authority. One of his master setrokes was the 1959 licensing deal with Disney. It allowed Nintendo to print Disney characters on its Western-style playing cards. It became a massive success, selling over 600,000 cards in the first year alone. But in the 1960s, Hiroshi took Nintendo into various failed business ventures. For example, he started a taxi company, an instant rice business and even ran Nintendo-branded "love hotels", which diluted the brand name. Due to these failures, Nintendo was eventually burdened with a significant amount of debt and almost went under. Almost by accident, Hiroshi noticed that one of his maintenance engineers, Gunpei Yokoi, was playing with an "extending arm" toy he had built for fun. Hiroshi ordered Nintendo to put the toy into mass production, calling it the "Ultra Hand". It quickly sold 1.2 million units, providing Nintendo with the liquidity it needed to survive. Hiroshi then worked with the engineer to take Nintendo into the arcade gaming industry and later the video game industry. He also nurtured other talent within Nintendo, tapping a young industrial designer, Shigeru Miyamoto, to design a new game called Donkey Kong in 1981\. It became a massive success and paved the way for the real blockbuster: the Nintendo Entertainment System (NES). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-61.png) Some of Nintendo's key products from its early playing cards, to toys, the Donkey Kong arcade game, the Nintendo Entertainment System, the Game Boy and the Switch Many of us who are in our early 40s have nostalgic feelings about the NES and its successors. Nintendo's early game consoles introduced franchises such as Donkey Kong, Super Mario Bros., Zelda, Pokémon, and more. While Hiroshi stepped down in 2002, Nintendo's business model remains the same. It focuses on family-friendly video game consoles, with new models released every 5-10 years and hit games released almost every quarter. There is greater competition from mobile games, and the video game industry is mature. But many households in developed markets continue to buy video game consoles for their children. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-60.png) The number of mentions of "Nintendo" in Google's digital library of scanned books, showing that Nintendo remains relevant in today's pop culture. Source: Google Ngram Nintendo has also taken inspiration from its early partner, Disney. It's now becoming an intellectual property powerhouse, using its characters for other businesses. For example, its 2022 Super Mario Bros movie earned US$1.3 trillion at the box office, and drove additional demand for Nintendo's video game consoles. In addition, Nintendo has partnered with Universal Studios to build "Super Mario World" theme parks worldwide. They have currently built three theme parks, in Hollywood, Orlando and Osaka. And another one is currently being built in Singapore. Nintendo is now in the midst of a transition from one video game console to another. In June 2025, Nintendo released the Switch 2: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-57.png) It can be docked and plugged into your TV or used as a handheld device. You can buy games in physical copies or download them directly from the Nintendo Store. The sell-through rate has been very encouraging, reaching 15 million units faster than any other console in history: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-58.png) Source: Nintendo investor relations That said, the sale of new games has lagged expectations. During the holiday season, neither Donkey Kong Bananza nor Metroid Prime 4 made much of a mark. Seven months after launch, owners of the new Switch 2 console had only bought 2.2 games on average, lower than the 3.6 games for the original Switch console at this stage of its development. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-63.png) The top games on the Nintendo Switch 2 console, so far So the headline numbers look mixed. But if we look towards the future, we'll notice several positive catalysts: - One is the recent release of [Pokémon Pokopia](https://www.gamespot.com/games/pokemon-pokopia/?ref=asiancenturystocks.com). In just a few weeks, it's become a blockbuster, with its success probably on par with the 2020 hit Animal Crossing - Another is the April 2026 release of the new [Super Mario Galaxy movie](https://www.imdb.com/title/tt28650488/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fin%5F0%5Fq%5Fsuper%20mario%20galaxy%20movie&ref=asiancenturystocks.com) - Then, in October 2026, we'll finally see the new [3D Super Mario](https://sea.ign.com/super-mario-odyssey/237287/feature/super-mario-odyssey-2-or-something-new-why-3d-mario-should-finally-return-in-2026?ref=asiancenturystocks.com), which is likely to drive significant sales of the Switch 2 console into the 2026 holiday period I think we should also recognize that while the console industry is mature, there's significant potential in Nintendo's online store. In FY2025, only 30% of Nintendo's games were digital, compared to 75% for the PlayStation 5\. The primary reason is that the original Nintendo Switch console had only 32 GB of storage. Players who bought their games online quickly ran out of storage space. That issue has been partly solved with the Switch 2\. The new console has 256 GB of storage, with an SD memory card slot that allows players to further expand storage capacity. And just as expected, in early 2026, we saw the digitalization rate hit a whopping 50%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-62.png) Nintendo's digitalization rate: digital games as a proportion of total That's going to be important for Nintendo's margins. Nintendo will save on cartridge production costs and keep the 20% retail margin. The incremental margin on a downloaded first-party game is almost 100%, suggesting the transition to the Switch 2 console is likely to be margin-accretive. And for any third-party games, Nintendo will get a fat 30% cut. It's a great business. I expect the sales of the Nintendo Switch 2 to peak at 25 million units in FY2026\. And I expect the number of games per console to hit 8.8 by FY2030\. By then, I foresee a gross profit margin of 61%. With these assumptions, I get to a 2028e P/E of 17.7x. The near-term picture looks positive. Nintendo has an ability to churn out incredible games, year after. It's not entirely clear how it's been able to perform this feat, over and over again. I believe that the leadership of Shigeru Miyamoto — the artist who created the original Donkey Kong game — still has a significant impact on the organisation. So the biggest risk for Nintendo in the long run is if he, or any of the other senior executives, ever retires. A more near-term challenge is the ongoing bull market for memory chips. Prices have gone to the moon, perhaps due to the ongoing retooling of Korean semiconductor fabs to high-bandwidth memory products. But I expect this headwind to gradually disappear, perhaps as early as the 2026 holiday season. So, with the Switch 2 early in its console cycle, several blockbuster games, and a new Super Mario Bros. movie hitting cinemas yearly, it looks like Nintendo's earnings are heading in a positive direction. **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the button below:** [Nintendo.pdf![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/drive_2020q4_32dp-6.png)Google Docs![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/AKGpihYmAwcj33uCOXIrxT_-i83-GHn6vMKVuHG43X6VvvnXQTzkItXK6D-LM_YaSyQopWatHy6PQujpIehJ9VwexWGi_6KqBCx7RHw-s1600-rw-v1)](https://drive.google.com/file/d/1MRLdapBCyH3rHQtUMQzjZFAcLQL71v-3/view?usp=sharing&ref=asiancenturystocks.com) Further material: - Nintendo's latest [investor presentation](https://www.nintendo.co.jp/ir/pdf/2026/260203%5F2e.pdf?ref=asiancenturystocks.com) - Crossroads Capital's [latest update](https://www.crossroadscap.io/investor-letters/q4-2025-investor-letter?ref=asiancenturystocks.com) on its position in Nintendo - Substack author [Leandro](https://open.spotify.com/episode/04LenZrlFt7sBN2yBO84FL?si=8b336d65c1734c5d&ref=asiancenturystocks.com) on Chit Chat Stocks discussing Nintendo - A recent deep dive into Nintendo by [The Investor's Podcast](https://open.spotify.com/episode/2rL4jKAy3DiEPGbkmdC7tR?si=33baaa99e3d0426f&ref=asiancenturystocks.com) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Want more? Sign up for **Asian Century Stocks**. You’ll get 20x similar write-ups annually, portfolio updates, and more. [Subscribe](https://www.asiancenturystocks.com/about/#/portal/signup/68ac64cb9c44bd0001fca885/yearly) ### Interview: Jamie Halse URL: https://www.asiancenturystocks.com/jamie-halse/ Last updated: 2026-03-13T02:12:35.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- ## Welcome, Jamie! Tell us about your background: where did you grow up and what led you to investing? I grew up in South Auckland, New Zealand, in a semi-rural area. We had six acres with 20-odd sheep, a duck pond, and a tonne of fruit trees. It was a great place to grow up, playing rugby and cricket with my father, brothers and cousins, and (in hindsight) the constant labour required to keep the place in order helped with the work ethic for later in life. In 2008, at the age of 25 I moved to Sydney for a job with a boutique fund manager on the buy side. I am not sure I ever really thought about how long I would be staying, but I am still here and somewhere along the way Sydney became home for me. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-52.png) I first really learned about investing through reading “[Rich Dad, Poor Dad](https://www.amazon.com/Rich-Dad-Poor-Teach-Middle-ebook/dp/B07C7M8SX9/ref=sr%5F1%5F1?crid=3PMLV3DDPCMWH&dib=eyJ2IjoiMSJ9.xUn8-H7Ugt50tZwLk6OHHl%5Fxu8LM9H1jTsO3AJUxZ%5F8EvbuywFh-t5KHJl08Bt00K5nT1cTTSKZGB1QKJp1djJZm3F7BqDFzI5v0735ilamiGO-Lht90Gjt5jR2e%5FC%5F%5FgSY52Hs3sgO10kyg2YwDDU8qADraEF0eQ3FeiZ3RGWbeRgvsOKEAR72QMB2VQE25NNZBHBh%5FJkAt-D2IcKKC61SrRDyFW9pdXKruXR3xE0k.DBHRaR8Z-96xyaDCp9ckR2tLSgSKbQ-w3nT3zN1YF7A&dib%5Ftag=se&keywords=rich+dad+poor+dad&qid=1773191416&sprefix=rich+dad+poor+%2Caps%2C352&sr=8-1&ref=asiancenturystocks.com)”. I was lucky enough that my father handed it to me and told me to read it. Something clicked in my brain and I started looking for opportunities. Then in my third year at Auckland University, I met another student in one of my classes who, after we got on to our common interest in investing, recommended I read Peter Lynch’s “One Up on Wall Street”. That was it – I was hooked. After that, I became addicted to reading about the stock market, financial history, and investing generally - in between reading annual reports and looking at company presentations. After a few years in my first job in Sydney, I joined the publicly listed global equities manager, Platinum Asset Management, where I became a senior portfolio manager, running \~$1bn across a global equities long/short fund and a Japan equities long / short fund. I also headed up the global consumer, and Japan equities research teams which were responsible for generating ideas for the flagship Platinum International Fund and the other funds. Platinum was a great learning ground, with a bunch of really smart people, and fantastic mentors. The main founder, Kerr Neilson, is a hall-of-fame fund manager in Australia and has this ability to look at a situation and see things entirely differently to how everyone else sees them. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-53.png) Kerr Neilson of Platinum Asset Management He and co-founder Andrew Clifford came out of Bankers Trust with a great track record and seed money from George Soros, then grew the business to >$30bn AUM at one point following an incredible run post the popping of the dotcom bubble. Andrew was the first PM to buy one of the stocks I pitched as an analyst - the theme park operator [Six Flags](https://finance.yahoo.com/quote/FUN/?ref=asiancenturystocks.com). Thankfully he made good money on that position, as later he became CEO & CIO, and has been a big supporter of mine over time. Another mentor of mine at Platinum, Jacob Mitchell, was key in my picking up more coverage of Japanese stocks (he managed Platinum’s Japan strategies from around 2008/9 through to his departure at the end of 2014). Jacob is also excellent at cutting through the noise and distilling issues to their essence. He went on to found the successful global equities manager Antipodes Partners, which now manages >$20bn. --- ## Can you tell us about Senjin Capital and its strategy? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-54.png) Jamie Halse and Umezaki Tsubasa, the founders of Senjin Capital Senjin Capital was founded in 2024 by Umezaki Tsubasa and I, to focus on the amazing deep value opportunity in Japanese small caps. The deep value has existed in that space for a long time, but in recent years, thanks to the government’s corporate governance reform, it has become easier to unlock it via shareholder activism. Before, the vast majority of these opportunities were just value traps – cheap stocks that stay cheap. Now, it is possible to effect real change in management policies around capital allocation and business execution. When I say deep value, I am talking about stocks trading at sizable discounts to their liquid net assets and real estate, with a decent cash generative business attached that you are effectively being paid to buy at the prevailing market price. The opportunity and market transition to more shareholder-focused capitalism is similar to that experienced in markets like the US, UK, and Australia from the late 1970s, through the 1980s and beyond. We buy substantial positions in a concentrated portfolio of these opportunities, and engage with management constructively to see that value reflected in the share prices. We do not do any public campaigns unless we have to – generally where a management team is refusing to change or grudgingly make only small / very easy changes, and other approaches to rectify this situation do not work. We are looking for quite obvious 150%+ upside from the time we first start purchasing a stock. Umezaki-san was most recently with Taiyo Pacific, a US Japan-focused friendly activist fund. He had a very interesting experience there, as during COVID he was seconded to one of their portfolio companies for three years, helping to drive its operational turnaround. Later, he was very involved in the execution of Taiyo’s acquisition of that company in a “white knight” transaction. He previously worked with BCG in the private equity team and KPMG in M&A advisory, so has a very well-rounded skillset. Umezaki-san is based in Tokyo and takes the lead on our engagement efforts. --- ## What’s the broad bull case for Japanese equities as of early 2026? The ongoing corporate governance reform, coupled with rising interest rates has seen foreign capital flood into Japanese equities. Rising rates have caused super-depressed financial stocks, including the mega-banks to massively re-rate upwards - the banks index is up \~5x over 5 years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-55.png) The TOPIX Banks Index. Source: Trading View The corporate governance reform has led to increased cash returns to shareholders via dividends & buybacks, and made companies much more focused on managing their capital base appropriately, including to the extent of many now pursuing business portfolio restructuring to exit subscale and loss-making or weakly profitable operations. The broad bull case is that this continues acting as a tailwind for stocks - though I am not particularly bullish on the large cap space in general as valuations have massively re-rated. The market may have got a little ahead of itself there. We still see plenty of opportunity amongst the small caps though, but even here the impact of greater amounts of capital being put to work is starting to become evident. Where we might have regularly been finding things with quite obvious 300% upside, that is now more like 150%-200%. --- ## Any tips for people who want to find great ideas in Japan, where do you suggest starting? For example, if you use screens, what screens would you recommend? It really depends on your investment style. I would not necessarily recommend buying the types of stocks we do if you do not have the capability or scale to pursue activism, unless you are willing to take a broad basket approach and rely on general improving trends in the market, bolstered by occasional & unexpected, but at a broad level inevitable, activist interventions. This is not a bad strategy necessarily, but is not one I would recommend to anyone who does not really know the Japanese market well and understand the different activists and their approaches. There are many different philosophies, even amongst activists who generally see things similarly. For example, some activists are happy to buy stocks where a large shareholder has control, in the hope they can badger and/or shame the shareholder into action that produces a good outcome for the stock. We prefer to have significantly more control over the ultimate outcome, so avoid such situations. Shadow activism (ie: following activists into positions) can be very profitable if done well, but again you need to really know the activists and do your own work on the target so as not to get caught out. Some activists have famously sold their positions into the price spike caused by their substantial holder filings, causing investors who were attempting to front-run their future purposes to take big short-term losses. Other activists sell their large positions back to the companies on less than a day’s notice. Investors need to be cognisant that activists may exit at any time, and that may not be good for the individual retail investor. I am obviously talking my own book here, but you may be better off considering an activist fund rather than trying to do it yourself. --- ## Which sectors do you think offer the greatest opportunities at this point, and why? We are sector agnostic, and are really looking for investments that make sense on the balance sheet alone, but where the company also owns a decent, relatively stable, cash-generative business. The opportunity we see is less in having an investment edge - we are buying obviously cheap things - but more in how we go about ensuring that shareholders actually get to see that value reflected in the share price. This will likely evolve over time, say the next several years, as the obvious balance sheet opportunities become fewer, but for now they are abundant. That said, there are tonnes of potential opportunities out there in different areas. For example, if you can get comfortable with the AI risks, this could be a very interesting entry point for many of the SaaS and IT services stocks, based on future growth in sticky cash flows. That is not the area we are focused on though. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/YwgJs-one-capital-japan-cloud-index-.png) The One Capital Cloud Index of Japanese SaaS companies. Source: TIKR --- ## I know you can’t discuss individual holdings, but overall - which Japanese companies do you think stand out in terms of their strategic focus, capital allocation, etc? It’s an interesting question, as historically very successful Japanese companies with great strategic focus often did not care almost at all about capital allocation. The market has changed a lot in that respect, but many of the great companies could do a lot better for shareholders. [Hitachi](https://finance.yahoo.com/quote/6501.T/?ref=asiancenturystocks.com) is probably the poster-child for corporate reinvention. It had a near-death experience around 2009, and has since spent the better part of two decades selling off non-core businesses, and implementing a coherent growth strategy. The stock has performed amazingly well, and deservedly so. The interesting contrast of Hitachi’s experience to present day market conditions, is that Hitachi’s stock went almost nowhere from 2010-2016 (from memory), whereas the conglomerates who announce a restructuring plan now see their stocks rerate well ahead of delivering any tangible results. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/SOc2I-hitachi-6501-jp-.png) Hitachi's share price. Source: TIKR [Toyota](https://finance.yahoo.com/quote/7203.T/?ref=asiancenturystocks.com) is obviously an outstanding company that has executed well on its hybrids strategy, and in recent years has become much more shareholder friendly in returning cash via dividends and buybacks, but you only need to look at the Toyota Industries transaction to see that capital allocation decisions may not necessarily be made in the best interests of all shareholders. [Nintendo](https://finance.yahoo.com/quote/7974.T/?ref=asiancenturystocks.com) has executed very well with consolidating its gaming platforms, transitioning to digital distribution, and licensing its IP, but it is a step too far to say they have great capital allocation given their huge cash balance. [Keyence](https://finance.yahoo.com/quote/6861.T/?ref=asiancenturystocks.com) is a world leading business, but leaves a lot to be desired when it comes to returning cash to shareholders. I like IT services firm [Shift Inc](https://finance.yahoo.com/quote/3697.T/?ref=asiancenturystocks.com)’s management and roll-up / serial acquirer story. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/1NZQ5-shift-inc-3697-jp-.png) Shift Inc's share price. Source: TIKR Similarly with property developer [Open House Group](https://finance.yahoo.com/quote/3288.T/?ref=asiancenturystocks.com), which has an innovative vertically integrated model and has made a bunch of sensible acquisitions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/HtvQR-open-house-3288-jp-.png) Open House's share price chart. Source: TIKR There are not many companies in Japan that consistently execute M&A well and are rolling up their industries. Perhaps a better question to ask in terms of prospective investment returns, is which companies have not been great, but look set to improve a lot in that respect. The ones that are already the best, are generally already well-liked by the market. Identifying these opportunities is not an area I have been focusing on for a couple of years now due to our balance-sheet driven activist approach, but is certainly something individual investors should be thinking about. --- ## What do you think the concerns have been among investors, and why are they wrong? There were concerns for a long time over whether the corporate governance reform is real, but I think we are past that point for most people that have spent any time looking at Japan in a meaningful way. More recently I get more questions on the currency, inflation, and the big move in rates at the long end of the curve. We see the yen as fundamentally cheap. Japan’s reform is about improving productivity of both labour and capital, which should help boost GDP per capita and ultimately be supportive of the currency. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-56.png) The JPY/USD exchange rate. Source: Trading View I think many investors also missed the less obvious plays on the Japanese semiconductor supply chain. [TEL](https://finance.yahoo.com/quote/8035.T/?ref=asiancenturystocks.com), [Advantest](https://finance.yahoo.com/quote/6857.T/?ref=asiancenturystocks.com), [Lasertec](https://finance.yahoo.com/quote/6920.T/?ref=asiancenturystocks.com), and even [DISCO](https://finance.yahoo.com/quote/6146.T/?ref=asiancenturystocks.com) have been quite well-loved for some time, but it is only more recently I am seeing plenty of smaller names with dominant positions in critical inputs bandied around on FinTwit. --- ## What shareholder activists in Japan do you admire, and what is it that they do right? I admire a lot of the different players. There are so many distinctive approaches, people doing things slightly differently. The bigger players (EG: Effissimo, Oasis, Dalton/NAVF) have obviously had the combination of huge success + duration to get into the position they are in, so their approaches have clearly worked well. As fund sizes get larger, activists have to deploy bigger amounts per investment, so their universe naturally shrinks and their tactics must change. Excess returns will always reduce with scale, but it is still a fertile field they are playing in, so I would not be betting against them still doing well. There has certainly been some adaptation - for example, Effissimo, which has historically engaged behind-closed-doors, launched a hostile takeover offer for Soft99 after it announced an MBO at a low price (see my Op Ed for Nikkei Asia on this [here](https://asia.nikkei.com/opinion/activists-ride-to-rescue-minority-shareholders-hit-by-japan-s-buyout-surge?ref=asiancenturystocks.com)) Other “friendly activist” funds have adapted as well. Taiyo Pacific for example seems to be undertaking more PIPE and public-to-private transactions. Whether that is good for governance and the market overall is another question. --- ## Can you give examples of past activist campaigns, and how you interacted with management? I have always tried to be polite and constructive, but also to use my “gaijin pass” to clarify what is meant when management gives vague non-answers to specific questions, and to reiterate our views on things. It is generally not very well accepted when Japanese people do this because of expectations around how they should interact in a formal setting. The Murakamis may break this mould, but for most others, it is typically much more tolerable for the gaijin to ask tougher questions, than it is for a Japanese person to do the same thing. While I was at Platinum we built a large position in packaging manufacturer [Toyo Seikan](https://finance.yahoo.com/quote/5901.T/?ref=asiancenturystocks.com) across the Japan strategies and International Fund, which we accumulated when the company had suffered a margin squeeze from the COVID & Ukraine war-related spikes in commodity costs, compounded by the weak yen. The company had, in rough numbers, a $2bn market cap with almost no net-debt vs $8bn of sales, $1.4bn of investment real estate, $1bn of cross shareholdings, and $1bn of excess working capital. They had begun selling down cross shareholdings, and said they were trying to raise prices to cover the commodity costs. We engaged consistently and constructively on points around pricing, managing capacity, and capital allocation. The company was probably hearing a similar message from Marathon Asset Management who also had a large position. They are not activists, but do engage on these issues in Japan. We gradually saw the price increases come through, and then the company announced a dramatic reshaping of its capital policies - essentially promising to return 55% of the then market cap in cash via dividends & buybacks over the following five years, as well as increasing its profit targets, and promising a review of its real estate business. The stock has roughly tripled over five years and paid out a tonne in dividends along the way, without doing much on the top line. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/g6eWx-toyo-seikan-5901-jp-.png) Toyo Seikan's share price. Source: TIKR Currently we have one position where we have publicly filed as substantial. We are engaging constructively with the management team via regular meetings. --- ## Thanks for your time, Jamie! Where can people go to learn more about you and your fund? People can visit our website [www.senjincap.com](http://www.senjincap.com/?ref=asiancenturystocks.com) and/or follow me on X.com [@jamiehalse](https://x.com/JamieHalse?ref=asiancenturystocks.com) or [Linkedin](https://www.linkedin.com/in/james-halse-cfa/?ref=asiancenturystocks.com). I post quite regularly on topics related to Japanese markets, the corporate governance reform, and shareholder activism. Our fund is open to investors who qualify as “wholesale” per the Australian Corporations Act. Typically that means investors need >AU$2.5m in net assets (including primary residence) or >AU$250kpa gross income for the prior two years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ### Insider activity February 2026 URL: https://www.asiancenturystocks.com/insiders-february-2026/ Last updated: 2026-04-14T03:28:23.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is a disclosure and not a recommendation to buy or sell.* --- ## Summary - The insider selling in **Mainland China** (the A-share market) became even more extreme in February, with 9.8x more selling than buying. - **Malaysia**, **South Korea**, **India** and **Thailand** showed more buying than selling. - We saw cluster buys in **Chinese biotech**, **Korean financials** and managers of **commercial real estate**. _This post is for paying subscribers only._ ### Hallyu Everywhere URL: https://www.asiancenturystocks.com/hallyu-everywhere/ Last updated: 2026-03-16T01:36:33.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- Let's talk about Korean products. We've had a multi-decade boom in the popularity of Korean products. People refer to this trend as the Korean Wave, or simply [Hallyu](https://en.wikipedia.org/wiki/Korean%5FWave?ref=asiancenturystocks.com). It's been a slow buildup. In the late 1990s, the Korean drama [What is Love](https://asianwiki.com/What%5Fis%5FLove?ref=asiancenturystocks.com) became a major success in Mainland China. And a few years later, the K-drama [Winter Sonata](https://www.imdb.com/title/tt0395057/?ref=asiancenturystocks.com) became a sensation in Japan. When I moved to Asia in the late 2000s, Korean pop bands like H.O.T., BoA and Girls Generation were everywhere. But in the rest of the world, the big breakthrough moment came when Korean artist Psy released his hit song [Gangnam Style](https://www.youtube.com/watch?v=9bZkp7q19f0&ref=asiancenturystocks.com) on YouTube. Thanks to the mass distribution of content online, Korean artists could finally reach global consumers with minimal friction. Another milestone was when Korean director Bong Joon Ho's [Parasite](https://www.imdb.com/title/tt6751668/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fin%5F0%5Fq%5FParasite&ref=asiancenturystocks.com) won the Academy Award for Best Picture in 2019\. During the COVID-19 pandemic, many of us watched the thriller [Squid Game](https://www.imdb.com/title/tt10919420/?ref=asiancenturystocks.com), which at the time became Netflix's most-watched series ever. And just last year, the kids' movie [K-pop Demon Hunters](https://www.imdb.com/title/tt14205554/?ref=asiancenturystocks.com) became Netflix's most-watched movie ever. These successes are having a major impact on consumer patterns. When K-pop stars like [BTS](https://www.youtube.com/watch?v=gdZLi9oWNZg&ref=asiancenturystocks.com) or [Blackpink](https://www.youtube.com/watch?v=bwmSjveL3Lc&ref=asiancenturystocks.com) wear a particular piece of handbag or use a particular type of cosmetics, fans pay attention. For example, one catalyst for Labubu dolls' popularity was when Blackpink member Lisa [attached a Labubu doll](https://www.asiancenturystocks.com/has-the-labubu-bubble-popped/) to her Louis Vuitton bag in 2024\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-42.png) K-pop group Blackpink's Lisa When it comes to cosmetics, K-pop stars popularized the glass skin look, and more recently, glass hair and regenerative skin care. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/h8v8A-google-search-queries-worldwide-.png) I think there's a whole host of Korean companies that will benefit from these successes. For example, in late 2024, I wrote about [Samyang Foods](https://finance.yahoo.com/quote/003230.KS/?ref=asiancenturystocks.com), and how the "Buldak ramen" challenge had gone viral on social media: [Samyang Foods (003230 KS)The “hottest” Korean instant noodles maker at 14x run-rate P/E![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-50.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f149135513_2fa5116e4a-bfda-438c-9cd1-75144810dca4_2ftranscoded-1726975334-1.jpg)](https://www.asiancenturystocks.com/samyang-foods-003230-ks/) More recently, Korean noodles maker [Nongshim](https://finance.yahoo.com/quote/004370.KS/?ref=asiancenturystocks.com) released a [K-Pop Demon Hunters](https://hallyusuperstore.com/collections/kpop-demon-hunters/products/k-pop-demon-hunters-shin-ramen-superstar-cup-65-g-1?ref=asiancenturystocks.com) special edition of its instant noodles product. Another company doing well is chocolate maker [Orion](https://finance.yahoo.com/quote/271560.KS/?ref=asiancenturystocks.com), whose Choco Pies are selling well in overseas markets like Vietnam, Russia and China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-44.png) Cosmetics brands are also benefiting. Sulwhasoo and Laneige, owned by [Amorepacific](https://finance.yahoo.com/quote/090430.KS/?ref=asiancenturystocks.com), lost favor among Chinese consumers after the THAAD crisis in 2017\. But several of its brands are now best-sellers at the US cosmetics retailer Sephora. Another cosmetics stock, [APR](https://finance.yahoo.com/quote/262260.KQ/?ref=asiancenturystocks.com), was one of the best-performing in Korea in 2025 thanks to its Medicube-branded cosmetics and beauty medical devices. Botox makers like [Hugel](https://finance.yahoo.com/quote/145020.KQ/?ref=asiancenturystocks.com) should benefit from the influx of tourists to South Korea for plastic surgery. Then we have Korean cosmetics ODMs like [Cosmax](https://finance.yahoo.com/quote/192820.KS/?ref=asiancenturystocks.com), [Korea Kolmar](https://sg.finance.yahoo.com/quote/161890.KS/?ref=asiancenturystocks.com) and [Cosmecca](https://sg.finance.yahoo.com/quote/241710.KQ/?ref=asiancenturystocks.com), which enable Korean indie brands to scale up fast. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-45.png) While K-pop and K-dramas have enjoyed immense success, the entertainment industry is hit-driven. So even though [CJ ENM](https://sg.finance.yahoo.com/quote/035760.KQ/?ref=asiancenturystocks.com) manages K-pop groups and funds film production, it's not particularly profitable. Korean k-drama producer [Studio Dragon](https://sg.finance.yahoo.com/quote/253450.KQ/?ref=asiancenturystocks.com) has had many recent hits, including [Queen of Tears](https://www.imdb.com/title/tt27668559/?ref%5F=nv%5Fsr%5Fsrsg%5F1%5Ftt%5F4%5Fnm%5F3%5Fin%5F0%5Fq%5FQueen%20of%20Tears&ref=asiancenturystocks.com) and [Marry My Husband](https://www.imdb.com/title/tt26628595/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fin%5F0%5Fq%5FMarry%20My%20Husband&ref=asiancenturystocks.com). Another category of products is webtoons, essentially Korean manga – better known as manhwa — readable on smartphone devices. IT giants [Naver](https://sg.finance.yahoo.com/quote/035420.KS/?ref=asiancenturystocks.com) and [Kakao Entertainment](https://sg.finance.yahoo.com/quote/035720.KS/?ref=asiancenturystocks.com) own two of the most popular webtoon platforms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-46.png) Finally, let's talk about tourism. A recent survey showed that 32% of young visitors to Korea cited Hallyu content as their primary reason for visiting. Tour agents such as [Hanatour](https://sg.finance.yahoo.com/quote/6561.T/?ref=asiancenturystocks.com) and [Modetour](https://sg.finance.yahoo.com/quote/080160.KQ/?ref=asiancenturystocks.com) should benefit, though I will admit that the younger generation tends to be less interested in group travel. Korean casino operator [Paradise](https://sg.finance.yahoo.com/quote/034230.KS/?ref=asiancenturystocks.com) could benefit from greater inbound tourism, as could Korean duty-free operator Hotel Shilla. And I think Korea will likely benefit from the ongoing shift in Chinese tourism away from Japan to other countries. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-47.png) The Korean Wave will continue. Over the five years to 2022, Netflix spent only US$180 million annually on Korean content. Today, it spends closer to US$625 million. And social media has levelled the playing field for Korean content to go overseas. So there are plenty of reasons to be bullish. Exactly who will benefit is a tougher question. I think the outlook for Korean inbound tourism is excellent, even if jet fuel prices stay at these elevated levels. I've noticed insider buying in Nong Shim, suggesting optimism about the sales of instant noodles in overseas markets. I also think that a cosmetics packaging company like Pum-Tech can do well, regardless of which cosmetics brand eventually wins the hearts of global consumers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Structural Monitoring Systems (SMN AU) URL: https://www.asiancenturystocks.com/deep-dive-structural-monitoring-systems-smn-au/ Last updated: 2026-03-16T13:16:04.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I do not hold a position in Structural Monitoring Systems at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Structural Monitoring Systems**](https://finance.yahoo.com/quote/SMN.AX/?ref=asiancenturystocks.com) *(SMN AU — US$44 million)* is an ASX-listed, UK-domiciled but fundamentally Canadian aerospace business. The company started as a research & development business to help airlines maintain the structural integrity of their aircraft. But in 2018, it acquired Anodyne Electronics Manufacturing (AEM) in Canada. It was formed in 2009 by a group of engineers laid off from another avionics company, based in the aerospace manufacturing hub of Kelowna, British Columbia, Canada. This group of 24 engineers have a great reputation within the industry, and has built relationships with Airbus Helicopters, Leonardo and Bell. In fact, AEM has become so successful that it's now the operational entity for the entire business: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-19.png) Today, Structural Monitoring Systems and its subsidiary AEM focuses on three separate segments: contract manufacturing, avionics products and a new technology called Comparative Vacuum Monitoring, or in short "CVM". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-20-1.png) The legacy segment is contract manufacturing for aerospace firms like Canyon AeroConnect. Margins are low, and most of the value is captured by its clients. Roughly 40% of revenues come from contract manufacturing, and a much smaller portion of profits. Instead, the company is now focusing on avionics products such as cockpit consoles, loudspeakers, communication systems and radios. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-21.png) These are high-margin products with EBITDA margins of 38%. Most of AEM's avionics products are used in special-mission helicopters, including those for aerial firefighting, law enforcement, and search & rescue operations. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-14.png) The avionics segment is growing nicely, with revenues roughly doubling since 2022\. Partly because competitor Cobham exited the special mission avionics segment, with its successor organization only supporting legacy units. But AEM's customers are also doing well, with Airbus Helicopters receiving a +20% increase in orders in 2025 with a book-to-bill ratio well above 1.0\. _This post is for paying subscribers only._ ### Investing, Fast and Slow URL: https://www.asiancenturystocks.com/investing-fast-and-slow-2/ Last updated: 2026-03-03T09:54:00.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- In Bloomberg's recent profile of Brevan Howard's [Minal Bathwal](https://www.bloomberg.com/news/articles/2026-02-06/hedge-fund-trader-minal-bathwal-makes-billions-at-brevan-howard-in-singapore?ref=asiancenturystocks.com), it was argued that part of his success stemmed from studying Nobel Prize winner Daniel Kahneman's book [Thinking, Fast and Slow](https://www.amazon.com/Thinking-Fast-Slow-Daniel-Kahneman-ebook/dp/B00555X8OA/ref=sr%5F1%5F1?crid=3UVDGPYM995FT&dib=eyJ2IjoiMSJ9.ceqZU8DyU2py75144OBkf9zHGHjPP8egj%5F5tnRTf3vbu67UaRdjt9xw3xxVFg6fvOitn6vAHqH2ynWDaUSTdL1rulDg1rk5AaU7AsvbrO8KJ3AQuiHi%5F46l5b63kDCYLtFwgToteVz5LKrLzV-X1NY%5FO%5FpSvRoyQ-ogcB7dBiUSdjViwFcKU33BUTe3gqcPluMiMP3Eu8IvlEvpNQdek3urMq8KKpdqlLAXW2H7ystE.oUc70JfMn4aW1dxjPJiLzsA95sifGeacHmf8j5qNgQ4&dib%5Ftag=se&keywords=thinking%2C+fast+and+slow&qid=1772344089&sprefix=Thinking%2C+Fast+and+Slow%2Caps%2C303&sr=8-1&ref=asiancenturystocks.com). Over the past two weeks, I read the book to see what I could learn from it. And think about what the book might teach me about how to invest. According to the old view of the human brain, we're for the most part rational. But in some cases, emotions lead us astray, making our decisions sub-optimal. Daniel Kahneman's work challenged this view. He spent decades together with fellow Israeli psychologist Amos Tversky to understand the human mind. Are we really as rational as we think? Are there perhaps patterns in the biases and the mistakes that we fall prey to? Their answer was unequivocally "yes". We make the same mistakes over and over, simply because of the way that our brains are wired. In the book, Kahneman argues that the brain employs two types of thinking: 1. There's an automatic, subconscious part of the brain that works through associations. It operates quickly, effortlessly, and without voluntary control. This is the realm of intuition, or in Kahneman's terminology, "**System 1**". 2. Then there's the logical brain, which can perform complex computations, requiring attention and effort. He called this part of the brain "**System 2**". It's activated whenever an event surprises us, and the subconscious brain is unable to cope. According to Kahneman, people spend 95% of their waking hours using System 1, our subconscious. Since it relies on associations and heuristics, we often end up making decisions that are inconsistent at best. Or illogical at worst. In the book, Kahneman lists a set of biases that we tend to fall prey to: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-10.png) One of Kahneman's most important ideas is that our minds try to build coherent stories from information that's available to us. They often fail to allow for the possibility that information is missing. Kahneman calls this tendency **What You See Is All There Is** (WYSIATI). In other words, we assume that what we can see is all that's needed to make a decision. And that can lead us astray, unless we dig deeper. Our brains are lazy. Faced with a hard question, we'll often try to **substitute the question** with an easier one. For example, retail investors want to find out whether a stock is worth buying. But instead of thinking about whether the stock is worth it, they'll often default to simpler questions, like whether they like the product (e.g., Tesla) or whether they believe in the CEO (e.g., Elon Musk). A related bias is what he calls the **availability heuristic**. We often have trouble estimating frequencies because we simply do not have the information at hand. And instead, we approximate the frequency by the ease with which an instance comes to mind. The result is that the probability of frightening events is often overestimated. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-6.png) Actual probability vs perceived probability ("decision weight"). Kahneman's research shows that we overestimate the probability of unlikely events, and underestimate the probability of near-sure events. People tend to **anchor** to reference points. Merely showing a number can skew subsequent judgments, even if the number is completely unrelated. For example, analyst estimates tend to be adjusted very slowly to new information. That could be why we continue to see near-term momentum in individual stocks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-9.png) We anchor to original retail prices, making us feel that discounts are a great deal. Source: The Decision Lab Our brains have trouble understanding statistics. That leads to **base rate neglect**. It means that we tend to ignore statistical background information, instead preferring causal relationships that help us generate if-then stories. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-8.png) We have trouble understanding "base rate probabilities", i.e. underlying frequencies. Source: The Decision Lab For example, if someone is tall, we like to attribute it to diet and lifestyle rather than mere chance. And we tend to underestimate the tendency for outcomes to regress to the mean. In investing, that could include a company being hurt by macro factors and extrapolating recent poor numbers into the future. A property of our subconscious brain, System 1, is that we start by trying to understand what an idea would mean if it were true. According to Kahneman, it takes deliberate effort from System 2 to "unbelieve it". So if our cognitive load is high and we don't have the energy to question narratives floating around, we might simply accept them as true. The implication is that mere repetition can cause people to believe in outright lies. Kahneman calls this the **mere exposure effect**. What Kahneman is perhaps most famous for is his finding that people are naturally risk-averse. His so-called **Prospect Theory** showed that losses hurt much more psychologically than gains: roughly 2x as much. So we tend to prefer the status quo. Here's how the psychological value tends to shift with gains or losses: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-7.png) The psychological value of gains tend to be lower than the psychological pain from losses Since we tend to think in terms of gains and losses rather than wealth, specific outcomes are also divided into **mental accounts**. It doesn't feel the same way to play with "house money", i.e. gains. The consequence is that we tend to sell winners early to "lock in gains" in that account. And we tend to shy away from selling stocks at a loss. So we end up cutting the flowers and watering the weeds. Finally, when we look back at an experience, we tend to forget how it actually felt to live through it. Our memories tend to be shaped by the peak intensity of the experience, rather than by its entire duration. Kahneman calls this bias **duration neglect**. In practical terms, that means investors might judge a stock based on its latest performance or results — ignoring its longer-term track record. --- Now, the question is: how can we fight all of these biases? I've come up with a list of eight tools that we can use to make more rational decisions, directly inspired by the recommendations in the book: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-11.png) Here's the reasoning behind them: - Kahenman is a huge proponent of using **checklists** to collect relevant data. Without a checklist, we'll just try to generate a coherent story using the information provided to us. But that information may or may not be complete. That's especially true if you rely on research from an individual or an organisation that has incentives to push a biased view of reality. - Then use the information to feed into specific **formulas**. Kahneman thinks that simple formulas can often outperform very sophisticated models. In investing, such formulas might include calculating prospective IRRs or comparing P/E ratios with long-term growth rates. Another formula might be selling the stock whenever something you predicted would happen didn't pan out. - Next, we'll try to fix our base-rate neglect through so-called **Bayesian reasoning**. It's named after English statistician Thomas Bayes and refers to a method for estimating probabilities. The first thing you do is to calculate the base rate probability that a particular category of events will occur. Kahneman calls this the "outside view", the purely statistical view. AI chatbots might help you find the statistical information you need. Then determine your subjective probability, based on your personal impression of the case – what Kahneman calls the "inside view". Finally, move away from the base rate towards your subjective view based on your level of conviction. Examples of base rate probabilities might include how often roll-ups implode or how often low-return-on-equity companies trade above 10x P/E. Focusing on base-rate probabilities is important because regression to the mean is a force of nature. - Once you've bought a stock, anchor to the **intrinsic value**. Most investors obsess about the price they paid for the stock. But the stock doesn't know you own it. If we instead focus on long-term intrinsic values, then we might avoid the instinct to sell winners prematurely or try to "get even" on loss-making trades. - Another way to fight our loss aversion is to focus on **opportunity costs**. The framing will shift entirely if we compare investment opportunities rather than ask whether a single idea is good. This will put the risk-reward into perspective. Or, if you want to go to extremes, use the old Michael Steinhard method of liquidating the entire portfolio, then decide whether you want to buy back your positions. This will frame any investment as a potential gain rather than a legacy loss. - To make sure we have all the evidence we need, Kahneman suggests doing a **pre-mortem** by asking yourself: "Imagine you are one year in the future. The outcome was a disaster. Take 5-10 minutes to write down exactly what went wrong." This will be a way to fight our tendency to focus on the information at hand, i.e. the bull case. Ignoring the other possible scenarios that could hurt us in the long run. - **Asking a thoughtful friend** of a colleague is another way to expose our blind spots. When we evaluate our own plans and think about our own stocks, we tend to focus on the specifics of why the story will succeed. In contrast, outsiders tend to be better at thinking about base-rate probabilities. So they can help us stay grounded. - That said, our associate System 1 – our **intuition** – can also be helpful at times. Kahneman thinks that our intuition works well in situations with a clear feedback loop and plenty of experience to practice. So intuition might help us in short-term trading, assessing market sentiment or judging the character of a CEO. I personally think that even long-term investors eventually develop an intuition for which business models work and which do not. So if you're an experienced investor, trust that intuition. If there's something I want you to take away from the discussion, it's to use checklists. They will ensure that you don't miss anything major. The second takeaway is to think about base-rate probabilities. With ChatGPT, it's easier than ever to estimate them. Growth rates, valuation multiples and investor sentiment tend to mean-revert. So you might as well keep that in mind from the very beginning. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio update February 2026 URL: https://www.asiancenturystocks.com/portfolio-update-february-2026/ Last updated: 2026-05-30T00:51:31.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ## Summary - The portfolio rose by +6.8% in February 2026, driven by a massive rally in the Korean index provider [FnGuide](https://www.asiancenturystocks.com/fnguide-064850-ks/). - The Asia-Pacific has become a two-tier market, with East Asian tech-heavy names riding the AI capex cycle and Southeast Asian old-economy markets left in the dust. However, the Thai market has surprised positively, and I'm seeing greater interest in Asia from international investors. - Several new buys. They're either at low valuation multiples or trading at fair value, with positive momentum in their fundamentals. - Looking forward, I'm excited about the decline in the share prices of SaaS companies like [Freee](https://www.asiancenturystocks.com/freee-4478-jp/). The impact of generative AI tools is hard to gauge, but Freee should certainly be more protected than the typical point-solution software providers. They seem to be skating to where the puck is going. The store count growth in [Best Mart 360](https://www.asiancenturystocks.com/p/best-mart-360-2360-hk) excites me as well, especially as the company is set to report full-year earnings in late March 2026\. --- ## Market commentary East Asian markets have been on fire. KOSPI is up by almost half in just two months. While that performance is mostly due to the memory chip bull market, index provider [FnGuide](https://www.asiancenturystocks.com/fnguide-064850-ks/) has also been swept up in the mania as Korean retail investors are clamoring for thematic ETFs. The Asia-Pacific has now become a two-way market: with tech-heavy markets like South Korea and Taiwan on the one hand, and sleepy Southeast Asian old-economy markets on the other. I prefer to stay away from industries that I do not understand. But I cannot help notice the scale of the capex taking place. In January 2026, [TSMC](https://finance.yahoo.com/quote/2330.TW/?ref=asiancenturystocks.com) reported +37% year-on-year sales growth, and it's now upping its capex from US$41 billion to US$52-56 billion. I see smart people are betting on Japanese AI capex beneficiaries. Others, like Stan Druckenmiller, are out of the AI capex trade altogether. My only exposure is in [Japan's SaaS industry](https://www.asiancenturystocks.com/babies-out-with-the-saas-water/), where I own the mini-enterprise resource planning system Freee. I spent some time thinking about the disruption from generative AI tools. The value of existing software must have decreased, given ongoing improvements in coding. In the words of newsletter company Ghost's founder, [John O'Nolan](https://john.onolan.org/open-source-in-the-age-of-ai/?ref=asiancenturystocks.com): > "I don't imagine it will be long before any sufficiently successful proprietary product with a public-facing interface **can be reverse-engineered and rebuilt by a motivated competitor** with access to frontier models" Scary words. So if I invest in software, I need to err on the side of caution. In other words, stick to companies with strong economic moats with management teams that are skating towards where the puck is going. It does feel like Freee is a sticky platform. I'm personally more concerned about outsourcing companies like [Infosys](https://finance.yahoo.com/quote/INFY.NS/?ref=asiancenturystocks.com) and [Tata Consultancy Services](https://finance.yahoo.com/quote/TCS.NS/?ref=asiancenturystocks.com), as generative AI tools could well reduce their billable hours, at least in the longer term. Another bombed-out sector is [alcohol](https://www.asiancenturystocks.com/alc/). I personally own [Ginebra San Miguel](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/) and [Multi Bintang](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/). There seems to be a post-COVID inventory problem that's about to be resolved. Alcohol seems more hated than tobacco at this point, so I lean towards the former. But I'm still not excited, given the signs that Gen Z are becoming less health-conscious and less willing to drink. A more positive trend is the rise in watch collecting. And I've now taken three positions in companies benefiting from it. I noted in a weekly update that there's an ongoing turnaround in [luxury watch prices](https://www.asiancenturystocks.com/watch-market-update/). Southeast Asia remains stronger than China/HK, but the turnaround is visible across almost all regions. The Swiss watch export data is constructive, and many of the names are trading at low multiples. Finally, there's been a quiet turnaround in the Thai stock market: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-84.png) Source: TradingView I haven't seen anybody express optimism about Thai stocks yet, except for Marc Faber late last year. That makes me think the rally has legs. The latest rally took off after the general election on 8 February 2026, which gave the Bhumjaithai Party coalition a supermajority. The outcome reduced the risk that incumbent monopolies would be broken up by the reformist People's Party (the successor to Move Forward). The Bank of Thailand also reduced its policy rate to 1.0%, increasing the likelihood that Thai credit growth has finally bottomed out: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-85.png) Overall, I see the greatest value in Southeast Asian equities. But I'm also excited about South Korea, where the reform momentum is gathering pace, and many higher-quality stocks still trade at single-digit P/E multiples. --- ## Portfolio update My portfolio rose by +6.8% month-on-month in US Dollar terms in February 2026\. Since the portfolio's inception in October 2021, the portfolio's value has increased by +75.3%, equivalent to a +13.7% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-82.png) The largest contributor by far was [FnGuide](https://www.asiancenturystocks.com/fnguide-064850-ks/), which reported that the AUM of ETFs following its indices rose from KRW 14 trillion in early 2025 to KRW 50 trillion today. There has been news of a large number of ETFs being launched based on the FnGuide indices. And there's also been a general market boom benefitting FnGuide's core information platforms. The bellwether stock in this bull market is memory chip maker [SK Hynix](https://finance.yahoo.com/quote/000660.KS/?ref=asiancenturystocks.com). And from what I can tell, there's no sign of DRAM or HBM prices falling just yet. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/03/image-1.png) Source: DRAMeXchange Thai cinema operator [Major Cineplex](https://www.asiancenturystocks.com/p/major-cineplex-update-major-tb) has also started rallying, with no news other than a general turnaround in the Thai stock market. On the negative side, the Japanese SaaS company [Freee](https://www.asiancenturystocks.com/freee-4478-jp/) declined by almost half over the past year. Investors are worried that competition will heat up, now that Claude can replicate code quickly. Freee's founder, Daisuke Sasaki, says that it will be a net beneficiary of generative AI. As a generalist, I can't have much conviction in how the software industry will develop. But at the same time, the market panic is clearly visible. And I question whether the market is properly differentiating between point-solution software and the moatier, B2B software like SAP's. In any case, here's what the latest portfolio looked like as of 25 February 2026: _This post is for paying subscribers only._ ### Babies out with the SaaS-water URL: https://www.asiancenturystocks.com/babies-out-with-the-saas-water/ Last updated: 2026-02-26T03:23:28.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the stocks mentioned below consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- Substack writer Citrini published a [controversial post](https://www.citriniresearch.com/p/2028gic?ref=asiancenturystocks.com) arguing that AI agents will replace jobs and lead to mass unemployment. Here's a short rebuttal to that article, together with a discussion of the opportunity set in Japan's software-as-a-service industry, as I see it today. There's no doubt that generative AI tools can generate code quickly. But that doesn't necessarily mean that they will commoditize the entire industry. I believe in Clayton Christensen's view that customers look for services that solve specific [jobs-to-be-done](https://www.amazon.com/Competing-Against-Luck-Innovation-Customer-ebook/dp/B01BBPZIHM/ref=sr%5F1%5F1?crid=2KXZFIQQK6SEF&dib=eyJ2IjoiMSJ9.YyxIRP0rIuI4-NTkEOIAPjlPAssWVA8lXFc6wwrJhEOuFDWMrKeyjftUi32Xpxqt8G0jlZrdrSgCGRsbqtunvtWPa7fS9CAMW-3OLGebK2%5FZWV4WbLGR93jvAz8ff%5F1yxa3lFpGbkJJL%5FkqhtNs4KSl6-K1wSoNxG2N3dHkkrcwVCMhdXIdVUhJljyws%5FJC30KX%5FuhwqOZQ81KoI7X5wC6HFjkpVp8VjIg6d2au1VDQ.LsUXAihS8gIqaxv%5FkjZa6XlAWic8gFrrH0bwZTFZpPk&dib%5Ftag=se&keywords=competing+against+luck&qid=1771827674&sprefix=competing+against+l%2Caps%2C319&sr=8-1https://www.amazon.com/Competing-Against-Luck-Innovation-Customer-ebook/dp/B01BBPZIHM/ref=sr%5F1%5F1?crid=2KXZFIQQK6SEF&dib=eyJ2IjoiMSJ9.YyxIRP0rIuI4-NTkEOIAPjlPAssWVA8lXFc6wwrJhEOuFDWMrKeyjftUi32Xpxqt8G0jlZrdrSgCGRsbqtunvtWPa7fS9CAMW-3OLGebK2%5FZWV4WbLGR93jvAz8ff%5F1yxa3lFpGbkJJL%5FkqhtNs4KSl6-K1wSoNxG2N3dHkkrcwVCMhdXIdVUhJljyws%5FJC30KX%5FuhwqOZQ81KoI7X5wC6HFjkpVp8VjIg6d2au1VDQ.LsUXAihS8gIqaxv%5FkjZa6XlAWic8gFrrH0bwZTFZpPk&dib%5Ftag=se&keywords=competing+against+luck&qid=1771827674&sprefix=competing+against+l%2Caps%2C319&sr=8-1&ref=asiancenturystocks.com). Consumers and companies have specific budgets to spend, and they'll spend them on whatever tools solve their problems with the least friction and risk. The problem is that generative AI tools don't always have the right context. Vibe-coded software tends to be approximately right, but not perfect. So an experienced programmer will still need to check the code, meaning the productivity improvement might be on the order of 30-50% rather than 90%+. And the roles a software company fulfils include not just programming but also: - User experience design - Sales & marketing - Customer support - Ongoing maintenance - Dealing with cybersecurity threats Whenever the technology advances in one area, the competitive frontier will inevitably shift to the other, such as a better user experience or improved technical support. From what I can tell, generative AI tools excel at content creation, summarization and brainstorming. To take my own industry as an example, I highly doubt that writers will be displaced. But writers who do nothing but summarize news certainly will be. The competitive frontier within the newsletter industry will shift into areas where generative AI tools cannot compete: providing a personal voice, offering genuinely contrarian views on new topics, collecting primary-source material and discussing real-world experiences. Citrini is wrong, longer-term. There's no need to worry about job losses in a functioning market economy, except in the short- to medium-term. There's an endless demand for services that solve our everyday problems, stimulate us, make us feel accomplished, provide guidance in our lives, or satisfy our need for community. Just because we cannot imagine the jobs of tomorrow, doesn't mean they won't exist. I don't think vibe coded software has been revolutionary. Or at least not yet. Check out the top success stories from the vibe-coding platform Lovable. They include names like [DummyForms](https://dummyforms.com/?ref=asiancenturystocks.com), [BoomHabits](https://boomhabits.com/?ref=asiancenturystocks.com) and [RaiseFlow](https://raiseflow.io/?ref=asiancenturystocks.com). None of them has really made a dent in the global SaaS industry. Their websites look like AI slop, and their services don't seem to be catching on. OpenAI itself uses [Slack, Salesforce, and other SaaS products](https://x.com/joecarlsonshow/status/1954249169528635761?s=20&ref=asiancenturystocks.com) to manage its business. If OpenAI itself hasn't vibe-coded alternatives to them, it seems unlikely that other customers will. I agree that AI tools will help competitors iterate faster. Today's AI-native start-ups might be outcompeting companies born in the SaaS and on-prem eras. Therefore, I will make sure that whichever company I invest in 1) has young engineers who know how to use AI tools to solve customer problems, and 2) enjoys significant economic moats that protect it from competition. There's a strong case to be made that most of the typical software "moats" remain mostly intact: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/0JpxX-economic-moats-in-saas---1-.png) For example: 1. Why do we keep using Google for search? It has become an ingrained habit after years of using it with favorable results. Getting people to adopt a new habit takes time. I do think that behavior can and will change if a better solution shows up, such as ChatGPT, Claude, or Gemini. So the benefits from **learned behavior** can diminish if users suddenly prefer to solve their jobs-to-be-done through AI tools. 2. A key reason why people buy **brand-name products** is to reduce their purchase risk. People have learnt that buying Apple products tends to be the safer choice. So finding companies that maintain high quality, whatever the product, is crucial. We're not yet at a point where prompting Claude to generate an app will guarantee that it works under all circumstances. Slight inconsistencies can quickly damage a brand. So if you're at a company facing career risk if you buy the wrong product, you'll most likely go with the safest option. This includes Salesforce, SAP, and other brand-name software suites. 3. If the company sits on **proprietary data**, even better. I learnt from my discussion with Japan's Kaonavi that the employee data was almost impossible to export. Imagine the friction if a company were to try change to a vibe-coded alternative and recreate the data sitting within Kaonavi. In fact, companies sitting on proprietary data will even benefit from probabilistic computing, as they can offer customers better ways to access the data. 4. **Regulatory lock-in** also increases the hurdles for disruption. Software needs to comply with relevant laws and sometimes seek certifications. Implementation cycles, for example, in the Japanese electronic health records industry, are incredibly long. You can't simply vibe-code your way to becoming a major software provider in Japan's electronic health records industry. 5. Some companies enjoy **network effects**, including social media platforms and two-sided marketplaces. For example, Bloomberg's IB Chat has become the de facto communication tool for Wall Street. And since the data generated by these networks is proprietary, it provides further lock-in as the companies learn to implement AI tools on top of them. 6. Finally, **bundling services** can createswitching costs. For example, if I use Bloomberg for IB Chat, news, trade execution and portfolio management, switching to competing services will be hard. I'd have to find replacements for all these services, introducing significant friction. And if the software is bundled with hardware, the switching costs will be even greater. So to summarize, I think that the big software moats are still intact. Companies that provide point-solution software have always been vulnerable, and they are even more so today. Just like in any other industry, I'd be more concerned about generative AI tools unlocking features that solve customer problems better or faster, for example, in the realm of content creation, summarization and brainstorming. Here's the investable universe of companies within Japan's SaaS industry – a major focal point for software investors within the Asia-Pacific region: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-80.png) Source: TIKR In my view, the companies most at risk are point-solution software developers such as [Rakus](https://finance.yahoo.com/quote/3923.T/?ref=asiancenturystocks.com) (the expense reimbursement part), [Sansan](https://finance.yahoo.com/quote/4443.T/?ref=asiancenturystocks.com) (the business card OCR part), [Bengo4](https://finance.yahoo.com/quote/6027.T/?ref=asiancenturystocks.com) (the e-signatures part) and [Yappli](https://finance.yahoo.com/quote/4168.T/?ref=asiancenturystocks.com) (their no-code mobile app development service). I also think that [Nulab](https://finance.yahoo.com/quote/5033.T/?ref=asiancenturystocks.com)(collaboration software), [TeamSpirit](https://finance.yahoo.com/quote/4397.T/?ref=asiancenturystocks.com) (collaboration software) and [Hennge](https://finance.yahoo.com/quote/4475.T/?ref=asiancenturystocks.com) (digital identity solutions) might be disrupted. Their customers are often savvy enough to switch to competing alternatives, including from tech giants like Microsoft. Conversely, enterprise resource planning software suites like [OBIC Business Consultant](https://finance.yahoo.com/quote/4733.T/?ref=asiancenturystocks.com)'s Bugyo platform, [Money Forward](https://finance.yahoo.com/quote/3994.T/?ref=asiancenturystocks.com) or [Freee](https://finance.yahoo.com/quote/4478.T/?ref=asiancenturystocks.com) (accounting, payroll, etc.) enjoy significant bargaining power against their customers. I also think that [Broadleaf](https://finance.yahoo.com/quote/3673.T/?ref=asiancenturystocks.com)(automotive aftermarket marketplace), [Medley](https://finance.yahoo.com/quote/4480.T/?ref=asiancenturystocks.com)(electronic health record systems for hospitals) are moaty businesses with massive switching costs for their customers. Whether their moats will protect them from the ongoing disruption in the software industry is unclear. But it certainly feels like there's an extreme level of pessimism within the investment community. And moats will remain moats, even in the age of AI. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### The Hour Glass (HG SP) URL: https://www.asiancenturystocks.com/deep-dive-the-hour-glass-hg-sp/ Last updated: 2026-03-16T13:17:31.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I hold a position in The Hour Glass at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**The Hour Glass**](https://finance.yahoo.com/quote/AGS.SI/?ref=asiancenturystocks.com) *(HG SP — US$1.1 billion)* is a Singapore-based luxury watch retailer focused on the sale of Rolex watches. It currently has 72 stores across Singapore, Thailand, Australia, Vietnam, Malaysia, New Zealand, Japan and Hong Kong. You can think of it as a luxury watch retailer focused on Southeast Asia. Rolex accounts for the vast majority of revenues and profits. But it also serves other luxury brands, including Patek Philippe, Audemars Piguet, and Omega. The company was started by Henry Tay and his then-wife Jannie Chan. His family had been distributing Rolex watches since 1948\. During his university years in Melbourne, Henry met Jannie Chan, and they decided to go into the wristwatch business together. They were inspired by specialist watch shops in Melbourne. And upon returning to Singapore, they decided to open a specialist luxury watch retailer called "The Hour Glass". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-77.png) Henry Tay and his then-wife Jannie Chan (left), the first The Hour Glass store (right) The following decade, The Hour Glass quickly expanded across the region, adding shops in Kuala Lumpur, Australia and Bangkok. The Asian Financial Crisis was tough on the local watch industry, compounded by poor investments in watch brands Daniel Roth and Gerald Genta, both of which ultimately failed. The 2002 appointment of Kenny Chan as Chief Operating Officer was a turning point for the company, and it went on to grow for the following two decades: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-78.png) The Hour Glass's revenues (bars) and earnings per share (line) However, behind the scenes, tensions flared up. In 2010, Henry and Jannie divorced. And what followed was a decade-long court battle. The two of them were equal owners of the parent company, TYC Investment. Since Jannie was unable to sell or liquidate her share of the business, she eventually had to file for bankruptcy. Henry remains Executive Chairman and is certainly impressive. In the annual report, he is forthright about the problems facing the company and the need to act countercyclically when it comes to share buybacks. At the same time, I was a bit taken aback by Henry referring to the book value of equity as the company's *"corporate net worth"*. Significant investments in retail properties at sub-5% cap rates also make me wonder how quickly capital will compound in the longer term. The business itself is doing well. The Hour Glass is among the most reputable Rolex retailers globally, perhaps a close second to London-based Watches in Switzerland. The Hour Glass is known within the industry for getting excellent allocations of the most sought-after Rolex watches. _This post is for paying subscribers only._ ### Alcohol stocks bottoming? URL: https://www.asiancenturystocks.com/alc/ Last updated: 2026-02-17T02:20:33.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- After a brutal 4-year bear market, high-profile alcohol stocks such as [Diageo](https://finance.yahoo.com/quote/DGE.L/?ref=asiancenturystocks.com), [Pernod Ricard](https://finance.yahoo.com/quote/RI.PA/?ref=asiancenturystocks.com), and [Brown Forman](https://finance.yahoo.com/quote/BF-B/?ref=asiancenturystocks.com) are finally showing signs of life: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-61.png) Source: Trading View This has prompted some investors to ask whether value is finally emerging. First, let's talk about the bear case. [Nielsen IQ data](https://nielseniq.com/wp-content/uploads/sites/4/2025/07/Mindful-consumption-among-APAC-consumers%5Fminiversion-1.pdf?ref=asiancenturystocks.com) shows that in Asia-Pacific, 30% are reporting drinking less, and only 15% more are reporting drinking more. The only exception is South Asia, where consumption levels remain low: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-67.png) Source: Nielsen IQ So why are consumers drinking less? Nielsen's data showed a mix of health concerns, more time spent alone, and financial challenges: > “I am **trying to be healthier**” > “I am **going out less**” > “I am trying to **save money**” > “I **do not like feeling hungover**” > “My **lifestyle has changed**” It's also possible that people are becoming better-informed now that they have instant access to generative AI tools in their pockets. Influencers such as [Bryan Johnson](https://www.youtube.com/@BryanJohnson?ref=asiancenturystocks.com) have millions of YouTube subscribers and are inspiring others to take better care of their health. And indeed, a US Gallup survey shows that an increasing number of people see alcohol as being bad for their health, coinciding with the release of ChatGPT in 2022: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-63.png) Source: Gallup It's also plausible that the smartphone itself has caused us to drink less. Younger people spend more time alone than in the early 2010s: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-64.png) Source: Jonathan Haidt / American Time Use Study That's having an impact on the sales of alcohol. Because it tends to be consumed in social settings, not when doomscrolling on your phone. Surveys across the world, including from [Hong Kong](https://www.scmp.com/lifestyle/health-wellness/article/3232284/alcohol-gen-z-are-saying-no-beer-drinking-wine-and-cocktail-consumption-are-all-decline-among-tiktok?ref=asiancenturystocks.com) and the [United States](https://monitoringthefuture.org/data/bx-by/drug-prevalence/?ref=asiancenturystocks.com#drug=%22Alcohol%22), show that underage drinking has declined. However, Rabobank analysts argue that smartphones are simply delaying the aging process. And that once they enter the workforce from around age 26, they'll end up drinking just as much: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-71.png) Source: Rabobank Recent OECD data show that individuals aged 15 or older in East Asian countries such as the People's Republic of China, South Korea, and Japan are consuming less than they did 10 years ago. Conversely, in India and Australia, consumption rates have actually increased. So there's nuance beyond the headline numbers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-68.png) Source: OECD We've also seen a shift by category. Since the 1990s, wine has clearly taken market share from beer. Wine is seen as the healthier option: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/3Ouyh-google-search-queries-per-alcohol-category-.png) The most health-conscious individuals are moving to alcohol-free beers and spirits. An index of Google search queries for "Mocktails" has tripled since 2020\. The success of Heineken Zero and Guinness Zero is another sign of a strong demand for alcohol-free options. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-74.png) Source: Guinness.com It now looks like spirits are finally taking market share from both wine and beer. This is due to a widespread premiumization trend that might have accounted for part of [Kweichou Moutai](https://sg.finance.yahoo.com/quote/600519.SS/?ref=asiancenturystocks.com)'s success: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/TIKR.com_Kweichow-Moutai-Co.--Ltd.--600519--Stock-Price.jpg) Source: TIKR COVID-19 provided a short-term boost to alcohol consumption, as at-home drinking surged. Spirit companies ramped up production, anticipating that demand would remain high. But as demand dropped, inventories built up across the industry, leading to indigestion: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-70.png) Source: Financial Times In 2026, supply is finally being curtailed. Suntory is halting production at its flagship Kentucky distillery through 2026\. And [Diageo](https://sg.finance.yahoo.com/quote/DGED.L/?ref=asiancenturystocks.com) is suspending operations at several US whisky facilities. So to summarize, my tentative view is that smartphones and possibly generative AI have caused a shift towards healthier, but also more isolated lifestyles. But once the younger generation enters the workforce, they'll probably get into a habit of drinking with their colleagues. In any case, a particular bright spot within the global alcohol industry seems to be higher-priced wine and spirits. Consumers feel that these options are healthier, while still giving a buzz. Those categories are probably a safer place to be than beer. The publicly listed universe of alcohol brands includes the following stocks: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-72.png) Debt levels have risen among spirits and wine producers. But as I noted in my write-up on [Treasury Wine Estates](https://www.asiancenturystocks.com/treasury-wine-estates-twe-au/), part of the debt increase is due to the ramp-up in COVID-era inventories. And those will eventually be monetized. Growth in India is by far the healthiest. And that's reflected in the much higher valuation multiples for Indian alcoholic beverage companies. [Kweichou Moutai](https://sg.finance.yahoo.com/quote/600519.SS/?ref=asiancenturystocks.com) is still growing its top line at a steady pace, and now trades at 19.0x P/E. A personal holding of mine, [Ginebra San Miguel](https://www.marketwatch.com/investing/stock/gsmi?countrycode=ph&ref=asiancenturystocks.com), continues to grow at double-digit rates, yet trades at just 10.0x P/E. Other stocks with low valuation multiples include the Chinese and Vietnamese beer brands, as well as [Lion Brewery](https://www.tradingview.com/symbols/CSELK-LION.N0000/?ref=asiancenturystocks.com) in Sri Lanka. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Update: Casio (6952 JP) URL: https://www.asiancenturystocks.com/update-casio-6952-jp/ Last updated: 2026-08-07T19:40:31.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Casio Computer at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **Summary** - Casio is one of the world's largest producers of wristwatches, mostly under the iconic Casio and G-Shock brand names. It sells 17 million watches annually. These watches have the unique selling point that they're cheap, low-maintenance, and ultra-durable. - The company's financial performance has been weak for many years, with Casio lagging behind Apple's and Garmin's latest watches. However, the appointment of Shin Takano in mid-2025 may have been a turning point. Around that time, Casio transitioned to a decentralized organizational structure. New department heads, such as Oh Takahashi in the timepiece division, has been given free rein to develop new products and market them. - We've already seen significant progress since that time. In the latest quarter, Casio reported a +34.5% year-on-year growth in the timepiece division. Iconic models such as the "Casioak" line are selling particularly well. They've taken bold steps to update the original G-Shock Square line to Memory-In-Pixel (MIP) displays. And Casio has appointed regional brand ambassadors to better reach consumers. - After the recent run-up, the stock now trades at 1.0x EV/Sales. With the latest quarter's operating margin already at 11.5%, it's plausible the stock will eventually trade below 10x EV/EBIT. That's remarkable for a company run by a seasoned finance professional. - The main risk is that fashion is cyclical. Retro designs are popular today, but may fall out of favor tomorrow. I also think that Apple and Garmin are formidable competitors, and it's not clear whether Casio can ever catch up technologically. --- ## **A quick background** [**Casio Computer**](https://www.asiancenturystocks.com/deep-dive-2022-27-casio-computer/) *(6952 JP — US$2.4 billion)* is a Japanese company that produces wristwatches and other consumer electronics. It's most famous for its "Casio" and "G-Shock" brand names, selling 17 million watches annually. I published my original deep dive on Casio back in 2022\. At that time, I pictured that it would benefit from a weaker Japanese Yen, on top of a nascent trend where consumers would get into the collecting of watches: [Deep-dive 2022-27: Casio ComputerWatch now | G-Shock has become cool, and increasingly price-competitive with the weaker yen![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-45.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f38b09384-ebdd-4a61-86ec-4f1948a4de7b_437x314.jpg)](https://www.asiancenturystocks.com/deep-dive-2022-27-casio-computer/) It's an old company. And it's had to reinvent itself many times over. It was initially formed as a partnership between the four brothers of the "Kashio" family in 1957\. The father initially served as Chairman, but the business was really run by the four brothers, each taking on different roles within the company. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-59.png) The four "Kashio" brothers Their first product was the A-14 electric calculator - a product that was novel at the time and cost more than US$1,000 in today's dollars. Over time, the company broadened its product portfolio to include other consumer electronic items, such as cash registers, digital cameras, and, finally, in 1973, Casio-branded wristwatches. At the time, Swiss mechanical watches dominated the industry. But cheaper electronic so-called "quartz" watches undercut them on price, leading to an upheaval in the industry. Many of the Swiss watch companies had to cut their staff and reorganize in what's now become known as the [quartz crisis](https://en.wikipedia.org/wiki/Quartz%5Fcrisis?ref=asiancenturystocks.com). Soon thereafter, Casio released its now-famous "G-Shock" line of watches. These are shock-resistant, ultra-durable watches that can be thrown off a mountain and land on the ground, still intact. The G-Shock franchise began when Casio engineer Kikuo Ibe accidentally dropped his father's pocket, breaking it into a thousand pieces. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-25.png) Kikuo Abe and his invention, the first G-Shock watch He went into his lab to find a solution. After 200 prototypes, he finally came up with the original "G-Shock" design, which had ten layers of protection and a floating quartz timekeeping module in the center. The watch was virtually indestructible, attracting millions of fans worldwide. In 1995, Casio entered the digital camera market, competing head-on with Nikon and Canon with great success. But it missed the shift to DSLRs and was eventually outcompeted by ever-improving smartphone cameras. Around the same time, it also got into the mobile phone business. But again, after merging with Hitachi's phone operations in 2004, and then with NEC in 2010, the business ultimately failed. Yet again, Casio had been unable to keep up with the times. A look at Casio's leadership transitions explains some of the issues it's faced throughout the years: - From 1960 to 1988, the oldest brother, **Tadao Kashio**, led the company. Tadao was an inventor who personally developed Casio's first electric calculator and then its digital watches. - But in 1988, his brother and master salesman, **Kazuo Kashio**, took over. He managed to popularize the G-Shock brand, making it into a collector's item. However, during their period, Casio also fell behind technologically. - In 2015, Kazuo's son **Kazuhiro Kashio** took over. His reign has been marked by evolutionary, rather than revolutionary shifts. Facing competition from the Apple Watch, he's tried to modernize the timepiece business, including by moving to new premium materials, slimmer models and with smartwatch functionality: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-29.png) How the G-Shock watches have developed over time At the time of my deep dive, Casio generated 61% of its revenue from its key "timepieces" segment, selling "Casio" and "G-Shock" branded watches. Another 32% came from its consumer business, which included educational tools such as electronic dictionaries, scientific calculators, and electronic musical instruments. Finally, you had the system equipment business, selling hand-held terminals and electronic cash registers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-33.png) But the jewel was clearly the timepieces. Margins in this segment have always been high, and they clearly hold a niche within the global watch industry. G-Shocks are famously indestructible. While the features are basic, they're low-maintenance watches you don't have to worry about. And their battery lives last for years, so you don't have to remember to charge them. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-30.png) New released back in 2022 Casio's timepieces segment included the following sub-brands: - **Casio**, with retro-looking 1980s-style simple watches that typically use digital quartz timekeeping modules - **G-Shock**, selling indestructible watches that are typically bulky but reliable. These include Master of G military-style analogue watches with advanced features that run on solar power. As well as G-Steel analog watches with similar timekeeping modules, including the "Master of G" watches. Casio had also released G-Shock smartwatches, typically running on MIP displays but still trailing Garmin in their feature sets. - **Baby-G**, a version of G-Shock for smaller wrists sold to women and children - **Edifice**, sporty metal chronographs inspired by motorsports - **Oceanus**, a luxury-oriented brand of dress watches, mostly analog - **Protrek**, a slimmer variant of G-Shock, focusing primarily on outdoor types that don't require shock-proof watches Here are some representative watches from each of these brands: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-36.png) Consumers love their G-Shocks, that's for sure. A random sample of popular G-Shock watches on Amazon had review scores of 4.5 to 4.8, with commentary like this: > “What can you say - it's a G-shock and does what it's suppose to do. Accurate and water proof to 200 meters. **It's comfortable to wear, light weight and looks really nice**. Good backlight.” > “**Literally the best watch I’ve ever owned**. Surprisingly comfortable for a $40 watch. Reliable and tough. 10 year battery life and 20 bar water resist?? Can't beat that. Aesthetics wise, in my opinion, is beautifully retro.” > “It's easy to read, the buttons are big and it's nice to press them and the watch is solar-powered. **I bought that watches for serving in the army and, as I think it is perfect for that**.” > “**Really an amazing watch**. First, let me talk about the aesthetics. It is a very handsome watch and obviously well made. It is a considerable step up in quality.” > “I got this watch for my husband as an anniversary gift and **HE LOVES IT**. It looks really good on him.🥰” > “I like it. I had no idea that it was so beautiful, comfortable and expensive in appearance. **I recommend**” At the time of my write-up, I pictured Apple Watch and Garmin potentially co-existing with Casio and G-Shock. I was particularly encouraged to see that G-Shock sales volumes continued to rise, even after the release of the Apple Watch in 2015: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-27.png) Source: Daiwa The other parts of the business were unexciting. The calculator business had been surprisingly stable, but clearly outdated in the age of iPads and smartphones. The cash register business seemed outdated as well, now that we all use mobile phones to pay. Finally, while the electronic music instrument business might be stable, there's tough competition from the much larger Japanese competitor, Yamaha. Casio's challenges were obvious from the multi-year decline in its revenues: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-31.png) After Kazuhiro Kashio took over in 2018, he introduced an early retirement program for senior Casio executives. He also replaced some of them with younger faces. And he changed the organizational structure so that the planning & development personnel would work together with the marketing personnel to better understand customer needs. I pictured that this could help Casio innovate faster. In 2020, we saw an uptick in Google search queries for "G-Shock", most likely thanks to their new "Casioak" line of analog watches: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-60.png) So perhaps the restructuring was working. I also pictured that weakness in the Japanese Yen might improve Casio's competitiveness and boost its margins. 75% of Casio's revenues came from overseas, and some of its watches were made at its Higashine plant in Japan. The translation effect alone should have increased sales by +17%. But it was contingent on a recovery in revenues after the COVID-19 chip shortage and the shutdown of manufacturing capacity. And in the long term, whether Casio could effectively compete with the Apple Watch and newer watches from Garmin and others. --- ## Update to my original post Since my write-up, Casio's stock price went nowhere for years, before coming to life in early 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/TIKR.com_Casio-Computer-Co.-Ltd.--6952--Stock-Price--1-.jpg) Source: TIKR _This post is for paying subscribers only._ ### Insider activity January 2026 URL: https://www.asiancenturystocks.com/insiders-january-2026/ Last updated: 2026-04-14T03:26:55.000Z HK REIT, Korean CPG name, and more. _This post is for paying subscribers only._ ### The luxury wristwatch market may have bottomed URL: https://www.asiancenturystocks.com/watch-market-update/ Last updated: 2026-02-17T02:20:50.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- While the luxury market [appears to be in decline](https://x.com/AstutexAi/status/2011749940976873814?s=20&ref=asiancenturystocks.com), one bright spot has been the wristwatch subcategory. A case in point: prices for second-hand Rolex watches are now on an upward trajectory. This should lead to higher profits for Rolex and its retail partners across the globe: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-7.png) Source: WatchCharts.com The watch market is clearly cyclical. For example, after Xi Jinping came to power in 2013, he initiated an anti-corruption program that led to a severe slump in global watch sales. Then came the COVID-19 pandemic. Consumers received stimulus cheques and accumulated savings while being cooped up at home. They then used some of those savings to buy watches. The popularity of mechanical wristwatches comes as a surprise to some. People have been predicting the death of Swiss watchmaking for well over 50 years. Quartz watches from Casio and other Japanese brands undercut them by a wide margin. And then in 2015, the Apple Watch started to take over, with its immersive screen, on-the-fly notifications and its rich feature set. That begs the question: why are consumers still buying mechanical watches? It's certainly not because of their accuracy. Nor is it because of their features, or their low prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/Patek-Philippe-Nautilus-5980-60G-white-gold-denim-WIT-crop-4-1536x1229.jpg) Source: A Blog to Watch It's a difficult question to answer, but most likely it's simply about the romance of owning an expensive hand-crafted object on your wrist. You can hear the movement tick as hundreds of microscopic parts work in harmony. There are also signs that young people are fed up with smart watches that give them notifications they don't really need. Another aspect is status. A luxury watch is perhaps the ultimate [Veblen good](https://en.wikipedia.org/wiki/Veblen%5Fgood?ref=asiancenturystocks.com): a product whose demand increases as its price rises. Scarcity sells. If only the top 0.1% of the population can afford a US$50,000 watch, then wearing it will be the ultimate way to demonstrate your success. In any case, the luxury wristwatch market is clearly thriving. Volumes have declined, but prices more than make up for it. A 2025 US survey showed that 30% of Gen Z individuals already owned a mechanical watch or planned to buy one. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-9.png) Source: Monochrome watches After the heights of the COVID-era watch bubble, the market suffered a multi-year downturn. The Chinese government's 2021 crackdown on its real estate bubble probably didn't help. And in the process, the share price of Rolex dealer "Watches of Switzerland" declined by almost 80% from peak to bottom: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/9pRty-watches-of-switzerland-s-share-price-.png) Source: TIKR But amid this volatility, we're starting to see watch collecting emerge as a major trend. Young buyers are influenced by Instagram, YouTube, and other social media platforms, where mechanical watches are showcased as lifestyleor investment objects. Just look at the number of visitors to the Rolex.com website: now 230,000 per day and rising: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-8.png) Source: TickerTrends There's interest in other brands as well. The number of search queries for "mechanical watch" on Amazon.com keeps rising, year after year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-10.png) Source: Momentum Commerce After a four-year decline, the industry looks set to turn. The year-on-year growth in Swiss watch exports to Hong Kong, China, Japan, and Singapore has finally turned positive: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/m0PUW-swiss-watch-exports-by-region-yoy-.png) Among these regions, Singapore is the clear outperformer. But we've also seen stabilization in watch sales in Japan, China, and Hong Kong. When it comes to Rolex resellers, it's helpful that prices for second-hand watches have begun rising again. Since Rolex watches continue to trade at a premium to MSRP, authorized dealers enjoy strong bargaining power over their customers. And they'll be able to push their customers to spend more to qualify for the most coveted models, such as the Rolex Dayton. In Japan, the three watch brands Seiko, Casio, and Citizen are also doing well, with their share prices hitting multi-year highs recently: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/9AkJv-share-prices-of-japanese-watch-brands---1-.png) These three companies operate at lower price points than Rolex. So their success has more to do with the weak yen and a seemingly unstoppable interest in watch collecting. The alternative data remains positive, especially for Casio and Seiko. The former company just released its 3QFY2026 results, with sales rising +28% year-on-year. The investable universe of luxury wristwatch stocks includes the three Japanese brands as well as smaller watch retailers, which tend to serve the industry heavyweight Rolex: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-12.png) Source: TIKR If you check the table above, you'll find that the Rolex-affiliated watch retailers all trade at single-digit P/E multiples. The biggest risk for them is that the premium over MSRP might one day disappear. Another risk is that Rolex takes distribution in-house, perhaps through its fully owned retail arm, Bucherer. But at the moment, both volumes and prices are currently heading in the right direction. And that should be positive for authorized Rolex dealers, especially those with exposure to the better-performing markets such as Singapore and Taiwan. ### Carabao (CBG TB) URL: https://www.asiancenturystocks.com/deep-dive-carabao-cbg-tb/ Last updated: 2026-03-16T13:18:14.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. I hold a position in Carabao at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- More than ten years ago, I bought shares in a little US energy drink maker called Celsius Holdings. It wasn't particularly known at the time, but I had tried its products in my native Sweden and thought they had room to expand. Unfortunately, I sold the shares before the massive 2020 run-up. But the experience left me yearning for more. And that led me to Thai energy drink maker [**Carabao**](https://finance.yahoo.com/quote/CBG.BK/?ref=asiancenturystocks.com) *(CBG TB — US$1.4 billion).* I've already mentioned Carabao one time before, when I [compared the effectiveness of different generative AI tools in equity research](https://www.asiancenturystocks.com/the-ultimate-ai-tool-battle/). This week, I dug even deeper to figure out what the company's long-term earnings picture looks like. And this is what I've found. Carabao is a Thai beverage company most known for its "Carabao Dang" energy drink. The company was formed in 2001 as a partnership between businessman Sathien Sathientham and Thai rock star Aed Carabao, who gave the drink its name. The word "Carabao", by the way, refers to a type of water buffalo that's common in the Philippines. The group's flagship product, Carabao Dang, is a sweet, non-carbonated energy drink that Thai workers consume for a quick boost. Each 150ml bottle costs 10 baht (about US$30 cents) and contains 50mg of caffeine. The first-mover in the industry was a local product called Krating Daeng, which was later rebranded internationally as "Red Bull". In 1985, competitor Osotspa launched its M-150 drink. That product now dominates the market with a 50% market share. However, in the past few years, Carabao has slowly taken share from the incumbents, with its green bottles appealing to the younger generation. The company is on track to increase its market share from 28% today to 32% by 2027\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-5.png) A bottle of Carabao Dang, next to Osotspa's M-150 energy drink. Picture taken from a convenience store in Pattaya, Thailand early last year. The differences between Krating Daeng (Red Bull), M-150 and Carabao aren't big. Krating Daeng and M-150 might have a sweeter taste. Though in my mind, they all seem extremely sweet. What sets Carabao apart is its association with Thai rock culture and English football through its sponsorship of the EFL Carabao Cup. Another thing that sets Carabao apart is that the product is cheaper: 10 baht instead of 12\. Carabao's ability to charge lower prices stems from its vertical integration. The company makes its bottles and aluminium cans in-house. It also distributes its products in-house. And since the machinery is modern, Carabao's plants tend to be more efficient than Osotspa's. _This post is for paying subscribers only._ ### South Korea's Value-Up Reforms URL: https://www.asiancenturystocks.com/korean-reforms/ Last updated: 2026-02-17T02:21:01.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- In a [recent interview](https://youtu.be/J6xBMwAtByc?si=8oH6DJBlg9wJUK8w&t=1787&ref=asiancenturystocks.com), Joe Bauernfreund of AVI Global Trust said that he recently shifted capital away from Japan to South Korea. Why? Because he sees real change taking place in Korea. A series of measures to protect minority shareholders has been introduced. And bit by bit, we're starting to see the "Korea discount" finally disappear. I first wrote about South Korea's "Value Up" program in [May 2024](https://www.asiancenturystocks.com/value-up/). At that time, I argued that the main reason for the low valuation multiples in Korea was a low return on equity. Historically, many of Korea's largest companies have been capital-intensive, and capital allocation hasn't served the interests of minorities. There were three main reasons for the poor treatment of minorities: 1. One is that Korea has historically had a **high inheritance tax** of 50%, and effective rates for controlling shareholders can be even higher. After the controlling shareholder dies, the next generation will need to sell down their shares to pay for the taxes. But they'll be keen to maintain control. And for that reason, many of Korea's family-owned businesses have established complex corporate structures to maintain control. The problem is that the interests of minorities in different parts of the corporate structure often diverge. And the family will have a strong incentive to keep stock prices low to minimize the tax burden when the controlling shareholder eventually passes away. 2. Another issue has been Korea's **high dividend taxes**. In South Korea, the average dividend payout ratio has been around 20% - much lower than the world average of 45%. That's because in Korea, dividend income is included in your overall taxable income. So high-income individuals have therefore paid taxes on dividends at the top 49.5% marginal tax rate. To avoid tax payments, many controlling shareholders have simply preferred to accumulate cash within the company. 3. The final issue has been recurring **related-party transactions**. In the past, companies haven't needed shareholder approval for related-party transactions. They've only needed to disclose the transaction after the fact. Under-priced mergers between group companies have been a common occurrence, much to the chagrin of minority shareholders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-2.png) Lee Bok-hyun, the former head of the Financial Supervisory Service (FSS) The start of the ongoing reform program was the **Corporate Value Up** program, launched by Korea's regulator and the Korea Exchange in early 2024\. Listed companies were encouraged to develop plans to improve their returns on equity. If you go to the websites of publicly listed Korean companies, you'll often find slide decks outlining their plans to realize shareholder value. Late in 2024, the Korea Exchange created the **Korea Value-Up Index**, comprising companies that perform well in their of their treatment of minorities. The assets under management of exchange-traded funds that track this index now exceed KRW 1 trillion (close to US$700 million). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-4.png) The Korea Value-up Index. Source: TradingView Another major forward was the July 2025 amendment to Korea's Commercial Act, which required directors to **act in the best interests of all shareholders**, not just the company itself. Today, if a director is found to benefit a parent company at shareholders' expense, he or she can now face shareholder litigation. On the tax side, the government has now started offering tax credits for companies that significantly increase shareholder returns. For example, it's **lowered dividend taxes** for companies with a dividend payout ratio of more than 40%, from a 49.5% tax rate to 30% or lower. And it's also also offered **lower inheritance tax** in the removal of the control premium in the valuation of publicly listed family companies. There are also discussions about reducing the inheritance tax rate from 50% to 40%. A sign of how seriously Korea Exchange is taking the Value Up program is that, if you go to its website today, the Value Up index is promoted first, even before Korea's benchmark KOSPI index. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/image-3.png) Another positive piece of news is that, from March 2027, every company within the KOSPI will have to provide **English-language disclosures** to its investors. They're clearly hoping to attract foreign capital to Korea. In 2023, they removed the requirement for foreigners to seek investment registration certificates. And starting in July 2026, foreigners will be able to trade Korean won 24 hours a day. I personally think that Interactive Brokers will begin offering access to Korean equities by the end of the year. Despite South Korea being the 10th-largest stock market in the world and having a high GDP/capita, it's still counted as an emerging market. But as Douglas Kim of Smartkarma has pointed out, we could well see Korea be upgraded to a **developed market** in 2027\. That would lead to greater flows from international investors, who have so far been mostly absent from Korean equity trading. The recent rally in Korean equities is not just about the country's corporate governance reforms. SK Hynix and Samsung Electronics are benefitting from an epic bull market in DRAM, pushing the KOSPI benchmark index +24% in just a month: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/02/C3ohj-korea-s-kospi-index-.png) I personally think that the memory chip cycle will prove fleeting. But Korea's corporate governance reforms are here to stay. Beneath the larger index weights, you'll find hundreds upon hundreds of smaller companies trading at single-digit P/E multiples. And big activist funds are starting to see the value, too. Joe Bauernfreund's Asset Value Investors is one of the firms that has shifted its attention to Korea. But there are others, too. Dalton also set up an office in South Korea in 2025\. Oasis added to its Korea team in late 2025\. And Palliser continues to run activist campaigns in Korea, including against Samsung C&T, SK Square, and LG Chem. Now that dividend payout ratios are rising, I think the obvious beneficiaries will be Korea's higher-yielding (non-voting) preference shares, which I discussed in March 2022 [here](https://www.asiancenturystocks.com/koreanprefs/). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio update January 2026 URL: https://www.asiancenturystocks.com/portfolio-update-january-2026/ Last updated: 2026-05-30T00:54:08.000Z A volatile month _This post is for paying subscribers only._ ### Understanding the e-paper market URL: https://www.asiancenturystocks.com/e-paper/ Last updated: 2026-02-17T02:21:09.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- So what is "e-paper" anyway? The technology was invented by an MIT professor called Joe Jacobson. In 1993, he had travelled to Peru. When a local man asked him for books, Jacobson only had a few to offer. This led to a realization: he couldn't carry many books on the trip because they're heavy and take up too much space. So he began dreaming about a portable book with hundreds of pages that could change through the click of a button. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/Jacobson.jpg) Joe Jacobson, then at MIT Once Jacobson arrived at MIT, he recruited two undergraduates to work on the problem. The solution they came up with was called "electrophoresis": moving ink particles around on a screen through an electric field. Each ink particle contained differentially charged black and white pigment. When electricity was applied, the black ink would rise to the top, or vice versa. And suddenly, text would form on the screen. The technology he invented, e-paper, was later adopted in the first-generation Amazon Kindle e-reader in 2007\. While the device didn't create much of a splash initially, it's now become the industry standard. The benefit of e-paper is that once the ink particles have moved, they stay in place. So the screen requires zero power to maintain an image, only to change it. For that reason, e-paper devices have exceptional battery lives – sometimes lasting for months. They're also easy on the eyes, reflecting ambient light just like a normal book would. And they've become gradually better over time. The contrast has improved. The resolution has reached a very impressive 300 pixels per inch. And while still slow, page refresh speeds have become better than before. E-readers remain niche devices, but they have a devoted fan base. What's interesting is that the industry is currently undergoing significant change: - One major shift was the 2022 release of the **Kindle Scribe** — a 10-inch black-and-white e-paper device that you can write on. The pen doesn't require a battery: instead, it pulls up black ink particles when you write. Because of this, using the Kindle Scribe feels like you're writing on actual paper, rather than an electronic device. - Another shift was Amazon's 2024 release of the **Kindle Colorsoft —** the first color e-reader released to the broad masses. It's led to a big jump in sales for the Kindle, with many wanting to upgrade to read comics and graphic novels in full color. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/Colorsoft.jpg) The new Kindle Colorsoft So the industry is currently in flux, with a refresh cycle boosting sales volumes, and average selling prices moving up, bit by bit. E-paper is also becoming popular in another product category: electronic shelf labels. Such labels are used to display item prices in retail stores. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/ESL.jpg) Electronic shelf labels used by UK supermarket Sainsbury's The benefit is that prices can be changed through software across an entire store. And it allows for dynamic prices. For example, a supermarket can charge higher prices during lunch hours or during the holiday season. In 2009, Jacobson sold his e-paper business to Taiwan's [E Ink Holdings](https://www.asiancenturystocks.com/deep-dive-e-ink-8069-tt/). It currently serves two groups of customers: - On the electronic shelf label side, it customers are the European system integrators [Vusion](https://finance.yahoo.com/quote/VU.PA/?ref=asiancenturystocks.com) and [Pricer](https://finance.yahoo.com/quote/PRIC-B.ST/?ref=asiancenturystocks.com). - On the e-reader side, [Amazon](https://finance.yahoo.com/quote/AMZN/?ref=asiancenturystocks.com) remains the undisputed leader. But in Japan and certain other countries like Canada and the Netherlands, [Rakuten](https://finance.yahoo.com/quote/4755.T/?ref=asiancenturystocks.com)'s Kobo e-reader is popular as well. Other e-reader brands include Norway's reMarkable and China's soon-to-be-listed [Onyx International](https://www1.hkexnews.hk/app/sehk/2026/108089/documents/sehk26011601624.pdf?ref=asiancenturystocks.com), which owns the Boox brand. Here are the multiples for each of these companies: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-85.png) But be aware that installing electronic shelf labels is a low-margin industry. Most of the industry economics seems to be captured by either Amazon or the monopoly e-paper display manufacturer, [E Ink](https://www.asiancenturystocks.com/deep-dive-e-ink-8069-tt/). ### E Ink (8069 TT) URL: https://www.asiancenturystocks.com/deep-dive-e-ink-8069-tt/ Last updated: 2026-03-16T13:19:03.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in E Ink at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**E Ink**](https://finance.yahoo.com/quote/8069.TWO/?ref=asiancenturystocks.com) *(8069 TT — US$6.6 billion)* is a global monopoly in the production of e-paper display panels, used in the Amazon Kindle and electronic shelf labels. The company is based in Taiwan, but it got its start as a spin-off from MIT Media Lab in the late 1990s. At MIT, a professor called Joe Jacobsson had the idea of creating a single physical book that could change its content through the push of a button. Determined to find a solution, he recruited two undergraduates to create a screen that felt like normal paper. The technology they developed used electricity to move ink particles across the screen. They put the ink in microcapsules, with black and white colors having different electric charges. When electricity was applied to a single pixel, the black ink would rise to the surface, forming readable text. The benefit of this new technology is that once the particles had moved, they would stay put. And that meant that the text would remain on the screen even when the device is powered off. This property has enabled e-paper devices such as the Amazon Kindle to achieve incredible battery life, sometimes lasting for months. And since e-paper only reflects light rather than emits it, the screen is also easy on the eyes with great outdoor visibility. In 2009, Joe Jacobsson's company was acquired by Prime View International, a display technology subsidiary of Taiwanese paper manufacturer called Yuen Foong Yu Group (YFY). The controlling shareholder, "SC Ho", saw the potential of e-paper and bet big on it. After the acquisition, Prime View changed its name to "E Ink Holdings" and eventually shifted its entire focus to e-paper. Since 2024, E Ink has been run by SC Ho's son-in-law, Johnson Lee. While nepotism is usually a risk factor, Johnson has done an amazing job at growing the business. Under his leadership, E Ink's operating margins have gone from zero to 33%, while continuing to innovate technologically. _This post is for paying subscribers only._ ### Myopia stocks in Asia URL: https://www.asiancenturystocks.com/investing-in-asias-myopia-trend/ Last updated: 2026-02-16T01:11:14.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- My eight-year old son was recently diagnosed with myopia — nearsightedness. It's a consequence of the eyes becoming too long, making distant objects appear blurry. And for some reason, it's become extremely common across Asia. Before 1950, the myopia rate in China was only about 5%. Fast-forward to today, more than 80% of Chinese high school children have myopia. And the numbers are even higher in Taiwan, South Korea, and Japan: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-79.png) Myopia rates by Asian city. Source: The Economist, 2017 That begs the question, what's causing this phenomenon? According to the YouTube channel [Asianometry](https://www.youtube.com/watch?v=3YWbR8K0jT4&ref=asiancenturystocks.com), the main culprit seems to be children spending time indoors. Their retinas are not getting enough sunlight. And the children spend too much time looking at objects close to themselves, including iPads and school books. In response to rising myopia rates, in 2010, the Taiwanese government launched a government program called "Tian Tian 120", encouraging children to spend 120 minutes outdoors each day. And that initiative seems to have worked. Following the launch of this program, the prevalence of myopia in Taiwanese primary school children declined, suggesting that spending time outdoors helps combat the trend: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-80.png) Source: Asianometry At the same time, the increasing prevalence of myopia is unlikely to reverse. Especially when children [are glued to their smartphones](https://www.globalstockpicking.com/2023/01/10/smartphone-usage-myopia-part-2/?ref=asiancenturystocks.com) for several hours per day. I dug into the research on myopia and found that there are three main treatment options for those affected by it: 1. **Atropine eye drops**. These are eye drops administered daily before sleep, and supposedly slow the onset of myopia. 2. **Ortho-k contact lenses**: These specially shaped contact lenses are worn overnight, reshaping the eye to help prevent worsening myopia. 3. **Refractive surgery**: Finally, after the eyes stop growing at age 21, patients can also use laser procedures like [LASIK](https://en.wikipedia.org/wiki/LASIK?ref=asiancenturystocks.com) to reshape the front of the eye and thus correct their vision. So, from an investment perspective, it seems that manufacturers of contact lenses, spectacles, and eye drops should benefit. As well as operators of eye surgery clinics. The "Big Four" heavyweights in the contact lens industry are Johnson & Johnson (Acuvue), Alcon, Cooper Vision, and Bausch + Lomb. These companies also make LASIK surgery equipment. Germany's Carl Zeiss Meditec has exclusive patents on another type of surgery called SMILE, which is a newer procedure that's less invasive. In Asia, I've found that the following companies have exposure to the increasing prevalence of myopia: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-81.png) In the above table, I've divided the investable universe into three buckets: - **Contact lens manufacturers**: These include Taiwanese contact lens OEMs such as [St Shine](https://finance.yahoo.com/quote/1565.TWO/?ref=asiancenturystocks.com) and [Pegavision](https://finance.yahoo.com/quote/6491.TW/?ref=asiancenturystocks.com). Meanwhile, Japan's [Menicon](https://finance.yahoo.com/quote/7780.T/?ref=asiancenturystocks.com) and [SEED](https://finance.yahoo.com/quote/7743.T/?ref=asiancenturystocks.com) primarily sell contact lenses under their own brand names. [Interojo](https://finance.yahoo.com/quote/119610.KQ/?ref=asiancenturystocks.com) in South Korea is one of the most popular cosmetic/color lens brands in the region. Finally, [Autek China](https://finance.yahoo.com/quote/300595.SZ/?ref=asiancenturystocks.com) is known for its ortho-k contact lenses, which help prevent the onset of myopia. - **Eye surgery clinics**: [Aier Eye Hospital](https://finance.yahoo.com/quote/300015.SZ/?ref=asiancenturystocks.com) is a well-known blue-chip eye surgery group. [Dr Agarwal Eye Hospital](https://finance.yahoo.com/quote/DRAGARWQ.BO/?ref=asiancenturystocks.com) in India has also achieved a reasonable return on equity. [ISEC Healthcare](https://finance.yahoo.com/quote/40T.SI/?ref=asiancenturystocks.com) in Singapore and [Optimax](https://finance.yahoo.com/quote/0222.KL/?ref=asiancenturystocks.com) in Malaysia own eye surgery clinics and also offer other healthcare services. - **Spectacle makers**: These include retailers such as [Lenskart](https://finance.yahoo.com/quote/LENSKART.BO/?ref=asiancenturystocks.com), [Japan Eyewear](https://finance.yahoo.com/quote/5889.T/?ref=asiancenturystocks.com), [JINS](https://finance.yahoo.com/quote/3046.T/?ref=asiancenturystocks.com), [Doctorglass](https://finance.yahoo.com/quote/300622.SZ/?ref=asiancenturystocks.com), and the recently privatized [Paris Miki.](https://finance.yahoo.com/quote/7455.T/?ref=asiancenturystocks.com) Then you have suppliers of eyeglasses such as [Shanghai Conant Optical](https://finance.yahoo.com/quote/2276.HK/?ref=asiancenturystocks.com), [Thai Optical](https://finance.yahoo.com/quote/TOG.BK/?ref=asiancenturystocks.com), and [Samyung Trading](https://finance.yahoo.com/quote/002810.KS/?ref=asiancenturystocks.com), which owns a joint venture with [EssilorLuxottica](https://finance.yahoo.com/quote/EL.PA/?ref=asiancenturystocks.com). There are many stocks to dig into here. But the three that excite me the most are [Pegavision](https://finance.yahoo.com/quote/6491.TW/?ref=asiancenturystocks.com), [Japan Eyewear](https://finance.yahoo.com/quote/5889.T/?ref=asiancenturystocks.com), and [Samyung Trading](https://finance.yahoo.com/quote/002810.KS/?ref=asiancenturystocks.com). They all trade at low valuation multiples while growing steadily. So stay tuned for a deep dive on at least one of these stocks in the next few months. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Midea (300 HK) URL: https://www.asiancenturystocks.com/midea/ Last updated: 2026-03-16T13:19:39.000Z *Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks – a newsletter about Asian value stocks. For a complete list of all previous posts, check out the* [***Table of Contents***](https://www.asiancenturystocks.com/library/)*.* --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Midea at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Midea**](https://sg.finance.yahoo.com/quote/0300.HK/?ref=asiancenturystocks.com) *(300 HK — US$84 billion)* is the world's largest producer of home appliances. It sells over 300 million units of air conditioners, washing machines, refrigerators and other appliances annually. The copmany started as a township enterprise in China's Guangdong province, producing plastic bottle caps. Then, in the 1980s, it switched its focus to electric fans and later air conditioners. After founder He Xiangjian retired in 2012, he left the control of the business to talented engineer Fang Hongbo. And since then, Midea gone from success to success. A pivotal year for Midea was 2016, when Midea acquired Toshiba's home appliance division as well as German industrial robot maker Kuka. The latter company is one of the top 4 robotics companies globally, alongside ABB, FANUC, and Yaskawa. Thanks to these acquisitions, Midea has narrowed the technological gap over time. The products are no longer just cheap; they are genuinely better than the competition's. For example, Tom's Guide called the Midea U product: "The best air conditioner. Period." The quality of Midea's products might be why an index of Google search queries for "Midea" keeps rising, year after year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/LuuTl-google-search-queries-for-midea-.png) The financial results has been similarly impressive. In the past decade, Midea's earnings per share has risen at an +11% compound annual growth rate. Midea now tops home appliance sales on China's Tmall and JD.com, ahead of its domestic rivals Haier and Gree. _This post is for paying subscribers only._ ### Indonesian land seizures URL: https://www.asiancenturystocks.com/indonesian-land-seizures/ Last updated: 2026-01-27T12:54:50.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- The biggest news story in Asia over the past week has been [Bloomberg's reporting](https://www.bloomberg.com/news/articles/2026-01-04/indonesia-s-prabowo-tightens-grip-on-plantations-mines-with-vast-land-grab?utm%5Fsource=chatgpt.com) of the Indonesian government's recent land seizures. These land seizures have been occurring for a while, but there hasn't been much news about them in the media. Since March 2025, more than 4 million hectares of oil palm plantation land has been taken over by the government. That's equivalent to the size of Switzerland, or 30% of Indonesia's total oil palm acreage. Much of the land has now been transferred to a new state-owned enterprise called "Agrinas Palma Nusantara". Its board is made up of retired army generals associated with President Prabowo Subianto. Initially, the government claimed that the land was seized because it was located within forest zones, which should technically not be used for agriculture. But once taken over, it seems that much of the land has now become legal, agricultural land. In the words of an industry professional: > “This is an extraordinary injustice. At the beginning, **these plantations were taken over under the pretext of returning them to forest**. In reality, they are being released into \[agricultural land\]” It doesn't take a genius to figure out what's going on. The government is simply nationalizing private assets, much like during the reign of socialist former President Sukarno, who ruled Indonesia from 1945 to 1967\. What will this mean for the palm oil industry? Well, given that Indonesia accounts for 58% of global palm oil production, the seizures will most likely affect palm oil prices. Farmers have been offered 15% of revenues if they stay, but many have been reluctant to maintain plots now owned by the government. Large plantation companies such as IOI Corporation and Wilmar have also become cautious about investing new capital in the industry. So I think you could argue that palm oil prices should be heading higher. The beneficiaries will be close-to-pure-play Malaysian producers such as IOI Corporation and United Plantations. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-74.png) Source: TIKR In October and November 2025, Indonesia's new state-owned holding company Dantantara issued so-called "Patriot Bonds" yielding just 2% — four percentage points below the government bond yield. 46 Indonesian conglomerates purchased close to US$4 billion of these Patriot Bonds when they were issued. The tycoons participating included the Salim, Hartono and Widjaja families. Now the big question is whether buying these Patriot Bonds will shield their companies from expropriation. I don't have the answer to that. But I will certainly think twice before buying plantation companies with significant exposure to Indonesia. ### Insider activity December 2025 URL: https://www.asiancenturystocks.com/insiders-december-2025/ Last updated: 2026-04-14T03:26:46.000Z Chinese insider activity flashing red _This post is for paying subscribers only._ ### Japan's high school tuition reforms URL: https://www.asiancenturystocks.com/japans-high-school-tuition-reforms/ Last updated: 2026-02-17T02:21:27.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- The Japanese government is about to introduce additional subsidies for private high school students. 35% of Japan's high school students are in private schools, so we're talking about approximately 1 million students. In the past, only families with a household income below JPY 9.1 million (US$58,000) received any subsidies. The households with an income above JPY 9.1 million did not receive any subsidies at all. From 1 April 2026, this JPY 9.1 million income cap will be removed, meaning that everyone will receive the full, new subsidy amount of JPY 457,000 (US$2,900) per year. This will be a significant improvement from before. I suspect that at least part of the savings will be redeployed into tuition services run by Japan's infamous cram schools ("juku"). Every parent wants their child to gain an advantage in Japan's fiercely competitive university entrance exams. And that's why nearly 40% of private high school students in Japan attend cram schools today. Here is what the investable universe of publicly listed cram schools looks like in Japan: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/01/image-57.png) Source: TIKR There are two types of cram schools: 1. **Traditional classroom teaching**, where star teachers attract groups of 20-30 students 2. **Individualized teaching**, where shy students in classes of just 1-3 get help from teachers, often working part-time Individualized teaching is gaining market share, but tends to carry lower margins. [Nagase Brothers](https://finance.yahoo.com/quote/9733.T/?ref=asiancenturystocks.com) and [Waseda Academy](https://finance.yahoo.com/quote/4718.T/?ref=asiancenturystocks.com) are the go-to cram schools for students seeking entry into top universities in Tokyo and beyond. [Gakken Holdings](https://finance.yahoo.com/quote/9470.T/?ref=asiancenturystocks.com) is a conglomerate where cram schools are just a small part of the total business. [STEP](https://finance.yahoo.com/quote/9795.T/?ref=asiancenturystocks.com) is a local cram school in Kanagawa that provides traditional classroom instruction, focusing primarily on high school entrance exams. [Riso Kyoiku](https://finance.yahoo.com/quote/4714.T/?ref=asiancenturystocks.com) provides individualized education through 1:1 instruction to help high school students gain admission to top universities. [Gakkyusha](https://finance.yahoo.com/quote/9769.T/?ref=asiancenturystocks.com) helps middle school students gain admission to public high schools through traditional classroom settings. [SPRIX](https://finance.yahoo.com/quote/7030.T/?ref=asiancenturystocks.com) owns a famous textbook series, and its schools help students who are lagging behind. [TIEI](https://finance.yahoo.com/quote/4745.T/?ref=asiancenturystocks.com) and [Meiko Network](https://finance.yahoo.com/quote/4668.T/?ref=asiancenturystocks.com) both provide individualized education; the latter does so under a franchise model. The industry is not growing much. Japan's fertility rate is only 1.2, and the number of new births is now shrinking. There's also a question of whether generative AI tools could replicate some of what cram schools offer today. That said, if you check out the earnings per share of, say, Gakkyusha or STEP, you'll find that these businesses have all the characteristics of long-term compounders. And as mentioned above, I think it's likely that greater subsidies for high school tuition could benefit pure-play university entrance exam specialists such as Nagase Brothers, Waseda Academy, and Riso Kyoiku. And indirectly, the Japanese cram school-SaaS company Poper, which I've discussed previously. [Poper (5134 JP)Japanese cram school SaaS service at 1.7x EV/Sales![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-37.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f157228501_2f71c40569-28a7-4529-81f2-a87d27221f04_2ftranscoded-1739677801-2.jpg)](https://www.asiancenturystocks.com/poper-5134-jp/) ### Update: Poper Co (5134 JP) URL: https://www.asiancenturystocks.com/update-poper-co-5134-jp/ Last updated: 2026-01-04T04:02:52.000Z Software developer for Japanese cram schools at 1.0x EV/Sales _This post is for paying subscribers only._ ### New reader? Start here URL: https://www.asiancenturystocks.com/asia-is-the-next-frontier-10-000-stocks-yet-to-be-discovered/ Last updated: 2026-08-26T13:07:36.000Z Asian Century Stocks is a newsletter focusing on Asian value stocks. I started it in 2021, and after 5 years, it's become one of the biggest finance newsletters in the region. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-91.png) A picture of me at Chijmes heritage building in Singapore **Asian Century Stocks** is read by over 20,000 investors worldwide. You'll get a perspective on Asian equities from an on-the-field Westerner with two decades of experience. You'll get regular free articles on topics as varied as [Japanese SaaS companies](https://www.asiancenturystocks.com/babies-out-with-the-saas-water/), an [El Niño in 2026](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/), and [South Korea's corporate governance reforms](https://www.asiancenturystocks.com/korean-reforms/). As well as updates on the \~500-stock watchlist, plus my top 5 links of each week. --- # What subscribers are saying ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-191-1.png) *"The *best commentary* on Asian markets and a must-read for any investor interested in Asian equities."* \- Sunday's Idea Brunch *"*Excellent coverage* and analysis of value stocks throughout Asia"* \- The Anomaly Report *"Unique coverage of APAC equities from an *on-field Westerner*."* \- Byron Street Research *"*Detailed, useful and independent* stocks analysis."* \- The Kaka by Bernard Hickey *"One of the very few publications covering companies and stocks in the APAC region, and at an extremely *high level of quality*."* \- Allocators Asia *"A *great way to understand* Asian markets and stocks"* \- The Transcript newsletter *"Michael is a *deep thinker* who puts together wonderful deep dives."* \- The Consilience Compass *"*Mandatory subscription* for anyone with an interest in Asian equities"* \- Turtles Research ## Sign up for Asian Century Stocks Join 20,000+ investors reading weekly Join Free Email sent! Check your inbox to complete your signup. By entering your email you agree to the [terms & conditions](https://www.asiancenturystocks.com/disclaimer/) --- # Go deeper with a premium membership For $50/month or $350/year (save 42%), you get: - Over 20 deep dives annually on undercovered Asian equities - Monthly portfolio updates - Monthly report with the top Asian insider transactions [See what's included](https://www.asiancenturystocks.com/about/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Disclaimer**: *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Portfolio update December 2025 URL: https://www.asiancenturystocks.com/portfolio-update-december-2025/ Last updated: 2026-06-04T10:44:40.000Z A nice end to the year _This post is for paying subscribers only._ ### Yahoo Finance rankings URL: https://www.asiancenturystocks.com/yahoo-finance-rankings/ Last updated: 2026-01-27T12:55:44.000Z For Japan's retail investors, Yahoo Finance reigns supreme. And if you check the message board for individual Japanese stocks such as Poper (5134 JP), you'll be presented with the following sentiment bar: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-75.png) So what does this mean? Well, the heading says "Bulletin board: Everyone's view". The ranking measures bullish vs bearish sentiment among users of Yahoo Finance Japan's message board for that stock. And right now, 100% of users report that they "want to sell" their shares in Poper. That begs the question: could investors use these Yahoo Finance rankings as short-term contrarian indicators? [Tsubouchi](https://www.ai-gakkai.or.jp/jsai2016/webprogram/2016/pdf/369.pdf?ref=asiancenturystocks.com) (2016) constructed a model using text from the Yahoo Finance Japan message board to predict short-term price movements. The model seemed to have worked well. Meanwhile, [Tsukioka](https://www.sciencedirect.com/science/article/abs/pii/S1059056017308171?ref=asiancenturystocks.com) (2018) found that Yahoo Finance Japan pre-IPO message board sentiment led to higher subsequent returns but longer-term underperformance. In other words, sentiment does seem to serve as a contrarian indicator of future returns. To conduct my own study, I'd need to examine the sentiment bar for each stock and then measure subsequent price movements. Unfortunately, the Wayback Machine doesn't have much historical data. Instead, I took a cross-sectional approach, comparing the EV/Sales valuation multiple of Japanese SaaS stocks with the sentiment on today's Yahoo Finance Japan message board. Surprisingly, Japanese retail investors seem to like cheaper stocks more than expensive ones: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-76.png) So while I haven't conducted a full-scale study yet and I don't have any evidence at hand, I'm convinced that the sentiment bar mentioned above has short-term predictive value. I personally turn cautious when the buy rating reaches 100% and more optimistic when it reaches zero. ### The DRAM capital cycle URL: https://www.asiancenturystocks.com/the-dram-capital-cycle/ Last updated: 2026-02-17T02:21:41.000Z **Disclaimer*: This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author might hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- My friend [MacroValue](https://x.com/pradeeepk?ref=asiancenturystocks.com) recently noted that the spot price for DDR5 memory chips has started declining, after an incredible rise from September 2025 onwards: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-69.png) Source: Bloomberg This decline begs the question: Is the DRAM capital cycle nearing its peak? The "capital cycle" concept comes from Edward Chancellor who put together a compendium of writing from Marathon Asset Management in a book called [Capital Account](https://www.amazon.com/Capital-Account-Manager-Turbulent-1993-2002/dp/1587991802/ref=sr%5F1%5F2?crid=3DVH6ZRJER202&dib=eyJ2IjoiMSJ9.Blz507AJTDgciZvasDOV0FWCurRhqE-7jceWBEr07LPo0QeAb26hsHI%5F%5FKUJ8ZM7rogE6UU560OftrEu5I4S20B%5FK6Dt5OSI9Y2JuILduz1306TheusIB1YakbQNuTSxDmKlaRkin3UJ6lnOl9k1uzb%5FOwma64cOWJEKwwenoEIWaHoK%5FRF6RizxsCuGwY0jlQno8bIHCV3wN0VIzyRvTfJpV-ELSHmdIuMylHANnF0.XmTbTZOatTyyoH%5Fc5C7MCNZ%5F66lZUXgprIo-nDTAXoc&dib%5Ftag=se&keywords=capital+account&qid=1766307903&sprefix=capital+acc%2Caps%2C394&sr=8-2&ref=asiancenturystocks.com). The book argued that commodity industries tend to follow boom-bust cycles, with return on capital compressing over time as more and more capital enters the industry. Eventually, it leads to oversupply, bankruptcies, and reduced supply. DRAM is a type of memory chip used for short-term storage of data. The demand for such chips has risen over the past year, as they're used in the graphics processors powering generative AI tools. The high demand for these services has now led to a shortage of DRAM chips, with prices quintupling in just a few months. However, there are several reasons why the industry will exhibit typical capital cycle dynamics. [As Harris Kupperman has pointed out](https://pracap.com/global-crossing-reborn/?ref=asiancenturystocks.com), the scale of the generative capex spend is simply massive. Looking at his numbers, we're about to see US$400 billion in data center capex against revenues of US$15-20 billion per year. Once funding dries up, capex could well decline. And we're now starting to see demand destruction. [Counterpoint expects 2026 smartphone volumes to drop -2%](https://counterpointresearch.com/en/insights/2026-smartphone-shipment-forecasts-revised-down-as-memory-shortage-drives-bom-costs-up?ref=asiancenturystocks.com) due to current high DRAM prices. Many flagship phones [will reduce their DRAM capacities](https://x.com/TheGalox%5F/status/1999372539655782875?ref=asiancenturystocks.com) to save money. Current DRAM prices may be unsustainable. We should also see a supply response by the middle of 2026\. SK Hynix's M15X fab is scheduled for completion in early 2026\. Samsung Electronics' Pyeongtaek P4 Phase II and P5 fabs are also planned for completion in 2026\. Meanwhile, the big three memory chip makers, Micron, SK Hynix, and Samsung Electronics, now trade at elevated Price/Book valuations: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-70.png) SK Hynix Price/Book. Source: TIKR I will admit that in the short run, there is no sign of an imminent peak in profitability. The inventories of High Bandwidth Memory chips used in AI data centers remain ultra-low. The volume-weighted [DXI Memory Index](https://www.dramexchange.com/?ref=asiancenturystocks.com) has yet to peak. And DRAM contract prices have yet to decline. I think the key factor to watch will be capacity additions from SK Hyni and Samsung Electronics. They're slated for the second quarter of 2025\. Eventually, the DRAM cycle will peak. It's only a question of when. ### India's development trajectory URL: https://www.asiancenturystocks.com/indias-development-trajectory/ Last updated: 2026-06-02T05:14:32.000Z Last week, I read Amitabh Kant's book [Made in India](https://www.amazon.com/MADE-INDIA-Years-Business-Enterprise-ebook/dp/B0BVZN8P12/ref=sr%5F1%5F4?crid=2VOYIGXEVACXN&dib=eyJ2IjoiMSJ9.mmPEJF6yxCgLG25yYefDNOR2yG%5FPrqJHZ9v0T%5FctqowVf8FoLVRXQ1BFukWWiXk8uAF0rRvNapmDMyEI6kDXLlgD8kpAEfIdP4Qam0prIHGP3rAkN8ZXxRRsMEjJiw3gMz1IQkWPJwF-lCRlFsk1%5FCVEORf0Bj-BuFQ5UN-B97SIfnbYbDpH9Cs6SPWvLm38spTi9rStKOJJDTWrZs7wPzeYNpC0jF0pDAtfIFuDobx0hMZJEtj-mlSqI%5Fe40aSIhNLFyHD5uUIkwo3GYxkd0qAM6mlapDSSqZOOqThOu8k.wmmcgrK2wmkLga5Ib-D6MD1ymem4QPthzt1DEC%5FVwHE&dib%5Ftag=se&keywords=made+in+india&qid=1765700601&sprefix=made+in+inda%2Caps%2C386&sr=8-4&ref=asiancenturystocks.com), which examines the growth of private-sector entrepreneurship in India. Let me share the key insights from the book: One is that many of today's conglomerates – Tata, Birla, Godrej, Bajaj, Cipla, etc. – were formed during the British Raj after the Limited Liability Act of 1857\. But trade remained unfair, with export tariffs on finished goods from India to the UK but zero tariffs on raw materials, ensuring that India remained undeveloped. However, the situation didn't necessarily improve after independence in 1947\. The new government adopted Soviet-style governance methods, including requiring licenses for all types of business activities and laying off workers, nationalization of key enterprises, capital controls, high import tariffs, high taxes, an overvalued currency, and halting of foreign direct investment. The result was that much of the economy turned towards the informal sector. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-65.png)](https://www.amazon.com/MADE-INDIA-Years-Business-Enterprise-ebook/dp/B0BVZN8P12/ref=sr%5F1%5F4?crid=2VOYIGXEVACXN&dib=eyJ2IjoiMSJ9.mmPEJF6yxCgLG25yYefDNOR2yG%5FPrqJHZ9v0T%5FctqowVf8FoLVRXQ1BFukWWiXk8uAF0rRvNapmDMyEI6kDXLlgD8kpAEfIdP4Qam0prIHGP3rAkN8ZXxRRsMEjJiw3gMz1IQkWPJwF-lCRlFsk1%5FCVEORf0Bj-BuFQ5UN-B97SIfnbYbDpH9Cs6SPWvLm38spTi9rStKOJJDTWrZs7wPzeYNpC0jF0pDAtfIFuDobx0hMZJEtj-mlSqI%5Fe40aSIhNLFyHD5uUIkwo3GYxkd0qAM6mlapDSSqZOOqThOu8k.wmmcgrK2wmkLga5Ib-D6MD1ymem4QPthzt1DEC%5FVwHE&dib%5Ftag=se&keywords=made+in+india&qid=1765700601&sprefix=made+in+inda%2Caps%2C386&sr=8-4&ref=asiancenturystocks.com) It was only after the Soviet Union fell in 1991 that the Indian government felt compelled to introduce reforms, with fewer import restrictions, lower import tariffs, lower taxes, and a resumption of bank lending to the private sector. India's IT, pharma, auto, chemicals, and private banks sectors flourished. The next step in India's liberalization came with Narendra Modi in 2014\. His government has now introduced a new harmonized GST, making cross-state trade more straightforward. He's privatized businesses. He's introduced biometric identity cards, reducing corruption and making it easier to open bank accounts, bringing hundreds of millions into the formal economy. And the higher tax revenues have been used to build roads and airports. India's manufacturing/GDP ratio remains flat at 15%, perhaps due to still-high import tariffs, land acquisition issues, and infrastructure bottlenecks. But the country is definitely on the right trajectory, as long as Modi continues to push forward with his reforms. I thought it was a good book. If you're interested, you can find it on Amazon [here](https://www.amazon.com/MADE-INDIA-Years-Business-Enterprise-ebook/dp/B0BVZN8P12/ref=sr%5F1%5F4?crid=2VOYIGXEVACXN&dib=eyJ2IjoiMSJ9.mmPEJF6yxCgLG25yYefDNOR2yG%5FPrqJHZ9v0T%5FctqowVf8FoLVRXQ1BFukWWiXk8uAF0rRvNapmDMyEI6kDXLlgD8kpAEfIdP4Qam0prIHGP3rAkN8ZXxRRsMEjJiw3gMz1IQkWPJwF-lCRlFsk1%5FCVEORf0Bj-BuFQ5UN-B97SIfnbYbDpH9Cs6SPWvLm38spTi9rStKOJJDTWrZs7wPzeYNpC0jF0pDAtfIFuDobx0hMZJEtj-mlSqI%5Fe40aSIhNLFyHD5uUIkwo3GYxkd0qAM6mlapDSSqZOOqThOu8k.wmmcgrK2wmkLga5Ib-D6MD1ymem4QPthzt1DEC%5FVwHE&dib%5Ftag=se&keywords=made+in+india&qid=1765700601&sprefix=made+in+inda%2Caps%2C386&sr=8-4&ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Links December 2025 URL: https://www.asiancenturystocks.com/links-december-2025/ Last updated: 2025-12-21T07:17:20.000Z The best Asia equities-related links anywhere online _This post is for paying subscribers only._ ### Has the Labubu bubble popped? URL: https://www.asiancenturystocks.com/has-the-labubu-bubble-popped/ Last updated: 2025-12-14T08:09:12.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I have a short position in Pop Mart at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- ## Wang Ning and the creation of Pop Mart Labubu is a collectible plush toy created by China's [**Pop Mart**](https://finance.yahoo.com/quote/9992.HK/?ref=asiancenturystocks.com) *(9992 HK — US$33 billion)*. It's become a global phenomenon, thanks in large part to the brilliance of young entrepreneur Wang Ning. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-39.png) Wang Ning in front of one of his Mainland China Pop Mart stores The story begins in 2010, when he and his girlfriend took a trip to Hong Kong. He noticed a fashionable lifestyle shop called LOG-ON, selling cute character-based goods. People went to the store to buy cute and trendy items. He felt that while Mainland China had plenty of department stores, it lacked trendy stores that sold items the younger generation was interested in. So when he got back to Beijing, he set up a variety store called "Pop Mart" that sold comic books, mobile phone accessories, and toys. It was a struggle. Managing the inventory of thousands of low-margin items was challenging, and the store struggled with profitability. At one point, his entire staff resigned, leaving him to manage the store on his own. But Wang Ning was determined to succeed. He eventually returned to university, enrolling at Peking University's Guanghua School of Management to learn the basics of building a business. And it was here that he adjusted the business into what it is today. Once he returned to running Pop Mart, he reoriented it to focus entirely on toys, using the now-famous "blind box" concept. These weren't entirely new. In fact, Japanese toy company Bandai launched its "gachapon" capsule vending machine way back in 1977, and these remain popular. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/GettyImages-2249842286.jpg) Source: Getty Images In these vending machines, customers put in a coin, and out popped a random toy. The low price point and the uncertainty created an experience similar to a slot machine. And customers would come back, hunting for rare items or toys in a collection they hope to complete. Pop Mart set out to replicate this vending machine experience. In 2016, he asked his followers on Weibo which artists and characters they would like to see in a collectible format. 50% of the replies mentioned the character "Molly", created by Hong Kong-based artist Kenny Wong. So Wang Ning jumped on a flight to Hong Kong and asked if he could use the character for a series of toys sold as blind boxes: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-40.png) The different variations of Molly dolls, sold under the Zodiac blind box series. Source: Pop Mart's Weibo account The Molly series became a massive success. Buyers paid CNY 59 per box, and they randomly got one out of the twelve toys. And every 144th time, they got the special edition "Acquarius" figurine. Many customers kept spending until they finally completed their entire sets. After the launch of Pop Mart's "Molly", its revenues jumped from US$13 million in 2016 to a whopping US$73 million in 2018\. --- ## The Labubu craze But this was just the beginning. The next phase in Pop Mart's development was the launch of its "Monster" series, created by artist Kasing Lung, who was also born in Hong Kong but grew up in the Netherlands. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-43.png) Kasing Lung and his creation, the "Labubu" character The Monster series were inspired by Nordic folklore. One of the characters was called "Labubu" - a mischievous but kind-hearted forest elf with big ears and nine teeth. These were also sold as blind boxes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-42.png) The Nordic folklore-inspired "Monster series", which includes Labubu and was designed by Kasing Lung. Source: Pop Mart After Labubus' launch in 2019, Pop Mart suddenly became the best-selling toy on Tmall during China's Singles Day, out-selling established companies like Disney and Lego. This was unprecedented in the history of China's toy industry. Pop Mart's revenues slowed after its blockbuster 2020 IPO. It was hurt by China's COVID-19 lockdowns, as foot traffic to its stores ground to a halt. Instead, Wang Ning shifted his focus overseas. Pop Mart announced that it would open 40-50 stores overseas, including in the United States and the United Kingdom. He also made a crucial modification to its Labubu character, transitioning from vinyl to plush. This made the toy feel more "cuddly and cute", appealing to the female demographic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-44.png) The plush version of Kasing Lung's labubu doll --- ## Crescendo **In the rest of the article, I describe how the demand for Pop Mart's products have evolved since mid-2025\. It's only available for premium subscribers, so subscribe to continue reading.* [Upgrade ](asiancenturystocks.com/#/portal) In the first quarter of 2024, Thai singer "Lisa" from K-pop group Blackpink was seen with a Labubu doll attached to her Louis Vuitton purse. ![Lisa Takes Her Labubus (and a Metallic Mini Dress) Out to the Club](https://imgix.bustle.com/uploads/image/2025/7/21/205c1e06/snapinstato_520895826_18308294716265211_8695696532291007533_n.jpeg) K-pop group Blackpink's Lisa This paparazzi photo ignited a frenzy for Labubu toys across Southeast Asia, and later, the rest of the world. In the following year, Pop Mart's revenues almost quadrupled: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/FwsDw-pop-mart-trailing-twelve-month-revenues-.png) In the following year, celebrities like Rihanna and the Kardashians were spotted with Labubu bag charms, making the brand a global phenomenon. By mid-2025, queues to Pop Mart's stores in the UK were so long that it had to halt Labubu sales temporarily. Meanwhile, in Singapore, over 160 fans queued from 5:30 in the morning to get a chance of buying the Labubu "Wacky Mart" blind box drop. The special edition sold out within hours. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-45.png) The queues for Pop Mart's "Wacky Mart" blind box drop In June 2025, [a first-generation human-sized Labubu doll sold for US$150,000 at an auction in China](https://www.bbc.com/news/articles/c780p4n33kyo?ref=asiancenturystocks.com). One of the "Big Into Energy" Labubu toys was sold at 45x the retail price in the secondary market. Media personality Kevin O'Leary — the self-proclaimed "Mr Wonderful" — said in an interview that he wouldn't sell his Labubu for $50 million. That's how much he valued it. > Forget stocks, [@kevinolearytv](https://twitter.com/kevinolearytv?ref%5Fsrc=twsrc%5Etfw&ref=asiancenturystocks.com) hottest investment is… a Labubu. He swears he wouldn’t sell it for $50M. Have you bought into the collectibles craze yet? [pic.twitter.com/yVbLrfimf7](https://t.co/yVbLrfimf7?ref=asiancenturystocks.com) > > — Nicole Lapin (@NicoleLapin) [December 6, 2025](https://twitter.com/NicoleLapin/status/1997129230757540151?ref%5Fsrc=twsrc%5Etfw&ref=asiancenturystocks.com) As the collector frenzy gained momentum, Wang Ning suddenly became the 10th-richest man in China. Pop Mart was a phenomenon. That's when the Chinese government decided to get involved. In the Communist Party mouthpiece "People's Daily", an author criticized blind boxes for being traps to encourage repeat purchases. The stock price reacted negatively. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/zkFJK-pop-mart-9992-hk-.png) --- ## Beanie Babies 2.0? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-51.png) _This post is for paying subscribers only._ ### Welcome to Asian Century Stocks URL: https://www.asiancenturystocks.com/new-reader-click-h/ Last updated: 2026-01-03T03:11:46.000Z There are 10,000 stocks listed in the Asia-Pacific region. But if you read mainstream media outlets such as CNBC and Bloomberg, most of the discussion will revolve around companies such as Alibaba and TSMC. Nothing wrong with that. But I think most readers can benefit from learning more about the broader universe of stocks here in Asia. In my view, the region represents a fantastic opportunity set. All you need is someone to guide you through the noise. You can start by signing up for our free mailing list. You’ll get occasional free posts and interviews discussing Asian equities. *Before signing up, make sure you read through the website’s* [*terms & conditions*](https://www.asiancenturystocks.com/p/legal-and-disclaimer)*.* So why am I writing a newsletter about Asian equities? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/DSCF2988-Edit-1-1.jpg) My name is Michael Fritzell. I’m originally from Sweden but have spent the last 16 years in Asia. Most of that time was spent on the buy-side, helping funds and a family office find ideas in Hong Kong, China, Singapore, Indonesia, etc. I became a CFA charterholder in 2012\. I have a Master’s Degree in Finance from the Stockholm School of Economics. I’m also a long-time member of Joel Greenblatt’s [Value Investors Club](https://valueinvestorsclub.com/ideas?ref=asiancenturystocks.com), a membership site for top investors around the world. **Disclaimer**: *I am NOT a financial advisor. Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website.* ![](https://substackcdn.com/image/fetch/$s_!rBtL!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Feb179d02-45f4-4437-873c-08f354a51eb3_680x600.png) Premium subscribers will also get 20 **deep-dive reports** each year, **industry thematics** to help you understand entire sectors and monthly updates on my personal, Asia-focused **portfolio**. --- So let me explain what content you get as a subscriber: # Deep-dives My deep dives are typically 40-60-slide PowerPoint decks that enable you to get to know the company deeply. That’s why I call them “deep dives.” My information gathering is extensive, going through past annual reports, investor presentations, earnings transcripts, sell-side research, independent research, social media commentary, newspapers and more. You’ll understand all aspects of each business and not just the surface-level information you might find elsewhere. You can check out a few of my previous write-ups on Hello Kitty licensor [Sanrio Corporation](https://www.asiancenturystocks.com/p/2021-5-sanrio-company-ltd), Hong Kong restaurant operator [Café de Coral](https://www.asiancenturystocks.com/p/deep-dive-2022-30-cafe-de-coral-341), and investment fund [Fairfax India](https://www.asiancenturystocks.com/p/fairfax-india-fihu-cn). [![](https://substackcdn.com/image/fetch/$s_!pce_!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2Fa9561353-4bcc-4e85-8127-81a9fc579735_1159x648.png)](https://www.asiancenturystocks.com/2021-5-sanrio-company-ltd/) [![](https://substackcdn.com/image/fetch/$s_!Y7lu!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F5b6c4818-22d1-44c3-bd9e-f8d053e603f1_1424x800.png)](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) [![](https://substackcdn.com/image/fetch/$s_!9x6P!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffd811b56-790d-4d0a-824e-e56bd25ce78e_1430x796.png)](https://www.asiancenturystocks.com/fairfax-india-fihu-cn/) For each of these deep dives, I also record videos in which I introduce the company in a 10-15-minute conversation that gets to the gist of the story. You can also just read the summary that comes with each report. --- # Thematic reports You will also receive thematic reports. These are meant to spark ideas related to a particular sector or product. You’ll get to know the companies benefitting from a trend and understand what distinguishes them from each other. Here is an example of such a report: [![](https://substackcdn.com/image/fetch/$s_!hCrK!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F8efdce29-4ecf-45bb-bd88-24431cf17f5d_1066x1718.png)](https://www.asiancenturystocks.com/hong-kongs-death-has-been-exaggerated/) --- # Portfolio updates Finally, I provide a full disclosure of my Asia-focused portfolio. Each month, I also give you updates on what’s happened with each of these companies. I follow these companies closely and tell you month-to-month if anything has changed. I’ve been incredibly transparent with regard to my portfolio. [![](https://substackcdn.com/image/fetch/$s_!Icy1!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F9922a04d-a627-4c74-80c2-f2fc4819d13d_1120x1262.png)](https://www.asiancenturystocks.com/portfolio2021oct/) *Though be aware that even though I disclose my personal portfolio, that disclosure does not constitute investment advice — speak to a financial advisor to understand whether any investment is suitable for your specific needs.* Finally, I send out monthly emails with the favorite content that I’ve come across during that month. These include stock write-ups, long-form articles, podcasts and charts. [![](https://substackcdn.com/image/fetch/$s_!CnPc!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Fb924e1be-2b4e-4dd4-b538-8e09cf4b415d_894x1720.png)](https://www.asiancenturystocks.com/tag/links/) Through these deep-dives, thematics and link emails, you’ll get a steady stream of new ideas. You’ll get a sense of the opportunity set in this part of the world. So consider a premium subscription to get the most out of the publication: I typically send out 1-2 emails per week. My deep dives are typically published on Sunday mornings so that you can read them with your Sunday morning coffee. I’ve been writing the newsletter since 2021, and have written hundreds of deep-dives and thematics. You can find the full list of them in my [**Table of Contents**](https://www.asiancenturystocks.com/table-of-contents/). Asian Century Stocks is focused entirely on stocks in the Asia-Pacific region. For stocks in the rest of the world, I recommend the following newsletters: - For Latin American stocks, I recommend [Ian Insider Corner](https://ianbezek.substack.com/) - For US stocks, I recommend [Clark Square Capital's Ultimate Value](https://www.clarksquarecapital.com/?ref=asiancenturystocks.com) - For European stocks, I recommend [The Mikro Kap](https://themikrokap.substack.com/) --- # Testimonials Premium subscribers of Asian Century Stocks have been positive: > *"*Great idea generation*, well written."* > > *"Thank you for all the *high-quality, detailed reports*.”* > > *"Love the work you do! Thanks for all the *amazing business deep-dives*."* > > *"Good to see someone covering the *interesting opportunities available in HK*!"* > > *"*Excellent* analysis on less well covered stocks & sectors"* > > *"Thanks for the quick reply and helpful trial! I look forward to reading the articles you *put so much work into*!"* > > *"To be introduced to Asian companies with exciting business models and attractive fundamentals from the perspective of a Western European with 15 years of "local knowledge" is *simply unique in this form*."* Substack chose Asian Century Stocks to become one of its Featured Publications in 2022\. They argued that Asian Century Stocks exemplified best practices, including posting regularly and engaging with readers. ![](https://substackcdn.com/image/fetch/$s_!xw0h!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F899d98d8-43aa-4fc3-913d-050e741b4146_444x452.png) I was also one of the 11 writers who won a [Substack Fellowship](https://on.substack.com/p/substack-grow-fellowship) in 2021, chosen based on the quality of the publication: > *“From a talented, competitive pool, a panel of judges selected 11 writers based on the *clarity and insight* of their publications, their *ability to inspire* new writers, and their appetite for *community engagement*.”* What if you regret your purchase after those 30 days? Just reply to any of my emails, and I’ll refund you pro rata, no questions asked. Can you invest in the stocks I write about in the newsletter? Sure. I am not a financial advisor, so I won’t recommend particular stocks to you. But in terms of trading access, at least 20x of the stocks I cover each year can be bought and sold on regular brokerage accounts such as those provided by [Interactive Brokers](https://www.interactivebrokers.com/?ref=asiancenturystocks.com) － in other words, stocks in Japan, Hong Kong, Singapore, Taiwan, Australia, and New Zealand. Soon, Interactive Brokers will also offer access to stocks in Malaysia and South Korea. As long as you’re on Interactive Brokers, you’ll get plenty of value from the service. ![](https://substackcdn.com/image/fetch/$s_!pkpB!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F47cfdfea-4e6d-41cc-909d-e88ba7b07275_1034x980.png) --- # In summary: Investors are inundanted with information from CNBC, Bloomberg and other financial news channels. But Asia has more to offer, and I’m here to highlight some of the companies that are listed within the Asia-Pacific. I promise you that with a premium subscription, you’ll become much smarter about the local markets. I’ll also help connect you to other investors in the region. Once you’ve signed up, you’ll also unlock the entire library and future posts from Asian Century Stocks. ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors ➔ Join Free Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. --- *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Insider activity November 2025 URL: https://www.asiancenturystocks.com/insiders-november-2025/ Last updated: 2026-04-14T03:27:06.000Z Insider selling has picked up in Japan _This post is for paying subscribers only._ ### freee (4478 JP) URL: https://www.asiancenturystocks.com/freee-4478-jp/ Last updated: 2026-03-16T13:20:16.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in freee at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**freee**](https://finance.yahoo.com/quote/4478.T/?ref=asiancenturystocks.com) *(4478 JP — US$1.1 billion)* is a Japanese developer of cloud accounting software. It was founded by a former Google executive called Daisuke (“Dice”) Sasaki, who had also run a start-up. Sasaki was shocked at how inefficient accounting processes were at his previous firm and other small- and medium-sized enterprises. So he decided to address the issue by writing software to automate mindless accounting tasks. The result was "freee" – an enterprise resource planning system for Japanese SMEs: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/12/image-4.png) It's an automated platform. Transaction data from bank accounts, credit cards, expense claims and payment services feed into the platform. Each transaction is then automatically categorized. Invoices can be created, sent and received on the platform. And outputs accounting data, including profit & loss statements, cash flow statements and balance sheet. So the entire process is seamless. Over time, Sasaki and his team has added additional features to the platform, including through bolt-on acquisitions. There are now additional modules such as HR module, project management, workload tracking, tax filing, e-signatures, health check-up tracking, SaaS account management and more. Almost anything that you might need to run a small business. There are significant tailwinds for the industry. Many of Japan's smaller businesses still use pen & paper or Excel to manage their accounting. Others use on-premise software that's not accessible online and doesn't connect to banks to download transaction feeds. The cloud accounting penetration rate is only 25% compared to 70% in Australia and 80% in the United States. freee is also benefiting from several new laws that are accelerating the adoption of cloud accounting software. In 2023, for example, Japan introduced the Qualified Invoice System that requires businesses to send invoices with specific registration numbers that then need to be verified against a national database. freee's software can perform this task automatically. The revised Electronic Book Preservation Act also forces companies to store invoices digitally — another feature that's embedded into freee's accounting platform. I think the platform is incredibly sticky. It's so simple to use that even non-accountants are able to do basic accounting and file tax returns. Transactions from thousands of Japanese banks feed into the platform. In addition, freee has an app store with 203 additional modules that add to the feature set. Migrating the data to another platform is impossible and would lead to a loss of comparability of accounting data across years. _This post is for paying subscribers only._ ### Portfolio update November 2025 URL: https://www.asiancenturystocks.com/portfolio-update-november-2025/ Last updated: 2026-06-04T10:46:11.000Z A down month _This post is for paying subscribers only._ ### Delfi (DELFI SP) — 2025 update URL: https://www.asiancenturystocks.com/delfi-delfi-sp-2025-update/ Last updated: 2025-11-27T07:55:58.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Delfi at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **A quick background** I've written about Indonesian chocolate producer [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/)*(DELFI SP – US$384 million)*many times. In fact, Delfi was one of the first companies I covered back in 2021: [Deep-dive 2021-7: Delfi LtdDelfi Ltd (DELFI SP) is a Singapore-listed chocolate producer with a major presence in Indonesia as well as other Southeast Asian countries such as the Philippines and Malaysia.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-27.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2fc728bc99-789b-4ee3-8f7f-51475f9094b1_1170x654.jpg)](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/) What drew me to Delfi is that it dominates its home market of Indonesia, where chocolate consumption is still low and has room to grow. The company owns several brand names, including SilverQueen, Ceres, Delfi, Goya and Van Houten. The first three are almost seen as national brands within Indonesia, having been around for well over 50 years. Delfi's best-selling chocolate bar is "SilverQueen". The most popular version is made with milk chocolate and cashew nuts. But there are several more recent variants, including fruits & nuts, matcha tea, dark chocolate and white chocolate. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/silverqueen-tangkapa-layar-bliblicom_169--1-.png) Delfi's second-most popular product is called "Ceres" — a type of chocolate sprinkles used on bread. The practice of eating bread with chocolate sprinkles was borrowed from Holland since the days of the Dutch East India Company. And in Indonesia, Ceres is the most well-known of any chocolate sprinkles brand: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-111.png) Source: Getty Images Since the 1980s, Delfi has also sold "Delfi" branded chocolate bars, featuring a skier going down a slope. The chocolate has a stronger, more European taste. These cost roughly the same as SilverQueen chocolate bars, at least on a price-per-gram basis: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-115-1.png) Delfi also has a chocolate button product called "Cha Cha", which looks suspiciously similar to Mars Inc.'s M&Ms: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-112.png) In Indonesia and Singapore, Delfi sells premium "Van Houten"-branded chocolate. Delfi acquired the Southeast Asian rights to the Van Houten brand in 2018\. This chocolate sits at a higher price point than SilverQueen, though still much cheaper than European premium brands like Lindt: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-116-1.png) In the Philippines, Delfi sells chocolate under the "Goya" and "Knick Knack" brand names. These brands were acquired from Nestlé back in 2006\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-123.png) In addition, Delfi also acts as a Malaysian and Indonesian distributor for brands such as Kellogg's, Toblerone, Pringles, Guylian, etc. This is what it refers to as its "agency" business, which is low-margin but cash flow positive. Delfi's agency business accounts for 44% of revenues but — given the low margins — represents only a fraction of operating profits. Back in 2021, I purchased all the Delfi chocolate products I could get my hands on, and compared the taste to competitor Mayora Indah's products: [Delfi tasting sessionIt’s 9.00 am here in Singapore, and in front of me is part of the product line-up of Delfi (ticker: DELFI SP).![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-28.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f23bf0f9e-7f78-42e1-b51e-55a8b1c12782_1280x855.jpg)](https://www.asiancenturystocks.com/delfi-tasting-session/) Delfi used to have a 45% market share in Indonesia – an impressive number. However, according to Euromonitor data from 2024, its [market share appears to have declined to 38%](https://www.dbs.com.sg/private-banking/aics/stock-coverage/templatedata/article/equity/data/en/DBSV/012014/DELFI%5FSP.xml?ref=asiancenturystocks.com). Competitor Mayora Indah now holds a 35% share through the chewy chocolate toffee product Beng Beng and the chocolate paste product Choki Choki. Both of these products are low-priced and popular with children. I think Delfi's competitive advantage is having access to over 400,000 points of sale across Indonesia. Nationwide distribution is rare and a valuable asset. Indonesia has over 17,000 islands, the infrastructure is poor, and the temperatures are hot and humid. Cold chain logistics are needed to prevent chocolate from melting. The per-capita chocolate consumption in Indonesia remains very low. Only about 20-25% of that in Singapore and Japan. And Indonesia's population is growing more than 1% per year, so there are underlying tailwinds that should boost growth over the long run. Delfi itself has guided for high single-digit growth: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-109.png) Delfi and its predecessor, Petra Foods, have been with the Chuang family since the 1940s. Today, three brothers are running the day-to-day operations, including CEO John Chuang, who's based in Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-140.png) Delfi's CEO John Chuang Investor communication hasn't always been perfect, but Delfi has been good to minority shareholders. It's paid out 60% of earnings as dividends, on top of special dividends following the sale of its cocoa processing unit to Barry Callebaut in 2013\. When I first dug into the story, growth had slowed down significantly from the heydays of the early 2010s. And the share price had declined by over 80%. Why? Well: - One reason was the rapid weakening of the Indonesian Rupiah against the US Dollar. Delfi's costs were mostly in US Dollars, and it was unable to raise prices commensurately. Meanwhile, Delfi traded in Singapore Dollars and used the US Dollar as a reporting currency. So growth looked weak on a foreign currency basis. - Another reason was that Delfi reduced its stock-keeping units from about 500 to less than 300\. Management felt they had to go this route due to a shift towards modern trade. Minimarts and supermarkets tend to focus on fewer products but in greater quantities. And I think Delfi's historical distribution advantage might have diminished somewhat over the years. But at the end of the day, Delfi's brands are well-known, and its market position is strong. And I still think that the long-term case for Indonesian chocolate consumption remains promising. It's only a question of whether Delfi will be able to compete with Mayora and the multinational chocolate companies that are now eyeing the Indonesian market as a source of future growth. --- ## An update to my original post ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-139.png) Delfi's share price showed up after the depths of the pandemic between 2020 and 2022\. But it's now come back again, more recently trading at SG$0.86 per share: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/6ljz4-delfi-delfi-sp-.png) _This post is for paying subscribers only._ ### FnGuide (064850 KS) URL: https://www.asiancenturystocks.com/fnguide-064850-ks/ Last updated: 2026-05-24T03:18:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in FnGuide at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- When I interviewed [Raghav Kapoor](https://www.asiancenturystocks.com/interview-with-raghav-kapoor-at-smartkarma/) the other day, he mentioned a small Korean financial information provider called [**FnGuide**](https://finance.yahoo.com/quote/064850.KQ/?ref=asiancenturystocks.com) *(064850 KS — US$64 million)*. I wanted to dig deeper. FnGuide is a tiny company in terms of market cap, but significant in terms of its impact on Korea's financial services industry. You see FnGuide's name mentioned almost every day in the business media and in sell-side research as a source of financial and economic data. FnGuide owns the Excel-based financial data tools DataGuide and Quantiwise. It also has several equity research aggregation platforms such as FnGuide.com, WiseReport and Retamin. Now, it's true that international alternatives such as Bloomberg and FactSet also provide corporate and economic data to investors. However, these platforms are expensive and not tailored to Korean-language disclosures and K-IFRS. In practice, most institutional investors seem to use Bloomberg for international stock data and FnGuide for local data. In addition to financial data, FnGuide also has a fast-growing index business. That industry is dominated by Korea Exchange (KRX), which controls the benchmark index KOSPI. FnGuide's index business is smaller, but it dominates the market for thematic ETFs, which have become popular in recent years. In fact, the total value of ETFs tracking FnGuide's indices has doubled in less than a year. And Korea's ETF penetration remains far below that of the United States, suggesting continued upside in the coming years. The stock has gone nowhere in the past four years. If you look at the share price, you'll also notice a recent spike: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/ugYu9-fnguide-064850-ks-.png) This spike is due to a fight for control over the company. FnGuide was initially spun out of Samsung Securities in 2000 by Kim Gun-ho. But after a few years, FnGuide encountered financial difficulties and was bailed out by industrial conglomerate Hwacheon Machine Tool. In 2023, Hwacheon ousted Kim, seemingly frustrated with FnGuide's slow growth and low return on equity. Investors speculated that both sides would eventually accumulate shares to gain control of the company. In the end, Hwacheon emerged as the winner, now controlling 47% of FnGuide. While having a machine tool company as a controlling shareholder of a financial information provider might seem odd, I think Hwacheon has minority interests at heart. For example, look at FnGuide's early 2024 Value-Up plan. FnGuide was one of the first companies in Korea to publish such a plan. The new plan targets an 18% return on equity. Hwacheon also wants FnGuide to get out of financial speculation and instead divest of non-core assets. Since then, we've seen significant progress in terms of FnGuide's governance. - The company has now begun communicating with foreign investors. The foreign ownership rate has gone from almost zero to 16%. - FnGuide has instituted its first dividend, and the payout ratio is likely to increase further. - 6% of shares outstanding have been cancelled. - FnGuide is planning to sell its valuable headquarters in Magok Industrial District in Seoul, worth 30% of the market cap. - And finally, FnGuide is also planning to separate the CEO and Chairman roles – another step towards better corporate governance. In March 2025, Hwacheon hired Lee Gi-tae as its new CEO. He's a seasoned Samsung Securities professional who previously headed up that company's research, pension, and wholesale divisions. Since Lee comes from a sales background, FnGuide will likely become more aggressive in creating and selling new products, including indices and data products. One current initiative is to leverage FnGuide's AI research team to develop new products. So I think the organization is finally moving in the right direction. FnGuide's earnings per share has risen significantly, reaching KRW 226 in the third quarter of 2025, while its share price now stands at KRW 8,650\. Part of that improvement is partly due to the popularity of FnGuide's shipbuilding and defense indices. But I also think there's a longer-term growth story here. On my relatively conservative numbers, I see the stock trading at a run rate of 10x EV/EBIT, or about 13x P/E. Global peers tend to trade closer to 20x. The key near-term risk is that ETFs using FnGuide's benchmark indices experience outflows, leading to a drop in aggregate AUM. Korean defense and shipbuilding stocks look toppy to me. On the other hand, ETFs tracking these sectors account for only a small portion of total AUM. And FnGuide's share price hasn't really responded to the company's success in its index division, perhaps due to persistent selling by former CEO Kim Gun-ho. Another risk is that the Kwon family, which controls Hwacheon, now completely dominates the board. There's a risk that decisions will be taken at the expense of minorities. On the other hand, the more research I've done, the more positive I've become about Hwacheon's longer-term intentions. FnGuide has finally found religion when it comes to capital allocation, and that bodes well for the future. **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the button below:** [FnGuideFnGuide.pdf3 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/FnGuide-1.pdf "Download") Further material: - FnGuide's latest [3Q2025 investor presentation](https://corp.fnguide.com/FileServer/FileRoot/Admin/2025/266/FnGuide%203Q25%20IR%20Presentation.pdf?ref=asiancenturystocks.com) (English language) - FnGuide's [2024 Value-Up plan](https://corp.fnguide.com/FileServer/FileRoot/Admin/2024/232/2024%EB%85%84%20%EC%97%90%ED%94%84%EC%95%A4%EA%B0%80%EC%9D%B4%EB%93%9C%20%EA%B8%B0%EC%97%85%EA%B0%80%EC%B9%98%20%EC%A0%9C%EA%B3%A0%20%EA%B3%84%ED%9A%8D.pdf?ref=asiancenturystocks.com) (Korean language) - jt1882's [FnGuide write-up](https://valueinvestorsclub.com/idea/FnGuide/9049287553?ref=asiancenturystocks.com) on Value Investors Club - Douglas Kim's [FnGuide report](https://www.smartkarma.com/insights/korea-small-cap-gem-36-fnguide-increasing-moat-for-its-index-business?ref=asiancenturystocks.com) on Smartkarma ($) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Links November 2025 URL: https://www.asiancenturystocks.com/links-november-2025/ Last updated: 2025-11-30T05:27:09.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Interview with Yilun Chen URL: https://www.asiancenturystocks.com/interview-with-yilun-chen/ Last updated: 2025-12-10T09:15:54.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- Today, I’m talking to Yilun Chen, who runs a hedge fund called Tiger Hill out of London. I know Yilun from the Value Investors Club, as well as Twitter, where he writes under the handle [@1lemonaday](https://x.com/1lemonaday?ref=asiancenturystocks.com). He has a global mandate but has exposure to Asian equities as well. ## Hi Yilun! Could you tell us about your background, how you became involved in investing and what you’re doing now at Tiger Hill Advisors? I started in primary school, when my parents were giving me monetary rewards for getting '1s', which are the top grades in Germany. There wasn't that much to do with money for a 10-year-old, so once I had few hundred Deutsche Marks my parents allowed me to swap some of my money for stocks in their portfolio. If you may remember, that was the dotcom bubble, so I picked Nokia and CommerceOne out of their portfolio. It was great for the first year or so, but ultimately CommerceOne went bankrupt and Nokia went the way of the Dodo. Many lessons were learned, but ever since, I have been intrigued by investing. When I was getting into investment banking, I knew I wanted to join the buyside, where I spent a few years doing special situations investing, and then started Tiger Hill with a partner, with a focus on well-managed companies in cyclical industries or geographies that have fallen out of favor with the investment community. Basically, I am looking for good companies when and where there’s not much competition. --- ## You wrote up Hong Kong’s Modern Dental (3600 HK) recently. I’m curious about your take on the stock today, given its success in Europe, its new CEO and the persistent fear that 3D printers will disintermediate the company? I think [**Modern Dental**](https://finance.yahoo.com/quote/3600.HK/?ref=asiancenturystocks.com)'s *(1600 HK – US$624 million)* success originally stemmed from its manufacturing prowess, but these days, it's a scaled and well-managed player who does a lot more than just manufacturing dental prosthetics. A mutual friend of ours, [Healthy Stock Picks](https://www.healthystockpicks.com/?ref=asiancenturystocks.com), has done great work on the company, so I will focus on 3D printing. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/XiIfo-modern-dental-3600-hk-.png) Predictions are hard but I am going to predict that "3D printing" is probably going to benefit Modern Dental eventually before it might potentially hurt it in the very far future. The biggest risk for Modern Dental is that "every dentist has a 3D printer at his desk" and out comes a crown. In that scenario, there would be no reason for Modern Dental's core business to exist, and Modern Dental management is acutely aware of this risk. However, I think the more likely path is that there may eventually be large and expensive 3D printing machines that complement the dental technicians that Modern Dental employs, and it would be uneconomical for each dentist to have one of these machines in their practices due to the materials used. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-97.png) Milled and virgin dental zirconia blocks Dental crowns are not made of plastic, which are commonly used in 3D printing these days, but made of ceramics, which are much more difficult to process. The crowns and bridges that Modern Dental produces are made of blocks of powders mixed with binding agents, which they first mill (see figure 1) and then sinter at 1,000+°C, to give the crowns the hardness and looks of natural teeth. Conversely, thermoplastics commonly used in 3D printing have melting points in the low hundreds, even specialty plastics like PEEK only have melting points below 400°C. I am not saying 3D printing of crowns cannot be done, but desktop 3D printing based on today's technologies is uneconomical compared to existing manufacturing processes. Modern Dental's delivery times currently are \~7 days from taking a digital oral scan to delivery of the finished crown, also because Modern Dental has production sites all around the world. How much time and money can you truly save by having your own crown printing machine? What is probably more exciting than 3D printing may be machines that can increase automation with regards to polishing and finishing of the prosthetics, but I digress. I think for the next decade, Modern Dental will be safe. --- ## In China, we’ve seen sector after sector end up with overcapacity, eventually hitting the export markets. These sectors include solar, chemicals and now electric vehicles and batteries. What do you think is the underlying reason behind this pattern? And which export markets do you think will be vulnerable in the future? I think the underlying reason is called capitalism, where the lack of a social safety net means that the average Chinese need to get off their bums and work, which naturally creates competition for clients, abundance of products, and both innovative and affordable products. A key tenet of free market capitalism is [fierce competition between companies](https://youtu.be/0H8AshEYrKw?t=53&ref=asiancenturystocks.com) creating consumer choice and consumer surplus. My parents told me stories of growing up during the truly communist times: even daily staples were in such short supply that you did not just need money, you also needed “粮票,” food stamps, in order to be able to buy rice, flour, or eggs. Today, you and I can stroll into the supermarket each day and decide whether we fancy bread, pasta, or rice, and our budgets will probably not be deciding what we're eating tonight. Around COVID-19, in London, we experienced rationing of toilet paper, flour, and eggs, which was thankfully only temporary (so far). Overcapacity is a feature not a bug of capitalism. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-96.png) Overcapacity of humanoid robots at the 2025 Spring Gala Unlike what many standard private equity guys are preaching about pricing power, I think they actually got the idea of "pricing power" wrong. It is natural for any given product that has required a lot of R&D to get cheaper over time: the R&D has been spent, and the marginal cost is much lower compared to the total average cost including the upfront R&D expenditure. I think this is called Wright's Law and this does not just apply to computer chip manufacturing but chemicals, autos, and most knowledge economy products. Basically, everything the Chinese are catching up on. Just think about cars from our childhood. I think the first car my parents bought was a Toyota where you still hand to hand crank the windows. I guess car makers wanted to increase prices over time so they added more features, removed lower priced models from the market. These are price increases that are OK. But I think the myth of having products where you can brainlessly increase prices is just a myth that has been propagated by certain business schools because it sounds smart, but it's neither realistic nor good for consumers nor even the companies themselves in the long-run. What other industries are going to be vulnerable? I think a relatively obvious one is airplanes. Presently, this is a comfortable duopoly between Airbus and Boeing with very long backlogs and a complex and highly regulated supply chain. This is a typical setup for high profits and slow pace of innovation that gives the Chinese a lot of room to catch-up and to cut costs. It doesn't mean that the Chinese will be able to make every single last part of the plane, say turbines or turbine blades, but I think congressman Ro Khanna made a great point when he [bemoaned that a small metal pin from TransDigm cost $4,000](https://www.bloomberg.com/news/articles/2019-05-15/pentagon-rips-transdigm-for-gouging-with-4-361-half-inch-pin?embedded-checkout=true&ref=asiancenturystocks.com). The [U.S. Government ended up asking for a refund](https://oversightdemocrats.house.gov/news/press-releases/chairwoman-maloney-and-senator-grassley-call-on-transdigm-to-repay-millions-it?ref=asiancenturystocks.com) and I think they got most of the money back. It's not communism, it’s common sense. Do I think that Airbus and Boeing are shorts? Not necessarily, these are national champions, and their supply chains provide a lot of employment, so I’m guessing the Chinese C919 and successors will struggle to make inroads in those markets. However, as we’ve seen with the German auto OEMs that used to derive almost 50% of their profits from China, I would want to be a lot more cautious paying a heroic valuation multiple for these guys. --- ## What do you think of the big export powerhouses like BYD and Xiaomi then, given this backdrop? That’s a great question to an age-old problem: Chinese manufacturers historically have been churning out unaesthetic low-quality me-too products, when are they ever going to build a decent brand? There’s no shortage of manpower or capacity to produce whatever one can imagine, however, how does one create a brand, a widely recognized and beloved brand? It’s not a trivial question, and when we started investing in [**Xiaomi**](https://finance.yahoo.com/quote/1810.HK/?ref=asiancenturystocks.com) *(1810 HK – US$140 billion)* in 2022, my hope was that Xiaomi could become the first Chinese consumer products brand with global cachet, like Apple or Sony. There are other Chinese players like Midea, Haier, or BYD but no one has embraced the Chinese manufacturing supply chain as shamelessly as well as successfully as Xiaomi, which ultimately led to their fairly successful launch of their car. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/YN3g7-xiaomi-1810-hk-.png) In fact, in my conversations with Xiaomi competitors, many “real” manufacturers looked down on Xiaomi: "they are not a real manufacturer, they just slap the Xiaomi label on products made by others and sell it as their own." There's an element of truth to this, but the critics were missing three important strengths of Xiaomi: design, marketing, and software. Due to the vastness of Chinese manufacturing ecosystem, Xiaomi didn’t have to good at manufacturing per se. Xiaomi is good albeit maybe not yet excellent at product design and quality control, but increasingly, this is also not sufficient to differentiate itself anymore: as many Chinese manufacturers are catching up to the Western brands and are increasingly pushing the limits of technology and innovation, being manufacturing pure play is tough. On the other hand, Xiaomi is great at marketing: they’ve successfully copied Steve Jobs in this regard, and are able to put through press and customers alike through 2-3 hours of new product introductions every year whilst many brands’ 10 second video clips on YouTube still get clicked away. On top of Xiaomi’s marketing prowess, of course, comes Xiaomi’s innate strength in software. What's also important to me is that Xiaomi’s CEO, Mr. Lei Jun, at heart, is a nerd and really understands software. People forget that he studied computer science and was CEO of [**Kingsoft**](https://sg.finance.yahoo.com/quote/3888.HK/?ref=asiancenturystocks.com) *(3888 HK – US$5.7 billion)* at some point. Increasingly, as home appliances are getting smarter, with Xiaomi’s strength in software, I think Xiaomi will have a growing advantage over many competitors with regards to user interface integration and remote control. For a Chinese company in particular, Xiaomi is pretty good at UI and UX, and in a world where the gadgets are increasingly getting "smarter" and connected, I think Xiaomi will be in pole position to also come up with products or drive adoption of products that we can't even think of today. I cannot tell you what they will do and whether they will succeed, but I can tell you that they will have setbacks and failed product launches. I don’t know if Xiaomi will be successful with its chip ambitions or AI initiatives, but I have faith in Lei Jun doing the right thing and continuing to drive shareholder value. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-91.png) The Xiaomi SU7 electric vehicle Personally, I like Xiaomi because their products offer great value for money as they are top or second quartile in terms of performance or quality at second or third quartile prices. When one buys from unknown Chinese manufacturers, one always worries whether it will work, and if it does work, how long it'll last. Xiaomi's products are often good enough for a few years, and given rapid technological advances, you probably want to get a newer and better replacement in a few years anyways. Furthermore, I believe Xiaomi is massively underpenetrated in developed markets. Internally, a few years ago, their view was in the West, they only want Xiaomi phones and not the other products. In their store in Westfield in London, they didn't even bother putting up the full breadth of their products. This is sad, but I hope and think they will fix this over time, because it’s a reasonable outlet for Chinese manufacturing capacity. --- ## I know you're somewhat of an expert on the global chemicals sector. Can you educate us on how you approach the industry as a whole? What types of companies are you looking for, the risks of investing in the sector, etc.? I think the most important thing about in investing in chemicals is to focus on making money as opposed to chasing some faddish megatrends or “specialty” labels, and to not forget about cyclicality and valuation. There are very interesting niches such as flavors and fragrances, chemicals for the semi-conductor industry, or high-performance plastics, however, in chemicals as in any other industry, I mostly focus on free cash flow and whether the companies run for their shareholders. Take some of the most successful chemical companies for public market investors, the industrial gas companies. I mean, they take ambient air that you and I are breathing right now, run it through a compressor, separate it into nitrogen, oxygen, and noble gases mostly. It’s hardly chemistry, it’s physics! Some high purity medical and specialty applications aside, there is nothing special about these products or production technologies at all. However, once constructed, these guys act like utility businesses, and thus could get a lot of cheap leverage after the GFC to do M&A. Are these companies going be as great investments at 25x+ PE as they were in the high-teens PE a decade ago? I don’t know. But they sure beat a hell of a lot of businesses that went to chase the specialty chemicals segments. It pains me to say, but it is very difficult to invest in Western chemical companies, even at today’s modest valuations, because (a) few are focused on making money for shareholders, (b) many assets are structurally challenged, and (c) regaining competitiveness will require some political and societal changes in attitudes towards the so-called “decarbonization.” ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-92.png) Source: Berkely Earth I believe in climate change, and I think reducing emissions is a good idea, but EU efforts in particular have done little to cut emissions but have done a lot to take Europeans back towards the Middle Ages. Any (human) activity creates emissions, and the way the Europeans are implementing various carbon taxes will ultimately just lead to its deindustrialization, plain and simple. High energy prices, partially due to carbon prices, discourages manufacturing. If all widget becomes made-in-China, then we also do not need to produce the plastics, the magnets, and the metals to make these widgets in Europe. European efforts to curb the production of fossil fuels raises the cost of raw materials and intermediate products. Why should we be surprised that the chemical producers are becoming increasingly uncompetitive in Europe? Feedstock and energy prices aside, I think we also have to acknowledge by now that on top of a vanishing supply chain, European chemical plants are old and small. As with computer chip fabs, new plants may be more expensive but are probably a lot more productive than older plants. The newest plants are now in the U.S. thanks to the shale oil boom, in the Middle East due to an abundance of oil and a strong desire to do something with their valuable resources other than just blindly exporting it, and in China where most of the world’s widgets are being manufactured. European chemical companies still dominate many niches, but how long for? And if your customers, neighbors, and suppliers are shrinking, it will be challenging for European chemical companies to maintain current profitability levels. Is buying such businesses at 10x historical through-the-cycle average earnings good value or is one buying a value trap? Germany has spent $200bn on green subsidies according to the [New York Times](https://www.nytimes.com/2017/10/07/business/energy-environment/german-renewable-energy.html?ref=asiancenturystocks.com), what does it have to show for? No solar industry to speak of, and one (still) leading wind turbine manufacturer. That’s it. Meanwhile, the Chinese have gone from being technological backwater to the world’s leading manufacturer and installer of solar and wind capacity, now [frequently enjoying negative power prices](https://x.com/pretentiouswhat/status/1927340854659760286?ref=asiancenturystocks.com) in the middle of the day. It’s wonderful for the world, wonderful for people who want to see the world to decarbonize, but very scary for those who may own stranded assets. --- ## Last year, you launched a strategy solely focused on China. What was your rationale? Our investment strategy is to look for great companies at reasonable prices, and often we find the best investment opportunities when an entire sector or country has fallen out of favor with the investment community. In 2020, this strategy led us to allocate 60% of our generalist portfolio into oil and gas and ancillary sectors. Back then, we were a bit smaller and a bit too green to raise a dedicated fund. But by 2024, I was so convinced of the investment opportunity in China specifically that I decided to raise funds just for our China investments. Whatever we like tends to be the “non-flavor-of-the-month,” but that’s how we find the most exciting opportunities with the least competition. Early last year, Xiaomi was trading below IPO price from 9 years ago, although not precisely low multiple PE at 24x or 18x when adjusted for the net cash. But there are many companies like Modern Dental that were trading well below 10x cash earnings and paying a high single-digit or low double-digit dividend, with long growth runways. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-95-1.png) The Economist, 2023/05/13 I’m not going to lie, fundraising has been tough. Many don’t even want to have a conversation. In 2020, the reason was ESG, no one wanted to touch fossil fuels, in 2023, people were worried that China’s People’s Liberation Army was going to land in Taiwan any day and TSMC was trading at 12x earnings. I don’t own TSMC but I agree with DaBao, who I believe you also interviewed in the past, that TSMC is one of the best businesses in the world, and sometimes it is available at a pretty reasonable price. Whether oil and gas 2020 or China 2024: when we got excited, all of the sector specialists and country specialists were down over a 5- or 10-year horizon. And this puny generalist shop knows better than them? We don’t know better, we just get in at much lower valuations and hope that the management teams just perform. For the past 3 years, we have been very bullish on China and especially Chinese equities, and we will continue to be bullish maybe for another 3-4 years. And then we’ll find something else to do. --- ## You’ve been skeptical about Chinese fintech companies in the past. Many of the larger lending platforms appear to have direct balance sheet exposure, including financial guarantees. Is the sector investable at all, in your view? And how do you think regulation is going to develop from here? I suppose we are talking about the Chinese online consumer lending platforms, which have in some ways evolved from the wild peer-to-peer (“P2P”) days into their current shape. Yes, I do think most of them were very challenging propositions back then, when they were pretty much shadow banks and regulators had good reasons to go after them, and yes, I do think they are investible now. They are not easy to understand, but today, I believe they are very well regulated, and thanks to some current regulatory concerns, also exceptionally cheap with strong capital return programs in place. I’ll give an overview of the history of these businesses and how we got to where we are today. The industry got started around 2007, when the first online lending platforms emerged as P2P lenders. If you think about it, they are nothing but banks: they take money, i.e. deposits, from some people, lend it out to others, i.e. loans. Bear in mind that the banking sector in China is exceptionally sleepy and risk averse, because practically all of them are SOEs. There was and still is real demand for innovative financial products, including unsecured consumer lending, which was a void that the P2P lenders filled. Unfortunately, this sector also had the usual issues of unregulated unsecured lending: sky-high default rates due to inappropriate lending to vulnerable borrowers, objectionable collection practices, and regular busts of borrowers or platforms resulting in quasi-depositors frequently losing money. And bear in mind, within the Chinese fintech world, we don’t just get the pure P2P lenders of today, but also behemoths such as Ant Financial or WeChatPay. It was the wild west. Over time, various government bodies come out with various rules and interpretation of the rules, such as interest rate caps, information sharing requirements, and guidance on collection practices, which ultimately resulted in today’s industry structure. Today, the former P2P lenders have turned themselves into something that practically resembles the U.S. credit card lenders like Synchrony Financial or CapitalOne. Strictly speaking, the Chinese online lending platforms attract and prequalify borrowers, and then pass on the client files to regulated financial institutions, which usually are smaller financial institutions such as rural banks. Chinese rural banks are normally deposit rich but asset poor, and given today’s low rates environment in particular, these rural banks are quite keen on earn a decent spread. Due to the banks’ regulated status, this also means that the effective funders for such loans, the banks’ depositors, enjoy deposit insurance. The institutional funding partners for the Chinese online lending platforms, be it rural banks or trust companies, also get guarantees from third party guarantee companies and the platforms themselves. Below is a simplified illustration of the various parties involved and how the information and the money flows. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-98.png) I think today, this sector is investible, despite the uncertainty the recent pronouncements by China’s supreme court, the People’s Supreme Court, have brought in April 2025\. Today’s industry structure helps the rural banks solve their asset issues, because these loans yield 4-7% for them net of all expenses and credit losses, which is very good in today’s near-ZIRP environment in China; funders have deposit insurance protection, so they don’t face random losses of principal; and borrowers can get unsecured short-term consumer loans at competitive interest rates even by international standards. In fact, given the Chinese rules stipulate that the IRR of loan-related costs must not exceed 36%, I think the Chinese regulation here, for once, is almost better than in the U.S. or U.K. where lenders charge late payment fees and what not. In April 2025, the People’s Supreme Court came out with a bunch of guidelines, including a reminder of the 24% interest rate cap, which has led to a decently sized selloff. I personally believe that ultimately, they do want to increase transparency for consumers, to reduce complaints, and to reduce cost for borrowers, and why not? Chinese base rates are down 300-400bps depending on what you are looking at, and obviously the Chinese government is trying to stimulate domestic demand after a pretty epic housing bust. However, given the links to the regular financial economy, as a regulator, I’d be very careful to not intentionally cripple the online consumer lending sector, because this will also affect regulated deposit taking institutions and guarantee companies as well as the marginal borrower. So far, we have seen very little evidence that the government will come after this sector as hard as they have done to the education sector in 2022/2023, but this will is a risk and always will be for investors in this sector. --- ## How’s the balance sheet and the current valuation of Qfin Holdings, in your view? [**Qfin Holdings**](https://sg.finance.yahoo.com/quote/QFIN/?ref=asiancenturystocks.com) *(QFIN US – US$3.0 billion)* is probably one of the better houses on the pure play Chinese Online Consumer Lending street, with high-quality assets and a very diverse funding base. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/Kj568-qfin-holdings-qfin-us-.png) QFIN is also the largest pure play online consumer lending platform, with the peers being LexinFintech (“LX”), FinVolution (“FINV”), XY Financial (“XYF”), Jiayin (“JFIN”), and also Yiren (“YRD”). They all have their quirks, e.g. LX has gotten itself into ecommerce and embeds its lending platform in it, FINV derives a solid amount of revenues from outside China, etc., but their Chinese businesses are in direct competition with each other. And these are not even the biggest guys: the big internet platforms, be it Ant Financial, Tencent, ByteDance, or Trip.com, all have their own consumer lending platforms, but they are comingled with a bunch of other businesses, but whilst I don’t spend too much time on them, they are frankly larger and systematically more important than the listed pure play peers that we are discussing here. QFIN is a name that is easy to like: it has historically enjoyed the lowest delinquency rates, and as a result, has offered loans at lower rates than peers, whilst also having the very high loan loss provisions. Furthermore, QFIN is also overcapitalized in my view, even if one treated the “capital-light” parts of the business as “capital heavy,” which has enabled it to fund generous share buybacks. If one was to take the People’s Supreme Court pronouncement from April this year very literally, QFIN is probably also going to take a smaller hit to earnings compared to peers because (a) most of their loans are held on its own balance sheet and therefore had rates below 24% anyways, (b) only part of the off-balance sheet loans it was originating carried effectively interest rates of more than 24%. I have to point out that as a secondary effect from the rule changes, QFIN may suffer from enhanced competition for sub-24% borrowers because everyone else, at the margin, may try to originate loans below 24%. However, this is hard to quantify, because many smaller players are also expected to exit the market altogether. At 4-5x earnings (after-tax and LTM), a lot has been priced in, although I have to point out that U.S. unsecured consumer lenders like Synchrony Financial also only trade at around 8x earnings, which is also interesting but that’s a story for a different day. But what about the China risk? Which country has the more stable political framework for consumer lenders, China or the U.S.? Under the Biden administration, the CFPB tried to put into force rules to curb late payment fees, but after 2-3 years of litigation, this idea was dropped under the Trump administration. It’s a tough call. --- ## I loved your take on Sony Financial on Twitter the other day. Spin-offs are incredibly rare in Japan, so that’s why I’m following the name with great interest. Could you summarize your views on the company today? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-93.png) Thank you! I have to admit that I have only invested in a handful of spin-offs and only one life insurer over the past decade or so, so when [**Sony Financial Group**](https://finance.yahoo.com/quote/8729.T/?ref=asiancenturystocks.com) *(“SFG”, 8729 JP — US$7.0 billion)* came along I got quite excited, also because life insurers have obnoxiously complex accounting and regulatory capital rules. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/mDm9R-sony-financial-span-class-italic-style-white-space-collapse-preserve-8729-jp-span-.png) You can read the thread [here](https://x.com/1lemonaday/status/1974463930836865369?ref=asiancenturystocks.com), but in a nutshell, I think SFG is not particular interesting in the ¥150 context despite its large buyback because: 1. Its capital levels are modest, which are determined based on J-GAAP figures, are not that high at 184% (consolidated) or 168% (unconsolidated) against a stated minimum target of 165%, 2. The buyback is going reduce capital by another 8pp and I estimate that SFG only generates around 10pp in capital every year ceteris paribus, which is, again, measured in J-GAAP and not based on IFRS earnings, and 3. SFG is a lot more rates sensitive than its peers, with a 50bps rates move impacting capital levels by a whopping 18pp. Of course, the Fed is lowering rates at the moment, but given the monetary and political situation in Japan, I’d rather be careful. Overall, SFG appears to trade at around 10-12x J-GAAP earnings, which is what the regulator looks at to approve distributions, so right now, the market offers much more interesting situations in my view. --- ## Thanks for participating, Yilun! How can people contact you or follow your work? Thanks for having me. They can follow us [on Twitter](https://x.com/1lemonaday?ref=asiancenturystocks.com), sign up on our [website](https://www.tigerhilladvisors.com/?ref=asiancenturystocks.com), or drop me an email via ychen@tigerhilladvisors.com. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Tai Cheung (88 HK) — 2025 update URL: https://www.asiancenturystocks.com/tai-cheung-88-hk-2025-update/ Last updated: 2025-11-27T04:41:38.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Tai Cheung at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **A quick background** [**Tai Cheung**](https://finance.yahoo.com/quote/0088.HK/?ref=asiancenturystocks.com) *(88 HK – US$272 million)* is a small Hong Kong-listed property developer focusing on luxury homes. I first wrote about the company in early 2024, when Hong Kong had just started recovering from the COVID-19 pandemic: [Tai Cheung (88 HK)Solid Hong Kong property developer at 79% discount to NAV with no debt![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-25.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f140613116_2f31260e8d-4cf6-44d4-85ce-dc02d1a945ff_2ftranscoded-1705206390.jpg)](https://www.asiancenturystocks.com/tai-cheung-88-hk/) The company used to focus on construction. It was formed by a Mainland Chinese refugee called Edward TT Chan. He fled Guangzhou during the Second World War and ended up in Hong Kong. Working tirelessly for decades, by the 1970s, Tai Cheung had become one of the five largest Chinese-owned construction companies in Hong Kong. Edward passed away in 1981\. By that time, his son David Pun Chan had studied mathematics at MIT and then worked for Tai Cheung for a number of years. So he was well-placed to take over the business, despite being only 30 years old. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/GettyImages-1124776923.jpg) David Pun Chan. Source: Getty Images Marc Faber noted in his 1988 book [The Great Money Illusion](https://www.amazon.com/Great-Money-Illusion-Confusion-Confusions/dp/0582999049/ref=sr%5F1%5F1?crid=1WH971V0MELV0&dib=eyJ2IjoiMSJ9.W9ZGuaqRSbbY6ZtPi7ihQg.4jsx%5F-TuFADkJZaqMiBVt6VPDsVrrVdENbyCvUjhnC4&dib%5Ftag=se&keywords=The+Great+Money+Illusion+marc+faber&qid=1763261521&sprefix=the+great+money+illusion+marc+fa%2Caps%2C368&sr=8-1&ref=asiancenturystocks.com) that David was a "bright and conservative CEO". And that remains the case. Since 1981, Tai Cheung has become more of a property developer than a construction company. It currently owns the following properties: - A 35% stake in the **Sheraton Hotel** in Tsim Sha Tsui. It has a fantastic location overlooking the Victoria Harbour, as you can tell from the following pictures: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-54.png) - Six connected houses at **3 Plunkett’s Road** with about 4,000 sqft of living space. They're located near The Peak, overlooking Hong Kong Island. The driving distance to Central is about 12 minutes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-57.png) - Eight newly built villas at **PULSA** in Repulse Bay overlooking the ocean. These villas are newly built and have about 5,000-9,000 sqft of living space. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-55.png) - A new luxury development on Ap Lei Chau on the Southern side of Hong Kong Island, called **VELE**. It's a condo tower with four-bedroom apartments in close proximity to the Lei Tung MTR station. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-56.png) - It also owns strata-title properties in **Metropole Square** in Sha Tin - As well as an industrial property in California called **French Valley Airport Center**, located between Los Angeles and San Diego. Roughly 63% of Tai Cheung's gross asset value comes from luxury residential properties. The rest of the value is mostly from its 35% of Sheraton Tsim Sha Tsui. Here's where the properties are located within the US and Hong Kong: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-53.png) As you can tell, the residential properties are in amazing locations and are definitely targeted towards the higher end of the market. That said, as you can tell from the share price, the last five years haven't been kind to the company: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/cyrJr-tai-cheung-88-hk-.png) The initial decline was due to a decline in tourist arrivals after the 2019 government protests in Hong Kong. After the protests broke out, Chinese tourism to Hong Kong plummeted. And in early 2020, the Hong Kong government shut down its borders entirely. After that, Sheraton's Revenue per Available Room (RevPAR) dropped precipitously. From 2022 onwards, Tai Cheung was further hurt by US interest hikes. Since the Hong Kong Dollar uses a currency board system, the Hong Kong Interbank Offered Rate (HIBOR) rose to a similar extent. And mortgage costs, therefore, came up as well. From 2022 to 2024, HIBOR rose from zero to over 5%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-59.png) Due to these higher borrowing costs, property prices finally started to decline. Investment buyers became cautious, knowing that they'd suffer from negative cash flows if they financed any purchase with debt. By the time I wrote my deep dive in early 2024, I sensed that we were nearing the end of the COVID-19 pandemic. Hong Kong's borders had finallly opened up. Net migration had turned positive thanks to talent from Mainland China. I also felt that US interest rates were about to peak, and that borrowing costs would eventually come down. Another positive tailwind was the October 2023 decision to cut the 30% additional stamp duties in half. I've always loved Hong Kong. I believe that eventually, Mainland Chinese would be tempted to buy properties in Hong Kong to enjoy the excellent education and healthcare systems, along with its ultra-low tax rates. --- ## Update to my original post ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-60.png) In my view, the fundamentals have finally started to improve. _This post is for paying subscribers only._ ### Interview with Raghav Kapoor at Smartkarma URL: https://www.asiancenturystocks.com/interview-with-raghav-kapoor-at-smartkarma/ Last updated: 2025-11-20T05:12:40.000Z I had the pleasure of speaking with Raghav ("Raj") Kapoor, the founder and CEO of the independent research platform [Smartkarma](https://www.smartkarma.com/?ref=asiancenturystocks.com). Here are the highlights of our discussion: 1. Brief introduction to Raj and what he's doing at Smartkarma (1:00) 2. Where Raj is spending most of his time currently (2:28) 3. Raj's investing approach: long-term dividend growth (4:06) 4. Singapore's post-2024 bull market in context (5:18) 5. Which of Singapore's policy reforms have proven effective? (9:10) 6. What the Equity Market Development Program funds have invested in (10:30) 7. Why Japan's and Korea's Value Up programs were successful (13:45) 8. Raj's views on the Korean financial services company and index provider [FnGuide](https://finance.yahoo.com/quote/064850.KQ/?ref=asiancenturystocks.com) (064850 KS) (19:50) 9. Which Asian markets are international investors over- and underallocated to within Asia (24:33) 10. Raj's updated views on Japanese SaaS companies (30:56) 11. The value in equities in the Philippines, Indonesia, and Thailand (38:10) 12. The positive aspects of Malaysia's growth story (45:32) 13. Smartkarma's new platform [pvtIQ](https://www.pvtiq.com/sign-up/?ref=asiancenturystocks.com) (47:45) 14. The target clients of the new platform (52:28) 15. Why Asia's IPO markets have yet to take off (56:30) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. Again, this is not a recommendation to buy or sell stocks.* ### The ultimate AI tool battle URL: https://www.asiancenturystocks.com/the-ultimate-ai-tool-battle/ Last updated: 2025-11-26T13:47:49.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## Summary - In this post, I've tasked the paid versions of ChatGPT, Gemini, Claude, and Grok to solve a series of equity research-related tasks. - This post has been updated for the release of Gemini 3 and Claude Opus 4.5 in late November 2025\. - I've asked each of these generative AI tools to answer questions about Thai beverage company [**Carabao**](https://finance.yahoo.com/quote/CBG.BK/?ref=asiancenturystocks.com) *(CBG TB – US$1.2 billion)*. It produces an energy drink called Carabao Dang. Specifically, I asked them to provide me with information about the company's business model, supply chain, competitive advantages, recent news reports, valuation metrics and more. - My conclusion is that ChatGPT and Gemini are neck-to-neck in most equity research tasks and that either of these is worth paying for. Gemini is faster and with the Gemini 3 model, now scores better than ChatGPT. - As for Carabao, the tools helped me understand that it's taking market share from key competitor Osotspa. At 13x P/E, the valuation multiple is not particularly high, either. But it does have issues with related party transactions. --- ## Introduction I'm currently paying for four separate generative AI tools: - [ChatGPT Plus](https://chatgpt.com/?ref=asiancenturystocks.com), which gives you access to the GPT-5 Thinking model - [Google Gemini](https://gemini.google.com/?ref=asiancenturystocks.com), which gives you access to the Gemini 3 model - [Claude Pro](https://claude.ai/?ref=asiancenturystocks.com), which gives you access to the Opus 4.5 model - [SuperGrok](https://grok.com/?ref=asiancenturystocks.com), which gives access to the Grok Expert model In this post, I'll put them to the test. I have ten equity research-related questions I want to ask them. I'll then score their output on a scale from 1 to 10, before adding up all of their scores towards the end of the post. The purpose is two-fold. I want to help you understand which service you should pay for. I also want to provide inspiration for how you can use these generative AI tools yourself. The stock I will use for this experiment is the Thai energy drinks company [**Carabao**](https://finance.yahoo.com/quote/CBG.BK/?ref=asiancenturystocks.com) *(CBG TB – US$1.2 billion)*. Its stock price has slumped in the past few years, as you can tell from the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/l0pPS-carabao-cbg-tb-.png) A few weeks ago, I noticed that there has been insider buying in the stock, with founder and CEO Sathien Sathientham buying shares for the first time in many years. Carabao now trades at 11x EV/EBIT - an all-time low. Carabao's US peer Monster Beverage has performed beautifully over the past 25 years. So I wonder if Carabao could potentially repeat that success. Let's jump into it. --- ## Business snapshot ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-26.png) First of all, let's start with a simple question: what does Carabao actually do? To answer that question, I feed the following prompt to each of the AI models: > "Explain in simple terms how Carabao makes money" Here are the answers I got from each of the four generative AI models: [Carabao Business Model - ChatGPTCarabao Business Model - ChatGPT.pdf201 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Business-Model---ChatGPT.pdf "Download") [Carabao Business Model - Gemini 3Carabao Business Model - Gemini 3.pdf40 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Business-Model---Gemini-3.pdf "Download") [Carabao Business Model - Claude 4.5Carabao Business Model - Claude 4.5.pdf182 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Business-Model---Claude-4.5.pdf "Download") [Carabao Business Model - GrokCarabao Business Model - Grok.pdf919 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Business-Model---Grok.pdf "Download") Here's the beginning of the answer from **ChatGPT**: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-43-1.png) ChatGPT's business snapshot I think ChatGPT's answer is excellent. We learn that Carabao is a Thai beverage company focusing primarily on energy drinks, but also sports drinks and vitamin drinks. Furthermore, ChatGPT tells us that it's a vertically integrated operation and that it also sells to neighbouring countries like Cambodia and Vietnam. My only issue with ChatGPT's answer is that it doesn't mention that Carabao also sells beer on behalf of a related party. **Gemini 3**'s answer has improved significantly from the 2.5 model. It now goes through most of Carabao's product categories and correctly point out that the beer business belongs to a related party. I still think the answer from **Claude 4.5** is vague and that it doesn't tell me much about the product portfolio. The answer from **Grok** is similarly vague. So in this first round, I think ChatGPT and Gemini 3 are tied on the first spot, each earning a score of 9\. This is a step-up from Gemini 2.5's score of 5\. While Claude has improved, the answer still leaves much to be desired. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/T6rCm-gen-ai-comparison-business-snapshot---1-.png) --- ## Deep research report ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-42.png) Let's move on to a "Deep Research" request. This refers to \~20 page reports written by generative AI tools based on publicly available data. The prompt I like to use is the following: > "Create a deep-dive investment research report on Carabao CGB TB. > > Include: > • Company overview and business model > • Competitive advantages compared to its main competitors > • Discussion of historical financials and the drivers of key numbers > • Industry supply & demand and regulatory framework > • Discuss the current management team and its track record of creating value for shareholders > • Management's long-term plan and likely growth prospects > • Potential risks to earnings > • Valuation multiples compared to historical levels, the peer group and likely growth prospects > > Please cite all sources and highlight areas of uncertainty or controversy." Note that in Grok, the tool is called "Deep Search"; in Claude, it's called "Research"; and in ChatGPT and Gemini, it's simply called "Deep Research". Here are the results of this prompt: [Carabao Deep Research - ChatGPTCarabao Deep Research - ChatGPT.pdf196 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Deep-Research---ChatGPT.pdf "Download") [Carabao Deep Research - Gemini 3Carabao Deep Research - Gemini 3.pdf209 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Deep-Research---Gemini-3.pdf "Download") [Carabao Deep Research - Claude 4.5Carabao Deep Research - Claude 4.5.pdf598 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Deep-Research---Claude-4.5.pdf "Download") [Carabao Deep Research - GrokCarabao Deep Research - Grok.pdf11 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Deep-Research---Grok.pdf "Download") Grok was the fastest at generating these reports, followed by Gemini and Claude. ChatGPT took by far the longest but its report was also the longest at 25 pages. The **ChatGPT** report was amazing, in my view. We learn that Carabao has done an incredible journey going from zero market share to 20-25% in less than 25 years, winning against incumbents such as Red Bull and Osotspa's M-150\. It talks about how Carabao has been to undercut M-150 on price and how it's more popular among younger Thais. The report also talks about the issues facing Carabao, including the Thailand-Cambodia border conflict, cost inflation and a gradually higher sugar tax. However, I think the valuation numbers are wrong, as Carabao's P/E is closer to 13x than the quoted 17x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-44-1.png) Claude's Carabao Research report The Deep Research report generated by **Gemini 3** was shorter, but also excellent. It states that Carabao has two new factories ramping up in the next six months, in Cambodia and Myanmar, respectively. Gemini's attempt to provide an investment recommendation is detracts from the overall positive impression. I'd prefer it if Gemini just kept to the facts and nothing else. The **Claude 4.5** report has improved significantly since the previous model. I like it just as much as that of Gemini. The **Grok** report is among the worst I've read – practically unreadable. ChatGPT wins again: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/sfeAf-gen-ai-comparison-deep-research---1-.png) --- ## Supply chain analysis ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-37.png) To understand where Carabao sits in the energy drinks supply chain, I now ask these tools to help create a picture of the supply chain. Here's the prompt I use: > "Explain the supply chain that Carabao operates in when it comes to energy drinks products domestically and clarify where Carabao sits within it. I want the output to be a map from upstream inputs all the way to the end customer with all stakeholders accounted for. Make sure to capture the names of all the companies interacting with Carabao." The answers from each of the tools: [Carabao Supply Chain - ChatGPTCarabao Supply Chain - ChatGPT.pdf399 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Supply-Chain---ChatGPT.pdf "Download") [Carabao Supply Chain - Gemini 3Carabao Supply Chain - Gemini 3.pdf43 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Supply-Chain---Gemini-3.pdf "Download") [Carabao Supply Chain - Claude 4.5Carabao Supply Chain - Claude 4.5.pdf91 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Supply-Chain---Claude-4.5.pdf "Download") [Carabao Supply Chain - GrokCarabao Supply Chain - Grok.pdf108 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Supply-Chain---Grok.pdf "Download") The answers here were much better – strong across the board. We learn that Carabao is a vertically integrated operation producing the beverages itself, but also dealing with bottling and distribution in-house. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-46-1.png) Grok's answer on Carabao's supply chain However, I note that only **Grok** points out that the Woody vitamin drink is produced under a JV format and that Carabao also distributes beer. **Claude 4.5** misses that Carabao distributes beer and other beverages for related and third parties, though I love the way the answer is structured through clear tables. **Gemini 3**'s answer is excellent and more to the point than ChatGPT's. So this was a close call with almost equal answers from the four models. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/rJM1g-gen-ai-comparison-supply-chain---1-.png) --- ## Competitive advantages ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-28.png) Next, I want to understand whether Carabao is a great business. Is the business defensible, and does it have pricing power? Here's the prompt I use to answer that question: > "I want to understand the strength of Carabao's products and business. How do the products compare with competitors' in terms of perceived value, branding, marketing etc? What are the competitive advantages that Carabao has that will protect it from competition in the future, so-called economic moats? And what is Carabao's bargaining power vs other stakeholders?" And here are the answers I got from each of the tools: [Carabao Competition - ChatGPTCarabao Competition - ChatGPT.pdf398 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Competition---ChatGPT-1.pdf "Download") [Carabao Competition - Gemini 3Carabao Competition - Gemini 3.pdf54 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Competition---Gemini-3.pdf "Download") [Carabao Competition - Claude 4.5Carabao Competition - Claude 4.5.pdf164 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Competition---Claude-4.5.pdf "Download") [Carabao Competition - GrokCarabao Competition - Grok.pdf162 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Competition---Grok-1.pdf "Download") It's clear that the Carabao brand is its key competitive advantage. It has a connection to the co-founder Aed Carabao's rock music and the sponsorship of the "Carabao Cup" English football league. It's also becoming clear that Carabao's distribution network is excellent, second only to Osotspa's. **ChatGPT**'s answer is amazing, in my view. It gives me the feeling of the positioning of Carabao Dang in the eye of the consumer, and what the brand means to them. It also points out that there isn't much product differentiation between Carabao Dang and Osotspa's competing energy drink M-150\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-45-1.png) ChatGPT's description of how Carabao's product compares **Gemini 3**'s answer has improved significantly from before, helping me understand the key differences between Carabao Dang and its competitors. **Claude**'s answer has also improved a great deal, for example pointing out that Osotspa retook market share in 2025 thanks to its cheaper Yellow Cap variant. But overall, I'd say ChatGPT wins this one: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/fydzg-gen-ai-comparison-competitive-advantages---1-.png) --- ## News update ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-29.png) In the next section, I'll review the news that has come out about Carabao in 2025, using the following prompt: > "I want to understand the primary drivers for Carabao's recent stock price performance. Find and summarize the key pieces of news that might have affected Carabao's business in 2025." Here are the answers I got: [Carabao News - ChatGPTCarabao News - ChatGPT.pdf433 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-News---ChatGPT.pdf "Download") [Carabao News - Gemini 3Carabao News - Gemini 3.pdf54 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-News---Gemini-3.pdf "Download") [Carabao News - Claude 4.5Carabao News - Claude 4.5.pdf113 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-News---Claude-4.5.pdf "Download") [Carabao News - GrokCarabao News - Grok.pdf111 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-News---Grok.pdf "Download") From these answers, I learn that Carabao has seen its Cambodian shipments grind to a halt due to the 2025 Thailand-Cambodia border conflict. But I also learnt that the energy drinks market is growing rapidly, with a lot of promotional activity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-47-1.png) A snapshot from the Gemini answer on recent Carabao-related news **ChatGPT**'s answers are long and extensive, but somehow missed the fact that Carabao signed a strategic partnership agreement with Tsingtao Brewery in September this year. I also think it underplayed the sugar tax rise on 1 April 2025\. **Gemini 3**'s answer was easy to read and provided a great summary, but also missed the Tsingtao Brewery agreement. **Claude 4.5**'s answer was significantly better than the previous model's, and included information about the Tsingtao Brewery agreement as well as M-150's early 2025 market share gains. However, it did not contain any information about Carabao's Q2 and Q3 earnings. **Grok**'s answer was in chronological order, a bit wordy and also missed several key facts, including that founder and CEO Sathien Sathientham bought shares in Carabao recently. In my view, neither model performed particularly well on this task: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/oKI3G-gen-ai-comparison-news-update---1-.png) --- ## Summarize earnings results ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-41.png) Next, I'll want to understand Carabao's first-half 2025 earnings result to get a sense of how well the company is performing. So I give each of the generative AI tools the following prompt: > "Analyze Carabao's latest earnings result and provide a snapshot of the key numbers, compare the revenues and earnings vs expectations, the key trends by product and geography, changes to the outlook and any key risks" I then get the following answers: [Carabao Earnings - ChatGPTCarabao Earnings - ChatGPT.pdf388 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Earnings---ChatGPT.pdf "Download") [Carabao Earnings - Gemini 3Carabao Earnings - Gemini 3.pdf34 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Earnings---Gemini-3.pdf "Download") [Carabao Earnings - Claude 4.5Carabao Earnings - Claude 4.5.pdf184 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Earnings---Claude-4.5.pdf "Download") [Carabao Earnings - GrokCarabao Earnings - Grok.pdf156 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Earnings---Grok.pdf "Download") We learn that 2Q2025 Carabao Dang energy drink sales rose +27% year-on-year in the first half, with gross margins staying high. Overseas sales dropped due to the Cambodia land border issue. Vietnam sales grew +38% year-on-year. **ChatGPT**'s answer was strong, though somewhat wordy. **Gemini 3**'s was inexplicably worse than the previous model, though captured most of the important aspects, except the execution risks with ramping up its two new factories in Myanmar and Cambodia. **Claude 4.5**'s summary was to the point and way better than before. **Grok**'s answer was somewhere in between. I think Claude won this one. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/a41dp-gen-ai-comparison-earnings-result---1-.png) --- ## Comps table ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-39.png) Now let's compare the valuation multiples of Carabao with those of its global peers. Here's the prompt I use: > "Generative a comparables table with Carabao and its key global peers within the energy drinks industry. Include the Bloomberg ticker, USD market cap and the following valuation multiples: EV/Sales, EV/EBIT, P/E and dividend yield. Also include the 5-year average return on equity for each peer." The answers: [Carabao Comps - ChatGPTCarabao Comps - ChatGPT.pdf347 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Comps---ChatGPT.pdf "Download") [Carabao Comps - Gemini 3Carabao Comps - Gemini 3.pdf32 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Comps---Gemini-3-1.pdf "Download") [Carabao Comps - Claude 4.5Carabao Comps - Claude 4.5.pdf109 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Comps---Claude-4.5-1.pdf "Download") [Carabao Comps - GrokCarabao Comps - Grok.pdf69 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Comps---Grok.pdf "Download") Carabao's energy drink peers include Thailand's Osotspa, but also US peers Monster Beverage and Celsius Holdings. At 13x P/E and 11x EV/EBIT, it certainly trades at a large discount to most peers: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-48-1.png) ChatGPT's comps table **ChatGPT** presented a great list of peers and also provided sources. However, it didn't include any ROE figures in the table. **Gemini 3**'s answer is short but accurate and now includes Osotspa. **Claude**'s and **Grok**'s market cap numbers for Carabao were flat-out wrong but I appreciate that Grok included Eastroc Beverage. ChatGPT wins this one: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/iWXwh-gen-ai-comparison-comps-table---1-.png) --- ## Challenging prediction ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-35.png) Next, I'll try to estimate Carabao's earnings for the next three years. This is a challenging task and will separate the wheat from the chaff. So I ask the models the following prompt: > "Estimate Carabao's earnings per share in the following three years from 2025 to 2027\. Consider industry growth, market share gains, price increases, cost pressures, operating leverage, financing costs and share count dilution in your final earnings per share estimates." Here are the answers I get: [Carabao EPS estimate - ChatGPTCarabao EPS estimate - ChatGPT.pdf363 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-EPS-estimate---ChatGPT.pdf "Download") [Carabao EPS estimate - Gemini 3Carabao EPS estimate - Gemini 3.pdf70 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-EPS-estimate---Gemini-3.pdf "Download") [Carabao EPS estimate - Claude 4.5Carabao EPS estimate - Claude 4.5.pdf168 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-EPS-estimate---Claude-4.5.pdf "Download") [Carabao EPS estimate - GrokCarabao EPS estimate - Grok.pdf93 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-EPS-estimate---Grok.pdf "Download") In my view, it's clear that Carabao's 2025 earnings will be hit by the Cambodia border issues, but that earnings will recover as the new factory ramps up through 2026: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-49-1.png) ChatGPT's earning per share estimate from FY2025 to FY2027 **ChatGPT** correctly identifies the positive effect from the factory ramp-up in the next six months. **Gemini 3**'s forecast now takes that factor into effect as well, though I think it might be underestimating the margin recovery story. I think **Grok**'s forecast is unimpressive, assuming price increases despite the almost-fixed THB 10 price point and using global beverage sales growth as a guide. **Claude 4.5**'s estimates are somewhat better but don't seem to consider the new factory in Cambodia. So ChatGPT wins this one, again: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/cbYaO-gen-ai-comparison-eps-estimate---1-.png) --- ## Finding red flags ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-34.png) Next, I'll try to understand the accounting risks in Carabao's financial statements. Here's the prompt I used: > "You are a forensic equity analyst. Identify red flags and accounting risks in the attached financial statements and MD&A section of Carabao, including revenue recognition, segment reporting, leases, related parties, contingencies, stock-based comp, goodwill/intangibles across the income statement, balance sheet and cash flow statement." The answers: [Carabao Risks - ChatGPTCarabao Risks - ChatGPT.pdf242 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Risks---ChatGPT.pdf "Download") [Carabao Risks - Gemini 3Carabao Risks - Gemini 3.pdf54 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Risks---Gemini-3.pdf "Download") [Carabao Risks - ClaudeCarabao Risks - Claude.pdf113 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Risks---Claude.pdf "Download") [Carabao Risks - GrokCarabao Risks - Grok.pdf120 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Risks---Grok.pdf "Download") **Claude**'s answer was amazing. It identified an impairment in Carabao Holdings Hong Kong, some goodwill, related party transactions including loans to related parties, a lack of geographic segment disclosure, and more. However, Claude 4.5 failed to load the answer, so I'm relying on the older model's output here. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-50-1.png) Claude's risk assessment for Carabao **Gemini 3**'s answer was great, adding that the cost of the Carabao Cup was 50% shared with a related party. **Grok**'s answer was somewhere in between. **ChatGPT** only identified the low provisioning for discounts (worth mentioning?) and related party receivables, but nothing else. So this section is a tie between Gemini and Claude, in my view: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/UpIu2-gen-ai-comparison-red-flags---1-.png) --- ## Q&A preparation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-36.png) Finally, now that we've done all the background research, let's reach out to Carabao's management team and ask for a meeting with them. But which questions should we ask? To get inspiration, I give each of the generative AI tools the following prompt: > "Create 15 precise questions for the CEO of Carabao about the company's long-term strategy, competitive advantages, capital allocation and risks that they see on the horizon. Order by information value." And here are the questions they suggest: [Carabao Q&A - ChatGPTCarabao Q&A - ChatGPT.pdf100 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Q-A---ChatGPT.pdf "Download") [Carabao Q&A - Gemini 3Carabao Q&A - Gemini 3.pdf36 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Q-A---Gemini-3.pdf "Download") [Carabao Q&A - Claude 4.5Carabao Q&A - Claude 4.5.pdf103 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Q-A---Claude-4.5.pdf "Download") [Carabao Q&A - GrokCarabao Q&A - Grok.pdf52 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/11/Carabao-Q-A---Grok.pdf "Download") Generally, I think the most important question is *what's going to change in the future.* So for that reason, I think **Gemini 3** performs the best. Its questions are specific and reveal how management thinks about strategy and capital allocation. Here's a highlight from Gemini's answer: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/Gemini-1.jpg) Some of Gemini 3's answers **ChatGPT**'s answers are decent, too, touching on capital allocation and strategy. **Grok**'s questions include a lot of fancy words but without much substance. Same with **Claude 4.5**, whose questions I continue to think lack nuance. So Gemini wins this round: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/DfBjN-gen-ai-comparison-q-amp-a---1-.png) --- ## Conclusion Before writing this post, I asked my Twitter followers which generative AI tool they prefer when it comes to equity research. Most preferred ChatGPT, followed by Gemini: > Reigning champion when it comes to equity research? > > — Michael Fritzell (Asian Century Stocks) (@MikeFritzell) [November 6, 2025](https://twitter.com/MikeFritzell/status/1986233777010712679?ref%5Fsrc=twsrc%5Etfw&ref=asiancenturystocks.com) After running this experiment, I feel exactly the same way. Here's the final tally from my ranking of the generative AI models across each of the 10 categories: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/PhzhR-gen-ai-comparison-the-final-tally---1-.png) So with **Gemini 3**, I think it's finally competitive against ChatGPT. Claude has improved, but is lacking in terms of data analysis and its nuance. SuperGrok remains far behind. Here's my updated advice: - With Gemini significantly **faster** than ChatGPT, and neck-and-neck on most tasks except Deep Research, I think you could argue that Gemini is a superior option to pay for. You'll get 20 Deep Research reports per day compared to only 25 reports *per month* for ChatGPT Plus. Gemini also gives you 2Tb of Google One storage, better functionality through the sister app NotebookLM and full integration with Gmail and Google Docs. - I've been incredibly satisfied with ChatGPT's 5 Thinking model, so I'll probably continue using it. For no other reason that I've **customized it**, and that it already knows a lot about me as a person. - Claude is said to be decent at **writing text** that sounds natural. If that's something that interests you, perhaps consider Claude as an option. - The only reason to use pay for Grok, in my view, is to access and summarize posts from **Twitter/X**. But I'll think you'll get far paying for the lower-priced US$8/month tier, as it also gives you access to Grok. And what did we learn about Carabao? It's an impressive company, run by an energetic entrepreneur with a long-term vision. It's continuously taking market share from Osotspa. And it's going to ramp up its exports through new factories in Cambodia and Myanmar. At \~13x P/E, the valuation is not particularly high. But be aware of the complex corporate structure with recurring related party transactions. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Treasury Wine Estates (TWE AU) URL: https://www.asiancenturystocks.com/treasury-wine-estates-twe-au/ Last updated: 2026-03-16T13:21:28.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Treasury Wine Estates at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only—not a recommendation to buy or sell shares.* --- [**Treasury Wine Estates**](https://finance.yahoo.com/quote/TWE.AX/?ref=asiancenturystocks.com) *(TWE AU — US$3.0 billion)* is one of the world's largest wine producers globally. And it's one of the very few large companies in Australia trading at a reasonable valuation multiple. It started as the wine division of brewery giant Forster's Group. From the 1990s onwards, Foster's acquired vineyards and brands such as Penfolds, Lindeman's and Beringer. But throughout the 2000s, this wine division underperformed, draining cash from Foster's highly profitable beer business. So in 2011, it was eventually spun off into a separately listed entity called Treasury Wine Estates (TWE). After Mike Clarke took over as CEO in 2014, the company has embarked on a premiumization strategy that led to operating margins rising from mid-single digits to 20%. TwE also acquired Diageo's wine business for 8x EBITDA. TWE also benefitted from the 2015 China-Australia Free Trade Agreement, which helped Penfolds become one of the top-selling luxury wines in China. Then came COVID-19\. Early on during the pandemic, the Australian government called for an independent investigation into the origins of COVID-19\. Shortly thereafter, the Chinese government imposed tariffs of up to 218% on Australian wines, causing demand for Penfolds wines to slump. By that time, the company was under the CEO Tim Ford. He responded to tariff shock by shifting focus to the US market. Under his leadership, TWE acquired DAOU Vineyards for 15x EBITDA. And throughout this period, TWE added 1.9x EBITDA of debt to the balance sheet. And that brings us to today. Treasury Wine Estates now has a portfolio of great brands, including Penfolds, DAOU, Beringer, Lindeman's, Frank Family and 19 Crimes. Many of them are luxury brands, which tend to carry higher margins. Typical Penfolds Koonunga Hill costs no more than AU$20, but higher-end products such as Penfolds Grange can cost AU$1,000 or more. Winemaking is a tricky business. Vineyards need to invest in costly acreage. They also need to invest in capital equipment, such as presses, fermentation vessels, and oak barrels. Most importantly, luxury wines need to be aged 2-4 years, tying up capital in inventory. And if a wine becomes popular, you can't just scale up production to meet demand. It would take years and require stringent quality controls. That said, TWE's return on capital employed is respectable at 11-12% – almost on par with key spirits companies. This high ROCE is thanks to its focus on higher-end wines, which tend to carry high margins. It's also a fact that TWE's revenues and earnings per share have grown over time, although at a slow rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/11/image-25.png) However, in the past year, the stock price dropped by over 50%. It's due to several factors: _This post is for paying subscribers only._ ### Insider activity October 2025 URL: https://www.asiancenturystocks.com/insiders-october-2025/ Last updated: 2026-04-14T03:27:15.000Z ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors ➔ Join Free Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is a disclosure and not a recommendation to buy or sell.* _This post is for paying subscribers only._ ### Portfolio update October 2025 URL: https://www.asiancenturystocks.com/portfolio-update-october-2025/ Last updated: 2026-06-04T10:47:29.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ``` Table of contents 1. Portfolio update 2. Update on my key holdings 3. My plans going forward ``` # **Portfolio update** There was a slight increase in the value of the portfolio in October, much thanks to continued price gains in AeroEdge. AeroEdge's success is due much to its ongoing shift from being a one-product company to three. But Japanese stocks have been strong in general. The Nikkei 225 has been on a tear this year, up +31%. The election of Takaichi as President of the leading political party, LDP, should probably prolong the ongoing bull market. Because she's likely to push for greater fiscal deficits, keeping the Yen weaker for longer and maintaining export-driven earnings growth for another year or two. Another market that's become highly priced is that of Australia. I recently went through a long list of [high-quality companies in Australia](https://www.asiancenturystocks.com/hidden-champions-of-australia/). While I wasn't looking for investment ideas, I couldn't help noticing the multiples at which some of these companies were trading. When I wrote about Codan back in 2022, for example, I predicted a forward P/E of 8x. Today, Codan has become a defense stock darling, bid up to the lofty level of 64x P/E. Even boring bank stocks like the Commonwealth Bank of Australia now trade at 28x P/E. This won't last forever. There's greater value in Southeast Asia, in my personal view. These markets include the Philippines, Thailand and Indonesia. There's not much news on that front, except that foreign investors remain disinterested. Yesterday, I listened in on Pangolin Asia Fund's investor call, where they made the case for Indonesian equities. As communicated in their [September letter](https://storage.e.jimdo.com/file/0787dc31-d970-4ce2-bcc3-f95d990a6178/Pangolin%20Asia%20Fund%20September%202025%20NAV%20Newsletter.pdf?ref=asiancenturystocks.com), the equity allocation of domestic institutions in Indonesia has declined from 30% pre-COVID down to just 13% today. This has represented incredible selling pressure that's only now starting to ease. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-208.png) Source: Pangolin Asia Fund September 2025 letter In said letter, Pangolin noted that investment managers employed by state institutions have effectively been barred from selling shares at a loss. So in a falling market, they've been acting like deer in a headlight, careful of buying too soon. Until now. Pangolin noted that US$50 billion social security fund JAMSOSTEK is planning to raise its equity allocation from 12-13% today to 20% by 2028\. Sounds bullish to me? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-209.png) Indonesian consumer staples stocks forward P/E. Source: Pnaoglin Asia Fund September 2025 letter When it comes to my own portfolio, its value rose by +0.7% month-on-month in US Dollar terms. Since the portfolio’s inception in October 2021, the value has increased by +54.1%, equivalent to a +11.3% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-194.png) Here's what the latest portfolio looks like, snapshot taken on 27 October 2025: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/06/image-17.png) During October, I spent countless hours moving my publication to its new home on the Ghost newsletter platform. So if I've been slow at replying, you know why. The website's initial design had glitches, but they've been fixed, and I think it's almost perfect now. You can check it out here: [asiancenturystocks.com](https://www.asiancenturystocks.com/). I want to thank you for your patience during this transition. Due to the work with the website, I only published one deep-dive in October: on Hong Kong-based luxury wristwatch retailer [**Oriental Watch**](https://www.asiancenturystocks.com/oriental-watch-398-hk/). The stock has been discussed on Smartkarma for many years. Personally, I've been waiting for a turn in the wristwatch market. Alternative data provider [Watchcharts.com](https://watchcharts.com/?ref=asiancenturystocks.com) has indices where you can track second-hand prices of Rolex watches and the like. I noted recently that watch prices had bottomed out in April this year. But digging deeper into the data, I realized that the Mainland China watch market remains weak. My conclusion is that the demand for wristwatches this year has primarily come from US buyers who are concerned about the coming tariffs on Swiss watch imports. Another conclusion is that Mainland Chinese buyers have gone to Japan in droves to take advantage of the weak Japanese Yen, especially when it comes to Grand Seiko watches. So the fundamentals for Oriental Watch don't seem to have fully turned yet, and I personally remain on the sidelines. But I will continue following the data with great interest. Oriental Watch itself remains inexpensive at just 8.3x P/E with a 12% dividend yield. I did, however, buy shares in two other stocks I've recently written about: - I bought a small position in the Mazda dealer [**Bermaz Auto**](https://www.asiancenturystocks.com/bermaz-auto-bauto-mk/). I think it's going to benefit from Malaysian tariffs on Chinese EV imports. The tariff rate will increase from zero to 30% on 1 January 2026 and then another sales tax of 10% on 1 January 2028\. The main reason why Bermaz Auto's earnings have declined is competition from BYD and other Chinese electric vehicle brands. Higher import tariffs should shift some of that demand back to Mazda. I personally doubt that we'll all move to electric vehicles, given that they have a limited range. I'd personally prefer a hybrid Toyota or Mazda, and I'm sure the brand will survive with continued low single-digit market share. On the positive side, Bermaz Auto's CEO and Chairman are both buying shares themselves, on top of the company's recent share buybacks. The stock trades at a headline P/E of 9.0x. But I expect earnings to come up significantly with the new Mazda model refreshes and the higher import tariffs. So it made rational sense to put on a position, in my personal view. - I also bought shares in Hong Kong-based printing company [**Lion Rock**](https://www.asiancenturystocks.com/lion-rock-1127-hk-2025-update/). The company doesn't have any exciting catalysts ahead of it. But I found it encouraging to see that founder CK Lau bought 2.2 million shares in early October. I consider CK Lau to be a safe pair of hands, making up for the fact that the book printing industry is ruthlessly competitive. As long as he's in charge, I think Lion Rock will do just fine. It now trades at about 5x P/E with a 10% dividend yield. And I'm hoping that the large net cash position of 30% of the market cap will be put to use at some point in the future, hopefully through value-accretive M&A. The portfolio’s cash balance is now 1.2%, held in Japanese Yen, Singapore Dollar, Hong Kong Dollars and US Dollar. --- # **Update on my key holdings** Let’s move on to updates on the individual stocks in my portfolio. ![](https://substackcdn.com/image/fetch/$s_!l_CR!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ffb9288fd-f5db-49a9-aa17-65bc94721f9f_206x140.png) [**AeroEdge**](https://finance.yahoo.com/quote/7409.T/?ref=asiancenturystocks.com)'s *(7409 JP — US$146 million)* (10.8%) share price is flying high, up another +24% vs last month. The last run-up seems to have been driven by the news that AeroEdge would [split its shares 3-for-1](https://tdnet-pdf.kabutan.jp/20251023/140120251023577350.pdf?ref=asiancenturystocks.com). So the share count will triple, effective on 1 January 2026\. I don't understand the enthusiasm for the share split, and it seems to suggest that weak hands have begun accumulating shares in the company. AeroEdge [issued 3,733 shares](https://tdnet-pdf.kabutan.jp/20251023/140120251023577348.pdf?ref=asiancenturystocks.com) to three directors on the board and a few executives, as part of the company's incentive scheme. They will be restricted from selling their shares within the first three months of ownership. A more important piece of news is that AeroEdge has now broken ground on a new casting plant and lab close to its existing "EdgeFactory" in Ashikaga City. The new plant will be used for producing the Titanium Aluminide alloy feedstock that AeroEdge will then use to build low-pressure turbine blades. AeroEdge had already announced back in August 2025 that it would enter the materials business. AeroEdge will invest JPY 2.6 billion in the new plant, and it's going to be finished by April 2027\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-198.png) Drawings of the new casting plant in Ashikaga On my numbers, AeroEdge now trades at 23.5x P/E on FY2027 numbers. I might be underestimating future earnings a bit, given that they've now entered the materials business. We'll just have to wait and see. I personally don't think the shares are undervalued anymore, but true growth companies tend to trade at high multiples, so I'm not surprised to see the run-up in the share price. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/jK7iP-aeroedge-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-23.png) When it comes to the [**Philippine Stock Exchange**](https://www.asiancenturystocks.com/p/the-philippine-stock-exchange-pse) *(PSE PM — US$285 million)* (9.8% position), Maynilad Water Services started its book-building process for its blockbuster IPO. It's reduced the size of the capital raise to PHP 34 billion (US$585 million). The shares are expected to be priced on 7 November 2025\. PSE's [trading volumes](https://documents.pse.com.ph/wp-content/uploads/sites/15/2025/10/page01%5FPSEWeeklyReport2025%5Fwk43.pdf?ref=asiancenturystocks.com) picked up in October. In the past four weeks, they've ranged from PHP 6 billion to PHP 10 billion on average, slightly higher than the pre-CMEPA baseline of PHP 6 billion. So I'm hopeful that the lower stock transaction taxes from 1 July 2025 (60 bps to 10bps) are finally having an impact on PSE's trading volumes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-197.png) On the other hand, the PSEi benchmark index actually fell during the last week of October, suggesting that the high volumes were due to panic selling by foreigners rather than true bullishness about the market. The exchange operator now trades at a forward P/E of 19.1x and a trailing P/E of 13.1x. But with significant operating leverage, I don't consider near-term earnings to be particularly meaningful. If trading volumes end up at PHP 10 billion per day, I think we could be getting closer to an EPS of PHP 17/share. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/HUqkV-philippine-stock-exchange-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-24.png) Japanese karaoke bar operator [**Koshidaka**](https://www.asiancenturystocks.com/p/koshidaka-2157-jp-2024-update) *(2157 JP — US$628 million)* (9.0% position) reported its full-year FY2025 result ending August 2025 ([investor presentation](https://www.koshidakaholdings.co.jp/en/ir/news/auto%5F20251016574933/pdfFile.pdf?ref=asiancenturystocks.com), [financial statements](https://www.koshidakaholdings.co.jp/en/ir/news/auto%5F20251009571091/pdfFile.pdf?ref=asiancenturystocks.com)): - Revenues rose by +9.7% year-on-year, thanks to the opening of new stores and steady same-store sales, including in the Kinki region, where Koshidaka is expanding rapidly - Its operating profit grew by +12.1% year-on-year - Koshidaka's net profit declined by -22.6% due to [impairment losses of JPY 3.4 billion](https://www.koshidakaholdings.co.jp/en/ir/news/auto%5F20251009571146/pdfFile.pdf?ref=asiancenturystocks.com) for certain unprofitable stores. There was also a JPY 405 million decline in non-cash cancelation income and shifts in FX gains. Overall, I think Koshidaka is executing well, with same-store sales oscillating between 0-7% during most of 2025\. The post-COVID surge in visitors is obviously over, but I think we can look forward to safe and steady growth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-196.png) The store count keeps rising by about +6% year-on-year. In addition, with new stores being larger in size, the number of total rooms actually grew +9% year-on-year. Most of Koshidaka's newly built stores are close to railway stations where foot traffic tends to be high. Overseas, Koshidaka opened two stores in Malaysia and one in Thailand. In September 2025 (after the financial year-end), it also opened another two stores in Malaysia. Koshidaka is also preparing for the first new stores in the United States and the Philippines, a country where singing karaoke is part of the culture. The long-term targets remain the same: JPY 100 billion in revenues and JPY 15 billion in operating profit by FY2027\. It hopes to achieve this by rolling out Private Entertainment Rooms, offering services that are much broader than typical karaoke outlets, including billiards, darts, etc. In other news, Koshidaka reported that [two of its outside directors](https://www.koshidakaholdings.co.jp/en/ir/news/auto%5F20251009571145/pdfFile.pdf?ref=asiancenturystocks.com), Tomohiko Nishi and Kenji Kobayashi, have resigned. Instead, Koshidaka has now appointed Kanako Murakami and Kaori Ota to the board. Both of them are lawyers with backgrounds in corporate law, including in international M&A. I wonder if these appointments reflect a shift in Koshidaka's focus towards overseas markets. Finally, in October 2025, Koshidaka agreed to sell [Atsugi Vista Hotel](https://www.koshidakaholdings.co.jp/en/ir/news/auto%5F20251003568016/pdfFile.pdf?ref=asiancenturystocks.com) in Kanawagawa at a profit, with extraordinary gains of JPY 0.9 billion. These will be reflected in FY2026 earnings. The updated earnings forecast undershot expectations, causing the share price to drop in October. Koshidaka's new guidance is for revenues to grow +19% year-on-year, partly thanks to its recent acquisition of Joysound. Koshidaka now expects an earnings per share between JPY 91 and JPY 115, putting the P/E ratio between 10.5x and 13.3x. Along with a dividend of JPY 26, equivalent to a yield of 2.1%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/3auAn-koshidaka-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-22.png) It's embarrassing to have owned Thai cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/p/major-cineplex-update-major-tb)’s*(MAJOR TB — US$169 million)* (7.6 % position) through this continued decline in its share price. I believed that the stronger box office coming out of COVID-19 and the Hollywood writers' strike would cause Major's earnings to recover. But so far, they haven't. Major Cineplex did announce progress in its new joint venture with seaweed snack manufacturer Taokaenoi. The capital for the Taokaenoi JV is THB 100 million, and the board has already been appointed. You can find more information about it [here](https://major.listedcompany.com/newsroom/0671NWS071020251728069720E.pdf?ref=asiancenturystocks.com). Major Cineplex also experimented with [VR converted films](https://mgronline.com/entertainment/detail/9680000098157?ref=asiancenturystocks.com) together with K-pop groups ENHYPEN and TXT over at Paragon Cineplex in central Bangkok. The insider buying has continued as the shares went lower in October. Founder and CEO Vicha Poolvaraluk purchased another 200,000 shares on 2 October and then another 40,000 on 16 October. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-199.png) The insider buying in Major Cineplex, mostly from CEO Vicha Poolvaraluk. Source: Smart Insider Here are the latest numbers for Thailand's box office revenues up until 27 October 2025\. As you can tell, there's been a strong rebound in 2025, suggesting that we could end the year stronger than in 2023\. In that year, Major Cineplex reported an adjusted earnings per share of THB 0.87\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-200.png) Source: Thai Box Office Mojo However, note that Thai Box Office Mojo numbers are only for Bangkok and Chiang Mai, and only include the larger movie franchises. So the actual growth numbers may end up being different from what's been reported by them. Major Cineplex now trades at THB 7.2 per share. Consensus estimates now have Major Cineplex trading at 9.6x P/E with a 4.9% dividend yield. The share buybacks have not yet resumed, but I'm hopeful that they eventually will. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/X6t3n-major-cineplex-eps.png) --- ![Annual Meeting April 10, 2024](https://substackcdn.com/image/fetch/$s_!672z!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Ff49923c1-133b-45a9-a43f-a81dd08c3e28_421x120.jpeg "Annual Meeting April 10, 2024") Not much news regarding investment holding company [**Fairfax India**](https://www.asiancenturystocks.com/p/fairfax-india-fihu-cn-2024-update)’s *(FIH/U CN — US$2.3 billion)* (7.5% position). With the expansion of Terminal 2 set to start early next year, Bangalore International Airport (BIAL) is planning to issue INR 46 billion (US$522 million) in [15-year bonds](https://www.tradingview.com/news/reuters.com,2025:newsml%5FL3N3VN0GY:0-bangalore-international-airport-to-issue-15-year-bonds-bankers-say/?ref=asiancenturystocks.com) with a coupon of 8.15%. While that may sound high, the bonds will be denominated in Indian Rupees – a currency with persistent inflation pressures. Perhaps more importantly, the Airports Authority of India is planning to submit a pre-feasibility report for a [second international airport in Bengaluru](https://www.deccanherald.com/india/karnataka/bengaluru/second-international-airport-near-bengaluru-city-aai-report-soon-minister-m-b-patil-3773417?ref=asiancenturystocks.com) in late October. There are two possible sites: one near Kanakapura Road in the South and one near Chikkasoluru in the West. It's unclear whether BIAL will operate this new airport, so it is a competitive threat. But in any case, BIAL will retain its monopoly until at least the mid-2030s. Fairfax India is going to report its 3Q2025 results on 30 October 2025, so I'll provide an update for you then. Its NAV per share remains at US$21.4\. So with the current share price at US$17.2, the discount to NAV is currently about 20%. Once BIAL receives approval for a listing, I believe that the NAV could end up in the low 30s. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/7yUk7-fairfax-india-bvps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-21.png) Indonesian beer producer [**Multi Bintang**](https://www.asiancenturystocks.com/p/multi-bintang-update-mlbi-ij)'s *(MLBI IJ — US$756 million)* (6.4%) parent company Heineken reported [weak global beer volumes](https://www.theheinekencompany.com/newsroom/heineken-nv-reports-on-2025-third-quarter-trading/?ref=asiancenturystocks.com) of -4.3% year-on-year. Beer volumes in Asia, specifically Vietnam and China, were strong. But unfortunately, Heineken did not provide any comments on Indonesia this time around. Multi Bintang was named a silver medalist in the [MEA Marketer of the Year Award](https://www.marketing-interactive.com/bca-named-marketer-of-the-year-at-mea-indonesia-for-the-third-year-running?ref=asiancenturystocks.com), within the sub-category "Experiential Marketing". Multi Bintang used the advertising agencies Acteeve and Leo Indonesia for the campaigns that led to it winning the prize. The stock now trades at a forward P/E multiple of around 10.7x, along with an 8.9% dividend yield. The company is expected to report 3Q2025 earnings on 29 October 2025\. I don't expect blowout earnings, given that the number of visitors to Bali has remained flat over the past year, and with the economy remaining weak. But eventually, growth is probably going to resume. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-20.png) The fundamentals of Malaysian glove maker [**Hartalega**](https://www.asiancenturystocks.com/p/hartalega-update-hart-mk)*(HART MK — US$1.0 billion)* (4.6% position) have improved recently, but brokers remain bearish. [Philip Capital](https://klse.i3investor.com/web/blog/detail/PhillipCapitalResearchReports/2025-10-09-story-h500439298-Hartalega%5FHoldings%5FHART%5FMK%5FLack%5Fof%5Fnear%5Fterm%5Fcatalyst?ref=asiancenturystocks.com) highlighted that Hartalega's utilization rate rose from 67% in 1Q2025 to 70% in 2Q2025\. It also noted that average selling prices have remained flat, and that the Ringgit weakened against the US Dollar. So despite higher volumes, margins have remained under pressure. The additional tax assessment of MYR 101 million will be reviewed on 30 October 2025\. In a worst-case scenario, Hartalega might lose 10% of its current net cash balance due to these newly required tax payments. [CGS International](https://www.thestar.com.my/business/business-news/2025/10/28/limited-returns-for------local-glove-makers?ref=asiancenturystocks.com)thinks the sector's return on equity will remain below 5.5% through calendar year 2027 due to competition. While US tariffs will cut Chinese supply in that market, CGS thinks that capacity is expanding outside of China, too. In summary, CGS thinks that Malaysian glove makers won't return to US$3 per 1,000 in profits until at least 2028\. The broker is particularly bearish about Hartalega, which it sees as being the most expensive, with the lowest ROE and the highest cost structure. In other news, it looks like new director Ms Lim Kit Yng [declared ownership of 300,000 Hartalega shares](https://bursamalaysia.com/market%5Finformation/announcements/company%5Fannouncement/announcement%5Fdetails?ann%5Fid=3595929&ref=asiancenturystocks.com) on 2 October 2025 via her spouse. I can't figure out whether this represents new buying or a disclosure of an existing position. For the record, Ms Lim is the country head of CLSA in Malaysia, so she comes from a banking background. I consider her to be a valuable addition to the board. Hartalega’s Price/Book ratio is now 1.0x, with a pre-COVID return on equity just below 20%. The bearishness that we're seeing in the sector is music to my ears, given that I'm contrarian in nature. Many years ago, Hartalega used to be touted as the sector's lowest-cost producer. I think CGS is simply wrong: just because Hartalega uses modern machinery,it doesn't mean that it has lost competitiveness. There is a market for high-quality disposable gloves. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/V3i6F-hartalega-eps.png) --- ![](https://substackcdn.com/image/fetch/$s_!2fC5!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F0b3e743f-eed6-468b-8ac5-a4e50adf1019_196x144.png) Not much news on [**Riverstone**](https://finance.yahoo.com/quote/AP4.SI/?ref=asiancenturystocks.com) *(RSTON SP — US$1.0 billion)* (4.7%) either. The last insider transaction was CEO TS Wong buying 1.5 million shares in May 2025 after the share price got hit from the strong Malaysian Ringgit. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-202.png) Source: Smart Insider In October, broker UOB Kay Hian [raised its target price for the stock to SG$0.98 cents](https://www.theedgesingapore.com/capital/brokers-calls/riverstone-shares-surge-uob-kay-hians-higher-target-price-98-cents-led-ai-end?ref=asiancenturystocks.com) on the basis of Riverstone becoming an AI stock. I had previously joked that Riverstone could eventually be seen as an AI play, given that its gloves are sold to semiconductor fabs and hard-disk drive manufacturers. And indeed, Riverstone is now expecting 10% QoQ volume growth in 3QFY2025 thanks to stronger demand from these two sectors. On the cost side, it also helps that nitrile prices have come off a bit. Riverstone paid out its MYR 2.5 sen interim dividend on 3 October. In the past 12 months, the company has paid out MYR 22 sen in dividends per share, equivalent to SG$7 cents and a 7.5% dividend yield against today's share price of MYR 0.88\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/gyalr-riverstone-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-207.png) Hong Kong book printer [**Lion Rock**](https://www.asiancenturystocks.com/lion-rock-1127-hk-2025-update/) *(1127 HK — US$130 million)* (4.2% position) is a new position for me. While book printing is a commodity service and subject to competition, I feel very comfortable with CK Lau in charge. He's proven to be a safe pair of hands, despite the turbulence that's occurred every few years. The biggest event over the past month is that CK Lau accumulated another 2.2 million shares on 3 October 2025 at an average price of HK$1.29\. I believe that this signals confidence about the future. The stock now trades at a trailing P/E of 4.7x with a dividend yield of about 10%. There's no clear catalyst, as far as I can tell. But I'm hoping that CK Lau will eventually find another value-accretive acquisition. The net cash/market cap ratio is currently around 30%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/HGBKd-lion-rock-1127-hk-.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-19.png) On 13 October 2025, Philippine gin maker [**Ginebra San Miguel**](https://www.asiancenturystocks.com/p/ginebra-san-miguel-gsmi-pm)*(GSMI PM - US$1.4 billion)* (3.9%) published a public ownership report, where it disclosed the ownership position of its directors and executives. Importantly, CEO Ramon Ang does not hold any material position in the stock. This provides a potential conflcit of interests. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-201.png) On 26 September, the House of Representatives filed [a bill (No. 5003) to raise excise taxes on alcoholic drinks](https://www.philstar.com/business/2025/09/26/2475397/bill-raising-excise-taxes-alcoholic-drinks-filed?ref=asiancenturystocks.com). Philippine excise taxes are already rising 6% per year, and have been offset by higher prices that have boosted Ginebra's margins. But the new bill suggests double-digit increases in excise taxes. Eventually, they could start to hurt demand for the product, in my view. Ginebra now trades at a trailing P/E of 10.2x. The company is performing well so far, but I think it's worth keeping track of House Bill No. 5003\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/g79FY-ginebra-san-miguel-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-13.png) Not much news regarding warehouse management software developer [**Logizard**](https://www.asiancenturystocks.com/logizard-4391-jp/) *(4391 JP - US$25 million)* (3.8%). According to its news page, it held [a seminar](http://logizard.co.jp/news/2025/09/2025-erp-seminar02.html?ref=asiancenturystocks.com) and exhibited at the [Kyushu Next Generation Logistics Exhibition](https://www.logizard.co.jp/news/2025/09/k-logi-2025.html?ref=asiancenturystocks.com). On the website, Logizard also highlighted a [case study](https://www.logizard-zero.com/cases/toranoana.html?%5Fgl=1%2Adpeho5%2A%5Fgcl%5Fau%2AOTY4NTE5NTU5LjE3NTYzNzE2Mjc.&ref=asiancenturystocks.com) of when e-commerce customer Toranoana used Logizard Zero managed to cut its staff by 50%. Toranoana reported better inventory accuracy and faster shipping. In their own words: > In order to create a system that allows for immediate shipping work in the morning, we **moved away from paper-based operations** and moved towards a paperless system. As a result, **work efficiency improved dramatically** and **shipping speed increased dramatically**. Furthermore, by utilizing inventory data analysis, we were able to level out operations and reduce staffing during busy periods to about half of what it was before. Logizard now trades at 15.9x trailing P/E. On the FY2026 consensus estimate, the stock now trades at a P/E of 12.7x. The long-term FY2028 target is JPY 3.1 billion in revenues and JPY 530 million in operating profit, putting the forward EV/Sales at 0.71x and EV/EBIT at 4.1x. Its net cash/market cap remains around 50%. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-18.png) Not much news about [**Best Mart 360**](https://www.asiancenturystocks.com/p/best-mart-360-2360-hk) *(2360 HK — US$269 million)* (3.7% position). Arena Man Capital (who is no longer a shareholder) tweeted that [an M3 Chardonnay wine bottle costs only HK$200](https://x.com/ArenaManCapital/status/1973389196103655761?ref=asiancenturystocks.com) at Best Mart's Foodville, compared to HK$700 in a restaurant. Best Mart is indeed very competitive. The stores continue to add [new products](https://www.bestmart360.com/new-product?ref=asiancenturystocks.com), including canned tuna, cookies, chocolate, drinks, etc. Some of the new products come from China, and others from Malaysia, Spain, South Korea, etc. Best Mart is also running a large number of promotions, including [Chupa Chups](https://www.bestmart360.com/new-product/id=1807?ref=asiancenturystocks.com) (imported from Vietnam), [EuroCake chocolate cake](https://www.bestmart360.com/new-product/id=1809?ref=asiancenturystocks.com), [Oolong tea](https://www.bestmart360.com/new-product/id=1798?ref=asiancenturystocks.com), [frozen food](https://www.bestmart360.com/cny2025/id=1780?ref=asiancenturystocks.com), etc. But no news otherwise. Best Mart trades at an 8.5x trailing P/E with a 10.0% dividend yield. I'm not sure how much the company will be able to grow, as there's no indication of a material increase in the store count this year. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-17.png) On [**Kawai Musical Instruments**](https://www.asiancenturystocks.com/p/kawai-musical-instruments-7952-jp) *(7952 JP — US$143 million)* (3.6 % position), I noticed that Halvio Capital recently [sold their shares in the company](https://static1.squarespace.com/static/6771ff72f1421821bd094e6a/t/68e395c7b1007143265fa638/1759745479062/Q3+2025+Letter+.pdf?ref=asiancenturystocks.com). Halvio justified the decision by saying that they: > *"*Found better opportunities for the capital* where there are actual catalysts or current shareholder return policies being implemented today."* On the positive side, I noticed that [an index of Google search queries shot up](https://trends.google.com/trends/explore?date=2021-01-01%202021-12-31,2022-01-01%202022-12-31,2023-01-01%202023-12-31,2024-01-01%202024-12-31,2025-01-01%202025-12-31&geo=,,,,&q=Kawai%20piano,Kawai%20piano,Kawai%20piano,Kawai%20piano,Kawai%20piano&ref=asiancenturystocks.com) between July and October 2025\. The interest in Kawai pianos seems to be the highest in years. If you search on Google News for "Kawai Piano" between these dates, you'll find news about Kawai's new CX Series of digital pianos, and about the Shigeru Kawai International Piano Competition in Tokyo. In August, Kawai also launched its new marketing campaign [Instrumental to Life](https://www.kawai-global.com/instrumental-to-life/index.html?ref=asiancenturystocks.com), with marketing that's way better than anything Kawai has put out in the past few years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-203.png) In other news, the Kawai CX302 Digital Piano won the grand prize in the [Musical Instrument Store Awards 2025](https://www.kawai.co.jp/news/20251028/?ref=asiancenturystocks.com). Kawai also moved its Tokyo office to the [Sumitomo Fudosan Oimachi Ekimae Building](https://maps.app.goo.gl/792gRiifa7E1XX948?ref=asiancenturystocks.com). This move may or may not help revitalizing the company. Kawai's 2QFY2026 earnings will be released on 12 November 2025\. The stock now trades at 0.20x EV/Revenues and 0.52x book. It has a great amount of inventory on its balance sheet, and the question is whether the inventory will need to be written down. Pianos do age, especially in certain humid climates like Indonesia. I'm hoping for further clues on 12 November. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-206-1.png) Malaysian auto distributor [**Bermaz Auto**](https://www.asiancenturystocks.com/bermaz-auto-bauto-mk/) *(BAUTO MK — US$178 million)* (3.4% position) is another new position for me. My reasoning is that the stock remains exceptionally cheap. It will probably benefit from the 1 January 2026 rise in import duties for Chinese electric vehicles, as they will rise from zero to 30%. I also think that Bermaz Auto will benefit from new Mazda product introductions in the next two years, including the new Mazda 3, the CX-60 and the 3rd generation CX-5\. As I noted in my write-up, the insider buying has continued, with Chairman Choon San Yeoh buying shares throughout October. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-205.png) Source: Smart Insider At the 8 October annual general meeting, Bermaz Auto renewed its share buyback mandate. Between 22 and 24 October, it repurchased 700,000 shares and on 28 October, another 160,000 shares. The amounts are small in absolute terms but signal confidence about the future. In late September, Bermaz's shareholder Pangolin Asia Fund put forward a special motion to pay its independent board directors 50% in shares rather than cash. I thought that was an excellent suggestion. But unfortunately, the board rejected the proposal. The stock now trades at a headline P/E of 9.0x with a dividend yield of 7.6%. It's hard to predict earnings with any degree of accuracy. I'm not just nothing that even in bad years, the company has earned more than MYR 10 sen per share. So the current share price of MYR 0.66 doesn't seem particularly high. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/rUu93-bermaz-auto-bauto-mk-.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-25.png) [**Mercari**](https://www.asiancenturystocks.com/p/mercari-4385-jp?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&showWelcomeOnShare=false) *(4385 JP — US$2.4 billion)* (3.2% position) finally [shut down its Mercari Hallo app](https://about.mercari.com/en/press/news/articles/20251014%5Fmercarihallo/?ref=asiancenturystocks.com), a competitor to popular gig sourcing network Timee. I felt the shutdown was a positive event, given that Mercari Hallo's losses weighed Mercari's profit margin by almost four percentage points. It was clear that Timee led in terms of user engagement, so I trust that it was the right decision for Mercari. The shutdown will take place on 18 December 2025\. In other news, Mercari was chosen as a partner company for the Official Tokyo Metropolitan Government app. Customers who hold Tokyo Points will be able to convert their points to Mercari points and then use them within the app or Merpay-affiliated stores. The stock now trades at a trailing P/E of 14.6x and a forward EV/Sales of 2.0x. But I think margins are likely to go up with the shutdown of Mercari Hallo and the ongoing turnaround at Mercari US. It's encouraging to see Shintaro Yamada finally take decisive action to improve the profitability of the company. I suspect that these moves have been a result of the influence of Hong Kong-based activist investor Oasis Management. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/TPYv6-mercari-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-14.png) [**Concepcion Industrial**](https://www.asiancenturystocks.com/concepcion-industrial-cic-pm/) *(CIC PM — US$93 million)* (3.1% position) reported its 3Q2025 result, and it wasn't great: - Consolidated 3Q2025 revenues increased by +2% year-on-year, a decline from +11% year-on-year in the first nine months of 2025\. Group-wide revenues, including contributions from associates like Midea and Concepcion-Otis, rose by +11% year-on-year. - Consumer segment sales declined -3% year-on-year due to lower air conditioning category sales. Meanwhile, the commercial segment did very well, with revenues rising by +18% year-on-year thanks to a number of large commercial projects and momentum in the contractor network. Contributions from elevator equipment sales and aftermarket services apparently bolstered the overall profitability. - Gross profit dropped by -3% year-on-year due to competitive pricing, along with higher input costs and lower utilization of its factories - 3Q2025 attributable net income declined by -25% on margin pressures and external headwinds CEO Ariel Fermin commented that the weak result was mostly due to market forces, perhaps due to cooler weather in 2025 and competition from Chinese appliance brands: > “Our third quarter performance reflect our commitment to serving our customers in a **soft market**... We continued to enhance brand relevance and deliver superior value across our product portfolio, demonstrating the resilience of our diversified business model." I have full faith in Ariel Fermin and his ability to revitalize the Carrier and Condura brand names. And while there's competitive pressure in the consumer segment, I think Concepcion has a strong competitive advantage in the commercial projects, thanks to local relationships and access to the Carrier and Otis brand names. Concepcion now trades at a forward P/E of 6.3x with a 6.8% dividend yield. There's been no new insider buying since January 2025, when a board member bought shares at an average price of PHP 13.50\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/cJclp-concepcion-industrial-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-16.png) [**IMAX China**](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/)'s *(1970 HK — US$348 million)* (3.2% position) parent company IMAX Corporation recently reported [3Q2025 earnings](https://www1.hkexnews.hk/listedco/listconews/sehk/2025/1023/2025102301496.pdf?ref=asiancenturystocks.com). Here are the key China-related takeaways from the report: - IMAX's Greater China 3Q2025 revenues declined by -4.9% year-on-year. Not a terrible result, but not great either. - There were 12 local language film releases in 3Q2025 compared to 10 in the same period in 2024\. However, the problem was that only 7 Hollywood movies were released compared to 11 in the same period in 2024\. IMAX Corporation now says that it's expanding the number of local language films is a core strategy for its international (non-US) segment. But no mention of whether the number of Hollywood movies screened in China is going to increase. - The number of screens declined from 808 last year to 800 today, suggesting poor growth momentum overall. However, there was a backlog of 227 IMAX systems as of 30 September 2025, and these will contribute to revenues at some point in the future. - IMAX China repurchased US$1.5 million worth of shares year-to-date, but zero share buybacks in the third quarter of 2025\. It looks like most of the shares were bought during the Q2 slump when a Xinhua journalist speculated that Hollywood movies would be shut out of the Chinese market. I think IMAX China could do so much more to add value to minorities, including reinstating its regular dividend. IMAX China now trades at 8.4x forward P/E. There's still no indication that a privatization will take place anytime soon. Vice Chairman Jiande Chen sold [10,886 shares](https://di.hkex.com.hk/di/NSForm3A.aspx?fn=DA20250812E00130&sa1=dd&src=MAIN&lang=EN&ref=asiancenturystocks.com) at an average price of HK$8.6 per share in July, and there's been no significant insider buying recently. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/chUqr-imax-china-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-26.png) Preparations for [**Samsonite**](https://www.asiancenturystocks.com/p/samsonite-1910-hk-2024-update)'s *(1910 HK — US$3.0 billion)* (2.2% position) US listing are still underway, but the timing remains unclear. Samsonite spent US$5 million in costs related to a US IPO in the first half of 2025, but it's still monitoring the *"economic backdrop and market uncertainty"*. It's presumably referring to US tariffs on luggage imports. In other news, Fitch updated its view on Samsonite's [proposed US$850 million senior secured facilities](https://www.fitchratings.com/research/corporate-finance/fitch-rates-samsonite-proposed-sr-secured-facilities-bbb-rr1-proposed-notes-bb-rr4-28-10-2025?ref=asiancenturystocks.com) maturing in June 2028\. Fitch rated the new loans BBB- and noted: > "Fitch expects Samsonite and its discretionary retail peers to experience **near-term operational challenges** due to softening consumer sentiment and the evolving U.S. tariff policy." Meanwhile, Fitch expects long-term EBITDA of US$650-700 million: > "Longer term, Samsonite's ratings assume the company can generate annual **EBITDA of around $650 million-$700 million**, with EBITDAR leverage sustained below 2.75x." These long-term estimates would put the stock on an EV/EBITDA of 7.0-7.5x and an EV/EBIT of 7.6-8.2x. I've been hoping that Samsonite would be awarded a higher valuation in the US market, but we'll see whether the US listing will eventually take place. In the meantime, the global luggage market has been softening. A board meeting is scheduled for 12 November 2025 to approve the 3Q2025 result. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/xGfb2-samsonite-eps.png) --- ![Pacific Textiles Announces FY2008 ...](https://substackcdn.com/image/fetch/$s_!7rVk!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2F01541d90-9c9d-489e-bff6-90e2d0a13429_576x87.png "Pacific Textiles Announces FY2008 ...") There's barely been any news on [**Pacific Textiles**](https://www.asiancenturystocks.com/p/pacific-textiles-1382-hk)*(1382 HK — US$258 million)* (2.1% position) this month either. Smartkarma analyst Sameer Taneja visited Hong Kong in October and wrote an [excellent piece](https://www.smartkarma.com/insights/hk-listed-apparel-footwear-screener-oct-2025-hk-meetings-with-jnby-leverstyle-and-nameson?ref=asiancenturystocks.com) summarizing his views. He made the point that high US tariffs on US and Chinese imports are causing textile manufacturing to move to Vietnam. That should benefit Hong Kong-listed textile names like Nameson, and presumably also Pacific Textiles, whose new Nam Dinh plant remains underutilized. Pacific Textile's forward P/E is now 5.7x and the dividend yield is 9.0%. But I expect earnings to rise now that the Nam Dinh plant in Vietnam is finally ramping up. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/q1np4-pacific-textiles-eps.png) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-27.png) Not much news around Indonesian chocolate manufacturer [**Delfi**](https://www.asiancenturystocks.com/p/deep-dive-2012-7-delfi-ltd) *(DELFI SP — US$382 million)* (1.3% position). Temperatures keep getting colder this year, and cocoa prices are down another 10% month-on-month. That should be bullish for Delfi, whose sales and profit margins have been weighed down by weak consumer sentiment and high input costs (especially cocoa). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-204.png) Source: Trading Economics [Janeo](https://x.com/janeo1934?ref=asiancenturystocks.com) on Twitter mentioned the Singapore website InvestingNote, where there's recurring commentary about Singapore small-caps. As you can tell, [when it comes to Delfi](https://www.investingnote.com/stocks/SGX:P34?ref=asiancenturystocks.com#/all) investors have been concerned about high cocoa prices. Otherwise, no news as far as I can tell. The stock now trades at a forward P/E of 13.2x. But the normalized P/E should be closer to 8x, if and when cocoa prices ever come down to earth. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-28.png) Japanese pet insurance company [**Anicom**](https://www.asiancenturystocks.com/p/anicom-8715-jp) *(8715 JP — US$370 million)* (0.9% position) launched a [media outreach campaign](https://www.anicom-sompo.co.jp/news-release/2025/20251007-3/?%5Fgl=1%2A16hjmvi%2A%5Fga%2AMTc5OTQwNTM2Ni4xNzU5Mzk1MDIz%2A%5Fga%5FZ1WB52F59P%2AczE3NjE3OTU5NjQkbzIkZzEkdDE3NjE3OTYwMDIkajIyJGwwJGgw&ref=asiancenturystocks.com) to promote its new JARVIS Medical Center in Tokyo. Surprisingly, Anicom's operational statistics for September 2025 have still not been disclosed. I expect continued steady growth around the 10% mark. Hikari Tsushin has continued buying, raising its stake in Anicom from 11.5% to 12.6% by late September. Activist Dalton Investments has remained at 6.3% since July, and there's been no public information about its intentions. The stock has come up quite a bit, now trading at a P/E of 21.0x with a dividend yield of 1.3%. For the record, I no longer think the stock is undervalued. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/xEP16-anicom-eps.png) --- # **My plans going forward** It feels like Japan is in the later stage of a bull market. But the best value can be found in Hong Kong small caps or Southeast Asia. That's what drew me to [**Bermaz Auto**](https://www.asiancenturystocks.com/bermaz-auto-bauto-mk/), [**Hartalega**](https://www.asiancenturystocks.com/hartalega-update-hart-mk/) and [**Concepcion**](https://www.asiancenturystocks.com/concepcion-industrial-cic-pm/). And I'll continue to move the portfolio in that direction. Within the portfolio, the stocks exhibiting positive momentum in fundamentals include [**AeroEdge**](https://www.asiancenturystocks.com/aeroedge-7409-jp/), [**Anicom**](https://www.asiancenturystocks.com/anicom-8715-jp/), [**Bermaz Auto**](https://www.asiancenturystocks.com/bermaz-auto-bauto-mk/), [**Mercari**](https://www.asiancenturystocks.com/mercari-4385-jp/), [**Fairfax India**](https://www.asiancenturystocks.com/fairfax-india-fihu-cn-2024-update/), [**Concepcion**](https://www.asiancenturystocks.com/concepcion-industrial-cic-pm/), [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/), [**Koshidaka**](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) and maybe [**PSE**](https://www.asiancenturystocks.com/the-philippine-stock-exchange-pse/). In contrast, I'm not as convinced that earnings will increase as quickly for [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/), [**IMAX China**](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/), [**Lion Rock**](https://www.asiancenturystocks.com/lion-rock-1127-hk-2025-update/), [**Best Mart 360**](https://www.asiancenturystocks.com/best-mart-360-2360-hk/), [**Hartalega**](https://www.asiancenturystocks.com/hartalega-update-hart-mk/), [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/) and [**Samsonite**](https://www.asiancenturystocks.com/samsonite-1910-hk-2024-update/). But they do remain undervalued, in my view. Thank you for reading all the way to the end. If you have any questions, feel free to ask them in the comment section below! Best regards, *Michael* ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Lion Rock (1127 HK) — 2025 update URL: https://www.asiancenturystocks.com/lion-rock-1127-hk-2025-update/ Last updated: 2025-11-19T07:03:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Lion Rock at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only — not a recommendation to buy or sell shares.* ## **Summary** - I first wrote about Hong Kong-based printing company Lion Rock back in August 2024\. It's run by self-made entrepreneur CK Lau, whose previous company, Recruit Holdings, compounded capital at a +23% annual rate. - 70% of Lion Rock's revenues come from printing illustrated books, but it also owns a majority stake in UK book publisher Quarto. The printing business has significant exposure to Mainland China and is also expanding its printing operations in Malaysia and Australia. - Investors have been concerned about the risks of higher US tariffs on books imported from Mainland China. However, the tariffs remain low at just 7.5% and there's no indication that they will rise anytime soon. In addition, Lion Rock has prepared itself for such a scenario by ramping up capacity at its Malaysian plant. - Lion Rock's P/E ratio is currently about 5x with a dividend yield of 10%. It also has a net cash position equivalent to 30% of the market cap. Lion Rock's earnings growth has historically been around +4% per year, partly thanks to clever acquisitions. On 3 October, CK Lau purchased 2.2 million shares at an average price of HK$1.29/share. - That said, Lion Rock's earnings guidance is cautious, with no obvious turnaround in its slow-growing book printing business. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## **A quick background** [**Lion Rock Group**](https://www.asiancenturystocks.com/lion-rock-group-1127-hk/)*(1127 HK – US$126 million)*prints books for publishers around the world, including Penguin Random House and Simon & Schuster. It was founded by a visionary entrepreneur called Chuk Kin ("CK") Lau. I had the pleasure of meeting him in Hong Kong in mid-2024\. And my research culminated in a deep dive, which I published in August last year: [Lion Rock Group (1127 HK)Top global book printer run by a master capital allocator at 7x P/E with net cash![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-16.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f147542277_2fd3ef3a24-e0b5-4cce-a16a-2867167444f4_2ftranscoded-1723348676.jpg)](https://www.asiancenturystocks.com/lion-rock-group-1127-hk/) CK Lau has been in the printing business for over 30 years. In 1990, he was working for a printing company when he and several colleagues decided to jump ship and start their own company. This business was named **Midas Printing** and was listed on the Hong Kong stock exchange in 1996\. In the year 2000, CK Lau decided to sell his share in Midas Printing. That was close to the Dotcom bubble peak, and he managed to sell his shares at an 8.8x P/E. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-170.png) Lion Rock's CEO, CK Lau Flush with cash, CK Lau started looking for ways to deploy his cash. He quickly found the perfect acquisition target: Hong Kong-based job information portal **Recruit**. This company suffered after the Dotcom bubble, with the share price falling 94%. CK Lau accumulated a 34% stake in Recruit, took over management, and turned it around. Within a year, Recruit had become profitable again. In 2005, CK Lau pushed Recruit to set up a new printing business called 1010 Printing. The idea was to focus on cookbooks, coffee table books, children's books and primary textbooks as those segments enjoyed stronger-than-average growth compared to, say, printed novels. His new business, **1010 Printing**, became a success. In 2011, it became separately listed on the Hong Kong Stock Exchange and was distributed to Recruit's shareholders three years later. By then, Recruit's shareholders had enjoyed a +23% annual return over a period of 13 years – all thanks to the brilliance of CK Lau. Now, 1010 Printing continues to be listed on the Hong Kong Stock Exchange under its name, **Lion Rock**. It refers to a famous landmark in Hong Kong, which many locals feel emotionally attached to. And since separating from Recruit, Lion Rock has gone through an acquisition spree, starting with Hong Kong-based print services management company **Asia Pacific Offset** in 2012, then Australian printer **Opus Group** in 2014, Singapore-based printer **COS** in 2016, UK publisher **Quarto** in 2017, Malaysian printer **Papercraft** in 2020 and finally, Australian printer **Griffin Press** in 2022\. These acquisitions weren't all successes. But overall, CK Lau's discipline when it comes to M&A has proven second to none: - First of all, he only paid HK$6.3 million to acquire the initial 34% stake in Recruit. Within a year, he turned it around and achieved a profit of HK$2.6 million. That's equivalent to a P/E multiple of just 2.4x. - Second, Asia Pacific Offset was acquired for only HK$158 million in 2012\. That year, it reported roughly HK$40 million in net profit, so the purchase price equated to a P/E ratio of about 4.0x. - Finally, the predecessor of Lion Rock acquired Opus Group during its bankruptcy. It bought its debt at 44 cents on the dollar for a total of HK$150 million (about AU$30 million). After the bankruptcy, the debt was converted into equity, and the business soon showed a net profit of AU$15 million. And since then, the net profit has doubled again. With a 62% stake, that implies a forward P/E of less than 2x. So as you can tell, CK Lau is a master of M&A – a true serial acquirer, without being perceived as such. After all these acquisitions, Lion Rock has become somewhat of a printing conglomerate, centered around book printing, print management and publishing. Here's the corporate structure of the business: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-169.png) Let me explain what each of these segments means: - Book **printers** run factories with big presses that turn PDFs into physical books, complete with folds, binders, covers, etc. The printer then ships the finished books to publishers. Printers run on thin margins, and it's all about minimizing cost. Some of the higher-end books use color pages and special paper, and these books typically carry higher margins. That's why CK Lau sees opportunity in coffee table books and the like. Lion Rock's printers include China's 1010 Printing, Malaysia's Papercraft, and Australia's Opus Group, which is now listed separately as [**Left Field Printing**](https://sg.finance.yahoo.com/quote/1540.HK/?ref=asiancenturystocks.com) *(1540 HK — US$28 million)*. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-171.png) Pictures from 1010 Printing's facilities - Book **publishers** have relationships with authors and pay them for writing new books. They often provide authors with advances and then help them edit the script, the cover design, etc. Once the books have been written, publishers submit orders to printers, which then distribute them to bookstores, Amazon, libraries, schools, and so on. Bookstores pay wholesale prices, and publishers then pay royalties to the authors. Lion Rock now owns UK publisher Quarto, which focuses on arts & crafts, cookbooks, gardening, and children's books. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-172.png) Some of the types of books published by UK-based Quarto - Finally, **print management services** are basically brokers that help publishers source, price, and coordinate printing across multiple suppliers. They help consolidate freight, handle quality controls, and manage schedules to ensure that enough inventory is available at all times. By running tenders, they'll usually be able to source the best printer at the lowest price. Publishers pay a margin on top of what the printer charges, but it could be worth it through a broker if timelines are tight, volumes are low, or complex materials are used. Lion Rock owns two print management services businesses: Asia Pacific Offset and Regent Publishing Services. From Lion Rock's point of view, owning these print management services businesses helps them direct business to their own printers and thereby maximize their overall utilization rate. Lion Rock now has printers in China, Singapore, Malaysia and Australia. Roughly half of revenues come from the United States and almost 30% from Australia. There is a threat that the United States will increase its current 7.5% tariff on books imported from Mainland China. Lion Rock is, of course, aware of this risk. So it has been proactive in setting up new facilities in Malaysia that can satisfy US orders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-173.png) Most investors have an impression that the printing industry is a melting ice cube — that demand is declining on a secular basis. There is some truth to it, but not so much for Lion Rock's niche. Readers typically do not buy coffee table books, cookbooks and children's books on their Amazon Kindle devices. They are much better suited for the printed format. Overall, I think Lion Rock's business is non-growth. I don't expect much earnings growth, but no decline either. That said, COVID-19 was a difficult period for the company. Initially, it had to close down all its printing operations. Freight costs skyrocketed as consumers stayed at home and bought items online with their stimulus checks. When I met CK Lau in 2024, however, its margins had already recovered, and CK Lau said that he was *"looking at the golden years for the printing business”*. At that time, the stock traded at 6.5x P/E with a 7.0% dividend yield. Its separately listed Australian subsidiary [**Left Field Printing**](https://sg.finance.yahoo.com/quote/1540.HK/?ref=asiancenturystocks.com) *(1540 HK — US$28 million)* traded at 7.5x P/E with an 8.0% dividend yield. Finally, one of Lion Rock's parent companies, [**JcbNext**](https://finance.yahoo.com/quote/0058.KL/?ref=asiancenturystocks.com)*(JCB MK — US$56 million)*, traded at a 34% discount to its net asset value per share. The key risks, as I saw them, included continued Houthis attacks in the Red Sea, which kept freight costs high. I also speculated that we might see a stronger Japanese Yen, in which case margins would compress. Finally — and perhaps most importantly — I wondered whether we might be seeing higher US tariffs on books imported from Mainland China. --- ## **An update to my original post** Since Lion Rock's IPO in 2011, the share price has risen nicely – almost doubling, while paying generous dividends. However, over the last year, the share price has barely budged: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/bH8Ot-lion-rock-1127-hk-.png) 2024 proved to be a strong year. Lion Rock's revenues increased +4.1% year-on-year. And thanks to strong cost control, the net profit margin rose from 7.3% to 8.0%, causing the bottom-line to rise by +13.2% year-on-year. Here is what Lion Rock's historical revenue and earnings per share has looked like: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-180.png) Roughly 70% of Lion Rock's revenues come from printing, and the rest from publishing. In 2024, the printing business reported a +6.8% increase in revenues, while the publishing business reported a -1.9% decline: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-183.png) I think this improvement in Lion Rock's printing business was partly driven by a post-pandemic recovery in printing orders. Growth in China was particularly strong, with revenues increasing by +21% year-on-year. And that growth was almost entirely driven by the export market. It seems that many publishers rushed orders to mitigate the risk of Donald Trump becoming US President for a second term in early 2025\. To mitigate the risk, Lion Rock has long sought to expand capacity at its Malaysian facilities, operated through subsidiary Papercraft. And in 2024, Papercraft's revenues rose a whopping +95% year-on-year, though it remains loss-making. Efforts continue to cut costs and to fulfil orders diverted from Mainland China. Lion Rock's Australian subsidiary, Left Field Printing, reported a lower revenue of about -6% in 2024\. However, heavy cost cuts led to a 7% decline in Left Field's direct operating costs. Its profits, therefore, increased slightly. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-181.png) Publishing subsidiary Quarto reported a -1.9% decline in revenues in 2024\. It published three books about Taylor Swift, including [Big Dreams: Taylor Swift](https://www.amazon.com/Taylor-Swift-Little-People-DREAMS/dp/0711295093/ref=sr%5F1%5F1?crid=J53GJIZHIYVN&dib=eyJ2IjoiMSJ9.OzqiafE81wIJxQ9kbgXld7myBlN6%5FcM7FNHkQPzrxuhuBSKEJWg3EN7MEqGwoKjjHojqj2vs-BRw6uucYcFSJ%5FVk4aFu%5FNfLcF92GL1vO9vjibz24yqdjIugbmtSra9RWX%5FR9NCxY5IuTZArY7nGezdsNO3KNdLAs45LiGivcM9rsOr88aptQ-dCu4TYRa3xW-TFITNhiQaZCZZhA%5FLFozsuw%5Fj2hOb41wwwtwRc4QY.ZOkcwMHAU-jqygqCze3DAoEkFGtB5wAcWMtIKHewMWc&dib%5Ftag=se&keywords=Big+Dreams%3A+Taylor+Swift&qid=1761450982&sprefix=%2Caps%2C301&sr=8-1&ref=asiancenturystocks.com), which became a New York Times bestseller. According to Lion Rock, Quarto Group is currently undergoing a reset to focus more on its core strength in illustrated books, including children's books. Here is a summary of Lion Rock's 2024 financials. To summarize, revenues grew marginally in 2024 thanks to rush orders before possible increases in US tariffs on Chinese books. There was also a HK$14.5 million one-off foreign-exchange gain in 2024, which boosted overall earnings. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-186.png) This growth did not continue. In fact, in the first half of 2025, Lion Rock's top-line revenues declined by -13% year-on-year, driven by weakness in the global illustrated book market and a slump in orders due to an inventory build-up. Thanks to a HK$17.8 million increase in foreign exchange gains, net profit declined by only -3.9%. It also helped that freight rates fell, with the cost of a 40-foot container dropping by roughly half. If it weren't for these two factors, the decline in earnings would have been much greater. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-185.png) By segment, Lion Rock's printing revenues declined by -12.3% year-on-year, and publishing revenues declined by -14.1% year-on-year. China contributed negatively, while Malaysian orders continue to rise, and Australia held up well. In other news, Lion Rock's CFO, Ms Lam Mei Lan, retired back in August 2025\. She had been with the company since 2015 and was seen as a safe pair of hands. The company has now appointed Colin Wong as the new CFO. He's a Certified Public Accountant from Canada who previously served as the finance director of Hong Kong's Citybus. I think he will be a good fit for the job. So to summarize, Lion Rock's earnings in 2025 have not been strong, and I can understand why the share price has declined somewhat. That said, the lull in orders after Donald Trump's election appears to reflect a prior inventory buildup. And I don't expect this sequential decline to continue. --- ## **A 2025 earnings projection** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-190.png) When I dug into the Lion Rock story back in 2024, I noted that the company had borrowed capital from banks to acquire assets on the cheap. However, CK Lau eventually repaid those bank loans after he found it challenging to identify suitable acquisition targets. He continues to remain disciplined. Today, Lion Rock has a net cash position of HK$347 million, equivalent to roughly 30% of the market cap. This cash pile is a drag on the return on equity, but I am hopeful that CK Lau will eventually find a good use for it. The latest earnings outlook is cautious, with the company noting that competition is fierce: > "**Competitive pressures** among book printers are **expected to intensify** in the second half. A double-digit contraction in market size during the first half prompted larger printers to adopt **aggressive pricing strategies** to protect their market share. Smaller players have followed suit, often engaging in unsustainable pricing practices. This challenging environment is likely to persist until supply and demand realign, potentially through market consolidation and the exit of less competitive operators. It doesn't rule out US higher tariffs on Chinese and Malaysian book imports either: > The management is taking a cautious approach as tariff rates and exemption statuses may continue to evolve. **One possible scenario is that US courts could rule the IEEPA tariffs unlawful**, prompting the Trump administration to shift to other tariff frameworks such as Section 301 (unfair trade practices) or Section 232 (national security), under which informational books may lose their exemption. To mitigate this risk, **we are proactively diversifying both geographically** and **across the book publishing value chain**. Quarto remains the problem child, but CK Lau is proactively moving towards emerging authors, with data-driven decision making: > Quarto is currently undertaking a strategic reset of its publishing operations, encompassing both editorial focus and business processes. The initiative to publish higher-profile titles proved unsustainable, as the company’s current sales and marketing capabilities were not sufficiently equipped to support such initiatives. In response, Quarto is refocusing its publishing program toward its core mid-market audience, **prioritizing acquisitions of emerging authors** and reducing the overall number of titles to ensure greater impact and quality. On the operational front, the company is enhancing workflow systems and **adopting data-driven decision-making** to boost efficiency and responsiveness. That said, Lion Rock's earnings guidance has always been cautious. Given that Papercraft remains unprofitable and that management expects an eventual turnaround to happen, I do think that Lion Rock's net margins will hold up at the current 8% level. The foreign exchange gains in the "Other income" line item are obviously unsustainable. And I don't expect much growth in top-line revenues, at least not until CK Lau identifies a new acquisition target. So with this backdrop, I foresee Lion Rock's earnings per share dropping in 2025 and then stabilizing in the high 20s in HK$ cents, putting the P/E ratio between 4x and 5x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-187.png) Historically, Lion Rock has traded around 6x P/E, as you can tell from the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-177.png) Forward P/E. Source: TIKR It's hard to say where a printing business "should" trade. The other Hong Kong-listed printing companies are hardly profitable. But overall, if you include companies like Cimpress, the peer group trades closer to 10x P/E: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-188.png) With Lion Rock paying out roughly 50% of earnings as dividends, I expect it to continue paying HK$13 cents per share, leading to a dividend yield of 10%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-178.png) At the April 2025 annual general meeting, Lion Rock received the board's approval to repurchase 10% of its outstanding shares. However, no shares have been repurchased to date, and the share count has remained flat since 2013\. So I'm not holding out hope for any significant share buybacks. On the positive side, I'm noting that CK Lau purchased shares on 3 October 2025 through an off-market transaction. He bought 2.2 million shares at HK$1.29 per share – slightly above the current share price. This was his first buy since early 2023\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-175.png) Insider transactions in Lion Rock Group. Source: Smart Insider --- ## **Conclusion** I think CK Lau is a genius. He's ruthless about cutting costs and disciplined in acquiring new companies. That's how he's achieved a +4.1% compound annual growth rate in earnings per share over the past decade, despite operating in a no-growth industry. There are some near-term challenges, including the risks of higher US tariffs on books imported from Mainland China. In such a scenario, there's no guarantee that Lion Rock's Malaysian operations will be able to compete effectively against its Eastern European competitors. It is encouraging, however, to see CK Lau purchase 2.2 million himself. On my numbers, Lion Rock now trades at around 5x P/E with a 10% dividend yield. Printing is not the sexiest business, but the multiple is certainly on the lower side. Thanks for reading, *Michael* Further material: - Lion Rock's [2024 annual report](https://www.lionrock.hk/pdf/investor/20250423/e1127%5F250327%5Far.pdf?ref=asiancenturystocks.com) - Lion Rock's [first half 2025 interim report](https://www.lionrock.hk/pdf/investor/20250911/e1127%5F250827%5Fir.pdf?ref=asiancenturystocks.com) - Value Praya's write-up on subsidiary [Left Field Printing](https://open.substack.com/pub/prayavalue/p/left-field-printing-hkex1540?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&showWelcomeOnShare=false) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Links October 2025 URL: https://www.asiancenturystocks.com/links-october-2025/ Last updated: 2025-11-19T07:06:40.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - IJW with a short update on [**Lufax**](https://www.turtlesresearch.com/p/another-insider-trade?ref=asiancenturystocks.com) *(🇨🇳 LU US – US$2.8 billion)* - Value Zoomer on [**Haw Par Corporation**](https://valuezoomer.substack.com/p/haw-par-corporation-crouching-tiger?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) *(🇸🇬 HPAR SP — US$2.5 billion)* - Fair Value on FPSO owner [**Yinson Holdings**](https://fairyiiliew.substack.com/p/yinson-holdings-bhd-7293kl)*(🇲🇾 YNS MK — US$1.7 billion)* - Acid Investments on datacenter proxy [**Wasion**](https://acidinvestments.substack.com/p/wasion-3393hk-transformational-contract?r=2xe91&utm%5Fmedium=ios&triedRedirect=true) *(🇨🇳 3393 HK — US$1.7 billion)* - Night Watch IM on Japanese PE firm [**Integral**](https://drive.google.com/file/d/18vfpZgqSXCCAWF8KwUraXgJAVsQGb4UW/view?ref=asiancenturystocks.com)*(🇯🇵 5842 — US$724 million)* - Healthy Stock Picks: [**Modern Dental**](https://www.healthystockpicks.com/p/modern-dental-3600-hk-follow-up?ref=asiancenturystocks.com)update*(🇭🇰 3600 HK — US$645 million)* - Stone Sentinel Capital on [**Able Engineering**](https://stonescap.com/letters/q325?ref=asiancenturystocks.com) *(🇭🇰 1627 HK — US$180 million)* - Iggy on Investing discussing [**Shin Maint**](https://iggyoninvesting.substack.com/p/shin-maint-japans-hidden-marketplace)*(🇯🇵 6086 JP — US$143 million)* - Net-Net Hunter on property developer [**Noda**](https://netnethunterjapan.substack.com/p/noda7879)*(🇯🇵 7879 JP — US$72 million)* - Nitin Gupta on Japanese cult brand [**Hobonichi**](https://x.com/nitinkinvests/status/1969048205615562866?ref=asiancenturystocks.com) *(🇯🇵 3560 JP — US$51 million)* Out of these, I would like to highlight: 1. Acid Investments on the data center beneficiary [**Wasion**](https://acidinvestments.substack.com/p/wasion-3393hk-transformational-contract?r=2xe91&utm%5Fmedium=ios&triedRedirect=true). The company makes smart meters that help monitor energy usage. Acid makes the argument that Wasion benefits from China's GDS's overseas data center capex, especially in the Singapore-Johor-Batam AI hub. He expects CNY 1.1 billion of order delivery from GDS this year and another CNY 1.2 billion next year. On Acid's numbers, the stock trades at 7.8x current-year EBITDA, a significant discount to most other datacenter beneficiaries. 2. Healthy Stock Picks' update on [**Modern Dental**](https://www.healthystockpicks.com/p/modern-dental-3600-hk-follow-up?ref=asiancenturystocks.com). The company primarily sells prosthetic devices, including crowns and bridges, to replace missing or damaged teeth. Last year's earnings were strong, bolstered by the strength of the European business and the strong Euro. Some investors are concerned that 3D printers could disrupt Modern Dental's business, as dentists will be able to produce crowns and bridges on-site. However, the quality of Modern Dental's products is superior to that of 3D-printed versions. And small clinics will struggle to justify significant investments in 3D printing machinery. Modern Dental's current-year P/E ratio is now 9.4x. 3. Night Watch IM on the Japanese private equity firm [**Integral**](https://drive.google.com/file/d/18vfpZgqSXCCAWF8KwUraXgJAVsQGb4UW/view?ref=asiancenturystocks.com). It generates revenue similarly to Blackstone and KKR: by managing funds and collecting management and performance fees from them. In 2025, Integral launched Fund V, which caused assets under management to skyrocket by +135% overnight. Integral is now setting its sights on Fund VI, which could be even larger. Japanese pension funds allocate only 1% to PE, compared to 10-30% in the US. Integral is conservative in its valuation marks, averaging around 5-6x EBITDA. On my numbers, Integral now trades at 0.20x EV/AUM. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - [**Russell Napier et al**](https://ebs.online.hw.ac.uk/EBS/media/EBS/PDFs/Practical-History-Financial-Markets-Course-Taster.pdf?ref=asiancenturystocks.com): Practical History of Financial Markets (116 pages) - [**Sector Stories**](https://sectorstories.substack.com/p/sector-story-flavours-and-fragrances?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2): Introduction to the flavours & fragrances industry (10 mins) - [**Value Zoomer**](https://valuezoomer.substack.com/p/an-exploration-of-leveraged-etfs): An exploration of leveraged ETFs (8 mins) - [**Raghav Kapoor**](https://drive.google.com/file/d/1Nxc40g9QNos7X3oleptDSKTEFMtX5YYj/view?ref=asiancenturystocks.com): Value-Up as next chapter for Singapore equities (6 mins) - [**John Hempton**](https://johnhempton.substack.com/p/bucket-shops-crypto-and-flash-crashes?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2): Bucket shops, crypto, and flash crashes (5 mins) - [**Pangolin Asia Fund**](https://storage.e.jimdo.com/file/a1a0a40a-e00f-4cf7-82f9-e0541a9b5eac/Pangolin%20Investor%20Conference%20September%202025.pdf?ref=asiancenturystocks.com): Notes from the Sep 2025 investor conference (5 pages) - [**Compound with AI**](https://news.aiinvestinghq.com/p/the-google-ai-that-makes-research?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com): How to use Google's NotebookLM (4 mins) - [**Michael Dunne**](https://newsletter.dunneinsights.com/p/how-china-is-gutting-western-automakers?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2): How China is gutting Western automakers (4 mins) - [**TickerTrends**](https://blog.tickertrends.io/p/pop-mart-labubu-collectibles-demand-trends?ref=asiancenturystocks.com): Pop Mart faces cooling demand for Labubu dolls (3 mins) - [**Clark Square Capital**](https://x.com/ClarkSquareCap/status/1970867210806800760?ref=asiancenturystocks.com)'s recurring idea thread, this from Sep 2025 (3 mins) I think you will find [**Compound with AI**](https://news.aiinvestinghq.com/p/the-google-ai-that-makes-research?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com)'s post on NotebookLM helpful. It's a tool from Google that helps you upload documents and analyze them through an AI model. The author provides a prompt for generating an analyst-style report within NotebookLM. He also discusses how you can upload 5-10 years' worth of annual reports, and then use NotebookLM to understand the drivers behind the historical performance. Finally, he argues that you can use NotebookLM to analyze management's behavior and hopefully spot patterns. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**Brad Setser**](https://open.spotify.com/episode/6fPAybWsdSfYWmarBCUUew?si=2f09082b5c294c54&ref=asiancenturystocks.com) on China's recent export boom (1:15 hours) - [**Marc Andreessen**](https://www.youtube.com/watch?v=m6bkPPXHWX0&ref=asiancenturystocks.com) on why Hollywood has done poorly recently (1:09 hours) - [**Paul Cavey**](https://pocketcasts.com/podcast/macro-hive-conversations-with-bilal-hafeez/a0aa9710-4abf-0138-977d-0acc26574db2/ep-330-paul-cavey-on-us-china-trade-war-japan-politics-and-taiwan-imbalances/e9194c8a-8b93-4d67-820f-2fae44793225?ref=asiancenturystocks.com) on China's property market, the value of the NTD, etc. (56 mins) - [**Tian Yang**](https://open.spotify.com/episode/4ZMk5sJxtp2cek8shCdhUV?si=1d9dc8d238954567&ref=asiancenturystocks.com) thinks Chinese private sector activity is recovering (53 mins) - [**Forrest Li**](https://www.youtube.com/watch?v=6FTdUO8D20o&ref=asiancenturystocks.com) on his experience building Singapore's Sea Limited (49 mins) - [**Dom St George**](https://www.youtube.com/watch?v=rH%5FK8SjTtSM&ref=asiancenturystocks.com) on HK conglomerate Jardine Matheson (44 mins) - [**Shri Dodani**](https://open.spotify.com/episode/6LWDQViv58fbf2aDHAOw0A?si=3851391d3a134487&ref=asiancenturystocks.com) on Japan's venture capital market (37 mins) - [**Jim Mellon**](https://www.youtube.com/watch?v=MQgWZLugQTw&ref=asiancenturystocks.com) is bearish on US equities and bullish on Chinese (36 mins) - [**J Michael Cole**](https://open.spotify.com/episode/61sEBWF5mSd44QQdZYwBDT?si=c361ea34b86a45aa&ref=asiancenturystocks.com) on the threat of a Taiwan invasion (30 mins) - [**JapaneseIPO**](https://japaneseipo.substack.com/p/alphapolis-9467-what-asset-management?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) discussing the case for anime publisher AlphaPolis (8 mins) I highly recommend listening to [**Marc Andreessen**](https://www.youtube.com/watch?v=m6bkPPXHWX0&ref=asiancenturystocks.com)'s explanation for Hollywood's current malaise. He argues that the 3-5 year lead time for producing a movie means that what's screening today was green-lighted in the midst of the COVID-19 pandemic. So the negative impact of the pandemic is still being felt. Furthermore, he thinks that online streaming cut off some of the financial upside previously provided by DVD sales. "Wokeness" also hurt the industry, as many movies became a form of political propaganda. Andreessen thinks the wokeness era is over. There's also newfound optimism about AI-generated films, which some believe might mark the beginning of a new era for the industry. If so, distributors such as cinema operators could potentially benefit. --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fd0179d0-2d5a-4a35-b2e9-a9fda759e9ce_1100x85.png) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-167.png) Website traffic for Pop Mart's Chinese and international websites is now declining, indicating a weakening demand for Labubu dolls since July 2025\. Source: TickerTrends ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors Join free Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ### Hidden Champions of Australia URL: https://www.asiancenturystocks.com/hidden-champions-of-australia/ Last updated: 2025-10-28T01:35:49.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- ****Summary**: This post is another attempt to identify "hidden champions" in different geographies. This time, I'll focus on hidden champions in Australia. It's a developed market with a large number of innovative companies. And the long-term stock price performance of Australian equities has been exceptionally strong. Some of the hidden champions I've been able to identify include ResMed for sleep apnea devices, Cochlear for hearing implants and Pro Medicus for medical imaging software. In the next few weeks, I am considering writing deep dives on either Treasury Wine Estates or IDP Education. Australia is part of my coverage universe. I just haven't focused much on the country in the past few years. The only deep dives I've published so far have been on [Codan](https://www.asiancenturystocks.com/deep-dive-2022-29-codan-cda-au/), [Tabcorp](https://www.asiancenturystocks.com/deep-dive-2022-28-tabcorp/), [Sierra Rutile](https://www.asiancenturystocks.com/sierra-rutile-srx-au/) and [Ten Sixty Four](https://www.asiancenturystocks.com/deep-dive-2022-12-ten-sixty-four/). In this post, I'll delve deeper into Australian companies that dominate their niches and might be able to compound their capital at a rapid rate. I've searched for similar "hidden champions" before, across [Taiwan](https://www.asiancenturystocks.com/hidden-champions-of-taiwan/), [Indian ADRs/GDRs](https://www.asiancenturystocks.com/hidden-champions-among-indias-adrsgdrs/), [Chinese ADRs](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/), [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/), [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/) and [Malaysia](https://www.asiancenturystocks.com/hidden-champions-of-malaysia/). Please note that I pay no attention to share prices, so do not take the following discussion as investment advice. I'm simply trying to identify some of the best businesses in Australia. ``` Table of contents: 1. A top-down view 2. Screening for candidates 3. Hidden champions of Australia 3.1. CSL 3.2. Macquarie 3.3. ResMed 3.4. Atlassian 3.5. Aristocrat Leisure 3.6. Brambles 3.7. Pro Medicus 3.8. REA Group 3.9. WiseTech 3.10. Xero 3.11. Computershare 3.12. Lynas Rare Earth 3.13. James Hardie 3.14. Cochlear 3.15. ASX 3.16. Orica 3.17. Codan 3.18. Treasury Wine Estates 3.19. Ansell 3.20. Breville 3.21. Catapult 3.22. IDP Education 3.23. Nanosonic 3.24. Jumbo Interactive 3.25. Seeing Machines 4. Conclusion ``` --- # 1\. A top-down view ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-64.png) To start with the absolute basics: Australia is obviously a massive continent, comprising the Mainland and Tasmania. However, despite its size, it has only 28 million people, most of whom live near urban centres such as Sydney, Melbourne, Adelaide, Brisbane and Perth. Australia became a federal state in 1901 by combining six British colonies into one: New South Wales, Victoria, Queensland, South Australia, Western Australia and Tasmania. Today, it also has two additional territories: the Australian Capital Territory and the Northern Territory. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-65.png) There's been some degree of economic specialization over time. **New South Wales** has the greatest population and a Sydney service economy centered around finance, healthcare and tech. **Victoria** **Tasmania** sells agricultural products, salmon farms, forestry and beverages. **South Australia**, the home state of Adelaide, is big in defense, vineyards and copper mining. **Western Australia** is mostly desert and rich in natural resources such as iron ore, gold and LNG, with most companies based in Perth. **Queensland** has large coal deposits and attracts tourists to the Great Barrier Reef. The **Australian Capital Territory**'s Canberra focuses on government services, including defense and cybersecurity. Finally, there's the Northern Territory, which has natural resources, including LNG, as well as defense operations. Australia's GDP per capita has been relatively close to that of the United States, although it has fallen behind in recent years. It's currently around US$60,000\. Some blame record immigration, but it could also be due to an undervalued currency or exposure to falling commodity prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-66.png) Living standards remain high, with residential floor space per capita close to Canada's, though lower than that of the United States: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-67.png) What explains this success? Clearly, a wealth of resources, especially in Western Australia. In fact, the GDP per capita for Western Australia is almost double that of Victoria and South Australia. Another explanatory factor could be a strong rule of law. I'm also noting that much of Australia's exports are to the United States, and it might help that they share the same language. Trading in stocks has been around since the 1800s, following the gold rush in Victoria and New South Wales. And independent exchanges were popping up in Brisbane, Adelaide, Hobart and Perth. In 1987, they eventually all merged formed the Australian Securities Exchange, with its headquarters in Sydney. Research shows that between 1900 and 2019, Australian equities have performed exceptionally well, with real annualized returns of +6.8% per year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-164.png) Source: Credit Suisse I've downloaded a list of all companies with primary listings in Australia that have a market capitalization above US$50 million. The list has a total of 750 companies. If your cutoff point is US$1 billion, you'll end up with a list of about 200 companies. The key benchmark index S&P/ASX 200 is a value-weighted index with the 200 largest companies, too. It's performed well, being in a clear bull market since 2023: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/WXVsN-s-amp-p-asx-200-local-currency-.png) Source: TIKR That said, it's definitely not a cheap market anymore. The S&P/ASX 200 now trades at a P/E of 22.6x. And that's an average, so many stocks trade well above that - potentially due to the impact of Australia's Superannuation funds, which buy local shares without much regard for value. The index-level return on equity of 15% is on par with India's and Taiwan's, though lagging the United States' 20% level. Here's what the market cap composition looks like: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-68.png) As you can tell, financials and the materials sector make up more than 50% of the total market cap. The rest is a mix of industrials, consumer, healthcare, IT stocks, etc. The largest companies with primary listings in Australia include banks such as CBA, NAB and Westpac, miners such as BHP and Fortescue, industrials companies such as Brambles, consumer names such as Wesfarmers and Aristocrat Leisure, healthcare companies such as CSL and Cochlear and many others. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-69.png) After spending almost a week researching Australian-listed stocks, I'm definitely impressed with the quality of some of them. It's also worth noting that Australian shares are accessible through Interactive Brokers, and all disclosures are made in English. --- # 2\. Screening for candidates Let’s dig deeper into individual companies that exhibit hidden champion-like characteristics, including: - High historical average return on equity - High growth in earnings per share - Strong share price performance So I've identified the top ten companies in Australia in terms of a high *return on equity*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-70.png) However, almost all of these companies are exploration companies that have one-off success. While some management teams are clearly superior, I doubt that their success will be replicable. But in any case, let me talk about what these companies do. [**Lion Rock Minerals**](https://finance.yahoo.com/quote/LRM.AX/?ref=asiancenturystocks.com)is an early-stage Cameroon-based exploration company for rutile, which is a feedstock for titanium dioxide. [**Tali Resources**](https://finance.yahoo.com/quote/TSK.TO/?ref=asiancenturystocks.com) is another exploration company operating in West Arunta in Western Australia. [**Fluence Corporation**](https://finance.yahoo.com/quote/FLC.AX/?ref=asiancenturystocks.com)sells water & wastewater treatment systems and earns recurring revenues from operating and maintaining completed plants. [**Elsight**](https://finance.yahoo.com/quote/ELS.AX/?ref=asiancenturystocks.com) sells "Halo" branded connectivity hardware and software that links 5G, radio and satellite links so that drones can stay connected. [**Northern Minerals**](https://finance.yahoo.com/quote/NTU.AX/?ref=asiancenturystocks.com)develops the Browns Range heavy rare earths project. [**Recce Pharmaceuticals**](https://finance.yahoo.com/quote/RCE.XA/?ref=asiancenturystocks.com) is an early-stage biotech company developing a new class of anti-infectives. It's unclear why its return on equity is high. [**Metal Powder Works**](https://finance.yahoo.com/quote/MPW.AX/?ref=asiancenturystocks.com) sells specialty metal powders for additive manufacturing / 3D printing. [**Qantas Airways**](https://finance.yahoo.com/quote/QAN.AX/?ref=asiancenturystocks.com) is the largest airline of Australia. Finally, [**Broken Hill Mines**](https://finance.yahoo.com/quote/BHM.AX/?ref=asiancenturystocks.com) mines silver-lead-zinc concentrates from the Rasp and Pinnacles mines at Broken Hill in New South Wales. Let's take another approach instead. Here are the Australian companies that have performed best in terms of share price return CAGR: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-71.png) The top 10 includes [**Capricorn Metals**](https://finance.yahoo.com/quote/CMM.AX/?ref=asiancenturystocks.com), which is a gold miner in Western Australia. Then you have [**Pro Medicus**](https://finance.yahoo.com/quote/PME.AX/?ref=asiancenturystocks.com), which produces a SaaS type medical imaging software that lets radiologists view CT and MRI scans fast. [**ioneer**](https://finance.yahoo.com/quote/INR.AX/?ref=asiancenturystocks.com) is a lithium miner with a US operation in Nevada. [**Genesis Minerals**](https://finance.yahoo.com/quote/GMD.AX/?ref=asiancenturystocks.com) is another gold miner with a presence in Leonara in Western Australia. [**Alpha HPA**](https://finance.yahoo.com/quote/A4N.AX/?ref=asiancenturystocks.com) is a high-purity alumina and aluminium salt operation used in LEDs, semiconductors and batteries. [**Bellevue Gold**](https://finance.yahoo.com/quote/BGL.AX/?ref=asiancenturystocks.com) is another gold miner in Western Australia. [**Lynas Rare Earths**](https://finance.yahoo.com/quote/LYC.AX/?ref=asiancenturystocks.com) is the largest rare earth miner outside of China, and therefore strategically important. [**HUB24**](https://finance.yahoo.com/quote/HUB.AX/?ref=asiancenturystocks.com)is an investment and wealth management platform, allowing financial advisors to manage client portfolios directly through the website. [**Codan**](https://finance.yahoo.com/quote/CDA.AX/?ref=asiancenturystocks.com) is the world's leading producer of metal detectors, and also sells high-frequency radios for defense and NGO use. Finally, [**NRW**](https://sg.finance.yahoo.com/quote/NWH.AX/?ref=asiancenturystocks.com) is a mining and civil contractor, building mines, roads, dams, railways, etc. I think that several of these companies exhibit hidden champion-like qualities. Finally, here are the top 10 companies in terms of their yearly earnings growth: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-72.png) This list also includes [**Pro Medicus**](https://finance.yahoo.com/quote/PME.AX/?ref=asiancenturystocks.com), the medical imaging SaaS company. Then we have [**Joyce Corporation**](https://finance.yahoo.com/quote/JYC.AX/?ref=asiancenturystocks.com), a franchisor of consumer chains, specifically bedding and kitchen renovation brands. [**Capricorn Metals**](https://finance.yahoo.com/quote/CMM.AX/?ref=asiancenturystocks.com) is another gold miner in Western Australia. [**Waterco**](https://finance.yahoo.com/quote/WAT.AX/?ref=asiancenturystocks.com)manufactures pumps, filters, heaters, tanks, etc. [**Lovisa Holdings**](https://finance.yahoo.com/quote/LOV.AX/?ref=asiancenturystocks.com) is a jewelry chain with its own products sold in proprietary stores around the world. [**Pinnacle Investment Management**](https://finance.yahoo.com/quote/PNI.AX/?ref=asiancenturystocks.com) is a multi-boutique asset manager, owning stakes in independent fund managers and then distributing their funds. [**Newfield Resources**](https://sg.finance.yahoo.com/quote/NWF.AX/?ref=asiancenturystocks.com)has a diamond project in Sierra Leone, but has not yet reached production. [**Lycopodium**](https://sg.finance.yahoo.com/quote/LYL.AX/?ref=asiancenturystocks.com) is an engineering business focusing on the mining industry. [**Northern Star Resources**](https://sg.finance.yahoo.com/quote/NST.AX/?ref=asiancenturystocks.com)is another gold miner with key assets in Kalgoorlie, Western Australia and Alaska. And finally, [**Capral**](https://sg.finance.yahoo.com/quote/CAA.AX/?ref=asiancenturystocks.com) makes aluminium extruded profiles for buildings and transport. So that's just a highlight of the companies that have performed well over the past decade or so, both in terms of their financials and share price appreciation. But I'll dig even deeper than this. In the past week, I've gone through the list of 750 or so companies with market caps above US$50 million. I’ve ranked them in terms of return on equity, historical price performance and earnings per share growth. Companies with above 10% return on equity / yearly total return / EPS growth are marked with a green background colour. You can find the full list here: [Australia Hidden ChampionsAustralia Hidden Champions.xlsx97 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/Australia-Hidden-Champions-3.xlsx "Download") --- # 3\. Hidden champions of Australia After reviewing the spreadsheet, I created a list of 25 hidden champions. I've looked for typical franchise characteristics: monopoly-like market positions with economies of scale, superior products, strong R&D, large distribution networks, strong brand names, excellent CEOs or companies sitting on rare natural resources. Note that I've also included several US-listed Australian stocks such as Atlassian and ResMed, just for completeness. In any case, here is the full list, ranked from the highest market cap to the lowest: ## 3.1\. CSL ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-151.png) [**CSL**](https://finance.yahoo.com/quote/CSL.AX/?ref=asiancenturystocks.com) *(CSL AU – US$69 billion)* is one of the global leaders in plasma-therapies, as well as a leader in the development of seasonal influenza vaccines. In its plasma business, CSL collects blood from patients and then processes the plasma before selling it on to hospitals and distributors. The end product helps patients with missing antibodies fight diseases. Other parts of the plasma can be used for surgery/trauma cases where blood volume expansion is needed. CSL's subsidiary Seqirus manufactures vaccines and sells them to governments, pharmacies, hospitals, etc. CSL also has a number of speciality drugs, including iron and renal therapies, sold to infusion centres and dialysis providers. One of the competitive advantages of CSL is having one of the largest donor networks globally. It's also built up manufacturing know-how over many decades. Its unit costs are apparently lower than those of Spanish competitor Grifols and Japanese competitor Takeda. CSL's earnings per share has grown nicely over time, at a compound annual growth rate of +12% over the past two decades. The market itself seems to be growing in the mid- to high-single digits. CSL's earnings per share seem to have shot up further thanks to the acquisition of Vifor Pharma in 2022 for US$12 billion. And value could potentially be unlocked through the spin-off of the Seqirus vaccine business in early 2026\. Key risks for CSL include regulatory pressures, including reimbursement rates and approvals for new vaccines. There's also seasonality in CSL's vaccine business, making near-term earnings unpredictable. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/7JH1d-csl-earnings-per-share-.png) --- ## 3.2\. Macquarie ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-158.png) [**Macquarie Group**](https://finance.yahoo.com/quote/MQG.AX/?ref=asiancenturystocks.com) *(MQG AU – US$54 billion)* is an Australian investment bank that's become a global leader in managing infrastructure funds. Its asset management division manages funds, with a particular focus on infrastructure assets such as toll roads, airports, telecom towers, data centers, etc. Its income comes from base fees, performance fees, and direct balance sheet exposure. Macquarie also trades commodities such as natural gas and crude oil. It has a corporate finance arm, which acts as an advisor and underwriter both internally and for third-party clients. It's ranked #1 in Australia but remains a niche player globally. Finally, Macquarie also has an Australian retail banking arm where it earns money through net interest income and credit card fees. I think Macquarie's reputation as an infrastructure investor has probably helped it raise capital. It currently manages a whopping AU$1 trillion from superannuation funds and institutional investors. The funds usually carry leverage, leading one sell-side analyst to refer to Macquarie as "the house that debt built". But its own balance sheet is conservatively managed, which explains why it was able to survive the Great Financial Crisis unscathed. The growth outlook seems decent. Macquarie recently sold Aligned Data Centers at a high valuation, and that capital will be reinvested. It has a large and growing private credit book, an asset class that has become popular among investors. However, with leveraged funds, Macquarie certainly has exposure to the interest rate cycle as well as commodity price volatility. The investment banking business is also cyclical, as we saw between 2008 and 2015\. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/Lk2ci-macquarie-earnings-per-share-.png) --- ## 3.3\. ResMed ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-145.png) [**ResMed**](https://finance.yahoo.com/quote/RMD/?ref=asiancenturystocks.com) *(RMD US — US$39 billion)* is a global leader in sleep apnea and respiratory devices. It's an Australian company that now has a large footprint, including in the United States, where its headquarters are now based. Sleep apnea devices keep your airway open while you sleep. It's for individuals whose throats have a tendency to collapse during sleep due to obesity or other causes, allowing for better sleep and less snoring. The device itself sends pressurized air through a mask to make sure the throat stays open. ResMed also has a related app that shows your sleep quality and whether any apnea event has occurred. Over 100 million people now use ResMed products and the related app. The company sells its products via distributors and retailers to end customers. It also sells consumables such as masks through a razor-and-blade type business model. ResMed also has a SaaS business that allows doctors to track patient sleep quality through the cloud. ResMed's growth has been impressive over time, with a compound annual growth rate of +16% over the last two decades. Aging populations, higher obesity rates and a greater penetration rate all contribute to growth. In recent years, growth has been boosted by competitor Philips recalling a significant number of sleep apnea devices in the US after it failed to meet FDA requirements, allowing ResMed to take market share. One risk is that GLP-1 drugs reduce obesity to such an extent that sleep apnea devices are no longer needed. There doesn't seem to have been much of an impact yet, but it remains a fear among investors. Another risk is changes to reimbursement rates for CPAP machines. However, steady growth is probably a decent base-case assumption. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/tUzBe-resmed-earnings-per-share-.png) --- ## 3.4\. Atlassian ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-144.png) [**Atlassian**](https://finance.yahoo.com/quote/TEAM/?ref=asiancenturystocks.com) *(TEAM US – US$39 billion)* makes software for team collaboration. Its software products include **Jira** for planning and tracking, **Confluence** for knowledge building, **Trello** for visual work management, Git repository management service Bitbucket and Loom for video-based collaboration. Atlassian's products are mostly on a freemium model, with monthly subscriptions for added features. Atlassian's server support ended in 2024, moving the new business entirely to the cloud. Today, subscriptions account for more than 95% of Atlassian's revenues. Atlassian enjoys strong network effects across several of its products. Jira and Confluence have become the de facto standards for team collaboration. There's significant lock-in and ecosystem dependency for its users. Another competitive advantage is Atlassian's marketplace, which extends the functionality of its core suites through 5,700+ apps. One question mark is whether generative AI tools will kill the SaaS industry. But I personally think that it will also allow companies like Atlassian to innovate faster and thus increase the total size of the pie. One risk is Atlassian's stock-based compensation, as it has kept reporting negative earnings since 2017\. But Atlassian's revenues have compounded at a +32% annual rate. And there's every reason to think that growth will continue. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/2cxEG-atlassian-earnings-per-share-.png) --- ## 3.5\. Aristocrat Leisure ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-139.png) [**Aristocrat Leisure**](https://finance.yahoo.com/quote/ALL.AX/?ref=asiancenturystocks.com) *(ALL AU — US$26 billion)* is one of the world's largest producers of slot machines, with a #1 position in North America and Australia/NZ. Aristocrat's slot machines are sold directly to casinos or leased to them. The company also sells casino ERP systems, which include accounting, managing loyalty programs and the operational side of running a casino. More recently, Aristocrat has moved into mobile games through its subsidiary Pixel United. These casino-style games are free to play but monetized through in-app purchases. Finally, Aristocrat has websites where you can gamble with real money across poker, bingo, sports betting, etc. The slot machine division has a huge presence in North America. And with a large installed base of slot machines, it enjoys recurring revenues. The gaming division grew through the acquisition of NeoGames in 2024 and suffers from greater competition. In the past 20 years, Aristocrat has compounded its earnings per share at +7% annually. While there is cyclicality, it's also benefiting from secular growth in its online gambling segment. Aristocrat is also buying back shares aggressively, including AU$1.85 worth of shares in the 12 months to January 2025\. The key risks in the industry are mostly related to regulations. Products need approvals, there are typically limits on advertising, increasing the cost of customer acquisition, and gambling rules dictate what can be offered to customers and not. Another risk is that IGT and Everi have merged, potentially making them a more formidable competitor in the future. Finally, casino capex tends to be cyclical, and Aristocrat's earnings indeed dropped after the 2008 financial crisis. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/0qYaA-aristocrat-leisure-earnings-per-share-.png) --- ## 3.6\. Brambles ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-135.png) [**Brambles**](https://finance.yahoo.com/quote/BXB.AX/?ref=asiancenturystocks.com) *(BXB AU - US$22 billion)* operates the world's largest pallet pooling network. Manufacturing companies rent CHEP-branded pallets from Brambles. They then use these pallets to ship goods to customers. Brambles eventually retrieves the pallets, repairs them and redeploys them into the network. How do they make money? Through rental fees, surcharges to account for the cost of redeploying the pallets elsewhere and compensation for lost or damaged pallets. There are clear network effects in the pallet pooling business. With a large network, Brambles has a high likelihood of being able to redeploy pallets close to where they end up, improving unit costs. Brambles' pallets are also integrated into customers' warehouse and logistics systems, causing some switching costs. Brambles does have some competition regionally. For example, in the United States, PECO is a major competitor. La Palette Rouge dominates in Europe and Loscam in Asia. Growth has been decent, though not spectacular. Brambles' earnings per share has increased by a compound annual growth rate of +5% in the past ten years. In the last year, group-wide sales grew by only +3%. M&A is a possible growth avenue. Some speculate that Brambles could eventually acquire Loscam. But nothing is on the table right now. Most of Brambles' pallets are made out of wood. There was previously a push by some retailers, including Costco, to move towards plastic pallets, which are more expensive and would destroy Brambles' unit economics. But Costco's initiative was eventually put on hold, at least for now. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/g38qX-brambles-earnings-per-share-.png) --- ## 3.7\. Pro Medicus ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-130.png) [**Pro Medicus**](https://finance.yahoo.com/quote/PME.AX/?ref=asiancenturystocks.com) *(PME AU – US$20 billion)*is a Melbourne-based company that's developed an imaging software called Visage. Visage is a SaaS product that allows doctors to view a variety of scans on any device. Such scans include X-rays, CT scans, MRIs, ultrasound, mammography scans, etc. The software is delivered over the cloud, and the payment is done via transaction-based payments, dependent on the volumes handled. Contracts with key hospitals are long-term in nature (5-10 years) with minimal churn. The competitive advantage is partly learning based. Doctors are unlikely to switch away to competing software once they've got used to a certain software suite. The so-called DICOM scans are also archived in the software, with migrations being costly and troublesome. In Pro Medicus's key US market, it has a market share of 7-8%. The key competitor seems to be Sweden's Sectra. The growth outlook seems decent, with FY2025 North American revenues +36% year-on-year. Management is now shifting its focus to Europe. Pro Medicus's earnings per share has risen +17% annually over the past 20 years, and it looks like growth is going to continue at a steady pace. The key risk is its reliance on a small number of very large contracts with US hospitals. They could easily shift to similar solutions by Sectra, with the latter winning several recent tenders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/obJbT-pro-medicus-earnings-per-share-.png) --- ## 3.8\. REA Group ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-147.png) [**REA Group**](https://finance.yahoo.com/quote/REA.AX/?ref=asiancenturystocks.com) *(REA AU — US$19 billion)* is the owner of property portals in Australia and beyond, with a primary focus on its website [realestate.com.au](https://www.realestate.com.au/?ref=asiancenturystocks.com). REA also owns a number of smaller websites including [Realcommercial](https://www.realcommercial.com.au/?ref=asiancenturystocks.com) (for commercial property) [Flatmates](https://flatmates.com.au/?ref=asiancenturystocks.com) (for shared accommodation), [Mortgage Choice](https://www.mortgagechoice.com.au/?ref=asiancenturystocks.com) (for mortgage broking) and [PropTrack](https://www.proptrack.com.au/?ref=asiancenturystocks.com) (for property data & analytics). It previously owned a stake in Singapore's PropertyGuru, but it sold down the stake in connection with a privatization deal in 2024\. Property agents or sellers of homes go to the website to list their properties. If they pay extra, they'll get greater visibility for their listings. Agents also pay subscription fees and are able to play display ads for extra money. The data that REA collects is sold to banks, insurance companies and property agencies. Finally, REA makes money by connecting home buyers with bank lenders, earning commissions for each transaction. The core platform has clear network effects. Just like in the case of PropertyGuru, the category leader attracts the most home buyers, and the platform with the most home buyers attracts the most property agents. In addition, the listing fees are paid by the vendors, and they tend to have deep pockets since a successful transaction can make them tens of thousands, if not hundreds of thousands, extra. REA's growth has been impressive, with a compound annual growth rate of +24% over the past two decades. This growth has been driven by higher property prices, greater listing volumes as the industry moved online and better monetization through REA's data products. It is a cyclical industry, however. There will come a time when sellers and real estate agents push back against high pricing. Although so far, so good. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/BWfVH-rea-group-earnings-per-share-.png) --- ## 3.9\. WiseTech ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-133.png) Sydney-based [**WiseTech**](https://finance.yahoo.com/quote/WTC.AX/?ref=asiancenturystocks.com) *(WTC AU – US$18 billion)* is a global leader in software for freight forwarding companies. Its core product, CargoWise, is deployed across 24 out of the top 25 freight forwarders in the world. It's also used by customs brokers and other logistics providers. These companies use the platform to keep track of bookings, paperwork, individual containers and billing. Customers put in orders and get quotes with prices and pick-up dates. When accepted, the quote turns into a live shipment, and bookings are made automatically with airlines or shipping companies. They then handle customs and compliance issues through the software. 99% of WiseTech's revenues are recurring, with a mix of usage fees and licensing fees. The platform is on the cloud, and payment is done periodically with a typical SaaS model. The platform has strong network effects. Shipping carriers and governments are deeply embedded in the platform, and customers are drawn to it for that very reason. The customer attrition rate has been less than 1% over the past 13 years. In the past ten years, the compound annual growth rate for WiseTech's earnings per share has been 31%. The forward guidance points to continued double-digit growth. CargoWise's new pricing model is going to be launched soon, and the penetration rate and monetization rates are both expected to rise with it. In 2025, a large number of independent directors departed the company over founder Richard White's role as Executive Chairman. He's a controversial individual with a history of sexual misconduct. There are competitors to WiseTech, including transport management systems, Descartes platforms and similar platforms hosted by SAP and Oracle. But it looks like CargoWise is the leader in terms of its global market share. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/Bv1B5-wisetech-earnings-per-share-.png) --- ## 3.10\. Xero ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-140.png) [**Xero**](https://sg.finance.yahoo.com/quote/XRO.AX/?ref=asiancenturystocks.com) *(XRO AU – US$17 billion)* is one of the leading cloud accounting software suites in the world, with 4.4 million customers. Xero helps small- and medium-sized enterprises with their accounting, invoice management and related services. Customers pay monthly on a subscription basis. Xero also has its own app store with add-ons, from which it collects 15% of the revenues. The most popular add-ons include connections to Amazon or Shopify stores, the no-code automation service Zapier, payroll services, tax filing services and HR management. Once a company starts using Xero, it will most likely continue using it. The app store adds value to the customer and increases the switching costs. The software also ends up integrated with customer workflows, making it challenging to switch to a competing provider. The monthly churn rate of 1.0% is decent, though actually higher than some of its global competitors. Xero dominates its home market of New Zealand and Australia. Elsewhere, it faces competition from Intuit and Sage/MYOB. It has been making progress in the UK but the reality is that customer acquisition costs remain higher overseas than at home. That said, Xero's earnings have grown nicely, going from heavy losses in 2023 to a 13% return on equity today. The key risks are competition from Intuit and other software developers. There could also be pushback from Xero's recent price increases. Ten years ago, it used to cost AU$10/month and higher, and now the software starts at AU$30/month. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/EdYLK-xero-earnings-per-share-.png) --- ## 3.11\. Computershare ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-136.png) [**Computershare**](https://sg.finance.yahoo.com/quote/CPU.AX/?ref=asiancenturystocks.com) *(CPU AU — US$14 billion)* is the world's largest transfer agent and share registrar by scale. It has a massive presence in North America. The company's three divisions help companies in different ways: - **Issuer services**: In this segment, Computershare maintains shareholder registers. If shares are sold, then Computershare helps process transfers to new owners. It also helps with lost certificates, corporate actions and proxy votes during annual general meetings. Fees are charged on a per-holder basis when it comes to maintaining shareholder registers. For each event or transaction, like an IPO or a rights issue, the company will charge a one-off fee. And it will also charge per outbound package if it needs to send communication material to shareholders. - **Corporate trust**: In this segment, Computershare is a trustee for structured finance deals. It sets up corporate debt structures like CLOs, ABS, RMBS, CMBS, etc. When events happen, Computershare carries out the instructions, including paying noteholders. It also holds collateral on behalf of the owners. In return, Computershare typically earns a fee based on total assets under management. Right now, it has roughly US$6.6 trillion of assets under management. - **Employee share plans**: Finally, Computershare does plan administration and acts as a trustee for employee share plans. It charges per plan and per participant and also earns interest on client cash balances. Additional revenues come from transaction fees for every grant and exercise, as well as sales or transfers of ownership, dividends, withdrawals, etc. Computershare is currently the leader in North America, with a 57% market share among S&P 500 companies. Since the computer systems are already set up, scale has led to an operating profit margin of about 30%. And the switching costs seem to be high for its share registry and employee share plan administration services. Growth has been decent, with a compound annual growth rate in the earnings per share of +8% over the last two decades. However, interest rates are currently high and the interest income on client cash balances would come down in case of a lower interest rate environment. Computershare is also reliant on IPO, M&A and corporate action activity, which tends to be cyclical. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/HkRrP-computershare-earnings-per-share-.png) --- ## 3.12\. Lynas Rare Earths ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-146.png) [**Lynas**](https://sg.finance.yahoo.com/quote/LYC.AX/?ref=asiancenturystocks.com) *(LYN AU – US$13 billion)* is the largest producer of rare earths outside of China, making it a scarce resource for Western buyers. It owns the Mt Weld rare earths deposit in Western Australia, just north of Kalgoorlie. The company mines for ore, and then produces concentrate which is then separated into individual oxides at Lynas's Malaysia operations. The rare earths mined include Neodymium and Praseodymium, used to make magnets for electric motors, wind turbines and robotics. Rare earths are not necessarily rare, but mining for them is harsh on the environment. For that reason, there's a lack of rare earth miners outside of China, making Lynas hold scarcity value. The fact that they're used for defense purposes makes Lynas a strategically important asset. The company exited bankruptcy in 2017 and has recovered nicely with record NdPr production in late 2025\. Last year, Lynas completed a mine-life extension. Earnings have also benefited from the fact that China has stopped the export of rare earths, causing global prices to skyrocket, boosting Lynas's bottom line. The risks are mostly regulatory and environmental. Lynas's operations in Malaysia have been criticized due to fears of radioactive waste. The Malaysian license only lasts until March 2026, and it might not be renewed. There could also be changes to the current US and Japanese off-take agreements. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/X9JAc-lynas-rare-earth-earnings-per-share-.png) --- ## 3.13\. James Hardie ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-163.png) [**James Hardie**](https://sg.finance.yahoo.com/quote/JHX.AX/?ref=asiancenturystocks.com) *(JHX AU — US$13 billion)* is the #1 producer of fiber-cement building products globally. Fiber-cement is used for parts of the exteriors of housing, including panels, trims, etc, but also under tiles in bathrooms and kitchens. It's durable, requires no maintenance, and has a low lifetime cost. James Hardie started producing asbestos-cement and then transitioned to asbestos-free fiber cement from the mid-1980s onwards. Its current business is primarily focused on the US market with 11 North American plants, but it also has exposure to Australia/NZ and Europe. Its competitive edge seems to be a national manufacturing footprint in the United States and a short lead time through a large network of distributors. It's sold directly to homeowners but also to contractors for renovations and new builds. James Hardie's North America EBIT margin of 32% suggests it's not a pure commodity product. The company's earnings per share has compounded at a +6% annual rate in the past twenty years. In 2025, the company acquired AZEK and flagged potential cost synergies. But on the other hand, this is a cyclical industry and might suffer from the current high-interest-rate environment in the short term. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/xBzho-james-hardie-earnings-per-share-.png) --- ## 3.14\. Cochlear ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-128.png) [**Cochlear**](https://sg.finance.yahoo.com/quote/COH.AX/?ref=asiancenturystocks.com) *(COH AU – US$12 billion)* is the global leader in implantable hearing aids, with an estimated 60% market share. The company literally invented the cochlear implant, which is used for patients with severe hearing loss. Instead of amplifying sounds, cochlear implants bypass the inner ear and directly stimulate the auditory nerve. In other words, it converts sound to electrical signals that the brain interprets as sounds. Cochlear's revenues come from selling these cochlear implants as well as upgrades to already-existing sound-processor units. It also sells consumables such as new batteries, microphone covers, cables, etc. Growth seems steady, though not incredible, at a +9% compound annual growth rate over the past two decades. Cochlear itself is guiding for mid-teens net profit growth in its core cochlear implant business. This earnings outlook is supported by rapidly aging populations across most of the developed world. One positive catalyst is the 2025 launch of the Necleus Nexa, marketed as the first "smart" cochlear implant with upgradeable firmware. Competition comes from Austria's MED-EL and Advanced Bionics, owned by Switzerland's Sonova. But 12% of Cochlear's sales is spent on research & development, and it seems like it's holding up well against the competition. The key risks seem to be regulatory, with part of the business dependent on government subsidies and support. For example, US Medicare currently reimburses 80% of the cost of hearing implants. Any reduction to that number would directly impact Cochlear's profitability. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/zfV5r-cochlear-earnings-per-share--1.png) --- ## 3.15\. ASX ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-150.png) [**ASX**](https://sg.finance.yahoo.com/quote/ASX.AX/?ref=asiancenturystocks.com) *(ASX AU – US$7.3 billion)* is the largest stock exchange group in Australia. It was formed through the merger of six state exchanges, but today, all trading takes place in Sydney. Just like other exchanges, it makes money through transaction fees for cash equity products and derivatives, listing fees, sales of data and the provision of benchmark indices. It's not a true monopoly in cash equity trading. CBOE has a 21% market share. Since October 2025, ASIC has allowed CBOE to list companies as well, opening up direct competition for the ASX. But ASX does have a monopoly in clearing and settlement for Australian equities. And ASX absolutely dominates in index futures and equity options. So while it's not a true monopoly, its market position is still strong. ASX's growth has been decent, with earnings per share compounding at +8% per year over the last twenty years, though slower recently. And the outlook should be decent overall: Australian stocks have recently, in the past few years, and the IPO market has been revived. The key risks are related to competition from CBOE in terms of equity trading and new listings. As well as the general cyclicality of trading volumes and the aggregate market cap. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/ckLwj-asx-earnings-per-share-.png) --- ## 3.16\. Orica ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-155.png) [**Orica**](https://sg.finance.yahoo.com/quote/ORI.AX/?ref=asiancenturystocks.com) *(ORI AU – US$6.6 billion)* is one of the world leaders in commercial-grade explosives for the mining and related industries. Its explosives and electronic detonators are sold to mining companies worldwide to break up ore bodies and then extract metals from them. It also has a related software called BlastIQ that uses orebody data to design and execute explosions for the best result. Orica's engineers drive to each site via "Mobile Manufacturing Units" and help customers prepare for the blast. Finally, Orica sells mining chemicals, in particular sodium cyanide, which is used to extract gold from ore. Orica's chemicals are produced in-house. Orica also has a large service fleet with these Mobile Manufacturing Units. Its main regional coverage includes Australia, Canada, Indonesia, Peru, Brazil, as well as parts of the United States. The industry is cyclical, however. Earnings have hardly moved in the past twenty years, but that's after a cyclical bear market in industrial commodities. Orica's revenues are up roughly 50%. The mining chemicals unit should benefit from the recent spike in gold prices, at the very least. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/PyMAK-orica-earnings-per-share-.png) --- ## 3.17\. Codan ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-131.png) [**Codan**](https://sg.finance.yahoo.com/quote/CDA.AX/?ref=asiancenturystocks.com) *(CDA US — US$3.9 billion)* is an Adelaide-based electronics company dominating the global market for gold and other types of metal detectors. Its metal detectors are sold under the Minelab brand name and cost about US$1,000 each. Customers include hobbyists, but also artisanal gold miners. Codan also has a defense business, where it provides communications equipment used in extreme environments. This equipment includes high-frequency radio devices used by militaries to communicate on land, sea, and in the air. Encryption enables the safe transmission of data. The equipment is not only used by militaries, but also by oil & gas companies, ambulances, mining control rooms, etc. Codan reinvests 8-10% of its revenues into new products. Upgrading to the latest metal detector seems to be the best way to beat your competitor in detecting gold nuggets that are sometimes too small and too far below the ground to be discovered. Within the defense segment, getting approvals is a major hurdle across both Australia and the United States. Management is now targeting growth of 10-15% per year. The guidance for FY2026 is even higher thanks to general defense tailwinds. Codan has several new Minelab metal detector products coming, including the Gold Monster 2,000\. In the last 20 years, Codan's earnings per share has grown at a +9% annual rate, and there's every reason to think that this growth will continue. One risk is that the previous CEO, Donald McGurk, quit in 2021, after leading the company for almost 12 years with great success. It's unclear whether his successor, Alf Ianniello, can live up to the high expectations set by McGurk. It's also a fact that the gold detector market is cyclical and would suffer in the case of a weaker gold price. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/eK45g-codan-earnings-per-share-.png) For the record, I wrote about Codan in 2022 here: [Deep-dive 2022-29: Codan (CDA AU)Watch now (7 min) | Australian metal detector producer selling ”picks and shovels in a gold rush”![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-14.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f665c6c65-53ec-4360-b923-fd9716da2fd8_1920x1080-1.jpg)](https://www.asiancenturystocks.com/deep-dive-2022-29-codan-cda-au/) --- ## 3.18\. Treasury Wine Estates ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-132.png) [**Treasury Wine Estates**](https://sg.finance.yahoo.com/quote/TWE.AX/?ref=asiancenturystocks.com) *(TWE AU – US$3.3 billion)* is the owner of the Penfolds, as well as a number of niche other wine brands such as DAOU, BV, Frank Family, etc. The company owns 10,000 hectares of vineyards in Australia, New Zealand, California and Europe. But the key base is Australia, especially in Southern Victoria and New South Wales and the Margaret River region. Other than the hard-to-replicate assets and some iconic brand names such as Penfolds, it also enjoys the benefit of a global distribution system. It's been able to acquire vineyards on the cheap and then plug them into the distribution network to better monetize them. The company suffered from 2020 to 2024, when Australian wines were subject to high import tariffs from Mainland China. However, Penfolds hasn't fully recovered yet, with some continued weakness in Mainland China. Given that it's a capital-intensive business, TWE is certainly not a compounder. But in the past 14 years, it's at least compounded the earnings per share at an +8% annual rate. The main risk is renewed Chinese tariffs on Australian wines. It's also a cyclical business, with droughts affecting yields in some years. Some also worry that Generation Z will consume alcohol in lower quantities than older generations. But then again, wine is generally seen as a healthier alternative to other types of alcohol. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/L0jvi-treasury-wine-estates-earnings-per-share-.png) --- ## 3.19\. Ansell ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-148.png) [**Ansell**](https://sg.finance.yahoo.com/quote/ANN.AX/?ref=asiancenturystocks.com) *(ANN AU – US$3.1 billion)* is a world leader in hand protection and other types of personal protective equipment. It sells products across two segments: - **Healthcare**: surgical gloves, exam gloves and cleanroom gloves - **Industrial**: chemical protective gloves and garments The products are sold using a variety of brand names, including TouchNTuff, HyFlex, AlphaTec, Kimtech and KleenGuard. The gloves and PPE are sold via distributors and directly to its larger customers. Just like for Riverstone, Ansell's niche is high-spec protection, including for semiconductor and chemical industries. Its direct contact with customers enables it to offer greater service levels than many of its Malaysian and Chinese competitors. High standard levels in these industries make it hard for these competitors to grab market share. Growth has been uneven, with a slowdown in growth post-2015, partly due to new competition from China. COVID-19 was a boon to the industry. We're in a temporary oversupply of PPE and disposable gloves. Earnings per share have been almost flat over the past 20 years. Nonetheless, Ansell remains a global leader, especially in its heavy-duty industrial/surgical/chemical protective glove niches. Its market share is 18%, and roughly 10 million workers use its brands daily. The 2024 acquisition of Kimberly-Clark's PPE division cements Ansell's leadership further. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/L9k2v-ansell-earnings-per-share-.png) --- ## 3.20\. Breville ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-141.png) [**Breville**](https://sg.finance.yahoo.com/quote/BRG.AX/?ref=asiancenturystocks.com) *(BRG AU – US$2.7 billion)* is one of the largest makers of coffee machines globally. The company focuses on kitchen appliances under the Breville and Sage brand names. These include not just coffee machines but also grinders, air fryers, microwaves, smart ovens, blending machines, rice cookers and tea kettles. It also makes capsule machines for Nespresso under the Creatista brand name. Breville's products are sold worldwide, with North America being the largest market. They are typically sold through retail partners, but Breville also has a direct-to-consumer e-commerce business that makes close to US$100 million per year. Growth has come from a higher penetration rate of at-home speciality coffee machines. The earnings per share has grown at a +11% compound annual growth rate over the past two decades. Breville has also engaged in M&A, including the acquisition of US coffee grinder maker Baratza in 2020, as well as Italy's LELIT in 2022\. One major risk is US tariffs on Chinese products. Breville has moved away from manufacturing in Mainland China towards Mexico and Southeast Asia, but this shift will take years to play out. There's also intense competition from Jura, De'Longhi and newer competitors such as SharkNinja. Consumers have many options. But Breville has certainly performed well so far. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/kbmGO-breville-earnings-per-share-.png) --- ## 3.21\. Catapult ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-153.png) [**Catapult**](https://sg.finance.yahoo.com/quote/CAT.AX/?ref=asiancenturystocks.com) *(CAT AU – US$1.3 billion)* is a world leader in sports technology for elite athletes. 17% of pro teams globally use its hardware and software, close to 5,000 in absolute numbers. The company makes money by selling multi-year subscriptions to its software platform, one for each team. It then places wearables on athletes to track how fast and where they move, speed, the workload, the intensity of training, etc. All to help teams train better and avoid injuries and overloading. It also helps teams keep the right players on the field and execute tactics better. Catapult's edge is clearly its technology, including proprietary sensors and its ClearSky local-positioning system. There are also switching costs, at least in terms of learning new software and getting it implemented on a day-to-day basis. Catapult is still loss-making, but revenues have grown at a +26% compound annual growth rate over the past decade. The sports analytics market is growing at a high 20s annual growth rate, and these tools are becoming more commonplace. Catapult's Vector 8 software could be another catalyst. It apparently offers better live analytics and promises improved efficiency. The key risks seem to be cyclicality in club and league budgets, which themselves are reliant on advertising. There is competition from the likes of STATSports, Kinexon and Hudl, though it's hard to estimate their exact market shares. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/HvzJ8-catapult-earnings-per-share-.png) --- ## 3.22\. IDP Education ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-137.png) [**IDP Education**](https://sg.finance.yahoo.com/quote/IEL.AX/?ref=asiancenturystocks.com) *(IEL AU - US$1.2 billion)* is the global leader in international student placements. It's a part-shareholder of IELTS, the biggest English test globally, with more than 2,000 test locations globally. In the core student placement business, IDP helps US, Canadian, Australian, and UK universities recruit international students. These universities pay IDP placement fees upon successful recruitment, with students themselves paying almost nothing. In the English language test business, IELTS organizes English exams used for immigration or university entrance applications. I believe that test takers pay for the exams themselves. Finally, IDP has its own language schools, where it charges tuition directly from students. Because of its partnerships with most of the large universities, IDP has a decent reputation. It has the highest visa acceptance rate among any of the larger student placement agencies, which many universities consider critical for attracting the best students. And IELTS has a strong brand name with universities, making it crucial for students to take the exam. IDP has grown nicely over time, at a +17% compound annual growth rate in the nine years to FY2024\. However, tightened visa requirements across Australia, the UK, Canada, and the US have reduced placement and IELTS test volumes. Revenues came down significantly in FY2025, about -14% and earnings fell even more. However, you could also make an argument that while geopolitical tensions now exist between certain nations, e.g. India and Canada or the US and China, students might go elsewhere eventually. The demand for overseas studies probably remains. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/nI3bY-idp-education-earnings-per-share-.png) --- ## 3.23\. Nanosonic ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-149.png) [**Nanosonic**](https://sg.finance.yahoo.com/quote/NAN.AX/?ref=asiancenturystocks.com) *(NAN AU — US$913 million)* is a Sydney-based company dominating the global market for disinfecting ultrasound probes. Its key product is called "trophon", and uses hydrogen-peroxide cartridges for disinfection. What they disinfect are ultrasound probes that are either inserted into the body or used on the skin to send ultrasound into the body and create images. Each time an ultrasound probe is used, the gel is wiped off and the probe is then placed in a trophon's sealed chamber for 7 minutes for complete disinfection. Nanosonic sells these disinfection machines to hospitals, and they then pay extra for consumables in the form of hydrogen-peroxide cartridges. The recurring consumables revenues now represent 74% of the total. There's also a smaller software business with analytics, but the revenue from this is not material. Growth has been decent, with the top-line increasing at a +25% compound annual growth rate in the past ten years, and with improving profitability. In 2024, Nanosonic also received FDA clearance for the next-generation trophon product, which should support replacement demand. It's also awaiting approval for a new endoscope cleaning platform that could create an entirely new line of revenue for the company. Nanosonic is reliant on a single product, however, and there is competition from Tristel, Germitec and several other companies. It also has a high reliance on the US market where it has a market share above 50%. In the US, it's been reliant on distribution by GE, and the transition to direct distribution could add risks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/or84B-nanosonic-earnings-per-share-.png) --- ## 3.24\. Jumbo Interactive ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-143.png) [**Jumbo Interactive**](https://sg.finance.yahoo.com/quote/JIN.AX/?ref=asiancenturystocks.com) *(JIN AU — US$491 million)* is an operator of online lotteries in Australia. The company sells official lottery tickets on the website **OzLotteries** and Jumbo's app. Jumbo then earns a 4.65% commission from The Lottery Corporation and a service fee from the customer. The website has over a million active players. Jumbo's contract runs to 2030, and it has no competition before then. In addition, Jumbo owns a **Lottery software platform** that it sells to other lotteries and charities to run their own online sales. It's structured as a SaaS product with monthly subscription fees and usage-based fees on top of it. It also **runs charity and society lotteries** end-to-end in the UK and Canada. Jumbo's earnings per share has compounded at a +18% annual growth rate over the past two decades. Growth is pushed by the move online by the lottery industry, with the current penetration rate barely 40%. The client base for the Jumbo Lottery SaaS platform is also expanding gradually, with RSL Queensland joining in September 2025\. The key risk is the reliance on The Lottery Corporation, including the renewal risk and compression in terms of the commission earned. TLC could one day bring its operations in-house. There's also cyclicality in the jackpot timing and the jackpot size from year to year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/frXtH-jumbo-interactive-earnings-per-share-.png) --- ## 3.25\. Seeing Machines ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-142.png) [**Seeing Machines**](https://sg.finance.yahoo.com/quote/SEE.L/?ref=asiancenturystocks.com) *(SEE LN – US$231 million)* is one of the world leaders in camera-based Driver Monitoring Systems. It's based in Canberra, Australia but listed in London. The main system serves as an early warning signal, alerting drivers whenever there are signs of fatigue or distraction that could lead to traffic accidents. It sells both integrated driver management systems for new vehicles as well as an aftermarket product called the Guardian box that's used to detect driver fatigue. These cost about US$1,000 each. There are currently 3.7 million cars using Seeing Machines' technology. Growth is likely to come from new EU mandates requiring all new vehicles to include an advanced driver distraction warning system from 2026 onwards. And to get top safety rankings, automakers are incentivized to buy the latest and greatest driver monitoring systems. There is competition from the likes of Mobileye, SmartEye, Harman/Cipia and Tobii. In particular, Mobileye's EyeQ seems like a tough competitor. They've just released a camera-based driver management system that will compete directly with Seeing Machines. It's also worth noting that Seeing Machines is still loss-making. Historically, losses have forced the company to dilute shareholders through regular equity issuance. But management is guiding FY2026 to be cash flow positive and for revenue to be higher than US$125 million. So perhaps the company is finally turning profitable. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/NXX7C-seeing-machines-earnings-per-share-.png) --- # Conclusion This has been my attempt to identify the top 25 hidden champions in Australia. It's obviously a tough challenge, given the large number of high-quality businesses in Australia. In this attempt, I paid zero attention to share prices. So I'm well aware that many of these companies trade at high valuation multiples. The purpose of this post is to learn about the opportunity set. In the near term, I am interested in diving deeper into several of these companies, including [**Treasury Wine Estates**](https://sg.finance.yahoo.com/quote/TWE.AX/?ref=asiancenturystocks.com) and [**IDP Education**](https://sg.finance.yahoo.com/quote/IEL.AX/?ref=asiancenturystocks.com). So stay tuned for that. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Ask Me Anything Oct 2025 URL: https://www.asiancenturystocks.com/ask-me-anything-oct-2025/ Last updated: 2025-11-19T07:07:24.000Z On Monday, I asked whether you had any questions you wanted me to answer. I've just recorded a video where I try to answer these questions: 1. Brief update on your current general outlook for the countries you cover? (1:00) 2. How to set up a long-term Asia-focused, high-dividend, income-generating portfolio? (4:15) 3. Which commodities do you see as offering opportunities or carrying significant risks? (7:05) 4. What is your current view on Central Asia, and do you expect to cover the region more extensively in the future? (9:20) 5. Name a business you love that you think is undervalued currently and why? (preferable if it trades on US exchange/OTC). (10:30) 6. What broker do you use to buy Asian stocks? (12:10) 7. What are some tax implications like withholding taxes or estate or wealth taxes etc. that foreign investors should be aware of? (13:05) 8. Any thoughts on Kaspi? More specifically their expansion to other markets? (13:50) 9. Are there any Asian compounders like Constellation Software? (14:55) 10. What Asian companies have interesting ROIC and management compensation tied to profitable capital allocation? Who are considered trustworthy capital allocator CEOs in Asian markets such as Mark Leonard? (16:20) 11. How do you factor in demographic trends when analyzing stocks in Asia? (18:30) 12. I’m curious your stance on the AI/Datacenter overbuild conversation. How do you think about it? What metrics would you look at? (20:00) 13. Yudhi Sadewa, the new finance minister in Indonesia, what do you know/think of him? Do you foresee any deviation from previous policies and how could he affect the Indonesian economy? (21:40) 14. Precious metals are increasing significantly in value. Various theories are floating around: debasement trade, mistrust in Western governments. Are gold, silver, platinum mining stocks attractive in this respect and how is the mood in this regard is in Asia? (23:10) To the extent that you ask me about how I invest, bear in mind that positive or negative views do not imply that I recommend you to buy or sell. Also, just because I think a stock is undervalued, does not mean that it eventually turn out to be a good investment. Do your own research and consult a financial advisor to understand whether an investment is suitable for your specific needs. *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ### Oriental Watch (398 HK) URL: https://www.asiancenturystocks.com/oriental-watch-398-hk/ Last updated: 2026-03-16T13:21:59.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Oriental Watch at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Our friends at TickerTrends recently wrote about [an ongoing turnaround in the luxury wristwatch market](https://blog.tickertrends.io/p/wosg-signs-of-a-turn-for-luxury-watches?utm%5Fsource=publication-search). The data is clear: in the past four months, an index of Google search queries for the keyword "Rolex" have shot up. Second-hand prices for Rolex watches have risen for the first time since 2022\. So what's going on? That's what I'll try to find out in this new deep-dive on Hong Kong's [**Oriental Watch**](https://finance.yahoo.com/quote/0398.HK/?ref=asiancenturystocks.com) *(398 HK — US$214 million)* – the most "blue chip" of the publicly listed watch retailers in China. But first, let's talk about the industry. Oriental Watch and its publicly listed peers Emperor Watch & Jewellery and Hengdeli are authorized dealers for Rolex in Hong Kong and Mainland China. Rolex remains the most sought-after luxury wristwatch brand, and has performed well despite new competition from the Apple and Garmin. Rolex has historically not run retail stores of its own. Instead, it's let authorized sell watches on its behalf. To become such an authorized dealer, companies need to meet strict requirements on the interior design of each store, service levels, store locations, etc. In the past decade, the demand for Rolex watches has greatly exceeded supply. This means that customers need to sign up for waitlists managed by the authorized dealers. They can then decide who gets which Rolex watch and not. In my view, this waitlist system gives the dealer a significant amount of bargaining power. Customers will buy additional watches to qualify for the most sought after ones, say Rolex Daytonas or a Rolex GMT-Master IIs. And for that reason, owning an authorized dealer for Rolex has been a license to print money. Oriental Watch has been around since the 1960s. It was founded by Hong Kong native Yeung Ming Biu and soon took control of the first authorized dealer for Rolex in Greater China. In 1993, it became the first publicly listed watch retailer in Hong Kong. And in 2004, it entered Mainland China - a market that now accounts for the majority of revenues. After Xi Jinping took over as General Secretary of the Communist Party in 2012, he initiated an anti-corruption campaign that had a negative impact on the luxury wristwatch industry. Oriental Watch took the opportunity to downsize its Mainland China store network, reducing inventory levels and becoming more of a lean operation. From 2017 onwards, it's also started to pay out generous dividends, with a payout ratio of about 100%. COVID-19 was initially a tough period. The company had to close its stores and watch production became disrupted. But as customers stayed at home without spending much money on services, they accumulated cash and spent part of it on luxury wristwatches. And it turns out that COVID led to record earnings for Oriental Watch, with margins expanding from the 5% level to 12% at the peak. Founder Yeung Ming Biu passed away in 2021\. However, his son, Dennis Yeung, now serves as Chairman and CEO. He seems to be a safe pair of hands. And from what I can tell, he seems to care about others. It's probably not a coincidence that the move towards a 100% payout ratio happened under Dennis Yeung's watch. Since COVID-19, the luxury wristwatch industry has been in decline. Prices for second-hand Rolex watches have declined from US$30,000 to almost US$20,000 at the bottom, having a direct impact on Oriental Watch's margins. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-63.png) Source: WatchCharts That brings us to TickerTrends' arguments for why the wristwatch might have turned. Indices of Google search queries for "buy watches" and "Rolex" have risen recently. Second-hand prices for luxury wristwatches bottomed in early 2025 and are now rising. Website traffic to most of the major brands have also started rising. But in my view, much of the buying that we've seen earlier this year is due to fears of US tariffs on Swiss watch imports. These tariffs were first set at 10% in April and then raised to 39% by August. Consumers responded by moving forward their watch purchases, and the second-hand prices reacted immediately. In China, the wristwatch market remains weak. Swiss watch exports to Hong Kong and Mainland China have continued lower this year through August 2025\. Chinese consumers are facing a high unemployment rate and a negative wealth effect from declining property prices. The weak Japanese Yen has also caused consumers to shift away from domestic watch stores to retailers in Japan, especially those stocking now-attractively priced Japanese watches such as those from Grand Seiko. So I expect the current upturn in watch prices to be short-lived. A stronger Yen would be positive for Oriental Watch. Greater supply from Rolex's new Bulle production plant in 2029 should also help Oriental Watch secure larger allocations. But without these factors, I don't see a quick turnaround for China's luxury wristwatch market. In my base case, I expect the operating margin to decline by 2.5 percentage points through FY2031, resulting in the P/E ratio expanding from 8.3x to 10.4x. In this process, I expect the dividend yield to compress from the current 12% to about 10%. The company has a massive cash pile, representing roughly 50% of its market capitalization. We could see another share buyback, similar to the one in 2020, when 15% of the shares outstanding were repurchased and eventually cancelled. To summarize, I think growth will be challenging. The major driver of its earnings remains the luxury wristwatch cycle, and it's not clear that the cycle has definitively turned. On the other hand, minority shareholders continue to enjoy generous, double-digit dividend payments. And I think it is plausible, that once Americans are hit with 39% tariffs on Swiss watch imports, that they will travel to Hong Kong for their watch purchases instead. Longer-term, a big question for Oriental Watch, is whether Rolex will follow Hermès' lead in taking retailing in-house. Back in 2022, Rolex acquired the European watch retailer Bucherer, leading some to believe that Rolex is now taking its watch retailing operations in-house. While Bucherer primarily operates in Continental Europe, Bucherer opened a store in Shanghai last year and is now competing head-to-head with Oriental Watch in that city. The threat from Bucherer could be real, longer-term. In the near term, I don't think Bucherer will move the needle for Oriental Watch. It only accounts for 5-8% of global Rolex wristwatch sales volumes, and the vast majority of those volumes are in Continental Europe. In addition, Rolex just awarded Oriental Watch the privilege of becoming a Certified Pre-Owned watch dealer, suggesting that the partnership is long-term in nature and unlikely to change anytime soon. Thank you for reading. *Michael* **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the button below:** [Oriental WatchOriental Watch.pdf5 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/Oriental-Watch-3.pdf "Download") Further material: - An excellent [2023 write-up](https://orientalvalue.substack.com/p/oriental-watch-398-hk) from a Substack newsletter called "Oriental Value" - Oriental Watch's [FY2025 annual report](https://www.orientalwatch.com/owh/pdf/250716/2025071600825.pdf?ref=asiancenturystocks.com) ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ## Sign up for Asian Century Stocks Deep reports for serious, Asia-focused investors Subscribe Email sent! Check your inbox to complete your signup. No spam. Unsubscribe anytime. ### Japan's Iron Lady URL: https://www.asiancenturystocks.com/japans-iron-lady/ Last updated: 2025-11-19T07:10:00.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is a disclosure and not a recommendation to buy or sell.* ****Summary**: This post is an attempt to figure out whether the appointment of Sanae Takaichi as the next Prime Minister will have any implications for Japanese equities. She's a conservative who's hawkish when it comes to geopolitics but dovish when it comes to monetary policy. It looks like she will continue Shinzo Abe's push for corporate reform. This combination should be bearish for the Japanese Yen and bullish for Japanese equities, especially within the nuclear and defense industries. Japan's ruling Liberal Democratic Party (LDP) has just elected Sanae Takaichi to become its next leader. From the end of October 2025, she is expected to succeed Shigeru Ishiba as the new Prime Minister of Japan. In one way, she'll be a break from the past. She'll become the first-ever female prime minister of Japan. But on the other hand, she represents continuity. She was close to former prime minister Shinzo Abe and is expected to revive and continue his reform agenda. Following the news of her election win, the Nikkei jumped +4.0%, with investors pricing in a weaker yen and a stronger economy: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-58.png) Source: Trading View In this post, I'll discuss who Sanae Takaichi really is and what changes she's likely to bring to Japan. Let's dig in. ``` Table of contents: 1. What happened? 2. Who is Sanae Takaichi? 3. "Sanaenomics" 4. Implications for Japanese equities 4.1. Japanese exporters 4.2. Construction 4.3. Defense 4.4. Energy sector 4.5. Tourism 5. Conclusion ``` # 1\. What happened? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-2236615562.jpg) Shinjiro Koizumi and Sanae Takaichi. Source: Getty Images On 7 September 2025, current Prime Minister Shigeru Ishiba announced that he would resign. This forced the ruling Liberal Democratic Party (LDP) to organize a vote for the top leadership. Five candidates joined this time around, and two of them were seen to be front-runners: - The current minister of agriculture **Shinjiro Koizumi**. He is the son of a former prime minister who was seen as a great reformer. - The former Minister of Economic Security **Sanae Takaichi**. She belongs to the conservative faction of the LDP and is closely connected to former prime minister Shinzo Abe. It was a tight race. In the first round, neither of them cleared the 50% bar. But thanks to the support of veteran politician [Aso Taro](https://en.wikipedia.org/wiki/Tar%C5%8D%5FAs%C5%8D?ref=asiancenturystocks.com) and broad support from rank-and-file members, the advantage swung towards Takaichi giving her 185 votes vs Koizumi's 156\. And she finished first or second in 36 of the 47 prefectural chapters. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-54.png) Polymarket data for who's to become the next prime minister. Unclear why Shinjiro Koizumi was not part of the original question. Source: Polymarket While the LDP doesn't have a majority in parliament, she's still expected to win enough support from lawmakers to become prime minister. Upon winning, she said that she will: > "**Work, work, work, work, work**... for the sake of Japan and to rebuild the LDP." Her new administration will likely be staffed with the remnants of the Abe faction, including Hagiuda Kōichi or Nishimura Yasutoshi. They are both affiliated with the ultranationalist organization Nippon Kaigi which supports a stronger national defense. Since LDP doesn't have a majority in parliament, she will need to seek a coalition with other like-minded parties. Most likely, LDP will now team up with the Democratic Party For the People (DPFP), whose views on fiscal spending are broadly aligned. DPFP are pro-nuclear, want to cut the consumption tax to 5% and are also hawkish when it comes to geopolitics. Since Takaichi is a conservative, she'll find it difficult to work with the LDP's longtime junior coalition partner Komeito. The Komeito party has been pushing for stronger healthcare, education and higher minimum wages. So it seems like such policies will now be put on the back-burner. --- # 2\. Who is Sanae Takaichi? Here's a brief bio of Sanae Takaichi. She was born in Nara, a former capital of Japan, famous for its wild deer and beautiful temples. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-2212942862.jpg) Wild deers in Nara Park. Source: Getty Images From an early age, she's been brilliant in school. Her excellent grades got her into both Waseda and Keio University. But since she couldn't finance the degrees on her own - her parents wouldn't support her - she had to stay at home and commute six hours daily to Kobe University. She was then trained at the public policy programv at Matsushita Institute and spent a few years at Capitol Hill in the 1980s working for Democratic US Representative Pat Schroeder. Back in Japan, she won her first Diet seat in 1993 - the same year as Shinzo Abe. And she soon became one of his allies. That friendship helped her become Minister of Internal Affairs & Communication under Abe from 2014 to 2017 and from 2019 to 2020\. She later also served as Minister for Economic Security in from 2022 to 2024\. As a person, Takaichi is known to be a voracious reader with great attention to detail. She's not natural at socializing, but has recently tried to become more active in creating a dialogue with her voters. Her favorite car? A 1991 Toyota Supra sports car. She has been a motorhead since she was young, perhaps thanks to her father, who used to work for a company associated with Toyota. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-59.png) Source: The Yomiuri Shimbun Another fun fact: during her university days, she played the drums in a heavy metal band. Takaichi gained notoriety for her energetic performances, often breaking drumsticks during gigs. Favorite song? 2004 hit [Burn](https://open.spotify.com/album/3wR7UC2ij2dx0TbtiMP4J9?si=f2I-I64dQFSwTgGydwAshQ&ref=asiancenturystocks.com) by Deep Purple. My point with all this is that she's not your typical Japanese politician. She's an original and will not be afraid of taking the road less travelled. --- # 3\. "Sanaenomics" In terms of her politics, Takaichi is a conservative. For example, she's long opposed legislation allowing women to keep their maiden names after marriage. She's also against same-sex marriage as she thinks it will break traditional family structures. Her favorite book is Margaret Thatcher's memoirs. This admiration for Thatcher has led to some supporters calling her "Japan's Iron Lady", since there are obvious similarities between the two. In terms of her ideological beliefs, however, she's closer to former Prime Minister Shinzo Abe. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-457643292.jpg) Shinzo Abe with Sanae Takaichi back in 2024\. Source: Getty Images Now that Abe has passed away, Takaichi has publicly stated that she will *"carry on his will"*. In other words, she will carry on the "Abenomics" program that began in 2012 and included: 1. Aggressive monetary easing 2. Substantial fiscal stimulus through increased government spending 3. Structural reforms to improve Japan's competitiveness So it seems clear to me that Takaichi will push for continued monetary easing. Last year, Takaichi complained that it was *"stupid \[for BOJ\] to raise interest rates now"*. She argued at the time that rate hikes would hurt household finances. When it comes to fiscal stimulus, Takaichi has said that she's willing to do whatever it takes to stimulate economic growth. > "If elected **I will turn on ALL switches** available, ALL at once, to drive growth of Japan" Not only does she want to raise spending, she also wants to lower income taxes, consumption taxes and gasoline taxes. So many investors now expect budget deficits to rise from the current 2.3% level: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-55.png) Japan's budget deficit/GDP. Source: Trading Economics That said, during Abe's second term - between 2012 and 2020 - fiscal deficits actually declined. On Twitter, Paul Cavey of [East Asia Econ](https://www.eastasiaecon.com/?ref=asiancenturystocks.com) recently argued that the impact of Abenomics was mostly on the monetary policy side, i.e. through quantitative easing and a weaker currency: > Is it really necessary to talk about “Sanae-nomics”? “Abenomics” was already a stretch, both linguistically, and content-wise, given it was as really all about monetary easing. [pic.twitter.com/A0J9r6Bb9w](https://t.co/A0J9r6Bb9w?ref=asiancenturystocks.com) > > — East Asia Econ (@eastasiaecon) [October 7, 2025](https://twitter.com/eastasiaecon/status/1975392524203401475?ref%5Fsrc=twsrc%5Etfw&ref=asiancenturystocks.com) When it comes to Abe's third arrow - the corporate reform agenda - she's likely to push it even further. In her [2021 book](https://www.amazon.co.jp/%E7%BE%8E%E3%81%97%E3%81%8F%E3%80%81%E5%BC%B7%E3%81%8F%E3%80%81%E6%88%90%E9%95%B7%E3%81%99%E3%82%8B%E5%9B%BD%E3%81%B8%E3%80%82%E3%83%BC%E7%A7%81%E3%81%AE%E3%80%8C%E6%97%A5%E6%9C%AC%E7%B5%8C%E6%B8%88%E5%BC%B7%E9%9D%B1%E5%8C%96%E8%A8%88%E7%94%BB%E3%80%8D%E3%83%BC-WAC-BUNKO-352-%E9%AB%98%E5%B8%82/dp/4898318525?tag=googhydr-22&source=dsa&hvcampaign=books&gad%5Fsource=1), she proposed a "cash deposit tax", pushing companies to either pay out or reinvest cash on their balance sheets. She's also argued for revising the Corporate Governance Code to require companies to clarify the use of retained earnings. In terms of geopolitics, she's most definitely a hardliner. She's hawkish towards China and has voiced support for reducing Japan's economic dependence on China. Once the prime minister, it seems likely that she will build alliances with other democratic countries. This clearly means greater defense spending in the years ahead, way beyond the current 2.0% of GDP target. She even wants to revise Japan's pacifist constitution, enabling it to declare war if needed and be able to export arms to other nations. There's been a great degree of criticism of her from the left, including about worsening press freedoms under her reign as Minister of Internal Affairs & Communication and promoting a book about Hitler's election strategy. However, the worsening press freedom ranking preceded her ascent, and she didn't explicitly promote the book about Hitler; she just allowed herself to have her photo taken with the author. That said, she's raised eyebrows for visiting the Yasukuni Shrine, where war criminals from the Second World War are buried. These moves may hinder her ability to work together with South Korea in building a geopolitical alliance. When it comes to the US, Takaichi apparently has a strong relationship with Donald Trump. And there's been some noise about her wanting to renegotiate the recent trade agreement with the United States, though we'll see whether that's at all possible. --- # 4\. Implications for Japanese equities ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-2239106138.jpg) Source: Getty Images So what does this all mean for stocks then? Following the news of Takaichi's win, the Nikkei jumped 4%. The Japanese Yen to US Dollar exchange rate rose from 147 to 150\. And the 30-year government bond yield moved from 3.15% to 3.30%. It looks like the market is now pricing in greater fiscal stimulus and a more dovish Bank of Japan. In the words of Saxo's Chief Investment Strategist, Charu Chanana: > "With policy unlikely to shift soon, **the yen stays under pressure** \- not collapsing, but also not finding safe-haven demand unless there's a shock. It **remains the go-to funding currency in global markets**." Takaichi will be facing a dilemma. If she pushes through with her tax cuts and pressures the Bank of Japan not to hike rates, then the Japanese Yen could weaken further. And that would cause inflation to stay higher for longer. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-57.png) Japan's consumer price inflation rate. Source: Trading Economics So it's unclear how much she can allow the Japanese Yen to weaken. When it comes to corporate reforms, I think they'll prove bullish for stocks. If we ever see a tax on corporate cash deposits, then that would ultimately lead to greater pressure on companies to pay out the cash to shareholders. Or, they'll simply reinvest the cash into non-productive assets like real estate. We'll see. ## 4.1\. Japanese exporters ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-1332073692.jpg) Source: Getty Images If the Yen does weaken further, then that would be fundamentally bullish for Japanese exports. The biggest exporters include the the passenger vehicle industry. Japan is also a massive exporter of machinery parts and manufacturing equipment. You already know the names: Toyota, Honda, Nissan, Hitachi, Panasonic, etc. I've covered a large number of exporters in the past, including US-focused auto maker Subaru: [Subaru (7270 JP) － 2025 updateEstimated reading time: 18 minutes![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-1.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2f192bf9b0-57a5-4b81-93c2-d8a5233c9bca_840x600.jpg)](https://www.asiancenturystocks.com/subaru-7270-jp-2025-update/) I've also covered auto supplier Koito Manufacturing, a producer of LED lights, LiDARs and adaptive driving beams who gets 70% of its revenues from overseas: [Koito Mfgr － 2024 update (7276 JP)LED headlights, adaptive driving beams and now LiDAR. Estimated reading time: 17 minutes![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-3.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2f768deb87-c238-4485-ac62-5eb028bda593_1104x634.jpg)](https://www.asiancenturystocks.com/koito-mfgr-2024-update-7276-jp/) Aircraft component supplier AeroEdge gets 100% of its revenues from overseas: [AeroEdge (7409 JP)A Japanese version of Precision Castparts at 12x 2027e P/E![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-2.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f169118377_2f085412d5-08e9-4a72-a183-e02e071cfef5_2ftranscoded-1753591623.jpg)](https://www.asiancenturystocks.com/aeroedge-7409-jp/) Paint manufacturer Kansai Paint gets 70% of its revenues from overseas, which includes its fast-growing subsidiary serving Maruti Suzuki in India: [Kansai Paint (4613 JP)India-focused Japanese paint manufacturer at 10x forward P/E![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-4.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2f8456a01f-476b-45bc-9132-c793f75603bb_1001x563.jpg)](https://www.asiancenturystocks.com/kansai-paint-4613-jp/) Finally, electronics giant Sony gets around 70% of its revenues from overseas: [Sony (6758 JP) － 2024 updatePlayStation 5 getting closer to full monetization. Estimated reading time: 23 minutes![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-5.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-post-media-s3-amazonaws-com_2fpublic_2fimages_2f6882e3eb-9871-4c34-a948-0b6ae37f1748_1402x928.jpg)](https://www.asiancenturystocks.com/sony-6758-jp-2024-update/) However, note that Takaichi's stance towards China could well impact Japanese companies with exposure to the Chinese market. Such companies include both Okamoto and Ryohin Keikaku: [Deep-dive 2021-15: OkamotoOkamoto Industries (5122 JP) is a family-run household products and industrial materials company based in Japan.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-7.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2feef41759-89d2-48b1-aa4b-6c6b38237033_2368x1328.jpg)](https://www.asiancenturystocks.com/deep-dive-2021-15-okamoto/) [Ryohin Keikaku (7453 JP)Japan’s finest retailer now benefitting from China’s reopening![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-6.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fsubstack-video-s3-amazonaws-com_2fvideo_upload_2fpost_2f122794609_2f3c640af9-a7a9-491e-a6bf-09af9d66f6b9_2ftranscoded-00000.jpg)](https://www.asiancenturystocks.com/ryohin-keikaku-7453-jp/) --- ## 4.2\. Construction ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-61.png) TSMC's new Kumamoto fab. Source: Japan Times A key part of Takaichi's vision is to strengthen infrastructure. She wants "wise spending" on projects that will increase tax revenues, though she hasn't mentioned exactly what such projects might entail. She also wants to build up national champions in certain strategic industries, including in semiconductor chips, batteries, AI hardware and advanced materials. So companies within these sectors could plausibly benefit from subsidies or other forms of government support. From what I recall, the only company I've written about that could plausibly benefit from greater factory construction is industrial robot maker FANUC: [Deep-dive 2022-14: FANUCWorld leader in CNC devices and industrial robots to enjoy yet another cycle![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-12.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f001031f0-8d3a-4502-8fac-0767969546ec_1754x984.jpg)](https://www.asiancenturystocks.com/deep-dive-2022-14-fanuc/) --- ## 4.3\. Defense ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-60.png) A Japan Air Self-Defense Forces F-2 fighter jet. Source: Kyodo News As mentioned above, Takaichi is pushing for a change to Japan's constitution that would allow for greater defense spending. Most of Japan's defense stocks popped on the day of her election win. We should expect greater spending on missiles, cybersecurity, as well as the building of new naval ships and fighter jets. Mitsubishi Heavy Industries has the largest exposure to missiles, and Kawasaki Heavy Industries has the greatest exposure to shipbuilding. Revising Japan's pacific constitution through Article 9 will be difficult, since supermajority votes will be needed in both houses of the Diet, followed by a national referendum. However, greater defense spending and arms exports do not require a revision to the Constitution. I have not written about individual stocks in Japan's defense sector, but in 2021, I did publish a primer on Asia's defense industry: [Mapping Asia’s defense industryDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-8.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2ffd16c685-e2be-4d91-9e7f-e00847bd76f6_1340x828.jpg)](https://www.asiancenturystocks.com/mapping-asias-defense-industry/) --- ## 4.4\. Energy sector ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-599123354.jpg) The Ikata nuclear power plant. Source: Getty Images Takaichi is a big fan of nuclear power. She wants faster reactor restarts. As you may recall, some reactors still remain idle after the post-Fukushima shutdowns. She also wants to support next-generation reactors and fusion technology through state support schemes. In contrast, she's skeptical of the solar industry and doesn't like imported (mainly Chinese) solar panels used in domestic solar farms. She's also skeptical about offshore wind, since it offers worse value-for-money compared to nuclear. So under Takaichi, it seems like security will matter more than the climate. She's said publicly that she wants to implement measures to supply high voltage electricity, and in the process improve the competitiveness of Japanese manufacturing. It's also worth noting that she wants to scrap the "temporary" gasoline tax, which has been in place since 1974\. I think it's another way to combat the inflation pressures facing many households. The only company within Japan's energy sector I've written about is Kansai Electric Power, the owner of nuclear power plants in Japan's Kansai region: [Deep-dive 2022-22: Kansai Electric Power (9503 JP)Nuclear reactor restarts to be completed by the summer of 2023![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-9.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f6f396a75-f086-4a95-890a-d75ddc54a2e1_2796x1574.jpg)](https://www.asiancenturystocks.com/deep-dive-2022-22-kansai-electric/) --- ## 4.5\. Tourism ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/GettyImages-1149107495.jpg) Source: Getty Images Takaichi's impact on tourism will be mixed. A weaker Yen will certainly pull in tourists from overseas and lift per capita-spend. On the other hand, her hawkish stance towards China may cause a backlash from Chinese tourists. They currently represent 23% of Japan's inbound tourist arrivals. Her security-focused agenda may also make it more difficult for foreigners to immigrate to Japan. Many of the service workers in Japan's hotels and food establishments are foreigners. So it's plausible that the current staff shortages will be exacerbated by Takaichi's skeptical views on immigration. One of the Japanese tourism-related companies I've written about is Kyushu Railway, which now trades at 13x P/E: [Deep-dive 2022-15: Kyushu RailwayRailway operator and real estate developer with COVID-19 catalysts![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-10.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f2385a957-7e09-4af3-975d-7730a8637970_1654x930.jpg)](https://www.asiancenturystocks.com/deep-dive-2022-15-kyushu-railway/) Another tourist-related name is Ichigo Hotel REIT, managed by Scott Callon's Ichigo Inc. and now trading at a 6.2% dividend yield: [Deep-dive 2021-4: Ichigo Hotel REIT Investment CorporationIchigo Hotel REIT Investment Corporation (3463 JP) is a Japanese hospitality REIT run by American hedge fund manager Scott Callon.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/icon/Bai-2-11.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/thumbnail/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2fe5a02dae-3ccf-4b89-a280-3addf9ff8539_1024x573.jpg)](https://www.asiancenturystocks.com/2021-4-ichigo-hotel-reit-investment-corporation/) --- # 5\. Conclusion I think Sanae Takaichi is brilliant in many ways. She's serious, detail-oriented and willing to go against the grain. As a woman in a male-oriented LDP, she got to where she is on her own merit - not due to nepotism or being a safe choice for the leadership. Of course, some of her past actions and behaviours are controversial and in some cases, even distasteful. I also question her strategy of battling inflation with lower interest rates and fiscal stimulus. So what does her ascent mean for Japanese stocks? Sell-side seems convinced that we'll see a weaker Japanese Yen. I'm not so sure. All I know is that defense spending is likely to rise further, and that nuclear power plants will have full government support for restarting idle reactors. And I think it's clear that Abe's corporate reform agenda is back on track. That's fundamentally bullish for the Japanese stock market. And if we see a tax on cash deposits, then perhaps we'll see the balance sheets of corporate Japan finally being right-sized. It's been a long time in the making. ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Insider activity September 2025 URL: https://www.asiancenturystocks.com/insiders-september-2025/ Last updated: 2026-04-14T03:27:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is a disclosure and not a recommendation to buy or sell.* ****Summary**: The literature on insider transactions says that stocks with insider buying tend to outperform the overall market by 6-10% per year. The signal is especially strong for 1) new positions, 2) in small firms, 3) with high trading volumes, 4) by people with CFO/investment management backgrounds, 5) when they coincide with share buybacks or 6) when they occur in large clusters of individuals. In this post, I review insider transaction data from service provider Smart Insider and identify five recent insider transactions that have caught my attention, involving Converge ICT, BYD, G8 Education, MST Golf, and Scope Industries. # 1\. What the literature says The seminal work on insider transactions is Nejat Seyhun's 1996 book [Investment Intelligence from Insider Trading](https://www.amazon.com/Investment-Intelligence-Insider-Trading-Press/dp/0262692341/ref=sr%5F1%5F1?crid=21PAIHXYJITKV&dib=eyJ2IjoiMSJ9.q-9HG%5FZVTbKkzlVPN1MAVPLdtXtyLWw84It5%5FNjHKsnl-ttqV6HCczzMTibEV%5FxyahL6dqwUtiJrLKAgWwxeBQyViDSrs9DQzZPEjfDO%5FKA.r1ohKIJMjZoJZKR7ty4BFfMohT7qUFcve5PwbYKCGdc&dib%5Ftag=se&keywords=Investment+Intelligence+from+Insider+Trading&qid=1759462450&sprefix=investment+intelligence+from+insider+trading%2Caps%2C1117&sr=8-1&ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-30.png) "Insider trading" refers to stock transactions of a company's officers, directors or controlling shareholders. Whenever insiders buy or sell shares, they are typically required to disclose those transactions to local regulators. So why should we care about insiders? Well, they tend to be better-informed than we are. Academic studies show that insider buying tends to outperform the overall market by 6-10% per year over several decades. In Nejat Seyhun's book, he analyzed over one million insider transactions in the United States between 1975 and 1996\. He had six main conclusions: - When insiders open **new positions**, stock prices tend to perform significantly better than when they engage in routine transactions, such as exercising options. - **Top executives**, such as CEOs, tend to be the best informed and therefore make more money on their purchases. Conversely, when controlling shareholders buy, they don't tend to outperform much at all. - Trading activity in **smaller firms** tends to have greater predictive power than in large firms. Insider trades tend to be particularly profitable when the market capitalizations are lower than US$25 million (equivalent to US$50 million in today's money). - **Greater trading volume** generally signals more valuable information and a higher prospective return. - Profitability increases when there is **strong agreement** among insiders, i.e., a cluster of buying activity occurs across multiple directors or officers. - When insiders of a firm buy and sell within a given month, then the signal disappears. So you'll want transactions that are **not preceded by conflicting signals**. In other words, you'll want to require that the buying has not been preceded by recent selling. Another great book discussing insider transactions is Wesley Grey's [Quantitative Value](https://www.amazon.com/Quantitative-Value-Web-Site-Practitioners/dp/1118328078/ref=sr%5F1%5F1?dib=eyJ2IjoiMSJ9.8VgwASv0tSd-IULh-mdIGwOpMhP5rWmWqhiTl1Sb4nG9NMYCtl5x8tAJkYuUTPfs1bm%5Fcv8woPXgawkUIPxzrbqCIOCJ9Aqa9SYtIUBgGoaxn%5Fppu8xwgXf1VKhR6W4qkMux9uoZhNlVLDMU9P1BkX7CfIh0-hihmKiTFKgopGzRvNt0Wt7aFWSFyNtcLHe3JaX2ocVCtvUFoLniSKqYACBJhdcI0v9MSt94P9wZkTo.dpURYcp5Q%5FVnYEWVuWYiOAxP8DUO5niUIHkbhV8%5FfEI&dib%5Ftag=se&keywords=Quantitative+Value&qid=1759479369&sr=8-1&ref=asiancenturystocks.com), which was published back in 2012: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-32.png) Grey came to similar conclusions as Seyhun, but he also points out that the signal of an insider purchase is amplified when: - The insider is buying a **value stock**, i.e. a company trading well below its intrinsic value. Conversely, insider trades in growth stocks tend to be much less profitable. - Companies that **announce buybacks** when insiders are simultaneously buying shares tend to outperform even more. Furthermore, Grey argues that stock **sales** tend to contain less information because they can be motivated by liquidity needs or a desire for diversification. Selling doesn't necessarily mean that the stock is overvalued. So he recommends focusing on insider buying only. Finally, in Asif Suria's 2024 book [The Event-Driven Edge in Investing](https://www.amazon.com/Event-Driven-Edge-Investing-Strategies-Outperform/dp/1804090808/ref=sr%5F1%5F1?dib=eyJ2IjoiMSJ9.03s-CA-OsgOoKa5tQMVduWY17k9I4aasK6RJn50pQN3GjHj071QN20LucGBJIEps.Y7l07mXvY2vCDpwNNokQEUDxUE%5FwMkr8wZzNmlABSPs&dib%5Ftag=se&keywords=The+Event-Driven+Edge+in+Investing&qid=1759481623&sr=8-1&ref=asiancenturystocks.com), there's also a chapter on insider transactions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-33.png) Suria argues that: - We should pay attention to what insiders of multiple companies in the **same industry** are doing. Because broad-based buying could be related to a turn in industry fundamentals. Especially in cyclical industries. - He also pays attention to buying by **independent directors**, especially those with a background in investment management and who have served on the board for an extended period of time. Conversely, Suria argues that we should **ignore the purchases of newly appointed directors and executives**. They're often legally required to hold a minimum number of shares and may simply be fulfilling their contractual obligations. He also cautions that some insiders purchase stock to send a signal to the market, perhaps even issuing a **press release** to pump the stock price. In the academic realm, [Wang, Shin & Francis](https://papers.ssrn.com/sol3/papers.cfm?abstract%5Fid=1787482&ref=asiancenturystocks.com) (2011) demonstrated that **CFO purchases** actually contain more information than those of CEOs. This might be because CEOs often come from sales backgrounds rather than from analytical backgrounds. CFOs know that companies are worth. So to summarize, recent insider purchases are often followed by significant outperformance - especially when they're new and large positions, in small firms, with high trading volumes, by people with CFO or investment management backgrounds, coincide with share buybacks and in large clusters where every person is buying rather than selling. --- # 2\. The Smart Insider platform I mentioned in my Ghost launch post that I've now become a subscriber to an institutional insider transaction platform called [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). It's the best one I've found, and I've found it very helpful in sorting out the noise. Smart Insider has two key modules covering 14 markets in Asia: - **Insider transactions**: You can search across the insider's role in the company, trading volumes, market cap, whether a cluster or not, by sector, by minimum change in ownership, filter out non-discretionary purchases and more. - **Share buybacks**: Another database covering tens of thousands of companies. You can search for announcements and executions over time with nice charts. If you purchase the global dataset, you'll also gain access to markets in the Americas, Europe, and other regions. Smart Insider also has a **Company Signals** service, where their analysts pick out insider transactions and share buybacks that they think contain the most predictive power when it comes to future returns. They also send out monthly emails with summaries of broad trends in insider trading activity across regions and sectors. For example, earlier this year, they noted broad insider buying in China and broad insider selling in India. That was a prescient call, because since then, the Chinese market has greatly outperformed. --- # 3\. Insider transactions in Asia In the past few days, I've spent some time reviewing the insider transaction data for September 2025\. I've attempted to identify situations where there's meaningful buying across five categories: CFO buying (because they tend to be more savvy than CEOs), cluster buying, buying in microcaps, returning buyers, and buying during corporate restructurings. I'll now discuss one situation from each of these five categories - all discretionary trades that I hope will contain some signal among all the noise. ## 3.1\. Top CFO situation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-40.png) Source: Converge ICT [**Converge ICT**](https://www.marketwatch.com/investing/stock/cnvrg?countrycode=ph&ref=asiancenturystocks.com) *(CNVRG PM - US$1.5 billion)* sells fiber broadband services to households in the Philippines. They have monthly postpaid plans called FiberX and BIDA Fiber, as well as a prepaid option called Surf2Sawa. 85% of revenues come from households, and the rest from companies. The company has done well over time, increasing its earnings per share 6x since 2017\. The return on equity remains high at 21% and the operating margin 38%. It now has 2.8 million subscribers, out of a population of 116 million. The prepaid option Surf2Sawa now has over half a million subscribers, two years after its launch, which has helped increase its penetration in lower-income areas. However, the stock price has dropped significantly since the summer of 2025\. Converge cut its FY2025 revenue guidance from 14-16% to 10-12% due to manpower constraints. It hasn't been able to find enough new employees to install and repair household connections. On 13 September 2025, the Senate approved a new law called the [Konektadong Pinoy Act](https://en.wikipedia.org/wiki/Konektadong%5FPinoy%5FAct?ref=asiancenturystocks.com) that will remove hurdles for smaller Internet service providers to enter the data transmission market. Competition is likely to increase, and Converge's average selling prices might drop after the law is passed. On the same day the law took effect, we observed significant insider buying by Maria Grace Uy, the founder and head of R&D. She purchased 2 million shares at PHP 11.10 each. There was also an additional, smaller purchase by Chief Financial Officer Robert Leo Yu and Chief Risk Officer Christine Renee Blabagno, all at a price below PHP 12 per share. It's unclear why insiders have been buying. But the stock now trades at a forward P/E of 7.0x with a relatively clean balance sheet. Converge may be able to monetize some of its excess capacity by selling it to others. So it might actually benefit from industry liberalization, at least in the short run. I also note that Converge now has an active share buyback program and pays a steady dividend representing 25-30% of earnings. So it looks like insiders consider the stock to be undervalued. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-39.png) Converge's stock price and insider transactions. Source: Smart Insider --- ## 3.2\. Top cluster situation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-41.png) Source: Top Gear [**BYD**](https://sg.finance.yahoo.com/quote/1211.HK/?ref=asiancenturystocks.com) *(1211 HK - US$54 billion)* \- formerly known as "Build Your Dreams" - is the global leader in electric vehicles, based in Shenzhen, China. They're known for their electric vehicles, but they also produce plug-in hybrids. It's a vertically integrated operation, making everything from LFP batteries, motors, gearboxes, chips, and more. There's plenty of competition in BYD's home market of China, with 300 electric vehicle brands competing on price. But BYD's DM-i hybrids and affordable EVs are selling well. Its domestic sales volumes now exceed 4 million vehicles per year. And BYD is increasingly setting its sights on overseas markets, where prices tend to be much higher than in Mainland China. In September 2025, we've seen significant cluster buying in BYD. CFO Yalin Zhou bought over 140,000 shares between CNY 82 and CNY 104\. Vice President Dongsheng Yang bought almost 200,000 shares. Vice President Hongbin Luo bought over 50,000 shares. And senior employee Wei Li bought over 30,000 shares too. Finally, Vice President Zhongliang Luo bought more than 50,000 shares, too. BYD issued a press release providing details of this insider buying, saying it *"reflected confidence in the company's future"*, but it reads like a regulatory notice. This cluster buy came immediately after a weak 2025 interim report, which showed slowing sales growth and lower margins resulting from domestic price cuts. The market also reacted negatively to Berkshire Hathaway's selling of its shares in BYD and BYD's March 2025 capital raise. So it's possible that the company coordinated the cluster buy to increase demand for the stock. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-38.png) BYD's stock price and insider transactions. Source: Smart Insider BYD now trades at 20.2x forward P/E. Their vehicles are selling well. At the same time, BYD is dependent on government subsidies in many of the countries where it's active. BYD is also facing new EU anti-subsidy duties. But in any case, it's encouraging to see insider buying activity - certainly better than the alternative. --- ## 4.4\. Top returning buyer situation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-48.png) Source: G8 Education [**G8 Education**](https://finance.yahoo.com/quote/GEM.AX/?ref=asiancenturystocks.com) *(GEM AU - US$436 million)* is an operator of daycare centers across Australia. It has 406 early-learning centers across 21 brand names, including Community Kids, Great Beginnings, First Grammar, etc. The government's Child Care Subsidy is a significant contributor to revenues, but there's also a portion that needs to be supplemented by parents. The business has been growing slowly since the mid-2010s, and earnings per share has declined due to overpriced acquisitions through 2019 and an ill-timed capital raise in 2020\. G8 was hurt significantly during COVID-19 as daycare centers had to close. But since then, capital allocation seems to have improved. G8 is now earning an operating cash flow of AU$185 million per year and capex of AU$33 million, for a total free cash flow of about AU$150 million per year. With a market cap of AU$656 million and an enterprise value of AU$1.4 billion, you could argue that there's value at the current share price. In mid-2025, there was media coverage of a G8 Education employee who had sexually abused children at a Victoria daycare center. Sell-side analysts downgraded the stock on the basis of an expected decline in enrolment. And it's true that the recent occupancy numbers have declined compared to last year's levels. On the positive side, there's been significant insider buying this year. Chairman Debra Singh bought 30,000 shares in May 2025 at AU$1.29 per share. And after the share price crashed, she returned to the market, purchasing another 30,000 shares. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-46.png) G8 Education's stock price and insider transactions. Source: Smart Insider G8 Education now trades at a forward P/E of 8.6x with a dividend yield of 6.7%. The EBIT interest coverage ratio is 3x and is probably manageable, given that this is a recurring revenue business. --- ## 4.3\. Top micro-cap situation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-45.png) Source: Google Maps [**MST Golf**](https://finance.yahoo.com/quote/5316.KL/?ref=asiancenturystocks.com)*(MSTGOLF MK - US$38 million)* is Malaysia's largest retailer of golf clubs, golf balls, golf apparel, shoes and accessories. It distributes golf gear to other retailers. MST also offers golf coaching services and lessons in Singapore and Malaysia. In 2022, it launched a new indoor golf simulator concept called MST Golf Arena, where customers can eat food and drink while playing indoor golf. The Johor MST Golf Arena location has a Google review score of a whopping 4.8/5\. The company was listed on Bursa Malaysia in 2023 at 81 sen per share, but the stock has since declined to below 20\. Revenues have also declined from the COVID-era golf boom. And margins have compressed due to the discounting of hard-to-move items. MST Golf's Indonesian expansion has also added costs. However, indoor golf is a growing industry, so growth may well resume at some point. An index of Google search queries for [MST Golf](https://trends.google.com/trends/explore?date=all&geo=MY&q=MST%20Golf&hl=en&ref=asiancenturystocks.com) continues to grow nicely. The insider buying has been continuous since 2024, but accelerated in June 2025 and more recently, in September 2025\. It's primarily Chairman Kok Poh Low who's buying. He bought over 7 million shares in September, worth more than US$300,000\. In addition, the controlling shareholder, All Sportz, recently lifted its stake to 54%. So insiders are clearly accumulating shares in the company. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-37.png) Source: Smart Insider It's unclear why Kok Poh Low is buying. The stock now trades at a discount to its net asset value per share of 28 sen. It also trades at a relatively low 0.67x EV/Sales, with historical margins of about 10% on average. Unfortunately, there's no indication that margins have turned just yet. --- ## 4.5\. Top restructuring situation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-44.png) Source: Scope Industries [**Scope Industries**](https://finance.yahoo.com/quote/0028.KL/?ref=asiancenturystocks.com) *(SCP MK - US$36 million)* is a mini-conglomerate based in Penang, Malaysia. It has a large electronics manufacturing business, assembling circuit boards and gadgets for larger brands. It also has an oil-palm plantation business, an electronics parts business and a smaller trading business. In June 2025, Scope announced that it would [sell its electronics manufacturing business](https://www.scope.com.my/attachment/2025EGMScope-Circular%28ProposedDisposal%29%28Part1%29.pdf?ref=asiancenturystocks.com) to China's Luxshare for MYR 97 million. The company has an enterprise value of MYR 118 million, so it's a significant portion of the business. From my understanding, Scope will end up with a net asset value of MYR 186 million, so it's still trading at a discount to its book value. Scope has already earmarked MYR 23 million for a special dividend after completion. Management has committed to investing another MYR 50 million in expanding the company's oil-palm estate. In September 2025, Executive Chairman Min Huat Lee has purchased shares aggressively, scooping up close to 60 million shares worth US$1.5 million. It's unclear why he's buying, but presumably he sees value in the company now that it's offloading its troubled electronics business. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-36.png) Source: Smart Insider --- # 5\. Conclusion I believe that insider transactions are worth tracking - especially when they involve new and large positions in small firms, when they're done by CFOs or directors with investment management backgrounds, in clusters of individuals, and when they coincide with share buybacks. However, investing requires considering all aspects of a business, as well as your personal situation and risk tolerance. So do not consider the above information as investment advice. It's only meant as a starting point for discussion. What caught my eye in September 2025 was the insider buying in [**Converge ICT**](https://www.marketwatch.com/investing/stock/cnvrg?countrycode=ph&ref=asiancenturystocks.com). I wonder if investors are overestimating the negative impact of the Konektadong Pinoy Act. There was cluster buying at the high-profile company [**BYD**](https://sg.finance.yahoo.com/quote/1211.HK/?ref=asiancenturystocks.com), although the press release raises concerns that the buying may not have occurred organically. The returning buyer in [**G8 Education**](https://finance.yahoo.com/quote/GEM.AX/?ref=asiancenturystocks.com) signals confidence in the future. Then again, the fundamentals have deteriorated, and the debt burden is substantial. The broad-based insider buying in [**MST Golf**](https://finance.yahoo.com/quote/5316.KL/?ref=asiancenturystocks.com) fascinates me, especially since I am interested in the indoor golf market. Finally, [**Scope Industries**](https://finance.yahoo.com/quote/0028.KL/?ref=asiancenturystocks.com)' Executive Chairman, Min Huat Lee, must be seeing value in the stock. Though I'm questioning how fast capital can compound when it's reinvested in oil-palm plantations. Thanks for reading! *Michael* ![](https://substackcdn.com/image/fetch/$s_!G3nA!,w_1456,c_limit,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984.s3.amazonaws.com%2Fpublic%2Fimages%2F6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio update September 2025 URL: https://www.asiancenturystocks.com/portfolio-update-september-2025/ Last updated: 2026-06-04T10:49:35.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ``` Table of contents 1. Portfolio update 2. Update on my key holdings 3. My plans going forward ``` # **Portfolio update** September was a weak month for the portfolio, which declined by -1.7%. But some markets actually performed well. Chinese equities, in particular, have been on a bull run. There's been relentless buying of Hong Kong equities by Mainland Chinese investors through southbound flows. These investors tend to prefer technology companies, and I think that's why companies like Alibaba has done well. The Chinese bull market has implications for Hong Kong, as IPOs and trading activity tend to have a significant impact on the local economy. I'm getting increasingly bullish on residential property prices in Hong Kong, especially in areas like Kowloon where newly arrived talent from Mainland China likes to live. I also think that Fed Chair Jerome Powell is about to be replaced by someone more dovish. That would lead to lower US and Hong Kong interest rates, which should support Hong Kong's 3.75% residential cap rate. I haven't bought any [**Tai Cheung**](https://www.asiancenturystocks.com/tai-cheung-88-hk/) yet, but I'm considering it. The news has been more mixed in Southeast Asia. In early September 2025, the Indonesian Rupiah depreciated against the US Dollar following the resignation of Finance Minister Sri Mulyani Indrawati. Investors now expect the budget deficit to increase beyond the current 3% maximum. I think investors are also concerned about the new Asset Forfeiture Bill, which would permit the seizure of assets involved in criminal activities. I fear that future "anti-corruption" campaigns will be used to consolidate power. Equally puzzling were the late September social media rumors that the Philippine military was plotting to oust President Ferdinand "Bongbong" Marcos. The defense department denied the rumors, but no smoke without fire? We know that Duterte is working hard to regain power. Here's a chart of the portfolio's value in US Dollar terms, with a decline of -1.7% month-on-month in September. Since the portfolio’s inception in October 2021, the value has increased by +53.1%, equivalent to a +11.3% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-18.png) The only stock that did well was Japanese Aircraft component supplier [**AeroEdge**](https://www.asiancenturystocks.com/aeroedge-7409-jp/), thanks to enthusiasm about its new deal with Safran and the two upcoming "Project A" and "Project B". On the negative side, you had beer producer [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/). The Rupiah fell, and the stock fell in local currency terms, too. I believe that this decline was related to macro. There was also an 11% decline in the share price of Japanese secondhand goods trading platform [**Mercari**](https://www.asiancenturystocks.com/mercari-4385-jp/). The CEO spoke to investors and guided for lower gross merchandise value growth in the fourth quarter of 2025\. Though on the positive side, he's also guiding for a return to growth in the US. We should also expect a positive impact from the taxation of low-value imports after Japan's de minimis rules are revised in late 2026\. In any case, here’s the latest portfolio as of 29 September 2025: _This post is for paying subscribers only._ ### This newsletter is now on Ghost URL: https://www.asiancenturystocks.com/launch-email/ Last updated: 2025-11-19T07:11:54.000Z ****Summary**: Asian Century Stocks has moved from Substack to another platform called Ghost. You don't have to do anything and your experience will be almost exactly the same as before. New posts will delivered via email and available on [asiancenturystocks.com](https://www.asiancenturystocks.com/). The only difference is that you won't be able to read posts via the Substack app. To log in, click "Sign in", enter your email and you'll get a login link via email. Why did I move the publication to Ghost? Because Substack has introduced in-app payments with fees of 40%. I was unable to turn these payments off. The new website on Ghost looks great and is blazing fast. I've also invested in resources that will allow me to generate even better content in the future. So I hope you'll enjoy the new and upgraded version of Asian Century Stocks. Thank you for your support! I started Asian Century Stocks in April 2021, more than four years ago. Since then, it's always been hosted on the Substack platform. The decision to work with Substack has served the publication well, especially in its early years. But Substack is no longer the best choice for serious publications. So from today onwards, Asian Century Stocks will be hosted on the newsletter platform Ghost. The truth is at this decision has been years in the making. So let me give you the background story. --- # Substack's promise In April 2021, I quit my previous job with the dream of making a living writing about stocks online. I had played around with a template on Substack and then renamed it Asian Century Stocks to emphasize my focus on Asian equities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-5-1.png) The original Asian Century Stocks launch tweet, dated 7 April 2021 I was excited about Substack. Readers were thirsty for longer-form content after years of scrolling social media feeds. Substack made payments easy. And that meant that you could finally get paid for writing about stocks. One of the pivotal moments for me was when Jason Calacanis interviewed Substack's founder, Chris Best, on the show "This Week in Startups": During this interview, Chris expressed a positive view about email marketing and the independence it brings to publishers: > "... the last place where you can have a **direct channel with your audience** that's not controlled by one of the major like one of those Google Facebook Twitter" His message resonated with me. I felt that Substack would enable me to form a direct relationship with my readers, without relying on larger platforms like Facebook or Twitter. Chris promised a future where consumers would be in greater control over what they consume. No longer did we have to rely on social media feeds designed to make you addicted: > "email newsletters and podcasts and especially paid content like this is **allowing people to reclaim control of their own attention** which has been kind of like voluntarily stolen from them by these algorithmic feeds that they've become addicted to" I thought that was great. Finally, we could be in control of our own time again. Finally, Chris argued that with Substack taking a clean 10% of writer revenues, our interests were fully aligned. The only way for Substack to thrive was for its writers to thrive. Soon after I began writing on Substack, I became one of eleven writers awarded a [Substack Fellowship](https://on.substack.com/p/substack-grow-fellowship). These fellowships were given to writers based on: > "\[the\] clarity and insight of their publications, their ability to inspire new writers, and their appetite for community engagement" The fellowship was incredibly flattering. In addition to US$10,000 in prize money, Substack also helped promote my publication, including through [an interview](https://on.substack.com/p/grow-series-11-michael-fritzell) that showed up on one of Substack's main publicity channels. To put it simply, Substack was supportive of its writers. And I could see the result in the growth of my publication. Within the first year, the number of paid subscribers hit 262, helping the publication reach escape velocity. I could finally afford to pay my rent, using Substack income alone. It was an incredible feeling. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-2.png) --- # The reality In 2021, Substack raised US$65 million from a consortium of investors in its Series B funding round. After this capital raise, I noticed a gradual shift in the company's strategy. Substack moved away from championing individual creators towards building a platform of its own. The first move in this direction was the "Substack Reader" app. This app had a feed of posts in a chronological order, as well as a search function that allowed users to find new publications: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/data-src-image-2769ba6e-1bb7-4416-aa50-1e8b2ef83d58-1.png) Initially, I thought the Substack app was a great idea. It resolved the issue of emails ending up in Gmail's spam or promotions folders, and it also addressed the issue of emails being cut off due to email size limits. The app helped publications get discovered by readers who hadn't yet noticed them. And within the app, I could now offer videos and reader polls. Substack promoted the app, stating that creators could now build their own mini media empires – all within the app. However, the app slowly morphed into something entirely different - becoming more of the type of platform that Chris Best had warned us about in his 2020 interview. For example, the Substack app soon introduced an algorithmic feed for the publications that readers were subscribed to: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-3-1.png) I could no longer rely on the app to actually display the posts I had written for you. Some paid subscribers told me they hadn't seen my posts in months. And so I was forced to write towards the algorithm - guessing what would help my posts reach the top of this new "Priority" inbox feed. Next came the "Substack Notes" social media feature. It was set up shortly after a public spat with Twitter's Elon Musk, perhaps prompting Substack to realize it needed a social media platform of its own. In theory, a Twitter clone within the Substack app might help creators get noticed. I found that the loudest voices often took up the most space in the Substack Notes feed. And with the social media feature becoming the default tab in the app, readers paid even less attention to the posts they actually paid for. Another problem was Substack's "recommendations" feature. This feature allows Asian Century Stocks to recommend other publications. And vice versa. Substack's platform ambitions were evident here, too. Instead of being a passive feature helping readers find new publications, Substack nudged readers to subscribe to as many publications as possible. Here's how it works: when you sign up for one publication, Substack will ask you to follow x number of additional people and subscribe to four publications instead of one. Many readers click "Continue" without giving it much thought. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/data-src-image-405904e0-7ec0-44af-a673-5b7fd8633ae1-1.png) Most Substack readers click "Continue" without reading the top part, and therefore end up subscribing to 3 additional publications This type of nudging caused our mailing lists to grow rapidly, but readers quickly felt overwhelmed by the number of emails in their inboxes. In the past, authors would create their own publications and send posts from those. But today, Substack is now pushing authors to publish posts directly from their profiles. For example, the following author – a brilliant former buy-side analyst – thought she had set up a Substack called "Sector Stories" when in reality, she had just set up a personal profile with that same name. Her publication doesn't have a website, so her articles are "stuck" within the app: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-11-1.png) It seems that Substack's vision is to create a platform where readers follow authors, and authors publish posts directly from their profiles. No email is exchanged in the process. Instead, both readers and publishers end up stuck within the Substack ecosystem. --- # The final straw ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-8-1.png) On 18 August 2025, Substack announced that it had enabled payments within its app. Readers on the Substack app can now subscribe to any publication within it. Since the payments are made via the iOS App Store, the total fee is now 40%. With a price of US$350/year, Asian Century Stocks would therefore have to raise its price to US$460 to break even. I asked my Twitter followers how they felt about this set-up, and they almost universally [expressed dismay](https://x.com/MikeFritzell/status/1958135059900502522?ref=asiancenturystocks.com). Why would anyone pay an additional US$110 per year to subscribe via the app instead of using a browser? What's worse is that if a reader subscribes via the app, I can't issue refunds, cancel the subscription, or transfer it to another platform. To Substack's credit, the platform is straightforward to use. I love Substack's video capabilities, since they allow me to upload videos with ease. The automated emails provided by "Substack Boost" are excellent, too. And I'm grateful that I've been able to dedicate over 95% of my time on research, which was the whole point of starting a publication in the first place. However, at this point, it's clear what Substack is trying to do. They want to create the next social media platform, where readers can "follow" and pay writers directly within the app, thereby providing a complete lock-in for publishers on the platform. These platform ambitions may serve Substack well. But I don't see how I serve my readers well asking them to fork out 40% more for the exact same content as they'd receive in an email. So, I've decided to move back to basics. --- # The future of Asian Century Stocks ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image.png) The new landing page. Click "Take me to the site" at the top-right corner if you want to go to the site directly. From today onwards, Asian Century Stocks will be on the Ghost platform. This platform was developed by an Englishman called [John O'Nolan](https://x.com/JohnONolan?ref=asiancenturystocks.com) and a half dozen people at the Ghost Foundation. John is sincere and doesn't have the platform ambitions that Substack has. The Ghost Foundation hasn't taken any venture capital funding, is self-sustaining and completely independent from any of the major platforms. So I think it will be the perfect home for Asian Century Stocks. Your experience will be almost the same as before: - The website address remains the same: [asiancenturystocks.com](https://www.asiancenturystocks.com/). - The new website has been created by the exceptional Marc Perel and his team at [Obox](https://oboxthemes.com/?ref=asiancenturystocks.com) in Cape Town, South Africa. I think it looks great. - The Ghost platform is blazing fast and, in my view, even more intuitive than Substack's. In fact, Ghost's software is so good that some of Substack's own code was actually [copied from Ghost](https://x.com/johnonolan/status/1602330392127741962?s=46&ref=asiancenturystocks.com). - Your subscription is processed through the US payment company Stripe. That has always been the case, even on Substack. So nothing will change on that front. - From now onwards, you will receive all future posts in your email inbox. They won't show up in Substack's app. If you're having trouble receiving emails from Asian Century Stocks, check your "spam" or "promotions" folders and then drag them over to your inbox to teach your email client that they're not spam. - My posts will resemble those I created on the Substack platform. And my PowerPoint presentations will be the same as before. - It will take a few days for all the videos to be uploaded to the new website. So please be patient. The new website menu now looks like this: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-1.png) Click "Search" to look through all previous posts. Click "Log In" to view the paid content, and you'll then receive an email with a login link. Once you're logged in, there will be a button that says "Upgrade", allowing you to become a premium subscriber: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-3.png) Click the "Profile" button (the outline of a person) at the top right corner of your screen to see your personal account settings, including your subscription details. The links in the top middle are almost the same as before, except that I've renamed "Home" to "**Latest**" and "Table of contents" to "**Library**". Just for simplicity. I've also added tags to the second column page of the main page. These tags enable you to access posts from specific countries, such as "Japan" or "Hong Kong". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-4-1.png) To make sure you are satisfied with my content, every email from Asian Century Stocks will now finish with the following three buttons: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-15.png) So if you enjoyed a particular post, click "**More like this**". And if you didn't, click "**Less like this**". This type of feedback will help me understand what content you enjoy and don't. Since I will be saving money during the transition (roughly 8% of total revenues), I've signed up for a subscription to the London-based institutional data analytics platform [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). It's a fantastic service that will allow me to track insider transactions and share buybacks across Asia. I plan to send out monthly posts highlighting the top insider purchases that occurred during a particular month. I'll continue to write about 20+ companies per year, as well as monthly portfolio updates. I've received feedback that you want to see more thematic reports, more storytelling. So I'll take your advice and write more about general-interest topics. I've also decided to move the Asian Century Stocks community from Telegram to Slack, as it'll be better suited for everyday chat. I'll be there daily, talking about companies in Asia. You'll get access to the community once you've become a paid subscriber: [you can find the link the Slack group here](https://www.asiancenturystocks.com/the-new-acs-slack-community/). I will also send out an invite link at 12:00 Singapore time on Thursday 2 October 2025 to all paid subscribers. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-14.png)](https://www.asiancenturystocks.com/the-new-acs-slack-community/) The new Asian Century Stocks community on Slack I'm grateful for everything that Substack has done for its writers. But it's time to move on. And I think Ghost will be the perfect new home for the publication. If you're not a premium subscriber yet, I encourage you to take the leap and join the 560 subscribers who are actively supporting the newsletter. You'll get smarter about equities in Asia and receive over 20 deep dives annually. To celebrate the launch, I'm offering you a [20% discount for the first year](https://www.asiancenturystocks.com/20-discount): [Claim your discount!](https://www.asiancenturystocks.com/20-discount) Thank you for trying Asian Century Stocks, and I hope you enjoy the content. Best regards, Michael Fritzell ### Bermaz Auto (BAUTO MK) URL: https://www.asiancenturystocks.com/bermaz-auto-bauto-mk/ Last updated: 2026-03-16T13:22:17.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Bermaz Auto at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Bermaz Auto**](https://finance.yahoo.com/quote/5248.KL/?ref=asiancenturystocks.com) *(BAUTO MK — US$186 million)* is the former auto distribution arm of Malaysia’s Berjaya Corporation. It has been listed on Bursa Malaysia since 2013 and has since expanded from a Mazda-focused dealer to also sell Kia, XPeng, and Deepal. The competition within Malaysia’s auto industry has historically been favorable, thanks to a set of regulations. For example, imported vehicles are subject to a 30% duty, thereby protecting locally assembled cars, such as those made by Mazda and Kia. For Bermaz Auto, 86% of its unit sales volumes come from Mazda-branded vehicles such as the CX-5, CX-30, CX-8 and Mazda 3\. These tend to cost around MYR 130-160,000 (US$30-40k). In a middle-income country like Malaysia, these are premium products. The company has performed well over the years, with consistently rising top-line revenues and earnings per share. Consumers appreciate Mazda’s sporty designs and enjoy the driving experience. Meanwhile, thanks to Bermaz Auto’s asset-light distribution model, it’s been able to earn a return on equity above 20% in most years. In June 2020, the Malaysian government decided to scrap the previous 10% motor vehicle sales taxes, causing a one-off boom in car sales that lasted for two years. Since the world was experiencing a semiconductor chip shortage at the time, delays accumulated, and Bermaz Auto’s profits remained strong through FY2024, which ended in April 2024. However, since then, Bermaz Auto’s earnings have gone straight down, for several reasons: - In mid-2022, Malaysia’s motor vehicle sales tax increased to 10% and households reduced their purchases of new vehicles. - In early 2022, Malaysia introduced an exemption from the 30% import duty for electric vehicles only, resulting in a surge in Chinese electric vehicles and prompting Bermaz Auto to offer discounts on its cars. - The Mazda model lineup has been ageing, with Bermaz Auto’s four top-selling products being launched between 2017 and 2020. _This post is for paying subscribers only._ ### How to avoid value traps in Asia URL: https://www.asiancenturystocks.com/how-to-avoid-value-traps-in-asia/ Last updated: 2025-09-30T13:13:34.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c10dc8c4-2ad5-4028-a0b1-9ce5009838db_2121x1414.jpg) Source: Getty Images # **Summary** - Value traps are stocks that look cheap but end up delivering poor returns. - The main reasons why stocks end up being value traps include hoarding cash, having obsolescent products, selling commodity products in a market with excess supply, related party transactions, aggressive accounting, industry cyclicality, high debt and government interference. - Cash hoarding is the most common in East Asian market such as Japan and South Korea, while in emerging Asia, the issue is more often complex corporate structure where the owner abuses minorities. - But in any case, I suggest going through my list to make sure all risk are considered. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Here’s a lighter post with some of the lessons learnt over the past fifteen or so years I’ve been involved in Asian equities. I’ll give you eight suggestions on how you can avoid “value traps”: situations where you think the stock is undervalued, yet ends up delivering sub-par returns. The most obvious case of a value trap is when the company does not deliver any capital returns. But there are many other reasons why a stock might end up being a value trap, including outright fraud, aggressive accounting, industry cyclicality and more. ``` Table of contents: 1. Avoid the cash hoarders 2. Avoid shrinking-demand products 3. Avoid commodity products 4. Avoid complex corporate structures 5. Avoid aggressive accounting 6. Avoid cyclicals at peak margins 7. Avoid highly indebted companies 8. Avoid government interference 9. Conclusion ``` --- # **1\. Avoid the cash hoarders** ![With Covid Fading, IMAX China Results Highlight Pre-Pandemic Cinema Troubles - Bamboo Works - China stock insights for global investors](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/586736f0-9904-40dd-8678-ae18bb5d3e9c_900x600.jpg) Some businesses are capital intensive, and others are not. That’s fine. But what’s inexcusable if a company reinvests capital at a low rate of return. Companies with poor capital allocation often end up being value traps. In early 2024, I personally invested in IMAX Corporation’s Greater China subsidiary [**IMAX China**](https://www.asiancenturystocks.com/imax-china-1970-hk/)*(1970 HK — US$351 million)*. I felt it was an asymmetric bet on a takeover by the parent, since Chairman Richard Gelfond had expressed an interest in privatizing it. At the time I invested, minorities had already rejected a privatization bid of HK$10/share. The company would be allowed to make a new bid from 10 October 2024 onwards, just a few months after I invested. [IMAX China (1970 HK) － mid-2024 updateDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in IMAX China when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e02f66a0-3643-4df0-bca2-ecc18beb62f1_2560x1707.jpg)](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/) However, the bid never came. And without a dividend, cash simply builds up on the balance sheet. And so despite a strong Chinese box office earlier this year, the stock continues to be range-bound. I personally think that the stock is undervalued. It trades at 10.7x P/E. But without a dividend, there is no value anchor. In such situations, investors can end up with a low internal rate of return, at least if a bid never materializes. ![MANEKINEKO, The Real Family Karaoke | Trenz Indonesia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/85a6f6d7-6923-4e4d-a466-70c671c6037b_1024x485.jpg) A more positive example is that of [**Koshidaka Holdings**](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/)*(2157 JP — US$801 million)*. It’s run by an entrepreneur called Hiroshi Koshidaka, who built it from the ground up. While Koshidaka’s dividend has always been low, the company has reinvested capital successfully through a larger network of karaoke outlets. It’s also been very successful in carving out a niche for itself. In 2020, Koshidaka spun off its sister company Curves to unlock value for shareholders. And the results speak for themselves, with a return on equity of 21%. [Koshidaka (2157 JP) － 2024 updateDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Koshidaka when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5ac95939-7474-49b9-851e-47577a007fda_1200x800.jpg)](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) So, how do you avoid the value traps that simply do not return cash to shareholders? Check the company’s cash flow statement. In IMAX China’s case, you can see that they pulled the dividend in 2023 and spent almost nothing on share buybacks in 2024\. So US$17 million of cash built up on the balance sheet, unfortunately out of reach for us minority shareholders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3bef612f-350b-4566-b31f-09be17c62df6_1668x1916.png) IMAX China’s cash flow statement You can also look at the return on equity the company has achieved compared to its peers. If a CEO has done well, then the return on equity should be on its way to exceed that of the company’s sector peers. In IMAX China’s case, the return on equity is currently 12%, but that number will probably head lower the longer the dividend is omitted. --- # **2\. Avoid shrinking-demand products** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b8f08ed6-3790-48c2-888a-c278e79af05a_1333x927.jpg) Source: Getty Images To avoid value traps, you also need to invest in companies that are seeing growing demand for their products. Companies selling fax machines, printers or other obsolescent products are not going to provide much earnings growth, and the dividend stream will likely shrink as well. One good example is [**British American Tobacco (BAT) Malaysia**](https://www.asiancenturystocks.com/deep-dive-2021-9-bat-malaysia/) *(ROTH MK — US$352 million)*: [Deep-dive 2021-9: BAT MalaysiaBritish American Tobacco Malaysia (ROTH MK) is Malaysia’s largest tobacco company, selling cigarettes under the Dunhill, Rothmans, Pall Mall and Peter Stuyvesant brand names.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1dede620-8579-40b6-896d-f0569f945fbb_1858x1044.png)](https://www.asiancenturystocks.com/deep-dive-2021-9-bat-malaysia/) In 2015, the Malaysian government doubled its cigarette excise taxes. Coinciding with this rise was the start of the smuggling of illegal cigarettes from Indonesia. Such illegal cigarettes continue to take market share. And while the government has lost excise tax revenues, it still hasn’t responded. Another problem for BAT Malaysia is the import of cheap vaping devices from China, further chipping away from BAT Malaysia’s cigarette monopoly. Since 2015, its earnings have declined by roughly 80% and indeed become a value trap. In contrast, the demand for [**Samyang Food**](https://www.asiancenturystocks.com/samyang-foods-003230-ks/)’s*(003230 KS — US$8.3 billion)* instant ramen is off-the-charts. I wrote about Samyang Foods in September 2024: [Samyang Foods (003230 KS)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Samyang Foods at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/149135513/a5116e4a-bfda-438c-9cd1-75144810dca4/transcoded-1726975334.webp)](https://www.asiancenturystocks.com/samyang-foods-003230-ks/) In the last financial year, the company’s earnings per share more than doubled, and the stock price has responded positively : So what happened to Samyang Foods? Well, they have an ultra-spicy instant noodle product called Buldak Ramen that’s taking the world by storm. The product is now available across most major supermarkets in the US and Europe. Cardi B did a video doing the “Buldak Ramen” challenge on TikTok, trying to see whether she could take the spiciness level. ![Cardi B's Buldak Noodle Mukbang Takes TikTok by Storm](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a62ea7b1-90cc-4e4e-b7a1-53fa3d3b6659_1200x800.jpg) Cardi B trying out the Carbonara version of Samyang’s Buldak Ramen So how can you know whether the underlying demand for a product is rising or not? First, check the like-for-like volume numbers reported by the company. Second, observe consumer behavior through customer engagement metrics. Third, check alternative data sources such as Google Trends or Similarweb to see whether interest in the product is rising or falling. You can also think long and hard about which new products are satisfying customers in a better or cheaper way. In Malaysia’s cigarette market, vaping devices are clearly superior in terms of cost. And when it comes to instant noodles, Buldak Ramen has carved out a nice niche for itself. --- # **3\. Avoid commodity products** ![NIU SQi launched as futuristic-looking light electric motorbike](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/56eaa366-1ea3-4a43-b2f4-ca7fa7595c91_932x573.jpg) NIU’s SQi electric motorbike With commodity products, you run the risk that excess supply will eat away at your margins and ultimately cause you to become loss-making. So products need some type of differentiation that will cause customers to stick with them. One of my biggest losses over the past few years was investing in Chinese electric bicycle designer and manufacturer [**Niu**](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/)*(NIU US — US$336 million)*: [Deep-dive 2022-21: Niu TechnologiesDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/11b03981-bc5e-418b-8b33-9010ab552ee6_1896x1064.png)](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/) I thought the designs of the motorbikes were compelling, and that lithium-ion battery bikes would take market share from lead-acid battery bikes. Niu’s CEO Yan Li seems to have a sharp mind. Finally, I believed that the end of China’s COVID-19 lockdowns would cause foot traffic to return to Niu’s stores. But in reality, demand never came back for Niu’s motorcycles. Why? Because competition with China’s Yageo and Aima caused prices to go lower and lower. Niu has now been forced to support its dealers through greater incentives, causing great losses. The crux of the issue is that while Niu’s designs have been beautiful, electric bikes are easy to produce, and there are no switching costs from one brand to another. They’re simply commodities. At the exact opposite end of the spectrum, you have a company like [**PropertyGuru**](https://www.asiancenturystocks.com/propertyguru-pgru-us/)*(PGRU US — delisted)*, which was taken out by Swedish private equity firm EQT in December 2024 in a US$1.1 billion transaction. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bc2573bb-b535-4fc0-8a24-54589b0316ed_1996x2274.png) I wrote about the company here: [PropertyGuru (PGRU US)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/142438355/839ef907-41f7-4270-aa9f-84e6f3e2c0d3/transcoded-1710044849.png)](https://www.asiancenturystocks.com/propertyguru-pgru-us/) What’s unique about PropertyGuru is that its property listings platforms dominate its key markets of Singapore and Malaysia. Consumers default to the largest platform, so real estate agents are forced to pay up. The platform is in a stable equilibrium that competitors will find difficult to disrupt. In other words, it has a strong economic moat. So, how do you know if a company is selling a commodity product or not? - You can check the company’s market share: if it’s greater than 50%, then it probably has some type of competitive advantage. - You can ask customers why they buy the product: is price the determining factor, or are they focusing more on other attributes when buying? - Finally, is there a market price for the product that fluctuates with supply & demand? If so, then you’re most likely looking at a commodity. --- # **4\. Avoid complex corporate structures** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b9ee4331-b803-4e04-9296-f3e3d74acb2f_848x440.png) Three types of complex corporate structures Earlier this year, I wrote a [guide to corporate governance](https://www.asiancenturystocks.com/guide-to-corporate-governance/): [Guide to corporate governanceDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d50dd51c-4833-48b5-98ac-ba7f6eb0d82c_1616x909.jpg)](https://www.asiancenturystocks.com/guide-to-corporate-governance/) One of my key points was that complex corporate structures introduce conflicts of interest. If there are separate listed entities within a group, how can management possibly do what’s right for all minorities simultaneously? In such corporate structures, what often ends up happening is that the parent gets involved in the business through related-party transactions. It might acquire intellectual property and require the ListCo to pay royalties to it. Or it might get involved in the distribution or the manufacturing of the products sold by the ListCo. In such situations, hard decisions will ultimately need to be made. Will such decisions be beneficial to minority shareholders? Sometimes, but sometimes not. One example of a complex corporate structure is that of Singapore’s [**Haw Par Corporation**](https://www.asiancenturystocks.com/haw-par-hpar-sp-2025-update/)*(HPAR SP — US$2.5 billion)*. It’s a family-owned conglomerate with significant shareholdings in both UOB and UOL: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3e0f5b37-e971-4221-ab8c-2f63de9c7753_2106x892.png) I wrote about the company here: [Haw Par (HPAR SP) — 2025 updateDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/164915740/d2ccab82-2ccb-452f-9e18-e1ea2e97f65d/transcoded-1748752430.jpg)](https://www.asiancenturystocks.com/haw-par-hpar-sp-2025-update/) I argued that there’s significant value in its portfolio of assets, in particular the Tiger Balm franchise, the 4.5% stake in commercial bank UOB and the net cash of SG$853 million. Now that patriarch Wee Cho Yaw has passed away, the jury’s out on whether the value of these assets might actually be realized. I argued in my post that the Wee family is facing a quandary: if Haw Par Corporation sells or distributes its share in UOB, then the family might lose control of the bank. And as a proportion of the family’s wealth, UOB matters a lot more than Haw Par Corporation itself. So there are clear conflicts of interest here. An example of a much simpler corporate structure is that of Singapore-listed [**Riverstone**](https://www.asiancenturystocks.com/riverstone-rston-sp/)*(RSTON SP — US$888 million)*. I wrote about the company here: [Riverstone (RSTON SP)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Riverstone at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/167620217/6004de8d-586f-4b38-84ef-939e05422868/transcoded-1751775140.png)](https://www.asiancenturystocks.com/riverstone-rston-sp/) Riverstone is 51% owned by TS Wong, meaning that he has significant skin in the game: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f7ecaa19-fcd9-4db4-923e-0b66b1168b61_2594x970.png) Meanwhile, the board is mostly made up of independent directors who will hopefully take minority interests into account. I think that’s part of the reason why Riverstone’s earnings per share has compounded at a +15% annual rate since its IPO in 2006. So, how do you check whether a company has a complex corporate structure? Search on TIKR using the company name and then click on the Ownership tab. If the parent is a holding company, ask ChatGPT what business the parent is involved in. Finally, open up the annual report and search for any related party transactions. --- # **5\. Avoid aggressive accounting** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff8d1b2f-6316-4f28-ae21-af1888bee083_961x427.png) If the accounting is aggressive, that means that profits are partly illusory. Once the market realizes what the sustainable earnings power of the business truly is, the shares will probably trade down. How do companies play these games? They might adjust their depreciation schedules, push products to customers on looser payment terms, capitalize expenses, under-estimate credit costs, etc. One company that I’ve previously owned is Indonesian milk producer [**Ultrajaya**](https://www.asiancenturystocks.com/deep-dive-2021-19-ultrajaya-milk/) *(ULTJ IJ — US$828 million)*: [Deep-dive 2021-19: Ultrajaya MilkUltrajaya Milk (ULTJ IJ) is the leading dairy company in Indonesia. Its most popular product “Ultra Milk” has a market share of roughly 40% and dominates the mass market.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/09e3f5d7-6ee7-4f71-88b3-e78bde7ff3cb_3328x1870.png)](https://www.asiancenturystocks.com/deep-dive-2021-19-ultrajaya-milk/) In 2020, it had enjoyed foreign exchange gains on top of inventory revaluation gains, boosting earnings per share through 2020: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/422d28f1-611e-4f8e-a61f-426f9638142e_2056x882.png) While cheap, Ultrajaya’s inventory revaluation and FX gains disappeared in 2022\. And the demand for the product stays more or less flat. Since 2020, the share price has gone nowhere for almost five years. With a modest payout ratio of about 30%, the total return hasn’t been particularly high either. So it’s been a value trap. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f0a41b73-8477-4fad-a026-4349c07bc47f_960x426.png) At the opposite side of the spectrum, you have companies with accounting that’s overly conservative. [**China Tower**](https://www.asiancenturystocks.com/china-tower-788-hk/) *(788 HK — US$828 million)* is a perfect example of such a company: [China Tower (788 HK)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/138598193/2a6806e9-356e-4495-a48f-a98690907602/transcoded-00000.png)](https://www.asiancenturystocks.com/china-tower-788-hk/) China Tower owns towers where telecom operators place their antennas and other types of network equipment. These telecom operators then pay China Tower monthly rent. The profitability of tower companies can get really high if more than one operator occupies each tower. What I felt was special about China Tower is that since 2015, its towers had been depreciated over just 6-10 years, despite useful economic lives of 10-25 years. So I was assuming that through 2025, the towers would already have been depreciated down to zero, and therefore stop weighing on earnings. And that’s exactly what happened. China Towers earnings per share has gone from CNY 0.50 to 0.64 in the past few years and is expected to rise to CNY 1.02 on 2026e consensus estimates. China Tower would then end up trading at 10.6x P/E. To detect aggressive accounting, you’ll need to parse through the footnotes of a company’s financial statements. Or alternatively, feed the annual reports from the last few years into NotebookLM and ask each the chatbot about each potential issue. Here is a list of items you can check: ``` Revenue recognition policies over time and vs peers Receivable days vs peers and historically Inventory days vs peers and historically Depreciation/gross PP&E vs peers Policies for the capitalization of R&D or software development One-off gains or losses in the income statement Effective tax rate much lower than the statutory rate "Buying of R&D" through acquisitions ``` --- # 6\. Avoid cyclicals at peak margins ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1ed7573a-3e88-4912-865b-0ee167270afb_1736x744.png) Cyclicals often appear the cheapest at the top of the cycle. Their margins are volatile, causing the P/E ratio to compress when margins are at their peak. A good heuristic is therefore to avoid buying cyclicals at the peak of the cycle, even if the near-term P/E ratio looks low to you at the time. One company whose earnings have cratered is Hong Kong-listed discount store [**International Housewares Retail**](https://www.asiancenturystocks.com/international-housewares-retail-1373/)(“IH Retail”) *(1373 HK — US$78 million)*. I wrote about the company in the summer of 2023, when it traded at a trailing twelve-month P/E of 10x: [International Housewares Retail (1373 HK)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/134800491/d3893c5e-8a4b-4a7e-8d72-11ea8576560b/transcoded-00000.png)](https://www.asiancenturystocks.com/international-housewares-retail-1373/) At the time, IH Retail had benefited from the COVID-19 pandemic, selling household goods to consumers at a time when everyone was locked up at home. IH Retail had also become a large seller of face masks. In my report, I believed that IH Retail’s profits would drop somewhat following the end of the COVID-19 pandemic. But I didn’t expect profits to fall as much as they did: down 77% from the 2022 level. The end of the COVID-19 pandemic was part of the issue, but IH Retail also ended up becoming a casualty of Pinduoduo’s and Taobao’s entry into the Hong Kong market. The Hong Kong discount retail market has become ultra-competitive. A company at the bottom of its industry cycle was Singapore-based events organizer [**Pico Far East**](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/)*(752 HK — US$457 million)* back in 2021. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a926fdfd-eba5-417a-bc6f-c992bc1e240c_961x426.png) I wrote about the company close to the bottom, arguing that the industry cycle was close to its bottom: [Deep-dive 2021-18: Pico Far EastPico Far East (752 HK) is one of the largest service providers for the global exhibitions and events industry. Organisers hire Pico to decorate and set up exhibition booths for major events taking pl…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/image/fetch/h_600-c_limit-f_auto-q_auto:good-fl_progressive:steep/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2f03074cc8-ee99-4c7a-8de9-b9f7ee0a51b8_3328x1866.jpg)](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/) In 2021, Asia was suffering from the COVID-19 pandemic, and borders had closed off. As a result, conference activity ground to a halt. However, Pico had a net cash position of HK$600 million, and it remained profitable, even through the depths of the pandemic. So I thought that the company would ultimately recover. And indeed it did. Pico’s profits are now far higher than in 2019\. When it comes to Pico’s operating margins, they bottomed out at 1.0% in 2021 and are now back to 6.9%. Investors responded by bidding up its share price. In reality, I sometimes struggle to judge whether an industry has hit a bottom. But I like to look at a company’s operating margins over time, to see whether they’re mean-reverting or not. You can also look at the operating margins of companies in the same industry. Property developers, auto companies and chemical companies are famously cyclical. So to avoid value traps in these industries, consider whether margins may one day head lower. --- # **7\. Avoid highly indebted companies** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c8dca425-6d1e-4ff9-8b40-4d5381002211_1736x744.png) Levered entities magnify gains and losses in both directions. On the positive side, you could argue that the debt is non-recourse to your portfolio. You’ll never risk blowing up your entire portfolio. On the other hand, levered entities will find it difficult to invest for the long term. And if profits head south, lenders might become cautious, refuse to roll over loans and put them in a vicious spiral that eventually leads to bankruptcy. There’s an entirely different reason for avoiding indebted companies. If a company doesn’t have any debt, it’s relatively easy to judge if it’s undervalued or not. But if a company carries a significant amount of debt, there’s always a risk that I misjudged the value and end up with a risk-reward skew that’s positive at all. The prime example of a company with a significant amount of debt is [**Hongkong & Shanghai Hotels**](https://www.asiancenturystocks.com/the-hongkong-and-shanghai-hotels/)*(45 HK — US$1.3 billion)*. When I wrote about the stock at the end of 2024, it traded at 0.28x book, roughly a third of the value of its investment properties after deducting the net debt. In that report, I argued that Hongkong & Shanghai Hotels’ earnings would probably recover as interest rates eventually came down. [The Hongkong & Shanghai Hotels (45 HK)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in The Hongkong & Shanghai Hotel at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb6cd638-57c3-47a5-9fbd-a70ba3cb45e1_4186x2990.jpg)](https://www.asiancenturystocks.com/the-hongkong-and-shanghai-hotels/) However, the devil was in the details. While both Peninsula London and Peninsula Istanbul had recently opened up to the general public, they carried a significant amount of debt. And today, after paying interest expenses, they’re not contributing much to earnings at all. So with a poor return on reinvested capital and high interest expenses, the stock has gone nowhere in the past few years, despite a forceful recovery for the hospitality industry after the COVID-19 pandemic. It’s been a value trap. A company at the opposite side of the spectrum is Japan’s [**BASE Inc**](https://www.asiancenturystocks.com/base-inc-4477-jp/)*(4477 JP — US$265 million)*. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f0a0bb0b-dd9e-4fd3-bf45-e149726edb4d_960x426.png) I wrote about the company earlier this year: [BASE Inc (4477 JP)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/154578867/d84c4845-808e-4727-aa55-6a37cea23bab/transcoded-1736566869.png)](https://www.asiancenturystocks.com/base-inc-4477-jp/) Like many other Japanese companies, BASE has a massive cash cushion representing half of its market capitalization. While it continues to face competition from Shopify, BASE does have its fans. And given the stability of its balance sheet, it’s now attracted activist investor interest in Hiroyuki Maki. With that much cash, BASE has plenty of leeway in its attempt to stage a comeback, including in its now-successful payment segment: How do you check whether a company has too much debt? - Start with the EBIT/interest expense ratio. If it’s below 2x, then the company doesn’t have much room to manoeuvre, especially if its earnings are cyclical. - For asset-heavy businesses, such as commercial property owners, you can also check the debt/assets ratio. I’d get very nervous if that number gets above 30%. - Finally, check the yield-to-maturity on any longer-term bond that the company has outstanding. If the company has to borrow at a rate above 10%, then it’s probably in trouble. It’s going to find it hard to find projects that can justify the cost of financing. --- # **8\. Avoid government interference** ![Weibo's active users reached a record high in Q2 | Dao Insights](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4041080-a172-4506-8916-568f671b0d04_1870x1139.png) Warren Buffett once said that his favorite stocks are those not targets of government regulation. Companies can be exposed in a variety of ways: taxes or tariffs, price caps, license requirements, antitrust regulation, etc. In some regions, the rule of law might itself be lacking, in which case you’ll have no idea how you might get screwed in the future. It’s a recipe for negative surprises. One of the first companies I covered on Asian Century Stocks was China’s [**Weibo**](https://www.asiancenturystocks.com/2020-6-weibo-corporation/)*(WB US — US$3.1 billion)*: [Deep-dive 2020-6: Weibo CorporationWeibo Corporation (WB US) is a Chinese social media platform that reminds us of Twitter. Just like Twitter, Weibo is a public platform that influencers can use to reach their fans, for the government…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/59413a5a-97a5-4579-b63b-607f20563378_1024x573.jpg)](https://www.asiancenturystocks.com/2020-6-weibo-corporation/) Weibo is a private company running a social media service that’s similar to Twitter. It completely dominates the Chinese market with 500 million users who come back to its app or website daily. In 2020, the Chinese government cracked down on its tech platforms, including Alibaba-backed Weibo. The company was hit with 44 penalties in 2021 alone, allegedly due to the misuse of data. The government removed parts of Weibo’s key features, moving it towards safer, state-aligned content — significantly raising the moderation costs. Weibo’s ad revenue dropped, and the platform has struggled to grow ever since. Conversely, I think that the Chinese state-owned oil & gas exploration and production company [**CNOOC**](https://www.asiancenturystocks.com/cnooc2022update/) *(883 HK — US$122 billion)* has actually benefited from its strong government support. ![2025_中国海洋石油有限公司](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2988b8e7-4e87-4ae0-8255-986db08f963a_802x571.png) At the time of writing about CNOOC, oil prices had just turned negative, and investors were more negative than ever. But I argued that CNOOC enjoyed a monopoly on production sharing contracts in offshore China, along with great assets in offshore Guyana. [Deep-dive 2020-5: CNOOC LtdCNOOC Ltd (883 HK) a.k.a. "China National Offshore Oil Corporation" is one of the largest oil exploration and production companies in Asia. It remains a pure play upstream oil company with a high bet…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a8722185-3e9f-4e69-830f-e8795c157fa5_1024x574.jpg)](https://www.asiancenturystocks.com/cnooc/) Today, CNOOC remains a growth stock, with 6% production growth annually and a reasonably generous dividend payout ratio of 40%. While CNOOC was targeted by Trump’s Executive Order 13959 on Chinese Military Linked Companies, it has always enjoyed strong government support. In 2022, the Chinese government invited the company to list on the A-share market, supporting the listing through direct funds. And it’s now entered into alliances in Abu Dhabi, Brazil and several other countries, also thanks to the government’s support. So what do we learn from this? At one level, I think it’s helpful to invest in countries with a reliable rule of law, just to avoid negative surprises in the future. But if you have to invest in countries with a poor rule of law, it’s helpful to invest in entities that are aligned with the top leadership. Because if any government interference occurs, it will most likely be on the positive side. --- # 9\. Conclusion In East Asian markets such as Japan and South Korea, value traps often end up being those that refuse to pay out cash to shareholders. In emerging markets such as Vietnam or China, the problem is more often related-party transactions and earnings being illusory in some way. In any case, it’s always helpful to go through the list of issues that can end up causing a stock to become a value trap, including poor capital allocation, aggressive accounting, product substitutes, complex corporate structures, a high debt load, government regulation and industry cyclicality. If you like this post, make sure to share it with your friends: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) ### Links September 2025 URL: https://www.asiancenturystocks.com/links-september-2025/ Last updated: 2025-09-17T04:15:47.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Concepcion Industrial (CIC PM) URL: https://www.asiancenturystocks.com/concepcion-industrial-cic-pm/ Last updated: 2026-03-16T13:23:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Concepcion Industrial at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Concepcion Industrial**](https://www.marketwatch.com/investing/stock/cic?countrycode=ph&ref=asiancenturystocks.com) *(CIC PM — US$91 million)* is an appliance company selling air conditioners and refrigerators in the Philippines. The business was started by the Concepcion family in 1962\. One year after being formed, it received exclusive distribution rights for Carrier-branded air conditioners in the Philippines. In 1987, Concepcion launched its own brand, “Condura” — now one of the top five brands in the country. And more recently, Concepcion has become a distributor for China’s Midea and Shark/Ninja brands. In addition to consumer appliances, Concepcion also has a large commercial segment, where it installs HVAC systems or elevators in commercial or industrial properties across the country. So what are the key drivers of the business? - In the **consumer segment**, the weather is an important factor, as is the Philippine Peso/US Dollar exchange rate, as many of the components are imported from overseas. - In the **commercial segment**, the key factor is the construction cycle, which itself is reliant on the availability of credit. COVID-19 had a significant impact on the Philippine consumer appliance industry, forcing stores to close and leaving households short on cash. In the consumer business, profits are still below their 2019 levels. Concepcion has also seen greater competition from China’s Haier, Hisense and TCL. Data from Google Trends shows that the key Carrier brand has lost consumer mindshare. Meanwhile, the commercial segment has now completely recovered from COVID-19\. The outlook is positive, with the government pushing large-scale infrastructure projects, including the modernization of key airports. If you combine the two segments, earnings are still down vs the 2019 level. The operating margin has gone from 18% in 2016 to just 8% today. So Concepcion remains somewhat of a turnaround story. One exciting aspect about Concepcion is that they just hired a new CEO, Ariel Fermin. This marks a break from the past, as he’s the first outside CEO to run the business. Third-generation leader Raul “Jojo” Concepcion justified the decision saying that they were: > *“*lucky to find Ariel, who’s very capable*... There are many family businesses that give the keys to their children who may not have the experience, capabilities or maturity to run things.”* _This post is for paying subscribers only._ ### Logizard (4391 JP) URL: https://www.asiancenturystocks.com/logizard-4391-jp/ Last updated: 2026-03-16T13:23:45.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Logizard at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Logizard**](https://finance.yahoo.com/quote/4391.T/?ref=asiancenturystocks.com) *(4391 JP — US$26 million)* is a Japanese developer of software for managing warehouse inventory. I first heard about the stock from a [Singapore-based former fund manager](https://sk564730.substack.com/) who has an excellent track record managing his own money. So I wanted to find out more. What’s fascinating about Logizard is that despite its US$15 million enterprise value, it’s somewhat of a market leader in cloud-based warehouse management systems for e-commerce. The CEO of competitor C-Net once said in a recent interview that he looks up to Logizard: > *“I've been working on WMS for over 35 years. I was *sometimes intimidated by Logizard's presence*”* The core Logizard Zero software helps warehouses keep track of their inventory. Wireless handheld barcode scanners are used to receive items into the warehouse. The system then directs warehouse personnel to pick up items for dispatch and print the needed documents to fulfil customer orders. Many of Logizard’s customers are warehouses serving individual e-commerce operators. But they also serve larger logistics companies and distributors that sell products wholesale. Logizard also has a product called Zero-Store, helping bricks-and-mortar stores keep track of their inventories. One of Logizard’s competitive advantages is that it offers standardized software distributed online and paid for monthly. Compared to customized on-premise software, the setup costs are minimal. And the system can be up and running in a matter of weeks. I also think that Logizard’s 365-day customer service is unique. While costly, customers seem to appreciate this support. In Japan, many small- and medium-sized enterprises still use pen-and-paper or Excel to keep track of inventory. They need hand-holding. Logizard’s software can be connected to Rakuten, Amazon, Yahoo! Shopping, Shopify and many other e-commerce cart systems. It also connects to Smaregi’s point-of-sale terminals and associated order system. These integrations should be convenient for many of Logizard’s customers. In addition, Logizard Zero also supports RFID tags, which makes the scanning process faster and seamless. And since 2020, it’s offered integration with certain logistics robots, including the Hikrobot and the Libiao t-sort robot. Customers seem to happy with the product. Here is some feedback about Logizard’s platform at Japan’s IT Grid Review: > *“I have tried various WMSs, but this is *by far the best in terms of cost/performance*”* > > *“*Simply outstanding*. Compared to our previous system, we are very satisfied with the 365-day support”* > > *“By implementing Logizard ZERO, our *shipping and inventory accuracy has improved dramatically*”* _This post is for paying subscribers only._ ### Golden Throat (6896 HK) URL: https://www.asiancenturystocks.com/golden-throat-6896-hk/ Last updated: 2026-03-16T13:24:19.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Golden Throat at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Golden Throat**](https://finance.yahoo.com/quote/6896.HK/?ref=asiancenturystocks.com) *(6896 HK — US$343 million)* is an iconic Chinese brand of throat lozenges, used to deal with sore or dry throats. The core product is similar to Strepsils, Halls, or Ricola, but is sold over-the-counter in pharmacies. The company sells 146 million boxes per year and has an estimated market share of 26% in China. Founder Jiang Peizhen is a unique individual. Her mom passed away when she was only 13 years old. Forced to find a job, she ended up at the state-owned Liuzhou No. 2 Sweet Factory in Guangxi Province, China and quickly rose through the ranks. At the age of 33, when China’s opening-up reform was starting to take shape, she somehow ended up becoming the sole owner of the factory. Jiang was travelling across the world to learn about the production techniques of foreign candy manufacturers, with the goal of eventually releasing jam and chocolate peanut candies for the domestic market. The company's real breakthrough occurred in 1994\. Jiang teamed up with Professor Wang Yaofa at East China Normal University to develop a lozenge product for sore and dry throats. The company submitted patents and became the sole owner of the product. Even though Professor Yang’s face was on each box, he never received any royalties from it. Another master move by Jiang was inviting football star Ronaldo to a private meal when he was visiting China. When arriving at the table, Ronaldo found Golden Throat products laid out across the entire table. And then the photography session began. Ronaldo was made to wear a “Golden Throat” branded shirt, smiling into the camera and then ended up in a [TV commercial](https://www.youtube.com/watch?v=J%5FP4TVBGgDQ&ref=asiancenturystocks.com), making Golden Throat into a nationwide phenomenon. Ronaldo sued Golden Throat, and Golden Throat eventually had to pay €12 million in compensation. Today, Golden Throat lozenges (金嗓子喉片) are available over the counter in pharmacies across China. The company also sells candy-style lozenges known as the Golden Throat series lozenges (都乐含片), which directly compete with Halls and Strepsils in China. There appears to be underlying growth in the industry, at a mid-single-digit level. Golden Throat has been able to raise prices by 6% annually, resulting in decent earnings growth. Thanks to this pricing power, it’s able to earn mid-30s operating margins, strong free cash flows, and a 20% return on equity. _This post is for paying subscribers only._ ### Portfolio update August 2025 URL: https://www.asiancenturystocks.com/portfolio-update-august-2025/ Last updated: 2026-06-04T10:50:13.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/74ab15d0-f75b-44bb-a699-372a30b9273e_2059x1050.jpg) ``` Table of contents 1. Portfolio update 2. Update on my key holdings 3. My plans going forward ``` # **Portfolio update** Another leg up for the portfolio. My Japanese equities have performed strongly in the past few months. I want to think that it’s all because of my stock picking. But I think it’s more likely due to Japan’s current bull market. I read an article in Nikkei the other day about stocks that retail investors could buy for their NISA accounts. I get the sense that amateur investors are becoming increasingly involved. That’s probably bullish in the near term, and bearish in the longer term. Meanwhile, my stocks in Southeast Asia continue to decline. Savvy investors tell me that stocks in Indonesia and Thailand are probably bottoming out. And in these markets, you can find solid blue-chip compounder stocks for 10-12x P/E. So it seems only rational that I should move my portfolio in that direction. My portfolio rose by another +1.9% month-on-month in August. Since the portfolio’s inception in October 2021, the value has increased by +55.7%, now equivalent to a +12.1% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9658c229-3a89-45f3-976c-93f62e91bf1e_2082x678.png) Much of this month’s performance was due to the rally in Japanese aircraft component supplier [**AeroEdge**](https://www.asiancenturystocks.com/aeroedge-7409-jp/). I got lucky: I had put on a large position just before the announcement that they would be taking materials manufacturing in-house (the titanium-aluminide alloy used in the LEAP engine’s low-pressure turbine blades). AeroEdge’s FY2026 guidance was upped to +36.9% year-on-year revenue growth and +28.3% year-on-year recurring profit growth. On the negative side, Malaysian glove producer [**Hartalega**](https://www.asiancenturystocks.com/hartalega-update-hart-mk/)’s share price continues to slide. I attribute this weakness to delayed orders amid US tariff hikes, as well as the unusual strength of the Malaysian Ringgit, and more recently, an unpaid tax notice from the Inland Revenue Board. There has been no insider buying in Hartalega yet, but the board is seeking approval for new share buybacks. The stock now trades at 1.0x book value. Before the COVID-19 pandemic, it had a return on equity of nearly 20%. In any case, here’s the latest portfolio as of 26 August 2025: _This post is for paying subscribers only._ ### A new era for Jardine Matheson URL: https://www.asiancenturystocks.com/a-new-era-for-jardine-matheson/ Last updated: 2025-11-19T07:12:43.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1940cf99-7f7f-4f9f-ba3f-324243930c13_1061x707.jpg) Jardine House in Hong Kong. Source: Getty Images # **Summary** - After Ben Keswick took over Jardine Matheson, the company has slowly transitioned away from being an owner-operator to more of a portfolio manager. - The privatization of Jardine Strategic was under-priced, but it also simplified the corporate structure. That should be positive for minorities in the long term. - Jardine Matheson’s own board has now been stacked with private equity professionals. And new CEO Lincoln Pan comes from private equity firm PAG, where he built up its non-China business. - The CEOs of several of Jardine Matheson’s listed subsidiaries have also been replaced, including at [**Hong Kong Land**](http://Hong Kong Land), [**DFI Retail**](http://DFI Retail) and [**Mandarin Oriental**](http://Mandarin Oriental). - In this post, I discuss the reforms that have taken place within the group and the implications for each of the portfolio companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Jardine Matheson is one of the original Hong Kong trading houses that has survived to the present day - a sprawling network of companies serving consumers in Asia. The performance of Jardine’s companies has been weak in the past few years. But after Ben Keswick took over in 2019, significant changes have taken place. Most importantly, Jardine Matheson is moving towards a decentralized structure where it’s becoming more of an investor than an owner-operator. In this post, I’ll explain exactly what those changes are. And the implications for each of the portfolio companies. ``` Table of contents: 1. Introduction to Jardines Matheson 2. An overview of the group today 3. The 2025 reform agenda 4. The investable universe of stocks 5. Conclusion ``` --- # **1\. Introduction to Jardine Matheson** Jardines was one of Hong Kong’s original trading houses, also known as “hongs”. It was set up as a partnership between William Jardine and James Matheson — two Scottish businessmen — to serve as a trading operation between different parts of the British Empire. ![History of Jardine Matheson & Co. - Wikipedia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5b57bad-8adc-4e5e-a1f3-2e5c6c79c298_814x519.jpg) William Jardine and James Matheson. Source: Wikipedia Commons They had met in British-controlled Bombay in 1820, then moved to Canton, where they took over a previous partnership into their own hands. Once Hong Kong became British in 1841, they shifted their operations there and bought the first piece of land ever sold in Hong Kong, close to what is today considered to be Causeway Bay. Initially, the Jardine Matheson partnership was active in the trading of opium, tea and cotton, primarily from India to the rest of Asia. It owned a network of steamships that transported products along the Chinese coast and into Japan. In the 1850s, a Scotsman named William Keswick came to Hong Kong and married the niece of William Jardine. He established the Japanese office of Jardine Matheson in the trading hub of Yokohama. And eventually he became managing partner — the so-called “tai-pan” — of the entire business in the late 1880s. And that’s how the Keswick family ended up in control of the whole group. After William Keswick stepped down in 1889, Jardine Matheson started to diversify into other industries. For example, it set up [**Hong Kong Land**](https://sg.finance.yahoo.com/quote/H78.SI/?ref=asiancenturystocks.com) to build offices in Hong Kong’s central business district. It set up mills and cotton spinning companies in Shanghai in 1895\. It set up a construction company in 1923 to build properties and infrastructure assets. And it launched an EWO-branded brewery in Shanghai in 1935. ![The Jardine Matheson Building on the Bund, Shanghai.](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d458e84d-e9b7-4211-a18c-27088f02b775_800x604.png) The Jardine Matheson building on the Bund in Shanghai, China After the communists took over the Chinese Mainland in 1949, Jardine lost all of its Shanghai assets. But it retained its Hong Kong operations and instead expanded the business to other parts of Asia. A pivotal point in the development of the group was the involvement of Henry Keswick, the great-grandson of William Keswick. He was born in Shanghai in 1938, studied at Eton and Trinity College before moving back to Asia in the 1950s. After Jardine Matheson became a public company in 1961, Henry became the most powerful individual within the business. Much thanks to his deal-making, its total assets grew from US$70 million in the early 1970s to US$27 billion by 2018. ![20241107 Zhu Rongji meets with Chairman of Jardine Matheson Holding Limited Henry Keswick](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/774bcbc6-5aca-41fb-9f31-ccc6f8d4cfae_1560x878.jpg) Henry Keswick with Zhu Rongji Some of Henry’s biggest deals included buying Reunion Properties in 1973, doubling the group’s assets in one go. The Hong Kong stock market was on a tear at the time, and Jardine Matheson only had to issue 7% more shares to finance the acquisition. Henry also acquired the Theo H. Davies sugar trading operation in 1973, just before a multi-year bull market in sugar. He built the Mandarin Hotel in Hong Kong and eventually merged it with The Oriental Hotel in Bangkok, forming the base of the [**Mandarin Oriental**](https://finance.yahoo.com/quote/M04.SI/?ref=asiancenturystocks.com) hospitality group. He built a Hong Kong-based property business called Gammon Construction as well as a Mercedes dealership called Zung Fu. He turned [**Dairy Farm**](https://sg.finance.yahoo.com/quote/D01.SI/?ref=asiancenturystocks.com) into a pan-Asian retailer running supermarkets, 7-Eleven stores, pharmacies, IKEA stores and bakeries. And he also built up brokerage firm Jardine Fleming before selling it to JPMorgan Chase. But his biggest home run might have been the acquisition of Indonesian auto distributor [**Astra International**](https://sg.finance.yahoo.com/quote/ASII.JK/?ref=asiancenturystocks.com) after the Asian Financial Crisis in 2001\. In the following 25 years, the share price has gone up by a factor of 36x, and the stock still trades at no more than 7x P/E. That said, Henry Keswick was no friend of minority shareholders. Under his supervision, Jardine Matheson built up a complex corporate structure designed to entrench Keswick family control. To that end, he set up Jardine Strategic in 1986, with reciprocal share ownership that amplified the family’s voting power. The corporate structure has improved a bit in recent years, but many question why this complex corporate structure is necessary, whether this pyramid of listed companies is simply designed to keep the family in control, potentially at the expense of us minorities. --- # 2\. An overview of the group today The Jardine Matheson is today a massive empire of companies operating across the Asia-Pacific, employing a total of 450,000 staff. They operate in two primary regions: China and Southeast Asia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/80763f6b-3a11-46b2-8977-a909ccfd3c49_1786x1178.png) The main listed companies in the Jardine Matheson Group In 2024, roughly 70% of underlying net profit came from Southeast Asia, and much of that from Indonesian auto distributor [**Astra International**](https://sg.finance.yahoo.com/quote/ASII.JK/?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6ee26f49-7a5e-459d-961c-77cd77d8a678_1270x604.png) Jardine Matheson’s underlying profit to shareholders by subsidiary After the sale of supermarket chain Yonghui Superstores, the only Mainland Chinese company in the portfolio is auto distributor [**Zhongsheng**](https://finance.yahoo.com/quote/0881.HK/?ref=asiancenturystocks.com). In Hong Kong, you’ll find a big part of the Jardine Matheson bureaucracy. Jardine Matheson is based in Hong Kong, as is commercial property owner Hong Kong Land, hotel developer [**Mandarin Oriental**](https://finance.yahoo.com/quote/M04.SI/?ref=asiancenturystocks.com) and retail operator [**DFI Retail**](https://sg.finance.yahoo.com/quote/D01.SI/?ref=asiancenturystocks.com). The Southeast Asian business is mostly controlled through a separately listed subsidiary, [**Jardine Cycle & Carriage**](https://sg.finance.yahoo.com/quote/C07.SI/?ref=asiancenturystocks.com). Through this entity, Jardines controls a majority stake in [**Astra International**](http://Astra International), which in turn owns a number of major Indonesian businesses: - [**United Tractors**](https://finance.yahoo.com/quote/UNTR.JK/?ref=asiancenturystocks.com) sells heavy machinery from Komatsu and operates coal mining businesses - [**Astra Agro Lestari**](https://finance.yahoo.com/quote/AALI.JK/?ref=asiancenturystocks.com) owns oil palm plantations - [**Astra Otoparts**](https://finance.yahoo.com/quote/AUTO.JK/?ref=asiancenturystocks.com) sells automotive components to its parent company - And finally, [**Astra Graphia**](https://sg.finance.yahoo.com/quote/ASGR.JK/?ref=asiancenturystocks.com) is an IT consulting and printing services business Here is Jardine Matheson’s corporate structure as it looks today: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4ab078fc-b5b1-42b1-81c6-0f413dc45175_1598x660.png) The Keswick family controls only 18% of Jardine Matheson and only 18% of the votes, so it’s not entirely in control anymore. The employee stock option plan represents another 13%, and then you have value funds such as First Eagle and Orbis participating with smaller stakes. Note, however, that most of the subsidiaries are >50% owned by Jardine Matheson, so they are fully in control of them, putting their minorities at risk. That’s something that Jardine Strategic shareholders got to experience first-hand. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a94b380a-4dd1-4ce0-98a6-340f3584d413_1864x808.png) Neither of the stocks looks particularly expensive, with the average Jardine company trading at no more than 10x P/E. There are good reasons for that, with some investors thinking that the group is perhaps behind its time. But perhaps the current reform agenda can eventually put the group on the right track. --- # 3\. The 2025 reform agenda After Henry Keswick stepped down as Chairman in 2018, his nephew Ben Keswick took over the group. ![Family business: Ben Keswick's grand plans to modernise Jardine Matheson](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/71c8d31e-a8ef-473b-b4d3-028e8f7afd06_700x394.jpg) Ben Keswick with his wife, Martha And finally, we’re starting to see changes taking place. The most significant shift was the 2021 privatization of Jardine Strategic. Jardine Matheson used to own 84% of Jardine Strategic, and Jardine Strategic, in turn, owned 57% of Jardine Matheson in a cross-holding structure. In the privatization, Jardine Matheson put in a US$5.5 billion bid for the remaining 15% it didn’t already own and cancelled its stake in Jardine Matheson. ![11 Things To Know About Jardine Strategic Holdings before you Invest](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6dc3a0e6-fec5-4cb4-ac55-079852314a14_620x208.png) The former corporate structure, with cross-holdings between Jardine Matheson and Jardine Strategic Shareholders [revolted](https://www.businesstimes.com.sg/opinion-features/columns/jardine-strategic-acquisition-a-shortfall-of-corporate-governance?ref=asiancenturystocks.com) because the US$33/share offer represented a 43% discount to Jardine Strategic’s net asset value/share of US$58\. But since Jardine Matheson controlled more than 75% of the required votes, the deal went through, and Jardine Strategic minorities just had to suck it up. On the positive side, Jardine Matheson’s corporate structure is now simpler with less room for minority abuse, at least in the top part of the structure. But there’s a broader change taking place within the group. Ben Keswick has committed to a transition for Jardine Matheson from an owner-operator to a portfolio manager. In his own words: > *“We have been on an ongoing *transition away from our historical owner-operator* model, towards becoming an engaged investor with a sharpened *focus on generating superior, long-term returns for shareholders*”* The board has become much leaner than before: now just nine directors vs 14 previously. What’s particularly bullish is that a number of private equity executives have joined the board. For example, Carlyle’s Janine Feng joined the board in May 2023, economist Keyu Jin joined in January 2024, KKR’s Ming Lu joined in February 2025, and investment banker Tim Wise joined in May 2025\. This shift towards finance professionals on the board probably signals that Jardine is taking the “portfolio approach” to management seriously. And we’re also seeing progress within the top executive ranks. Former private equity executive Lincoln Pan has now taken over as CEO. He has a great reputation and was almost solely responsible for building up private equity group PAG’s non-China business. He has a JD from Harvard Law School and a background as a McKinsey consultant. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e39cef62-16b4-4708-925c-6c42752f5136_2104x622.png) There’s also been a number of new hires in Jardine’s portfolio companies: - August 2023: DFI Retail’s new CEO, **Scott Price,** is an American who was previously in senior positions at Coca-Cola Japan, DHL Express Japan and Walmart Asia. He has degrees from the University of North Carolina and the University of Virginia. He’s known to be a turnaround expert and has taken several steps to streamline the portfolio. - September 2023: Mandarin Oriental’s new CEO, **Laurent Kleitman,** came from Christian Dior, where he headed up the perfume division. Before that, he was president of the consumer beauty division of Coty. He also spent 25 years at Unilever. Since he took over, he has been focused on building the Mandarin Oriental brand, which I think is exactly what is needed here, rather than property development. - April 2024: Hong Kong Land’s new CEO, **Michael Smith,** comes from real estate manager Mapletree, where he was a regional CEO for Europe and the US. Prior to that, he spent 11 years at Goldman Sachs and 10 years at UBS, both in investment banking. He’s originally from Australia with a degree from the University of South Australia. Since taking over, he has been pushing to exit China and reinvest capital into higher-return vehicles. The talent of these CEOs will matter more and more as Jardine is moving towards a decentralized structure. The portfolio company CEOs will focus on the operational side of things, while Lincoln Pan oversees overall capital allocation within the group — a bit like at Berkshire Hathaway. One practical aspect of this decentralization is that Jardine has now scrapped its graduate trainee program. Instead of rotating between Jardine portfolio companies, talent is now encouraged to focus their careers on each of the single entities, serving them, not the parent. I think that’s a great development. Executive remuneration within Jardine Matheson is apparently based on four key priorities: evolving the portfolio, enhancing entrepreneurialism, driving innovation and operational excellence and embedding sustainability. I’m finding these targets very fuzzy and wonder if they’ll help Lincoln Pan drive returns appropriately. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6df9cebf-0b3a-442a-9876-c342134ec2e5_1810x834.png) On the website, however, Jardine Matheson does state four financial objectives that are much more concrete in their nature: 1) high-quality long-term growth of earnings and cash flows 2) investment ROICs higher than WACC 3) NAV per share growth and 4) progressive dividends. Poor acquisitions will penalize executives on ROIC, so hopefully these guidelines will prevent what Peter Lynch used to call *“diworsification”*. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/249990f0-18fa-4251-99dd-653b5375a5d9_1654x1481.jpg) Within the portfolio companies, executive remuneration now seems more straightforward than it used to be. For example, - At [**Hong Kong Land**](https://sg.finance.yahoo.com/quote/H78.SI/?ref=asiancenturystocks.com), the share-based portion is now measured on total shareholder return vs the cost of equity and vs peers over a 3-5 year time frame. - At [**DFI Retail**](https://sg.finance.yahoo.com/quote/D01.SI/?ref=asiancenturystocks.com), pay is now based on both total shareholder return and the return on capital. - At [**Mandarin Oriental**](https://finance.yahoo.com/quote/M04.SI/?ref=asiancenturystocks.com), bonuses are based more on qualitative factors such as brand perception. So, overall, remuneration policies have improved, though how much differs from subsidiary to subsidiary. With all these changes taking place, has Jardine Matheson’s capital allocation improved? That remains to be seen. There has been no obvious improvement to the return on equity of Jardine’s main holding companies: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d11b5df5-e9cd-4604-b503-a2851bc88597_2102x698.png) Though some of the group’s recent M&A deals have indeed been encouraging: - In April 2024, [**Mandarin Oriental**](http://Mandarin Oriental) sold its Paris hotel property for US$227 million, as well as the associated retail space for US$160 million. It retains the management contract for the Paris hotel, so this transaction seems to be aimed at moving towards a more asset-light model. I love to see it. - In September 2024, [**DFI Retail**](http://DFI Retail) sold its 21% stake in Yonghui Superstores at a big loss. It was unprofitable at the time, and Scott pointed to DFI Retail’s new strategy of divesting unprofitable companies. DFI Retail also divested its 22% stake in Robinson Retail in the Philippines and Cold Storage & Giant supermarkets in Singapore. The proceeds from these divestments will be used to pay down debt and then reinvest in pharmacies and 7-Eleven stores. And he even paid out a US$600 million special dividend, directly benefitting DFI Retail’s minority shareholders. - In April 2025, [**Hong Kong Land**](https://sg.finance.yahoo.com/quote/H78.SI/?ref=asiancenturystocks.com) sold a number of One Exchange Square floors to Hong Kong Exchange and Clearing for HK$6.3 billion. This included 147,000 square feet of floor space from floors 42 to 50, where HKEX already occupies office space. The rental yield was a relatively low 2.9% — in fact, lower than Hong Kong’s 10-year government bond yield. So I think the transaction made perfect sense from the point of view of Hong Kong Land. The proceeds will be used for debt reduction and share repurchases, as management believes the stock continues to be undervalued. - In early 2024, [**Jardine Cycle & Carriage**](http://Jardine Cycle & Carriage) sold barely profitable Siam City Cement for US$99 million and reinvested the capital in fast-growing Vietnamese mini-conglomerate REE. So overall, I think these moves are a step in the right direction. I’m particularly positive about Michael Smith at Hong Kong Land, as he seems to have the right mindset when it comes to capital allocation. --- # 4\. The investable universe of stocks ## 4.1\. Jardine Matheson (JM SP) ![Creating Long-term & Sustainable Value in Asia | Jardine Matheson](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb256bd1-3fca-471c-8b6a-28cb541bef0a_1440x500.jpg) _This post is for paying subscribers only._ ### Links August 2025 URL: https://www.asiancenturystocks.com/links-august-2025/ Last updated: 2025-08-20T04:01:10.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Mercari (4385 JP) URL: https://www.asiancenturystocks.com/mercari-4385-jp/ Last updated: 2026-03-16T13:25:03.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Mercari at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- I’m fascinated by the market for second-hand goods. eBay has existed for many decades, but it was only with the smartphone that the market took off. With a smartphone, you could snap a photo of your item and post it online within minutes. Meanwhile, buyers appreciate the fact that they can purchase items at a fraction of what they cost in a store. Bernstein research shows that the global apparel resale market is growing 3x faster than the market for new goods. And even in Japan, the market has been growing at 8% on a secular basis. Within Japan, there are several listed companies to choose from, including offline retailers such as [**Hard Off Corporation**](https://finance.yahoo.com/quote/2674.T/?ref=asiancenturystocks.com) *(2674 JP — US$165 million)* and [**Treasure Factory**](https://finance.yahoo.com/quote/3093.T/?ref=asiancenturystocks.com)*(3093 JP — US$279 million)*. But the undisputed champion is probably [**Mercari**](https://finance.yahoo.com/quote/4385.T/?ref=asiancenturystocks.com)*(4385 JP — US$2.4 billion)* — the owner of Japan’s largest consumer-to-consumer marketplace app. Mercari is a young business. Founder Shintaro Yamada studied mathematics at Waseda University in the late 1990s. After university, he started his own video game company, which became a massive success and was then sold to Zynga in 2010. Flush with cash and without a sense of direction, Shintaro decided to take six months off and travel the world. He stayed in $5-a-night hostels, took local buses and visited remote places all across South America and Africa. One of his biggest revelations during the trip was that mobile phones had leapfrogged PCs in much of the world. Another revelation was that people around the world had “sleeping assets” such as unused clothes, electronics and toys whose value could be unlocked if traded with others. So when he got back to Tokyo, he teamed up with a few friends to launch the mobile trading app Mercari. It was designed for mobile use from the start, with snap-and-shoot cameras helping sellers post items on the platform quickly. Armed venture capital funding, Mercari grew through TV advertisements that made the app into a nationwide phenomenon. Over time, Mercari added fintech features such as a digital wallet, a credit card and a buy-now-pay-later service. It also entered the US, though it remains a distant third behind eBay and Poshmark. Within Japan, however, Mercari reigns supreme. Employees rank Mercari within the top 1% of 75,000 companies on OpenWork, the Japanese equivalent of Glassdoor. Similarweb data shows that users stay on the Mercari app longer than on competing apps such as Yahoo! Flea Market and Rakuten Rakuma. While Mercari’s fees are higher at a 10% seller fee and a 3.6% buyer protection fee, the liquidity within the marketplace is amazing. 50% of items posted on Mercari are sold within 24 hours. Customers seem to appreciate the user interface and the ease of anonymous shipping through partnerships with most of Japan’s convenience stores. Some will argue that location-based apps such as [**Jimoty**](https://finance.yahoo.com/quote/7082.T/?ref=asiancenturystocks.com)*(7082 JP — US$89 million)*are more convenient, because buyers and sellers can meet up in person without the need to ship items through the mail. But on the other hand, anonymous shipping ensures that both parties are protected from potential bad actors. If you can trade all over Japan, you’ll find precisely what you want at better prices. And as shipping improves through lockers and perhaps even ride-hailing delivery, I expect shipping-based apps such as Mercari to take market share. Given Mercari’s success, it’s surprising to see the share price close to its all-time low, and 70% below its all-time high: I’ve thought long and hard about why Mercari’s share price has lagged the market, and come up with the following four explanations: _This post is for paying subscribers only._ ### How to use Asian Century Stocks URL: https://www.asiancenturystocks.com/how-to-use-asian-century-stocks/ Last updated: 2025-08-13T12:43:50.000Z A complete guide for new readers _This post is for subscribers only._ ### Interview with "DaBao" URL: https://www.asiancenturystocks.com/interview-with-dabao/ Last updated: 2025-08-11T04:07:17.000Z FinTwit celebrity. Estimated reading time: 11 minutes _This post is for paying subscribers only._ ### Haier D-share (690D GR) — 2025 update URL: https://www.asiancenturystocks.com/haier-d-share-690d-gr-2025-update/ Last updated: 2025-11-19T07:17:30.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Haier Smart Home at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* # **Summary** - Haier is the world’s largest home appliances company, with particular strength in refrigerators and washing machines. It’s got multiple world-renowned brands, including Haier, GE Appliance, Fisher & Paykel, Candy and more. - The company was largely built by visionary entrepreneur Zhang Ruimin, who created a corporate culture unique in China and beyond. He spearheaded Haier’s international expansion, acquiring companies such as America’s GE Appliances and Italy’s Candy, giving it local distribution networks for its lower-priced Haier offering. - In late 2020, Haier Smart Home merged with its separately-listed distribution subsidiary Haier Electronics. Following this complex transaction, Haier was left with three separate share classes: A-shares listed in Shanghai, H-shares listed in Hong Kong and D-shares listed in Frankfurt. - The D-share ended up trading at a massive 60%+ discount to the H-share, even though their cash flow rights and voting rights were identical. - In this post, I discuss what’s happened to Haier since my first write-up, and what I think might happen in the future. I then discuss current valuation multiples in light of said earnings forecast and discuss the potential impact of US tariffs on Chinese goods as well as China’s recent trade-in program. ``` Table of contents: 1. A quick background 2. An update to my original post 3. The 2025 valuation model 4. Conclusion ``` # **1\. A quick background** My PowerPoint deck on [**Haier Smart Home**](https://www.asiancenturystocks.com/2020-2-haier-smart-home-co-ltd-d-share/) *(690D GR — US$39 billion)* was one of the first I made on the Asian Century Stocks: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/92f2eed2-6388-4e43-b950-da8811fdea8f_1710x958.png)](https://www.asiancenturystocks.com/2020-2-haier-smart-home-co-ltd-d-share/) Back then, Haier had become the first Chinese company to list on Germany’s [China Europe International Exchange](https://www.ceinex.com/?ref=asiancenturystocks.com), also known as “Ceinex”. So it had two separate listings: one A-share listed in Mainland China and one D-share listed in Germany, with the D standing for Deutschland (=Germany). While the Ceinex IPO was successful, the D-share quickly sold off and started trading at a massive discount to the A-share. And given China’s capital controls, there was no way for arbitrage to take place, and no way for the two share prices to converge. But let’s start with a quick overview of the company itself. Haier was started in 1984 as Qingdao Refrigerator Co., a collective enterprise owned by the local government. It took over a struggling state-owned refrigerator company and then tasked a young city manager, Zhang Ruimin, to turn it around. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1868a3d1-1030-4180-b7dc-4f02ab2f5a14_1040x690.png) Zhang Ruimin in the early days of the Qingdao Refrigerator Company It became a massive success. Zhang Ruimin quickly realized the need to improve the quality of the company’s products. So he orchestrated a joint venture with Germany’s Liebherr to produce refrigerators in China’s Shandong province. Liebherr contributed with cutting-edge technology, and Haier contributed with low-cost and highly productive labor. The joint venture took on the name “Haier”, a Chinese transliteration of the word “Liebherr”, or at least part of the word. In the following decade, the Qingdao government supported Zhang Ruimin’s company by allowing it to take over other struggling appliances businesses in the region, helping it to expand its product portfolio beyond refrigerators. These products included air conditioners, microwave ovens, washing machines and more. In 1993, the company’s key operating subsidiary, Qingdao Haier, was listed on the Shanghai Stock Exchange. While this led to a somewhat complex corporate structure, assets were gradually injected from the parent company into the ListCo. Meanwhile, Liebherr soon exited from its JV, with the Chinese side eventually taking over the entire business. US private equity firm KKR became a 10% shareholder in the early 2010s through a transaction valued at US$550 million. And KKR might have helped it grow internationally through the acquisition of GE Appliances. In the 2010s, Haier acquired the following four companies: - 2011: **Sanyo**’s Southeast Asian unit - 2012: High-end appliances brand **Fisher & Paykel** - 2016: **GE Appliances** for US$5.6 billion (8x EBITDA) - 2018: Italian appliances firm **Candy** And then came the listing of Haier’s D-share. The reason for seeking an international listing might have been political in nature. Or to gain an acquisition currency, should it want to expand further into Europe. But the share price quickly traded down and remained, trading just a few hundred thousand shares per day. By the time I wrote my post on Haier, it had accumulated five brand names: - Mass-market brand **Haier**, associated with refrigerators & washing machines - **Leader**, another domestic mass-market brand with stylish, minimalist designs - The company’s domestic high-end brand, **Casarte**, which it launched in 2006 - US-based **GE Appliances**, formerly part of General Electric - New Zealand’s **Fisher & Paykel**, a luxury appliances brand These five brands produced refrigerators, washing machines, air conditioners, water heaters and a variety of kitchen appliances: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/95e91c07-cd24-4cc0-b243-11102a5fbc6c_1204x542.png) Part of the business was run through Hong Kong-listed subsidiary Haier Electronics, whose primary business was acting as a distributor of the broader Haier Group. A messy corporate structure, to say the least. By the 2020s, Haier had already become successful globally. It was ranked #1 in home appliances with a global market share of 16%. And within China, it held a 30% market share. Its most important products included refrigerators, washing machines, water appliances, and air conditioners. However, when it comes to Haier’s profitability, refrigerators and washing machines made up half of its profits from its Mainland China segment. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16f114e8-f357-4e38-a47d-2fe6f896d92c_1618x598.png) Over the past twenty years, China’s home appliances market has been dominated by three companies: Gree, Midea and Haier. Gree’s focus is on air conditioners. Midea is strong in air conditioners, too, as well as kitchen appliances. Meanwhile, Haier is primarily known for its refrigerators and washing machines, two segments where it holds 40-50% domestic market shares. So what was Haier’s edge? Primarily cost control, with Chinese wages significantly below those of Europe and the United States. The prices for Haier’s appliances were typically 30% lower than those of most of its foreign competitors. And today, Haier’s scale remains hard to beat. I also think that Zhang Ruimin was a visionary leader, helping introduce strict quality controls and helping to build up a global distribution network. One of his great contributions was the company’s management philosophy “Rendanyihe” (人单合一), which translates to an “alignment between employees and customers”. Zhang recognized that employees in large organizations typically ended up serving their bosses rather than customers. So within Haier, he ensured that teams would enjoy significant autonomy and be rewarded based on how well they added value to customers. ![RenDanHeYi](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d20606a-d51d-4712-a27d-56d8d3e54beb_1280x769.jpg) In the 2010s, growth had been slow but steady. But with an international focus, Haier had grown faster than, for example, Gree. By the early 2020s, the global appliances market grew roughly 6% per year, and high single digits in Asia. I didn’t see much upside in the penetration rate of washing machines and refrigerators in China. But other segments such as air purifiers, vacuum cleaners, kettles, cooking hoods and hobs grew much faster. And internationally, Haier seemed adept at taking market share from slower-moving Western brands such as Whirlpool and Electrolux. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/46289271-1383-4c59-820a-272cb0480357_1432x826.png) In my first post on Haier Smart Home, I noted that the company was planning to merge with its Hong Kong-listed distributor subsidiary, Haier Electronics. This meant that the complex corporate structure would be partially resolved. In addition, Haier Smart Home would also gain a Hong Kong listing, gaining greater visibility among institutional investors and hopefully be awarded a higher valuation. The discount at which the D-share was trading was befuddling. The D-share and the H-share had identical cash flow and voting rights. The only major differences were reporting requirements and the regulator (CSRC for the D- and A-share and SFC for the H-share). So while I wasn’t sure that the D-share would trade up to the price of its Hong Kong shares, I considered it a possibility. And the valuation of the D-share was astounding. I projected a forward P/E of 4.4x, a massive 72% discount to the A-share, even though the shares were virtually identical. Would the discount ever narrow? --- # **2\. An update to my original post** Since I first wrote about Haier’s D-share, the stock price has performed nicely: Why? _This post is for paying subscribers only._ ### Hidden Champions of Thailand URL: https://www.asiancenturystocks.com/hidden-champions-of-thailand/ Last updated: 2025-11-19T07:29:09.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5643fd9f-f899-48b5-8adb-bccfb938face_1485x990.jpg) The Bangkok skyline. Source: Getty Images # **Summary** - Thailand is a medium-sized country in Southeast Asia, dependent on tourism, manufacturing and the export of agricultural goods. - It’s been one of the worst-performing stock markets over the past year, partly due to weak credit growth that’s led to persistent selling of local equities. - In this post, I run through a number of screens, and then propose 25 Thai companies with “hidden champion” characteristics, i.e. monopoly-like businesses with strong competitive advantages. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Asian Century Stocks reader “William” asked a few weeks ago whether I could write about “hidden champions” in Thailand. Thailand has been among the worst-performing stock markets globally in the past year, partly due to restrictive monetary policy. But it’s also a fascinating market with hundreds of high-quality businesses. So in this post, I’ll dig into companies that [Hermann Simon](https://www.amazon.com/Hidden-Champions-Twenty-First-Century-Strategies/dp/0387981462/ref=sr%5F1%5F1?crid=2BXKFRPYNJZ7S&dib=eyJ2IjoiMSJ9.NoimzavRQVzwGpZIqrRI%5FC9clwqfjPYNCMPVYVNJqZwvp0%5Fswa1UwkJNgs6GR6g2iXhF1Wtwz%5FJRqKWS5WtlEGfHp9iToLII3BugrAcU9MmGAdZf80IpCqSt%5FdgoyJm0OUxJnqbndcMos-bHUe-bSn0a9j3BdD6LaoI7mrc7TBE.buGlLzxJkQsSU%5FRTtxDqvyvJGA9Sb%5FbWKvjHl8DLWWQ&dib%5Ftag=se&keywords=hidden+champions+of+the+21st+century&qid=1754183948&sprefix=hidden+champions+of+the+2%2Caps%2C425&sr=8-1&ref=asiancenturystocks.com) might have considered to be hidden champions. Such companies dominate their niches and are able to compound their capital at a high return on equity. This post follows similar write-ups on hidden champions in [Malaysia](https://www.asiancenturystocks.com/hidden-champions-of-malaysia/), [Taiwan](https://www.asiancenturystocks.com/hidden-champions-of-taiwan/), [Indian ADRs/GDRs](https://www.asiancenturystocks.com/hidden-champions-among-indias-adrsgdrs/), [Chinese ADRs](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/), [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/) and [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/). Note that I pay zero attention to share prices. Don’t take the following discussion as investment advice — I’m simply trying to identify hidden champions. Nothing more, nothing less. ``` Table of contents: 1. A top-down view of Thailand 2. Screening for candidates 3. Hidden champions of Thailand 4. Conclusion ``` --- # **1\. A top-down view of Thailand** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2f599d51-0653-41a8-a103-544d89bf2924_1090x1046.png) Before we dig into it, let’s talk about the country and its stock market. The country has a population of 72 million and sits between Myanmar, Cambodia, Laos and Malaysia. It’s one of the very few countries in Southeast Asia that was never colonized by foreign powers. Instead, it’s maintained its independence throughout, allowing foreign businessmen to trade on its soil through much of history without impacting governance. During the Second World War, the Thai government sided with Japan and declared war against the Allies. And after the war, it spent years paying reparations, before eventually forming a relationship with the United States and pushing a more pro-market agenda. So while the economy was mostly state-led after the war, it shifted towards export promotion from the 1960s onwards, with GDP per capita growing rapidly thereafter: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/da271deb-672d-4fd4-8050-0e07f691b06a_1872x1102.png) Thailand's GDP per capita. Source: Our World in Data, the World Bank A significant event for Thailand was the Plaza Accord in 1985, which caused the Japanese Yen to be revalued upwards. Since the Thai Baht was more or less pegged to the US Dollar, it became very cheap compared to the Yen. And in the next decade, droves of Japanese companies outsourced manufacturing to Thailand. This caused a boom that lasted for well over a decade. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d426f17-553a-4fa8-a8e0-2734be8f2cd0_1324x886.png) The cheap currency helped stimulate tourism from the mid-1980s onwards. Source: Nick Kontogeorgopoulos, TAT However, while the boom initially stimulated foreign direct investment, it ended up pushing market prices too. And in the process, Thai companies built up significant external debt, hoping that the currency would be a one-way bet. When portfolio flows reversed in 1997, the government was unable to defend its currency peg, and the Baht dropped from THB 25 to the US Dollar to 56\. A severe recession followed. Another important event in Thailand’s history was the election of Thaksin Shinawatra in 2001\. He was a businessman who had entered Thai politics in the mid-1990s. He quickly won the hearts of the Thai people through populist policies that promised cash handouts to rural and lower-income voters. But the economy grew fast under his tenure, before being ousted by the military junta in 2006. And that’s been a recurring theme since 2006\. Thai politics has been a back-and-forth between the Thaksin family and the military reasserting power, over and over again. For example, Thaksin’s sister Yingluck Shinawatra took over as Prime Minister in 2011 before being ousted by the military in 2014\. And now, the military has changed the constitution in such a way that it has the ability to veto any future prime minister. A case in point: In 2023, a young Harvard-educated former businessman called Pita Limjaroenrat enjoyed immense success in the general election. His new Move Forward Party received 36% of the votes, and his coalition controlled 313 seats in the 500-member House of Representatives. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cef0e13e-db3e-4f01-b0c1-13a4389f9f4b_1024x682.jpg) Pita Limjaroenrat. Source: Getty Images But because the military controlled the Senate, they were able to block him from becoming Prime Minister. And his Move Forward Party has been dissolved by the Constitutional Court, and its executives banned from politics for 10 years. Pita continues to be popular among the Thai people, but there is no way for him to re-enter politics. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aa6dd487-70ad-4c6b-b4fb-9c70959be691_1500x648.png) In mid-2024, the majority of respondents in a Thai opinion poll said they would prefer Pita Limjaroenrat as Prime Minister Instead, Thaksin’s daughter Paetongtarn Shinawatra became Prime Minister in August 2024\. Earlier this year, however, an audio clip emerged in which Paetongtarn was found to criticise the Thai military. So the Thaksin family was pushed out of politics, yet again. So the Thai military continues to be in control of the country. It’s allied with the royal family and establishment businessmen. Pita Limjaroenrat had promised to break up monopolies. He therefore faced significant opposition from the establishment. Throughout this political turbulence, the Thai economy ticked along as usual, with no major impact on either tourism or trade. Today, the economy relies on a mix of agriculture, tourism, and manufacturing across electronics, autos, machinery, and more. Thailand’s income inequality is the third highest in the world, trailing just Russia and India. Half of the population are farmers, selling rice, coconut, corn, rubber, soybeans, etc. And the rest of the population is in a mix of the service sector and industry. It’s a deeply divided society controlled by an elite that also dominates many of the publicly listed companies. In recent years, growth has been somewhat sluggish due to manufacturing salaries that remain higher than those in nearby Vietnam. That’s why Vietnam continues to gain market share in global manufacturing. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a8d50e27-66ca-405d-887e-8e5deb13c620_2476x764.png) Thailand became wealthier from the 1960s to the 1990s. This growth journey caused it to become dominant in several industries that were hot at the time, including hard-disk drives and the assembly of Japanese vehicles. But in these two instances, they’re now facing competition from solid-state drives from South Korea and electric vehicles from China. Thai industry is now facing an onslaught of competition, and it doesn’t look like the situation is changing anytime soon. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/35ad7a65-8048-4df1-a541-78754d87a7e9_1488x632.png) Imports from China as a % of total Thai imports. Source: Jefferies Trading in Thai equities has taken place since the 1960s, but the local stock market only became mainstream with the government-backed Securities Exchange of Thailand in 1975, later renamed the Stock Exchange of Thailand (SET). In the early days, it was challenging for foreign investors to participate. As described in Claire Barnes’ book [Asia’s Investment Prophets](https://www.asiancenturystocks.com/clairebarnes/), good quality companies could in the early 1980s be picked up for 1.5x yearly cash flows with dividend yields often exceeding the local interest rate of 18%. The market took off after the Plaza Accord in 1985, and even more after exchange controls were removed in 1991: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/55c81c36-e7ae-4fed-877d-dd613050a86b_2379x1180.png) The Stock Exchange of Thailand (SET) Index. Source: SET After the Asian Financial Crisis in 1997, the Thai stock market went on another run until the late 2010s. In the past few years, Thai equities have been in a bear market with locals preferring to invest overseas and foreigners deserting the market. The weak sentiment might be related to politics, specifically the military blocking Pita Limjaroenrat from becoming Prime Minister. But two other, perhaps even more important factors, include an almost complete lack of loan growth. Household debt is high, and the government seems unwilling to raise the already-high budget deficit beyond the current 4.5%. With real money supply growth close to zero, there’s no inflow to Thai equities. Meanwhile, foreigners keep selling. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ed7fc058-7adc-431b-a014-1c53b1858c7f_1636x936.png) Thailand’s credit growth has turned negative. Source: Jefferies The Thai stock market is fairly small, on par with those in Indonesia, Singapore and Malaysia. But it’s much smaller than Taiwan, South Korea, Japan and China. And its trading volumes are only about US$25 billion per day, just slightly ahead of Singapore’s US$21 billion. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2258ab9a-51e2-44b5-810c-5dfa14e04d25_1708x586.png) Aggregate market cap by country. NB: 2022 numbers. Source: Bloomberg The return on equity has historically not been impressive compared to Taiwan and India, with many asset-heavy businesses in real estate and financials bringing down the average. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/08a4d5fc-2a8a-4d66-ae96-d3cd7f72b1e7_1812x608.png) Return on equity by index. NB: 2022 numbers. Source: Bloomberg Is the market cheap? It’s come down a great deal. But at around 14x 2025 earnings, it’s still more expensive than Indonesia and the Philippines. The Stock Exchange of Thailand is looking at [various measures](https://www.bloomberg.com/news/videos/2025-07-04/thai-bourse-looking-to-improve-liquidity-video?ref=asiancenturystocks.com) to boost the market. And we might be seeing tax benefits in [Thailand ISA accounts](https://www.nationthailand.com/business/trading-investment/40047217?ref=asiancenturystocks.com) from the second half of this year. But the main problem — weak credit growth — hasn’t turned yet. In Thailand, there are 446 companies with market caps above US$50 million. Among these companies, 23% are in financials, 16% in IT, 14% in energy, 11% in telecoms and communication services and 9% in consumer staples. So it’s a well-diversified group of companies to choose from: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f017343d-c81a-4fc6-b0ae-74d72bba93e4_1596x620.png) The largest companies in each of these sectors include Thai oil company PTT, hospitals such as Bangkok Dusit, the Charoen Pokphand Group, Central Retail, etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b177db2c-24d7-4c24-a45f-cfecaf08f4d7_1696x624.png) TIKR, which seems to have issues classifying REITs as real estate, so take the real estate section with a grain of salt. Source: TIKR To summarize, the Thai stock market has a great deal of diversity when it comes to the types of companies on offer. The market is small and illiquid, so if you’re running a large fund, it will be challenging to go below the top 50 companies in terms of market cap. But after 3 years of poor performance, value is finally starting to emerge. For those of you who are unable to buy Thai equities through your broker, I suggest opening an Asian brokerage account with the likes of Phillip Securities in Singapore or Boom Securities in Hong Kong. For a complete guide, check out my post on Asian brokerage firms [here](https://www.asiancenturystocks.com/the-best-asian-retail-broker/): [The best retail broker for AsiaDisclaimer: This article constitutes the author’s personal views only and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own re…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/34960dd3-7037-4a05-9746-67c2dda03665_1000x667.jpg)](https://www.asiancenturystocks.com/the-best-asian-retail-broker/) --- # **2\. Screening for candidates** Let’s dig deeper into individual companies that exhibit hidden champion-like characteristics: - A high historical average **return on equity** - A high **growth in earnings per share** - Strong **share price performance** I’ve ranked the entire list of 446 companies along these three metrics. To start with, here are the top ten companies in Thailand in terms of a *high return on equity*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dd03c23b-7709-423a-8193-1c93dfa7dc53_1722x586.png) The highest ROE companies include [**Jasmine Technology**](https://finance.yahoo.com/quote/JTS.BK/?ref=asiancenturystocks.com), a subsidiary of the Thai telecom company Jasmine International. It’s a Bitcoin miner that’s probably earning windfall profits right now thanks to the high valuation of Bitcoin. The second company on the list is [**Asia Aviation**](https://finance.yahoo.com/quote/AAV.BK/?ref=asiancenturystocks.com), the owner of low-cost airline AirAsia in Thailand, which has been taking market share but has a complex corporate structure. [**Union Auction**](https://finance.yahoo.com/quote/AUCT.BK/?ref=asiancenturystocks.com) runs auctions of used cars and motorcycles on behalf of banks and dealers. [**Advanced Info Services**](https://sg.finance.yahoo.com/quote/ADVANC.BK/?ref=asiancenturystocks.com) is a wireless and broadband telecom company that has a decent dividend payout ratio but isn’t growing much. [**Premier Technology**](https://finance.yahoo.com/quote/PT.BK/?ref=asiancenturystocks.com) sells enterprise hardware and customized software for customers throughout Thailand. [**Thai Nippon Rubber**](https://finance.yahoo.com/quote/TNR.BK/?ref=asiancenturystocks.com) manufactures condoms for third parties and also has its own brand called ONETOUCH. [**Netbay**](https://finance.yahoo.com/quote/NETBAY.BK/?ref=asiancenturystocks.com) is a rare Thai SaaS business that has built a platform for the Thai customs agency. [**Miss Grand International**](https://finance.yahoo.com/quote/MGI.BK/?ref=asiancenturystocks.com) runs an international beauty pageant with some recent controversies. [**Com7**](https://finance.yahoo.com/quote/COM7.BK/?ref=asiancenturystocks.com) is Thailand’s biggest tech retailer through brands such as BaNANA and Studio 7\. And finally, [**Forth Smart Service**](https://finance.yahoo.com/quote/FSMART.BK/?ref=asiancenturystocks.com) runs kiosks called [Boonterm](https://www.boonterm.com/web/index1.php?ref=asiancenturystocks.com) which can be used to top up phone credit, pay bills, deposit cash, borrow money, etc. Here are the top ten companies in Thailand in terms of *share price return CAGR*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4303b5b0-fff9-4115-ad1e-93e37a2b64b5_1700x582.png) The companies with the highest 10-year stock price returns include Bitcoin miner [**Jasmine Technology**](https://finance.yahoo.com/quote/JTS.BK/?ref=asiancenturystocks.com). The second on the list, [**Delta Electronics (Thailand)**](https://sg.finance.yahoo.com/quote/DELTA.BK/?ref=asiancenturystocks.com), is a subsidiary of Taiwan’s Delta Electronics that was acquired in 2019\. It sells power supplies, cooling fans and automation parts to global tech companies operating in the region. [**SiS Distribution (Thailand)**](https://sg.finance.yahoo.com/quote/SIS.BK/?ref=asiancenturystocks.com) distributes PCs, phones, servers, etc. to Thai retailers and corporate clients. [**Sky ICT**](https://sg.finance.yahoo.com/quote/SKY.BK/?ref=asiancenturystocks.com) is another government tech consultant for airports, building biometric gates, security cameras and passenger apps. [**Asian Sea**](https://sg.finance.yahoo.com/quote/ASIAN.BK/?ref=asiancenturystocks.com) is one of the largest producers of tuna, shrimp and pet food in Thailand and beyond. [**Exotic Food**](https://sg.finance.yahoo.com/quote/XO.BK/?ref=asiancenturystocks.com) sells Thai chilli sauces and sriracha for export markets. [**Krungthai Card**](https://sg.finance.yahoo.com/quote/KTC.BK/?ref=asiancenturystocks.com) issues credit cards and makes small personal loans. [**Regional Container Lines**](https://sg.finance.yahoo.com/quote/RCL.BK/?ref=asiancenturystocks.com) is a container shipping line operating in Asia. [**Synnex (Thailand)**](https://sg.finance.yahoo.com/quote/SYNEX.BK/?ref=asiancenturystocks.com) is the Thai peer of Indonesia’s Metrodata, distributing hardware and software products to local customers. And finally, [**Business Online**](https://sg.finance.yahoo.com/quote/BOL.BK/?ref=asiancenturystocks.com) runs a database of Thai companies’ credit and risk information data and is partly owned by Dun & Bradstreet. Finally, here are the top ten companies in Thailand in terms of *EPS CAGR*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2974c83e-3fbd-410a-a612-53b6f3b2eba2_1706x564.png) The fastest-growing companies have been [**Regional Container Lines**](https://sg.finance.yahoo.com/quote/RCL.BK/?ref=asiancenturystocks.com), the container shipping line that’s benefited from higher shipping rates. [**Muangthai Capital**](https://sg.finance.yahoo.com/quote/MTC.BK/?ref=asiancenturystocks.com) runs branches that hand out small, high-interest loans secured by customers’ vehicles. [**Exotic Food**](https://sg.finance.yahoo.com/quote/XO.BK/?ref=asiancenturystocks.com) sells Thai chilli sauce, such as sriracha. [**Bangkok Airways**](https://sg.finance.yahoo.com/quote/BA.BK/?ref=asiancenturystocks.com) is a smaller full-service airline with a large exposure to tourism. [**Rajthanee Hospital**](https://sg.finance.yahoo.com/quote/RJH.BK/?ref=asiancenturystocks.com) is a private hospital in Ayutthaya, north of Bangkok. [**Lanna Resources**](https://sg.finance.yahoo.com/quote/LANNA.BK/?ref=asiancenturystocks.com) owns coal mines in Indonesia, mining for thermal coal that’s then sold to Asian power utilities. [**Srisawad**](https://sg.finance.yahoo.com/quote/SAWAD.BK/?ref=asiancenturystocks.com) is a pawn shop operator doing microloans secured by jewellery and similar assets. [**Buriram Sugar**](https://sg.finance.yahoo.com/quote/BRR.BK/?ref=asiancenturystocks.com) crushes sugarcane into raw sugar. [**Delta Electronics (Thailand)**](https://sg.finance.yahoo.com/quote/DELTA.BK/?ref=asiancenturystocks.com) makes power supply units, cooling fans and industrial automation gear as mentioned before. And finally, [**Sabina**](https://sg.finance.yahoo.com/quote/SABINA.BK/?ref=asiancenturystocks.com) is a rare example of a Thai luxury brand selling women’s underwear. After this exercise, I also went through the entire list of 446 companies line by line to identify companies that could be seen as hidden champions. These have all been ranked in terms of return on equity, historical share price performance and earnings per share growth. Companies with a return on equity of above 10%, a yearly total return / EPS growth, are marked with a green background colour. Here is the entire spreadsheet: _This post is for paying subscribers only._ ### Portfolio update July 2025 URL: https://www.asiancenturystocks.com/portfolio-update-july-2025/ Last updated: 2026-06-04T10:50:44.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/74ab15d0-f75b-44bb-a699-372a30b9273e_2059x1050.jpg) ``` Table of contents 1. Portfolio update 2. Update on my key holdings 3. My plans going forward ``` # **Portfolio update** Asian equities have been on a run recently. Singapore has rallied on the back of chatter about a [new program](https://www.bloomberg.com/news/newsletters/2025-07-26/singapore-s-s-5-billion-stock-market-revival-begins-with-a-whisper?ref=asiancenturystocks.com) designed to revive interest in local stocks. South Korean equities have also rallied, partly thanks to a [July 2025 law](https://www.kedglobal.com/business-politics/newsView/ked202507020007?ref=asiancenturystocks.com) that requires company directors to look after the interests of all shareholders, including minorities. The broad market rally pushed up the value of the portfolio by another +4.1% month-on-month. Since the portfolio’s inception in October 2021, the value has increased by +52.7%, equivalent to an +11.8% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/701f073c-e45c-4730-8a82-5c7d2341a326_1710x568.png) When it comes to individual stocks, the share price of Japanese SaaS company [**Poper**](https://www.asiancenturystocks.com/poper-5134-jp/) has come off by 25% from the peak. Roughly 1/3 of the free float has changed hands since the peak. Investors might be concerned about management’s guidance of a sequential decline in earnings due to “strategic investments”. But nothing significant has really changed, and last quarter's revenues grew at a whopping +45% rate on a year-on-year basis. The border conflict between Thailand and Cambodia is [getting worse](https://www.bloomberg.com/news/articles/2025-07-29/thai-army-accuses-cambodia-of-continuing-attacks-after-truce?ref=asiancenturystocks.com). While there is a short-term truce right now, we’re finally seeing the risk of an outright war in Southeast Asia for the first time in many decades. I am not particularly worried about my single Thai holding [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/), however. It only has 4% of its screens in Cambodia, and I don’t expect the conflict to spread to Bangkok, Chiang Mai or other city centers within Thailand. And the Thai box office has been on fire since April, with Hollywood movie productions on track to finally recover from the COVID-19 pandemic. Smaller holding [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?ref=asiancenturystocks.com) has also rallied recently. While cocoa prices seem to be topping with better harvests in West Africa, the rally was not motivated by improving fundamentals. In fact, Delfi’s issues are more long-term in nature, with consumers unable to accept the higher prices that Delfi has begun to charge for its SilverQueen chocolate bars. Earnings are due on 8 August 2025. In any case, here’s the latest portfolio as of 28 July 2025: _This post is for paying subscribers only._ ### Share Asian Century Stocks — earn free months URL: https://www.asiancenturystocks.com/the-acs-referral-program/ Last updated: 2025-07-28T06:00:55.000Z Refer 3, read free for a month _This post is for paying subscribers only._ ### AeroEdge (7409 JP) URL: https://www.asiancenturystocks.com/aeroedge-7409-jp/ Last updated: 2026-03-16T13:25:49.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in AeroEdge at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Earlier this month, Substack writer [Gezzogero](https://x.com/gezzogero?ref=asiancenturystocks.com) mentioned [**AeroEdge**](https://finance.yahoo.com/quote/7409.T/?ref=asiancenturystocks.com) *(7409 JP — US$88 million)* on his blog. I thought it was a fantastic write-up and wanted to dig into it myself. The company is a supplier of aircraft components. It manufactures low-pressure turbine blades for the well-regarded LEAP jet engine, which is used in narrow-body aircraft such as the Airbus A320neo and Boeing 737 MAX. Turbofan jet engines such as the LEAP compress air and mix it with jet fuel before it’s eventually combusted. At the back end of the engine is the turbine, where exhaust gases are pushed out. These exhaust gases then help rotate the turbine blades, which in turn rotate the fan and compressor at the front of the engine. Since exhaust gases can reach 1,000 degrees Celsius, turbine blades need to be made from durable materials. In the past, they were mostly made from nickel superalloys. However, when the LEAP engine became the industry standard in 2016, the blades were increasingly constructed using titanium-aluminide (TiAl), an intermetallic alloy of titanium and aluminium. Turbine blades made from titanium-aluminide have the advantage of being 50% lighter than nickel superalloys. For a typical engine, that works out to about 10 kilograms. With a lower weight, you achieve better fuel efficiency and lower CO2 emissions. On the other hand, titanium-aluminide alloys are brittle and challenging to shape and handle. Constructing blades from the material is time-consuming, and failure rates are high. That’s why only a few companies globally have been able to break into the industry. AeroEdge is young. It was spun off in 2016 from Kikuchi Gear, at exactly the same time it received an order from Safran to construct low-pressure turbine blades for the LEAP engine. The previous head of the aerospace division at Kikuchi Gear, Jun Morinishi, is now the CEO of AeroEdge, and he seems to be well-regarded. The company’s success has been astounding. It’s the only Japanese small- and medium-sized enterprise that has managed to become a Tier 1 aircraft supplier. It now holds a 40% market share for low-pressure turbine blades for the LEAP engine. In 2022, Safran gave it a “supplier performance award”, and in 2025, Safran called it a “top 3 innovative supplier”. It’s clearly doing something right. The outlook for the LEAP engine is positive. Both Airbus and Boeing have exceptionally long backlogs for the A320neo and 737 MAX. Safran plans to ramp up its deliveries of LEAP engines over the next two years, increasing from 635 engines in 2025 to 921 in 2027\. And even then, the backlog will still take over a decade to work through. In addition, AeroEdge has three additional growth drivers mentioned during the second-quarter FY2025 earnings call: - With funding from the IPO in 2023, AeroEdge has just built a second factory next to the old one in Ashikaga City, north of Tokyo. It cost JPY 1.9 billion and has a floor space of 3,100 square meters. From mid-2025, it’s going to produce a new product within this factory. Nobody knows what the product is, but I suspect it is the high-pressure compressor blisk (also known as an integrally bladed rotor) for Pratt & Whitney’s new GTF Advantage engine that’s going to be used in the Airbus A321neo. Airbus is guiding for a slow ramp-up of GTF Advantage due to past quality control issues, but AeroEdge, will in any case start to receive revenues from this product from mid-2025 onwards. - AeroEdge has also signed a long-term agreement until 2036 with a global aircraft manufacturer, who I think is likely to be Airbus. Again, nobody knows what the project entails, but it could involve structural machining for the Airbus A321neo’s pylons, which connect its engines to the wings. This could lead to significantly higher revenues, though at a slightly lower operating margin of around 20 to 25%. - Since its IPO in 2023, AeroEdge has been collaborating with European research institutes to develop expertise in repairing low-pressure turbine blades for the maintenance, repair, and overhaul (MRO) market. If it’s able to break into this market, that would increase the total addressable market for its titanium-aluminide blades. The LEAP engine went into operation in 2017, and with 5-7 year life spans, the replacement cycle has only just begun. There’s a huge installed base of LEAP engines worldwide. With these positive developments, and bearing in mind a slight decline in average selling prices for turbine blades as demanded by Safran, I expect AeroEdge’s earnings per share to reach JPY 256 by 2027, putting the forward P/E ratio at 11.2x. That number assumes a 23% operating margin, which has some further upside towards FY2030 as volumes continue to rise. Customer concentration is the primary risk factor here. Safran accounted for 93% of revenues in FY2024\. However, with two new projects, it appears that AeroEdge is poised to become a more diversified business with less reliance on a single customer. In the near term, we can also expect some volatility in AeroEdge’s margins. Depreciation of the new factory will be reflected in the income statement from fiscal year 2026 onwards. Also, be prepared for low production yields initially before AeroEdge ramps up its exposure to its two new customers. A longer-term question mark is whether Safran will replace titanium-aluminide with ceramic matrix composite materials in their low-pressure turbine blades. AeroEdge has experience working with ceramic composite materials, but there is no guarantee that it will receive orders after its contract with Safran ends in 2034. But in the near-to-medium term, the outlook seems brighter than ever. Thank you for reading. *Michael* **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** [AeroEdgeAeroEdge.pdf3 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/AeroEdge.pdf "Download") Further material: - Gezzogero’s [AeroEdge post](https://open.substack.com/pub/gezzogero/p/aeroedge-7409t?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&showWelcomeOnShare=false) on Substack - The METI Journal [company feature](https://journal.meti.go.jp/p/37414/?ref=asiancenturystocks.com#:~:text=%E5%B1%95%E9%96%8B%E3%80%822023%E5%B9%B4%E3%81%AB%E3%81%AF%E6%A0%AA%E5%BC%8F%E3%81%AE%E4%B8%8A%E5%A0%B4%E3%82%82%E6%9E%9C%E3%81%9F%E3%81%97%E3%81%9F%E3%80%82%E6%98%A8%E5%B9%B46%E6%9C%88%E3%81%AB%E3%81%AF%E6%96%B0%E5%B7%A5%E5%A0%B4%E3%82%82%E5%AE%8C%E6%88%90%E3%81%97%E3%80%81%E3%82%A8%E3%83%B3%E3%82%B8%E3%83%B3%E9%83%A8%E5%93%81%E7%94%A8%E3%81%AE%E6%96%B0%E6%9D%90%E6%96%99%E3%82%84eVTOL%EF%BC%88%E9%9B%BB%E5%8B%95%E5%9E%82%E7%9B%B4%E9%9B%A2%E7%9D%80%E9%99%B8%E6%A9%9F%E3%80%81%E3%81%84%E3%82%8F%E3%82%86%E3%82%8B%E7%A9%BA%E9%A3%9B%E3%81%B6%E3%82%AF%E3%83%AB%E3%83%9E%EF%BC%89%E9%83%A8%E5%93%81%E3%81%AE%E8%A3%BD%E9%80%A0%E3%81%AA%E3%81%A9%20%E3%81%AB%E3%82%82%E5%8F%96%E3%82%8A%E7%B5%84%E3%82%80%E3%80%82%E3%82%B0%E3%83%AD%E3%83%BC%E3%83%90%E3%83%AB%E3%83%8B%E3%83%83%E3%83%81%E3%82%92%E5%86%B7%E9%9D%99%E3%81%AB%E8%A6%8B%E6%8D%AE%E3%81%88%E3%80%81%E4%BB%96%E7%A4%BE%E3%82%92%E5%AF%84%E3%81%9B%E4%BB%98%E3%81%91%E3%81%AA%E3%81%84%E5%9C%A7%E5%80%92%E7%9A%84%E3%81%AA%E6%8A%80%E8%A1%93%E5%8A%9B%E3%81%A8%E3%80%81%E3%83%AA%E3%82%B9%E3%82%AF%E3%82%92%E6%81%90%E3%82%8C%E3%81%AA%E3%81%84%E6%A9%9F%E5%8B%95%E7%9A%84%E3%81%AA%E7%B5%84%E7%B9%94%E5%8A%9B%E3%82%92%E7%99%BA%E6%8F%AE%E3%81%97%E3%81%AA%E3%81%8C%E3%82%89%E3%80%81%E5%9C%B0%E5%9F%9F%E3%81%A7%E8%BC%9D%E3%81%8D%E7%B6%9A%E3%81%91%E3%81%A6%E3%81%84%E3%82%8B%E3%80%82) (Japanese language) - The 1HFY2025 [earnings call presentation](https://youtu.be/Nx4gy7SDhV0?si=U36LunJijS9MFKLK&ref=asiancenturystocks.com) (Japanese language) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Links July 2025 URL: https://www.asiancenturystocks.com/links-july-2025/ Last updated: 2025-07-22T04:00:46.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Asian Terminals (ATI PM) URL: https://www.asiancenturystocks.com/asian-terminals-ati-pm/ Last updated: 2026-07-31T02:02:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Asian Terminals at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Asian Terminals**](https://www.marketwatch.com/investing/stock/ati?countrycode=ph&ref=asiancenturystocks.com) *(ATI PM — US$941 million)* is a Philippines-based port operator. It’s owned by Eusebio (“Yosi”) Tanco, recently famous for having hit a jackpot with online bingo operator DigiPlus and school operator STI Education. Asian Terminals has also done exceptionally well. It was set up in the 1980s and managed to acquire the Manila South Harbor port in the early 1990s. In the mid-2000s, Asian Terminals received investments and help from Dubai-based DP World to modernize its operations, and they continue to be a key partner. Today, Asian Terminals manages 1.3 million twenty-foot equivalent containers (TEU) per year at Manila South Harbor as well as 0.3 million TEU at the Port of Batangas further south. At the Port of Batangas, it also imports 200,000 vehicles per year and handles 4 million ferry passengers annually. Asian Terminals dominates the southern part of Luzon. While there is some competition from ICTSI’s Manila International Container Terminals, they’ve co-existed for decades. Throughout this period, Asian Terminals has achieved a return on equity of nearly 20% while distributing generous dividends to its investors. So, where is growth going to come from? Partly through capacity expansions: - In April 2024, the company built the **Tanza Barge Terminal**, which will connect to Manila South Harbor through sea barges carrying up to 240,000 TEUs per year. It will essentially serve to improve Manila South Harbor’s capacity. - Separately, Manila South Harbor is expanding its **Pier 3**, expanding capacity from 1.6 million TEU to 1.9 million by 2025 - Asian Terminals also just spent US$25 million to upgrade the **Batangas passenger ferry terminal** from 4 million passengers per year to 8 million - There’s talk of a potential privatization of the **General Santos Port** in Mindanao. Asian Terminals already owns 35.7% but could potentially acquire the rest. Another growth driver will be **higher port tariffs**. Specifically: > *Manila South Harbor implemented a *10%* tariff hike on 6 August 2024 and another *6%* on 6 February 2025.* > > *In addition, Batangas implemented a *10%* tariff hike on 1 July 2025 and another *6%* will come on 1 January 2026.* This will ensure fast EPS growth for Asian Terminals through next year as well. You also have underlying demand growth. The Philippines doesn’t have a significant manufacturing economy, partly due to high port tariffs. But the country is heavily reliant on container imports, and its service economy is performing well. Volumes are growing at a rate of 5-6% on a secular basis. The country’s demographics are positive. And high US tariffs on Chinese goods could well prompt multinationals to relocate manufacturing from China to the Philippines. I expect a step-up in growth, thanks to higher capacity and increased port tariffs, followed by a steady increase in the high single-digit range. That would lead to a 20% return on equity, close to its twenty-year average. According to my numbers, Asian Terminals trades at 10 times 2025 earnings, along with a 6% dividend yield. While this P/E ratio is certainly low compared to its global peer group, the historical average P/E has been only 11x, for reasons I don’t fully understand. Some investors appear to be concerned about Asian Terminals' concessions expiring in 2035 and 2038\. But I think the likelihood of extensions is high. My key point here is that the Philippine Ports Authority (PPA) makes money as a percentage of Asian Terminals’ port revenues. So they have strong incentives to maintain the status quo, and even raise port tariffs further. Another, more pressing issue is that competitor ICTSI is building a US$800 million container terminal in Bauan, just 10 kilometres away from the Port of Batangas. This terminal will be completed in 2028 and potentially reduce the container volumes flowing through Asian Terminals’ assets. ICTSI’s CEO, Enrique Razon, is incredibly aggressive. I find it challenging to estimate the impact of this new terminal, but it has to be negative. I envision strong earnings growth in 2025, followed by somewhat slower growth in 2026, steady growth thereafter, and then a negative impact when ICTSI’s new terminal in Bauan opens in 2028. Long-term, however, I come away feeling positive about Eusebio Tanco and Asian Terminals in general. The company’s assets exhibit monopoly-like characteristics. I consider it likely that the company will continue growing its earnings per share at a rate of close to 10%, perhaps for decades. That’s a good recipe for a high internal rate of return, at least for long-term shareholders of the company. Thank you for reading. *Michael* Further material: - Dede Eyesan’s Substack post on Asian Terminals’ competitor [ICTSI](https://globaloutperformers.substack.com/p/international-container-terminals) - YouTube videos: [Manila South Port](https://www.youtube.com/watch?v=xQQTEMNeGmI&ref=asiancenturystocks.com), [Batangas Port](https://www.youtube.com/watch?v=-1PZMDIFRzg&ref=asiancenturystocks.com) - Sameer Taneja’s post on Asian Terminals on [Smartkarma](https://www.smartkarma.com/insights/asian-terminals-inc-ati-pm-steady-and-cheap-container-port-terminal-operator?ref=asiancenturystocks.com) ($) **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Interview with Myles Kuah URL: https://www.asiancenturystocks.com/interview-with-myles-kuah-82f/ Last updated: 2025-10-24T14:57:19.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45d2077c-8736-4492-8c99-4c6dc59bdb40_960x540.png) ``` Table of contents 1. Personal background 2. The Value Zoomer blog 3. Participating in "Survivor" 4. Investing the prize money 5. Shorting 6. MDR 7. Singapore Shipping 8. Thakral 9. Japanese SaaS companies 10. Contact details ``` # **1\. Hi Myles! Thanks for participating. Could you tell us about your background and how you became involved in investing?** I did a physics degree at university, but partway through, I realised I wasn’t good enough at maths to keep up. I got into investing in late 2019 while bartending because I made a bit of money and figured it was something I should do. Over the next few years, I got hyperfixated on it and shifted my career goals from science to finance. --- # **2\. I love your Substack “Value Zoomer”; you always seem to find ideas that others have overlooked. Is there a common thread behind the 15 ideas that you’ve featured so far? What have you learnt from the winners and losers?** A key question for me is *“why is this idea so cheap?”* and there are two answers to this question: 1. For most ideas, the answer will simply be that *“the market has a different view of this company to me”* 2. But I’ve been focused on finding ideas with a different answer, namely that *“nobody is looking or paying attention”* I think there are markets where these “easy money” ideas do exist and my Substack is a great example of that. My worst-performing ideas have consistently been larger ideas with more analyst coverage, so I’ve focused on places with little analytical competition and attention. --- # **3\. You recently won the Australian edition of Survivor. How did it feel to be on the show? What did you experience from start to finish? And what did you learn from it when it comes to life or investing?** Australian Survivor was incredible. I’m a huge Survivor fan so just being there was a dream come true. Everything from strategising, finding idols, winning immunity challenges, to lying on the beach staring up at the stars was amazing. I would say that I discovered a resilience in myself I didn’t realise I had (growing up fairly privileged). ![Australian Survivor 2025 champion wins $500,000 in nail-biting finale: 'So happy'](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b44bfa76-ffea-42c6-b701-2bc2d420ebf5_640x427.png) AJ Antonios, Kaelan Lockhart and Myles Kuah in the grand finale of Australian Survivor It was brutal physically, I lost 12 kg and I was a skinny guy to start, but it was also mentally tough. I played a lot of the game as an underdog, got the most votes against me in the history of the show and still won. It’s very tough to keep fighting when you’re exhausted and everything seems stacked against you. --- # **4\. You wrote on Substack that you won AU$500,000 in prize money. How are you planning to invest that money?** Winning the prize money has completely changed how I invest. Previously, I ran a very concentrated, high-conviction portfolio where I would feel comfortable betting at times up to 50% on an idea. My mindset has shifted now from wealth creation to wealth preservation, so I’m much more heavily diversified with around 100 names and a position size limit of 10%. I’m 24 and have made life-changing money; my focus is capital preservation first, performance second. [On Winning Survivor and Portfolio ConstructionFor those who don’t follow me on Twitter you may not be aware, but in April I was announced as the winner of Australian Survivor, and the $500k prize that comes with it. Obviously this was an incredible honour, and it’s hard to express how completely life changing this is for me. In the space of a few months I made almost 10x my annual salary, while als…![](null)Value Zoomer](https://valuezoomer.substack.com/p/on-winning-survivor-and-portfolio) --- # **5\. I understand from Twitter that you also have a short book. How have you constructed your short portfolio, and what types of stocks are you shorting right now?** To be honest, my short portfolio is more of a novelty. I LOVE shorting as an intellectual exercise; however, it is the hardest form of investing. I short a very diversified basket of frauds and pump and dumps, while also trying to find more interesting, unique shorts when I can. I keep it as a fairly small section of my portfolio. Right now is the most short I’ve been in a while simply because it feels like a target-rich environment. The quantum and drone companies are all nonsense, same with blatant pumps like [**SoundHound AI**](https://finance.yahoo.com/quote/SOUN/?ref=asiancenturystocks.com)*(SOUN US — US$4.5 billion)*, [**Enovix Corporation**](https://finance.yahoo.com/quote/ENVX/?ref=asiancenturystocks.com) *(ENVX US — US$2.8 billion)* and [**BigBear.ai**](https://finance.yahoo.com/quote/BBAI/?ref=asiancenturystocks.com)*(BBAI US — US$2.1 billion)*. But I also love shorts like [**Wayfair**](https://finance.yahoo.com/quote/W/?ref=asiancenturystocks.com) *(W US — US$6.8 billion)* which are simply failing businesses with large debt loads. My largest short at the moment is [**Commonwealth Bank of Australia**](https://finance.yahoo.com/quote/CBA.AX/?ref=asiancenturystocks.com)*(CBA AU — US$194 billion)*, a no-growth bank trading at over 30x earnings. --- # **6\. You invested in the Singapore telco company MDR. What did you see in the stock, and what do you think the outlook is from here?** This was a bizarre one that shows it’s better to be lucky than right. [**MDR**](https://finance.yahoo.com/quote/Y3D.SI/?ref=asiancenturystocks.com) *(MDR SP — US$52 million)* was my 3rd largest position on the basis that they were trading at .3x a book full of liquid securities and paying a solid dividend. The company announced a dilutionary rights offering and climbed 50% in a day, which I didn’t understand, so I sold, happy to book the profit. They’re up another 100% in the two weeks since then and I have no idea why. While it’s still cheap relative to book value, it’s not cheap enough to justify all of the hairiness, so I’m no longer involved. --- # **7\. How about Singapore Shipping? What do you think about the quality of its assets and the current valuation?** [**Singapore Shipping**](https://finance.yahoo.com/quote/S19.SI/?ref=asiancenturystocks.com) *(SSCL SP — US$95 million)* has been my largest position for a while. They own a fleet of 5 old PCTC Car ships that (after renewing their oldest and largest ship at elevated rates) are leased out on long-term contracts that will be worth 150% of their current market cap (adjusted for cash) value in 5 years’ time. At that point, they will still have 3 ships left still operational, which is just further value. There has been a lot of insider buying, and in the last shipping cycle (2007) the company paid out a huge amount in dividends. --- # **8\. Tell us about the Thakral story. It’s been a large position for you, and the stock has almost doubled. Do you think it’s still undervalued, and why?** [**Thakral**](https://finance.yahoo.com/quote/AWI.SI/?ref=asiancenturystocks.com) *(THK SP — US$138 million)* is a small Singaporean company with an eclectic range of different assets including a lifestyle brand, Japanese and Singaporean commercial real estate and most importantly a 30% stake in Australian lendlease company Gemlife. I had a modest position while in the process of researching further when they announced that Gemlife was IPO’ing at a valuation that would make their stake worth $210m SGD (vs a market cap of $110m at the time). The company climbed 40% in two days, but understanding what the announcement meant for the company and having seen similar momentum dynamics in Singaporean small caps before (where price increases lead to attention, leading to more price increases), I sized up hard and made an extra 30% on a full-sized position in a week. I sold around $1.53, but am back in now, it has settled down a bit with a smaller position. They still trade below the value of their Gemlife stake, while also owning a profitable operating business and the Japanese and Singapore real estate, and most importantly, buying back shares aggressively. --- # **9\. I believe you’re also interested in Japanese SaaS companies. I’ve personally found it to be a challenging sector to analyze. So what’s your conclusion so far, and have any of them made their way into your portfolio?** Japanese SaaS looks very cheap on the surface, with very strong, often profitable growth relative to cheap valuations. I struggle with the language and cultural barriers, with no Japanese and limited understanding of their business culture and economy. As a result,t I invest in Japan generally with a basket approach, picking ideas I like from writers such as yourself, [Altay Cap](https://altaycap.substack.com/), [Made in Japan](https://madeinjapan.substack.com/) and plenty of others. One of the benefits of my Survivor winnings is that the Japanese round lot rules no longer stop me from basket investing in Japan. The ideas that have made it in so far include [**Avant Group**](https://finance.yahoo.com/quote/3836.T/?ref=asiancenturystocks.com)*(3836 JP — US$368 million)*, [**Robot Payment**](https://finance.yahoo.com/quote/4374.T/?ref=asiancenturystocks.com)*(4374 JP — US$62 million)*, [**Teamspirit**](https://finance.yahoo.com/quote/4397.T/?ref=asiancenturystocks.com)*(4397 JP — US$60 million)*, [**Poper**](https://finance.yahoo.com/quote/5134.T/?ref=asiancenturystocks.com)*(5134 JP — US$29 million)*, [**Rebase**](https://finance.yahoo.com/quote/5138.T/?ref=asiancenturystocks.com)*(5138 JP — US$45 million)*, [**Eguarantee**](https://finance.yahoo.com/quote/8771.T/?ref=asiancenturystocks.com) *(8771 JP — US$70 billion)* and [**Nulab**](https://finance.yahoo.com/quote/5033.T/?ref=asiancenturystocks.com)*(5033 JP — US$39 million)*. --- # **10\. How can people contact you or follow your work?** You’re welcome to DM on Twitter [@finphysnerd](https://x.com/finphysnerd?ref=asiancenturystocks.com), I try my best to answer my Twitter DM’s, though sometimes I forget if I’m particularly busy. I post a lot of random ideas on Twitter, and then write long-form, high-conviction ideas on Substack for free at [Value Zoomer](https://valuezoomer.substack.com/). [Value ZoomerI love investing, this is my little personal diary.By Myles Kuah](https://valuezoomer.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Thanks for reading Asian Century Stocks. Consider becoming a subscriber! You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure — all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Interview with Myles Kuah URL: https://www.asiancenturystocks.com/interview-with-myles-kuah/ Last updated: 2025-12-23T09:07:29.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45d2077c-8736-4492-8c99-4c6dc59bdb40_960x540.png) ``` Table of contents 1. Personal background 2. The Value Zoomer blog 3. Participating in "Survivor" 4. Investing the prize money 5. Shorting 6. MDR 7. Singapore Shipping 8. Thakral 9. Japanese SaaS companies 10. Contact details ``` # 1\. Hi Myles! Thanks for participating. Could you tell us about your background and how you became involved in investing? I did a physics degree at university, but partway through, I realised I wasn’t good enough at maths to keep up. I got into investing in late 2019 while bartending because I made a bit of money and figured it was something I should do. Over the next few years, I got hyperfixated on it and shifted my career goals from science to finance. --- # 2\. I love your Substack “Value Zoomer”; you always seem to find ideas that others have overlooked. Is there a common thread behind the 15 ideas that you’ve featured so far? What have you learnt from the winners and losers? A key question for me is *“why is this idea so cheap?”* and there are two answers to this question: 1. For most ideas, the answer will simply be that *“the market has a different view of this company to me”* 2. But I’ve been focused on finding ideas with a different answer, namely that *“nobody is looking or paying attention”* I think there are markets where these “easy money” ideas do exist and my Substack is a great example of that. My worst-performing ideas have consistently been larger ideas with more analyst coverage, so I’ve focused on places with little analytical competition and attention. --- # 3\. You recently won the Australian edition of Survivor. How did it feel to be on the show? What did you experience from start to finish? And what did you learn from it when it comes to life or investing? Australian Survivor was incredible. I’m a huge Survivor fan so just being there was a dream come true. Everything from strategising, finding idols, winning immunity challenges, to lying on the beach staring up at the stars was amazing. I would say that I discovered a resilience in myself I didn’t realise I had (growing up fairly privileged). ![Australian Survivor 2025 champion wins $500,000 in nail-biting finale: 'So happy'](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b44bfa76-ffea-42c6-b701-2bc2d420ebf5_640x427.png) AJ Antonios, Kaelan Lockhart and Myles Kuah in the grand finale of Australian Survivor It was brutal physically, I lost 12 kg and I was a skinny guy to start, but it was also mentally tough. I played a lot of the game as an underdog, got the most votes against me in the history of the show and still won. It’s very tough to keep fighting when you’re exhausted and everything seems stacked against you. --- # 4\. You wrote on Substack that you won AU$500,000 in prize money. How are you planning to invest that money? Winning the prize money has completely changed how I invest. Previously, I ran a very concentrated, high-conviction portfolio where I would feel comfortable betting at times up to 50% on an idea. My mindset has shifted now from wealth creation to wealth preservation, so I’m much more heavily diversified with around 100 names and a position size limit of 10%. I’m 24 and have made life-changing money; my focus is capital preservation first, performance second. [On Winning Survivor and Portfolio ConstructionFor those who don’t follow me on Twitter you may not be aware, but in April I was announced as the winner of Australian Survivor, and the $500k prize that comes with it. Obviously this was an incredible honour, and it’s hard to express how completely life changing this is for me. In the space of a few months I made almost 10x my annual salary, while als…![](null)Value Zoomer](https://valuezoomer.substack.com/p/on-winning-survivor-and-portfolio) --- # 5\. I understand from Twitter that you also have a short book. How have you constructed your short portfolio, and what types of stocks are you shorting right now? To be honest, my short portfolio is more of a novelty. I LOVE shorting as an intellectual exercise; however, it is the hardest form of investing. I short a very diversified basket of frauds and pump and dumps, while also trying to find more interesting, unique shorts when I can. I keep it as a fairly small section of my portfolio. Right now is the most short I’ve been in a while simply because it feels like a target-rich environment. The quantum and drone companies are all nonsense, same with blatant pumps like [**SoundHound AI**](https://finance.yahoo.com/quote/SOUN/?ref=asiancenturystocks.com)*(SOUN US — US$4.5 billion)*, [**Enovix Corporation**](https://finance.yahoo.com/quote/ENVX/?ref=asiancenturystocks.com) *(ENVX US — US$2.8 billion)* and [**BigBear.ai**](https://finance.yahoo.com/quote/BBAI/?ref=asiancenturystocks.com)*(BBAI US — US$2.1 billion)*. But I also love shorts like [**Wayfair**](https://finance.yahoo.com/quote/W/?ref=asiancenturystocks.com) *(W US — US$6.8 billion)* which are simply failing businesses with large debt loads. My largest short at the moment is [**Commonwealth Bank of Australia**](https://finance.yahoo.com/quote/CBA.AX/?ref=asiancenturystocks.com)*(CBA AU — US$194 billion)*, a no-growth bank trading at over 30x earnings. --- # 6\. You invested in the Singapore telco company MDR. What did you see in the stock, and what do you think the outlook is from here? This was a bizarre one that shows it’s better to be lucky than right. [**MDR**](https://finance.yahoo.com/quote/Y3D.SI/?ref=asiancenturystocks.com) *(MDR SP — US$52 million)* was my 3rd largest position on the basis that they were trading at .3x a book full of liquid securities and paying a solid dividend. The company announced a dilutionary rights offering and climbed 50% in a day, which I didn’t understand, so I sold, happy to book the profit. They’re up another 100% in the two weeks since then and I have no idea why. While it’s still cheap relative to book value, it’s not cheap enough to justify all of the hairiness, so I’m no longer involved. --- # 7\. How about Singapore Shipping? What do you think about the quality of its assets and the current valuation? [**Singapore Shipping**](https://finance.yahoo.com/quote/S19.SI/?ref=asiancenturystocks.com) *(SSCL SP — US$95 million)* has been my largest position for a while. They own a fleet of 5 old PCTC Car ships that (after renewing their oldest and largest ship at elevated rates) are leased out on long-term contracts that will be worth 150% of their current market cap (adjusted for cash) value in 5 years’ time. At that point, they will still have 3 ships left still operational, which is just further value. There has been a lot of insider buying, and in the last shipping cycle (2007) the company paid out a huge amount in dividends. --- # 8\. Tell us about the Thakral story. It’s been a large position for you, and the stock has almost doubled. Do you think it’s still undervalued, and why? [**Thakral**](https://finance.yahoo.com/quote/AWI.SI/?ref=asiancenturystocks.com) *(THK SP — US$138 million)* is a small Singaporean company with an eclectic range of different assets including a lifestyle brand, Japanese and Singaporean commercial real estate and most importantly a 30% stake in Australian lendlease company Gemlife. I had a modest position while in the process of researching further when they announced that Gemlife was IPO’ing at a valuation that would make their stake worth $210m SGD (vs a market cap of $110m at the time). The company climbed 40% in two days, but understanding what the announcement meant for the company and having seen similar momentum dynamics in Singaporean small caps before (where price increases lead to attention, leading to more price increases), I sized up hard and made an extra 30% on a full-sized position in a week. I sold around $1.53, but am back in now, it has settled down a bit with a smaller position. They still trade below the value of their Gemlife stake, while also owning a profitable operating business and the Japanese and Singapore real estate, and most importantly, buying back shares aggressively. --- # 9\. I believe you’re also interested in Japanese SaaS companies. I’ve personally found it to be a challenging sector to analyze. So what’s your conclusion so far, and have any of them made their way into your portfolio? Japanese SaaS looks very cheap on the surface, with very strong, often profitable growth relative to cheap valuations. I struggle with the language and cultural barriers, with no Japanese and limited understanding of their business culture and economy. As a result, I invest in Japan generally with a basket approach, picking ideas I like from writers such as yourself, [Altay Cap](https://altaycap.substack.com/), [Made in Japan](https://madeinjapan.substack.com/) and plenty of others. One of the benefits of my Survivor winnings is that the Japanese round lot rules no longer stop me from basket investing in Japan. The ideas that have made it in so far include [**Avant Group**](https://finance.yahoo.com/quote/3836.T/?ref=asiancenturystocks.com)*(3836 JP — US$368 million)*, [**Robot Payment**](https://finance.yahoo.com/quote/4374.T/?ref=asiancenturystocks.com)*(4374 JP — US$62 million)*, [**Teamspirit**](https://finance.yahoo.com/quote/4397.T/?ref=asiancenturystocks.com)*(4397 JP — US$60 million)*, [**Poper**](https://finance.yahoo.com/quote/5134.T/?ref=asiancenturystocks.com)*(5134 JP — US$29 million)*, [**Rebase**](https://finance.yahoo.com/quote/5138.T/?ref=asiancenturystocks.com)*(5138 JP — US$45 million)*, [**Eguarantee**](https://finance.yahoo.com/quote/8771.T/?ref=asiancenturystocks.com) *(8771 JP — US$70 billion)* and [**Nulab**](https://finance.yahoo.com/quote/5033.T/?ref=asiancenturystocks.com)*(5033 JP — US$39 million)*. --- # 10\. How can people contact you or follow your work? You’re welcome to DM on Twitter [@finphysnerd](https://x.com/finphysnerd?ref=asiancenturystocks.com), I try my best to answer my Twitter DM’s, though sometimes I forget if I’m particularly busy. I post a lot of random ideas on Twitter, and then write long-form, high-conviction ideas on Substack for free at [Value Zoomer](https://valuezoomer.substack.com/). [Value ZoomerI love investing, this is my little personal diary.By Myles Kuah](https://valuezoomer.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Thanks for reading Asian Century Stocks. Consider becoming a subscriber! You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure — all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Hikari Tsushin's portfolio URL: https://www.asiancenturystocks.com/hikari-tsushins-portfolio/ Last updated: 2026-04-17T05:24:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![The Top 10 Richest People in Japan](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ef754c9a-3aac-49d8-b350-4085558f3bf9_800x534.jpg) # **Summary** - This write-up is about Hikari Tsushin — a Japanese sales organization run by a visionary founder called Yasumitsu Shigeta - It’s been much talked about on Twitter and Substack, but few of the write-ups discuss Hikari Tsushin’s portfolio of publicly listed equities - I am personally not particularly interested in Hikari Tsushin itself, as it is primarily a sales organization helping other businesses find customers - But what I am impressed by is Hikari Tsushin’s capital allocation and investing discipline. You’ll find them on the shareholder register of some of Japan’s best-performing small caps. - In this post, I identify 218 publicly listed Japanese companies where Hikari Tsushin is a 5% or larger shareholder. These companies are small, but often undervalued, and growing. - In the past week, I’ve gone through this entire list and narrowed it down to ten companies that I think warrant further attention. It includes larger companies such as Daito Trust but also SaaS companies like Broadleaf. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) In this post, I go through Hikari Tsushin’s history, its current valuation, its investment portfolio and ten holdings that I think warrant greater attention. ``` Table of contents 1. The company's background 2. Hikari Tsushin as an investment 3. The current portfolio 4. Ten Hikari stocks on my watch list 5. Conclusion ``` # **1\. The company's background** Japanese compounder stock [**Hikari Tsushin**](https://finance.yahoo.com/quote/9435.T/?ref=asiancenturystocks.com) *(9435 JP — US$13 billion)* has been the subject of much discussion on Twitter. Some people call it the “Berkshire of Japan”. Many find it encouraging to see a Japanese company that finally understands capital allocation. I am not sure I’d go that far, but the company is certainly worth a deeper look. Hikari Tsushin was set up by an entrepreneur called Yasumitsu Shigeta back in 1988\. He had just dropped out of college and was looking to make money fast. So he teamed up with a few friends to sell office phones door-to-door across Tokyo. He chose the name “Hikari Tsushin”, meaning “light communication” in Japanese. At the time, Japan had just deregulated the telecom industry, so it was a market ripe for disruption. It terminated the monopoly that NTT had once had and allowed companies like Hikari to start selling telecom products to the general public. The company was a sales organization from the start. Yasumitsu Shigeta hired young and hungry individuals eager to make a mark on the world, paying them nothing but commission and encouraging them to use hard sales tactics. From 1993 onwards, Hikari Tsushin added mobile contracts to the mix, and growth took off like a rocket. By the late 1990s, it had set up 1,500 phone shops across Japan, becoming an Internet darling just a few years after its IPO. ![Fifteen Years of Ups and Downs for Yasumitsu Shigeta](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6adf57ab-f730-4d42-8176-f21fa4286aad_300x396.jpg) At the peak of the Dotcom bubble, Yasumitsu Shigeta became one of Japan’s richest men. Investors competed with each other to figure out how big an impact the Internet could eventually have on our society. ![The Gavekal Angle: Party like it's 1999?](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cacbfc37-a2f2-4b61-bcee-bb437d177f7b_1040x763.jpg) Hikari Tsushin, and the other Japanese Internet darling of the time: SoftBank. Source: GaveKal And it all came crashing down. In the late 1990s, Hikari had increasingly turned to aggressive accounting to spur growth. For example, it had sold mobile phone contracts and booked all revenues on day one. It had fabricated contracts with the predecessor of Telecom company KDDI. Finally, Hikari had stuffed franchisee stores with inventory to boost quarterly revenue numbers. The original guidance of JPY 6 billion in profit for the year 2000 turned into a loss of JPY 13 billion. In just six weeks, the stock price had lost 96% of its value. Shareholder lawsuits continued for years, and Hikari Tsushin’s reputation was shattered. Part of the blame could surely be put on the company’s high-pressure sales tactics. Shigeta had hired high school graduates without career prospects and asked them to achieve his vision no matter what. The sales staff were likened to “street fighters”, doing whatever it takes to close deals. After the crash, Shigeta sat down with his lieutenants to try to reimagine the business. He expanded beyond telecom into office suppliers to small- and medium-sized enterprises. The focus was now on recurring revenue business — anything that would make earnings stable and predictable. However, the street fighter mentality remains. If you survive Hikari Tsushin’s Darwinian environment, you can achieve anything. The high-pressure sales model remains, often helping other companies sell products door-to-door. The sales tactics employed by Hikari Tsushin work, and despite the post-1999 crash, the company survived and has continued to thrive to this day. --- # 2\. Hikari Tsushin as an investment In 2025, Hikari Tsushin continues to be a sales organization, with great success. It employs 20,000 people selling electricity and gas, telecom products, mineral water, insurance, office equipment and more. The contracts are long-term in nature, with 80% of revenue considered recurring. And the business throws off huge amounts of cash, which is then reinvested into stocks. In the past few years, I’ve written about a large number of Japanese small caps. I’ve often been surprised to find Hikari Tsushin in the shareholder register, across niche businesses such as pet insurance company Anicom and SaaS company Poper. They clearly know what they’re doing. Yasumitsu Shigeta has now stepped down, but CEO Hideaki Wada has similar views on investing and capital allocation. Jake Barfield’s interview with Wada was among the most refreshing I’ve ever heard in my life. Finally, someone who gets it! Hideaki Wada and Yasumitsu Shigeta see capitalism as the answer to Japan’s troubles. They think that a lack of understanding of capital allocation is the reason why Japan, as a market, has been underperforming. Companies have been unable to lay off employees. CEOs do not need to take shareholder interests into account to retain their jobs. At the same time, that spells opportunity for Hikari Tsushin itself. It’s able to buy stakes in high-quality companies cheaply, and then guide them in the right direction. In their main businesses, they strive for a 30% internal rate of return over a five-year period. And the equity portfolio has compounded at 17% per year over the past seven years, far above TOPIX. And they’ve been able to employ leverage, juicing returns further. I’m not that interested in Hikari Tsushin itself. It does look undervalued, with the company quoting an intrinsic value of JPY 56,000 — far above the current share price of JPY 42,000\. In its [presentation materials](https://www.asiancenturystocks.com/content/files/en/assets/ir/38th/4th%5Fpresen.pdf), it reports look-through earnings on its investment portfolio of JPY 115 billion, which, along with core earnings, leads to total look-through earnings of JPY 193 billion. Compared with Hikari Tsushin’s total market cap of JPY 1.8 trillion, you can therefore see the stock as trading at an adjusted P/E of 9x. That said, I wonder how much of a “moat” Hikari Tsushin has when it comes to its main businesses. Why don’t power companies sell electricity themselves? Or why do companies making mineral water not sell the water themselves? One Yahoo message board user commented that other companies use Hikari Tsushin to employ high-pressure sales tactics on their behalf, with the company taking the hit if there’s ever any reputational damage from these types of activities. Someone else likened the sales model to multi-level marketing schemes. I have read Cialdini’s books, so I can imagine what tactics they refer to. So my research into Hikari Tsushin itself has made me less keen on the company itself, and more keen on its investment portfolio. If they can achieve a +17% internal rate of return over time, then we should be able to copy their approach and achieve similar — if not better — results. --- # 3\. The current portfolio To that end, I’ve gone to great lengths trying to identify Hikari Tsushin’s current investment portfolio. Its stocks carry the following characteristics: - Recurring revenues and consistently rising profitability - Strong balance sheets that can endure crises - Smaller, and sometimes illiquid companies - Earnings yields of 15% or higher Its investment activities are mostly done through key subsidiaries “Hikari Tsushin KK” and “UH Partners 2”: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4742666-60c9-49eb-9492-516b49faf4b8_1638x606.png) If you go through Hikari Tsushin’s investor relations materials, you won’t find the full list. But luckily, Japanese securities law requires companies accumulating 5% stakes to disclose that information within five days. This information ends up on EDINET — the “electronic disclosures for investors network”. But to make it easier for myself, I’ve instead used the website IRBank.net to download the data for each of Hikari Tsushin’s subsidiaries. And by triangulating, I ended up with a list of 219 Japanese publicly listed stocks currently owned by Hikari Tsushin. Other than the recurring nature of their revenues, there is no common denominator. The stocks are in industries as varied as industrials, distribution, financials, software, consumer and more. Here is the entire spreadsheet, with the stocks listed from the highest market cap to the lowest: [Hikari Tsushins portfolioHikari Tsushins portfolio.xlsx289 KBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/Hikari-Tsushins-portfolio.xlsx "Download") --- # 4\. Ten Hikari stocks on my watch list I’ve gone through the entire list over the past few days and found a few that I think warrant greater attention, ranked in order of size. Some of these market caps are tiny, but the liquidity is in most cases enough for personal accounts. ## 4.1\. Daito Trust Construction (1878 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e3dad14-9c42-4794-9bd2-9f5f8a7f0e66_2032x1018.png) [**Daito Trust Construction**](https://finance.yahoo.com/quote/1878.T/?ref=asiancenturystocks.com) *(1878 JP — US$7.1 billion)* constructs rental properties on behalf of landlords. After the construction is over, a one-off construction fee is paid. Daito then rents the properties from landlords for \~30 years and sublets the apartments to the actual tenants. Roughly 2/3 of revenues come from rental income and the rest from new construction. After the bubble burst in the early 1990s, the Japanese became less keen on buying properties and more interested in renting. It’s also advantageous in that in Japan, landlords are not allowed to raise rents more than inflation. But the flip side of that equation is that Daito Trust benefits from deflation and is hurt by inflation. Daito’s profits have also been hurt by the weak yen, which has raised the cost of imported materials. Since Daito doesn’t own the land or the properties itself, it’s an asset-light business, enabling it to earn a return on capital above 20% consistently. That’s very impressive, at least in a Japanese context. The business has recovered nicely since COVID-19, with FY2025 earnings per share finally exceeding the pre-COVID level. On trailing numbers, it now trades at a P/E of 10.8x, with a dividend yield of 4.5%. One question mark is Japan’s inheritance tax. According to the rulebook, owners of land can reduce their inheritance tax by building apartment blocks, as they are valued lower than their actual market price. So if the owner passes away, the Daito-operated apartment blocks help landlords reduce taxes, while Daito captures some of the economics through its long-term rental contract arrangement. So far, there are no plans to change the current inheritance tax system, but if the rules are ever changed, that could pose a threat to Daito’s business. --- ## 4.2\. Broadleaf (3673 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16e62aa9-122d-48dc-8886-42e68b0f9919_1796x946.png) [**Broadleaf**](https://finance.yahoo.com/quote/3673.T/?ref=asiancenturystocks.com) *(3673 JP — US$438 million)* is a software provider to the Japanese automotive aftermarket. In 2009, it was privatized through an MBO thanks to the support of The Carlyle Group, before being listed again in 2013. Dealers and maintenance use the platform to trade auto parts. Broadleaf’s classification of car parts has become the industry standard. In 2022, Broadleaf stopped selling on-premise software and moved towards a SaaS model, a transition that is not yet complete. The stock has come up gradually, yet it continues to trade at just 3.6x EV/Sales. Long-term margins are likely to end up at 30-40%. You can read Alexander Eliasson’s Twitter thread on Broadleaf [here](https://x.com/alexeliasson/status/1890801339971563531?ref=asiancenturystocks.com) and Japan Business Insights’s 2020 Substack post [here](https://japanbi.substack.com/p/broadleaf-the-vertical-saas-enabled). --- ## 4.3\. Fullcast (4848 JP) ![運送業の運転手はパートでも採用できる？向いている人材の特徴も紹介｜人材派遣・紹介のフルキャストホールディングス](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6727b765-a003-4055-9297-ecbac520f793_2560x1707.jpg) [**Fullcast**](https://finance.yahoo.com/quote/4848.T/?ref=asiancenturystocks.com) *(4848 JP — US$382 million)* runs a platform for short-term staffing services. Roughly 8 million workers are registered on the platform. Companies can fill a shift within a few hours. Fullcast bills the client an hourly rate and pays parts of the proceeds to the worker while keeping the rest for itself. You can think of Fullcast as an Uber for day labor. In addition, it has call-center crews that sell phone/broadband plans for telecom companies, and also rents out guards to events and public sites. Revenues have doubled in the past seven years, meaning that the platform is growing steadily. Margins are currently about 10%, though higher in the past. The problem is that from April 2023, the government widened mandatory social-insurance coverage for short-hour workers. Costs have been rising due to a tight labor market. Competitors include Recruit’s TownWork, Pason’s JobHub and even Timee. On the positive side, the stock trades at just 12.3x P/E, it earns a 20% return on equity, and the company is paying out 40% of earnings as dividends. The total return ratio is above 50%, with Fullcast buying back shares as recently as March 2025. --- ## 4.4\. Business Brain Showa-Ota (9658 JP) ![Business Brain Showa-Ota Inc. Office relocation project by Nomura Co., Ltd. — Sky Design Awards](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5b9c1a25-a25c-41a8-86bf-a6c822a91d1f_2500x1667.jpg) Amiral Gestion has previously owned [**Business Brain Showa-Ota**](https://finance.yahoo.com/quote/9658.T/?ref=asiancenturystocks.com) *(9658 JP — US$191 million)*. I’ve paid attention to it but never invested. Yet the company has continued to perform. Business Brain Showa-Ota (“BBS”) is a consulting company helping clients with finance-related enquiries. It designs and writes code for accounting software and then installs it at the client's premises. It also has a routine business taking care of payroll, bookkeeping, HR paperwork, and IT maintenance for other Japanese companies, leading to recurring revenues. It’s been around for 50 years and trusted by governments and many of Japan’s largest corporations. BBS has performed well over time, with EPS on a steadily rising trajectory. The stock now trades at a P/E of 11.9x with growth around 10% per year. On the look of it, it feels like it’s on a safe trajectory to higher earnings. --- ## 4.5\. Temairazu (2477 JP) ![Temairazu Pricing, Alternatives & More 2025 | Capterra](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/401bf2ce-dd4b-4c12-8de9-55e36a86e67b_870x500.webp) [**Temairazu**](https://finance.yahoo.com/quote/2477.T/?ref=asiancenturystocks.com) *(2477 JP — US$132 million)* is a software suite used by hotels to manage customer bookings. Hotels pay a fixed monthly fee to use the service, as well as on a per-reservation basis. The benefit of the service is that the inventory can be managed across several booking sites, without any risk of overbooking. And it’s a cloud service, so hotels can access the data on any device at any time. It also owns an e-commerce price comparison site called Hikaku.com. Temairazu enjoys incredible margins of 92% (gross profit) and 60% (operating profit). Hence, a 5.1x EV/Sales means that the stock now trades below 10x EV/EBIT. In early 2025, the company announced a 4% share buyback program, and it has since completed most of the buyback. You can find a recent write-up on Temairazu on the Value Investors Club [here](https://valueinvestorsclub.com/idea/Temairazu/7762579235?ref=asiancenturystocks.com). --- ## 4.6\. Auto Server (5589 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/579865f5-5706-4651-80f2-d99d84176c7c_2424x1238.png) [**Auto Server**](https://finance.yahoo.com/quote/5589.T/?ref=asiancenturystocks.com) *(5589 JP — US$117 million)* owns ASNET, a used car distribution network. Dealers join the network to list or bid on cars, and Auto Server collects a fee every time a vehicle changes hands. Auto Server’s system bids at 140 physical auctions, settles the payment and does the paperwork without taking on any inventory. ASNET also collects money when a dealer posts a new car to the platform, or when another dealer decides to purchase. About 80,000 dealers are connected to the platform and trade with each other. Given that Auto Server doesn’t hold any inventory, it’s been able to earn a 20% return on equity. The stock now trades at 12.0x P/E and a 2.7% dividend yield. The payout ratio is meager at just 30%, and it’s also invested in a fancy new headquarters in Toyohashi. But I still think the valuation is on the low side, given the platform nature of its business. --- ## 4.7\. Heian Ceremony Service (2344 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6ef64424-a0dd-46cc-a4bf-e2101939d56c_1023x680.jpg) [**Heian Ceremony**](https://finance.yahoo.com/quote/2344.T/?ref=asiancenturystocks.com) *(2344 JP — US$74 million)* provides funeral services. It has 62 halls in Kanagawa and Shizuoka that are used for ceremonies. Heian charges one-off fees for each funeral, as well as membership dues for the prepaid plan. In addition, Heian has a nursing care business, which offers home visits to senior citizens. Finally, Heian helps organize weddings with two chapels and costume rental services. But the vast majority of profits come from the funeral hall business. While only a portion of the revenues are recurring, Japan’s [death rate](https://www.macrotrends.net/global-metrics/countries/jpn/japan/death-rate?ref=asiancenturystocks.com) is rising steadily as the country continues to age. While growth has been low, the stock now trades at 7.9x P/E and 0.5x book. Earnings have come back strongly since the depths of the COVID-19 pandemic, yet the stock has languished. In May 2025, Heian started another share buyback program in modest amounts. I’m hoping that it will soon find religion when it comes to capital allocation and re-rate to a higher multiple. --- ## 4.8\. Property Data Bank (4389 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f531a37a-144b-463c-8fba-d297032a38d4_2013x720.png) Hikari Tsushin just increased its stake in [**Property Data Bank**](https://finance.yahoo.com/quote/4389.T/?ref=asiancenturystocks.com) *(4389 JP — US$64 million)* to 12.8%. The company provides a niche service: an enterprise resource planning system for property management services. Customers can log into an online dashboard for tracking leases, rents, maintenance jobs, energy bills, documents, etc, on a building-to-building basis. 50% of Japan’s publicly listed REITs are customers. And several large corporations are using their service, including 70% of Japan’s top 15 railroad networks. Property Data Bank’s revenues are recurring, with a monthly fee per building. According to Made in Japan, who wrote about Property Data Bank in 2024, Property Data Bank’s guidance came down recently due to large customization orders. But the revenue recognition was simply delayed, meaning that revenue growth is likely to accelerate from this year onwards. The stock is cheap at only 17.0x P/E. The founder, Sadahisa Takeno, is still involved, so that’s a big plus. The medium-term margin target is 22%. You can read more about Property Data Bank at Made in Japan’s post [here](https://madeinjapan.substack.com/p/a-quick-note-on-a-japanese-appfolio) ($). --- ## 4.9\. TVE (6466 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fe8060c5-69c8-4254-933d-45aca37ab8fc_1140x640.jpg) [**TVE**](https://finance.yahoo.com/quote/6466.T/?ref=asiancenturystocks.com) *(6466 JP — US$34 million)* makes valves for nuclear power plants. 60% of revenues come from the replacement and maintenance of existing facilities, many of which have been restarted after the Fukushima disaster. TVE’s biggest competitor is Okano Valve Manufacturing, which is also benefitting from the ongoing restart process. But TVE is stronger in pressurized water reactors, used in plants that will restart faster than the rest. TVE’s valves are also used for thermal power plants, some overseas. The stock trades at 13.8x P/E, but earnings are lumpy. Also, TVE has net cash roughly equal to the current market cap. It’s currently reducing cross-shareholdings, which in theory should be positive for its governance. Andy from The Magic Bakery Substack thinks TVE might be the target of a takeover by shareholder Seika at some point, given that it launched a nuclear power business in 2023\. Read more at the Magic Bakery Substack [here](https://themagicbakery.substack.com/p/tve-co-ltd-6466-jp). --- ## 4.10\. Porters (5126 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f1782a09-856a-4532-ae84-d3e877a57d38_2690x1724.png) [**Porters**](https://finance.yahoo.com/quote/5126.T/?ref=asiancenturystocks.com) *(5126 JP — US$21 million)* is a company selling workflow software for staffing and recruitment firms. Clients use the system to keep track of recruits and clients. Each client pays about US$800 per year, and 95% of revenues are recurring based on the number of IDs. Porters has an AI search module, which should help identify the right fit for any job. In addition, there are one-off project fees for data migration, API integrations, etc. The software has excellent reviews from clients and seems to dominate the industry. The company is tiny, but trades at 1.3x EV/Sales, and 13.1x P/E. Porters’ top-line growth was 21% in 2024, but margins have compressed. Hikari Tsushin showed up as a 5.0% shareholder in early 2025, and the stake has been increased to at least 6%. You can find a great write-up on the stock at The Magic Bakery Substack [here](https://themagicbakery.substack.com/p/porters-5126-jp). --- # 5\. Conclusion I strongly urge you to take the spreadsheet of Hikari Tsushin’s portfolio of publicly listed stocks. They know how to pick stocks, so why not piggyback on their efforts? We all have different investing styles, portfolio constraints and risk appetites. I think that Heian Ceremony could be undervalued, at least if Hikari Tsushin inspires it to finally increase its shareholder returns. Thanks for reading, *Michael* Further material: - Longriver’s [3Q2024 letter](https://www.longriverinv.com/thought/3q24-letter?ref=asiancenturystocks.com), which discusses Hikari Tsushin at length - Jake Barfield’s [interview with Hideaki Wada](https://www.youtube.com/watch?v=Y5rRs1IK6Zo&ref=asiancenturystocks.com), the CEO of Hikari Tsushin - Made in Japan’s two-part introduction to Hikari Tsushin: [Part 1](https://madeinjapan.substack.com/p/company-profile-hikari-tsushin?utm%5Fsource=publication-search) & [Part 2](https://madeinjapan.substack.com/p/hikari-tsushin-part-2-the-investor?utm%5Fsource=publication-search) ($) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) ### Guide to corporate governance URL: https://www.asiancenturystocks.com/guide-to-corporate-governance/ Last updated: 2025-10-24T14:57:41.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d50dd51c-4833-48b5-98ac-ba7f6eb0d82c_1616x909.jpg) Source: Getty Images # **Summary** - Corporate governance is a dry subject, but nonetheless important. - It deals with managing conflicting interests between shareholders and insiders, and maximizing the value of the company. - I argue that best practices include 1) small boards, 2) a balance between insiders and independent director,s 3) insiders having a sizeable stake in the company,y 4) presence of a nomination committee, 5) pay-for-performance CEO remuneration,n 6) no dual class shares, 7) no takeover defenses and 8) limited cross-shareholdings. - In the Asia-Pacific region, protections for minorities have improved dramatically, especially in Japan, South Korea, and Taiwan. In Emerging Asia, legal protections are weaker, making it even more important to pay attention to the alignment of interests. You don’t want to be completely in the hands of corporate insiders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) I spent part of the last week reading through Bob Tricker’s textbook [Corporate Governance](https://www.amazon.com/Corporate-Governance-4e-Principles-Practices/dp/0198809867/ref=sr%5F1%5F2?crid=2GNZHI1V8MMZG&dib=eyJ2IjoiMSJ9.Tr0bUbWOLtfVRlzC%5FrE5qM8nnul%5FF8WilWhnfPLzB3QwqB-Blmol6%5FLrsca0-PMTlLnJmrTsWYieH%5Fd2rPGcdMM0tyZcy5HYuuDYWNTW1OU6LKQtycDjruefELueYVyek8jubqEd-51chfeTScKGMCohrAbDrVflPSUy%5Fg6ZNY4EgLlKPYVvekQeF8vSJqihn2adnwrw1i1nQ0Tae0uzFcK0EMgjpMk3aHXmykunfN-uiW%5F-adOlo1iEdTtiJvfQwibVQHJ0KdbQzEauzS-d0nZMaILRYU%5FbvTwNY4xWErU.4I8L6NzhrTAynmh3uo3JJzX6fIa2xq%5FABqoco286i-w&dib%5Ftag=se&keywords=corporate+governance&qid=1752024963&sprefix=Corporate+Governance%2Caps%2C335&sr=8-2&ref=asiancenturystocks.com). It’s an incredibly dry but helpful 500-page tome about the ins and outs of corporate governance. [![Corporate Governance: Principles, Policies, and Practices](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ead14d9f-24f3-45dc-8f98-46f640abdee8_401x522.jpg)](https://www.amazon.com/Corporate-Governance-4e-Principles-Practices/dp/0198809867/ref=sr%5F1%5F2?crid=2GNZHI1V8MMZG&dib=eyJ2IjoiMSJ9.Tr0bUbWOLtfVRlzC%5FrE5qM8nnul%5FF8WilWhnfPLzB3QwqB-Blmol6%5FLrsca0-PMTlLnJmrTsWYieH%5Fd2rPGcdMM0tyZcy5HYuuDYWNTW1OU6LKQtycDjruefELueYVyek8jubqEd-51chfeTScKGMCohrAbDrVflPSUy%5Fg6ZNY4EgLlKPYVvekQeF8vSJqihn2adnwrw1i1nQ0Tae0uzFcK0EMgjpMk3aHXmykunfN-uiW%5F-adOlo1iEdTtiJvfQwibVQHJ0KdbQzEauzS-d0nZMaILRYU%5FbvTwNY4xWErU.4I8L6NzhrTAynmh3uo3JJzX6fIa2xq%5FABqoco286i-w&dib%5Ftag=se&keywords=corporate+governance&qid=1752024963&sprefix=Corporate+Governance%2Caps%2C335&sr=8-2&ref=asiancenturystocks.com) In this post, I want to provide the main takeaways from that book, along with a tentative checklist that you can use to assess the quality of a company’s corporate governance. ``` Table of contents 1. The basics of corporate governance 2. Corporate governance around the world 3. An eight-step scorecard 3.1. Small board size 3.2. Balanced ownership concentration 3.3. Balanced board independence 3.4. Nomination committees 3.5. Pay-for-performance 3.6. No dual-class shares 3.7. No takeover defenses 3.8. No cross-shareholdings 4. Conclusion ``` # 1\. The basics of corporate governance The term “corporate governance” is about ensuring that a company is run in the best interests of its shareholders. They exercise control by electing a board of directors, which then sets the company's strategic direction and supervises the management team. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/da73c72d-4a7c-4daf-a655-a57f27e61f06_396x326.png) In the past, people conducted business as sole traders or through partnerships. The owner and the business were the same legal entity. And if it failed, the owner became liable for the debts incurred. That all changed in 1855, when Britain began allowing companies to be established as **limited liability companies**. These companies were incorporated as separate legal entities, capable of entering into contracts and maintaining their own accounts. And most importantly, owners were not personally liable for the company’s debts beyond the amount they had invested in the business. However, a conflict of interest then arose. How could the owners make sure that management would make sensible decisions and not take unnecessary risks with their money? This is at the heart of the principal-agent problem — principals, such as shareholders, delegate authority to agents such as company management teams. Insiders know more about the business, so they’re in a position to take advantage of shareholders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4a02d81b-65cc-4aae-8e6b-34c60fe14611_838x558.png) So checks and balances are needed. These include: - **Company law**: How companies are formed, governed and dissolved - **Securities law**: How companies can issue securities, and how these can be traded. For example, public companies are allowed to offer shares to the general public, whereas private companies are not. - **Company constitution**: a document specifying how the company should be governed: the company’s objective, information about the share classes, paid-up capital, etc. The company law in each country codifies shareholder rights. Such rights include receiving dividends, attending annual general meetings (AGMs), receiving disclosures about the business's performance, electing directors, and voting on important matters such as mergers and acquisitions. In practice, shareholders primarily exercise control through AGMs. These are to be held yearly. The board presents the company’s financial accounts to shareholders. Meanwhile, shareholders elect a new board, approve dividend payments and appoint a new auditor. Sometimes, shares are owned by a complex chain of intermediaries, and voting is done on behalf of other shareholders. That’s why documents are sent to shareholders well in advance of the AGM, allowing them to make informed decisions about how to vote. These documents are known as proxy materials, as they allow shareholders time to appoint somebody else to vote on their behalf. At the AGM, shareholders elect boards of directors, which typically include: - A Chairman, who sets the agenda of board meetings, facilitates discussion and serves as a public face of the company - Executive directors, company insiders working full-time in executive positions and helping the board make better decisions - Independent non-executive directors (INEDs) are typically older individuals with extensive experience in the industry. They’re brought in to provide new perspectives and act as a counterweight against the interests of insiders - A company secretary, who prepares the agenda, files annual returns and sometimes communicates with investors about how the business is doing While listed entities are “limited liability companies”, it doesn’t mean that directors’ liabilities are limited. If they fail to obey company laws or mislead auditors, they can be punished. In China, they can even face the death penalty. So it’s not a responsibility to be taken lightly. There are two types of board structures: **unitary boards** and **two-tier boards**. In the United States, shareholders elect boards that include both executive and non-executive directors and the Chairman and CEO positions are typically combined. In other countries, such as Germany, the board has two tiers: shareholders elect a supervisory board, which then elects a management board. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bdaee7a2-fd80-4ae2-a9bc-43ce566259a1_832x600.png) Source: ICFJ.org There are pros and cons to each approach. In unitary boards, you could argue that executive board members are giving scorecards to themselves. However, on the other hand, they have more knowledge about the business and are in a better position to make informed decisions. Modern boards will also typically be supplanted by three subcommittees, comprised entirely of independent directors: - **Nomination committees**, which nominate new board members who are then ratified at the AGM - **Remuneration committees**, which determine the salaries of directors and senior executives - **Audit committees**, which serve as the contact point between the board and the auditor In a true shareholder democracy, anyone should be able to propose a new director for the board. But in practice, including the United States, director nominations are typically done by the incumbent board and then approved at the AGM. In other words, boards essentially elect themselves. That’s problematic. Once elected, the board sets the direction of the company, often in conjunction with management. This direction will be reflected in the company’s mission statement or long-term plan. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/af628985-4e01-44f3-a4c5-7f09f15ecbb4_728x608.png) Source: TSMC’s mission statement in its 2024 annual report The board is also responsible for key disclosures to investors. Listed companies often establish investor relations departments to address questions that investors may have. Once set up, companies can own other companies in long chains, and even shares in themselves (treasury shares). Here are some common corporate structures: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b9ee4331-b803-4e04-9296-f3e3d74acb2f_848x440.png) Specifically: - **Pyramids** are when a single holding company at the top owns a set of subsidiaries, which in turn own other subsidiaries. Most listed companies are structured like this. - **Chains** are when a single holding company owns subsidiaries in a straight line down to an operating company. **Magnificent Hotels** in Hong Kong come to mind, as do the typical HoldCo/OpCo structure in South Korea. - **Networks** are when a set of companies own shares in each other, perhaps to fend off hostile predators and reduce the influence of outsiders. Keiretsus in Japan and Chaebols are examples of network structures. It’s usually best for minorities if the corporate structures are simple. If there are listed companies in several parts of the hierarchy, conflicts of interest will arise between each of these minority groups. Even if independent directors run the board at the top, they’ll look after the interests of their own shareholders, not the minorities of each subsidiary company. So why do companies end up with these complex structures? Sometimes, due to years of mergers and acquisitions. At other times, due to tax or payroll. However, it can also be due to controlling shareholders seeking to control a broader range of assets. If there are minorities in each step of the hierarchy, then a small stake, say 5%, can be used to control, for example, 30% of the operating company at the bottom. This type of behavior is clearly problematic. Equally problematic is the use of dual-class shares, technically known as “weighted voting rights”. Dual-class shares allow insiders to control a majority of the votes, despite owning only a small portion of the cash flow rights. If insiders fail to perform, it will be virtually impossible for minorities to remove them. So pay attention to the corporate structure. --- # 2\. Corporate governance around the world As mentioned earlier, companies are governed by company law and securities law. However, companies need incentives to follow these laws; otherwise, they’re not worth the paper they’re written on. Enforcement is facilitated through independent judicial systems, robust regulators, and active stock exchanges. And the rules need to be in favour of minorities, not vested interests. The identity of the actual shareholders also influences governance. The distribution of ownership is not the same across all countries, as you can tell from the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/74c0cdf0-66fa-42cc-98f1-2097498c768c_1676x576.png) In the United States and the United Kingdom, for example, listed companies are owned by institutions and individuals. Conversely, in Italy, listed companies are more often owned by banks and family holding companies. They have their own interests, and don’t always align with those of minorities. US regulation is known to be **rules-based**. Investor protections, auditing requirements, and disclosures are all federal responsibilities. And if companies don’t live up to them, they’ll face legal repercussions. The same is true for China, South Korea, India, Thailand and Vietnam. In other parts of the world, such as the United Kingdom and its former colonies, corporate governance rules tend to be **principles-based**. Companies are encouraged to comply with corporate governance codes; otherwise, they must explain why they have not. This approach is commonly referred to as “comply or explain” regimes. The benefit of this approach is that it provides flexibility. But on the other hand, many companies will do the bare minimum and leave minorities in the dust. In Asia, principles-based regimes include Hong Kong, Singapore, Japan, Malaysia and the Philippines. Another distinction between board practices is between unitary boards and two-tier boards: - **Unitary boards** are used in the United States, the United Kingdom and much of the rest of the world. Shareholders elect a single board which then controls management. - Then there’s the **two-tier board** system, as practised in continental Europe, Indonesia and historically, in Taiwan. These have supervisory boards elected by shareholders, and the supervisory boards then elect executive boards. In Germany and the Netherlands, employee unions appoint part of the supervisory boards. In Asia, there are also cultural and country-specific peculiarities. For example, in Japan and parts of East Asia, the culture tends to emphasize social cohesion. Confrontation tends to be frowned upon. That could be one reason why minorities tend to have less influence in Japanese corporations. Boards tend to side with the management teams they have elected. Another peculiarity is the use of cross-shareholdings in Japan and South Korea. Companies own shares in each other in complex networks called keiretsus, often based around banks that lend to them. By forming these networks, they ensure access to debt-based financing. And they ensure that outside investors won’t be able to challenge their grip on power. ![Keiretsu - Overview, History, Types, Pros and Cons](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eff422dd-404d-4bb3-81e9-6350d7a325ee_949x527.jpg) Cross-shareholdings in the Toyota Group China, Vietnam and other communist nations have their own peculiarities. In these countries, courts serve the state and the party. Within China’s two-tier boards, members of the Communist Party committees often chair the supervisory board, ensuring the companies are aligned with the Communist Party's interests. And under Xi Jinping, all listed companies are now required to have communist party committees, which serve as shadow directors able to hire and fire senior management teams. In China’s case, additional conflicts of interest emerge from the fact that many overseas-listed Chinese companies are structured as variable interest entities, where the operating companies are governed by separate boards completely disconnected from the foreign shareholders. ![Alibaba: Do You Know What You Are Buying? (NYSE:BABA) | Seeking Alpha](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/503aaae6-af5c-4ff7-9a87-02069bdb97f8_948x512.jpg) Alibaba’s VIE structure In its latest 2023 report, the Asian Corporate Governance Association (ACGA) ranked corporate governance as the strongest in Australia, Japan, and Singapore. Minority protections have improved significantly, especially in Japan, South Korea, and Taiwan. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aef4ee2f-5e66-414e-a695-70044f517a98_1330x684.png) ACGA’s 2023 corporate governance ranking. Source: ACGA Here is a summary of the strengths and weaknesses of each jurisdiction. As you can tell, the main issues include takeover defenses, dual class shares, cross-shareholdings, poor enforcement and an inability to stop companies from engaging in related party transactions: As you can see, Singapore, Hong Kong, and Malaysia have robust protections for minorities. But in the case of Hong Kong, companies listed there often have their primary operations in other jurisdictions, making it challenging to stop related party transactions at unfavorable prices. While Japan and South Korea have strong minority rights on paper, cross-shareholdings and tax policies frequently prevent minority interests from being taken into account. Meanwhile, Indonesia and the Philippines lag when it comes to enforcement, with minority abuses rarely addressed in courts. Finally, China and Vietnam have their issues, with a lack of independent courts, and in the former case, communist party control setting policy behind the scenes. --- # 3\. An eight-step scorecard What if you’re tasked with assessing a company’s corporate governance policies? What should we consider to be best practices? I’ve gone through the literature and come up with a list of eight metrics that I think are worth tracking: ## 3.1\. Small board size Smaller boards are generally better. A European study by [Conyon ](https://www.sciencedirect.com/science/article/abs/pii/S0165410109000809?ref=asiancenturystocks.com)and[ Peck](https://www.sciencedirect.com/science/article/abs/pii/S0165410109000809?ref=asiancenturystocks.com) (2010) found a negative relationship between board size and return on equity, as well as market valuations. The more people you add to the board, the worse the performance gets. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/048a357f-df42-4614-88cb-c01cdebbd498_1074x830.png) Tobin’s Q (market valuations) declines with a larger board size The explanation seems to be that each extra director raises coordination costs and slows down decision-making. Large board meetings may encourage passivity. And they may allow CEOs to dominate meetings more than smaller groups might. At the same time, there is evidence that in complex companies with significant research & development or in regulated industries, larger boards may add some value. So, a board of no more than 7-9 directors is probably ideal for most companies. And if a company is highly complex, then up to 12 directors is perhaps okay. --- ## 3.2\. Balanced ownership concentration [McConnell & Servaes (1990)](https://www.sciencedirect.com/science/article/abs/pii/0304405X9090069C?ref=asiancenturystocks.com) showed that insider ownership between 30-50% leads to a higher market valuation for listed companies: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ef157b9a-25b0-4a25-889a-56f9450e6c25_1568x1070.png) McConnell & Servaes (1990) Why? Because insiders typically have strong incentives to maximize shareholder value. But beyond a certain level, the risk of unchecked empire building and minority abuse starts to build. When it comes to founder ownership concentration, the sweet spot appears to be somewhere in the middle, around 30-50%. This result seems to be consistent across both developed and emerging markets. --- ## 3.3\. Balanced board independence As Blackbull Research [recently pointed out](https://blackbullresearch.substack.com/p/is-a-100-independent-board-good?utm%5Fsource=publication-search), fully independent boards are not always ideal. While independent board members can stop the empire-building tendencies of corporate insiders, they’re also less informed about the business. And as Louis-Vincent Gave of GaveKal has repeatedly pointed out, many of them are only out to collect salaries and “cover their asses”, to use a technical term. [This paper](https://www.aicd.com.au/content/dam/aicd/pdf/news-media/glc/2016/05643-POL-GLC-Independent-Directors-research-paper-A4v4.pdf?ref=asiancenturystocks.com) from Alex Frino supports the view that more independent directors are not always better. Using data from the ASX, he showed that companies with balanced boards of 40-60% independent directors tend to outperform when it comes to market-adjusted stock price returns. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/20660fc9-e521-43b9-a064-b48e5d888f3e_1200x745.jpg) --- ## 3.4\. Nomination committees Another study by [Agyemang-Mintah](https://www.researchgate.net/publication/311485166%5FThe%5Fnomination%5Fcommittee%5Fand%5Ffirm%5Fperformance%5FAn%5Fempirical%5Finvestigation%5Fof%5FUK%5Ffinancial%5Finstitutions%5Fduring%5Fthe%5Fprepost%5Ffinancial%5Fcrisis?ref=asiancenturystocks.com) (2015) in the UK showed that financial institutions with nomination committees led to higher market returns and higher return on equity. And especially when members brought relevant expertise to the committee. Another study by [Aldegis et al](https://www.researchgate.net/publication/381925790%5FBOARD%5FCOMMITTEES'%5FEFFECTIVENESS%5FAND%5FFIRM%5FPERFORMANCE%5FEVIDENCE%5FFROM%5FJORDAN?ref=asiancenturystocks.com) (2023) from Jordan (of all places) showed that non-financial companies with nomination and remuneration committees showed a positive and significant relationship with market valuations. The reason is that with a nomination committee, insider board capture is much less likely. And especially if the nomination committee is staffed by independent board members with industry expertise. --- ## 3.5\. Pay-for-performance The most effective way to remunerate CEOs is by linking their compensation packages to total shareholder returns over the long term. And the pay shouldn’t be too high. According to [this Harvard Law School article](https://corpgov.law.harvard.edu/2024/09/09/relative-tsr-awards-challenges-and-trade-offs/?ref=asiancenturystocks.com), CEO incentives that only pay out if the company beats a peer group’s total shareholder return tend to lead to higher stock prices. Longer vesting periods are better. [Gu, Lu & Yu](https://www.sciencedirect.com/science/article/abs/pii/S0890838923001221?utm%5Fsource=chatgpt.com)’s (2023) research shows that longer vesting terms lead to lower perceived crash risk for any given stock. [Edmans, Fang & Lewellen](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2014/04/01-14-edmans-myopia20140331p.pdf) (2014) demonstrated that equity grants with short-term vesting periods led to managerial myopia. And lower CEO pay is probably better, too. [Balafas & Florackis](https://papers.ssrn.com/sol3/papers.cfm?abstract%5Fid=2346861&ref=asiancenturystocks.com) (2014) showed that LSE-listed firms that pay their CEOs the least enjoy positive abnormal returns. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/75d3e573-4551-4344-b7fb-b541e1fd129e_2094x1038.png) Source: Balafas & Florackis (2014) --- ## 3.6\. No dual-class shares Dual-class shares weigh on market returns over the long run. While dual-class shares might help brilliant companies enter the market, they can eventually become a burden. [Smart & Zutter](https://www.sciencedirect.com/science/article/abs/pii/S0304405X03001090?ref=asiancenturystocks.com) (2003) showed that dual-class IPOs underperformed single-class IPOs by -26% over the three years following the IPO. [Cremers, Lauterbach & Pajuste](https://papers.ssrn.com/sol3/papers.cfm?abstract%5Fid=3062895&ref=asiancenturystocks.com) (2018) showed that dual-class IPOs enjoy valuation premiums during their IPO, but this premium eventually turns into a discount: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/40e75204-7591-4cb2-97cd-0a477707a0fd_1306x710.png) [Cremers, Lauterbach, Pajuste](http://file///Users/michael/Downloads/ssrn-3062895.pdf?ref=asiancenturystocks.com) (2018) Furthermore, an [ISS/IRRCI study](https://weinberg.udel.edu/new-study-says-multiclass-voting-companies-underperform-riskier/?ref=asiancenturystocks.com) showed that multi-class stocks underperformed relevant benchmarks on all time horizons longer than 1 year. The explanation is obvious: brilliant entrepreneurs have enough bargaining power to create dual-class share structures, but if they start to underperform, minorities will have no way to get rid of them. So buyer beware. --- ## 3.7\. No takeover defenses Management teams use a poison pill to defend themselves against hostile takeovers. Whenever there’s a takeover, it allows existing shareholders to buy shares at a discount, thus diluting the acquirer. Since poison pills entrench management teams and create a failure in the market for corporate control, it’s no surprise that they lead to lower shareholder returns. [Malatesta & Walkling](https://www.sciencedirect.com/science/article/abs/pii/0304405X88900505?ref=asiancenturystocks.com) (1988) showed that the poison pills lead to -1% to -3% abnormal return on the day of adoption. Another way for company insiders to protect themselves against hostile takeovers is through the use of staggered boards, which cannot be replaced quickly. Another way to protect against hostile takeovers is through golden parachutes, which provide large payments to management in the event of a hostile takeover. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16820d2e-df29-475c-95a7-d7867f45f2aa_1090x256.png) In any case, [Eisdorfer, Morellec and Zhdanov](https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2022.03111?ref=asiancenturystocks.com) (2023) showed that: > *“Distressed firms experience a *significant decrease in value* and increase in returns and market betas *after the passage of anti-takeover laws*”* The explanation is that poison pills reduce the likelihood of a takeover at a premium. When companies are acquired, bidders usually pay 25-30% over the last close for a controlling stake, and when poison pills are active, minorities lose this premium. --- ## 3.8\. No cross-shareholdings [Miyajima & Kuroki](https://www.asiancenturystocks.com/content/files/en/events/05091301/open%5Fmiyajima%5Fpaper%5F2.pdf) (2006) demonstrated that high bank ownership and corporate cross-holdings in Japan lead to lower valuations. Another study available [here](https://corporate.quick.co.jp/en/japanmarketsview/equity/successive-unwinding-of-cross-shareholdings-and-resulting-downward-pressure-on-stock-prices/?ref=asiancenturystocks.com) shows that stocks with the highest cross-shareholding ratios significantly underperformed the TOPIX in a recent time frame. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a2b9bef1-3e92-44ae-854b-714b9a6cec87_1688x742.png) Underperformance of companies with cross-shareholdings. Source: Quick.co.jp A similar result has been seen in Western Europe, with Bennedsen & Nielsen (2004) reporting a negative impact on valuations from a high degree of cross-ownership, though perhaps less so than dual class shares. --- # 4\. Conclusion Corporate governance sounds boring — perhaps because the subject has been taken over by the ESG mafia and box tickers at corporate compliance departments. But I’m convinced that good governance leads to higher shareholder returns. And if my tentative checklist is as well-designed as I think it is, then you should invest in companies with small boards. They should have a balance between insiders and independent directors. The founders should have a sizeable stake in the company. The board should have a nomination committee. Ideally, the CEO should be rewarded based on shareholder returns, with lengthy vesting periods. Finally, avoid companies with dual-class shares or other takeover defences, including cross-shareholdings. They’re not in the best interests of minorities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Thanks for reading Asian Century Stocks. Consider becoming a subscriber! You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure — all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Ready to binge Asia’s best stock write-ups? URL: https://www.asiancenturystocks.com/unlock-120-deep-dives/ Last updated: 2025-07-07T01:42:54.000Z Asian Century Stocks: All-Access Library _This post is for subscribers only._ ### Riverstone (RSTON SP) URL: https://www.asiancenturystocks.com/riverstone-rston-sp/ Last updated: 2026-07-31T02:02:02.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Riverstone at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Asian Century Stocks reader Christopher alerted me to the fact that [**Riverstone**](https://finance.yahoo.com/quote/AP4.SI/?ref=asiancenturystocks.com)’s *(RSTON SP — US$779 million)* CEO recently bought 1 million shares on the open market. That caught my attention. Insider buying after a decline in the share price is usually a positive sign. I also knew that Riverstone had been one of the best-performing stocks on the Singapore Stock Exchange, compounding earnings per share at a +15% annual rate since its IPO in 2006. The company manufactures disposable nitrile gloves for customers worldwide. But unlike its larger peer, Hartalega, Riverstone focuses on customized gloves sold directly to the end-users. And unlike Hartalega, Riverstone has a significant focus on cleanroom gloves used in semiconductor fabs and other electronics-related industries. These gloves are made-to-order and high-spec, specifically designed to minimize contamination, corrosion, and the risk of electrostatic discharge. They’re sold to Class 10 and Class 100 cleanrooms, which have exacting standards regarding the amount of airborne particles allowed in the air. Disposable gloves used in such settings should not shed particles. Since the gloves are high-spec, Riverstone can charge US$88 per 1,000 pieces — far above the US$20 typically charged for medical gloves. These high prices have also enabled Riverstone to earn decent operating margins of 20-30%. The company is run by the two co-founders, Teek Son (“TS”) Wong and Lee Wai Keong. Both were chemistry majors working in the R&D department of a Malaysian electronics firm. When it was shut down, the two of them managed to take over a manufacturing line for disposable gloves. That business eventually grew into what is today known as Riverstone Holdings. I have only good things to say about TS Wong. He is media-shy and laser-focused on growing the business. As an avid runner, his mantra is apparently *“keep fit, keep curious”*. And he’s shareholder-friendly, with a majority independent board and paying out cash to shareholders to the extent they’re not needed to grow the business. Just like its rubber glove peers, Riverstone initially benefited from the COVID-19 pandemic, when demand for medical gloves skyrocketed. Average selling prices for cleanroom gloves also rose significantly, as industry capacity was redirected to the medical side. Riverstone also has exposure to the healthcare glove market. But the boom eventually turned to bust, and Riverstone’s margins have come off since the peak in 2022. However, roughly 70% of gross profit comes from the cleanroom glove segment, and it continues to do well. Investments in new fabs and electronics factories continue amid the current generative AI boom. Many plants are now relocating from China to Malaysia, where Riverstone’s primary business is located. Riverstone’s first-quarter 2025 earnings were weak due to the strength of the Malaysian Ringgit. But competitor Hartalega just reported that it will increase its glove prices by 10%, so perhaps the industry will eventually adapt to fluctuations in exchange rates. I also believe that average selling prices will be supported by the additional US tariffs on Chinese gloves, which increased to 80% this year and are set to reach 130% next year. I also see earnings growth from the Riverstone’s Phase 8 expansion, which will bring total production capacity to 12.0 billion pieces per year by the end of 2026. According to my calculations, Riverstone trades at 11x current-year earnings and 10x next-year earnings. Gross margins will come off, but not materially. Riverstone’s net cash position accounts for 22% of the market cap, and the majority will be distributed as dividends over the next few years. The dividend yield of 8% is high, but I expect this to fall to mid-single-digit levels by 2027. The only question mark is whether Chinese competitors such as Intco will eventually catch up in terms of quality control. Chinese energy and labor costs are lower, so they could potentially undercut Riverstone on price. Then again, Riverstone does have an edge in high-specification gloves. And it has strong customer relationships. So it can probably withstand the competition for now. Thank you for reading. *Michael* Further material: - Riverstone’s first quarter 2025 [investor presentation](https://www.asiancenturystocks.com/content/files/newsroom/20250508%5F173119%5Fap4%5Fikv5x1re6ru003m3-1.pdf) - Riverstone’s 2024 [annual report](https://www.asiancenturystocks.com/content/files/newsroom/20250404%5F173820%5Fap4%5Fimjqzb4eodqwawmz-1.pdf) **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### MAP Aktif (MAPA IJ) — 2025 update URL: https://www.asiancenturystocks.com/map-aktif-mapa-ij-2025-update/ Last updated: 2025-11-19T07:38:24.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in MAP Aktif at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* # **Summary** - MAP Aktif is the sportswear subsidiary of Indonesian retail giant Mitra Adiperkasa. - I wrote a deep dive on MAP Aktif in January 2022, during the depths of the COVID-19 pandemic. At the time, it was suffering from Indonesia’s large-scale social distancing restrictions. But I thought that it would eventually recover, continue growing its store count, and end up with a single-digit P/E ratio. - The recovery was even more forceful than I had expected. Today, MAP Aktif’s revenues are more than twice what they were before the COVID-19 pandemic. The stock increased roughly fivefold before peaking in 2024. - While MAP Aktif’s revenues continue to grow at a rate of close to 20% per year, there has been margin compression. I suspect MAP Aktif was overearning back in 2022-2023, as we had just emerged from the pandemic. The Indonesian macro environment is also challenging right now. There’s been greater competition from both JD Sports and Decathlon. And finally, MAP Aktif’s international expansion probably hasn’t been as profitable as that in Indonesia. All of these factors may have contributed to the decline in the gross profit margin from 48% to 46%. - However, I believe MAP Aktif has performed admirably, regardless of these issues. First-quarter 2025 revenues grew by +17% year-on-year and net profit by +19%. Yet the stock price trades at a next-twelve-month P/E of just 11.8x. - Assuming gross margins end up at 46%, opex/sales at 33% and top-line growth slows from 16% to 6%, I arrive at a 2030e forward P/E of 6.5x, well below the pre-COVID trading range of 15-20x. ``` Table of contents: 1. A quick background 2. The original thesis 3. MAP Aktif’s recovery 4. An updated valuation model 5. Conclusion ``` # **1\. A quick background** I first wrote about Indonesian sportswear company [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) *(MAPA IJ — US$1.1 billion)* back in January 2022\. Here’s a link to the deep dive: [Deep-dive 2022-3: MAP Aktif AdiperkasaDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7037a6f7-907e-43c3-865a-6f42b3c0ae48_3274x1838.png)](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) MAP Aktif is part of the broader [**Mitra Adiperkasa**](https://finance.yahoo.com/quote/MAPI.JK/?ref=asiancenturystocks.com)group *(MAPI IJ — US$1.2 billion)* — one of Indonesia’s largest retailers. The story began in the early 1990s. Indonesian property developer Boyke Gozali had just built his high-profile shopping mall, “Plaza Indonesia,” and saw an opportunity to start a retail operation. In 1995, he established retailer Mitra Adiperkasa and hired Indian banker Virendra Prakash (“VP”) Sharma to manage it. ![V. P. Sharma - World Economic Forum on East Asia 2012 | Flickr](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb3a24bf-ac0e-49ae-8f18-98c77f88e1aa_1024x683.jpg) Mitra Adiperkasa’s first success was bringing Japan’s SOGO department store to Indonesia. And later on, he inked exclusive distribution deals with Starbucks, Zara, Marks & Spencer and Nike. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/19efcf71-f3a7-46b9-8ae0-a2c0471ef247_1248x712.png) The broader Mitra Adiperkasa Group, which runs stores including SOGO, Marks & Spencer, Zara, Starbucks, Krispy Kreme and Sports Station VP Sharma’s strength was securing great locations within Indonesia’s biggest shopping malls. He pushed the company to invest heavily in logistics to ensure that inventory levels were under control. Indonesia’s retail sector benefits from protectionism. Foreign brands cannot easily operate their stores due to stringent regulations: - Smaller stores with a floor area of less than 400 square meters must be 100% owned by local companies. - Mid-sized stores between 400 and 2,000 square meters can only be 33-66% owned by foreign companies and require special licenses as well. - Foreigners can indeed own larger stores above 2,000 square meters, but the availability of such stores within shopping malls is rare. Therefore, foreign brands typically seek local partners, and ideally respectable ones such as Mitra Adiperkasa or Erajaya. Mitra Adiperkasa was listed on what was then known as the Jakarta Stock Exchange in 2004\. After the IPO, VP Sharma saw potential in the sportswear industry and decided to expand its store network within that niche, as well as sign distribution agreements with Nike, Reebok, and others. During the 2008 financial crisis, Mitra Adiperkasa’s sportswear division ended up with excess inventory. It took years to digest, and the company had to employ heavy discounting to clear the inventory. Growth slowed, and Mitra’s brand partners were upset. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7b075281-2d3d-4b71-8ee5-90d1d1e6cc98_1596x948.png) Mitra Adiperkasa’s overall inventory days The problem had been a weak IT system and poor budgeting practices. While Mitra had an SAP system, it didn’t use it correctly across the organization. So in 2015, Mitra Adiperkasa brought in well-regarded private equity company CVC to help modernize its business practices. A new subsidiary, MAP Aktif, was carved out. This subsidiary then borrowed US$114 million from CVC through a loan that would ultimately result in a 30% equity stake in the event of an IPO. ![CVC Capital Partners Guides for Further Growth After Beating Views - WSJ](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8912e1a4-06a6-4ca8-89ae-6692141041f2_700x467.jpg) CVC jumped into it and quickly helped the company modernize: - Average store productivity improved by resizing stores and tailoring the product mix based on the store location - Within the sportswear subsidiary, Mitra introduced private label products and obtained the licensing rights for Airwalk and Diadora, helping boost margins - Mitra also outsourced logistics to third parties to save money and gain flexibility in its operations - Parent Mitra Adiperkasa launched its first-ever loyalty program, “MAP Club”, improving customer loyalty and helping it understand its customers better - Finally, CVC helped Mitra Adiperkasa launch an e-commerce site called MAPeMall, now rebranded as “MAP Club” and connected to the loyalty program MAP Aktif eventually IPO’d on the Jakarta Stock Exchange in 2018, becoming a separately listed entity: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d0443388-2865-4739-a079-105703c8aa11_1768x662.png) The IPO was a success. But after an initial run in the stock price, CVC sold down its 30% stake to just 7.5%. The market reacted negatively to the news. And then came COVID-19. ![About Us – MAP Indonesia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f058aeec-c9d7-43ac-9936-2ab053a3b3f4_1184x500.png) --- # **2\. The original thesis** When I wrote my first in-depth analysis of MAP Aktif back in January 2020, the situation looked grim. Indonesia had introduced large-scale social restrictions back in 2020, causing foot traffic to grind to a halt. MAP Aktif’s revenues dropped by 36% in a single year, and its profits evaporated. While the 2021 performance was better, Indonesia was still under lockdown. But I felt that the underlying story was compelling. Indonesia had a sportswear retail selling space of only 1.3 square meters per 1,000 population. That compares favorably to China’s 10.1 and Singapore’s 11.5\. So I felt that the company had a long runway of growth ahead of it. A Credit Suisse analysis of MAP Aktif’s store productivity confirmed strong unit economics. With a sales per square meter of IDR 31,000 and 13% operating margins, they calculated a return on capital employed of 56%, suggesting a payback period of less than 2 years: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c4db3273-9a48-4940-9bc4-947666e74c37_678x400.png) Source: Credit Suisse At the time, MAP Aktif had 1,121 stores across Indonesia. 70% of those were multi-brand stores such as the Sports Station, Planet Sports, Kidz Station and The Athlete’s Foot. The average reviews for these stores were 4.4 out of 5 on Google, so the customer feedback was positive, almost across the board. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/244d2fd8-4348-4938-9f7e-f5ed4e70ad97_2016x748.png) Out of these, “Sports Station” represented roughly 1/3 of the store count: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b5e4a7b2-9d82-42b9-9b75-d36a4ff0c07e_2120x828.png) It was positioned as a mass-market brand, with prices significantly lower than at MAP Aktif’s other multi-brand store, “Planet Sports”. More than 150 brands were sold in these stores, including Nike, Puma and Adidas. And roughly 40 of these were exclusive to MAP Aktif, meaning that no other retailer in Indonesia was allowed to carry them. The exclusive brand portfolio included Crocs, Ecco, New Balance, Taylor Made, Speedos, Reebok, Skechers, Oshkosh and Oakley. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/efd113c6-77ec-4df2-9bcf-590097320ca9_2106x534.png) Within MAP Aktif, the sportswear segment contributed to 83% of revenues. It also operated leisure shops for brands such as Birkenstock, Clarks, Onitsuka Tiger, and Dr Martens, with revenues from these shops contributing 9% of total revenues. Finally, it operated kids’ stores on behalf of brands such as Lego, Smiggle, and Crocs, contributing 8% of its revenues. Before the COVID-19 pandemic, MAP Aktif had grown its store count by nearly 10% per year. By adding low-single-digit same-store sales, I felt that MAP Aktif could easily become a low-teens grower once Indonesia recovers from the COVID-19 pandemic. MAP Aktif had also begun to expand overseas. Parent Mitra Adiperkasa had injected Planet Sports Philippines and its Thai business into MAP Aktif back in 2020\. The company also had a presence in Vietnam. I saw particular upside in the Philippines, as the sportswear market there is almost as under-penetrated as in Indonesia. I was also positive about MAP Aktif’s management team. Long-time Mitra Adiperkasa employee Michael Capper had helped MAP Aktif list on the Indonesia Stock Exchange, and then served as the CEO of the listed entity. I had a good impression of him, and liked that he had experience working for Reebok, Royal Sporting House and Dr Martens. He was also an avid runner, so I felt that he must empathize with MAP Aktif’s key customer base. Assuming a recovery from the COVID-19 pandemic, I expected MAP Aktif to end up trading at a single-digit P/E, roughly half the pre-COVID average of 18x. It wasn’t all rosy, however. I didn’t like the fact that MAP Aktif never paid out any dividends. I also saw a risk that e-commerce platforms such as Tokopedia and Shopee would erode MAP Aktif’s historical advantage as a necessary partner for foreign brands. Finally, there was a risk that French retailer Decathlon would eventually expand its business across Indonesia. I usually don’t like investing in listed subsidiaries. The line between MAP Aktif and its parent, Mitra Adiperkasa, was fuzzy. They had a close relationship in terms of logistics, e-commerce and the loyalty program. I couldn’t rule out the risk of related party transactions at unfavorable terms. Regardless of these risks, I still felt that MAP Aktif had a bright future ahead of it. COVID-19 wouldn’t last forever. With a strong balance sheet and support from its parent, I thought it would eventually emerge from the crisis even stronger than before. --- # **3\. MAP Aktif’s recovery** And indeed, that’s exactly what happened. After 2021, MAP Aktif staged a recovery that was far ahead of what I had expected. Its revenues are now more than double the pre-COVID level: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b27f9129-554f-44ee-b6f6-ac8da0e0e23e_1744x600.png) A rapid increase in the number of stores supported this explosive growth. Not just in Indonesia, but also in the Philippines and several other countries in the ASEAN region: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4b02acba-64b5-4adf-82d8-d5d9870ec5b4_1726x576.png) And the stock reacted strongly. From 2021 to 2024, the stock price quadrupled. However, the share price has subsequently declined by almost 40%: _This post is for paying subscribers only._ ### Interview with Michael McGaughy URL: https://www.asiancenturystocks.com/interview-with-michael-mcgaughy/ Last updated: 2026-04-15T04:01:03.000Z *Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ``` Table of contents 1. Background & current focus 2. "Minority Report" 3. Typical investor mistakes 4. The Research Alpha Fund 5. Currency risks 6. Nigeria 7. Argentina 8. Sri Lanka 9. Top stock 10. Contact details ``` # 1\. Hi Michael! Thanks for participating. Can you tell us briefly about your background, including your experience living in Asia since the 1980s? Thanks so much for having me on! My journey in Asia began in 1985 as a Yale-China exchange student at the Chinese University of Hong Kong. I was 20 years old, and it was my first real experience outside the US. The approach into Kai Tak airport—so close that we could see what people were eating in their apartments—made me realize how different the world outside my Washington, D.C. suburb could be. It was a life-changing experience for me and my fellow exchange students. After finishing my undergraduate degree, I worked for Chase Manhattan in New York. My friends who stayed in Asia seemed to be doing well and having more fun, so I saved up $1,000, bought a one-way ticket for $400, and returned to Hong Kong with $600 and no credit card debt. It was the start of the first emerging market boom, and firms were looking for native English speakers to write company research. I hustled to get a job at Crosby Securities as a sell-side analyst. ![Crosby](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e57fa1e-8dbb-407d-829c-982673b60814_400x200.jpg) My first assignment in 1989 was covering the Tiananmen protests. I thought I’d be out of work when China virtually closed after that. Luckily, the Indonesian stock market opened that summer, and I was sent to check out stocks in Jakarta. From there, I helped Crosby enter markets opening to foreign investors: Pakistan, India, Sri Lanka, and China. To get up to speed on these, I tracked who owned what and mapped the connections between business families and the government. This turned into several longish reports, a lifelong passion, and now forms the basis of my investment methodology --- # 2\. Your blog “Minority Report” is one of my favorites of all time. Tell us what the blog is about? Which posts are you the most proud of, and which posts would you recommend us to read? Thank you for your compliment! I haven’t posted much since starting the fund, but much of my investment thinking – and other stuff - can be found there. As a sell-side analyst I got used to expressing my opinion, so I suppose I wanted to make some of my non-consensus views public. I also started it out of frustration with the repetitive, negative, and sensationalist tone typical of today’s financial press. I recommend the post on [corporate structure](https://michaelmcgaughy.blogspot.com/2015/10/the-importance-of-structure%5F18.html?ref=asiancenturystocks.com) as the first stop for investors. It’s probably the most boring, but also the most important, IMHO. It describes why it’s important to look at the controlling shareholders’ entire holdings to determine the potential for them to take cash out of the company to the detriment of minority shareholders. Not many do this, but I think it’s vital to understand. The second recommendation is a [long-term comparison between two Indonesian business groups](https://michaelmcgaughy.blogspot.com/2013/08/astra-and-sinar-mas-22-year-perfomance.html?ref=asiancenturystocks.com). Coming out of the 1997-2021 Asian financial crisis, one returned more than 200x, while the other group’s listcos were nearly flat. Researching and writing this greatly influenced the type of investing I do today. It highlights the importance of long-term thinking and choosing companies with a quality history and pedigree. The most enjoyable post to write [compares investing to music styles](https://michaelmcgaughy.blogspot.com/2015/12/music-different-investing-analogy.html?ref=asiancenturystocks.com). Time permitting, I check out local music acts and clubs and visit vinyl and CD shops when I travel. Streaming makes discovering new music more accessible than ever, but nothing beats seeing a local act in their hometown or getting good recommendations from someone who knows the local scene. --- # 3\. What mistakes do you think inexperienced investors in emerging markets typically make? And what do the pros do better? I think that both the pros *and* inexperienced investors make the same mistakes. Far too many treat them like a single, homogenous basket, when each country is unique. Some will break out larger markets like China, India, and Brazil, but very few look deeper and consider places like Indonesia and Turkey on their own merits. Treating each country on a standalone basis is a source of potential alpha, as few seem to be doing this. --- # 4\. Can you tell us about your fund, “Research Alpha”, and the strategy you’ve employed to create a +130% return since its inception (despite a strong USD)? What is your “Trifecta Approach”? Research Alpha is a long-only absolute return fund launched in 2017 at Fusion Wealth Management in Hong Kong. Our “Trifecta Approach” focuses on people, structure, and value. We look for companies controlled and managed by quality people, have corporate structures that align minority and majority shareholder interests, and buy at valuations that look like generational lows. Many times, these occur during a financial crisis. Our research focus on business groups allows us to quickly get up to speed on a new market to take advantage of these dislocations. First is **people**. Management and quality owners are probably the most essential aspects of any business. Major decisions, particularly those regarding capital and resource allocation, are made by those at the top. However, the people behind listed companies are not well-researched. The sell-side can’t do it as they don’t want to tick off corporate finance clients. And most of the buy side is just looking at the numbers, programming an algorithm, or hugging an index. Few look critically at the controlling shareholders, which is another good source of alpha, hence our fund’s name, “Research Alpha.” We ask ourselves questions such as: Are the controlling shareholders good or bad stewards of the company? Do they respect minority shareholder interests, and what’s their track record? Is the company their primary focus, or are they doing other things and not that focused on the listed company? Is their reputation good enough to attract and retain top talent? Second is **structure.** We are very sensitive to the possibility of controlling shareholders extracting cash or something of value from listed companies to the detriment of minority investors. Like our deep dive into people, corporate structure is another thing few look at, but it is core to our investment philosophy and another source of ‘Research Alpha.’ Outside the US, listed companies are often majority-owned and controlled by large families, conglomerates, or business groups. It may be just one of their many assets, so their attention and resources could be focused elsewhere. There’s also the strong possibility that the controlling family will transfer profits and cash from the listed company into their 100% owned and controlled entities. This is stealing from minority shareholders. It is easy to do and tough to prove. For instance, a listed candy company may buy packaging material from the controlling family’s wholly owned packaging company. By controlling both, the family can raise the packaging price to shift cash from the listed company, where they own, say, 30-50%, to their wholly owned entity. Third is **value.** We like to buy at what appear to be generationally low prices. We do this by investing when and where there’s a financial crisis or significant devaluation. This mostly leads us to emerging and frontier markets simply because they’ve been out of favor since we started the fund, we have lots of experience researching and investing in them, and there are more of them. MSCI says there are 23 developed markets. Our database tracks nearly 100 markets, so there are roughly three emerging or frontier markets for every developed one. And there are many markets that our database doesn’t include, such as Uzbekistan’s Republican Stock Exchange and several secondary boards, such as those in Nigeria, Egypt, and Pakistan. We measure value using longer-term indicators such as CAPE or its dividend yield, price to sales, and EV/EBITDA equivalents. These are used for both the overall market and individual stocks and are very helpful during a financial crisis to help us determine long-term value when others see nothing but losses. Another point is that, during a crisis, almost all stocks are good value. This allows us to concentrate on our quality metrics of people and value. We then hold for a long time, reinvest our dividends, and let compounding do its magic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/27d7f4a4-395a-45ed-8f60-f36ac218b5da_1490x734.png) Source: Research Alpha --- # 5\. How do you think about currency risk? How does FX exposure play into your investment decisions? Invert, always invert. We try to take advantage of currency volatility by buying *after* a big devaluation. It’s the significant currency depreciation combined with a meltdown in equity prices that typically makes us interested in a market. At the end of the day, local prices, and by extension earnings and asset prices, tend to change in response to currency changes. Energy and technology are priced in USD and are so crucial to a modern economy that prices need to adjust to the USD rate at some point. If they don’t — usually due to bad policies — standards of living drop and politicians/leaders face pressure to make changes. --- # 6\. You’ve previously mentioned that Nigeria currently offers “the world’s best equity set-up”. How do you expect the future to play out for Nigerian equities? While leaders like Milei in Argentina get more press, Nigeria’s reforms are just as significant. Nigeria today reminds me of Indonesia after the Asian Financial Crisis: it’s also a big and diverse country, equities are very inexpensive, few investors are paying attention, but fundamental reforms are underway that should benefit the country long-term. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce1db12c-a55c-4f36-9e91-a6229b37f30a_1061x707.jpg) Lagos, Nigeria. Source: Getty Images Since President Tinubu was inaugurated about two years ago, Nigeria has seen far-reaching reforms, including freeing the currency, ending petrol subsidies, and deregulating electricity generation and distribution. There are others but just these three are a developmental economist’s wet-dream. More recently, leadership at the large state-owned petroleum company was replaced with directors who have relevant private sector experience. Like many state-owned oil companies, it’s rumored to be very corrupt and with new leadership, there’s a chance it can be improved. There’s also the launch of the massive Dangote refinery, which should end the FX draining practice of exporting crude and importing refined products. It’s big enough to supply all West Africa so the country could start exporting refined products very soon. There’s a reason Aliko Dangote is the richest person in Africa, and I have no doubt that he’s an inspiration to younger Nigerians. Listed companies and the market are reacting to the reforms. After several years of slowing and negative earnings, firms are regaining pricing power and income statements are starting to reflect this. Nigeria’s All Share index is up nearly 18% so far this year despite weak oil prices, Nigeria’s largest export. Local and foreign investors are becoming more active. Foreigners accounted for 32% of turnover in the first four months of the year, nearly triple last year’s participation rate. Finally, one can find very good value there with most companies trading below 10x earnings. Despite rising prices, most stocks are still 70-90% below their all-time USD highs. Our favorite NBFI (non-bank financial institution) is trading at some 3x earnings, has a 5% dividend yield, and is down nearly 70% from its 2008 USD high price. Readers should bear in mind that we’ve been invested in Nigeria since the fund started and it’s been our biggest drag on performance. Thankfully we’re now starting to see the light with many of our shares doubling or more in the last 6-12 months. But doubling after 8 years is not a great return. This is a 9% *gross* CAGR which gets whittled down after all the fees and expenses are included. --- # 7\. I’m curious to hear your thoughts on Argentina. What reforms have Javier Milei undertaken and how has the economy responded to those reforms? The reforms in Argentina have been dramatic and fast-paced. Since taking office in December 2023, the Milei administration has implemented sweeping reforms, including fiscal austerity, massive deregulation, privatization of state companies, and strict monetary policies to curb inflation. As a result, Argentina recently posted its first fiscal surplus in over a decade, inflation has gone down from over 20% per month to 1.5%, and foreign reserves have increased. In April, after nearly six years, strict currency controls were lifted. The economy is expected to rebound to 5.5% growth this year and about 4.5% in 2026. ![Argentina GDP growth fastest since 2022, though lagging forecasts | Reuters](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d122b6b-05de-4fd3-92e0-b10e77520592_1320x862.png) Argentina real GDP growth. Source: Reuters Milei’s approval rating, at around 45%, is the highest ever for an Argentine president at this stage in an election cycle, and his party is expected to perform well in October’s mid-term elections. This means that the current pro-business government may be in a position to solidify and strengthen the reforms. We’ve been invested in Argentina since its last meltdown in 2019 and have done well, with our six-stock portfolio up about 6x. --- # 8\. Can you speak about the changes that are taking place in Sri Lanka, and what companies you think are well-placed to benefit from it? Ironically, Sri Lankan equities were amongst the best performers in the last 12 months because of *less* change than most expected. They initially fell until just before the first post-Rajapaksa elections took place last September. The market was spooked because the leading candidate and eventual winner, Anura Kumara Dissanayake, has a far-left Marxist-Leninist-Communist background. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1755cd6f-c3ef-4784-b340-18cdf101e41f_1024x683.jpg) Anura Kumara Dissanayake. Source: Getty Images Better known by his initials, AKD campaigned on an anti-corruption platform and publicly acknowledged the vital role of private business and entrepreneurs, so he’s certainly not your typical communist. It's the first genuinely new government since independence 76 years ago, and it looks like they’re sticking to their campaign promises. Feedback from a recent trip to Colombo was very positive. Several noted that petty corruption in Colombo is now rare. Officials are not asking for bribes to get things done, and police can’t be paid to look the other way for traffic violations. Businesspeople I met – even those who didn’t vote for him – believe he’s the best person for the job. The positive vibes are backed by good economic news. Business confidence is at a 10-year high, last year’s 5% GDP growth was the highest in seven years, tourist numbers continue to increase, and, after five years, per capita income is back above USD4,000. However, I’m not entirely impressed. The privatization program has been delayed or canceled, and the government still has a heavy hand in the economy. Energy prices are set monthly for the whole country, regional pricing on consumer products is restricted, and the government sets minimum hotel rates for foreigners which can be up to double what locals pay. Despite these challenges, Sri Lankan equities are still good value with many quality companies trading at between 5-10 earnings. --- # 9\. Finally, if you had to put all your family wealth in a single stock in Asia Pacific and keep it for 10 years, which would it be and why? That’s a tough one. Given the solid growth rates and changes in our markets I wouldn’t put all my eggs in one basket. Growth means change, and it's possible that things that look good today may not look so good in one or two years, much less than ten. While Nigeria currently has better value than any Asian market, Sri Lanka and Pakistan both look attractive. Both have increased from what I think are crisis-level valuations but are still good value. The rise of the consumer and higher purchasing power is a good place to invest. In Sri Lanka we like consumer and pharmaceutical companies like [**Hemas Holdings**](https://www.marketwatch.com/investing/stock/hhl.n0000?countrycode=lk&ref=asiancenturystocks.com) and [**Sunshine Holdings**](https://www.marketwatch.com/investing/stock/sun.n0000?countrycode=lk&mod=search%5Fsymbol&ref=asiancenturystocks.com). Wood coatings producer [**JAT Holdings**](https://www.marketwatch.com/investing/stock/jat.n0000?countrycode=lk&mod=search%5Fsymbol&ref=asiancenturystocks.com) could be a good long-term bet. In Pakistan [**Lucky Cement**](https://www.marketwatch.com/investing/stock/luck?countrycode=pk&mod=search%5Fsymbol&ref=asiancenturystocks.com) looks to be good value. In addition to cement, it assembles Samsung phones and Kia cars and has a majority stake in one of the country’s largest fertilizer and chemical businesses. They allocate capital very well. We also like [**Indus Motors**](https://dps.psx.com.pk/company/INDU?ref=asiancenturystocks.com), which has the Toyota business in Pakistan. Closer to home, Hong Kong stocks are all over my value screens, with many trading at very attractive valuations. Also, select counters in SE Asia are also looking very good. They are not at the widespread blood-in-the-streets valuations that generally occur during a financial crisis, but there are some very enticing situations, as you continue to highlight in the excellent Asian Century Stocks Substack. --- # 10\. How can people contact you or follow what you do at Fusion Wealth Management? People can follow me on X (formerly Twitter) [@MichaelMcGaughy](https://x.com/MichaelMcGaughy?ref=asiancenturystocks.com), or connect with me on [LinkedIn](https://www.linkedin.com/in/michael-mcgaughy-caia-647653/?ref=asiancenturystocks.com). My blog can be found [here](https://michaelmcgaughy.blogspot.com/?ref=asiancenturystocks.com). I’m always happy to connect with fellow investors and music lovers interested in off-the-beaten-path ideas. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Thanks for reading Asian Century Stocks. Consider becoming a subscriber! You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure — all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Portfolio update June 2025 URL: https://www.asiancenturystocks.com/portfolio-update-june-2025/ Last updated: 2026-06-04T10:51:23.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure, not a recommendation to buy or sell stocks.* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/74ab15d0-f75b-44bb-a699-372a30b9273e_2059x1050.jpg) ``` Table of contents 1. Portfolio update 2. Update on my key holdings 3. My plans going forward ``` # **Portfolio update** The portfolio’s value increased again in June 2025, up +2.1% month-on-month. Since the portfolio’s inception in October 2021, the value has now increased by +46.7%, equivalent to a +10.9% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f2fa4f6a-7b78-4d46-ab0f-8e7bb3e2a4c3_1268x426.png) This year, Japanese SaaS company [**Poper**](https://www.asiancenturystocks.com/poper-5134-jp/)’s share price has gone up in an almost parabolic curve. It finally broke in mid-June. Japanese retail investors on Twitter have started to write about the name more frequently. In a Q&A with CEO Shingo Kurihara, investors asked a whopping 79 questions. That makes me question whether the stock is still “undiscovered”. That said, Poper’s last result exceeded expectations with +45% revenue growth and strong operating margins. I’m also seeing some life in the share price of [**Philippine Stock Exchange**](https://www.asiancenturystocks.com/the-philippine-stock-exchange-pse/)**.** Sell-side is warming up to the idea that trading volumes will ramp up once the new CMEPA law goes into effect on 1 July 2025\. With CMEPA, stock transaction taxes in the Philippines will drop from 60 basis points to 10\. Many investors now think that this will be positive for both volumes and prices of companies listed on the PSE. Otherwise, the month was uneventful. We saw a decent result from [**Pacific Textiles**](https://www.asiancenturystocks.com/pacific-textiles-1382-hk/) as the new Nam Dinh factory continues to ramp up. Management’s latest guidance is positive, yet the share price remains in the doldrums. Part of the issue could be a fear that Trump’s tariffs on Vietnamese textile exports are going to hit them. But Vietnam is not the only country faced with tariffs, and textiles are cheap relative to the end-customer price for clothing. I don’t think we’re going to see much demand destruction, even at the tariff rates announced in April. The main detractor from performance came from Thai cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/). Thailand is currently in a bear market, and we’re seeing selling almost across the board. Foreign fund flows continue to be negative. Another reason for the decline is the decline in the company’s dividend payouts. Major has been buying back shares, but the share buyback has been put on hold. On the positive side, the Thai box office has surprised to the upside recently. Hollywood is finally emerging from its post-COVID slumber. In any case, here’s the latest portfolio as of 27 June 2025: _This post is for paying subscribers only._ ### Interview with Pon Van Compernolle URL: https://www.asiancenturystocks.com/interview-with-pon-van-compernolle/ Last updated: 2025-06-24T18:35:55.000Z Estimated reading time: 12 minutes _This post is for paying subscribers only._ ### Links June 2025 URL: https://www.asiancenturystocks.com/links-june-2025/ Last updated: 2025-06-18T07:44:57.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Didi Global (DIDIY US) URL: https://www.asiancenturystocks.com/didi-global-didiy-us/ Last updated: 2026-07-31T02:01:43.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Didi Global at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Didi Global**](https://finance.yahoo.com/quote/DIDIY/?ref=asiancenturystocks.com) *(DIDIY US — US$23 billion)* is China’s largest ride-hailing company. You can think of Didi as the “Uber of China.” Open the app and specify a destination, and Didi will then match you with a driver to take you there. Payment is done seamlessly via the app. Didi has been an incredible success story. It has almost 700 million users in China and beyond, with a significant presence in Brazil and Mexico. Supporting these markets are roughly 25 million drivers, many working full time. The story began in 2012\. An Alibaba salesman named Cheng Wei teamed up with a colleague to provide ride-hailing services in Beijing. It took them two years to launch the first version of the app. From 2014 onwards, Cheng Wei and his ex-Goldman Sachs partner Jean Liu raised US$20 billion to consolidate the industry, first acquiring Tencent-backed competitor Kuaidi Dache and then Uber’s business in China. Then came the government’s crackdown on Chinese tech companies. Didi had managed to IPO on the New York Stock Exchange (NYSE) in 2021, raising US$4.4 billion. However, just days after the IPO, China’s cybersecurity regulator ordered all Chinese app stores to delete Didi’s app. And in the following 18 months, Didi’s market share dropped from 90% to 70%. The Chinese government also pressured Didi to delist from the NYSE. Today, Didi trades over the counter on the US Pink Sheets market, which means lower reporting requirements. Didi doesn’t offer earnings calls with investors. And it issues press releases instead of quarterly reports. That said, Didi’s market share has recovered nicely since 2023\. It’s doing well against new competitors such as Alibaba’s and Meituan’s aggregator apps. These frequently offer lower prices but a weaker user experience. Didi’s focus has shifted from gaining market share to monetizing the business. Margins have continued to surprise on the upside in the past few years. Didi sold its EV subsidiary to Xpeng, closed its loss-making food delivery business, and exited several unprofitable ventures overseas. He seems to be doing everything right. On my numbers, Didi trades at 12x forward EV/EBITDA — a large discount to Uber’s 19x. And there’s plenty of upside to Didi’s margins. With relatively modest assumptions of 6-8% top-line growth and a 6% EBITA margin by 2029, I get to a P/E ratio of 8.4x and a clean balance sheet. My sum-of-the-parts pins the intrinsic value at US$13.5/share, way above the current share price of US$5.0. I’ve been skeptical of Didi and Grab in the past. They’ve both spent billions of dollars to gain their market positions. And I’ve felt that switching costs for drivers are low. Why can’t drivers simply switch to another app? But I’ve changed my mind on that point. I still think spending all those billions of dollars was wasteful. But today, it’s clear that Uber’s, Grab’s and Didi’s market positions are stable. Riders continue to use their favorite ride-hailing apps. And drivers also seem to stick with the incumbents. We’re not seeing big market share movements in any of these markets. So, my base case is for Didi to maintain its market share in Mainland China and gradually reach Uber’s current profit margins. Didi handles 16 billion rides per year, and Uber 11 billion. Yet Didi’s current market cap is only 1/8 that of Uber. That shows you Didi's potential if it ever manages to monetize its platform fully. Another catalyst will be Didi’s “homecoming” to the Hong Kong Stock Exchange. In late 2024, Didi said it would list in Hong Kong but most likely without raising additional capital. If Didi gains a Hong Kong listing, it will most likely become part of the Hang Seng Index and probably catch the eye of institutional investors. I also think that sell-side analysts will be compelled to start writing about the name again. We’re still waiting for Didi to receive clearance from China’s cybersecurity regulator. Once it gets that clearance, I believe a Hong Kong listing will happen within six to nine months. We’ll just have to wait and see. Thank you for reading. *Michael* Further material: - A 2017 Acquired Podcast episode discussing [Didi’s origin story](https://open.spotify.com/episode/6T4VZObOyMJkrhFVbvgBPg?si=46080d61afbd4ab8&ref=asiancenturystocks.com) - The best Substack post on Didi thus far: [Theoria Substack](https://theoria137.substack.com/p/didi-global#footnote-16-163022260) **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-fc3/ Last updated: 2025-06-02T01:49:08.000Z _This post is for subscribers only._ ### Haw Par (HPAR SP) — 2025 update URL: https://www.asiancenturystocks.com/haw-par-hpar-sp-2025-update/ Last updated: 2025-11-19T07:20:21.000Z Estimated reading time: 16 minutes _This post is for paying subscribers only._ ### Portfolio review May 2025 URL: https://www.asiancenturystocks.com/portfolio-review-may-2025/ Last updated: 2026-06-04T10:52:18.000Z Estimated reading time: 22 minutes _This post is for paying subscribers only._ ### Unlock the full Asian Century Stocks experience URL: https://www.asiancenturystocks.com/unlock-the-full-asian-century-stocks/ Last updated: 2025-05-27T12:03:34.000Z Here's what you're missing _This post is for subscribers only._ ### This newsletter is now on Ghost URL: https://www.asiancenturystocks.com/this-newsletter-is-now-on-ghost/ Last updated: 2025-10-01T03:03:51.000Z ****Summary**: Asian Century Stocks has moved from Substack to another platform called Ghost. You don't have to do anything and your experience will be almost exactly the same as before. New posts will delivered via email and available on [asiancenturystocks.com](https://www.asiancenturystocks.com/). The only difference is that you won't be able to read posts via the Substack app. To log in, click "Sign in", enter your email and you'll get a login link via email. Why did I move the publication to Ghost? Because Substack has introduced in-app payments with fees of 40%. I was unable to turn these payments off. The new website on Ghost looks great and is blazing fast. I've also invested in resources that will allow me to generate even better content in the future. So I hope you'll enjoy the new and upgraded version of Asian Century Stocks. Thank you for your support! I started Asian Century Stocks in April 2021, more than four years ago. Since then, it's always been hosted on the Substack platform. The decision to work with Substack has served the publication well, especially in its early years. But Substack is no longer the best choice for serious publications. So from today onwards, Asian Century Stocks will be hosted on the newsletter platform Ghost. --- # Substack's promise I quit my previous job in April 2021 with the dream of making a living as a writer online. I had played around with a template on Substack and then renamed it Asian Century Stocks to emphasize my focus on Asian equities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-5-1.png) The original Asian Century Stocks launch tweet, dated 7 April 2021 At the time, I was excited about Substack. Readers were thirsty for longer-form content after years of scrolling social media feeds. Substack made payments easy. And that meant that you could finally get paid for writing about stocks. One of the pivotal moments for me was when Jason Calacanis interviewed Substack's founder, Chris Best, on the show "This Week in Startups": During this interview, Chris expressed a positive view about email marketing and the independence it brings to publishers: > "... the last place where you can have a **direct channel with your audience** that's not controlled by one of the major like one of those Google Facebook Twitter" His message resonated with me. I felt that Substack would enable me to form a direct relationship with my readers, without relying on larger platforms like Facebook or Twitter. Chris promised a future where consumers would be in greater control over what they consume. No longer did we have to rely on social media feeds designed to make you addicted: > "email newsletters and podcasts and especially paid content like this is **allowing people to reclaim control of their own attention** which has been kind of like voluntarily stolen from them by these algorithmic feeds that they've become addicted to" I thought that was great. Finally, we could be in control of our own time again. Finally, Chris argued that with Substack taking a clean 10% of writer revenues, our interests were fully aligned. The only way for Substack to thrive was for its writers to thrive. Soon after I began writing on Substack, I became one of eleven writers awarded a [Substack Fellowship](https://on.substack.com/p/substack-grow-fellowship). These fellowships were given to writers based on: > "\[the\] clarity and insight of their publications, their ability to inspire new writers, and their appetite for community engagement" The fellowship was incredibly flattering. In addition to US$10,000 in prize money, Substack also helped promote my publication, including through [an interview](https://on.substack.com/p/grow-series-11-michael-fritzell) that showed up on one of Substack's main publicity channels. To put it simply, Substack was supportive of its writers. And I could see the result in the growth of my publication. Within the first year, the number of paid subscribers hit 262, helping the publication reach escape velocity. I could finally afford to pay my rent, using Substack income alone. It was an incredible feeling. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-2.png) --- # The reality In 2021, Substack raised US$65 million from a consortium of investors led by Andreessen Horowitz as part of its Series B funding round. After this capital raise, I noticed a gradual shift in the company's strategy. In my view, Substack moved away from championing individual creators towards building a platform of its own. The first move in this direction was the "Substack Reader" app. This app had a feed of posts in a chronological order, as well as a search function that allowed users to find new publications: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/data-src-image-2769ba6e-1bb7-4416-aa50-1e8b2ef83d58-1.png) Initially, I thought the Substack app was a great idea. It resolved the issue of emails ending up in Gmail's spam or promotions folders, and it also addressed the issue of emails being cut off due to email size limits. The app helped publications get discovered by readers who hadn't yet noticed them. And within the app, I could now offer videos and reader polls. Substack promoted the app, stating that creators could now build their own mini media empires – all within the app. However, the app slowly morphed into something entirely different - becoming more of the type of platform that Chris Best had warned us about in his 2020 interview. For example, the Substack app soon introduced an algorithmic feed for the publications that readers were subscribed to: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-3-1.png) I could no longer rely on the app to actually display the posts I had written for you. Some paid subscribers told me they hadn't seen my posts in months. And so I was forced to write towards the algorithm, guessing what would help my posts reach the top of this new "Priority" inbox feed. Next came the "Substack Notes" social media feature. It was set up shortly after a public spat with Twitter's Elon Musk, perhaps prompting Substack to realize it needed a social media platform of its own. In theory, a Twitter clone within the Substack app might help creators get noticed. I found that the loudest voices often took up the most space in the Substack Notes feed. And with the social media feature becoming the default tab in the app, readers paid even less attention to the posts they actually paid for. Another problem was Substack's "recommendations" feature. This feature allows Asian Century Stocks to recommend other publications. And vice versa. Substack's platform ambitions were evident here, too. Instead of being a passive feature helping readers find new publications, Substack nudged readers to subscribe to as many publications as possible. Here's how it works: when you sign up for one publication, Substack will ask you to follow x number of additional people and subscribe to four publications instead of one. Many readers click "Continue" without giving it much thought. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/data-src-image-405904e0-7ec0-44af-a673-5b7fd8633ae1-1.png) Most Substack readers click "Continue" without reading the top part, and therefore end up subscribing to 3 additional publications This type of nudging caused our mailing lists to grow rapidly, but readers quickly felt overwhelmed by the number of emails in their inboxes. In the past, authors would create their own publications and send posts from those. But today, Substack is now pushing authors to publish posts directly from their profiles. For example, the following author – a brilliant former buy-side analyst – thought she had set up a Substack called "Sector Stories" when in reality, she had just set up a personal profile with that same name. Her publication doesn't have a website, so her articles are "stuck" within the app: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-11-1.png) It seems that Substack's vision is to create a platform where readers follow authors, and authors publish posts directly from their profiles. Instead of submitting your email to them, you follow them within the app. And voilà - everyone is suddenly stuck within the Substack ecosystem. --- # The final straw ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-8-1.png) On 18 August 2025, Substack announced that it had enabled payments within its app. Readers on the Substack app can now subscribe to any publication within it. Since the payments are made via the iOS App Store, the total fee is now 40%. With a price of US$350/year, Asian Century Stocks would therefore have to raise its price to US$460 to break even. I asked my Twitter followers how they felt about this set-up, and they almost universally [expressed dismay](https://x.com/MikeFritzell/status/1958135059900502522?ref=asiancenturystocks.com). Why would anyone pay an additional US$110 per year to subscribe via the app instead of using a browser? What's worse is that if a reader subscribes via the app, I can't issue refunds, cancel the subscription, or transfer it to another platform. To Substack's credit, the platform is straightforward to use. I love Substack's video capabilities, since they allow me to upload videos with ease. Over the past four years, Substack has enabled me to dedicate over 95% of my time to research, which is precisely how I want to spend my time. However, at this point, it's clear what Substack is trying to do. They want to create the next social media platform, where readers can "follow" and pay writers directly within the app, thereby providing a complete lock-in for publishers on the platform. Substack might be making the right decision for itself. But I don't think it's in your interest to pay 40% more for the exact same content as you'd receive in an email. So, I've decided to move back to basics. --- # The future of Asian Century Stocks ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image.png) The new landing page. Click "Take me to the site" if you want to go to the site directly. From today onwards, Asian Century Stocks will be on the Ghost platform. This platform was developed by an Englishman called [John O'Nolan](https://x.com/JohnONolan?ref=asiancenturystocks.com) and a half dozen people at the Ghost Foundation. John is sincere and doesn't have the platform ambitions that Substack has. The Ghost Foundation hasn't taken any venture capital funding, is self-sustaining and completely independent from any of the major platforms. So I think it will be the perfect home for Asian Century Stocks. Your experience will be almost the same as before: - The website address remains the same: [asiancenturystocks.com](https://www.asiancenturystocks.com/). - The new website has been created by the exceptional Marc Perel and his team at [Obox](https://oboxthemes.com/?ref=asiancenturystocks.com) in Cape Town, South Africa. I think it looks great. - The Ghost platform is blazing fast and, in my view, even more intuitive than Substack's. In fact, Ghost's software is so good that some of Substack's own code was actually [copied from Ghost](https://x.com/johnonolan/status/1602330392127741962?s=46&ref=asiancenturystocks.com). - Your subscription is processed through the US payment company Stripe. That has always been the case, even on Substack. So nothing will change on that front. - From now onwards, you will receive all future posts in your email inbox. They won't show up in Substack's app. If you're having trouble receiving emails from Asian Century Stocks, check your "spam" or "promotions" folders and then drag them over to your inbox to teach your email client that they're not spam. - My posts will resemble those I created on the Substack platform. And my PowerPoint presentations will be identical. - It will take a few days for all the videos to be uploaded to the new website. So please be patient. The new website menu now looks like this: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-1.png) Click "Search" to look through all previous posts. Click "Log In" to view the paid content, and you'll then receive an email with a login link. Once you're logged in, there will be a button that says "Upgrade", allowing you to become a premium subscriber. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-3.png) Click the "Profile" button (the outline of a person) at the top right corner of your screen to see your personal account settings, including your subscription details. The links in the top middle are almost the same as before, except that I've renamed "Home" to "**Latest**" and "Table of contents" to "**Library**". You'll also notice that I've added tags to the second column page of the main page. These tags enable you to access posts from specific countries, such as "Japan" or "Hong Kong". ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-4-1.png) To make sure you are satisfied with my content, every email will now finish with the following three buttons: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-15.png) If you enjoyed a particular post, click "**More like this**". If you didn't, click "**Less like this**". This feedback will help me understand what content you enjoy and what you don't. Since I will be saving money during the transition (roughly 8% of total revenues), I've signed up for a subscription to the London-based institutional data analytics platform [Smart Insider](https://www.smartinsider.com/?ref=asiancenturystocks.com). It's a fantastic service and will allow me to track insider transactions and share buybacks across Asia. I plan to send out monthly posts highlighting the top insider purchases that occurred during a particular month. I'll continue to write about 20+ companies per year, as well as monthly portfolio updates. I've received feedback that you want to see more thematic reports, more storytelling. So I'll take your advice and write more about general-interest topics. I've also decided to move the Asian Century Stocks community from Telegram to Slack, as it'll be better suited for everyday chat. I'll be there daily, talking about companies in Asia. You'll get access to the community once you've become a paid subscriber: [you can find the link the Slack group here](https://www.asiancenturystocks.com/the-new-acs-slack-community/). I will also send out an invite link at 12:00 Singapore time on Thursday 2 October 2025 to all paid subscribers. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/09/image-14.png)](https://www.asiancenturystocks.com/the-new-acs-slack-community/) The new Asian Century Stocks community on Slack I'm grateful for everything that Substack has done for its writers. But it's time to move on. And I think Ghost will be the perfect new home for the publication. If you're not a premium subscriber yet, I encourage you to take the leap and join the 560 subscribers who are actively supporting the newsletter. You'll get smarter about equities in Asia and receive over 20 deep dives annually. To celebrate the launch, I'm offering you a [20% discount for the first year](https://www.asiancenturystocks.com/20-discount): [Claim your discount!](https://www.asiancenturystocks.com/20-discount) Thank you for trying Asian Century Stocks, and I hope you enjoy the content. Best regards, Michael Fritzell ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-71d/ Last updated: 2025-05-26T01:51:44.000Z _This post is for subscribers only._ ### Kawai Musical Instruments (7952 JP) URL: https://www.asiancenturystocks.com/kawai-musical-instruments-7952-jp/ Last updated: 2026-07-31T02:01:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Kawai Musical Instruments at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Kawai Musical Instruments Manufacturing**](https://finance.yahoo.com/quote/7952.T/?ref=asiancenturystocks.com) *(7952 JP — US$153 million)* is one of Japan’s largest piano makers. It’s famous for its higher-end Shigeru Kawai pianos, which are used in concert halls around the world. These pianos are close to Steinways in terms of quality and can cost up to US$240,000\. But Kawai also sells mid-priced pianos for younger learners and enthusiasts in 80 countries around the world. In addition, Kawai runs music schools with over 4,000 classrooms and 100,000 students attending each year. It also has a materials business, using what it learnt in piano manufacturing to serve automaker and semiconductor customers. And it also has a number of smaller businesses, including music software, health equipment manufacturing, insurance agents, etc. The story began in 1927 when Koichi Kawai was an apprentice to Torakusu Yamaha, the founder of Kawai’s larger competitor, Yamaha. After another firm took over Yamaha, Koichi felt it was time to start a business of his own. And for the next few decades, he made handcrafted pianos to the highest possible standards. In the 1950s, his son Shigeru Kawai took the business to the next level. He took Kawai pianos to the average consumer through mass production techniques. He also innovated in terms of material science, improving the performance of Kawai’s piano action mechanisms through ABS plastics and later carbon. After Shigeru Kawai stepped down in 1989, the business started to stagnate. Of course, this was at the top of Japan’s bubble economy. However, Kawai also lost market share against Yamaha, and its brand name is not particularly well-known outside the enthusiast segment. Kawai enjoyed a boom during the COVID-19 pandemic, but that was short-lived. The post-COVID normalization was exacerbated by weak demand in China, which is suffering from falling property prices and changes in regulation that have made households less willing to spend on music education. In 2024, the former president’s son-in-law, Kentaro Kawai, took over as CEO. And I think he will be a game-changer for the business. At 47 years old, he’s young enough to take risks. But at the same time, he has an excellent background for the job. He studied economics at Kobe University and then spent many years in the insurance industry, where he met his future wife. At the time, he didn’t know she was Shigeru Kawai's granddaughter. When he travelled to Hamamatsu to meet her family, Shigeru convinced him to join the family business. Kentaro spent his first year on the factory floor learning how to make pianos from the ground up. Later in his career, he’s had roles in strategy and investor relations. One of Kentaro’s first initiatives has been to devise a new 10-year plan. This was a break from the past 3-year plans, suggesting that Kentaro’s thinking was much more long-term and strategic in nature. His new FY2035 financial targets are aggressive. He wants to achieve JPY 130 billion in revenues, JPY 15 billion in operating profit and a 16% return on equity. And that’s for a company with an enterprise value of just JPY 17 billion. To achieve this, Kentaro envisions moving the Shigeru Kawai brand to the absolute top in terms of quality. By cementing Kawai’s reputation as a top piano maker, it will produce digital and hybrid pianos for the mass market. These will have the feel of concert pianos but at a lower cost and with added conveniences such as recording features, headphone jacks, etc. Kentaro also wants to shift to digital marketing on YouTube and social media. And Kentaro is adamant about hiring based on merit — not age or experience, as is common in Japan. Kawai is about to become a meritocracy. Today, Kawai trades at 0.49x book, with a clean balance sheet and a large net cash position. If the company gets anywhere near its 16% return on equity target, the stock will end up trading at a low-single-digit P/E. I project a 7.5x P/E by FY2028, below its pre-COVID trading range of 10x to 15x. With a new total payout ratio of above 50% of profits (dividends + share buybacks), I think we can expect a mid- to high-single-digit dividend yield. In the next three years alone, Kentaro has promised at least JPY 6 billion of capital returns, equivalent to 27% of the current market cap. So is Kentaro’s plan realistic? I happen to think it is. He comes from a finance background, and should realize that better capital allocation alone can probably increase the return on equity to much higher levels. I also like his strategic initiatives. Kawai has hired Ogilvy to improve its brand and seems to be moving towards influencer marketing. That’s exactly what the brand needs. I don’t like Kawai’s existing poison pill, which protects management from hostile takeovers. I also wish Kentaro owned more shares, perhaps through a more generous stock option program. But at least we now have Murakami and Hibiki Path Advisors in the shareholder register, and they’re both pushing for change. So, there’s much to be positive about. Now, we just need to be patient enough to allow Kentaro’s ambitious plan to be implemented over the next few years. Thank you for reading. *Michael* Further material: - Kawai’s March 2025 [Mid-Term Plan](https://www.asiancenturystocks.com/content/files/ir/setsumei/2025/20250319%5F2025chukei%5Fe.pdf) - Hibiki Path Advisors’ May 2023 [Letter to Kawai](https://www.hibiki-path-advisors.com/en/message/2023/post-3372/?ref=asiancenturystocks.com) **NOTE! This was just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Links May 2025 URL: https://www.asiancenturystocks.com/links-may-2025/ Last updated: 2025-05-21T04:00:16.000Z 10 write-ups, 10 articles and 10 podcasts _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-a9c/ Last updated: 2025-05-19T02:58:44.000Z _This post is for subscribers only._ ### Hidden champions of Malaysia URL: https://www.asiancenturystocks.com/hidden-champions-of-malaysia/ Last updated: 2025-10-06T12:54:53.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fe987134-a250-4569-a15d-1f0c798876d7_2001x1499.jpg) Malaysia’s capital, Kuala Lumpur. Source: Getty Images # Summary - Malaysia is a small economy in Southeast Asia with a population of 36 million people. - I think it’s underrated in many ways: it has a dynamic export sector, excellent disclosures, strong corporate governance practices, English disclosures and trading access to 1,000 stocks via Interactive Brokers - I’ve gone through the entire list of publicly listed companies with more than US$50 million in market cap and picked out 25 companies that I consider to be hidden champions. These operate within the healthcare, finance, consumer, tech industries and more. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Last year, Interactive Brokers enabled access to Malaysian equities. So if you have a brokerage account with them, you can now buy and sell the \~1,000 stocks listed on the Bursa Malaysia. That’s why I think it’s a good time to dig into the Malaysian market. Over the past two years, I’ve searched for [Hidden Champions](https://www.amazon.com/Hidden-Champions-Twenty-First-Century-Strategies/dp/0387981462/ref=sr%5F1%5F1?crid=SQ8NDCXHBN7U&dib=eyJ2IjoiMSJ9.F3ZGom-nvoWdNk5q12kbkaysGR13zBmcgI%5F8uYik8Ignq8a7i1Ze8Py3B-BoDBb7-mnC2nQHHJwFKLcHJIMoxTm9JSfu6l8nX3Ws9itlpXw.etF52hd12lxb01WwYT8wjW3TMiH64IpY0HsfHyETT8g&dib%5Ftag=se&keywords=Hidden+Champions+of+the+Twenty-First+Century&qid=1747442037&sprefix=%2Caps%2C296&sr=8-1&ref=asiancenturystocks.com) in each of Asia’s markets, including [Taiwan](https://www.asiancenturystocks.com/hidden-champions-of-taiwan/), [Indian ADRs/GDRs](https://www.asiancenturystocks.com/hidden-champions-among-indias-adrsgdrs/), [Chinese ADRs](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/), [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/) and [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/). Today, I’ll see whether I can do the same for Malaysia — to see whether I can find companies that fit the profile of being long-term compounders. In other words, companies that dominate their niches and are able to compound their capital at a high return on equity. I’ll pay zero attention to share prices, so don't take the following discussion as investment advice — I’m simply trying to identify hidden champions and nothing more. ``` Table of contents: 1. A top-down view 2. Screening for candidates 3. Hidden champions of Malaysia 4. Conclusion ``` --- # 1\. A top-down view ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0b37e3f7-c269-4662-81fc-832cf50ce4b9_1082x1134.png) Let me first give a brief introduction to Malaysia. If you’re already familiar, you can skip to section to. The country is divided into two parts: - **Peninsular Malaysia**, just south of Thailand and north of Singapore. Its capital city Kuala Lumpur in peninsular Malaysia, as are several major cities such as Georgetown, Malacca and Johor Bahru. - **East Malaysia,** which consists of two states on the northern part of Borneo, is a popular tourist destination. People have been living in Malaysia for at least 40,000 years. But current-day Malays came from southwestern China and the Mekong River Delta about 10,000 years ago. Indian and Chinese traders arrived around 2,000 years ago. In the 12th century, traders from the Middle East brought with them Islam, which is now the state religion. Some of Malaysia’s key territories were run by British from the 19th century until independence in 1957\. The British brought the English language, and the Malaysian business community continues to speak English as a lingua franca. Financial disclosures are all in English. And the country has a common law legal system with decent protections for minority investors. Four parts of Malaysia were direct British colonies: Penang, Dinding, Malacca and Singapore, known as the Straits Settlements. But the independent Federated Malay States were also under the protectorate of the British Empire, and heavily influenced by it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/561fa43c-5c01-4273-986f-84aa7a88a598_330x355.png) Britain’s Straits Settlements and the Federated Malay States, which were under the protectorate of Britain Malaysia is clearly multicultural. According to the 2020 census, 67% are Malays, 25% are Chinese and 7% Indians. The indigenous population, which includes Malays, are often referred to as “Bumiputera”, meaning native inhabitants. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9b6b947c-f28f-45f5-8794-5bcdf5a0985e_2164x756.png) It’s a divided society. The government has long considered the Bumiputera population to be lagging behind. To rectify the situation, a variety of affirmative action policies have been introduced, including preferential access to government contracts, preferential access to jobs in state-owned enterprises, reserved spots in universities, better access to loans, etc. Malaysia has a dynamic economy, with a host of export companies in Penang and the Klang Valley. The GDP/capita is about US$11,000 per year, similar to China’s. So what are Malaysia’s competitive advantages? In my view, one major advantage is proximity to manufacturing supply chains in East Asia. Ships carrying manufactured goods from Asia tend to pass through the Malacca Strait, right next to. Malaysia. For example, semiconductor chips will typically be shipped from Southern China or Taiwan to Malaysia for testing and packaging before transport to the rest of the world. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d1179f0e-fd9f-48cf-8c12-d2086e240c77_1312x784.png) Increase in light goods manufacturing activity since 1990\. Source: Emerging Advisors Another advantage is the climate, enabling highly productive oil palm plantations and rubber plantations. A medical glove industry has emerged, with workers imported from Bangladesh and India, thanks to permissive visa schemes. There’s also a thriving oil & gas sector thanks to discoveries of resources in the Gulf of Thailand and offshore Borneo. Finally, it’s an easy place to do business. Malaysia is an English speaking country with a relatively educated population. There’s a Chinese diaspora able to communicate with their counterparts in Mainland China or Taiwan. Taxes are low. The protection of intellectual property is stronger than many other emerging markets. The infrastructure is decent. And as a Muslim country, Kuala Lumpur is well placed to serve the Muslim world with Sharia-compliant banking services. As I’ve argued in the past, the currency has been incredibly weak, with the Malaysian Ringgit trading at right about its post-Asian Financial Crisis lows in terms of the real effective exchange rate. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e0d1b47c-5913-498f-a863-a71d91eeaab5_2616x912.png) The implication is that Malaysian labor costs are competitive. When travelling from Singapore to Malaysia, you can feel how cheap the currency is. Many Singaporeans retire in Malaysia, given the lower costs and similar culture. When it comes to the stock market, the Malaysian and Singapore stock exchanges used to be run as a single entity before being split off in 1973\. The aggregate market cap for Bursa Malaysia is about US$400 billion, close to that of Singapore: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4f90b404-0095-4eb2-8eae-d656d146bd9d_1766x800.png) Out of roughly 1,000 stocks, only 80 or so are above US$1 billion in market cap. So it’s a small and relatively illiquid market. Perfect for retail investors, in my view. The most popular index is the [FTSE Bursa Malaysia Kuala Lumpur Composite Index](https://finance.yahoo.com/quote/%5EKLSE/?ref=asiancenturystocks.com). It has rebounded nicely since 2023 and is now trading at a current-year P/E multiple of 14.3x. A P/E of 14.3x is not particularly compelling in relation to the index’s 5-year average return on equity of 9.9%. Several other Asian countries such as Taiwan, India and the Vietnam show much higher return on equity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1edf57be-07db-4c10-9ab0-0bdebc46eaac_1864x638.png) In terms of the sector split, it’s more diversified than many other emerging markets, with plenty of industrials, consumer stocks and even tech companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/50d94b38-7123-4636-806e-1348e0b3a13d_1290x470.png) The largest companies in each sector are the following: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f64b48a0-f444-45b2-a24c-94c98cc86ef7_1306x528.png) So to summarize, I think Malaysia is a straightforward market to invest in. The analyst coverage is excellent, even for smaller companies. All disclosures are in English. You can buy and sell stocks using Interactive Brokers. All disclosures are in English. And I also think that corporate governance practices are relatively strong, at least in relation to the broader emerging market universe. So, definitely pay attention to Malaysia if you want to invest in the region. --- # 2\. Screening for candidates Let’s dig deeper into individual companies that exhibit “hidden champion” like characteristics, including: - High historical average return on equity - High growth in earnings per share - Strong share price performance Here are the top ten companies in Malaysia in terms of a *high return on equity*: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e7fa2793-15c1-4579-aa77-817a190e52a9_2284x772.png) Brewers [**Carlsberg Brewery Malaysia**](https://finance.yahoo.com/quote/2836.KL/?ref=asiancenturystocks.com) and [**Heineken Malaysia**](https://finance.yahoo.com/quote/3255.KL/?ref=asiancenturystocks.com) both stand out. While Muslims generally do not drink alcohol, roughly a third of the population is a potential target customer of the two brewers. [**Oriental Kopi**](https://finance.yahoo.com/quote/0338.KL/?ref=asiancenturystocks.com) is a Malaysian restaurant and coffee chain with great customer reviews. [**AirAsia X**](https://finance.yahoo.com/quote/5238.KL/?ref=asiancenturystocks.com) is the country’s leading low-cost airline that has debt, though it has been criticized for its consolidation accounting. [**Avangaad**](https://finance.yahoo.com/quote/5259.KL/?ref=asiancenturystocks.com) own oil tankers, floating storage units and support vessels. [**Reach Ten**](https://www.wsj.com/market-data/quotes/my/xkls/5332?ref=asiancenturystocks.com) is a new IPO owning telecom towers, a fiber optical network and a satellite Internet service. [**Nestle Malaysia**](https://finance.yahoo.com/quote/4707.KL/?ref=asiancenturystocks.com) is the local subsidiary of Nestle that sells the chocolate beverage Milo, instant noodle product Maggi, Kitkat and several other food products. [**Northern Solar**](https://finance.yahoo.com/quote/0340.KL/?ref=asiancenturystocks.com) installs solar panels for businesses, factories and homes. [**Ajinomoto Malaysia**](https://finance.yahoo.com/quote/2658.KL/?ref=asiancenturystocks.com) is a subsidiary of Japan’s MSG giant Ajinomoto. Finally, [**Uchi Technologies**](https://finance.yahoo.com/quote/7100.KL/?ref=asiancenturystocks.com) builds ASIC chips for fully automated coffee machines like Jura, Thermoplan, etc. Overall, I think most of these companies are exceptional. Though be aware that some cyclical companies will sometimes exhibit high return on equity at the peak of the cycle. And write-downs can have the effects of boosting return on equity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1f176899-1acb-46e7-81c2-2bbec5973acf_2232x750.png) The Malaysian companies with the *highest* *total returns* include [**Frontken Corporation**](https://finance.yahoo.com/quote/0128.KL/?ref=asiancenturystocks.com) provides precision cleaning and coating for semiconductor parts, including for Taiwan’s TSMC. They also include [**Pentamaster Corporation**](https://finance.yahoo.com/quote/7160.KL/?ref=asiancenturystocks.com), a sister company to the [Pentamaster International](https://www.asiancenturystocks.com/pentamaster-international-1665-hk/) I wrote about last year. [**Chin Hin Group**](https://finance.yahoo.com/quote/7187.KL/?ref=asiancenturystocks.com) is a cement company. [**Hextar Technologies**](https://finance.yahoo.com/quote/5136.KL/?ref=asiancenturystocks.com) is a trading company that now has a fintech app called MoneyX. [**Kelington Group**](https://finance.yahoo.com/quote/0151.KL/?ref=asiancenturystocks.com) makes gas and chemical delivery pipes for chip fabs. [**Binastra**](https://finance.yahoo.com/quote/7195.KL/?ref=asiancenturystocks.com) is a building contractor for condos, offices, retail lots and data centers. [**PMB Technology**](https://finance.yahoo.com/quote/7172.KL/?ref=asiancenturystocks.com) smelts silicon metal at a plant in Sarawak. [**Tanco**](https://finance.yahoo.com/quote/2429.KL/?ref=asiancenturystocks.com) is another construction companies, owning a large seafront landbank in Port Dickson. Finally, [**Sern Kou Resources**](https://finance.yahoo.com/quote/7180.KL/?ref=asiancenturystocks.com) owns owns sawmills and a furniture factory that exports to the United States. I’m noting that several companies operating in the semiconductor industry have had great runs, though I believe this phenomenon is partly cyclical. I am not particularly impressed with either of these companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5a73d27a-3946-4f99-8a69-da2d41526850_2232x764.png) The fastest-growing companies in terms of EPS have been [**Tomei**](https://finance.yahoo.com/quote/7230.KL/?ref=asiancenturystocks.com), the jewelry company, which I suspect has been benefiting from a strong demand for gold. Then [**Lotte Chemical Titan**](https://finance.yahoo.com/quote/5284.KL/?ref=asiancenturystocks.com), the operator of a petrochemical plant in Johor. [**D&O Green Technologies**](https://finance.yahoo.com/quote/7204.KL/?ref=asiancenturystocks.com) designs LED chips used in car headlamps, etc. [**RCE Capital**](https://finance.yahoo.com/quote/9296.KL/?ref=asiancenturystocks.com) is a payroll lender. [**Focus Point**](https://finance.yahoo.com/quote/0157.KL/?ref=asiancenturystocks.com) runs Malaysia’s largest optical retail chain. [**Gopeng**](https://finance.yahoo.com/quote/2135.KL/?ref=asiancenturystocks.com) owns an oil palm estate and has property developments around Perak. [**T7 Global**](https://finance.yahoo.com/quote/7228.KL/?ref=asiancenturystocks.com) is an oil services contractor, helping with rig decommissioning, maintenance, etc. [**JHM**](https://finance.yahoo.com/quote/0127.KL/?ref=asiancenturystocks.com) makes LED modules and precision machinery for third parties. [**Shin Yang**](https://finance.yahoo.com/quote/5173.KL/?ref=asiancenturystocks.com) is a shipping company with four shipyards in Sarawak. And finally, [**KUB Malaysia**](https://finance.yahoo.com/quote/6874.KL/?ref=asiancenturystocks.com) is a distributor of LPG cylinders to households. I believe that the EPS screen, while interesting, suffers from the same problem of industry cyclicality. I think we’ll have to dig deeper to find hidden champions. And in the past week, I’ve done just that. I’ve gone through the list of 500 or so companies with market caps above US$50 million listed on Bursa Malaysia. I’ve then ranked them in terms of return on equity, historical price performance and earnings per share growth in the following spreadsheet. Companies with above 10% return on equity / yearly total return / EPS growth are marked with a green background colour. _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-7ff/ Last updated: 2025-05-12T03:01:35.000Z _This post is for subscribers only._ ### Giant Manufacturing (9921 TT) URL: https://www.asiancenturystocks.com/giant-manufacturing-9921-tt/ Last updated: 2026-07-31T02:01:03.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Giant Manufacturing at the time of publishing this article. To reiterate, this post and the presentation below are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Taiwan’s [**Giant Manufacturing**](https://finance.yahoo.com/quote/9921.TW/?ref=asiancenturystocks.com) *(9921 TT — US$1.7 billion)* is the world’s largest bicycle manufacturer. It’s based in the Taiwanese city of Taichung, which has become somewhat of the center of the global bicycle industry. From there, it controls nine factories around the world, selling about 6 million bicycles a year via many thousands of distributors in 50 countries. Most of these bicycles are sold under their own brand names, including “Giant” and “Liv.” The founder, King Liu, set up Giant Manufacturing in the early 1970s with several business partners. In the first year, he produced and sold 3,800 bicycles. The big breakthrough came in 1976, when America’s Schwinn hired it to become a supplier. Giant benefited enormously, and soon, Schwinn represented 75% of total revenues. However, King Liu became concerned that Giant was becoming too reliant on Schwinn, so he launched the brand “Giant” domestically in Taiwan. Those fears were warranted because Schwinn soon cut ties to Giant, forcing it to survive independently. In the following years, King Liu responded by aggressively moving upmarket. He enlisted much-younger NTU graduate Tony Lo to spearhead an international expansion, first to the Netherlands and then to America. He built up an international organization with mostly local hires, so much so that today, many consider Giant to be a “Western” brand, despite its Taiwanese origins. Throughout this period, Giant collaborated with Taiwanese research institutes and designers to innovate. For example, it developed carbon fiber bicycle frames and compact road design frame geometries. By the mid-2010s, Giant became the largest bicycle manufacturer in the world. Industry insiders called Giant’s factories the most efficient and sophisticated in the industry, making it a natural supplier to well-regarded brands such as Trek. When I was on the buy-side in the 2010s, Giant was seen as a blue-chip growth stock. Its top-line revenues grew close to 10% per year, and its margins remained steady at about 8%. The company has had its fair share of challenges since then: - Since 2015, Giant’s major US customer, Trek, has been diverting orders to Mainland Chinese competitor Quest Composite. - Then came the 2016-17 bike-sharing boom, when millions of bicycles flooded the streets of China and elsewhere. The boom proved short-lived but hurt Giant’s financials for a year or two. - COVID-19 was initially a challenge for Giant as factories shut down. But then came one of the biggest booms the industry has ever seen. Flush with stimulus checks, consumers spent lavishly on higher-end bicycles. They felt that bicycles were a safe form of transport with a low risk of infection. We’re now at the tail end of the COVID-19 bicycle boom. Throughout 2021 and 2022, inventories kept rising, forcing bicycle brands to raise their discounts. With higher discounts, Giant’s margins fell from 24 to 19%. The slump reached a crescendo in the fourth quarter of 2024 with a TWD 1.9 billion inventory write-down. It looks like the bottom is in. Giant’s sales growth in the first few months of 2025 ended up in positive territory. Management is now guiding for European inventories to fall from about 5 months to normal levels by the second half of 2025\. I don’t expect a rapid turnaround, but the recovery is certainly starting to take shape. There is another kicker. Donald Trump seems intent on raising US tariffs on Chinese goods, including bicycles. A few days ago, Trump said that 80% tariffs on China “seems right”. I think such tariffs would be positive for Giant. Close to 90% of all bicycles sold in the US come from Mainland China. I suspect Trek orders would come back to Giant in short order, as it will be able to satisfy them through its factories in Europe or Southeast Asia. Giant will also have less competition selling its higher-margin Giant-branded bicycles through its US store network. There’s plenty to be positive about in the long term, too. While Giant does assembly, it’s not an easy business to replicate. There’s a cluster of bicycle component suppliers in Taichung serving Giant, including Shimano, SRAM, KMC, Topkey and Transart. The “Giant” brand is well-known globally. It has a global distribution network of 12,000+ retail stores. And Giant sits on key carbon fiber technologies, which are essential to reducing the weight of performance-focused higher-end bicycles. I also think the e-bike trend will be a positive growth driver. 30% of Giant’s revenues now come from e-bikes, and this market grows about 8-10% annually. E-bikes feature batteries and electric motors that provide extra power, making the cycling experience easier and more enjoyable. Giant is one of the world's top e-bike brands, so it definitely benefits from this trend. The stock price has come down significantly due to the current oversupply. During the April 2025 mini-crash, the stock tested its 2020 lows. With management guiding for 2025 operating margins of 4-7%, I expect the longer-term number to end up at 7% and the forward-looking P/E at about 10x. It is not super-low, but it is lower than Giant’s historical level of 20x. There are a few question marks. One is that founder King Liu retired in late 2016, leaving the reins to his son Young Liu. It’s hard to live up to the expectations of a true genius, and it does look like Giant has become less nimble than before. In early 2025, Young Liu became Chairman while promoting Phoebe Liu to CEO. She was his executive assistant previously, so I’m not expecting a significant shift in management priorities. So expect more of the same. That said, I have great conviction that margins bottomed in 2024 and that they will recover in 2025\. Meanwhile, the e-bike trend should continue for the foreseeable future as the technology improves and more consumers discover the benefits of pedal-assist electric bikes. Thank you for reading. *Michael* Further material: - Asianometry’s [Introduction to Giant](https://www.youtube.com/watch?v=rlnri95UAW4&ref=asiancenturystocks.com) - Alex Sweet’s write-up of [Shimano](https://sweetstocks.substack.com/p/shimano-cycling-uphill) - DaBao’s introduction to [Topkey](https://1foothurdle.substack.com/p/4536tw-an-innovative-carbon-fiber?utm%5Fsource=publication-search) - VIC user jt1882’s write-up of [Transart Graphics](https://valueinvestorsclub.com/idea/Transart%5FGraphics/8439668134?ref=asiancenturystocks.com) **NOTE! This is just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Weekly highlights URL: https://www.asiancenturystocks.com/weekly-highlights-e02/ Last updated: 2025-05-04T10:19:07.000Z _This post is for subscribers only._ ### Become smarter through Generative AI URL: https://www.asiancenturystocks.com/generative-ai-in-equity-research/ Last updated: 2025-10-24T23:56:37.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/963cfc50-24d8-4c9e-b7de-b3b34b7f6bc1_1485x990.jpg) Source: Getty Images ChatGPT has just reached the milestone of 800 million weekly active users. There’s clearly a huge amount of interest in generative AI tools like ChatGPT. But what I’m keen to find out is how we as investors can use these tools to become better versions of ourselves. After spending some time thinking about this, I’ve come up with 10 use cases for generative AI in the equity research process. These include summary generation, earnings call sentiment analysis and podcast generation. To make the examples more vivid, I’ll explain how I would use the tools to analyze Taiwanese semiconductor company [**TSMC**](https://finance.yahoo.com/quote/2330.TW/?ref=asiancenturystocks.com) *(2330 TT — US$801 billion)*. Hopefully, by the end of the post, I will have convinced you to adopt some of these methods yourself. ``` Table of contents 1. Large language models 2. Ten use cases for equity research 2.1. Better Internet search 2.2. Compile summaries 2.3. Q&A with primary source materials 2.4. Create a podcast from text 2.5. Generate transcripts from voice 2.6. Deep Research introductory report 2.7. Mind maps to understand structure 2.8. Idea generation 2.9. Analyze earnings call sentiment 2.10. Write beautiful language 3. Conclusion ``` # 1\. Large language models Generative artificial intelligence (“AI”) tools such as ChatGPT allow users to input text in natural language and then receive relevant output related to the question asked. They’re called generative as they generate text or other types of content. These tools are based on large language models (“LLMs”), which are mathematical models that can predict what word will appear next in any piece of text. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4575c03f-dd14-4e06-910f-f67cc3034be8_1406x954.png) Source: 3Blue1Brown’s [Large Language Models Explained Briefly](https://www.youtube.com/watch?v=LPZh9BOjkQs&ref=asiancenturystocks.com) The models are able to do this by “pre-training” on huge amounts of historical data from the Internet. For example, the model might learn that the sentence “Paris is a city in…” is most likely followed by the word “France”. So the pre-training allows the models to learn about the world and then feed back that information to you, based on what you ask them. Once pre-training has been done on historical data from the Internet, the models are fine-tuned by reinforcement learning with human feedback and adjusted accordingly. The models are then used by generative AI tools such as ChatGPT, which has several additional features, including generating images and performing real-time website searches. Other popular generative AI tools include Google’s Gemini, xAI’s Grok, and Deepseek Chat. I’ve been playing around with these models for the past few days, and the quality of their answers is hit-and-miss. They sometimes “hallucinate” — create convincing but ultimately false statements. That’s why I’ve learnt to appreciate the tools that provide links that allow you to verify that the information comes from trustworthy sources. --- # 2\. Ten use cases for equity research ## 2.1\. Better Internet search When you open up [ChatGPT](https://chatgpt.com/?ref=asiancenturystocks.com), you’re presented with a text box like this: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1c7e8667-8610-4357-8e42-8c7016174a2b_1596x368.png) ChatGPT’s prompt window So what question should you ask it? Literally anything — the same way you might use Google search today. But instead of Googling a topic and visiting a half dozen websites to get the answer you’re looking for, ChatGPT often gives you the answer directly. For typical questions that I might otherwise use Google search for, I like the generative AI tool [Perplexity](https://www.perplexity.ai/?ref=asiancenturystocks.com). It combines third-party large language models such as GPT-4.1 and Claude 3 with real-time web search to get the data you want. So, if you ask Perplexity questions about recent events, such as what happened to the stock market yesterday, you’ll most likely get a [decent reply](https://www.perplexity.ai/search/7b56ea92-ffdd-4a38-a770-2d25e7779bea?ref=asiancenturystocks.com). ChatGPT can also perform real-time web search, but you will have to click the “🌐 Search” button to make sure a web search actually takes place. On my Mac, I’ve installed Perplexity’s app, which I pull up by pressing the shortcut “⌘ + Shift + D”. That gives me immediate access to Perplexity to ask any questions that might pop up in my head. To take the example of TSMC, I might click “⌘ + Shift + D” and then type in a question about how TSMC makes its money: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/885f2161-ec69-421e-af4c-66ecd6cf031f_1352x290.png) A simple prompt in Perplexity Pro Perplexity gives me [the following answer](https://www.perplexity.ai/search/d448ee5e-57ad-444f-936a-fdd1d6fd0ecf?ref=asiancenturystocks.com): > *“Taiwan Semiconductor Manufacturing Company (TSMC) makes money primarily by manufacturing semiconductor chips for other companies, operating as a “pure-play” foundry. This means TSMC does not design its own chips; instead, it fabricates chips based on the designs provided by its clients, which include many of the world’s leading technology companies such as Apple, Nvidia, AMD, Qualcomm, and Broadcom… ”* The answer is over 500 words and not particularly helpful. So in this specific case, how can I ask a more specific question that gives me exactly what I’m looking for — a good explanation of how TSMC makes money? Writing precise questions — the right “prompts” — is known as prompt engineering, and is a science in itself. I’ve spent some time learning about prompt engineering and concluded that YouTuber [Jeff Su'](https://www.youtube.com/watch?v=jC4v5AS4RIM&ref=asiancenturystocks.com)s approach works well for me. He argues that your prompts should have the following attributes: - Give **context**: for example, who you are, what you’re trying to achieve and the environment - Say what **task** you want the model to perform, for example, “write”, “analyze” or “generate” - Any **examples** of what you think you might want to see - A **persona**: who you want the generative AI tool to pretend to be - The **format** of the output - The **tone** of the answer Using these guidelines, we can refine the prompt in our TSMC example. I now provide far greater detail, giving the model a context, a specific task, and the desired format and tone of the answer. ``` I am an investment analyst at an asset manager trying to understand the basics of TSMC's business model. Provide an overview of TSMC's key business segments and what makes the dominant in their respective fields. For example, how TSMC's foundry business compares to Samsung Electronics' in terms of its technological capabilities. Write in a language that's simple enough for generalist investors to understand. ``` You can find the result from that search query [here](https://www.perplexity.ai/search/5a24aa66-f761-4334-8463-8f5c7d857b18?ref=asiancenturystocks.com). I think the answer is excellent, providing much greater detail about TSMC’s key business segments and its competitive advantages over Samsung Electronics’ foundry division. As a general rule, be **specific** when writing prompts. Ask open-ended questions, avoiding simple yes-or-no questions. You’ll want to provide **context** of who you are and what you’re looking for. If you don’t get the answer you’re looking for, use **follow-up questions** to really understand what the model is trying to communicate. Finally, if the accuracy of the answer is important, make sure to click the links in the answer from Perplexity or ChatGPT to **verify** that the source is reliable. To save time, you can enter details about the context, persona, format and tone as a default setting in your ChatGPT user profile. Once you’ve logged in, click on your profile picture, and then “customize ChatGPT”: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea336fad-5b90-460a-9257-c519cc7d7986_590x700.png) In my case, I’ve provided the following customizations to ensure that ChatGPT gives me the answers I want without having to remind it every time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/753c8d94-0712-487e-b5ec-f144a6f2c2cc_1096x1436.png) In ChatGPT, you can also use the follow-up question *“Can you please remember this?”* whenever you want the tool to remember something specific about you. Perhaps something about your preferences or the context in which you’re asking questions. It will then remember this for all future interactions. The questions you ask your generative AI chatbots can go beyond introductions to specific companies. For example, you can also ask them to : - **Explain challenging concepts**. In my TSMC example, I might ask what “CoWoS” means in simple terms. Apparently: chip-on-wafer-on-substrate. - **Describe** **recent events**, for example, “Why did TSMC’s stock price rise on 2 May 2025?” Turns out Daiwa just upgraded the stock. - **Compare** a company’s attributes with those of a competitor. For example, I might ask Perplexity to compare TSMC’s dividend policy with that of its competitor, Samsung Electronics. Answer: They have a similar dividend payout ratio. And the list goes on. You can even ask Perplexity or ChatGPT to create a prompt for itself. In my example, I might tell Perplexity to write a prompt that helps me understand TSMC’s business better. This is what it throws back at me: ``` Explain TSMC’s business model in simple terms. What does it mean that TSMC is a ‘pure-play foundry’? Who are its main customers, and how does TSMC make money? What are the key advantages that make TSMC dominant in the semiconductor industry compared to other chip manufacturers? Please include how its focus on manufacturing, economies of scale, and customer partnerships contribute to its leadership position. ``` Inputting this new prompt into Perplexity, I get the [following answer](https://www.perplexity.ai/search/b1793ecb-3c58-4fa8-aa43-5df56d20f0ae?ref=asiancenturystocks.com) — an even better one. So don’t be afraid of asking them to write their own prompts. If you prefer speaking over typing, I recommend the voice-to-text app [SuperWhisper](https://superwhisper.com/?ref=asiancenturystocks.com). Once installed, you can click “Option + Space Bar” to pull it up, speak into the microphone and then click Option + Space Bar again to get the text to show up on the screen. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/178e40ae-61ba-460c-8027-7e7ff67653df_1260x288.png) [SuperWhisper](https://superwhisper.com/?ref=asiancenturystocks.com)’s MacOS X app In the Perplexity and ChatGPT mobile apps, you can also click on the button at the bottom-right corner of the screen. This will open up the voice chat mode. The quality of the conversation tends to be excellent, and I often use it for questions I would otherwise use Google search for. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/22b6f71c-3052-461a-8711-e87368ecbeec_1280x316.jpg) The Voice icon on ChatGPT’s iPhone app --- ## 2.2\. Compile summaries Another use case for generative AI tools is to provide summaries of large documents such as PDFs or annual reports. Most tools, such as ChatGPT, Gemini, Perplexity or Claude, allow you to drag and drop files into the search window and then submit your query. For example, if I drag and drop TSMC’s 2024 annual report into [Google Gemini](https://gemini.google.com/?ref=asiancenturystocks.com), I can write the following search query: ``` I have attached TSMC's 2024 annual report. Provide a summary of the Letter to Shareholders, the Operational Highlights and Financial Highlights and Analysis to help me understand how TSMC is performing as a business in 2024.  ``` I then get the [following answer](https://g.co/gemini/share/e5dfb8e264b6?ref=asiancenturystocks.com) — an excellent 353-word summary that tells me the basics about TSMC’s annual report. I learn that 2024 revenue increased \~30% year-on-year and that demand for 3nm technology continues to be strong, with 2nm volume production planned for the second half of 2025. You can also summarize earnings call transcripts. I’m a long-time user of research platform [TIKR](https://www.tikr.com/?ref=asiancenturystocks.com), so I tend to search for the ticker, click “Transcripts”, save each as a PDF and then drag and drop them into Google Gemini with the following prompt: ``` Summarize TSMC’s latest earnings call with focus on guidance changes ``` If you want to summarize YouTube videos or websites, I recommend Google’s “personalized AI research assistant” [NotebookLM](https://notebooklm.google/?ref=asiancenturystocks.com). Just click “Try NotebookLM” and then “+ Create new”. Choose one of the options under the section “Link”. For example, I can paste [the Acquired Podcast](https://youtu.be/FZItbr4ZJnc?si=8f8GW4DKZuHxs-Cp&ref=asiancenturystocks.com) interview with TSMC’s founder, Morris Chang and ask it to provide a detailed summary. I then get a 2,659-word summary, which takes me about 10 minutes to read, saving me time in the research process. I also find it helpful to use generative AI tools to summarize research documents that are otherwise difficult to understand. You can ask tools such as ChatGPT to summarize reports in simple terms using the following prompt: ``` Summarize this research report in great detail using simple terms ``` In the case of TSMC, I might feed the model Xie, Zhang, Zhang and Guo’s paper *“Introduction of Gate-All-Around Field-Effect Transistor (GAAFET)”* to understand the technology better. I then get the [following answer](https://g.co/gemini/share/d994aa527b46?ref=asiancenturystocks.com), explaining the basics about GAAFETs. I can then ask follow-up questions to ensure I understand the paper's arguments fully. --- ## 2.3\. Q&A with primary source materials Google’s [NotebookLM](https://notebooklm.google/?ref=asiancenturystocks.com) is not limited to a single document. You can feed it 50 different sources per project (“notebook”) and then ask the model you’ve created specific questions. If I’m writing a deep dive on TSMC, for example, I might feed Notebook LM the following documents and links: - The five latest annual reports - Ten sell-side initiation reports - The last four quarterly earnings call transcripts - Six write-ups on the stock from the Value Investors Club - Acquired’s podcast interview with Morris Chang If you click “Discover sources” at the top-left corner of the screen, you can sometimes find even more documents that might be worth uploading into NotebookLM. In my case, I write that I’m interested in TSCM’s business model. I then get the following result: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/62b6ea0c-edf9-45f5-b41b-3d1a0941f9ed_1568x1394.png) Just check the ones you want and click “Import”. You can now feed NotebookLM questions about TSMC’s business. Here are a few suggestions on what you might want to ask it: ``` Explain how TSMC makes money in extremely simple terms ``` ``` Provide an overview of each of TSMC's business segments ``` ``` What is TSMC's 2025 guidance and how does it compare to previously? ``` ``` List the five biggest factors impacting TSMC's 2025 earnings ``` ``` List the five biggest risks that TSMC is facing today ``` You might find it tedious to download and import all these documents. But the benefit is that the model you create through NotebookLM is far less likely to “hallucinate”. In other words, the data will be very reliable. It will even be able to translate documents from foreign languages. You might even feed NotebookLM your own meeting notes, enabling you to find the information you’re looking for faster, and even analyze how the commentary has changed over the years. --- ## 2.4\. Create a podcast from text One of my favorite features of [NotebookLM](https://notebooklm.google/?ref=asiancenturystocks.com) is the ability to create a podcast from the documents that I just uploaded into a particular notebook. If there’s any area you’re particularly interested in, you can customise the podcast with specific instructions. Then click “Generate.” Here is a podcast with two hosts generated from the documents I uploaded in the section above: [link](https://notebooklm.google.com/notebook/1370dbdf-4e24-43be-a12a-2a4929d8f445/audio?ref=asiancenturystocks.com). [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/749aa1e4-107a-4b00-b408-b08e62c92f3f_914x328.png)](https://notebooklm.google.com/notebook/1370dbdf-4e24-43be-a12a-2a4929d8f445/audio?ref=asiancenturystocks.com) I then typically share the link with my phone using the Telegram Saved Messages feature and listen to it on the subway or while going for a run. --- ## 2.5\. Generate transcripts from voice If you have a recording of a meeting, speech, or other type of conversation, you can upload the audio file into NotebookLM. Click the audio file on the left side of the screen, and it will then show you the complete transcript of the audio file, which you can then copy and paste somewhere else. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/14df6be3-4d19-4020-8fa5-06f730bd698e_2706x1304.png) --- ## 2.6\. Deep Research introductory report In February 2025, OpenAI released [Deep Research](https://openai.com/index/introducing-deep-research/?ref=asiancenturystocks.com) — a tool that works like a junior research analyst in compiling reports about particular subjects across multiple steps. These Deep Research reports can take 10 minutes to generate and tend to be thorough. They’ll give you an initial company overview before digging deeper into the specifics. Here is a prompt that you might use to generate these reports: ``` Create a deep-dive investment research report on TSMC. Include: • Company overview and business model • Competitive advantages compared to its main competitors • Discussion of historical financials and the drivers of key numbers • Industry supply & demand and regulatory framework • Management's long-term plan and likely growth prospects • Potential risks to earnings • Valuation multiples compared to historical levels, the peer group and likely growth prospects Please cite all sources and highlight areas of uncertainty or controversy. ``` They’ll then come back with questions for you to answer. Then, they scour the Internet, put together the results, and create a report to the best of their abilities. The beauty of the Deep Research feature is that it can feed from information in other languages — which I consider to be absolutely necessary for companies in Taiwan, South Korea, Japan, Vietnam, etc. So, which tool should you use? In my view, the ChatGPT Plus and Gemini Advanced Deep Research reports are better than those from Perplexity. Using the example of TSMC, this is the output I get from the prompt mentioned above: [ChatGPT](https://chatgpt.com/s/dr%5F68146683361881918da986baf12a33d1?ref=asiancenturystocks.com) (2,436 words), [Gemini](https://g.co/gemini/share/16591fc3970d?ref=asiancenturystocks.com) (4,790 words), [Perplexity](https://www.perplexity.ai/search/4eb8d7bb-0a1e-41a6-bc56-4533c161a88e?ref=asiancenturystocks.com) (2,492 words). In my view, the Perplexity report is thin on details and not particularly helpful. The ChatGPT report is decent. But I think Gemini Advanced’s report stands out among the three, especially when you consider that you get 20 Deep Research reports *per day*. With ChatGPT Plus, you only get 25 Deep Research queries per month. While impressive, I don’t consider Deep Research reports on par with what you get from experienced analysts. Instead, I use these reports as a first look at a new company I know nothing about. I’ll then go through the source material to learn about the company in greater detail. --- ## 2.7\. Mind maps to understand structure Generative AI tool [Claude](https://claude.ai/new?ref=asiancenturystocks.com) can create conceptual diagrams or mind maps for books, reports, and even videos. For example, I asked Claude to provide a conceptual diagram of the Acquired podcast’s interview with Morris Chang. ``` I'm providing the link to the Acquired podcast interview with TSMC's Morris Chang. Create a conceptual diagram of this conversation ``` [This](https://claude.ai/public/artifacts/bff1a1c6-7e6d-475d-b5ff-2bba36568d04?ref=asiancenturystocks.com) is what the model spit out: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4e760ff4-97a2-4813-8d33-3fedc725bbc3_2736x1232.png) There is not much structure to this conversation, but it still helps me understand its topics of discussion. I might then search the transcript for the sections I’m particularly interested in. --- ## 2.8\. Idea generation You'll have to get more creative when it comes to finding new ideas. One way I try to find new ideas is to go ChatGPT, turn on the “🌐 Search” button and then feed it specific prompts. Here are a few examples of prompts I’ve used in the past: Stocks with **improving fundamentals**: ``` Identify small-cap companies in Singapore that recently upgraded their earnings guidance ``` Stocks with new **share buyback** programs: ``` Identify Japanese companies that have recently announced large share buyback programs ``` Stocks with improving dividend payouts: ``` Identify Japanese companies that have materially increased their dividend payout ratios recently ``` Stocks with **insider buying**: ``` Identify publicly-listed stocks in Hong Kong that have recently experienced insider buy transactions ``` Stocks with **low valuation multiples**: ``` Identify stable Singaporean stocks with low P/E multiples ``` Stocks **benefitting from a particular trend**: ``` Which Singaporean industries benefit most if interest rates drop? ``` **Suppliers or customers** benefitting from the success of a company: ``` List suppliers to TSMC that benefit from its capacity growth ``` **Peers** to specific publicly listed stocks: ``` Provide a list of publicly listed companies that operate in the same industry as TSMC ``` These prompts may not be perfect, but they can still give you that initial idea. Then I typically ask Gemini to create a Deep Research report to understand whether I want to dig deeper into a particular stock. --- ## 2.9\. Analyze earnings call sentiment There are specialized services that provide sentiment analysis for earnings calls. Bloomberg has tools to detect sentiment, as do AlphaSense and several other services. But sticking with the main generative AI tools discussed above, my approach has been to upload a series of quarterly earnings call transcripts into NotebookLM and then ask it sentiment-related questions like these: ``` How has the tone of TSMC's earnings calls changed over the past 4 quarters? ``` ``` Identify positive vs. negative sentiment trends in TSMC management's remarks over the past four quarters ``` ``` Highlight shifts in sentiment around specific topics (e.g., margins, growth) in TSMC's earnings calls over time. ``` Alternatively, you can ask NotebookLM to rank the sentiment of each earnings call from a scale of 1 to 10, to understand whether there’s been a trend shift more recently: ``` Rank each of TSMC's last four earnings call in terms of positive sentiment on a scale from 1 (lowest) to 10 (highest) ``` OpenAI’s GPT-4 and later versions are known to be particularly strong at assessing sentiment from text. But in the above examples, I think NotebookLM did a pretty good job, too. --- ## 2.10\. Write beautiful language For creative writing, ChatGPT is generally considered to be the best generative AI tool, followed by Claude. ChatGPT knows what it’s like to be a value investor in Asia. When I ask it to write a Haiku poem about our collective experience investing in the region, it gives me the following: > *Stocks dip, hope persists,* > *In the East, value hunts deep,* > *Patience wins the day.* Isn’t that the truth? But on a more serious note, you can use ChatGPT to write polished emails, marketing messages and summaries — anything that’s supposed to sound formal or polished. I’ve found it essential to let ChatGPT know what format you’d like the language to be in, the tone you want the language to be in, and perhaps even the voice. Here is an example I used for a summary of TSMC’s Wikipedia page, using my voice, which the ChatGPT is able to download from the Internet: ``` Generate a 300-word summary of TSMC's Wikipedia page. I will want to see the key details, for example including its history, management and production capabilities. You are a financial analyst writing the summary for your portfolio manager boss. Write it in flowing, easy-to-understand text in the tone of Michael Fritzell of the Substack newsletter Asian Century Stocks. ``` [Here](https://chatgpt.com/share/68147ea0-860c-800f-baa9-0a74e92466a5?ref=asiancenturystocks.com) is the result from that prompt. As you can tell, it’s not perfect and reads more like a press release than serious financial research. So I suggest treating the output as a draft and then rewriting it in your own words. Otherwise, it’ll be evident that you’ve outsourced the writing task to ChatGPT. You can also use generative AI tools to detect grammatical mistakes. In the past four years, I’ve been using the proofreading tool Grammarly to ensure the language is somewhat readable. But if you’re based in the United States, you can now use Google Gemini to proofread text directly in Google Docs or the “Help me write” feature in Google Chrome. You can also paste an email into ChatGPT and make it into a more polished version of itself. For example, this is what ChatGPT comes up with when I ask it to rewrite an email to TSMC’s Morris Chang asking for an interview. I gave it the following prompt: ``` Rewrite this email to make it more formal and polite: "Dear Morris Chang, my name is Michael Fritzell and I run a Substack newsletter called Asian Century Stocks. I'm writing you because I want to ask whether you would be willing to participate in an interview for the benefit of my readers. Thanks, Michael" ``` This is what ChatGPT comes up with: > **Subject: Interview Invitation for Asian Century Stocks Newsletter** > > *Dear Dr. Chang,* > > *I hope this message finds you well. My name is Michael Fritzell, and I am the publisher of the Substack newsletter "Asian Century Stocks," which focuses on in-depth analysis of Asian equity markets.* > > *I am writing to respectfully inquire whether you might be willing to participate in an interview for the benefit of our readers. Your insights and experience would be of tremendous value to our audience.* > > *Thank you very much for considering this request. I would be honored to hear from you at your convenience.* > > *Warm regards,* > *Michael Fritzell* > *Publisher, Asian Century Stocks* Not bad, right? I doubt Morris Chang would ever reply, but the email reads beautifully. The language sounds polite and formal. I personally recommend using ChatGPT to fix grammar and factual mistakes and make sentences sound more formal and polite. But make sure to read the output so that it doesn’t sound like it’s been produced by a tool like ChatGPT. --- # 3\. Conclusion I think the winning strategy is to: - Install the free version of [Perplexity](https://apps.apple.com/us/app/perplexity-ask-anything/id6714467650?mt=12&ref=asiancenturystocks.com), especially if you use a Mac computer. Whenever a question pops up in your head, just press “⌘ + Shift + D” to ask the question in the Perplexity window that pops up. And install the Perplexity app on your phone whenever you need advanced search on the go. - If you have complex problems you need to solve, pay for [ChatGPT Plus](https://chatgpt.com/?ref=asiancenturystocks.com), as you’ll gain access to their o3 model. It’s amazing. - If you need Deep Research reports on individual stocks, pay for [Gemini Advanced](https://gemini.google/advanced/?hl=en&ref=asiancenturystocks.com) and use detailed prompts such as the one I mentioned above. Twenty reports per day should be enough to keep you occupied. The other tools — such as podcast generation via [NotebookLM](https://notebooklm.google.com/?ref=asiancenturystocks.com), conceptual charts in [Claude](https://claude.ai/?ref=asiancenturystocks.com), searching online using Perplexity, generating summaries through Gemini — can all be used without premium subscriptions. Their output seems good enough for me. If you want to learn more about using generative AI tools, check out AI researcher Andrej Karpathy’s [YouTube video](https://youtu.be/EWvNQjAaOHw?si=Crsbs5Qmv89FuH24&ref=asiancenturystocks.com) on that topic. It’s fantastic and well worth two hours of your time. Regards, *Michael* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Thanks for reading Asian Century Stocks. Consider becoming a subscriber! You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure － all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Portfolio review April 2025 URL: https://www.asiancenturystocks.com/portfolio-review-april-2025/ Last updated: 2026-06-04T10:52:48.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # **Portfolio update** The portfolio rebounded last month despite significant intra-month volatility. Since its inception in October 2021, the value of the portfolio has now increased by +40.6%, equivalent to a +10.1% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ad63ea1f-538d-48ad-ba78-b9fe80e6a73e_2286x774.png) It was a stressful month. After “Liberation Day” on 2 April 2025, Asian equities went into freefall, with many stocks limit-down. The tariffs announced were shockingly high, and in the case of China, eventually ramped up to a whopping 145%. And what’s worse, the United States will also remove exemptions on tariffs for low-value goods, known as the *“de minimis rule.”* That means goods from overseas e-commerce websites will now carry much higher tariffs than before. With this backdrop, I cannot imagine much positive news coming out of the Chinese export industry in the next few quarters. The declines in the share prices of companies such as [**Pico Far East**](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/) and [**Sony**](https://www.asiancenturystocks.com/sony-6758-jp-2024-update/) were probably warranted, in my view. [**Pacific Textiles**](https://www.asiancenturystocks.com/pacific-textiles-1382-hk/) and [**Samsonite**](https://www.asiancenturystocks.com/samsonite-1910-hk-2024-update/) will also face pressure, as they export products out of Mainland China, partly to the United States. Some of these companies will be able to deal with the problem by moving production overseas. But it can, in some cases, take years. As I outlined in my post' [Tariff Chaos](https://www.asiancenturystocks.com/tariff-chaos/),' I believe that high US tariffs on Chinese goods are here to stay, whereas America’s historical allies, Japan, South Korea, Taiwan, and the Philippines, will probably be able to negotiate a lower rate before the 90-day exemption window passes. As Donald Trump has made clear, it’s not just about fair trade, it’s also about implicit US security guarantees to its allies. So these countries will have to raise their defense spending, let their currencies appreciate and show progress at allowing US companies to enjoy market access on equal terms. For Asian equities, the news isn’t necessarily all bad. Materially higher defense spending could lead to an acceleration of credit growth in some countries, including Japan and Taiwan. Some of that liquidity might eventually spill over to their local stock markets. And if their currencies start to appreciate, flows might pick up, with foreign investors thinking that the market is a one-way bet. I’m personally wary of Chinese exposure. There could be retaliations, as we saw with the rumor that the Chinese government is going to ban US movies from being played within Mainland China. I also think the Chinese consumer is going to suffer in the near term. To use an old cliche, it’s only when the tide goes out that you realize who has been swimming naked. ![Who is Warren Buffett? - by T.W. - Whyte Media](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7893e0af-81da-40d1-8404-dc881ece9156_320x180.gif) I feel that Southeast Asian stock markets offer decent value today. Thai equities have come down significantly, as have Indonesian equities. Some countries, such as the Philippines, don’t export much in the first place, so where is the hit from US tariffs going to come from? And where else can you buy the most blue-chip of blue-chip stocks below 10x P/E? When it comes to East Asia, I see a path towards stronger currencies for both Japan and Taiwan. And that would spell trouble for the earnings of their export industries. So, I’m leaning towards companies that serve local consumers, including [**Koshidaka**](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) and [**Poper**](https://www.asiancenturystocks.com/poper-5134-jp/). These companies will continue to do well, regardless of what happens to the USD-JPY exchange rate. In any case, here is what the latest portfolio looks like as of 28 April 2025: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-ae3/ Last updated: 2025-04-28T02:31:02.000Z _This post is for subscribers only._ ### Anicom (8715 JP) URL: https://www.asiancenturystocks.com/anicom-8715-jp/ Last updated: 2026-07-31T02:00:43.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Anicom at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Anicom**](https://finance.yahoo.com/quote/8715.T/?ref=asiancenturystocks.com) *(2353 JP — US$295 million)* is a Japanese pet insurance company. I first heard about the business from fellow blogger Global Stock Picking, who wrote an excellent introduction to the company [here](https://www.globalstockpicking.com/2022/09/25/anicom-dominant-japanese-pet-insurance/?ref=asiancenturystocks.com). I also noted that private investor [Alexander Eliasson](https://x.com/alexeliasson/status/1913945000657948814?ref=asiancenturystocks.com) took a position in Anicom earlier in April. He’s a savvy investor, so it's worth paying attention to him. As is [**Hikari Tsushin**](https://finance.yahoo.com/quote/9435.T/?ref=asiancenturystocks.com)*(9435 JP - US$12 billion)*, which has also recently increased its position in Anicom. The business is simple. Anicom provides insurance for household pets. Policyholders pay premiums of, say, JPY 3,000/month (US$21/month). In return, future unexpected medical expenses will then be partly covered by Anicom. Such medical expenses can include outpatient visits, hospitalizations and surgery due to either injury or disease. Typically, Anicom pays 30% or 50% of any bill, and the pet owner pays the rest. Since there is a winner and a loser for each policy, you might ask yourself why insurance is needed in the first place. The best explanation I’ve found is that pet insurance helps you budget and hedge against catastrophic risks. In [this video](https://www.youtube.com/watch?v=q25eUpPxYmY&ref=asiancenturystocks.com), Trupanion founder Darryl Rawlings tells the story of how his 2-year-old dog died when his parents couldn’t pay a hospital bill. Many pet owners would rather pay $30 a month to hedge against this scenario ever playing out. In Japan, pet insurance policies are mostly sold via pet shops. And this is where Anicom dominates. It has partnerships with around 2,000 pet shops nationwide, which is roughly 40% of the total. These will then sell 600-700,000 puppies per year to prospective owners. Most of Anicom’s policies are for dogs, but they also cover cats and other pets, such as rabbits. Other than pet shops, Anicom also targets the general population of pets through its website, call centers, affiliated insurance companies and relationships with dog and cat breeders. Anicom has an advantage when it comes to the breeder market because it owns the two most popular websites for matching dogs and cats with potential owners: Minna no Breeders (for dogs) and Minna no Koneko Breeder (for cats). Since the purchase of pets often warrants new pet insurance policies, there are synergies between the breeder matching websites and Anicom’s mainstay insurance business. Property & casualty insurance is indeed a commodity industry. But I think Anicom has a strong reputation when it comes to pet insurance. It’s spent decades building up relationships with pet shops and veterinarians. It has a decent policy renewal rate of 88% after each year. It’s also ranked as the #1 pet insurance company in the Oricon Customer Satisfaction survey. One underappreciated benefit is that Anicom offers over-the-counter bill settlement at almost 7,000 affiliated veterinary clinics or hospitals. With typical insurance contracts, policyholders need to pay the bill first, fill out a form, and later hope to get reimbursed. It’s a huge hassle. But with Anicom’s insurance card, policyholders just need to present it at the counter, and they’ll only need to deal with the 30-50% co-pay component of the bill. The rest will be taken care of behind the counter, through a software system called Anicom Receptor. The clinic submits a payment request to Anicom, which then quickly reimburses the clinic. There are currently only three companies offering over-the-counter settlements: Anicom, Pet & Family, and ipet. The latter has just been taken over by a much larger insurance company, Dai-Ichi Life. Now, ipet has been growing fast, but more so through the online channel, and it’s not clear how profitable policyholder acquisition through this channel really is. The company has grown nicely over time. It has compounded its book value per share at an annual rate of +11 % since its IPO in 2010\. Part of its success is profitable underwriting with a current combined ratio of 93%. While its return on equity has been average in the past at 10%, it is now targeting 12-15% by 2031. There’s every reason to think that growth will continue. Founder Nobuaki Komori continues to be involved in the business, serving as CEO, and his vision is for Anicom to move into preventive services, lowering claims by improving pet health. Japan’s pet-to-population ratio is only 13% compared to 24% in Scandinavia. Meanwhile, the pet insurance penetration rate is only 17% compared to 65% in Sweden. This is a company with secular growth ahead. The near-term picture seems excellent, too. COVID-19 led to an acceleration in growth, as pet owners feared their dogs and cats would fall sick. Growth then decelerated to mid-single-digit levels. However, over the past few months, growth in written premiums has increased to around 10% year-over-year. And in March 2025, Anicom cancelled 7.8% of its shares outstanding, leading to materially higher earnings per share. The stock now trades at 13 times its current-year earnings. With about 10% expected earnings growth, I see the stock reaching 12x P/E by next year. That compares to about 30x P/E historically, back when Anicom used to be seen as a growth stock. Seen from another perspective, Anicom trades at 1.5x book compared to a targeted 12-15% return on equity. It’s also worth mentioning that competitor ipet was acquired at 7.6x book — a massive premium to Anicom’s current multiple. There are a few question marks, including the threat of online competition. A new animal welfare law is set to take effect in 2027, and we don’t know what new policies may be introduced. Finally, while Anicom has historically performed well, the insurance industry requires solid execution. With an aging pet population, its policies may be mis-priced from one year to another. But so far, Anicom has executed well and will most likely continue to execute well. Thank you for reading, and if you have any questions, feel free to ask them in the comment section below. Regards, *Michael* **NOTE! This is just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Links April 2025 URL: https://www.asiancenturystocks.com/links-april-2025/ Last updated: 2025-04-23T04:35:56.000Z 10 investment write-ups, 10 articles and 10 podcast episodes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-fdd/ Last updated: 2025-04-21T08:39:01.000Z _This post is for subscribers only._ ### Travel notes: Taipei URL: https://www.asiancenturystocks.com/travel-notes-taipei/ Last updated: 2025-04-21T05:24:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5b704607-bec3-4cd8-a2e7-0cd7db7d9abd_732x549.png) Taipei’s Daan Park I just spent four days in Taipei — the capital of Taiwan, and its political and commercial center. My trip was organized last-minute, and I didn’t have the chance to meet any companies this time around. But by meeting friends, I gained a better understanding of the macroeconomic climate, politics and the current opportunity. So I thought I’d share some of my takeaways with you. For what it’s worth, the Taiwanese stock market performed strongly between 2022 and 2024\. This year’s decline is primarily due to Donald Trump’s proposed tariffs on Taiwanese exports: In any case, here are my thoughts from last week’s trip. ``` Table of contents 1. Lai Ching-te’s recall campaign 2. US tariffs are a clear negative 3. Annexation seems unlikely 4. The currency is undervalued 5. Housing has become expensive 6. The current watch list 7. Conclusion ``` --- # 1\. Lai Ching-te’s recall campaign ![An estimated 55,000 people gather on Ketagalan Boulevard to participate in the "Reject United Front, Defend Taiwan" rally. CNA photo April 19, 2025](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dad65bde-2270-4078-acfb-50d1b02c42ea_800x533.jpg) A rally on 19 April supporting Lai Ching-te’s recall campaign. Source: CNA On Saturday, there was a large rally in Taipei under the banner of *“Reject United Front, Defend Taiwan”*. It’s been on everyone’s minds, including Substack writer [Angelica Oung](https://taipology.substack.com/p/can-trumps-tariffs-make-the-kmt-great). In essence, the rally was organized to support President Lai Ching-te’s recall campaign of KMT lawmakers suspected of collaborating with the CCP. The United Front refers to the CCP’s “United Front Work Department” influence operations. Let me give you a backdrop. Current President Lai Ching-te is from the Democratic Progressive Party (DPP). But the Legislative Yuan (Taiwan’s parliament) is controlled by the opposition alliance, which includes the Kuomintang (KMT) and Taiwan’s People’s Party. The fact that the DPP does not control the legislature has led to an impasse and dirty methods to gain control. The Chinese government used to be run by the KMT. When the communists took over Mainland China in 1949, the KMT and its supporters fled to Taiwan and moved the Republic of China's capital to Taipei. KMT quickly introduced martial law in Taiwan under former military leader Chiang Kai-Shek, perhaps to combat communist interference. Martial law was then lifted in 1987 under his son Chiang Ching-kuo, and Taiwan has been a democracy ever since. Since that time, KMT politicians have turned increasingly closer to their former enemy, the Chinese Communist Party (CCP). President Lai Ching-te’s DPP, on the other hand, wants Taiwan to remain independent from Mainland China, with no ambitions of ever returning to the mainland. ![President Lai Ching-te addresses an event in New Taipei on Monday to commemorate the late pro-democracy movement pioneer Nylon Cheng. CNA photo April 7, 2025](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f2db2ba5-948c-4592-83df-4c872ab2a09d_800x450.jpg) President Lai Ching-te. Source: CNA The CCP’s influence campaigns have intensified in recent years. The DPP is now accusing dozens of KMT lawmakers of working for the CCP and undermining national defense. A key sticking point is that the DPP is trying to increase Taiwan’s defense spending, in line with US demands. But the KMT is instead pushing for lower defense spending, leading to angst among some Taiwanese. In Taiwan, lawmakers can be “recalled” if enough votes are gathered from the population. KMT lawmakers have been the primary targets of the current campaign, and 7 seem to have reached the second-stage threshold for recalling them from Taiwan’s parliament. If the lawmakers are pushed out in favor of DPP lawmakers, then the DPP could theoretically gain control of the legislature and get its budget approved. KMT has responded by trying to introduce a law to shift national security powers away from the president and into the hands of the KMT alliance-controlled legislature. Meanwhile, President Lai Ching-te is trying to tighten restrictions on trade with Mainland China. He’s also pushed to send home CCP activists operating on Taiwanese soil. He’s particularly worried about Beijing forcing Taiwanese companies to expand their investments in China, and what he claims to be organized intellectual property theft. So Taiwanese politics are messy, not unlike South Korea. Taiwanese are well aware of the methods that the CCP uses to try to take control of the Taiwanese government. But whether Lai Ching-te will succeed in his quest to recall KMT lawmakers and achieve his political objectives remains unclear as of April 2025. --- # 2\. US tariffs are a clear negative One of the key takeaways from the trip is that Taiwan will be at risk of US tariffs on Taiwanese goods. The economy was more or less built on the back of the demand for its goods and services in the United States. Now that US President Donald Trump is threatening to raise tariffs on East Asia’s export-dependent nations, Taiwan is at risk weaker export demand. Trump has suggested a tariff of 32%. This rate will be implemented on Taiwanese goods exports in 90 days unless the Taiwanese government can find a deal that works for both sides. Suffice it to say that US tariffs of 32% would be brutal for Taiwan’s export industry. Taiwan’s export/GDP ratio is almost 70%, an incredibly high number. ![Taiwan – belated export strength](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/135236b9-7691-4c0c-bfc4-47b4223c2fc3_972x589.png) Taiwan’s trade balance with the US has risen dramatically in the past few years. Source: [East Asia Econ](https://www.eastasiaecon.com/?ref=asiancenturystocks.com) So what exactly are Donald Trump’s demands? One seems to be that voiced by Elbridge Colby — that Taiwan needs to increase its defense spending to 10% of GDP. Taiwan’s government debt/GDP is only 29%, so it certainly has the capacity to ramp up budget deficits. Taiwan’s foreign minister recently said: > *“In response to President-elect Trump's call for Taiwan to demonstrate a stronger commitment to self-defense, *we are of course ready to increase our defense budget*”* But given the impasse in the Legislative Yuan, it seems unlikely that Lai Ching-te can meet that demand anytime soon. Another one of Trump’s demands is a reduction in the bilateral trade deficit with Taiwan. The purchase of US defense equipment would certainly decrease the surplus. Buying US agricultural goods, such as pork, would also help, but would likely lead to a widespread backlash in Taiwan. The proposed 32% tariff has been reduced to a 10% rate during an initial 90-day grace period. Taiwanese President Lai Ching-te has been well-behaved and not retaliated against Trump’s tariffs. So, in my view, the eventual tariff will probably end up closer to 10% than 32%. In the near term, even a 10% tariff is likely to impact US demand for Taiwanese products, especially for lower-margin items such as textiles and simpler electronic components. So, expect weak macroeconomic data from April 2025 onwards. --- # 3\. Annexation seems unlikely ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b844e86f-54ae-41e2-bda0-708b3ba982e5_1060x707.jpg) Source: Getty Images While the Taiwanese government is only spending 2.5% of its GDP on defense, it’s probably not at risk of an amphibious invasion. As I’ve written in the past, it would be incredibly challenging to [annexe the island](https://www.asiancenturystocks.com/10-things-i-learned-from-ian-eastons/). American military planners once concluded that a five-to-one superiority would be needed to secure a victory, given the dense cities and mountainous environment. And landing such forces on an island 160 kilometers away from Mainland China cannot be easy, either. There would be significant risks for Xi Jinping on a personal level if a campaign fails. It could lead to a revolt against the CCP by the country’s own people. Xi’s hold on power could well vanish. Some in Taiwan believe that the CCP will never be able to take control of the island. And they seem to be better informed than almost anybody. For example, after the spread of COVID-19, Taiwan was one of the first countries to close its borders, recognizing the problem earlier than the rest of the world. The same goes for cross-border influence. The threat seems more political. I can see a future where the KMT regains power and agrees to specific demands raised by the CCP. A blockade coupled with an ultimatum could force the legislature to grant the CCP’s wishes, without any actual fighting on the ground. For example, we could well see a resurrection of the [2014 Cross-Strait Service Trade Agreement](https://en.wikipedia.org/wiki/Cross-Strait%5FService%5FTrade%5FAgreement?ref=asiancenturystocks.com), which was set to allow partial CCP ownership of media outlets, greater economic linkages and an influx of Mainland Chinese to Taiwan. The reality is that Taiwanese have been living with the threat for 75 years. The only difference now is that 1) the CCP has dramatically ramped up military spending, and 2) the United States has deserted its past ally, Ukraine. That has led some to question whether it would desert Taiwan in a time of crisis, too. I came away from the trip thinking that I’ve probably overestimated the risk of a full-blown annexation of the island. Practically nobody in Taiwan is in favor of communist control. Taiwanese will certainly fight to avoid letting the island *“becoming another Xinjiang”*, in one person’s own words. I also believe that the Japanese are serious about intervening in any conflict, as it has a history with Taiwan being a former Japanese colony for 50 years. A slow takeover from the inside seems much more likely than an all-out war. --- # 4\. The currency is undervalued Another takeaway from the trip is that the New Taiwan Dollar (NTD) feels undervalued at the current rate of 32.5 to the US Dollar. A high-quality meal at a casual dining restaurant costs perhaps US$8, compared to at least US$15 in Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4189fc84-68d1-4558-a786-98c57f764361_1024x791.jpg) A breakfast with egg pancake and soy milk costs US$1.5, far less than in Singapore, too. Donald Trump has criticized East Asian nations for keeping down the appreciation of their exchange rates. And Taiwan is certainly one of the countries that has actively manipulated its exchange rate to spur economic growth. Taiwan has a large current account surplus, so the Taiwanese currency should, in theory, be on an upward trajectory. Taiwan’s manipulation of its exchange rate is evident from the fact that the government has accumulated foreign exchange (FX) reserves. It currently has FX reserves of US$578 billion, around 71% of GDP compared to just 18% in China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aa9dd4be-29c3-4fc9-9a7f-728ce57fba8f_1682x710.png) Taiwan FX reserves. Source: Trading Economics But Taiwan also uses other methods to suppress its currency. It seems that its insurance companies have moved heavily into USD-linked assets in a search for yield. Taiwanese banks also have significant foreign currency exposures, partly due to their role in restricting capital inflows. A few years ago, I was bewildered by the fact that [Taiwan’s 10-year government bond](https://tradingeconomics.com/taiwan/government-bond-yield?ref=asiancenturystocks.com) yielded less than 0.5%. But then again, if its currency has the potential to eventually appreciate 50% against the US Dollar, who cares about the near-term yield? From that perspective, I can see why locals have been willing to save in high-priced residential property or accept minuscule yields. They know that the currency trades significantly below its fair value. --- # 5\. Housing has become expensive ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/88cad3d5-1468-420c-ab33-aeb9bf0b871d_1030x1372.jpg) An old housing block close to Elephant Mountain 象山 Much of the housing in central Taipei looks dilapidated. Apparently, 70% of the housing units are [30 years or older](https://x.com/kaiwloka/status/1913940891552956716?ref=asiancenturystocks.com). The state of Taipei housing is hard to square with the fact that Taiwan’s PPP-adjusted GDP per capita is actually close to US standards. The living standards between the US and Taiwan don’t seem comparable at all, at least not in terms of housing. One problem seems to be that redevelopment of any apartment block needs the approval of 100% of tenants. When apartments are owned by multiple children or grandchildren of the original owners, it becomes almost impossible to agree on redevelopment, even when it makes financial sense. So while owners may feel secure owning freehold property, the quality of that property might not be much to write home about. It’s also a fact that Taipei’s residential property prices are incredibly high. According to this website, the [price/income ratio](https://www.numbeo.com/property-investment/in/Taipei?t&ref=asiancenturystocks.com) is 33x, meaning that it takes 33 years of saving all income to be able to buy a property if you’re single. The gross rental yield in the city center is less than 2%. And prices continue to go up across both Taipei and nearby cities such as Taoyuan and Hsinchu: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4f6ab088-ac6c-4da3-b32f-0599a62c79ea_1996x1038.png) Source: MacroMicro One explanation is the influx of Hong Kong people to Taiwan since the national security law was introduced in 2020\. Another explanation is that a great deal of wealth has been created from Taiwan’s trade with the United States, as it has skyrocketed in recent years. The average Taiwanese may not have benefitted much from TSMC’s success. But some individuals at the top have, and they may have ploughed their money into residential property. Great for them. But not so great for the average Taiwanese looking to buy property. Perhaps that’s why Taiwan’s birth rate has dropped to just 0.9\. Housing has become unobtainable, making some young Taiwanese postpone marriages and having children. It’s a pity, in my view. --- # 6\. The current watch list ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/573e9928-28e1-4510-9762-b0a0d958aa1a_1612x1210.png) _This post is for paying subscribers only._ ### 10 Questions with Jussi Askola URL: https://www.asiancenturystocks.com/10-questions-with-jussi-askola/ Last updated: 2025-04-18T04:00:52.000Z Global REIT expert. Estimated reading time: 13 minutes _This post is for paying subscribers only._ ### Kina Securities meeting (KSL AU) URL: https://www.asiancenturystocks.com/kina-securities-meeting-ksl-au/ Last updated: 2026-01-23T13:54:04.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Kina Securities at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5666d157-176d-445a-bf2a-dc5cff4edfd0_960x540.png) Last week, I had the pleasure of meeting the senior management team of [**Kina Securities**](https://finance.yahoo.com/quote/KSL.XA/?ref=asiancenturystocks.com) *(KSL AU — US$193 million)* — a Papua New Guinea- (“PNG”) based commercial bank listed on the ASX. Participants included Kina Securities’ CEO Ivan Vidovich and CFO Johnson Kalo. The bank trades at a modest P/E ratio of 8.2x with a dividend yield of 9.2%. While the share price has risen recently, it remains well below its all-time high in 2019. Having recently written about frontier market commercial bank [**Halyk Bank**](https://www.asiancenturystocks.com/halyk-bank-hsbk-li/), I wanted to understand how the PNG banking market compares to other frontier markets. Specifically, I wanted to understand whether there might be an upside in PNG’s private sector credit penetration and whether banking super-apps might help bring individuals into the formal economy. ``` Table of contents: 1. The PNG macro backdrop 2. Introduction to Kina Securities 3. The bull case for Kina Securities 4. The upside from digital services 5. Kina’s capital allocation 6. Conclusion ``` --- # 1\. The PNG macro backdrop Papua New Guinea (“PNG”) is located east of Indonesia and north of Australia. Its capital is Port Moresby, but most of the population lives in rural areas. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cade3783-acbf-48af-b1d4-b755e13c23e1_1341x805.jpg) Source: Getty Images It’s a small country. It has a population of 12 million people with a median age of just 21\. The population growth has been close to 2% per year, though falling. With an aggregate GDP of US$31 billion, GDP per capita remains low at just US$2,600. There have been tribes on the island for at least 50,000 years. Portuguese explorers came in the 16th century, calling the island “Papua”, referring to the frizzy hair of the local Melanesian people. In the 19th century, the Dutch claimed the Western part of Papua, the Germans the Northern part and the British the Southeastern part. Eventually, the Western part of Papua came under Australian administration, where it remained until independence in 1975\. The new country’s new became Papua New Guinea (“PNG”). Today, most of the population lives in the fertile central highlands. Poor employment opportunities in cities mean that most of the population survives on simple farming, with crops such as coffee, cocoa, and palm oil. Only 14% of the population live in cities such as Port Moresby, with its \~400,000 population. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dc9b9d02-e328-4a86-812b-799ca0b81809_1001x750.jpg) Stilt houses in Port Moresby. Source: Getty Images PNG has a mixed reputation. It’s known as a violent country, with over 800 tribes— each with their languages — clashing in and outside of cities. Women, in particular, are advised to take precautions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fa850a91-6af4-4701-8675-4c6a90f5dc7a_1061x707.jpg) Locals selling betel nuts, the drug of choice in many of PNG’s coastal regions. Source: Getty Images It is a resource-rich country, however. It has plenty of natural gas, crude oil, and gold developed by global resource companies such as Exxon Mobil, Total and Santos. Resource extraction is about 30% of GDP and is likely to grow. [Four major resource projects](https://www.thenational.com.pg/investments-worth-k111-billion/?ref=asiancenturystocks.com) are in the pipeline with aggregate investments of about US$30 billion. Hopefully, those will yield benefits for years to come. That said, PNG’s real GDP per capita growth has been modest in the past: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/615e19cd-11ae-4273-b3f8-b950fccfa9be_1554x904.png) Real GDP per capita, Papua New Guinea Politics have been stable. There have been elections since 1964, when it was still under Australian administration. The current administration under President James Marape has been in charge since 2019\. Many of the institutions match those of its former administrator, Australia. The country’s currency is the “Papua New Guinean Kina” or simply “Kina,” abbreviated as “PGK.” One US Dollar is worth around 4.1 PGK. I don’t expect significant volatility in the exchange rate. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2aec60b8-247e-4918-aac3-eae381e53397_2150x1494.png) The US Dollar/ Papua New Guinean Kina exchange rate. Source: Trading View PNG’s current account balance shot up in 2014 thanks to a surge in LNG exports, supporting the currency: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7434085f-813e-4184-b2fd-f1ba2cedec73_1534x860.png) PNG current account balance. Source: Trading Economics The country’s budget deficits are modest at around 4% per year, and inflation is about 4-5% per year — better than many other frontier markets. So overall, I think the macroeconomic backdrop is favorable. Especially when you consider that PNG’s private sector credit penetration is only 17%, with 80% of the population remaining unbanked. That’s where the opportunity is for the nation’s commercial banks, including challenger bank Kina Securities. --- # 2\. Introduction to Kina Securities ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/455db69f-7445-48e7-8a51-355c27438cda_1174x882.png) Kina Bank’s headquarters in Port Moresby Kina Securities is a one of the larger financial services companies in Papua New Guinea, with a 14% market share in terms of deposits. The company was formed in 1985, focusing mostly on finance and brokerage services in PNG. A few months after Kina Securities’ IPO, it acquired the PNG operations of Malaysia’s Maybank. Then, in 2019, it acquired the PNG retail and SME segment of Australian bank ANZ. In September 2020, Kina Securities conducted a secondary offering to finance the acquisition of Westpac’s PNG and Fiji banking operations. But regulatory authorities in Papua New Guinea halted the acquisition on antitrust grounds. It looks like the regulator wanted the nation’s banking licenses to remain spread across at least a number of companies. But despite the failure to acquire Westpac’s PNG and Fiji operations, Kina Securities has done well. The capital it raised in 2020 has been put to use, and it’s been able to grow organically since that time. From 2019 to today, Kina has increased its lending market share from 10-11% to 17%. As of 2025, Kina Securities has two main segments: - **Kina Bank**: Typical commercial bank offering corporate loans, home loans, and credit cards. It has 18 Kina-branded bank branches and 2 co-branded branches with micro-lending partner MiBank. - **Kina Wealth**: Investment advice, fund management e.g. for superannuation funds, stock brokerage. It has roughly Papua New Guinean Kina Roughly half of the bank’s revenues come from lending and 50% from non-banking services such as payments or wealth management services. ![Kina's Westpac offer finally rejected – what's next? - Devpolicy Blog from the Development Policy Centre](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2ec4569f-d663-424c-b6bd-81281ce74128_2560x1702.jpg) Competitor [**BSP Financial**](https://finance.yahoo.com/quote/BFL.XA/?ref=asiancenturystocks.com) *(BSL AU — US$2.2 billion)* is the market leader in PNG and benefits from its close relationship with the government. The reason is that BSP took over former state-owned bank Commonwealth Bank when it was privatized in the year 2000\. Thanks to BSP’s scale, its cost/income ratio is just 41%, giving it somewhat of an advantage. On the other hand, Kina Securities seems to have an advantage in its technology stack, being at the forefront in terms of the payments market. Kina also has strong relationships with PNG superannuation funds, including the NASFUND, with about PGK 16 billion in funds under management. --- # 3\. The bull case for Kina Securities There’s plenty of upside to further growth. What’s exciting about the broad macro picture is not just PNG’s population growth, but also the fact that 80% of the population remains unbanked. And the weighting between corporate and retail sector within the banking sector is another 80/20 split, suggesting there’s potential for retail banking to grow. Kina’s own loan-to-deposit ratio is only 70%, below the regulatory ceiling of 90%. And its capital adequacy ratio is a comfortable 18%, well above the regulatory minimum of 12%. So, Kina’s balance sheet has room to grow. Last year, the loan book grew by +13%. This year, Kina expects the loan book to grow single-digits or low-double-digits. There’s been an uptick in the non-performing loan ratio in the past few years, perhaps as consumers feel the pinch from higher inflation. The NPL ratio is currently 8.1%. And most of the problems are in the unsecured personal loan portion of the portfolio. So Kina took action in the fourth quarter of last year, re-evaluating their product positioning to make sure the NPL ratio remains under control. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c06e5bb3-8a36-4f82-9189-8b49ac75650b_2012x1138.png) But still, Kina’s banking operations remain fundamentally profitable. Kina’s net interest margin is currently 5.8%. While the PNG’s policy rate has risen from 3.0% in 2022 to 4.0% today, the net interest margin has remained steady and is probably sustainable. On the funding side, Kina relies mostly on demand deposits at 68% of the total, with little borrowing otherwise. Between 2020 and 2023, Kina’s deposit growth was about 10-13% per year. It’s been weaker recently, however, due to an overall decline in banking system deposits. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f4063d9f-e530-4a1f-8b64-7b5dd416628c_2460x822.png) I suspect this decline is due to corporations moving capital to foreign currency deposits transferred overseas, perhaps to take advantage of a higher-yielding US Dollar. Other than net interest income, there are also opportunities in fee & commission revenues. A few years ago, Kina made 90% of its banking income from lending. But today, it enjoys an almost 50/50 split between interest and non-interest income. Such income includes foreign exchange transactions, payments and digital banking. There’s also a smaller portion of about 8% from the wealth management side of the business. But what’s most exciting is probably the digital banking side, where Kina has proven adept at innovation. --- # 4\. The upside from digital services The payment business has been a bright spot for Kina. After the acquisition of ANZ’s PNG banking business in 2019, Kina grew its exposure to point-of-sale (POS) machines in retail shops. It was one of the first in PNG to issue EMV chip cards to its retail customers. ![Kina Bank VISA Debit Card Fees - Tech Pacific](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d7377e68-3fc7-4071-8773-d84eedc3aa41_612x474.png) Kina’s take rate on a local credit card transaction is typically 1.0%, and that will flow straight through to the bank’s top-line revenues. Compared to other regions, those margins are reasonably healthy. The bank also works with local fintech companies and has a strategic partnership with NuPay, which is working with the PNG government to digitalize its services. NuPay makes money off each transaction and then shares that income with Kina in a joint venture. Given its possession of this Internet payment gateway, Kina believes that it is best positioned when it comes to e-commerce. It has a front-end Internet payment gateway and a back-end Internet payment switch that routes transactions to the correct payment provider. The NuPay model is where they simply run the front-end of the payment — the website that pops up — and then connects to the back-end payment switch that Kina operates. In other words, NuPay is the distributor of digital payments, while Kina is the processor. The digital payments market in PNG is growing by double-digits. Telecom operators such as Digicell have built around 800 towers across the PNG and have another 400 under construction. With these towers, they’ll soon reach 80-85% of the population. Prices for mobile plans have come down significantly, with K400 plans having come down to, say, K40 (about US$10 per month). With mobile network coverage, there’s a good chance that PNG’s unbanked population will finally start to use regular banking services. Kina is now developing new mobile and desktop banking apps. They’re building a new corporate Internet banking service to try to get ahead of the market. And they’re also developing a digital wallet with lower payment thresholds. What might the future look like? In nearby Fiji, the most successful banking innovation has been the M-PAiSA digital wallet, which originated from Kenya. ![Transfer money from ANZ directly to M-PAiSA](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/831fe913-7161-4b77-adb3-1f1a9713aa27_1280x720.jpg) M-PAiSA allows users to transfer money to each other and deposit and withdraw money from agents such as retail shops and kiosks. The app quickly captured a big share of the non-bank payment market. Kina is now trying to replicate its success in PNG. BSP has a rudimentary digital wallet product called [Wantok](https://www.bsp.com.pg/personal-banking/wantok-wallet/?ref=asiancenturystocks.com). Kina is developing a supposedly more sophisticated digital wallet. These are new initiatives, so it’s too early to tell whether they’ll be successful. In 2020, Kina invested in an Internet payment gateway, a digital equivalent of a POS terminal that collects payment information from the customer to the payment processor. Kina is also experiencing strong growth in its online bill payments, from which they take a cut. --- # 5\. Kina’s capital allocation Kina’s capital allocation has been mixed. The bank’s return on equity has consistently been in the mid-teens. The 2020 secondary offering was done at close to 1x book. From 2019 to 2021, the share count rose by +75%. Management is remunerated based on a balanced scorecard. Key inputs include financial, customer, people, and risk metrics. Net profit growth is heavily weighted in the calculations. Other key metrics include lending growth, the non-performing loan ratio, customer experience, market share growth, etc. It seems that many of these metrics are on an aggregate basis rather than per share. The dividend payout ratio has generally been 60-80%. Management is guiding for a long-term payout ratio closer to the mid-to-lower end of that range. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fc692f44-05a2-4f14-bdb1-6bc3ce7657d2_2444x806.png) Share buybacks? They are not on the agenda right now. The company is dual-listed on the PNGX and ASX, with the latter counter being significantly more liquid. Kina is looking at Tier 2 capital options to support future lending growth, and they’re hoping to complete it within the next six months. --- # 6\. Conclusion Both [**Kina Securities**](https://finance.yahoo.com/quote/KSL.XA/?ref=asiancenturystocks.com) *(KSL AU — US$193 million)* and its larger competitor, [**BSP Financial**](https://finance.yahoo.com/quote/BFL.XA/?ref=asiancenturystocks.com) *(BSL AU — US$2.2 billion)*, are dual-listed on the Papua New Guinea Stock Exchange (PNGX) and the Australian Securities Exchange (ASX). Kina trades at a trailing 8.2x P/E with a 9.2% dividend yield and BSP at a trailing 8.3x P/E with an 8.5% dividend yield. The big question is how the PNG banking sector is going to evolve. Kina’s NPL ratio has risen dramatically in the past two years, and it seems reasonable to expect provisioning for credit losses to rise. With a 5.8% net interest margin and a growing payment business, however, the problems in the unsecured personal loan book seem manageable. With limited inflation pressures, it seems plausible that PNG’s policy interest rate will eventually decrease. Given the large current account surplus, I’m not worried about the exchange rate. And there’s an enormous opportunity if and when PNG’s large unbanked population starts to use basic financial services. I’m finding it challenging to judge whether BSP’s Wantok digital wallet will be a game-changer. Or whether Kina will be the bank that takes market share in the transition to mobile banking. It’s an exciting story, for sure. If they can replicate parts of what Kaspi has achieved in Kazakhstan in terms of digital banking services, then the Kina story is definitely worth tracking. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-7f8/ Last updated: 2025-04-14T01:32:35.000Z _This post is for subscribers only._ ### Nippon Parking Development (2353 JP) URL: https://www.asiancenturystocks.com/nippon-parking-development-2353-jp/ Last updated: 2026-07-31T02:00:24.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Nippon Parking Development at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Nippon Parking Development**](https://finance.yahoo.com/quote/2353.T/?ref=asiancenturystocks.com) *(2353 JP — US$477 million)* — also known as *“NPD”* — is a Japanese lessor of parking spaces and an operator of ski resorts and theme parks. It’s the brainchild of lifelong entrepreneur Kazuhisa Tatsumi, who literally built the company in his garage in the early 1990s. In Japan, developers are generally required to build 1/3 parking space per 100 square meters of floor area for any large building. This is known as “legally mandated parking space”. The purpose of legally mandated parking spaces is to keep parked vehicles off roads. The government wants to minimize congestion and reduce the risk of traffic accidents. However, legally mandated parking has led to an oversupply of parking space in many urban areas across Japan. Kazuhisa Tatsumi saw an opportunity to make money from the excess supply of parking spaces. He would enter into long-term contracts with property owners to take them over and then sublease individual parking spaces on a monthly basis. It turns out that Tatsumi’s sales-focused organization was adept at taking at finding underutilized assets and then turning them around. He eventually formulated the strategy as NPD’s *“Happy Triangle”* — finding solutions to underutilized assets that benefit owners, users, and society alike. The same type of thinking led Nippon Parking Development to the ski resort industry in the mid-2000s. From that point onwards, it acquired a collection of eight ski resorts in central Japan, half of which are in the Hakuba Valley. These resorts now belong to the separately listed subsidiary [**Nippon Ski Resort Development**](https://finance.yahoo.com/quote/6040.T/?ref=asiancenturystocks.com)*(6040 JP — US$129 million)*. NPD acquired snow machines to increase utilization, built terraces overlooking beautiful mountain valleys, and introduced a kids' loyalty program. These efforts helped increase the attractiveness of the company’s ski resorts. In the mid-2010s, NPD entered the theme park industry by acquiring the Nasu Highland Park and, later, a nearby family ranch. These were mismanaged before the acquisition and are now thriving. Some measures taken included building indoor roller coasters for rainy days, seasonal character events and festivals, family-friendly features such as a dog park and barbecue areas, and a new area with rental villas for overnight guests. Meanwhile, the parking rental business has continued to grow steadily. Over the past 20 years, Nippon Parking Development’s earnings per share has grown at a +12% annual rate. Meanwhile, nearly 60% of earnings have been paid out as dividends, on top of modest share buybacks. Kazuhisa Tatsumi’s genius can be gleaned from the company’s exceptional 35% return on equity. The outlook for the parking business is positive. About five years ago, the company launched a website called Nippon Parking Search, which allows customers to search a growing inventory of roughly 200,000 parking spaces. The ski resort business had a record year in 2024 thanks to snow in the Hakuba Valley throughout March and robust inbound tourism. However, I worry that the recent strengthening of the Japanese Yen will cause overseas tourists to shy away from Japan, so I’m expecting a sequential decline in ski resort earnings. The theme park business is doing well. Last year was unusually rainy, so it’s possible that earnings will recover. Visitors are mostly domestic tourists, including students on school trips. The stock currently trades at a 12.9x headline P/E. Now that the Yen has strengthened, I expect earnings to come off slightly and continue to grow from next year forward. That’s an unusually low multiple compared to its peers and its historical level 25x. Of course, bad weather can occur in any year. For example, the exceptionally warm winter of 2016 caused ski resort earnings to plummet, and that could certainly happen again. Volatility in the Yen exchange rate can also cause the number of visitors to drop. On the parking side, the biggest risk is regulatory. If a new regulation improves parking space utilization, that could reduce the need to hire NPD to find parking lot users. However, with the new Nippon Parking Search website, it looks like NPD has built a moat that will be difficult for competitors to cross. On the positive side, Nippon Parking Development announced last month that it’s planning to IPO its theme park subsidiary on the Tokyo Stock Exchange. I’m hoping that an IPO could demonstrate the business's intrinsic value. And perhaps free up cash for further development of the company. I’ll keep you posted. **NOTE! This is just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Tariff chaos URL: https://www.asiancenturystocks.com/tariff-chaos/ Last updated: 2025-04-09T05:22:02.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1243adee-8bf1-40a0-9404-24b4757acbee_1273x848.jpg) A container port in Shenzhen, China. Source: Getty Images Trump’s tariff war has caused Asian equities to decline considerably. In this post, I’ll try to understand Trump’s intentions. I’ll discuss how Asia is going to be impacted by the tariffs. And I’ll also mention a few companies that will do fine regardless of whether Trump’s tariffs stay or not. I don’t claim to be an expert. But as an investor, I have to adjust to this new reality and respond accordingly. So this is simply my attempt at making sense of the recent chaos. ``` Table of contents 1. Trump's tariff war 2. The impact on the United States 3. The impact on Asia 4. Ten highlighted companies 5. Conclusion ``` --- # 1\. Trump's tariff war In 2021, I wrote a post about how East Asia became wealthy. It was heavily inspired by Joe Studwell’s books and Jonathan Anderson’s research at Emerging Advisors Group. [The East Asian development modelDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a5f8fe4e-0cf7-4692-ab3f-f1f337688c4d_300x300.png)](https://www.asiancenturystocks.com/the-east-asian-development-model/) The gist of the post was that East Asia developed thanks to the export of manufactured goods. The invention of the container in 1956 brought down the cost of transporting goods across the world. Western companies outsourced manufacturing to factories in Japan and later South Korea, Singapore and Taiwan. Over time, technological know-how spilt over to local companies, who then started competing in world markets on their own terms. I’m thinking of brands such as Sony, Samsung and TSMC. But the process didn’t happen organically. All of these countries adopted industrial policies to boost exports and accelerate this transfer of technological know-how. Some of the methods used included: - Financial repression to channel savings into investments that facilitate trade - Sterilizing capital inflows so as to maintain exchange rates weaker for longer - Infant industry protection to allow local companies to survive - Direct subsidies, including lower taxes, cheap land and access to loans Later on, communist nations such as China and Vietnam copied the same industrial policy, taking it to the next level. A lack of EU-style environmental laws made it more profitable to outsource manufacturing to these countries. A lack of intellectual property protection meant that the transfer of technological know-how could happen faster, with fewer hurdles. And they’ve also limited access to foreign brands through a variety of methods and thus maintained high budget surpluses. So I can certainly see where Trump is coming from when he says that he’s seeking to rebalance the American economy in favor of domestic manufacturing. He wants manufacturing to move back to America, not just to create middle class jobs but also for geopolitical stability. Trump’s realignment push began during his first term in office from 2016 to 2020\. Back then, he raised US tariffs on Chinese goods to match theirs. This led to tit-for-tat retaliation and eventually 20% tariffs in both directions between the US and China, not counting non-tariff trade distortions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/37ebc2e8-5b08-4b9f-b40e-3e7a5ef29f66_1220x1186.png) Source: PIIE This year, he’s upped the ante significantly. Trump introduced another 10% tariff on Chinese goods on 4 February 2025 to punish the Chinese Communist Party for its alleged complicity in the US fentanyl crisis. Then came yet another 10% tariff on Chinese goods on 4 March 2025\. Additional tariffs were imposed on steel, aluminium, semiconductors, pharmaceuticals and autos. However, Trump was just getting started. On 2 April 2025 — the day Trump calls “Liberation Day” — he imposed a universal 10% tariff on all imports to the United States. Countries seen as having mercantilist trade policies were hit with tariffs of 11-50%, with most of Asia hit with 24%+ rates. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bcc4f79d-9fa2-46f3-9259-5e50f32bd1af_1024x683.jpg) Source: Getty Images In the past week, we’ve seen the Chinese government retaliating with an equal 34% tariff on US goods. Trump retaliated yet again with another 50% tariff, putting the total at 104%. Such tariffs would put Chinese manufacturing at an enormous disadvantage and cause an immediate negative impact on the Chinese export industry. So what is Trump’s longer-term vision? From my understanding, he’s been heavily inspired by economic advisors Peter Navarro and Stephen Miran. To understand their worldview, I read through Miran’s November 2024 paper “[A User’s Guide to Restructuring the Global Trading System](https://www.asiancenturystocks.com/content/files/documents/FG/hudsonbay/research/638199%5Fa%5Fusers%5Fguide%5Fto%5Frestructuring%5Fthe%5Fglobal%5Ftrading%5Fsystem.pdf)” and found it a reasonable take on the predicament the US finds itself. Miran makes the point that the accumulation of US$12 trillion of foreign exchange reserves has caused distortions in the US economy, most importantly by pushing up the US Dollar exchange rate. If true, then trade policy has been positive for US consumers and negative for US producers. He thinks that if trade distortions are allowed to continue, they could plausibly lead to a hollowing out of the US manufacturing base, a loss of middle class jobs and a reliance on foreign adversaries. He views the current trajectory as being unsustainable. What Miran wants is for the US Dollar to weaken, for manufacturing to move back to the United States and for trade deficits to narrow. ![Charted: What's Driving The U.S. Trade Deficit?](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e7cb0c20-0eea-4671-a3c4-07264109194f_1200x1153.jpg) His suggestion is, therefore, to introduce reciprocal tariffs to offset the distortionary policies already in place in the rest of the world. As a starter, Miran suggests a 10% flat tariff on the rest of the world. And then additional tariffs on countries that have: - Tariffs on the import of US goods - A history of suppressing exchange rates - Limited market access to US firms - No respect for intellectual property rights - Enabling the transhipment of goods to hide the country of origin - Not living up to their NATO obligations - Siding with the Russia-Iran-China axis geopolitically Since China performs poorly in most of these respects, it’s understandable that China has been hit by the highest tariff rates so far. But other countries in Asia have also been hit by tariffs, including Vietnam Taiwan, South Korea and Japan. More on that later. --- # 2\. The impact on the United States In his paper, Miran recommended a gradual implementation of tariffs, to allow economic actors to adjust their behaviors gradually. He suggested increasing tariffs by 2% per month until the ultimate targets had been reached. However, Trump has taken a far more aggressive approach by imposing tariffs immediately, effective today 9 April 2025\. This shock treatment is likely to lead to significant mark-ups on US imports from the early summer 2025 onwards, and reduced discretionary spending by US consumers. Given that Atlanta Fed’s GDPNow model had already estimated a near-term recession back in February, it seems likely that the additional tariffs imposed this month is going to cause even more pain for the US consumer. The US economy might already be in a recession. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fd686f7e-e54f-4e40-bd1e-683813d81099_650x534.png) Source: Atlanta Fed There are several precedents to what Trump is trying to achieve. When the Smoot-Hawley Tariff Act of 1930 was passed by the US Congress in June 1930, other countries retaliated with their own tariffs. Industrial production fell almost immediately and by 1933, US exports had dropped by over 60%. In economist [Ed Yardeni’s view](https://www.yardeniquicktakes.com/reprint-the-protectionist-road-to-depression-deja-vu-all-over-again/?ref=asiancenturystocks.com), Smoot-Hawley was the primary catalyst for the Great Depression. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a053ad2c-9a70-4d82-b587-1d3bdc079d22_547x411.png) Source: Yardeni QuickTakes I think that one would have to assume that with reduced discretionary household spending, a lower budget deficit, reduced immigration and delayed investments, economic growth will have to turn negative. Torsten Slok of Apollo said US layoffs could approach 1 million from the current tariffs alone. Since the Federal Reserve has a dual mandate to not only keep inflation low but also unemployment, it may become forced to act. Another question mark is the fact that 40% of Chinese exports to the US are not actually sold to end customers. Instead, they’re intermediate goods sold to US manufacturers. As such, I believe that companies like Boeing will lose in competitiveness vs Airbus until it’s been able to rearrange its supply chain away from Asia to the United States. But that’s a process that could take years. I also suspect that the consumer backlash will be massive. Consumers will see the cost of their iPhones going up 30% in one fell swoop. Meanwhile, the benefit of a longer-term reduction in payroll taxes will not be obvious to voters, so I suspect a Trump will eventually have to step back from his initial tariff rates. His tariffs might also be rolled by Congress, or by a new administration in 2029\. But the near-term picture looks challenging. --- # 3\. The impact on Asia The outlook does not look rosy for China, or its closest allies, either. US tariffs for most of Emerging Asia have ended up at 24-54%. The Philippines will be hit the least and China, Cambodia and Vietnam the most. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eff56ef6-2760-4dde-a019-cbc1cb2dda39_2104x1266.png) Source: Jefferies A confusing part of Miran’s paper is that he expects the US Dollar to strengthen initially thanks to reduced imports. But that sounds counterintuitive when he also wants to improve US competitiveness through a weaker currency. I’m not sure I buy into his argument about a stronger US Dollar. When consumers purchase a product from China, money flows out. But thanks to FX sterilization, it then flows back into the US, enabling greater borrowing and bidding up prices for financial assets. It’s also a fact that the net international investment position of the United States reached a record low in early 2024\. In other words, foreigners have been buying US assets en masse, pushing up US equities and perhaps real estate prices, too. ![U.S. International Investment Position, 4th Quarter and Year 2024 | U.S. Bureau of Economic Analysis (BEA)](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/737e8495-fff9-4f90-b65b-d3e095f7d8b7_504x457.png) If that money flows out, it will surely end up being negative for the US Dollar. Reduced economic growth, earnings downgrades could well hit equities, leading to a cycle of lower asset prices. The US Dollar looks expensive on a real effective exchange rate basis. It’s probably been propped up by the recent enthusiasm for fast-growing US technology companies. If the US Dollar weakening cycle ever begins in earnest, then I would expect foreign equities to start outperforming, though not necessarily in Asia as a whole. With the Trump administration intent on putting greater tariffs on the Russia-Iran-China league of nations, I think it would be foolish to bet on the resilience of their economies. I would personally much rather allocate capital to historical US allies such as Japan, the Philippines and Singapore, as they will be less likely to impose capital controls and more likely to support private sector entrepreneurship. Donald Trump does not appear to be stable nor a genius, but if Trump’s thinking reflects the vision that Miran outlines in his paper, I think the rational approach would be to avoid the Russia-Iran-China axis of countries. Countries such as Japan and Taiwan are more likely to be able to negotiate down their tariff rates and have strong incentives to continue trading with the United States. I also think their countries have the potential to appreciate their current low levels. Currency appreciation would not be positive for exporters but certainly for companies selling services to the local population. --- # 4\. Five highlighted companies The last few days have been complete carnage. East Asian markets such as Japan, South Korea and Taiwan are down about 10-14% year-to-date. Hang Seng and MSCI China are up year-to-date but have fallen off a cliff more recently. _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-706/ Last updated: 2025-04-07T02:27:59.000Z _This post is for subscribers only._ ### Haad Thip meeting (HTC TB) URL: https://www.asiancenturystocks.com/haad-thip-meeting-htc-bk/ Last updated: 2025-11-19T07:29:50.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Haad Thip at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Last week, I had the great pleasure of meeting with Chief Financial Officer Amrit Shrestha and several of his colleagues at Coca-Cola bottler [**Haad Thip**](https://finance.yahoo.com/quote/HTC.BK/?ref=asiancenturystocks.com) *(HTC TB - US$193 million)*. The company is the exclusive producer and distributor of Coca-Cola products across Thailand’s 14 Southernmost provinces. The stock has performed beautifully over time, though sideways since 2021\. It trades at a 9.6x P/E ratio and a 6.4% dividend yield. In this post, I’ll discuss what I learnt from the meeting with Amrit and what the future holds for the Haad Thip. ``` Table of contents: 1. Introduction to Haad Thip 2. The growth journey until today 3. New product introductions 4. Haad Thip’s capacity expansion 5. A few question marks 6. Conclusion ``` --- # 1\. Introduction to Haad Thip I first wrote about [**Haad Thip**](https://finance.yahoo.com/quote/HTC.BK/?ref=asiancenturystocks.com) *(HTC TB - US$193 million)* in February this year: [Haad Thip (HTC TB)![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/478bcfa3-5c24-4bd8-8e15-6847f5a70b12_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/156710179/d0a9a1e5-986b-4dd4-bc6e-79f48cd77572/transcoded-1739077565.png)](https://www.asiancenturystocks.com/haad-thip-htc-tb/) It’s one of the very few Coca-Cola bottlers listed in Asia, dominating 14 states in the south of Thailand. Haad Thip’s primary business is buying syrup and blending it with other ingredients, putting the final beverage into bottles or cans and finally selling them to supermarkets, restaurants and other customers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/821c4038-1fb9-485d-98ae-ee43e5be005e_2150x890.png) The company’s economic moat is strong. Haad Thip faces practically zero competition in its key markets. Its contract with the Coca-Cola Company of Atlanta, Georgia, is long-lasting and tends to be renewed every few years without any issues. In Thailand, Coca-Cola is an incredibly strong brand name. The company has an 84% market share in carbonated beverages. It’s the gold standard — Pepsi or Est Cola don’t even come close. Since 2019, Haad Thip has been run by a man called Patchara “Dollar” Rattakul. I think he’s talented, with a great track record as Chief Operating Officer for over a decade before taking over as CEO. Under his watch, Haad Thip’s margins have improved drastically and the company continues to be a generous dividend payer. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff68859c-68be-4156-9236-5b0ebabd7e34_260x338.png) CEO Patchara “Dollar” Rattakul Haad Thip’s volumes have grown at a +4.4% CAGR in the past eight years. On top of volume growth, we’ve also seen price increases, including +6.0% in 2022 and another +1.5% in 2023. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45daedd9-a180-4db2-89e1-687e9fe52833_2146x732.png) The bull case for the Coca-Cola Company in Atlanta, Georgia, is its new CEO, James Quincey. Since taking over in 2017, he’s reworked the company’s incentive structure and allowed each subsidiary to experiment with product introductions. We’ve seen a number of new flavors and variants pop up, including a no sugar version of Coke that’s becoming increasingly popular. Haad Thip’s Coke Zero revenues are growing at over +20% annually. When I wrote my first deep dive in February, I projected a forward P/E of 9x. With a 70% dividend payout ratio, I expected the dividend yield to creep up to 7-8% in the next few years. However, a few questions remained. I wanted to ask Haad Thip’s management team about Thailand’s planned increase in sugar taxes and to what extent it would affect the company’s sales volumes. Another question mark was a broader trend towards healthy beverages and whether this trend could affect Coca-Cola’s future in Thailand. Finally, CEO “Dollar” Rattakul has been selling shares in the market. These three points have been weighing on market sentiment and could explain why the stock trades at just 9x P/E. But let’s hear management’s side of the story. --- # 2\. Haad Thip’s transformation ![Sustainable and profitable – Coca-Cola bottler Haad Thip is on the path to net zero - Krones](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4fc03da6-8aac-4112-8076-a3340a703a07_1240x826.jpg) Source: Haad Thip _This post is for paying subscribers only._ ### Portfolio review March 2025 URL: https://www.asiancenturystocks.com/portfolio-review-march-2025/ Last updated: 2026-06-04T10:53:25.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update March was rough for the portfolio as US tariffs started to be priced in. The portfolio value dropped -4.6% month-on-month. Since inception in October 2021, the value of the portfolio has now increased +38.9%, equivalent to a +9.9% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dc2c5df3-01f5-4e25-b67c-cdd7ce711e22_2980x992.png) [**Best Mart 360**](https://www.asiancenturystocks.com/best-mart-360-2360-hk/) reported steady growth, as did [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/) and [**Poper**](https://www.asiancenturystocks.com/poper-5134-jp/). However, trade-dependent companies such as [**Hartalega**](https://www.asiancenturystocks.com/hartalega-update-hart-mk/) and [**Samsonite**](https://www.asiancenturystocks.com/samsonite-1910-hk-2024-update/) declined considerably despite their already-low multiples. [**Pico Far East**](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/) also sold off, presumably due to its exposure to auto trade shows in China and beyond. Thai cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/) dropped close to 30% after reporting weak fourth-quarter numbers. Even [**Fairfax India**](https://www.asiancenturystocks.com/fairfax-india-fihu-cn-2024-update/) dropped despite largely positive developments in its core businesses. All eyes are now on Trump’s tariff negotiations. The tariffs are so high that I can’t imagine the US economy surviving them without a recession. Since the US administration is so hell-bent on eliminating trade deficits, Asian currencies will have to appreciate. I’m particularly bullish on the Japanese Yen. But let’s see whether Trump follows through on his tariffs. Trump has a history of shocking his counterparts early in negotiations and eventually settling for less. Hopefully, Asian governments will step up to the plate and negotiate trade deals that are more fair than they’ve been in the past. In any case, here is what the latest portfolio looks like as of 31 March 2025: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-6bd/ Last updated: 2025-04-01T03:37:38.000Z _This post is for subscribers only._ ### Travel notes: Pattaya URL: https://www.asiancenturystocks.com/travel-notes-pattaya/ Last updated: 2025-04-01T02:36:08.000Z Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-790/ Last updated: 2025-03-24T04:40:14.000Z _This post is for subscribers only._ ### Metrodata (MTDL IJ) URL: https://www.asiancenturystocks.com/metrodata-mtdl-ij/ Last updated: 2026-07-31T02:00:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Metrodata at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Metrodata**](https://finance.yahoo.com/quote/MTDL.JK/?ref=asiancenturystocks.com) *(MTDL IJ — US$410 million)* is Indonesia’s largest IT distributor. Notebooks, smartphones, and network equipment all flow through Metrodata’s logistics facilities before they are sold to customers. Almost all global consumer electronics brands sell through Metrodata, giving it a nearly complete product portfolio. In addition to distribution, the company serves as a system integrator (“digital solutions”): helping design, install and maintain complex hardware and software products from SAP, Workday, Cisco and others. Metrodata works with customers in the financial services, telecom, mining, and other industries to solve any possible IT issues. These two businesses have helped Metrodata compound its earnings per share at a 22% annual rate over the past two decades. There’s every reason to think that growth will continue, with deferred revenues growing +39% year over year in the first half of 2024. Distribution may seem like an industry ripe for disruption. But they do seem to serve an essential need, as evidenced by the success of IT distributors in other countries, including [**TD Synnex**](https://finance.yahoo.com/quote/SNX/?ref=asiancenturystocks.com) *(SNX US - US$11 billion)* in the United States, [**Daiwabo**](https://finance.yahoo.com/quote/3107.T/?ref=asiancenturystocks.com) *(3107 JP - US$1.5 billion)* in Japan and [**Dicker Data**](https://finance.yahoo.com/quote/DDR.AX/?ref=asiancenturystocks.com) *(DDR AU - US$935 million)* in Australia. In my view, the business model works because: - IT distributors offer quick and easy access to the local market for international consumer electronics brands. A company like Dell would have to build costly logistics infrastructure, educate a local sales force, learn to do credit analysis on each customer, deal with returns and warranty claims, and more. By turning fixed costs into variable costs, consumer electronics brands can minimize their own risk. - With scale, incumbents become hard to beat regarding delivery cost per unit. Large product portfolios also enable them to satisfy the needs of almost any customer, including value-added services such as installation and maintenance of, say, server equipment. The distributors become one-stop shops for solving any IT issues customers might have. While distribution historically represented most of Metrodata’s profits, that is no longer true. The system integration business is growing rapidly and already makes up half of the operating profit, properly adjusted. For that reason, Metrodata is more of a bet on cloud services, cyber security, and mobile payments than the sale of IT hardware itself. Within Indonesia, spending on software is growing at a +18% annual rate, and Metrodata sits in the middle of the entire industry. Today, the stock trades at a P/E multiple of 9x. Now, I will be the first to admit that global distributors all trade at relatively low multiples, with the median at 11x. However, you could well argue that Metrodata is no longer a pure distributor and should trade closer to the global system integrator or IT consultant peer group’s 20x P/E. So, from a sum-of-the-parts point of view, you’ll get closer to a 16x weighted P/E. In my mind, the big question is whether cloud services will diminish the role of system integrators. For now, they do not seem to be much of a threat, with partners moving to smaller clients and enjoying recurring maintenance revenues that are on par or better than their old, on-premise contracts. Another question is why Metrodata’s employee count stopped growing during COVID-19\. The hiring still hasn’t picked up. Could it be due to competition from Shopee, which has recently built extensive logistics infrastructure in Indonesia to support its local e-commerce platform? Finally, some investors worry that generative AI tools could disrupt system integrators. But as far as I can tell, the answer seems to be “no”. In fact, quite the opposite. Metrodata has picked up several AI-related projects, some in cooperation with Vietnam’s [**FPT Corporation**](https://www.marketwatch.com/investing/stock/fpt?countrycode=vn&ref=asiancenturystocks.com) *(FPT VN - US$7.4 billion)*. In the near term, we should see strong growth in Metrodata’s digital solutions segment as projects continue to ramp up after COVID-19\. I also suspect that Metrodata will benefit from Microsoft’s end of support for its Windows 10 operating system in October 2025\. It could lead to a new upgrade cycle for its corporate customers. So the base case, for now, seems to be “more of the same”. In other words, earnings compounding at a steady rate rate with a return on equity of about 20%. **NOTE! This is just a summary of the actual deep dive. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Links March 2025 URL: https://www.asiancenturystocks.com/links-march-2025/ Last updated: 2025-03-19T04:01:16.000Z 10 investment write-ups, 10 articles and 10 podcast episodes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-bc5/ Last updated: 2025-03-17T01:43:15.000Z _This post is for subscribers only._ ### Bottom-fishing in Indonesia URL: https://www.asiancenturystocks.com/bottom-fishing-in-indonesia/ Last updated: 2025-11-19T07:42:44.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/05e9c74c-c4aa-4881-bdc5-ea71a3d112df_1697x1131.jpg) Source: Getty Images I mentioned a few weeks ago that Indonesian equities have performed poorly. In my view, much the recent underperformance is due to new president Prabowo Subianto. Indonesians seem disgruntled by the new administration. There have been reports of corruption in his school lunch program. High interest rates and recent austerity measures have hurt consumer confidence. People are suspicious of Prabowo’s new sovereign wealth fund. I wrote about Prabowo last April, arguing that his military background was a concern and that his ascent potentially signals a return to a dictatorial past. [Indonesia after JokowiDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7c11b14b-42d8-4652-a8e7-69524fad5c2c_1485x990.jpg)](https://www.asiancenturystocks.com/indonesia-after-jokowi/) However, Indonesian stocks have now come down to very attractive levels. So, how concerned should we be about Prabowo? Are there perhaps winners from his new policies? And what kind of valuation multiples are Indonesia’s growth companies now trading at? ``` Table of contents 1. New President Prabowo Subianto 2. Prabowo’s ambitions 2.1. The Free Meal program 2.2. Enhancing state revenue 2.3. The Million Housing program 2.4. Health and education 2.5. Diplomacy and defense 2.6. The Danantara sovereign wealth fund 3. The investable universe of stocks 4. Ten highlighted companies 5. Conclusion ``` I’m aware that many of you don’t have trading access to Indonesian equities. For those of you who don’t have access, I suggest you set up a pan-Asian brokerage account with Phillip Securities in Singapore or Boom Securities in Hong Kong. [The best retail broker for AsiaDisclaimer: This article constitutes the author’s personal views only and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own re…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/34960dd3-7037-4a05-9746-67c2dda03665_1000x667.jpg)](https://www.asiancenturystocks.com/the-best-asian-retail-broker/) # 1\. New President Prabowo Subianto ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e63f90b8-c8fb-4938-9662-8f838ba19249_1024x683.jpg) Source: Getty Images On Sunday, 20 October 2024, Prabowo Subianto was sworn in as the next president of the Republic of Indonesia. Indonesia is a massively large country bordering Malaysia in the North and Australia in the South. It has a population of 280 million people living across 17,000 islands. Most of these are Muslim, explaining the high birth rate and the nation’s outstanding demographics. The GPD per capita is currently close to US$5,000 per year — twice that of India’s, but materially less than China’s. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1e2883d9-93b4-45c8-8775-fbdebe413deb_1594x760.png) Growth has been slow, but study. The export of natural resources has ramped up gradually and these include palm oil, coal, natural gas and industrial metals such as nickel. However, red tape and a malfunctioning bureaucracy have prevented the rise of the manufacturing sector. That explains the lack of a broad middle class, like the one that has emerged in China. Up until 1945, Indonesia was a Dutch colony. After independence, President Sukarno was inspired by the Soviet Union’s anti-imperialist movement and thus nationalized Dutch businesses. This was the start of Indonesia’s state-led model of development. Which, I might add, has not worked very well. His successor, Suharto, was not a communist, but an autocrat nonetheless. As documented in the book [Asian Godfathers](https://www.amazon.com/Asian-Godfathers-Money-Power-Southeast-ebook/dp/B008V4621S/ref=sr%5F1%5F1?crid=1J4H63AFHTAZK&dib=eyJ2IjoiMSJ9.orrr8QqHHq8nLzftFDGQ5Y6NMOB4A1DLND1h2vDAgrQbea-pEeaf1FCimW5a2WwEr5RclJhVDbl6o43hinjZsMYlSb-8x1rFCvSFiy3nVMTBJWpDYqtFFt2iGkxYI4DQsrnkMGN%5FvNO-%5FZejIVbHpDYJokA%5Fa9upOVTwINHK6cibxU5mv5oKy71Vac2iy5omTTMc5fK8Fo3nWF3bwAZNErfuZnS8UYcttKiGmiH81B4.b5DDDjUbW4cavA6jFvX9mlhIKmN%5F2ZLBjXKJWElaawk&dib%5Ftag=se&keywords=asian+godfathers&qid=1742092147&sprefix=asian+godfather%2Caps%2C317&sr=8-1&ref=asiancenturystocks.com), he teamed up with minority businessmen — providing them with exclusive licenses that guaranteed profits to himself and his cronies. Suharto’s reign ended in 1998 after heavy protests. The country became a functioning democracy. However, the election of Prabowo Subianto has caused some to express concern. Prabowo was married to Suharto’s daughter for many years, and he was a senior military commander working directly under Suharto. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a3457383-b43f-4943-a4fc-ba83fbcb4aa7_1280x720.jpg) Prabowo Subianto the second person in the back from the left. Suharto in the front sitting in the middle. In addition, Prabowo’s father, Sumitro Djojohadikusumo, served as a Minister of Economy under socialist president Sukarno and built the nation’s first state bank, Bank Negara Indonesia. Prabowo’s father was also minister of trade in the late 1960s and early 1970s. So when Prabowo won last year’s presidential election, many started fearing a return to the past. Prabowo used social media channels such as TikTok to portray himself as a person who cares about the everyday man. He promised free school meals, free medical checkups and the large-scale construction of affordable homes. I think investors have legitimate reasons to question Prabowo. His party, Gerindra, frequently criticizes liberal democracy as being unsuitable for Indonesia. Instead, it favors “culturally aligned democracy”, which is a code word for providing more power to the state. And himself, obviously. In Prabowo’s election campaign, he presented an overarching vision called “Asta Cita”, which serves as a roadmap to becoming a wealthy country by 2045\. This vision includes the typical buzzwords you might see in such documents: strengthening human rights, creating employment, improving defense, industrialization, etc. But to understand the near-term future, let’s go through Prabowo’s policies in greater detail and see which companies might end up as winners in Prabowo’s Indonesia. --- # 2\. Prabowo’s ambitions ## **2.1\. The Free Meal program** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c78eb5c8-7dcd-4e88-85e2-51b73c284919_1024x683.jpg) Source: Getty Images One of the highlights of Prabowo’s campaign was the promise to provide free school meals for Indonesia’s 80 million children and expectant mothers. The initial stage of the program was rolled out earlier this year on 6 January 2025\. On that day, close to half a million children started receiving free school lunches. This was behind the day-one target of 3 million and a far cry from the ultimate goal. Netizens also discovered that the quality of food differed from school to school, with reports of corruption in some of Indonesia’s poorer regions. The budget of the school lunch program was also slashed by a third to just 10,000 rupiah per box (US$60 cents), causing concern about the quality of the food. But still, malnutrition remains a problem, so one could well argue that the program is a step in the right direction. It’s still unclear how the free meal program will be financed. Funds might be freed up by cutting energy subsidies. There is also hope that tax revenues could be raised in the medium- to long term. --- ## **2.2\. Enhancing state revenue** The informal sector remains about 30-40% of Indonesia’s economy. There are probably 100 million or more working-age individuals who don’t pay much tax at all. That presents a huge problem for the funding of the state. And it explains why Indonesia has had a persistent government budget deficit, causing the currency to depreciate. Prabowo has set out to improve the situation. His goal is to raise the tax revenues/GDP ratio from 10% today to 23% by the end of his term in 2029\. Indonesia’s ratio is about the same as India’s but lower than China’s 20%. ![Charted: Tax Revenue vs. GDP for Major Countries](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d09074b-24c1-4b48-964a-758477d4cbca_1200x1565.jpg) Source: Visual Capitalist There are initiatives to improve tax collection. For example, Prabowo is pushing for a new digital tax system to be implemented in 2025. However, many observers remain skeptical. And the 2025 target is for the ratio to remain flat due to a one-percentage-point decline in the VAT rate. What’s more worrisome is that Prabowo wants to create a separate institution to manage tax revenues, overseen by the executive branch. Specifically, it will be overseen by the vice finance minister, who happens to be Prabowo’s nephew. --- ## 2.3\. The Million Housing program Roughly a decade ago, then-president Joko Widodo (“Jokowi”) embarked on a project to build one million housing units per year. It was meant to support the nation’s lower-income population. The project was first launched in 2025 and gradually ramped up to 1 million units per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cda1e90b-8996-4e04-b1f6-454e63b9a447_1280x744.png) At that time, the government subsidized mortgages capped the interest rate at 5% for 20% years and required only minimal down payments of 1%. Until today, roughly 10 million units have been delivered However, the quality of construction has been shoddy. The homes are often in remote areas, making them impractical even for lower-income families. ![alt](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e098eca-f2d1-4ed1-8382-256f48f520a1_3500x2163.jpg) Source: Dimas Ardian Nevertheless, Prabowo is doubling down on the program, vowing to build 3 million homes annually. His brother Hashim Djojohadikusumo will lead the effort through a new housing task force and a standalone housing ministry. Hashim’s track record isn’t great. He previously worked for mining company Bumi and Nations Energy and did not do well for minority shareholders. It’s also not clear how Prabowo will fund the construction of these 3 million homes. Investment banks in Indonesia are assuming that greater budget deficits will be necessary to achieve these goals. --- ## **2.4\. Health and education** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9bcc1139-26e2-4e9a-9954-dbbda4854651_1061x707.jpg) Source: Getty Images Starting in 2025, Prabowo’s government will start offering free medical checkups to 60 million Indonesians. It will then gradually move up to 200 million annually. From a humanitarian point of view, this makes perfect sense. Over 100,000 citizens die of tuberculosis each year, and these deaths are totally preventable. The idea is that preventative medicine like this will save on future healthcare costs. However, in the short term, it is likely to lead to higher costs, somewhere around US$300 million annually. In addition to free checkups, Prabowo has pledged to establish 300 new medical facilities. However, he’s recently backtracked from that goal, given the challenges involved. The government is instead switching its attention to improving the productivity of existing healthcare facilities through better medical equipment and a more equitable distribution of doctors. This will also add to government burdens, though less than the free medical checkups. --- ## **2.5\. Diplomacy and defense** As I mentioned earlier, Prabowo held significant roles in the military under former President Suharto. He was also the nation’s defense minister from 2019 to 2024\. Prabowo is well-versed in global politics, having studied abroad and studied at military academies in Indonesia. One of Prabowo’s key priorities upon becoming president was to travel to China to sign deals. He quickly announced that Indonesia would join the BRICS organization of emerging markets cooperating with the People’s Republic of China. Indonesia has also joined China’s China’s Community of Shared Destiny of like-minded countries forming a closer relationship politically and economically. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9631e60d-3ddf-4df4-928e-e8cd18a247c7_1080x2400.jpg) When in China, Prabowo put his name on an official statement accepting overlapping claims in the South China Sea, suggesting that China’s 9-dash line claims are legitimate. This has angered ASEAN neighbors who have taken the People’s Republic of China to international courts for perceived aggressions along their coastlines. At the same time, under Prabowo, Indonesia purchased Rafale jets from France and F-15EX jets from the United States. So in summary, it seems like Prabowo is trying to maintain positive relationships globally, which should be positive for trade. > *"Indonesia has a *desire to maintain good relations with all countries in the world*, all economic blocs where we want to maintain a close relationship”* --- ## 2.6\. The Danantara Sovereign Wealth Fund ![Danantara: What to know about Indonesia's sovereign wealth fund - ANTARA News](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a9494322-8fd2-4d9e-9a85-73d47f188085_1200x800.jpg) What’s more concerning is Prabowo’s new Danantara sovereign wealth fund. Countries that set up sovereign wealth funds do so to manage the capital received from selling natural resources to foreign countries. However, Indonesia has a current account deficit. Instead, Danantara has been set up to take control of 65 state-owned enterprises from the Ministry of State-Owned Enterprises. The total amount of SOE assets to be injected into Danantara will amount to nearly US$1 trillion — a significant number, even for Indonesia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/79dae4ed-6f39-46e4-bf50-f06abf0fec95_1272x770.jpg) I don’t understand why Danantara is needed. Indonesia already has a sovereign wealth fund: Jokowi’s Indonesia Investment Authority, which was launched in 2021\. And it’s not clear why taking over the assets from the Ministry of SOEs will make any difference. Danantara will even be managed by the same person — the Minister of Investment, Rosa Roeslani. In addition to the SOE assets taken over, the government will also inject US$20 billion of capital to be invested by the fund. The fund will focus on “sustainable sectors”, including real estate, advanced manufacturing, food production, etc. Investors have responded negatively to the news of Danantara. There is a fear that if banks are taken over by the fund, they will be run for political purposes — perhaps to enrich vested interests. So far, it does look like Danantara will be staffed by politicians rather than investment professionals. The recent US$12 billion corruption scandal at Pertamina highlights the risks of capital extraction from state-owned enterprises. I don’t see how Danantara will solve the problem — quite the opposite. --- # 3\. The investable universe of stocks _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-81f/ Last updated: 2025-03-10T03:55:51.000Z _This post is for subscribers only._ ### Halyk Bank (HSBK LI) URL: https://www.asiancenturystocks.com/halyk-bank-hsbk-li/ Last updated: 2026-07-31T01:59:45.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Halyk Bank at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- This Wednesday, I asked readers [which stock you wanted me to cover](https://www.asiancenturystocks.com/ask-me-anything-vote-for-deep-dive/). 28% of you suggested [**Halyk Bank**](https://finance.yahoo.com/quote/HSBK.IL/?ref=asiancenturystocks.com) *(HSBK LI — US$5.5 billion)*, Kazakhstan's largest commercial bank. So here is my conclusion. When putting together the deck, I received significant help from an American investor called Tyler, who owns the stock and has an excellent grasp of the business. I also received help from another subscriber on the ground in Kazakhstan. Kazakhstan is a landlocked country right between Russia and China. It’s wealthier than most realize, with a great amount of natural resources such as oil & gas and uranium. Thanks to resource extractions and favorable demographics, GDP per capita has grown rapidly. One of the biggest beneficiaries of that growth has been Halyk Bank - the country’s leading commercial bank. The compound annual growth rate of its earnings per share has been 17% in US Dollar terms. Halyk was formerly part of the state labor banks of the USSR. After Kazakhstan became independent in the 1990s, then-president Nursultan Nazarbayev privatized the bank. And it just so happens that 70% of the shares ended up in his own hands through his daughter Dinara and her husband, Timur Kulibayev. Halyk Bank itself is professionally run. It dominates the Kazakhstani banking system with an impressive return on equity of 30% and a cost-to-income ratio below 20%. It owns a super app with eight million monthly active users, representing over half of Kazakhstan’s adult population. Halyk Bank’s QR codes can be found at shops throughout Kazakhstan, enabling users to transfer money seamlessly. The war in Ukraine has had a significant impact on the bank: - Initially, the Kazakhstan Tenge depreciated against the US Dollar, and Russia instituted export bans, causing imported inflation to skyrocket. - Second, money flowed across the border from Russia to Kazakhstan, leading to an overall increase in the country’s bank deposits. - Finally, redemptions in Russia+ funds sold off their assets, causing selling across the board, with Halyk’s P/E dropping from 5x to just 3x. The base case has to be that there will ultimately be a resolution to the war in Ukraine. If that occurs, I expect Kazakhstan’s inflation pressure to ease and interest rates to decrease. That would pressure Halyk’s net interest margin, at least in the medium- to long term. I’m also worried about the rapid growth in unsecured retail lending. Halyk hasn’t reported any rise in the non-performing loan ratio as yet. But they’re certainly in the riskier category of loans. With Halyk’s employee count flat over the past few years, I wonder whether new loan officers can support the 20-30% yearly growth in the retail loan book. After the mid-2000s building boom, Halyk’s non-performing loan ratio reached 20%, and it had to seek government bailout money. For these reasons, I expect the provisioning for credit losses to increase from the current low level of just 1% to closer to 2%. I also think Halyk’s effective tax rate will rise. President Tokayev released a new tax code raising the statutory rate from 20% to 25%. Despite these assumptions, Halyk will still trade at no more than 3x P/E. Just be aware that if interest rates drop, the bank will face some near-term headwinds in terms of EPS growth. As I see them, the key risks are NPL formation, President Tokayev's anti-corruption campaign and the war in Ukraine. I already touched on the first point. Regarding Tokayev, it seems likely that the Nazarbayev family would have to pay fines for past misdeeds. [Bloomberg](https://www.bloomberg.com/news/articles/2025-02-05/kazakh-tycoon-in-talks-on-making-1-billion-payout-to-the-state?embedded-checkout=true&ref=asiancenturystocks.com) suggests they’ll have to pay the state a US$1 billion fine. Locals in Kazakhstan seem convinced that a fine will be paid but that the bank itself will be left intact. I certainly don’t expect the bank to be nationalized. There is also a risk that Kazakhstan gets dragged into the war in Ukraine, but I consider it low. Kazakhstan’s Collective Security Treaty Organization membership doesn’t require intervening in conflicts outside Russia’s borders. For what it’s worth, President Tokayev is on friendly terms with Moscow. For now, it’s business as usual. The bank continues to trade at 3x P/E with a low teens dividend yield. If there’s a resolution to the war in Ukraine, expect capital to return to Central Asia. **THIS WAS JUST A SUMMARY. To view the full PowerPoint presentation, click the “Download” button below:** _This post is for paying subscribers only._ ### Ask Me Anything + vote for deep dive URL: https://www.asiancenturystocks.com/ask-me-anything-vote-for-deep-dive/ Last updated: 2025-03-04T04:09:50.000Z _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-70d/ Last updated: 2025-03-03T03:38:05.000Z _This post is for subscribers only._ ### Link REIT (823 HK) URL: https://www.asiancenturystocks.com/link-reit-823-hk/ Last updated: 2026-07-31T01:59:24.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Link REIT at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Link REIT**](https://finance.yahoo.com/quote/0823.HK/?ref=asiancenturystocks.com) *(823 HK — US$12 billion)* is Asia’s largest real estate investment trust, focusing on retail properties in Hong Kong. Gocanucks97 on VIC wrote about the stock in early January. He argued that it would benefit from southbound flows after being included in the HKEX Stock Connect program. You can find his write-up [here](https://valueinvestorsclub.com/idea/LINK%5FREIT/2433775903?ref=asiancenturystocks.com) (no paywall). The Hong Kong government formed the REIT in the mid-2000s when it spun off public housing estate shopping malls into a listed entity. These properties had been mismanaged. But under the leadership of Link, they were revitalized and are now performing well. Thanks to such asset enhancement initiatives, Link REIT’s distribution per unit (DPU) rose by almost 10% yearly in the first thirteen years, making it one of the best-performing REITs in the world. Then came 2019\. That was the year when demonstrations broke out in Hong Kong. Tourism ground to a halt, and retailers saw lower foot traffic to their stores. Soon thereafter, COVID-19 caused the Hong Kong government to close its borders and implement social distancing restrictions. Link REIT was forced to step in and support its tenants through direct cash subsidies. The higher rate environment from 2022 onwards hasn’t helped either. Link itself was not without fault. From 2018 onwards, the capital allocation has deteriorated. Most importantly, it started taking on debt to acquire assets overseas. These acquisitions were done at low cap rates. And what’s even worse, it used equity to buy them, including HK$18.5 billion raised through a dilutive rights issue. They own high-quality assets. Link REIT’s tenants are supermarkets, food and beverage vendors and other essential services. They should be well-protected from the e-commerce threat. Furthermore, its occupancy rates are high, tenant retention is decent, and satisfaction scores are high. I’ve found the reviews for Link REIT’s malls to be positive. From a corporate governance point of view, it’s encouraging that Link is internally managed, avoiding the misalignment of incentives that plague many other REITs in Asia. The management team is competent, especially CEO George Hongchoy, who enjoys an excellent reputation. So what should we expect now? I foresee three significant changes ahead: - First, the REIT has a new vision called “Link 3.0”, which involves being more careful in acquiring new assets and instead focusing on managing assets for third parties. I welcome this shift and hope that capital allocation will finally improve. - Second, asset enhancement initiatives are still in the pipeline for Link’s retail property portfolio. This should drive further growth in DPU. - Finally, while Link’s interest expense will continue to rise for at least another year, I believe that in the longer run, interest rates are more likely to fall than rise further. So, I expect the interest expense to fall from FY2027 onwards. The REIT trades at a 7% near-term yield and 8% on 2028 numbers. Those are very healthy yields. Link used to trade closer to 4%. Then again, in the current interest rate environment, a 7% yield is not necessarily the wrong price. A near-term catalyst that gocanucks97 correctly identified is that Link will likely be included in the Stock Connect program. Once implemented, Mainland Chinese investors can invest in REITs listed on the Hong Kong Stock Exchange. Such an inclusion has made Alibaba’s share price wonders, for example. We still don’t know when the inclusion will occur. Some sell-side firms, such as HSBC, speculate it could happen in March. In that case, investors would have a near-term catalyst to look forward to — because if you’re a Mainland investor, a 7% yield would probably look attractive, even after the dividend withholding tax. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Portfolio review February 2025 URL: https://www.asiancenturystocks.com/portfolio-review-february-2025/ Last updated: 2026-06-04T10:54:01.000Z Excitement in Japan SaaS. Estimated reading time: 20 minutes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-efc/ Last updated: 2025-02-24T02:15:38.000Z _This post is for subscribers only._ ### Japan's top 2024 IPOs URL: https://www.asiancenturystocks.com/japans-top-2024-ipos/ Last updated: 2025-02-23T04:26:19.000Z Estimated reading time: 16 minutes _This post is for paying subscribers only._ ### Boustead Singapore meeting (BOCS SP) URL: https://www.asiancenturystocks.com/boustead-singapore-meeting-bocs-sp/ Last updated: 2025-11-19T07:23:10.000Z Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Links February 2025 URL: https://www.asiancenturystocks.com/links-february-2025/ Last updated: 2025-02-18T04:06:22.000Z 13 investment write-ups, 18 articles and 13 podcast episodes _This post is for paying subscribers only._ ### Weekly highlights URL: https://www.asiancenturystocks.com/weekly-highlights-ba1/ Last updated: 2025-02-17T06:10:41.000Z _This post is for subscribers only._ ### Poper (5134 JP) URL: https://www.asiancenturystocks.com/poper-5134-jp/ Last updated: 2026-07-31T01:59:04.000Z Japanese cram school SaaS service at 1.7x EV/Sales _This post is for paying subscribers only._ ### How do Zoomers behave? URL: https://www.asiancenturystocks.com/how-do-zoomers-behave/ Last updated: 2025-10-24T14:59:00.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/11869810-24cc-499e-a461-953e70626e60_2062x1375.jpg) Source: Getty Images Today’s youth will be the consumers of tomorrow. That’s why I think it’s essential to consider how Generation Z — also known as Zoomers — behaves. In this post, I’ll discuss how young people behave differently from us in the older generations. I’ll also discuss the impact of those behaviors on the demand for a variety of consumer products and services. Finally, I’ll conclude with some thoughts on what this implies for stocks previously discussed here on [Asian Century Stocks](https://www.asiancenturystocks.com/). ``` Table of contents: 1. Generation Z 2. Seeking community online 3. Trusting influencers over brands 4. A greater focus on health 5. Ego-building on social media 6. A search for new experiences 7. Ever-shorter attention span 8. A shift in dating patterns 9. Online gambling 10. Conclusion ``` # 1\. Generation Z Generation Z — also known as “Gen Z” or “Zoomers” — is the demographic cohort that came of age during the smartphone and social media revolution. According to the most common definition, Zoomers were born between 1997 and 2012, meaning that they’re currently 13-28 years old. They are the generation coming after the Millennials, which came of age during the turn of the millennium: ![undefined](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4ea661e-8538-414d-b7ae-7f7607a24c30_2880x1800.png) The typical names of key demographic cohorts. Source: Wikipedia This way of classifying people into generational labels started with Karl Mannheim in 1928\. It gained popularity after the Second World War, when soldiers returned to civilian life and started forming families en masse. Children born after the war — the baby boomer generation — were not only large in numbers, but they also exhibited similarities in terms of being more liberal than their parents. These patterns were picked up by sociologists, and generational analysis was thus born. Generation Z is different from previous generations because they were below 10 years old when the first iPhone came out in 2007\. Most of them will have been glued to their smartphones and scrolling social media feeds during their formative teenage years. That’s led to consumer behavior that’s distinct from what we’ve seen in the past. So why do I care enough about Generation Z to write a Substack post on them? Because I think their way of life will shape future consumption patterns. Young people tend to be first adopters in terms of fashion and technology. As they enter the workforce, their spending power will increase, lending to greater revenues for the companies that sell to them. Besides, in many parts of Southeast Asia, half of the population already belongs to Generation Z or younger: ![Pin page](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f6decddc-878b-4931-b251-5cf1eefda06a_736x804.jpg) So, paying attention to their spending patterns matters a great deal if you want to understand the consumer of tomorrow. --- # 2\. Seeking community online ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c9742849-fcbe-42f4-aa2b-26bcb892d012_2048x1080.jpg) Source: Getty Images In the book [The Anxious Generation](https://www.amazon.com/Anxious-Generation-Rewiring-Childhood-Epidemic/dp/0593655036/ref=sr%5F1%5F1?dib=eyJ2IjoiMSJ9.2Iw-hl779B6NIX6C7uLseWB2Kp5zEfS9You0LyJceH-mfJJGH%5FycUfWGqs1Jvgv5gMPR1PqlIXKJEnyRmm78MCe5dAb5SHPjWgctCNRSzgH0RDXCFgSu9szVTuGzJCiWInStvEGngdVfxD1rOcpHwze-OvvXZ5hTaakhfNh-Fi6NYxSyr1F2TZFe1SmSgefg9Z461EnlsIoBnSe3cS%5FqEm0EvvNbhgbGS%5F8UGPJR7dU.SqwMk%5F1nOqXDRR7igTgXGDwUXY%5F7mNg1lmERLFvrO6Y&dib%5Ftag=se&keywords=The+Anxious+Generation&qid=1739269821&sr=8-1&ref=asiancenturystocks.com), author Jonathan Haidt makes the case that smartphones and social media have had a massive impact on the younger generation. According to data quoted in the book, the time that US teens spend with friends has gone down from 150 minutes in 2003 to just 40% minutes in 2020\. And this decline preceded COVID-19: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3c108901-6bd5-4e4f-881c-ae3143482094_1160x870.jpg) Source: Jonathan Haidt So, if they’re not hanging out with friends, what are they doing instead? Spending time on their phones. A study from the UK government agency Ofcom suggests that Zoomers spend over 4 hours per day online, compared to just 3 hours for the population as a whole: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7b74b38b-8295-47a5-ae73-451c56b7592f_1614x926.png) Percentage of UK individuals aged 16+ with access to the Internet at home by year. Source: Ofcom Similar numbers have been observed in Asia. According to 2019 numbers from McKinsey, Zoomers in Indonesia and Thailand spend a [whopping 8-9 hours per day](https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/what-makes-asia-pacifics-generation-z-different?ref=asiancenturystocks.com) on their phones on average and 6 hours per day for developed Asia. The key draw seems to be social media platforms such as Instagram and TikTok/Douyin. Global data from McKinsey suggest that Zoomers spend over 1 hour on social media per day — roughly twice as much as long as their older counterparts: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4f711fc1-681d-4862-b3a2-2c898d2ec979_1460x394.png) Source: McKinsey The 2023 [US Bureau of Labor Statistics American Time Use Survey](https://www.bls.gov/news.release/pdf/atus.pdf?ref=asiancenturystocks.com) provides greater granularity on how Zoomers spend their time. A few highlights from that study: - In 2022, Zoomer spent twice the amount of time playing **video games** as they did ten years earlier - In 2022, they spent 35% more time doing **homework** and research than ten years earlier - They spend 1/3 less time **socializing** and communicating - And they also spend less time **watching TV** In other words, Zoomers are on their phones constantly, scrolling social media or playing video games. Meanwhile, we’re seeing children mature more slowly than in the past. Key milestones such as having had a part-time job, getting a driver’s license, having a girlfriend or boyfriend, or drinking alcohol are delayed into later in life, into their 20s. They also report feeling lonely and isolated more often: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3e804697-2a4b-4884-8a89-1e5b665f3398_1584x1180.png) Zoomers also live with their parents a lot longer than in the past. That trend is particularly clear for women. Perhaps it is related to rising home prices and greater difficulty saving for a down payment. ![Living Arrangements Trends Of 25-34 Years Old In The United States [OC] : r/dataisbeautiful](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/717e69c0-e857-4236-b286-177e84912a9f_1080x1080.jpg) The fact that Zoomers increasingly live with parents means that they’re less likely to bring their partners home and that they’re less likely to host get-togethers with friends. In Asia, the problem with smartphones is widely recognized. For example, in China, schools prohibit students from bringing phones into schools. Here in Singapore, many schools force children to put their phones away in a locker at the start of their school days. Which means they’ll spend recess time socializing instead of staring at their phones. One consequence of the loneliness epidemic is that many young people seek community online through WeChat, TikTok and other social media apps. Another trend is that Zoomers are far more likely to adopt pets than other generations, with cats being particularly popular, a trend that I wrote about here: [The Asian pet industryDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2b81a138-5d4a-4c2c-adcb-377a428ee78f_2450x1826.jpg)](https://www.asiancenturystocks.com/the-asian-pet-industry/) This greater time spent at home scrolling social media also has an impact on the demand for streaming services and online food delivery, which remains far more popular among Zoomers than older generations. Essentially, Zoomers seem to favor products and services that can be delivered to their homes. --- # 3\. Trusting influencers over brands ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8bc3b020-343c-47ae-abf6-f21e95ad76f7_1129x664.jpg) Source: Getty Images In microeconomics, we’re taught that brands provide costly signals of quality. Consumers know that companies have strong incentives to maintain quality control so as to avoid destroying their own brand names. But there’s a case to be made that brands are losing some of their relevance. There are now other ways to improve the likelihood that a consumer is satisfied with his or her purchase: - **Product reviews and ratings** also provide costly signals about quality, at least when it’s difficult for sellers to game them - The emergence of an **influencer** economy, with Zoomers looking for individuals they trust and then following their product recommendations There’s clear evidence that Zoomers use restaurant ratings far more than in the past. For example, they might go to Booking.com or Trip.com for hotel ratings. Or to Tmall or Amazon for product ratings. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/840801c1-cc46-48df-920d-2394606d3706_2868x1532.png) Zero recognizable brand names among Amazon best-sellers for silk pyjamas, just to cite one example of where brand names have become less important Influencer marketing occurs on platforms such as TikTok, Instagram or YouTube. Many argue that the superstars of tomorrow won’t be tech entrepreneurs or Hollywood stars such as Johnny Depp or Brad Pitt but rather influencers such as [MKBHD](https://en.wikipedia.org/wiki/Marques%5FBrownlee?ref=asiancenturystocks.com) or [Xiao Yang Ge](https://www.8days.sg/entertainment/asian/chinese-top-5-influencers-2023-make-so-much-money-825631?ref=asiancenturystocks.com). Famously, a UK study showed that 30% of kids listed being a “YouTuber” as their top career choice. The numbers for some of these influencers are insane. Mr Beast’s main YouTube channel is now racking up over 2 billion monthly views, enabling him to launch Mr Beast-branded burgers and chocolate and disrupt those industries. ![MrBeast's Main YouTube Channel Racked Up 2 Billion Views... In One Month [OC] : r/dataisbeautiful](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c6390eb4-51bb-42d6-9514-9501b43e4280_1198x1198.png) I think this is just the beginning of influencers disrupting existing industries through the power of attention and eyeballs. There’s evidence that Zoomers tend to make purchase decisions based on video sources more so than text or e-commerce websites. That means TikTok and YouTube are gaining relevance and worth tracking if you want to understand how products are trending. User-generated content is also taking over the music industry. The accessibility of music on Spotify or TME’s platform means lower barriers to entry for new talent. Over half of Zoomers listen to music via streaming services on a daily basis, far more than their older counterparts. This means that artist product endorsements are likely to matter a great deal more than in the future, as we saw when Cardi B endorsed [**Samyang Food**](https://www.asiancenturystocks.com/samyang-foods-003230-ks/)’s Buldak Ramen: ![Cardi B's TikTok makes Korean noodle maker's stock rise 30% - Face2Face Africa](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2a2c9558-7ded-4f02-8755-e0a92b883570_1200x900.webp) Artists on Spotify are no longer making much money from selling the music themselves. Instead, concerts are becoming their main way to monetize their music, leading to a blossoming of the live concert industry. --- # 4\. A greater focus on health Jonathan Haidt’s book argues that loneliness and the stress from social media have led to poor mental health among Generation Z. Data quoted in the book showed a \~150% increase in depression among American teenagers and a decline in self-satisfaction. This trend is especially serious among young girls: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce9c01d4-eada-4502-ade7-baaf2f4c6d12_1166x876.jpg) Source: Jonathan Haid Another Oliver Wyman report shows that Zoomers are [83% more likely](https://www.oliverwymanforum.com/gen-z/2023/sep/how-gen-zers-are-reshaping-the-healthcare-industry.html?ref=asiancenturystocks.com) to report feelings of anxiety than other generations. Such anxiety implies a reduced willingness to engage in social interactions. And could explain their preference for QR code ordering systems, and the mobile payments offered by companies such as Luckin Coffee, where customers don’t need to interact with service personnel at all. Another consequence of the mental health epidemic is that a higher number of individuals are now treated for depression. SSRIs (selective serotonin reuptake inhibitors) such as Prozac are becoming increasingly commonplace in developed markets, with roughly a quarter of US Zoomers reporting having taken them. Physical health is deteriorating as well. Childhood obesity in Asia is still unusual but has deteriorated significantly over the past two decades. In China’s case, by a factor of five: ![Map of the childhood obesity rate in Asia.](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dc4dde96-4b97-4801-b2b5-280c749be709_2100x1440.png) Source: Landgeist.com In developed markets, Zoomers seem to have a preference for high-protein snacks. Meats are popular, especially among the gym-going population. Zoomers also seem to favor eggs, fruits and vegetables, presumably due to a greater focus on health. Meanwhile, they spend less on sugary products, including cereals and bakery products. They also seem to be skeptical about artificial sweeteners such as aspartame. The only exception to the trend is chocolate, which Zoomers seem to consider a health food due to the anti-oxidative properties of cocoa. This increased focus on health is evident when looking at the success of influencers such as Andrew Huberman and Peter Attia. The word “biohacking” has become common parlance. ![The $4,990 Ice Bath - The New York Times](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff2d0913-635a-42cc-b612-ff32216219ee_3000x1687.jpg) A US$4,990 cold plunge bath. Source: NYT However, it does seem like biohacking and extreme food diets are still far more popular in the United States than in Asia. The number of Google search queries for “calorie counting” is increasing in Australia and New Zealand but steady in most Asian countries. In theory, this greater health focus should be a death knell for fast-food restaurants. Though the data on that remains unclear, with fast-food consumption continuing to grow in much of emerging Asia. This suggests that the health obsession remains mostly a developed market phenomenon at this point in time. In 2022, I wrote about continuous glucose monitors and how health-obsessed individuals will want to track sugar levels to optimize their diets. I still believe this to be true, though with the caveat that pricking your skin remains too intrusive for the general population: [Glucose monitors will become mainstreamDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3f1cd12f-c6c5-4a95-89d5-32c803c05328_1200x1004.jpg)](https://www.asiancenturystocks.com/glucose-monitors-will-become-mainstream/) Regular wearables such as Apple Watches and fitness trackers remain popular among Generation Z. Wellness apps such as Headspace also seem to appeal to the younger generation, at least in developed markets such as Singapore. When it comes to alcohol use, the data is mixed. Younger individuals seem to be less likely to drink than older in the Asia-Pacific: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2723d3d6-1afa-4e62-aba3-f32be34c1fb5_1332x736.png) Source: Euromonitor Underage drinking seems to have gone down, as many surveys from [Hong Kong](https://www.scmp.com/lifestyle/health-wellness/article/3232284/alcohol-gen-z-are-saying-no-beer-drinking-wine-and-cocktail-consumption-are-all-decline-among-tiktok?ref=asiancenturystocks.com) and the [United States](https://monitoringthefuture.org/data/bx-by/drug-prevalence/?ref=asiancenturystocks.com#drug=%22Alcohol%22) have shown. However, some of this decline might be attributable to delayed aging, cannabis use and COVID-19, with some studies showing that alcohol use picks up once Generation Z enters the workforce. The alcohol market in Asia [still seems to be growing](https://www.mordorintelligence.com/industry-reports/asia-pacific-alcoholic-beverage-market?ref=asiancenturystocks.com). --- # 5\. Ego-building on social media ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a043ba45-d1fc-424f-9a42-a2f0bfc4409d_1483x990.jpg) Source: Getty Images Haidt’s book commented that the mental health epidemic has disproportionately hit younger women, with depression rates far higher than for young men. He blames Instagram for this trend, whose users tend to skew female. The primary issue seems to be that women compare themselves to others, with some feeling excluded from online communities. A feeling of inadequacy might plausibly lead to a drive to outdo friends who are exhibiting their lives on social media. The demand for [luxury handbags](https://trends.google.com/trends/explore?date=all&q=Luxury%20handbags&hl=en&ref=asiancenturystocks.com) is stronger than ever despite greater isolation among the younger generation. A need to show off might also explain the popularity of sportswear products such as sneakers. The Netflix documentary [Sneakerhead](https://www.netflix.com/search?q=sneaker&jbv=81249713&ref=asiancenturystocks.com) shows how sneakers have turned into an obsession. This could be a way to deal with a feeling of inadequacy by spending your way to an “ideal self”. Similar trends can be observed for mechanical watches, whisky and even Pop Mart blind boxes. It’s not all about status, however. Many Zoomers report being value-conscious, with them being the prime customer demographic of e-commerce apps such as Shein and Temu. They will typically get inspiration from TikTok or Instagram and then buy products from Shein. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d1037cce-9cfd-4336-9b2a-6a5dd5b64148_1158x1108.png) --- # 6\. A search for new experiences ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/26addf09-2009-432c-888d-928388fb5e45_1273x848.jpg) Source: Getty Images Zoomers seem to have a great interest in travel. Their spending on travel following the end of the COVID-19 pandemic has increased faster than for other age cohorts. Zoomers tend to use online travel agents to make bookings and use social media for inspiration on where to go. Generation Z’s love of travel could be the increased availability of foreign-language TV series and music on online streaming services. I strongly believe that the success of Buldak Ramen noodles in the United States might be related to the success of Korean dramas and movies on Netflix. Generation Z knows more about other cultures and is more willing to consume foreign products. While e-commerce continues to grow, there are signs that Zoomers have a [greater interest than other generations in experiences](https://www.asiancenturystocks.com/content/files/uploads/about/2023icsc%5Fgen%5Fz%5Freport.pdf). According to this survey, Zoomers actually enjoy the Treasure hunt experience of discount and Dollar stores, suggesting they maintain relevance even in a post-Shein and post-Temu world: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a01d2050-5efe-418e-849f-bbd033e0c867_1442x1028.png) But even so, it’s clear that offline retail is more used by Generation Z to find new experiences outside the home. Even in the mid-2010s, mall operators like Pakuwon started emphasizing lifestyle malls that attract customers through pop-up shops, food & beverages, bowling, events and other spaces. So, just like travel, offline retail does serve a purpose in creating experiences beyond what Zoomers can enjoy from the comfort of their homes. ![Funan mall guide: Best food, shops and things to do | Honeycombers](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d25b665a-55c1-4e95-8917-19b7f127c84b_1400x1000.png) Funan Mall in Singapore In other words, Zoomers seem to consider offline retail as being a social event with something to do with friends. Shopping offers excitement, but they won’t necessarily buy products on the spot. That seems to suggest that malls are increasingly used for marketing rather than storing inventory. The mall that I think best exemplifies this demand is Funan in central Singapore, with its climbing wall, esports tournaments, pop-up stores and stores focusing on products that appeal to the younger consumer. --- # 7\. Ever-shorter attention span ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4ec3a6eb-9dcc-4e13-8b19-947c7abebb1c_2121x1414.jpg) Source: Getty Images Streaming services such as Netflix and Tencent Video continue to take market share from linear television across almost all age groups. However, according to a [global study from WARC & GWI](http://but the reality is that attention spans have narrowed so much that they no longer appeal to younger audiences.), Generation Z (16 to 24-year-olds) actually consume less from online streaming services than their millennial counterparts: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5eaa45de-bfc4-4ef7-b432-25d8f033ff37_1020x650.png)](https://www.researchgate.net/figure/Global-Media-Consumption-2023-8%5Ffig2%5F371562756?ref=asiancenturystocks.com) Source: WARC / GWI While there are confounding factors, there are reasons to believe that Zoomers’ reluctance to watch long-form videos on Netflix has to do with a shorter attention span than older generations. A widely reported statistic has put the average attention span of Generation Z at [8 seconds](https://www.iabuk.com/opinions/rise-short-form-video-gen-z-social-revolution?ref=asiancenturystocks.com), shorter than the 12 seconds reported for Millennials. That could explain why the younger generation is drawn to user-generated content on YouTube instead, which tends to be shorter in duration and frequently optimized to provide short-term rewards. Even Instagram and YouTube are moving towards short videos in the form of Reels and Shorts. Zoomers’ short attention span has implications for Hollywood. There’s an open question of whether Zoomers have the patience to sit through 2-hour movies. And having to resist the temptation of bringing up their phones during the screening. They’re used to getting what they want, when they want it — not having to adapt to the fixed schedule of traditional theaters. There are also implications for the book industry. [Only 36%](https://www.libraryjournal.com/story/Reading-Through-the-Ages-Generational-Reading-Survey?ref=asiancenturystocks.com) of US Zoomers identify themselves as avid readers, whereas the same number for Millennials is 48%. And when Zoomers read, they tend to spend less time doing it than older generations. Generation Z also tends to receive its news from social media feeds such as Instagram or TikTok rather than media outlets such as the New York Times. They’ll cherry-pick articles or follow influencers on Substack. I also think that Zoomers’ short attention span has implications for the gaming industry. They seem to favor mobile games and more casual platforms such as the Nintendo Switch. In contrast, AAA games on consoles such as Sony PlayStation and Microsoft Xbox tend to have more complex storylines that require greater commitment and attention. This seems to suggest that first-person shooters, racing games and casual mobile games are going to win out over MMORPGs. Finally, Zoomers are much more likely to use generative AI tools such as ChatGPT than older generations. This might be attributed to them being tech savvy, but also due to an impatience with finding answers quickly. --- # 8\. A shift in dating patterns ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e5b681e1-3142-4569-a0b5-2dd55e2ff8f5_1273x848.jpg) Source: Getty Images I’m sure you’ve seen this chart. It’s from a Stanford study showing that the vast majority of American couples met through dating apps: ![How heterosexual couples met [OC] : r/dataisbeautiful](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/feb13e24-2f82-49ad-94cb-3712f26eed26_1942x1654.png) Source: How Couples Stay Together However, there are some signs that Zoomers are moving away from dating apps. The [Knot 2020 Jewelry and Engagement Study](https://www.theknot.com/content/gen-z-relationships-marriage?ref=asiancenturystocks.com) suggest that more Zoomers are more likely to meet their partners in school than online. Though that could well change as they move into their late 20s and 30s. The average age of first marriage is moving higher and higher across almost all geographies, crossing the 30-line for most of the developed Asia-Pacific. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d794d81-6d8a-46cf-b47a-232bd6ff4a07_1640x948.png) This could be related to higher education levels for women and, hence, greater focus on careers, greater access to contraceptives and a reduced role of religion in people’s lives. But I also think that the perceived greater availability of potential partners on dating apps has made it less important to tie the knot quickly. Lower marriage rates and higher age of first marriage have [direct implications](https://ifstudies.org/blog/no-ring-no-baby?ref=asiancenturystocks.com) on fertility. The birth rate is falling almost across the board, partly due to the fact that female fertility drops fast after the age of 34. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4acd1bba-a5ee-46b5-a385-d9e4e652956e_1860x1128.png) This increases demand for in vitro fertilization in countries such as Thailand and Australia. I wrote about the IVF trend here: [IVFDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b126a6b8-49c0-48b3-84ba-5a76f05737f1_728x524.png)](https://www.asiancenturystocks.com/ivf/) Other implications of delayed marriages include a reduced need for home building. The fact that younger generations are increasingly living on their own should increase the demand for smaller apartments and condos. --- # 9\. Online gambling ![DigiPlus revenue, profit soars in 2Q24 – IAG](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b6352168-81e9-4827-ae8c-6bc773201920_1024x576.jpg) Chinese online broker **Futu** recently did a survey of young people in Hong Kong, suggesting that they are [three times](https://www.thestandard.com.hk/section-news/section/4/269405/Gen-Z-more-secure-with-crypto-than-homes?ref=asiancenturystocks.com#:~:text=Around%2045%20percent%20of%20Gen,virtual%20assets%20than%20real%20estate.) more optimistic about the future of cryptocurrencies than property. Another study by crypto exchange Independent Reserve Singapore suggested that [47% of Zoomers surveyed](https://www.straitstimes.com/business/more-gen-z-and-boomers-in-singapore-buying-into-crypto-poll?ref=asiancenturystocks.com) owned cryptocurrencies. A US study showed that more than half of cryptocurrency holders are under the age of 35\. So, they’re definitely receptive to the idea of investing in virtual assets. I personally think that cryptocurrencies are speculative assets. And that they’re competing with other forms of speculation, including casinos and individual stock trading. This means that Zoomers have greater options when it comes to speculation in the past. Zoomers also seem to have taken to speculation in tech stocks. They dominate the user base of trading apps such as Robinhood and Futu’s Moomoo. And the competition is heating up, with GCash starting to offer mobile trading in 2023 and Robinhood coming to Asia in 2025\. They’ll be less likely to buy mutual funds from the likes of Value Partners or Magellan. --- # 10\. Conclusion This post has been an attempt to understand the minds of younger consumers. It’s tentative, given that it’s hard to generalize across borders. But I think we can at least draw the following conclusions: - Many Zoomers feel lonely. This should increase the demand for services that offer a feeling of community. - Status symbols continue to hold relevance, especially if they’re easy to display on social media - Zoomers care about influencers, so it’s worth watching what products are pushed by these online celebrities - Zoomers seem to love travelling and experiences, increasing demand for online travel agents such as Trip.com - Sugary foods seem to have gone out of fashion in favor of salty snacks - Health gadgets such as Apple Watches, Oura rings and continuous glucose monitors will continue to be in demand - Zoomers have shorter attention spans. This should be bullish for user-generated content on TikTok and YouTube, as well as easy-to-pick-up mobile games - Online gambling is here to stay, whether in the form of lottery, sports betting, stock trading or perhaps even cryptocurrencies A more recent trend is generative AI tools. There’s little data on how they affect consumer behavior among the younger generation. But presumably, they should be making consumers better-informed. Hence, generative AI tools should benefit from best-in-class products that are ranked the highest typical product reviews. So, what does all of this mean for stock-picking in Asia? My goal is to skate to where the puck is going. From that perspective, companies like [**Samyang Foods**](https://www.asiancenturystocks.com/samyang-foods-003230-ks/), **DigiPlus**, [**JD.com**](https://www.asiancenturystocks.com/jdcom-jd-us/), and [**Fairfax India**](https://www.asiancenturystocks.com/fairfax-india-fihu-cn/) seem better placed than old-industry names such as [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-group-public-co-ltd-major-tb/) and [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/). There’s a price for everything, of course. However, I believe that the true home runs will be sellers of products or services that appeal to the younger generation. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) # Become an expert on Asian equities If you’d like to get smarter about Asian equities and get 20x high-quality deep-dives per year, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-fc8/ Last updated: 2025-02-11T02:46:55.000Z _This post is for subscribers only._ ### Haad Thip (HTC TB) URL: https://www.asiancenturystocks.com/haad-thip-htc-tb/ Last updated: 2026-07-31T01:58:47.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Haad Thip at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Haad Thip**](https://finance.yahoo.com/quote/HTC-R.BK/?ref=asiancenturystocks.com) *(HTC TB — US$194 million)* is a Coca-Cola bottler responsible for Thailand’s 14 southern provinces. It was mentioned by the Twitter account [Nate,](https://x.com/Nate93658762/status/1883185352082677839?ref=asiancenturystocks.com) who suggested I read through Haad Thip’s annual report. And I’m happy I did. A bottler works with the Coca-Cola Company in the United States to manufacture and distribute its products. It buys concentrate and then mixes it with water, sweetener, carbon dioxide and other additives. Finally, it fills the drink into bottles sold to retail outlets across Southern Thailand. Haad Thip is run by Patchara “Dollar” Rattakul, the son of the previous CEO. Before becoming CEO, he spent 10 years as Chief Operating Officer, during which Haad Thip modernized its production equipment and became a lean operation. From what I’ve read, I’ve been impressed by Patchara and consider him a safe pair of hands. I also think Haad Thip is a high-quality operation. The Thai Coca-Cola market is divided into two and controlled by Thai Namthip in the North and Haad Thip in the South. As such, it’s a virtual monopoly. Indeed, Haad Thip has an 84% carbonated beverage market share for the provinces in which it operates. While there’s more competition in the non-carbonated beverage area from Sermsuk, Tipco and Malee, Haad Thip also sits on several important brand names, including the Minute Maid brand of orange juice. It’s a steady grower. Haad Thip’s sales volumes have grown at a 4.4% CAGR over the past nine years. It currently produces 70 million cases per year. On top of this, we should expect steady price increases. For example, in 2022, Haad Thip raised prices by +6.0%, followed by another +1.5% in 2023. I also think it’s under-appreciated how the Coca-Cola Company, under new CEO James Quincey, has become more agile than in the past. It’s innovating with new flavors and variants, including no-sugar versions of Coke that are becoming increasingly popular. Coca-Cola is now entering the alcoholic beverages area, and Haad Thip is planning to release such beverages in Southern Thailand soon. On my numbers, Haad Thip trades at around 10x current-year P/E and 9x 2027e P/E. Given the generous 70% dividend payout ratio, expect 7-8% dividend yields in the next few years. One concern with Haad Thip has to do with sugar taxes. In 2017, Thailand introduced such taxes to combat obesity. The fourth phase of the sugar tax increase will take place on 1 April 2025. Given the 11 grams of sugar per 100 milliliters of a regular Coca-Cola, the tax will increase from THB 1 to THB 3 per litre (US$3 cents to US$9 cents). These are low numbers but will matter on the margin. A typical Coca-Cola costs THB 20-25 in Thailand. A more serious question is the future of sweetened carbonated beverages. There’s a perception that we’re moving towards healthier lifestyles. Will Coca-Cola eventually become out of fashion? I’m personally not worried. Thailand is nowhere near the types of consumption levels seen in the United States or even Europe. And most prefer the taste of the regular version of Coca-Cola. I also think that Coca-Cola is responding well to the threat. It’s introduced a series of no-sugar versions for those who prefer healthier beverages. While mineral water has become more of a competitor, the taste of Coke simply cannot be beaten. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### A coming surge in trading volumes URL: https://www.asiancenturystocks.com/a-coming-surge-in-trading-volumes/ Last updated: 2025-11-19T07:44:39.000Z How CMEPA will affect Philippine equities. Estimated reading time: 12 minutes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-32b/ Last updated: 2025-02-03T02:11:15.000Z _This post is for subscribers only._ ### Guide to dividend withholding taxes URL: https://www.asiancenturystocks.com/guide-to-dividend-withholding-taxes/ Last updated: 2025-10-24T14:59:16.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f2d51282-ad15-4047-99d0-5292b23b4bfd_1061x707.jpg) Source: Getty Images A reader called [JackB](https://open.substack.com/chat/posts/1d620ec2-c8ca-491b-bfba-bfd6b3c911f6) asked whether I’ve ever written a post on withholding taxes on dividends. So, I thought I should discuss the issue once and for all. Withholding taxes can add up quickly if you invest in dividend-paying international stocks, so it’s an issue worth paying attention to. ``` Table of contents: 1. Introduction to withholding taxes 2. Dividend withholding tax rates 3. Double taxation agreements 4. How to reclaim withholding taxes 5. Conclusion ``` # 1\. Introduction to withholding taxes “Withholding tax” refers to the prepayment of tax. For example, in cross-border transactions, governments usually take a cut of dividends, interest and royalties paid out to companies and individuals outside the country. Any time there’s a payment out of a country’s borders, part of the payment will be “withheld” and sent to the local tax authority. Why? Without withholding taxes, there would be a risk that non-residents would shift profits between countries to avoid paying taxes entirely. Governments would end up without tax revenues. If you’re an international investor, withholding tax will automatically be deducted from your dividends. In the following example of a dividend from an emerging market company, 20% is deducted and sent to the tax authority: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b7a48b95-7e1a-4dab-8b8a-59e5344710b8_1352x598.png) If you pay tax on your dividend income at home, too, you’ll pay tax twice. Some countries have entered into “double taxation agreements” to avoid such double taxation. They then offer tax refunds or tax credits to ensure that a stream of income isn’t taxed twice. In my example above, making a claim might help get some of that paid withholding tax back, say 10 percentage points of what you paid. --- # 2\. Dividend withholding tax rates Here are the withholding tax rates for dividends from publicly listed companies to non-resident individuals. These are the withholding tax rates that non-resident individuals pay when there are **no** double taxation agreements: Note that the country of domicile refers to where it is incorporated — not where it’s listed. For example, Chinese companies listed in Hong Kong (“H-shares”) deduct withholding tax of 20% rather than 0%, since they’re domiciled in Mainland China. The first two characters of the security’s [ISIN code](https://en.wikipedia.org/wiki/International%5FSecurities%5FIdentification%5FNumber?ref=asiancenturystocks.com) will tell you where it’s domiciled. In Australia and New Zealand, profits already subject to corporate tax will carry so-called “franking credits” or “imputation credits” and thus enjoy lower withholding tax rates. This lowers the withholding tax in Australia from 30% to 0% and in New Zealand from 30% to 15%. Finally, note that the Philippines is planning to reduce dividend withholding taxes from 25% to 10% if the new CMEPA bill is signed by President Marcos later this year. --- # 3\. Double taxation agreements As mentioned earlier, the withholding tax rate mentioned in the table above can be reduced if “double taxation agreements” exist between the country where the company is domiciled and where you are a tax resident. You achieve this reduction by reclaiming the paid tax from the tax authority in the source country. Most readers of Asian Century Stocks come from either the United States, the United Kingdom, Singapore, Hong Kong or Australia. So, to simplify, I’ll focus on these five countries regarding double taxation agreements. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fec09349-dbb1-474c-9639-7165285a7e33_1400x602.png) Countries where Asian Century Stocks subscribers reside Here are the countries that have double taxation agreements with the United States, the United Kingdom, Hong Kong, Singapore and Australia: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b0669fd2-ddae-4901-81c6-3bd6071e3844_1074x484.png) For example, if you’re a Singapore tax resident, you can reduce the South Korean non-resident individual dividend withholding tax from 22% to 10%. --- # 4\. How to reclaim withholding taxes If withholding tax has been deducted at the source and there’s a double taxation agreement between your country and the source country, here’s how you can get it back: - First, you need evidence that the dividend deducted is higher than expected. Ask your broker to determine how much withholding tax you’ve paid on your dividend. - Second, you must fill out a form to reclaim paid withholding tax. For example, this form is called W-8BEN in the United States. But the name of the form differs from country to country. In your application, you may need to include a *“certificate of residence”* to prove you’re paying tax in your home country. Here is what the forms are called in each of the countries in the Asia-Pacific: Processing times can vary from several months to a year. You’ll have to apply for a refund within a specific time frame, ideally within a few years. Is it worth the trouble? Probably not. Only if the amounts are high enough to justify the labor hours. Alternatively, if you cannot get a refund from the source country, you might be able to claim tax credits when you submit your annual tax filing in your home country. But you better check what the rules are in your specific country. --- # 5\. Conclusion I’ve never tried to reclaim withholding taxes paid on dividends received from overseas. However, one of my foreign employers — a family office — did have processes for trying to reduce paid withholding taxes. In my view, the main takeaway from this post is that dividends from certain countries, such as Indonesia, South Korea and Taiwan, will be subject to high withholding taxes. So bear that in mind when you invest. Then again, I rarely invest for dividends alone. I just use the dividend yield to determine whether a stock is undervalued. So, if withholding taxes reduce my total return by a per cent or two, so be it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you’d like to get smarter about Asian equities and get 20x high-quality deep dives per year, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Portfolio review January 2025 URL: https://www.asiancenturystocks.com/portfolio-review-january-2025/ Last updated: 2026-06-04T10:54:28.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update There was a slight decline in the value of the portfolio in January 2025, -0.3%, due to a decline in Bloomberry Resorts and generally weak market sentiment. The value of the portfolio is now up +37.6% since October 2021, equivalent to a +10.2% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8bc0dc5-013b-4c70-8b1d-6a5a2f3ef115_1932x626.png) The majority of stocks that I either own or track have weakened somewhat, presumably due to outflows. There’s some enthusiasm about Chinese equities in the wake of the success of DeepSeek AI. It also feels like Japanese SaaS companies are finally waking up from their slumber. Here is what the latest portfolio looks like, all share prices from 27 January 2025: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-eda/ Last updated: 2025-01-27T06:11:35.000Z _This post is for subscribers only._ ### Subaru (7270 JP) － 2025 update URL: https://www.asiancenturystocks.com/subaru-7270-jp-2025-update/ Last updated: 2025-01-26T04:04:30.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Subaru at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/192bf9b0-57a5-4b81-93c2-d8a5233c9bca_840x600.png) The new Solterra EV. Source: Subaru Rochester I discussed Subaru in 2022 back when the Japanese Yen had just started falling against the US Dollar. Fast-forward to today, and the Japanese Yen is incredibly weak: at just 156 to the dollar. Subaru should in theory benefit from the current exchange rate as much of its revenues are from the United States. Subaru’s car sales has also recovered nicely from the COVID-19 pandemic. Yet its stock price continues to linger at a low level: What’s going on? Well, in this post, I’ll discuss the reasons why investors continue to be cautious about Subaru. I’ll also provide an outlook for the company. And discuss Subaru’s 5.0x P/E in relation to that outlook. ``` Table of contents: 1. Quick recap 2. What’s happened since 2022? 2.1. Subaru’s 2023-2024 earnings reports 2.2. New vehicle releases 2.3. A shift in Subaru’s senior leadership 3. What's going to change for Subaru? 3.1. The company’s cautious 2025 guidance 3.2. Positive data from late 2024 onwards 3.3. Subaru’s new electrification plan 3.4. Greater capital returns 4. Valuation 5. Risks 6. Conclusion ``` # 1\. Quick recap I wrote my first deep-dive on Japanese automaker [**Subaru Corporation**](https://www.asiancenturystocks.com/deep-dive-2022-11-subaru/) *(7270 JP － US$12 billion)* in May 2022\. Here’s a link to the deck I wrote at the time: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e6b9fcc-237b-4927-876f-ac1cd69eeefa_1814x1020.png)](https://www.asiancenturystocks.com/deep-dive-2022-11-subaru/) Back then, I made the following points: - Subaru’s brand name is incredibly strong, especially in the US mid-west. Their vehicles are known to be fuel-efficient, safe and reliable vehicles suitable for off-road driving. Subaru’s all-wheel drive and high ground clearance are key differentiating factors. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5583c14c-2456-4503-aea5-4dea92eef174_1820x614.png) - Subaru has its loyal fans. JD Power’s US auto brand loyalty study in 2021 also placed Subaru at the top ([the latest survey](https://www.jdpower.com/business/press-releases/2024-us-automotive-brand-loyalty-study?srsltid=AfmBOoq%5FpGB-DludTmJm5sxXuNk0vHAS-jXwpauPxXtT7w3GLUd2glQP&ref=asiancenturystocks.com): latest survey #2). Subaru also ranked as #1 in the [American Customer Satisfaction Index](https://media.subaru.com/pressrelease/2205/1/subaru-earns-top-ranking-2024-american-customer-satisfaction?ref=asiancenturystocks.com) for 2024\. Finally, Consumer Reports ranked Subaru as the best overall auto brand in 2022, and it has [retained this spot](https://www.consumerreports.org/cars/cars-driving/which-car-brands-make-the-best-vehicles-a6159221985/?ref=asiancenturystocks.com) until today. - I argued that Subaru’s success from 2013 onwards was partly driven by the weakness in the Japanese yen. Subaru has some of its cost base in Japan, whereas its main revenues are in US Dollars. In other words, Subaru benefits from a weak Japanese Yen compared to the US Dollar. - Between 2016 and 2021, Subaru’s earnings per share dropped gradually. I attributed this drop to a sluggish US auto market, a low utilization rate at Subaru’s new Indian plant as well as production issues during COVID-19\. Historically, Subaru had focused on just-in-time manufacturing, but that approach backfired when supply chains were disrupted from 2020 onwards. It made it challenging for Subaru to satisfy customer orders. - When writing the original report, the yen stood at 130 against the US Dollar. I believed that the yen would drop further. I predicted the weak exchange rate would improve Subaru’s competitiveness and boost its gross profit margin. - Meanwhile, the demand for Subaru’s vehicles remained strong. The number of Google search queries for the keyword “Subaru” had been flat since 2019, suggesting continued demand for the product. In addition, Subaru’s discounts remained the lowest in the industry, and the company’s backorders had reached a record high. - I believed that Subaru’s production issues would eventually ease. The shortage of semiconductor chips was already on the verge of easing, with Malaysian chip exports to the United States having started to accelerate from mid-2022 onwards. - With an assumption of a 23% gross profit margin and 1.1 million in sales volume by 2025 with 97% plant utilization, I expected Subaru to trade at 5.4x earnings, well below its 10x historical median. - The risks I foresaw were rising prices for raw materials and potential recalls, which have plagued the Japanese auto industry for years. But neither of these factors seemed particularly serious to me. --- # 2\. What’s happened since 2022? ## 2.1\. Subaru’s 2023-2024 earnings reports Since 2022, Subaru’s earnings have enjoyed a forceful recovery thanks to strong demand in the United States. Revenues grew almost 50% in yen terms from the 2019 level, many thanks to the weaker currency. Subaru’s earnings per share rose from **JPY 183** in FY2019 to **JPY 525** in FY2025 thanks to operating leverage. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b34a2fde-6697-4ab0-a582-39bcba4cf8dd_1354x554.png) _This post is for paying subscribers only._ ### Links January 2025 URL: https://www.asiancenturystocks.com/links-january-2025/ Last updated: 2025-01-21T04:06:44.000Z 9 investment write-ups, 11 articles and 15 podcast episodes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-48f/ Last updated: 2025-01-20T02:16:18.000Z _This post is for subscribers only._ ### JD.com (JD US) URL: https://www.asiancenturystocks.com/jdcom-jd-us/ Last updated: 2026-07-31T01:58:30.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in JD.com at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- China-focused Twitter user “pandawatch” posted a [tweet](https://x.com/pandawatch88/status/1878809424607019133?ref=asiancenturystocks.com) comparing the total shareholder return of Chinese tech companies. At the top of the list was online retailer [**JD.com**](https://finance.yahoo.com/quote/JD/?ref=asiancenturystocks.com) *(JD US — US$57 billion)* with a total dividend yield and buyback yield of 10% — even after deducting share-based compensation. That’s impressively high. JD is one of China’s largest e-commerce companies. It dominates the niche of selling authentic, branded goods online with fast and reliable delivery. Unlike Alibaba, JD focuses on selling authentic products directly to consumers, taking on inventory risk and delivering packages straight to customers’ doors. The company was founded by Richard Liu, the son of a peasant farmer in China’s Jiangsu province. He managed to get into the top Renmin University in Beijing and then ventured on a path of entrepreneurship. Richard’s first business was a restaurant, which failed within months due to employee embezzlement. He then found gainful employment, saved money along the way and used that money to start an electronics shop in Beijing. Within five years, his business had grown to a network of 12 shops with CNY 10 million in total turnover. But then came the SARS epidemic of 2003, causing foot traffic to grind to a halt. Richard then decided to close all stores and shift to an online model. That online business later became JD.com and became a smashing success. Up until 2007, JD.com had a relatively small footprint. Yet somehow, he managed to raise US$1.0 billion to build out proprietary logistics infrastructure. It’s unclear where the money came from, but he must have had powerful backers. Today, JD has built logistics infrastructure across most of China’s larger cities with 1,500 warehouses, seven fulfilment centers and 6,700 delivery stations. And the numbers speak for themselves: 93% of packages are delivered within the next day. In contrast, products from Alibaba’s marketplaces can take three or more days until delivery. China’s e-commerce market grew nicely during COVID-19\. However, after the zero-COVID policy was lifted in 2022, growth decelerated to around 10% yearly. Investors were not impressed, and valuation multiples contracted accordingly. Another issue has been the government’s crackdown on tech companies. In 2021, both Tencent and Alibaba were forced to pay CNY 50 billion each in *“common prosperity”* donations. Fines were imposed for companies engaging in monopolistic behaviors. The Chinese state received *“golden shares”* in several companies. CEOs across the industry resigned — perhaps even pushed out — from the organizations they had built. Finally, the industry has seen new challengers like Pinduoduo and short video platforms like Douyin. Fellow e-commerce platform Pinduoduo sells white-label products directly from factories at cutthroat prices. Meanwhile, Douyin has enabled influencers to sell products through short videos, much like QVC did during the TV era. I don’t want to minimize these challenges, as they are real. However, JD was relatively unaffected by these challenges. In fact, it’s even benefitting from the end of monopolistic supplier exclusivity agreements at Alibaba. And it’s not directly competing with the short video platforms. JD occupies its niche of fast and reliable delivery of branded goods, which continues to be the case. I believe JD will grow its gross merchandise volumes in the high-single-digit range for the foreseeable future. Meanwhile, with new CEO Sandy Ran Xu being laser-focused on margins, I believe she will achieve the medium-term operating margin target of 5-6%. With these assumptions, I get to 2027e earnings per share of CNY 29, implying a P/E ratio of 9x with a cash-rich balance sheet. These valuation multiples are low in a regional perspective. For example, the Korean e-commerce platform Coupang trades at 1.1x EV/Sales and 58x P/E. Taiwan’s Momo.com trades at 0.7x EV/Sales and 25x P/E. I agree with Scott Bessent when he says that there might be a [5-10-20% risk of a total wipeout](https://x.com/MikeFritzell/status/1857263989790822830?ref=asiancenturystocks.com) in overseas-listed Chinese equities if, one day, the government decides that VIE structures are illegal or blocks dividend distributions to overseas entities. JD and other overseas-listed Chinese tech companies employ complex corporate structures in which minority shareholders don’t own physical assets. Instead, they own profit-sharing agreements with Mainland Chinese entities. Why? Because according to Chinese law, foreigners are not allowed to own companies within the software industry. The complexity of the VIE structure has made me skeptical of these companies, thinking they’re just trading sardines. However, seeing JD and Alibaba buy back shares is encouraging. JD just completed a US$3.0 billion share buyback, and another US$5.0 billion is underway. These are big numbers. In my view, there’s only one reason management teams buy back shares: they think the shares are worth something. Otherwise, they’d be throwing money into the sea. And at 9x forward P/E, I can see why JD’s management team thinks the shares are undervalued. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-f65/ Last updated: 2025-01-13T03:04:55.000Z _This post is for subscribers only._ ### BASE Inc (4477 JP) URL: https://www.asiancenturystocks.com/base-inc-4477-jp/ Last updated: 2026-07-31T01:58:10.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in BASE Inc at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**BASE Inc**](https://finance.yahoo.com/quote/4477.T/?ref=asiancenturystocks.com) *(4477 JP — US$234 million)* is an e-commerce technology company based in Tokyo, Japan. The software helps small merchants open stores online and manage their operations. BASE is often likened to *“Shopify of Japan”* due to similarities in their product offerings. However, investors have become skeptical about BASE, with the stock now trading at just 0.8x EV/Sales — a massive discount to Shopify’s 13.3x. The company was set up by young programmer Yuta Tsuruoka in 2012\. His mother told him she wanted to open an online shop but lacked technical knowledge. After helping his mother to set up her store, Yuta standardized the product and opened it up to the public. Today, BASE has four constituent parts: 1. **Online store business**: The company empowers individuals and small businesses to open online stores. They operate with individual websites, which connect to BASE’s system with regard to orders, inventory, payment, customer messaging, etc. 2. **Payments**: BASE’s product “PAY.JP” acts as a settlement agent between merchants and payment methods such as Visa, Mastercard, JCE, Amazon Pay, PayPal, etc. 3. **Authentication**: The company has an authentication feature called PAY ID, which helps customers buy products quickly without re-entering their payment information over and over again. In other words, quick and seamless check-out. Pay ID also runs a popular shopping app with over 1 million downloads showcasing all products sold through BASE’s online stores. 4. **Factoring**: Since 2018, BASE has also offered merchants a financing service called YELL BANK, where it acquires receivables from merchants at a discount — similar to Shopify Capital and Square Capital overseas. During COVID-19, BASE enjoyed incredible growth as millions of retailers sought to shift their businesses online. However, that growth quickly reversed, and the share price declined 90% from its peak. During the slump, Yuta decided to change BASE’s pricing structure. In the past, BASE had offered merchants to set up shops for free but then charged 6.6% on all transactions going through the system, plus a modest charge of 40 yen. This pricing caused customers to shift to Shopify to enjoy their lower take rate. And so in 2022, BASE introduced a new Growth Plan, where merchants would pay a monthly fee and transaction fees of only 2.9% per month. Predictably, BASE’s take rate dropped — from 8.1% in early 2021 to just 6.0% at the end of 2023. With the new pricing structure, BASE is in a much better position. The take rate has now bottomed out. It’s much more competitive than in the past, and its market share is stable, if not growing. BASE’s product is still somewhat behind Shopify regarding multi-channel integration and cross-border e-commerce, but it’s catching up. For example, in August 2024, BASE acquired Want.jp, which allows merchants to sell their goods to customers and marketplaces overseas. It will finally solve the problem of overseas logistics, customer duties, exchange rates, etc. BASE seems to have a critical mass in its home market in Japan. It seems to be the leader in the number of stores and brand recognition. And with its improved pricing structure and a gradual improvement in the feature set, it’s taking on larger merchants, too. Since 2023, BASE’s gross profit has grown by almost 50% year-on-year. The PAY.JP business offered to third-party merchants is doing exceptionally well, with each cohort of customers continuing to grow their gross merchandise value over time. Yet the stock continues to trade at just 0.8x EV/Sales. On management’s conservative guidance, the stock trades at a 2029e P/E of 10x. But that multiple doesn’t take the company’s net cash into account of 62% of the market cap. It should be worth something, too. In an interview with the media, Yuta said that he eventually wants to repay the faith of the company’s investors. His heart seems to be in the right place. It’s great that BASE has adjusted its pricing structure to attract larger merchants. The only question now is whether its feature set can catch up with Shopify’s and how fast it can get there. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-f49/ Last updated: 2025-01-08T02:46:20.000Z _This post is for subscribers only._ ### Something is rotten in the state of Korea URL: https://www.asiancenturystocks.com/something-is-rotten-in-the-state/ Last updated: 2025-01-07T04:03:37.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![South Korea's Yoon impeached: powers stripped, benefits kept and retirement | Reuters](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/631edebb-086b-4b98-9289-f4659ad4243a_5000x3334.jpg) South Korea’s President Yoon Suk Yeol. Source: South Korea Presidential Office The imposition of martial law in South Korea on 3 December 2024 has left investors scratching their heads. Why did President Yoon take such an extreme measure? In this post, I want to shed light on what’s transpired since 3 December. And discuss the opportunity given what’s happening politically in South Korea. ``` Table of contents: 1. Yoon Suk Yeol's coup 2. The Value Up program is dead 3. The opportunity set 4. My current watch list 4. Conclusions ``` # 1\. Yoon Suk Yeol's coup On 3 December 2024, President Yoon Suk Yeol imposed martial law. In a televised late-night address to the people of South Korea, he justified the decision in the following way: ``` Dear respected citizens, As president, I appeal to you with a heart full of sorrow. Since the inauguration of this government, the National Assembly has proposed 22 motions to impeach government officials and has been pushing for the impeachment of a 10th individual since the 22nd National Assembly took office in June. This is not only unprecedented in any country in the world; there has been nothing like it in the history of our country since its founding. The Assembly has paralyzed judicial work by intimidating judges and impeaching prosecutors. It has even paralyzed the administration with attempts to impeach the minister of the interior and safety, the chairman of the Korea Communications Commission, the president of the Board of Audit and Inspection, and the minister of national defense. The National Assembly cut all major budgets for key essential functions of the state, such as anti-drug crime measures and public safety maintenance, sabotaging the core functions of the state, turning Korea into a “drug paradise,” and causing panic over public security. The Democratic Party (DP) has slashed 4.1 trillion won ($2.85 billion) for next year’s budget, including 1 trillion won from funds to prepare for disasters, 38.4 billion won in child care support, and more for youth employment and deep-sea gas development projects. They even put the brakes on enhancing the welfare of military officials, including pay raises for junior military officers and raising costs for them working on duty. This kind of reckless movement regarding the budget is nothing less than the cajolement of national finances. The DP’s legislative dictatorship, using the budget only as a tool for political strife, has even gone as far as to propose a budget impeachment. The state administration is paralyzed, and the sighs of our citizens are deepening. This is clearly an act of inciting internal rebellion by trampling on the constitutional order of the free Republic of Korea and disrupting legitimate state institutions established by the Constitution and law. The people’s lives are not considered, and the administration is paralyzed due to its sole focus on impeachment, special prosecution, and shielding its party leader from prosecution. Now, our National Assembly has become a den of criminals, paralyzing the nation’s judicial and administrative systems through legislative dictatorship and planning for the overthrow of our liberal democratic system. The National Assembly, which should be the foundation of liberal democracy, has become a monster trying to destroy it. At this moment, Korea faces a fate that is never strange even if it collapses immediately. My fellow citizens, I declare martial law to protect the Republic of Korea from threats posed by North Korean communist forces, to immediately eradicate unscrupulous pro-Pyongyang anti-state forces that pillage the freedom and happiness of our people, and to protect free constitutional order. Through this emergency martial law, I will rebuild and protect the free Republic of Korea, which is falling into ruin. For this purpose, I will certainly eradicate such anti-state forces and those responsible for ruining our country who have committed evil acts up until now. It’s an inevitable measure to guarantee the people’s freedom, safety, and national sustainability against actions by anti-state forces seeking to overthrow our system. The declaration of martial law will cause some inconveniences for good citizens who believe in and follow constitutional values. However, we will focus on minimizing such inconveniences. I will eliminate anti-state forces and normalize our country as soon as possible. Such a measure is inevitable for ensuring a free Republic of Korea’s permanence. There is no change in Korea’s foreign policy stance or its commitment to fulfilling responsibilities within the international community. As president, I sincerely appeal to you—the people: I will dedicate my life to protecting this free Republic of Korea. Please trust in me. Thank you. ``` Martial law means replacing the civilian government with military authority. In one fell swoop, all political activities, such as strikes, sabotage and assemblies, became illegal. All speech and publishing were to be controlled by a martial law authority. This was a break from the past. Yoon’s imposition of martial law was the first time it had happened since South Korea became a democracy in the 1980s. Article 77 of South Korea’s constitution allows the president to declare martial law when: > *"It is required *to cope with a military necessity* or *to maintain the public safety* and order by mobilization of the military forces in time of war, armed conflict or similar national emergency."* But it’s highly questionable whether the situation called for it. There was no military necessity to impose martial law, nor was there a threat to public safety. ![What is a self-coup? South Korea president's attempt ended in failure − a notable exception in a growing global trend](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5ac07759-f960-4685-83e4-a78ea466714d_1356x668.jpg) Source: Getty Images Under an order by President Yoon, the Defense Ministry sent 300 soldiers to the National Assembly to gain control of the building and － some say － even block lawmakers from getting in. Crowds immediately gathered outside the National Assembly, chanting, *“Arrest Yoon Suk Yeol!”*. Many argued that Yoon was trying to cover up a corruption scandal involving his wife. He had repeatedly vetoed an opposition-led bill calling for an investigation into the scandal. The martial law didn’t last long. Lawmakers were indeed able to get into the National Assembly. And since the opposition now controls it, they got enough votes to get martial law lifted. In the end, martial law only lasted six hours. Yoon apologized, saying, *"I'm very sorry, and I apologize to the public, who must have been deeply surprised*." The big question is now whether Yoon will be impeached for his actions. Or perhaps even arrested. In the days following the event, protests emerged outside the National Assembly, with many believing Yoon undermined the country’s democracy. An opinion poll in early December showed that 74% of South Korea’s population wants Yoon to be impeached. ![alt](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5350e474-170c-4597-8862-7fa96520b958_3936x2214.jpg) Source: Kyodo On December 14th, the National Assembly got enough votes to impeach him. The Constitutional Court will make the ultimate decision, which could take up to six months. Initially, South Korea’s eminently capable Prime Minister, Han Duck Soo, took over Yoon's presidential duties. However, a few days later, *he was impeached too* for his involvement in the December 3rd events. ![20241209 Han Duck-soo](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2254e685-c617-4774-a461-3ff64c8472ad_1560x878.jpg) South Korea’s Prime Minister Han Duck-soo. Source: Getty Images So, at the moment, the country’s new acting President is instead Deputy Minister Choi Sang Mok, who happens to be the finance minister as well. It’s a big mess. Prosecutors have also named Yoon Suk Yeol as the subject of a criminal investigation over his attempt to impose martial law. If he’s guilty of leading an insurrection, he could be punished by life imprisonment or death. So what the hell happened? Why did Yoon impose martial law in the first place? The best explanation I’ve found comes from Professor Joel Atkinson in a Nikkei editorial available [here](https://asia.nikkei.com/Opinion/Yoon-Suk-Yeol-should-have-acted-like-a-politician-not-a-prosecutor?ref=asiancenturystocks.com). Atkinson argues that Yoon is simply acting the way that he’s become accustomed to as a public prosecutor. He’s used to having power in his hands. In Atkinson’s own words: > *“Prosecutors have certain legal powers and exist within a clear hierarchy of authority. *They are loyal to the organization and move antagonistically against other organizations*. They give orders to their subordinates and expect them to be carried out.”* For example, Yoon was the lead prosecutor against former president Park Geun Hye, who was implicated in a bribery scandal. As a result, Yoon became known as a person of strong principles. From what I’ve read about him, he seems to have his heart in the right place. He supports liberal values and a market-driven economy and believes in democracy. He was probably earnest when he said he intended to root out anti-state forces and rebuild the democratic system. Atkinson, again: > *“More credible are those who see Yoon and his agenda as indeed *boxed in by the opposition*. Instead of being a competent politician and preventing that situation from developing, *Yoon brought himself to this point of siege and declared martial law as a solution*.”* But Yoon’s talk of operating within a *“legislative dictatorship”* is laughable. The opposition was elected, most likely in a lawful way. At the same time, it’s probably true that the Minjoo Party opposition is doing everything in its power to subvert and disrupt the existing order. It’s plausible that both North Korea and China are doing what they can to see a return of control to the Minjoo Party and its leader, Lee Jae Myung. That would lead to a geopolitical shift away from the United States and Japan. In any case, it’s clear that for investors, having a pro-market politician such as Yoon Suk Yeol in charge should be preferable. According to [opinion polls](https://www.hani.co.kr/arti/politics/politics%5Fgeneral/1174155.html?ref=asiancenturystocks.com), if a presidential election were held today, Lee Jae Myung would likely win. And on the margin, that would probably not be positive for Korean equities. --- # 2\. The Value Up program is dead I think the biggest casualty of the episode will be the *“Corporate Value Program”*, which Yoon Suk Yeol championed as one of the main pillars in his campaign to attract foreign capital to South Korea. The government encouraged companies to outline plans to improve their market values. A Korea Value Up Index was launched, comprised of companies exhibiting global best practices. In May 2024, I wrote about South Korea’s Corporate Value Up program, arguing that the main impediments to better corporate governance are the high inheritance and dividend taxes. They incentivize controlling shareholders to minimize dividends and keep share prices low. The fact that related party transactions don’t require minority approval is another issue setting the market back. [Value... Up? Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/55030843-2586-4dee-bd65-de5c8a06f546_1061x707.jpg)](https://www.asiancenturystocks.com/value-up/) In my post, I argued that the Corporate Value Up program would be ineffective anyway. Participation has been voluntary. Why would South Korea’s leading business families suddenly care about maximizing share prices? They’ll go through the motions and continue favoring themselves at the expense of minorities. So the underlying problem hasn’t been solved. In fact, on 10 December 2024, the National Assembly rejected the proposed cuts in the inheritance tax and the special tax on dividend income. And with Yoon out of the picture, the Value Up program is probably dead. If the Minjoo Party opposition takes back control of the presidency, it will probably launch a diluted version of the Value Up program, which it calls the *“Korea Boost Up Project*.” This program aims to strengthen the rights of minority shareholders, including mandating the appointment of independent directors. I don’t think this plan will make much of a difference on valuations. --- # 3\. The opportunity set I think the imposition of martial law and the Corporate Value Up program have been side shows, for the most part. Even if the Lee Jae Myung becomes the next President, the base case has to be a return to normal. Yoon has openly stated that he does not intend to impose martial law a second time, nor is he in a position to do so. Korean brokers argue that the macro backdrop is challenging, with South Korea’s famously export-driven economy exposed to the Chinese slowdown and high global interest rates. But cycles come and go. And you could have argued the same about Taiwan, whose stock market went on an epic bull run in 2024. KOSPI’s P/B ratio is nearing its 2008 lows. And the forward index P/E is now close to just 8x: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/527790a4-fd99-4c73-8cb6-4348f94de1db_814x584.png) Source: Goldman Sachs This is an entirely different climate than in 2021 when I argued that South Korea’s stock market was in a bubble: [Korea's stock market is a bubbleDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7159ad2b-4de8-4a14-8308-0f32035e7712_2000x1333.jpg)](https://www.asiancenturystocks.com/koreas-stock-market-is-a-bubble/) And recently, we’ve also seen weakness in the South Korean won, which has dropped about 25% against the US Dollar since 2022. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a4df100a-42ea-4578-8ebc-4eb7094bcfbd_2308x1206.png) Many of South Korea’s largest companies, such as **Samsung Electronics**, **SK Hynix**, **Hyundai Motor**, **Kia**, **KB Financial** and **Shinhan Financial Group** now trade at low multiples. Have a look for yourself: The problem, as I’ve explained above, is that capital allocation is suboptimal in most cases, leading to a lower return on equity compared to most other markets. In the case of South Korea’s banks, they’re or less controlled by the regulator who sets their dividend policies and micro-manages their lending practices. When it comes to higher quality companies, many investors argue that **SK Hynix** qualifies, as does **Naver**, **Lig Nex1**, **Coway**, **Samyang Foods**, **Korean Ratings** and a few more. To highlight the opportunities available in the Korean market, let me go through five companies that I’ve recently added on my personal watch list. I might write about them in future deep dives here on Asian Century Stocks. --- # 4\. My current watch list _This post is for paying subscribers only._ ### Portfolio review December 2024 URL: https://www.asiancenturystocks.com/portfolio-review-december-2024/ Last updated: 2026-06-04T11:33:22.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update There has been a slight recovery in the past month, +2.2%, thanks to a rally in Hartalega and a rebound in Kaonavi. The value of the portfolio is now up +37.9% since October 2021, equivalent to a +10.5% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a62e83fe-e0a0-4e22-8ec0-aa57c8e3f15b_1882x638.png) The full-year 2024 performance was not impressive at just +7.5%, paling in comparison with the 20-60% returns demonstrated by many on Twitter. My issue is that I’ve been stuck with companies like Multi Bintang that trade cheaply but are unlikely to rerate unless growth picks up. I’ve been trying to shift into faster-growing companies such as Hartalega, Koshidaka, Ginebra San Miguel and Fairfax India. Even if the multiples don’t rerate I’m hoping that underlying growth will put a floor on the IRR of the portfolio. I recently read Mano Sabnani’s book [Money Secrets](https://x.com/MikeFritzell/status/1871941109636878405?ref=asiancenturystocks.com). He compounded his portfolio at 15.5% for almost three decades by investing in Singaporean small-caps. His strategy has been to keep 20% in cash in regular times and then invest in growth stocks during crises. Makes perfect sense to me. Malaysian glove maker Hartalega was a growth stock purchased during a crisis, as was sportswear retailer MAP Aktif during COVID-19\. Hopefully, I can find a few more such stocks. In any case, here is what the latest portfolio looks like as of 31 December 2024: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-891/ Last updated: 2024-12-31T09:14:34.000Z _This post is for subscribers only._ ### 2024 review URL: https://www.asiancenturystocks.com/2024-review/ Last updated: 2024-12-31T03:32:47.000Z Estimated reading time: 13 minutes _This post is for paying subscribers only._ ### Fairfax India (FIH/U CN) － 2024 update URL: https://www.asiancenturystocks.com/fairfax-india-fihu-cn-2024-update/ Last updated: 2025-11-19T07:52:32.000Z Gearing up for a 2025 BIAL IPO. Estimated reading time: 23 minutes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-bdf/ Last updated: 2024-12-25T14:20:17.000Z _This post is for subscribers only._ ### Season's Greetings URL: https://www.asiancenturystocks.com/seasons-greetings-041/ Last updated: 2024-12-24T09:31:52.000Z _This post is for paying subscribers only._ ### The bubble tea craze URL: https://www.asiancenturystocks.com/the-bubble-tea-craze/ Last updated: 2025-10-24T14:59:32.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. We may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/afd90518-eb32-489f-802e-89dfc0832fbd_640x427.jpg) Black tapioca balls in bubble tea in Hong Kong. Source: Getty Images Bubble tea (珍珠奶茶), also known as “boba tea”, is a Taiwanese beverage. It blends tea — often mixed with milk or fruit flavours — with chewy tapioca pearls or other toppings (such as jelly, fruit popping boba, or pudding). There’s been a massive rise in the popularity of bubble tea in the past few years. Just look at the chart of Google search queries for the key word “bubble tea”: The big question is whether the product has staying power or whether the craze is nearing its end. This will have implications for Asia’s publicly listed bubble tea shop operators. This post was written in collaboration with [Diogo Perneta](https://x.com/DiogoPrnt?ref=asiancenturystocks.com), who previously wrote about Chinese cemetery operator [Anxian Yuan](https://www.asiancenturystocks.com/anxian-yuan-922-hk/) on Asian Century Stocks. If you have any questions for him, please ask them in the comment section below. [Leave a comment](#ghost-comments-root) ``` Table of contents: 1. A brief history of bubble tea 2. The bubble tea industry in 2024 3. The investable universe of stocks 3.1 Mainland China 3.2 Hong Kong 3.3 Taiwan 4. Valuation multiples 5. Conclusion ``` # 1\. A brief history of bubble tea Bubble tea’s roots can be traced back to the 1600s. During their occupation of Taiwan between 1624 and 1662, the Dutch introduced the practice of adding milk and sugar to tea. While milk tea didn’t become an immediate trend, it laid the foundation for later innovations in tea preparation. In the mid-20th century, Hong Kong-style milk tea gained popularity in Taiwan. However, the process of preparing such milk tea was intricate and therefore didn’t lend itself for standardization. The product that we today know as “bubble tea” originated in Taiwan in the 1980s as a fusion of traditional tea culture and modern culinary creativity. The invention is often credited to Chun Shui Tang in Taichung, where a staff member added tapioca balls to iced tea. It’s also credit to Hanlin Tea Room in Tainan, where tapioca pearls inspired by local desserts were added to tea drinks. ![A Chun Shui Tang store in Taichung](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0b9814f1-b3ae-4fc4-a663-0819e2346bba_1920x1440.jpg) Taichun teahouse [Chun Shui Tang](https://en.wikipedia.org/wiki/Chun%5FShui%5FTang?ref=asiancenturystocks.com). Source: Wikipedia Initially, the pearls were small and white, but the now-iconic black tapioca pearls emerged with the addition of brown sugar. The drink quickly gained popularity in Taiwan for its combination of chewy textures and sweet, refreshing flavors. By the 1990s, bubble tea had spread across Asia and into the United States, propelled by immigrants from Taiwan. Over time, it evolved into a customizable beverage with diverse tea bases, toppings, and flavors. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e84a460f-0d3a-4997-b39c-9fff3f44cb42_2121x1414.jpg) Source: Getty Images The 2010s brought a global boom fueled by social media and Asian pop culture, cementing bubble tea as a worldwide phenomenon and a symbol of Taiwanese innovation. --- # 2\. The bubble tea industry in 2024 Most bubble tea is sold in specialized beverage shops. There are also ready-to-drink (RTD) bubble teas sold in supermarkets and convenience stores, but these do not contribute materially to industry turnover. You can find bubble tea almost anywhere globally, especially in countries with large Taiwanese and Chinese communities. It’s particularly popular in Asia － the region where the key Taiwanese bubble tea brand initially expanded to. According to CICC, Southeast Asia is now the fastest growing freshly made drinks market. They expect the market to grow at a 20% CAGR in the five years to 2028. Looking into **PRC**’s beverage industry, there are two major types of beverage shops: - Freshly-made coffee shops; and - Freshly-made tea shops, where bubble tea is sold In 2022, there were approximately 117,300 freshly made coffee shops in China, led by industry stalwart Luckin Coffee: ![Luckin Coffee startup challenging Starbucks in China worth $1 billion](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3b20acb9-19bb-4773-a17a-a57fa9d6a268_1600x900.jpg) Luckin Coffee. Source: Quartz However, freshly-made tea is even more popular, with an estimated 407,000 shops as of mid-2022: ![Fast Expanding Budget Milk Tea Chain Mixue Brews 6.5 Billion Yuan Shenzhen IPO - Caixin Global](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/77ef4efc-0536-4bfa-9056-f4a7b71af395_705x470.jpg) Mixue Ice Cream & Tea. Source: Caixin Global In sales numbers, the freshly-made tea segment made up roughly 64% of the CNY 380 billion beverage shop industry. And the tea sub-segment has apparently been growing at a 25% CAGR since 2018. In 2020, the annual per capita consumption of freshly made tea in China was 6.2 cups. And when it comes to coffee, the annual consumption was only 1.7 cups. It’s not difficult to imagine that consumption going up over time. The freshly-made tea market in PRC has shown robust growth across all city tiers. For example, third-tier city freshly made tea markets have experienced yearly growth of +34% in the past five years. And CICC expects the market to grow another +18% per year until 2028. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/13191bd6-508b-4321-bbd0-10a0e339c087_2178x1298.png) Source: Frost & Sullivan These numbers come from Frost & Sullivan, so they should be taken with a grain of salt. But it’s still clear that the industry has grown fast and that bubble tea has become far more popular than it was ten years ago. Another factor behind the industry’s success has been the emergence of online food delivery platforms, enabled by the widespread adoption of mobile devices and shifting dining preferences. The delivery market now makes up 56% of industry revenues and is expected to reach 75% by 2028, again according to Frost & Sullivan numbers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6a4994da-2781-48d9-aaeb-3a90bad93a63_2024x1180.png) Source: Frost & Sullivan Based on selling price, freshly-made teas can be categorised into: - **Premium modern teahouses**; - **Mid-end tea shops**; - **Low-end tea shops** **Low-end tea shops** focus on affordability, using synthetic additives and milk tea powders to create simple drinks. They primarily operate as street stands for takeaway, with an average selling price not exceeding CNY 10 (US$1.4) in China. **Mid-end tea shops** offer a step up in quality by incorporating ingredients like canned fruit and flavoured syrups to create drinks such as mango green tea and honey grapefruit tea. They are commonly found in shopping malls or as street stands, with prices ranging from CNY 10 to CNY 20 (US$1.4 to US$2.7). **Premium modern teahouses** prioritize high-quality, fresh ingredients like premium tea leaves, fresh milk, and seasonal fruits. They serve innovative drinks such as cheese strawberry tea and cold-brewed tea in stylish social spaces, with prices starting at CNY 20 or higher (US$2.7 or higher). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d2dcca58-1818-4ec0-900b-35f5e67aac28_2132x1276.png) Source: CICC **Premium modern teahouses**, representing the third generation of tea shops, have experienced remarkable growth, outperforming other tea shop categories with an impressive CAGR of +76% from 2015 to 2020. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5c65d6eb-055f-4f52-8ae9-796ad08a3d04_2100x1160.png) Source: CICC By 2020, **mid-end tea shops** dominated the market, accounting for 49% of total consumption, while l**ow-end tea shops** accounted for 32% and premium modern teahouses captured 19%. The main point that CICC is trying to make with the above numbers is that premium modern teahouses are growing rapidly. Though be aware that inflation itself boosts the growth of a particular category defined as above a certain price level. Cross-selling of products (baked goods, coffee, ready-to-drink tea beverages, and packaged snacks) is an opportunity that some premium tea shops are exploring. The sales of cross-sold products have been projected to grow even faster than the overall industry. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9a6e50d5-65bb-4635-adbe-c516e4cad605_1844x1092.png) Source:CICC PRC has the world's largest diabetic population. So, the government is now recommending and following WHO guidelines to reduce sugar intake in diets. Sugar reduction is a key focus in government initiatives like the *National Nutrition Plan (2017-2030)*, *Health China Action (2019-2030)*, and *Guidelines for Prevention and Treatment of Chronic Diseases in China (2017-2025)*. This focus on healthy diets has become reflected in bubble tea consumption, too, with clients opting for less sugar in their drinks. It may even lead customers to avoid bubble tea altogether. ![As China puts on weight, type-2 diabetes is soaring](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ae73c3bd-cec3-4bf4-b083-a9daddf82725_608x662.png) Source: The Economist In 2024, the Chinese bubble tea industry started to suffer a downturn, with sluggish consumer demand and increasing competition within the industry, especially at the higher end. Chinese consumers have become price-sensitive. More recently, videos like [these](https://www.youtube.com/watch?v=eFu8RdWnDOA&ref=asiancenturystocks.com) have started to appear, highlighting mass closures of bubble tea shops across China. This weakness in Chinese consumption can also be measured through consumer confidence indices. According to McKinsey, consumer confidence is at an all-time low, though higher in China’s poorer cities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f5e093ae-654c-45ca-954f-61a2f0d8bb9c_1780x974.png) Source: Trading Economics Nayuki and ChaPanda, the only two publicly listed companies with their primary operations in Mainland China, reported revenue declines during this period and, consequently, pressure on their profitability. You can also argue that increased competition, accompanied by a lack of product differentiation, has caused pressures on sales and margins. China’s top ten shopping areas host around 50 freshly-made tea shops within a 1km radius, while the top ten shopping malls average 10 tea shops each, reflecting a high concentration in prime retail locations. As product and service offerings become increasingly similar, price has emerged as a key factor for differentiation. As a result, more and more lower-end and mid-range brands now offer fresh fruit tea products in their drinks. Such options were previously only available at more premium tea shops. They’ve achieved this by optimizing their fresh fruit supply chains and leveraging franchise models. With fierce competition on their home soil, Chinese brands are now currently looking for expansion opportunities overseas: > *“Amid surging tea chain growth in China, *Shenzhen-based Heytea is seeking to build upon debuts in the UK, Australia, the US and South Korea* made within the last 12 months while pursuing further international opportunities.”* \-World Coffee Portal Chinese premium bubble tea player Nayuki is continuing to pursue an overseas expansion strategy, focusing first on Thailand: > *“Steadily promoting the franchise business; *continued overseas expansion,* *with the excellent performance of the flagship store in Thailand further boosting confidence*.”* \- Nayuki- 1H2024 Results Presentation ChaPanda is also expanding into other countries in the Asia-Pacific: > *“We are advancing our overseas business as scheduled. As of 30 June 2024, *we have opened four stores in South Korea, two in Thailand and one in Australia*, respectively.” -* ChaPanda- 1H2024 Results Presentation Chinese bubble tea brands have set their sights on the US market to compete with already established Taiwanese and local brands. There has been an increased interest in Asian culture recently, partially thanks to the popularity of K-pop and Korean drama. In the words of Chinese business magazine Caixin: > *“More and more bubble tea brands from the Chinese mainland *have set their sights on the growing North American market* to take advantage of changing consumer tastes and challenge the dominant Taiwanese brands there.”* \- Caixin Global In 2023, the **Taiwanese** nonalcoholic beverage market grew +4% to a record high TW$57 billion (US$1.8 billion), driven by the demand for tea drinks. The freshly made tea sub-sector registered TW$19 billion (US$582 million) in sales, representing an increase of +6% from a year earlier and accounting for 33 % of the nonalcoholic beverage market. So the Taiwanese freshly made tea industry is still growing. In the Taiwan bubble tea market, based on delivery data as of March 2023, local operator “Macu Tea” recorded the largest market share growth among the top five companies, solidifying its position as the leader with 27% of the market. “Kebuke” follows closely with a 25% share. The top five bubble tea brands collectively hold 45% of the market share, with the remaining 55% distributed among numerous smaller brands. ![台灣手搖飲外送市場份額概覽](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f04164b4-1999-4d90-b7e5-67220e1dee7f_1600x1000.png) Taiwan’s top tea brands: Macu followed by Kebuke. Source: Measurable AI --- # 3\. The investable universe of stocks ### **3.1 Mainland China** ![Chinese Bubble Tea Chain Nayuki's Tea Releases 2020 White Paper on Millennial's “Drinking” Habits - Pandaily](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a15cdc37-19b2-4912-a72b-14b03786a216_2000x1041.jpg) [**Nayuki**](https://finance.yahoo.com/quote/2150.HK/?ref=asiancenturystocks.com) *(2150 HK - US$321 million)* is premium teahouse operator in PRC. It has 1,894 stores, of which 1,597 self-operated and 297 franchised. So it relies mainly on the self-operated store model. As of June 2024, around 70% of the stores were in Tier 1 and New Tier 1 cities. Between 2021 and 2023, revenues increased at CAGR of +6%. The two founders Zhao Lin and Peng Xin own 59% of the company. Nayuki's main competitor is HeyTea, which also uses self-operated store model. Nayuki stores boast a modern, premium design and specialize in offering a range of products focused on healthier options. They also offer baked goods. ![Chinese cheese tea bakery and cafe Nayuki will open its first overseas store here next month | BK Magazine Online](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/15ea956b-cbbe-43da-9587-fd4f6bff67ed_1200x628.jpg) Source: Nayuki After facing intense competition from mid-end tea shops that were penetrating the premium segment and higher-tier cities through franchisees with lower prices. Nayuki reacted and initiated a strategy to also expand via franchised stores in low-tier cities instead of relying solely on a self-owned model, which is more capital-light and enables quicker expansion. However, they are carefully choosing franchisees for this expansion. > *“When we open a franchise store, *we want it to be exactly like our existing ones, delivering a high-quality experience to customers*. We don't simply approve every franchisee who wants to join.” -* CEO, Conference Call Nayuki also embraces an internationalisation strategy to diversify its store portfolio. One of the markets that they are focusing on is Thailand. > *“*Both of our initial stores in Thailand are located in their top shopping malls*. Our second store, which opened last week, is located in the atrium on the first floor of CentralWorld, Thailand's premier mall, where we have been allocated 200 square meters.”* \- Nayuki CEO- Conference Call 1H2024 For the first half of 2024, revenues declined slightly about -2%. And it returned to a net loss of RMB 438 million, after being profitable for first time in 2023\. It has a cushion of RMB 2.6 billion in cash which should help if the company continues to bleed cash. Management has focused on optimizing store costs, resulting in significant improvements in the cost structure. If the consumer market recovers, I believe they can achieve an operating profit of RMB 200 million within two years, equating to an EV/EBIT multiple of approximately 7.5x. ![ChaPanda joins a long queue of Chinese tea brands seeking an IPO | KrASIA](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9fb06b2e-eed5-4849-b6f1-eeb04d158eda_1175x500.jpg) [**Chabaidao**](https://finance.yahoo.com/quote/2555.HK/?ref=asiancenturystocks.com) *(2555 HK - US$2.0 billion)* is mid-end tea shop operator. It runs stores under the ChaPanda brand name. In mid-2024, it had 8,385 stores, of which almost all (8,376) were franchised. They rely almost exclusively on franchising, focusing more on lower-tier cities. According to Frost & Sullivan, ChaPanda is ranked third in China’s freshly-made tea shop market in terms of retail sales value with a market share of 6.8%. Chapanda is ranked second in mid-end freshly-made tea shops in terms of gross merchandise value, with 15.6% market share. Wang Xiaokun and his spouse own 83% of the company. Revenues increased at a CAGR of +16% from 2021 to 2023, with an operating margin of 23%. The Chabaidao stores are smaller and more efficient with less sitting space. [This](https://thatbubbleteablog.wordpress.com/2024/04/11/chapanda/?ref=asiancenturystocks.com) bubble tea review blog ranked ChaPanda A-Tier bubble tea store, highlighting the tea flavour presence and taro balls. > *“*The tea was combined flawlessly* with the other ingredients, resulting in *a harmonious couple with the milk*, rather than the milk-dominant drinks I’ve been having. *The milk was high-quality*, as I’ve come to expect. The taro balls were my favourite topping I’ve had so far in China.” -* That Bubble Tea Blog One of the main competitors in the mid-end tea beverage category, Guming (also known as Goodme), is preparing for an IPO in Hong Kong. Guming leads the mid-end category with a 17.7% market share in terms of gross merchandise value. Its store distribution is heavily concentrated in second-tier and lower-tier cities, with a notable focus on towns and townships. The total upfront investment for a Guming franchise is over RMB 330,000 (excluding rent), whereas ChaPanda requires a slightly lower upfront investment of RMB 280,000 (excluding rent). Chapanda is also seeking to diversify its operations by expanding into Southeast Asia and its presence in Australia. They are introducing an independent, freshly brewed coffee brand called “Coffree.”. For example, Guming sells coffee in their stores, but this strategy has proven challenging due to the difficulty of changing an established brand image. Creating an independent brand is an easier strategy. Over the past three years, ChaPanda has consistently maintained slightly higher operating and profit margins compared to Guming. However, this year, Guming's operating margin stands at 20.9%, surpassing ChaPanda's 19%. For the first half of 2024, ChaPanda also experienced some demand weakness, with revenue decreasing by -10% and profits declining by -34%. It’s still profitable and currently trading at 16x P/E. If consumer spending recovers, it could end up with an earnings per share of HK$1, implying a P/E ratio of 10x. --- ### **3.2 Hong Kong** ![TenRen's Tea](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1db8276d-5ecc-4c75-93a5-075dc7552133_1207x788.jpg) [**B&S International Holdings**](https://finance.yahoo.com/quote/1705.HK/?ref=asiancenturystocks.com) *(1705 HK - US$18 million)* \- is a distribution and retail operator in Hong Kong’s food and beverages industry. Their biggest retail business is a franchisee operation of TenRen Tea, a freshly made tea brand from Taiwan. TenRen seems to be emphasizing traditional tea culture rather than innovation and customization. B&S International hold the license to self-operate TenRen's 57 stores in Hong Kong. They also run other retail outlets such as Chef Hung, 1705, and Nam Kok. TenRen's stores have been quite popular in Hong Kong for many years. However, when it comes to Google reviews, TenRen's ratings are lower compared to the emerging PRC brand HeyTea. Competition has intensified in recent years with PRC bubble tea companies entering the Hong Kong market. Most recently, Mixue has opened stores in Hong Kong. Amid the current economic slowdown, Mixue's low-pricing strategy could pose a significant threat. > *“Apparently, *the pricing strategy by Mixue has already shaken the beverage market* in China and overseas. Since its first Hong Kong stores opened last month in Mongkok, the business of* [*Chinese lemon tea*](https://lacrucci.com/chinese-lemon-tea-has-taken-hong-kong-by-storm-in-2023/?ref=asiancenturystocks.com) *shops nearby are hit.”* \- Lacrucci B&S International’s distribution business includes sourcing food and beverage products from overseas brand owners or their distributors, as well as over 100 brands, which are sold at retailers such as supermarkets, pharmacies, convenience stores, and department store chains in Hong Kong. The company has a net cash position of around HK$25 million (16% of market cap), is trading at EV/EBIT of 4x and a dividend yield of 10%. For the first half of 2024, Hong Kong's weak consumer market and outbound spending, especially in Shenzhen, impacted B&S International Holdings. As a result, revenues have declined by -5.1% year-on-year, with net profit decreasing by -40% year-on-year. --- ### **3.3 Taiwan** ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/56e9017c-fcf5-4a07-96ca-ef091770640e_1429x1072.jpg) A Chatime outlet [**La Kaffa International**](https://finance.yahoo.com/quote/2732.TWO/?ref=asiancenturystocks.com) *(2732 TT - US$144 million)* is a Taiwanese retail operator specializing in bubble tea stores. It owns the Chatime bubble tea franchise with 2,500 stores across over 50 countries. Chatime’s beverages include milk teas, fruit teas, smoothies and it also serves coffee. Other than tea shops, La Kaffa also owns outlets selling traditional Taiwanese desserts (ChunSun and ZenQ) and bakery goods (Bake Code). And restaurants through its subsidiary Kingza International. More recently, La Kaffa has entered the consumer goods sector with instant and refillable milk tea packs. And these are also sold online through the major e-commerce platforms. Growth at La Kaffa has been sluggish recently, and despite this, the stock still trades at a premium valuation of 20.3x P/E and 5.0% dividend yield. ![Where to get boba tea — Sharetea - Best Bubble Tea Brand](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6fbcb044-0e26-493e-9b98-0df4c3755e59_1600x1066.jpg) Lian Fa’s Sharetea brand, popular in the United States [**Lian Fa International Dining Business**](https://finance.yahoo.com/quote/2756.TWO/?ref=asiancenturystocks.com) *(2756 TT - US$56 million)* operates bubble tea stores under the Sharetea brand name. Its roughly 400 stores are positioned in the premium category and have sometimes been referred to as the “Louis Vuitton” of the bubble tea industry. The United States is Sharetea’s primary market with roughly 140 stores. But it also operates bubble tea shops in Canada, Dubai, Singapore and Taiwan. A few of its hero products include its Classic Pearl Milk Tea and its Okinawa Pearl Milk Tea. Other store concepts run by Lian Fa include Kampung Hainanese Chicken Rice restaurants and MAMAK Stalls, which serve Malaysian food. The company hasn’t grown much in the past few years, but the return on equity has been decent at 24% and the valuation is now a reasonable 13.6x with a 5.0% dividend yield. --- # 4\. Valuation multiples Judging from the number of [Google Trends search queries](https://trends.google.com/trends/explore?date=all&q=ShareTea,Chatime,TenRen%20Tea&hl=en&ref=asiancenturystocks.com), the popularity of ShareTea, Chatime and TenRen Tea seems to be falling since their peak in 2019\. The data is not encouraging. Reported revenues have also slowed recently. La Kaffa has shrunk its turnover since 2019, and Lian Fa isn’t growing either. Nayuki’s and Chabaidao’s revenue growth seems to be decelerating, too, after reports of intensifying competition in Mainland China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5fe261bd-f1d2-4d2c-b67b-0f7450ee4fbb_1826x606.png) The operating margin profile suggests that Chabaidao is an outperformer. This is no doubt because of Chabaidao’s higher exposure to its franchisee operation. La Kaffa’s declining margins suggests increasing competition in the sector. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3bd5f7dc-7168-4ba3-b58c-8a2d53480e81_1816x598.png) If Chabaidao’s franchisees are profitable and their operations sustainable, then the EV/EBIT does look unusually low at 9.3x. Such a low multiple is rare for companies with double-digit revenue growth. La Kaffa’s and Lian Fa’s multiples are high given that lack of growth. The stock with the lowest valuation multiples of all is B&S International Holdings, the Hong Kong-based distributor and TenRen Tea franchisee. It trades at a P/E of 5.1x, EV/EBIT of 3.9x a dividend yield of 16.4%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d3f11d8-cf16-4f84-b93d-b51cfa5bf585_1248x258.png) --- # 5\. Conclusion In the PRC, consumer demand for freshly made tea beverages has visibly weakened due to the current economic backdrop with reduced consumer confidence and spending. Additionally, the IPOs of Mixue and Guming have been put on hold following regulatory decisions, likely influenced by the significant post-IPO share price declines of Nayuki and Chabaidao. However, this presents an excellent opportunity to research these companies more deeply. [Nayuki](https://finance.yahoo.com/quote/2150.HK/?ref=asiancenturystocks.com), in particular, stands out due to its focus on the premium segment, offering healthier options — a market with growing potential. Moreover, the inclusion of baked goods in their product lineup is also interesting. On the downside, it has yet to achieve full profitability. That remains a concern. Additionally, I was greatly surprised by [Chabaidao](https://finance.yahoo.com/quote/2555.HK/?ref=asiancenturystocks.com). Customer reviews are better than I expect for mid-end stores. It’s a profitable business with a “lighter” business model and doesn’t trade at excessive valuation. I also find [Guming](https://thebambooworks.com/ipo-tea-party-set-to-resume-with-gumings-regulatory-nod-from-china/?ref=asiancenturystocks.com) interesting, as the company is preparing for an IPO in 2025\. Despite the industry's slowdown, Guming is outperforming its peers and continues to dominate the mid-end market segment. The mid-end market could benefit from the ongoing economic weakness thanks to two separate factors: increased consumer confidence in lower-tier cities, where these businesses have a strong presence, and price-sensitive consumers seeking value-for-money options. In Hong Kong, a weak consumer market and outbound spending are affecting the F&B industry. Despite that, [B&S International Holdings](https://finance.yahoo.com/quote/1705.HK/?ref=asiancenturystocks.com) has maintained a dominant bubble tea brand in Hong Kong over the past years. While its revenues and profits decreased this year, it trades at a low valuation multiple. A potential catalyst would be if Hong Kong's consumer spending recovers along with greater inbound tourism. The primary risk lies in fierce competition from PRC freshly-made tea brands entering the market with more appealing products. The Taiwanese bubble tea shop operators [La Kaffa](https://finance.yahoo.com/quote/2732.TWO/?ref=asiancenturystocks.com) and [Lian Fa](https://finance.yahoo.com/quote/2756.TWO/?ref=asiancenturystocks.com) have not been able to grow their top-line revenues much in the past few years. And Google Trends suggests that their brands are becoming less popular. Between the two, [Lian Fa](https://finance.yahoo.com/quote/2756.TWO/?ref=asiancenturystocks.com) has a greater return on equity, and its Sharetea stores enjoy strong customer reviews. The financials suggest strong execution on the part of Lian Fa’s management team. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-862/ Last updated: 2024-12-18T10:59:47.000Z _This post is for subscribers only._ ### 10 Questions with Made in Japan URL: https://www.asiancenturystocks.com/10-questions-with-made-in-japan/ Last updated: 2024-12-18T04:00:57.000Z Japanese growth stock investor. Estimated reading time: 24 minutes _This post is for paying subscribers only._ ### Links December 2024 URL: https://www.asiancenturystocks.com/links-december-2024/ Last updated: 2024-12-15T04:00:54.000Z 12 investment write-ups, 13 articles and 10 podcast episodes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-6ca/ Last updated: 2024-12-11T06:54:15.000Z _This post is for subscribers only._ ### The Hongkong & Shanghai Hotels (45 HK) URL: https://www.asiancenturystocks.com/the-hongkong-and-shanghai-hotels/ Last updated: 2026-07-31T01:57:34.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in The Hongkong & Shanghai Hotel at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**The Hongkong & Shanghai Hotels**](https://finance.yahoo.com/quote/0045.HK/?ref=asiancenturystocks.com) *(45 HK — US$1.3 billion)* is a family-controlled hospitality company with a rich history. Today, the company owns and operates hotels under the “The Peninsula” brand name. They’re widely seen as some of the best in the world. For example, check out the following reviews from Booking.com: > *“*This is HK's most famous hotel* and deserves its reputation. We have stayed in many hotels and this is in a class of its own.”* – The Peninsula, Hong Kong > > *“*The best hotel ever I stayed*. Every thing was exceptionally very good from the staff to cleanliness to location, the service was excellent.”* \- The Peninsula Istanbul > > *“*The best hotel in London*, not cheap but worth every penny! Superb facilities and staff... outstanding.”* – The Peninsula, London The stock trades at 0.28x book value. Which begs the questions: is the book value real, and can value be unlocked? The company has three main segments: - **Hospitality**: 10 luxury hotels around the world, with typically full ownership of the underlying property. The flagship hotel, The Peninsula Hong Kong, is legendary, but there are several other hotels of almost equal caliber, including the new The Peninsula London. - **Investment properties**: The company also owns investment properties such as the Peak Tower, an office building in Hong Kong, and another commercial property in Paris. Most importantly, it owns 484 apartments in the Repulse Bay residential development on the southern side of Hong Kong Island, which it rents out to wealthy individuals. - **Clubs and services**: Hongkong & Shanghai Hotels operates the Peak Tram, which takes tourists from Admiralty to The Peak on Hong Kong Island. It also owns and operates a golf course in California and the Peninsula membership club. Regarding the gross asset value split, roughly half comes from its hotel properties and approximately 40% from the owned apartments at The Repulse Bay development. The company is controlled by the Kadoorie family. The predecessor of the Hongkong & Shanghai Hotels was founded in 1866 by a group of Scotsmen. It was later taken over by businessman Elly Kadoorie in a series of events documented in the book [The Last Kings of Shanghai](https://www.amazon.com/Last-Kings-Shanghai-Jewish-Dynasties/dp/0735224439/ref=sr%5F1%5F1?crid=2FH9E59H59ASK&dib=eyJ2IjoiMSJ9.0MNJ7BHkb1pdmIFi1QGggkpE9-aluMVAVSg2hPr30hIfKJ7j8K2EaixtCQaw9ib04Yc%5FAIHn75aNULMSyKpCqWOx0cqxN0vVvBdEKTuN4e99TEIyCqQQ0ffWsSSQ3E8UZDafodm2WFXcg8zzLP0NjjDuygxEAUfl5bMCCTSjsYx4-pwWK038LA2X22gMzqRdWqe6oKjbg1v-qIMWL-WzHeDRTzcu8fcUtC7wwP00lv0.gjJqcuhfNznJl12zrp6K7XGcwHMrg3X7LMCjhJm6e6Q&dib%5Ftag=se&keywords=the+last+kings+of+shanghai&qid=1733532678&sprefix=the+last+kings+of+shang%2Caps%2C510&sr=8-1&ref=asiancenturystocks.com). Today, Elly’s 83-year-old grandson, Michael Kadoorie decides on the strategic direction of the growth. But cracks in the facade are starting to show. Under Michael’s leadership, the company's financials have started to deteriorate, with a falling return on equity, rising debt levels, and overspending on new hotel properties. The company’s annual reports emphasize “capital appreciation” and growth in the company’s total asset value. Earnings seem to be a secondary concern. However, the leadership is currently undergoing a transformation. Gareth Roberts has just taken over as COO. Michael’s 32-year-old son, Philip Kadoorie, will become Deputy Chairman in January 2025\. And ex-Cartier, Richemont, and DFS Group professional Benjamin Vuchot will take over as CEO in March 2025. It’s too early to tell whether these leadership changes will improve capital allocation. Philip seems like a trustworthy individual, but he lacks real-world experience. Right now, his passion seems to be motorsports rather than running a hospitality group. What the company should do is sell minority stakes in its trophy hotels, use them to pay down debt and eventually buy back shares. The company has now signalled an intention to pay down the debt, but share buybacks are not on the agenda. The near-term outlook is positive. The company recently completed two high-profile hotels in Istanbul and London, and it is ramping up as we speak. From what I can tell, they are fantastic properties that are just as much trophy assets as Peninsula Hong Kong. I believe the company’s EBITDA margins will eventually revert to at least 2019 levels. However, due to high interest expenses and depreciation for the London property, my earnings per share estimate will only reach HK$0.31, putting the stock at a 19.8x P/E ratio and 13.7x EV/EBITDA. What about a sum-of-the-parts valuation? I’ve tried to put together a sum-of-the-parts valuation myself, heavily inspired by the excellent work of Andrew Brown at East72 Dynasty Trust [here](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2024/04/e72dt-quarterly-report-march-2024.pdf). I think their valuation numbers broadly make sense. I get to an NAV/share of HK$24, a slight premium to the book value per share of HK$22\. That compares to the current share price of HK$6.1. You could question the book value assumptions, including using three-handle cap rates for residential properties. But even if you make the appropriate adjustments, the liquidation value is undoubtedly far higher than the current share price. So to summarize, the near-term outlook is excellent with The Peninsula London and The Peninsula Istanbul ramping up this year through the next. But don’t expect the P/E to come down to single-digit levels anytime soon. There is hope that the ongoing leadership change will cause a shift to a return-on-capital mindset. But until we see more evidence of Philip Kadoorie’s intentions, the base case has to be: “more of the same, for now”. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-275/ Last updated: 2024-12-02T05:54:59.000Z _This post is for subscribers only._ ### Portfolio review November 2024 URL: https://www.asiancenturystocks.com/portfolio-review-november-2024/ Last updated: 2026-06-04T11:33:57.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update What a month. The portfolio dropped -4.8% in November. Probably the worst month that I can remember since starting to track it in October 2021\. The value of the portfolio is now up +35.0% since October 2021, equivalent to a +10.1% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a6bee9b1-f24c-451d-b4aa-99e1b0998ee6_2020x644.png) It would be easy to blame macroeconomic factors such as the election of Donald Trump and renewed worries about US tariffs on Chinese goods. But there were also several idiosyncratic factors: - New position [**Kaonavi**](https://www.asiancenturystocks.com/has-the-kaonavi-story-changed-4435/) dropped -27% in the past month after margins contracted due to their aggressive hiring of software developers - Philippine casino operator [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/) saw weakness in its main casino in Entertainment City in Manila due to competition from online gambling and a lack of Chinese VIP customers - [**Yakult**](https://www.asiancenturystocks.com/kaonavi-4435-jp/) dropped due to weaker-than-expected sales of the Yakult 1000 product now that the COVID-19 pandemic is over Another negative factor for the portfolio and Asian equities is that the US Dollar remains strong. Or, as some might say: overvalued. For now, however, high interest rates continue to prop up the dollar. Once the dollar begins its weakening cycle, Asian equities should start outperforming again. That said, I am not a China bull. The economy is looking weak, with falling property prices and a leadership that wants the state to control the economy. The country seems to be moving inwards politically. However, there are plenty of opportunities in Hong Kong-listed companies whose fundamentals are moving in the right direction. For example, stocks such as Prada or Samsonite just happen to be listed in Hong Kong － they don’t have much exposure to China to begin with. The median P/E for my portfolio is currently 11.4x. If you adjust for cycle-average margins, that number will come down closer to 10x. And many of them offer high-single-digit or double-digit dividend yields. Here is what the latest portfolio looks like as of 28 November 2024: _This post is for paying subscribers only._ ### Has the Kaonavi story changed? (4435 JP) URL: https://www.asiancenturystocks.com/has-the-kaonavi-story-changed-4435/ Last updated: 2024-11-27T04:29:26.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Kaonavi at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![CFO（最高財務責任者）の新設及び就任のお知らせ (2019年4月1日) - エキサイトニュース](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/896b6a0f-bc3b-477a-9660-4d3c8f9fd50a_1259x635.jpg) Kaonavi’s CFO Kimitaka Hashimoto On Monday, I had the great pleasure to speak to [**Kaonavi**](https://www.asiancenturystocks.com/kaonavi-4435-jp/)’s*(4435 JP - US$131 million)* CFO, Kimitaka Hashimoto. He provided color on Kaonavi’s second-quarter earnings result, which were released on 13 November and led to a negative reaction from the market: ``` Table of contents: 1. Short introduction to Kaonavi 2. Steady top-line growth 3. Kaonavi’s rising expenses 4. Supposedly tough competition 5. Contribution from new products 6. Conclusion ``` # 1\. Short introduction to Kaonavi For those of you who haven’t read my original post on Kaonavi, you can check it out here: [Kaonavi (4435 JP)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/150779465/870a403c-22c9-463f-8b96-39a4418cb1d1/transcoded-00001.png)](https://www.asiancenturystocks.com/kaonavi-4435-jp/) In short, Kaonavi is a Japanese developer of talent management software. It helps companies manage their employees by solving staffing problems, designing their organizational structure, performance reviews, surveys, training, internal recruitment, etc. Kaonavi has grown at a 35% compound annual growth rate in the past five years. Yet despite this growth, the return on its marketing expenditures (LTV/CAC) continues to be an impressive 10%. The monthly churn rate is now just 0.40%, thanks to high switching costs. The secret sauce seems to be Kaonavi’s user-friendliness. While the software has been criticized for being simplistic, the company continuously adds new features. Kaonavi only has about 4,000 customers － a small number compared to the 63,000 or so companies in Japan with more than 100 employees. If you include smaller companies, the total addressable market will grow to a few hundred thousand companies. There’s been concern about competition in the industry, most notably from [**Plus Alpha Consulting**](https://finance.yahoo.com/quote/4071.T/?ref=asiancenturystocks.com)’s*(4071 JP - US$452 million)* software suite Talent Palette. But there’s no sign of any fee pressure yet, and Kaonavi’s churn rate is low and falling. Further, the number of Google search queries for Kaonavi’s software product has risen +37% over the past year, a momentum that exceeds that of Talent Palette. Kaonavi trades at an EV/Sales multiple of 1.5x, with long-term operating margin guidance of 20-30%. But given the current hiring spree, the big question is how fast it will reach these margins. --- # 2\. Steady top-line growth After Kaonavi reported second-quarter earnings on 13 November, the stock price dived as margins contracted due to rapidly rising costs. In this post, I’ll provide some nuance and explain precisely what’s happened since July. Here are the key metrics from the second quarter earnings report: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-2c3/ Last updated: 2024-11-26T08:19:00.000Z _This post is for subscribers only._ ### Prada (1913 HK) URL: https://www.asiancenturystocks.com/prada-1913-hk/ Last updated: 2026-07-31T01:57:12.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Prada at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Prada**](https://finance.yahoo.com/quote/1913.HK/?ref=asiancenturystocks.com) *(1913 HK —US$18 billion)* is a strange beast. It’s an Italian fashion group listed in Hong Kong, of all places. Many European and American investors ignore the name, which has caused Prada to trade at a considerable discount to its peers. The first Prada shop was opened in 1913 by Mario Prada, a former leather goods salesman who imported English handbags and travel accessories and sold them to the Italian elite. After decades of modest growth, Mario’s granddaughter, Miuccia Prada, took over the business. In the 1970s, she decided to merge Prada with the leather goods business of Patrizio Bertelli, who later became her husband. Miuccia had a PhD in political science and was a self-professed Marxist and revolutionary at heart. Her rebelliousness might have helped Prada stand out in its new direction as an “anti-status” or “inverse snobbery” brand. Prada’s first breakthrough came in 1979 when it launched its first shoe line. Then came the Prada backpacks, which challenged conventions by being made of nylon rather than leather. Finally, the first Prada tote bags were also made of nylon. The 1988 catwalk made a stir. At that time, Italian fashion was mostly about glamor and glitz. Prada’s clothing stood out by being minimalist and utilitarian. Miuccia wanted women to use her clothing to make statements: > *“Clothes were never about doing clothes… *it’s about living different parts of your personality*”* That philosophy has stayed with Prada until today and it continues to be run by Miuccia and her husband Patrizio, though with the help of Andrea Guerra, the former CEO of Luxottica. Prada has three main brands: - Today, the “Prada” brand represents 74% of revenues. Prada sells handbags at relatively high price points and ready-to-wear fashion. The designs are minimalist and conservative. - The “Miu Miu” brand, named after Miuccia herself. It sells handbags, clothing targeted to a younger clientele. The designs are youthful and playful. Miu Miu represents 23% of revenues but growing fast. - Finally, the British footwear brand Church’s was acquired in 1999\. These conservatively styled shoes are sold to both men and women and represent 1% of revenues. The mainstay of Prada’s business is its handbags and accessories. In addition, Prada sells eyewear and fragrances through partnerships with Luxottica and L’Óreal. Does Prada have competitive advantages? Well, the brands are certainly known far and wide. It owns a whole range of iconic products that continue to do well year after year. And the management team has an impressive track record. If there’s anything I can fault Prada with, it’s that it only produces 24% of its products in-house, with the rest outsourced to third parties in Asia. Such outsourcing makes it challenging to ensure quality control. But outsourcing hasn’t been an impediment to growth in the past. Both Prada and Miu Miu have enjoyed a resurgence in recent years. The turnaround started in 2017 when Prada reduced its reliance on wholesale channels. By taking this action, Prada was able to reduce wholesale channel discounting and thus improve the brand's perception. And since 2019, prices for Prada handbags have gone up significantly, leading to higher margins for the group. Another shift for Prada was hiring Belgian clothing designer Raf Simons. Miuccia and Raf are now co-creative directors, allowing Miuccia to spend more time on the Miu Miu brand and take it to the next level. It seems to be working. Miu Miu’s mini skirts and crop tops got the fashion world talking, and its Wander and Arcadie bags are selling like hotcakes. According to the Lyst Hottest Brand Index, Miu Miu is now the #1 fashion brand in the world, and Prada is #3. Miu Miu’s success is evident from alternative data sources. An index of Google search queries for “Miu Miu” has risen +85% year-on-year. Miu Miu keeps trending on TikTok in an upward curve. In the last quarterly report, Miu Miu’s revenues grew +105% year-on-year, as noted by [Global Stock Picking](https://x.com/GlobalStockPick/status/1851799343784956254?ref=asiancenturystocks.com) who has written about the stock on Twitter. Prada’s management team commented that: > *“Miu Miu remains on a *remarkable organic growth trajectory*”* So Prada is certainly doing well right now. But will its success continue? Short-term, yes. But in the medium term, that’s more difficult to forecast. The fact is that the luxury goods industry is suffering from weak demand in China. Some of the culprits include falling property prices and weak consumer confidence. The price increases we’ve seen in the core Prada brand will be challenging to keep up with now that households have already spent their COVID-19 stimulus checks. Other question marks include: - Prada’s and Miu Miu’s latest spring/summer fashion shows weren’t as well received as those in previous years. - I wonder if Prada and Miu Miu indirectly benefitted from the “quiet luxury” and “Y2K aesthetic” trends. - The CEO of Miu Miu recently resigned, and there is no replacement in sight. In any case, Miuccia is a creative genius, and the Miu Miu brand is on a roll right now. I believe that Prada will continue to outperform its peers, at least in the short term. From that perspective, it’s odd to see the stock trade at a modest EV/pretax profit of 14x － a significant discount to its global peers. It’s just a matter of getting comfortable with and learning to deal with the fashion industry’s cyclical nature. **Click the “Download” button to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Weekly highlights URL: https://www.asiancenturystocks.com/weekly-highlights-acb/ Last updated: 2024-11-18T08:21:40.000Z _This post is for subscribers only._ ### Koito Mfgr － 2024 update (7276 JP) URL: https://www.asiancenturystocks.com/koito-mfgr-2024-update-7276-jp/ Last updated: 2024-11-18T04:01:03.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Koito Manufacturing at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![LED Headlamps | Products | KOITO MANUFACTURING CO.,LTD.](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/768deb87-c238-4485-ac62-5eb028bda593_1104x634.jpg) Source: Koito Manufacturing Orbis Japan Equity Fund recently wrote about auto supplier [Koito Manufacturing](https://finance.yahoo.com/quote/7276.T/?ref=asiancenturystocks.com) in their [second-quarter 2024 letter](https://www.orbis.com/bm/private-client/insights/commentaries/quarterly/2024/q2/japan?ref=asiancenturystocks.com). So, who is Koito? It’s the world’s largest manufacturer of automotive lighting products, serving primarily Japanese customers such as Toyota, Nissan and Honda. What stood out in Orbis’s second-quarter letter is that Koito plans to return JPY 350 billion to shareholders in the next five years, more than half the current market cap. Rational capital allocation is rare in Japan, so this number caught my attention. Another thing that caught my attention is that Koito Manufacturing’s share price is getting close to its 2020 lows when the world seemed to be ending: So I wanted to revisit the Koito Manufacturing story and see whether its recent headwinds are permanent or not. Here’s what I discovered: ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Koito’s financials 2.2. Shifts in the customer base 2.3. Improved capital allocation 3. What will change for Koito? 3.1. Koito’s FY2025 outlook 3.2. The new medium-term plan 3.3. The latest product roadmap 4. Valuation 5. Risks 6. Conclusion ``` # 1\. Quick recap Here’s my original write-up on [**Koito Manufacturing**](https://www.asiancenturystocks.com/deep-dive-2022-25-koito-manufacturing/) *(7276 JP － US$3.7 billion)* from back in 2022: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2b74a9f6-10ac-4d9a-8257-d727dbf0ccfa_2292x1288.png)](https://www.asiancenturystocks.com/deep-dive-2022-25-koito-manufacturing/) Here’s a quick summary of that presentation: - Koito is the world’s largest manufacturer of automotive lighting products: headlamps, rear-combination lamps, fog lights, etc. - It’s grown with its key customer, Toyota, which still represents more than 40% of Koito’s revenues. - Between 2020 and 2022, the global auto industry suffered from a shortage of semiconductor chips, constraining production volumes. These lower production volumes caused second-hand car prices to skyrocket and OEMs to make windfall profits. However, auto suppliers such as Koito － whose earnings are a function of production volumes － did not benefit as much. - Back when I did my write-up, I saw signs that the semiconductor chip shortage was going to ease. And I also saw the Japanese yen weakening, which I predicted would lead to a renaissance for Koito’s mostly-Japanese OEM customers. - Finally, I thought that Koito would benefit from the ongoing shift from halogen and HID lamps to LED. And that it would benefit from the increased popularity of adaptive driving beams. Further, Koito was developing headlamps with integrated LiDARs that would enable level 2/3 advanced driver assistance systems. - With a prediction of JPY 90 billion in net profit, I foresaw a forward P/E of 7.0x, while net cash represented 40% of its market cap. --- # 2\. Update since my first write-up ## 2.1\. Koito’s financials Koito’s revenues have already recovered nicely following the 2022 end of the semiconductor chip shortage. Yet its earnings per share has continued to lag: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d43a238e-fd77-4bea-8400-2b0cdf13c0fd_2710x910.png) Here’s another way to visualize its earnings development: _This post is for paying subscribers only._ ### Links November 2024 URL: https://www.asiancenturystocks.com/links-november-2024/ Last updated: 2024-11-17T03:29:25.000Z 16 investment-related write-ups, 12 articles and 10 podcast episodes _This post is for paying subscribers only._ ### Anxian Yuan (922 HK) URL: https://www.asiancenturystocks.com/anxian-yuan-922-hk/ Last updated: 2026-07-31T01:56:53.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: Neither of us hold any position in Anxian Yuan at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Today, we have the great pleasure of hearing Portuguese investor [Diogo Perneta](https://x.com/DiogoPrnt?ref=asiancenturystocks.com) discuss Chinese cemetery operator [**Anxian Yuan**](https://finance.yahoo.com/quote/0922.HK/?ref=asiancenturystocks.com) *(922 HK —US$45 million)*. We’ve been communicating for some time and agreed that Anxian Yuan was worth investigating. It owns a unique cemetery in Hangzhou, China, and trades at a low P/E of just 6.1x, with a 13.3% dividend yield. Anxian Yuan was formed in 2010 through a reverse merger between electronics company China Boon Holdings and the Anxian Yuan cemetery. Well-connected former government official Shi Hua used the ListCo to take over the asset, and he has since expanded operations to parts of the country. The company now owns three main assets: - The flagship Zhejiang Anxian Yuan cemetery is located a mere 30 minutes from the Hangzhou city center. According to the China Cemetery Network, it’s ranked as the #23 best cemetery nationwide. The cemetery covers an area of 1,000 acres and is situated on a mountain with picturesque surroundings. - The Fushouyuan Humanistic Memorial Park in Yinchuan, Ningxia Province - The Dashenshan Ecological Cemetery in Niuxin Village, Guizhou Province Anxian Yuan’s disclosures are poor, so we don’t know the exact revenue split between each of these cemeteries. But the Zhejiang Anxian Yuan cemetery in Hangzhou is quite clearly the jewel of the company. The company enjoys fat operating margin of 28%. We know that new supply remains limited as the central government is publicly against the building of new cemeteries. And most importantly, tomb prices are not constrained by regulation, giving the company virtually unlimited pricing power. A tomb at the Hangzhou cemetery costs around CNY 111,000 on average. That’s expensive but not unusual for a Chinese tier 1 city cemetery. A key competitor in Hangzhou － the Jingshan Bamboo Tea Garden － charges CNY 127,000, even though it’s farther away from Hangzhou. So, it’s plausible that Anxian Yuan could raise its prices further. The industry backdrop is positive. The number of deaths in China grows at around +1.4% each year. This number is likely to go up as the +65 year-old-population has started growing at a +4% yearly rate. These individuals will eventually pass away. If there’s something to fault the company for it’s excessive share issuance. The share count has gone up over time. Notably, in 2020, Anxian Yuan issued shares through a large rights issue. The company founder and chairman, Shi Hua, bought 85% of those shares, increasing his ownership from 20% to 57%. Interestingly, those shares were acquired at close to the same share price at which Anxian Yuan is trading today, equivalent to roughly 5x P/E. So, he clearly saw value in the company at the current share price. Anxian Yuan’s trailing P/E multiple is now 6.1x with a 13.3% dividend yield. The P/E is far lower than the peer group’s 14x median P/E. It’s also lower than its pre-COVID trading range of around 10-15x P/E. Is the dividend sustainable? Most likely, yes. The company raised a significant amount of capital through its 2020 rights issue, and net cash now represents 82% of the market cap. Yearly cash flows easily cover the current dividend. And it’s remained almost flat over the past four years, suggesting that the current policy is to maintain the dividend per share in absolute terms. The key risks are government intervention, perhaps through price caps or outright expropriation. There’s also been a downturn in China’s property market, and it’s plausible that tomb prices will also take a hit at some point. Another risk is dilution, as management has shown a willingness to issue shares in the past. It was encouraging to see the Shi family buy shares in the 2020 rights issue. If they decide to dilute shareholders further, they’ll be hit just as hard as minorities. The key catalysts are higher tomb prices and the long-term tailwinds of an aging population. Also, note that Anxian Yuan’s contract liabilities increased in the last fiscal year. This suggests that it’s been receiving greater pre-payments for future services. The implication is that we could see greater revenue recognized in FY2025, at least for the portion of revenues contributed from pre-sales. To read more of Diogo’s work, follow him on [Twitter](https://x.com/DiogoPrnt?ref=asiancenturystocks.com) and [Substack](https://diogoperneta.substack.com/). **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-a11/ Last updated: 2024-11-12T05:54:43.000Z _This post is for subscribers only._ ### Trump's tariff plan URL: https://www.asiancenturystocks.com/trumps-tariff-plan/ Last updated: 2024-11-12T04:16:02.000Z I invited economist Priyanka Kishore to discuss the impact of Donald Trump’s election on Asia. Priyanka runs the [Asia Decoded](https://asiadecoded.substack.com/) Substack newsletter, which specializes in macroeconomics and geopolitics in Asia. She has a background as an economist and FX strategist for companies such as Standard Chartered, Oxford Economics and ICICI Bank. In this discussion, we discuss her 2025 outlook, Donald Trump’s tariff plan, how future US monetary- and fiscal policy is likely to affect Asia, US protectionism, China’s weakening economic growth and the likelihood that China’s stimulus measures will turn the tide. ``` Table of contents: 1. Priyanka’s background 2. Her economic outlook 3. Trump’s tariffs 4. US and Asia monetary policy 5. Asian currencies 6. US investment bans 7. The Chinese economy ``` A summary of the discussion follows below: _This post is for paying subscribers only._ ### Is Fairwood a melting ice cube? (52 HK) URL: https://www.asiancenturystocks.com/is-fairwood-a-melting-ice-cube-52/ Last updated: 2024-11-07T05:41:31.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Fairwood at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![Indoor shooting - Happywood Restaurant](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/44587f66-d389-4282-964d-f607f6ffa185_1280x853.webp) Source: [Yin Daxin](https://www.zcool.com.cn/work/ZNjE4ODU1ODg=.html??ref=asiancenturystocks.com) I bought shares in Hong Kong restaurant operator Fairwood in late December 2022\. At the time, the city’s COVID-19 restrictions had just been removed, and the Hong Kong-China border was about to open, too. But since that point, Fairwood’s share price has continued lower: This begs the question: what the hell happened? The answer is that Hong Kong’s restaurant industry has faced incredible challenges throughout COVID-19 and even until today. But if we look beyond those challenges, will Fairwood end up in a better place? Or is the business facing a secular decline? ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. The post-COVID experience 2.2. The new Fairwood app and website 2.3. Related party transactions 2.4. Fairwood’s repriced options scheme 3. What will change for Fairwood? 3.1. Positive recent guidance 3.2. The 4th generation store design 3.3. A potential supply response? 3.4. Government initiatives to solve the manpower crunch 4. Valuation multiples 5. Risks 6. Conclusion ``` # 1\. Quick recap Have a look at my original [**Fairwood**](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) *(52 HK － US$117 million)* report. It was written back in 2021\. At the time, I considered Fairwood to be a bet on its recovery from COVID-19. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/71e530d5-3fe9-4859-841d-d7606569dc8d_3304x1854.png)](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) For those who don’t want to read the entire presentation, here’s a quick summary: - Fairwood is a Hong Kong fast-food restaurant operator. At the time of the report, it ran 172 restaurants in Hong Kong and Mainland China. Most of its restaurants carried the “Fairwood” (大快活) brand name, serving a mix of Chinese and Western food. - The founder has a family connection to competitor Cafe de Coral. And the two restaurant chains look alike, too. But I think the two restaurants, together with Maxim’s, continue to fill a niche of reasonably-priced fast-food that’s probably healthier than what’s on offer at McDonald’s. I believe all three can co-exist. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4cb7ac6f-b414-4c88-9530-ca872cb2be47_1662x934.png) Typical meals from Fairwood. Source: Tripadvisor - Up until the 2019 democracy protests in Hong Kong, Fairwood had done okay, with fast-food outlets taking market share from casual dining restaurants. Back then, it enjoyed a return on equity well above 20%. But after the protests broke out, foot traffic ground to a halt and inbound tourism from Mainland China stopped as well. - Then came COVID-19, which led to a complete halt in tourism, along with dining-out restrictions and social distancing measures. - Fairwood continued to sell food throughout the pandemic by setting up an online ordering system, yet profitability continued to lag due to lower margins on takeaway food. - I thought there was a good chance that it would recover following the COVID-19 pandemic, with margins back to its prior levels. - I foresaw a 2025e EPS of HK$1.71, putting Fairwood at a sub-10x P/E ratio at the then-prevailing share price of HK$16.7x, despite a strong balance sheet. When I eventually bought shares in Fairwood myself in December 2022, I saw evidence that foot traffic was returning. All COVID-19 restrictions had been removed, and the border was also about to open up. And that’s indeed what happened in the subsequent two years. --- # 2\. Update since my first write-up ## 2.1\. The post-COVID experience Fairwood’s revenue recovery has played out nicely: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dfa98df5-919b-4ccf-946b-6532d6c6dd84_1670x554.png) The two major factors were the removal of Hong Kong’s dining-out restrictions in October 2022 and the reopening of Hong Kong’s border in January 2023\. It took a while for the face mask mandate and the arrival PCR test requirements to be removed, but eventually, they were. Hong Kong’s government even introduced spending vouchers to lure tourists back to the city. _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-fc6/ Last updated: 2024-11-04T06:34:28.000Z _This post is for subscribers only._ ### Where are you finding value in Asia? URL: https://www.asiancenturystocks.com/where-are-you-finding-value-in-asia/ Last updated: 2024-11-03T02:39:51.000Z _This post is for paying subscribers only._ ### Portfolio review October 2024 URL: https://www.asiancenturystocks.com/portfolio-review-october-2024/ Last updated: 2026-06-04T11:34:28.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author holds positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update The portfolio continued rising in October, up another +0.6% month-on-month. The value of the portfolio is now up +41.8% since October 2021, equivalent to a +12.2% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0ff35b87-adbd-48ed-b525-8ee8889db0d3_1674x554.png) This month's major contributor was Japanese karaoke operator [**Koshidaka**](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/)’s after it reported positive earnings. My original estimates proved far too conservative. Quarterly revenues grew +18% year-on-year and operating profit +27%. Koshidaka’s store expansion is likely to continue across the Kansai region with talks of “doubling the pace” of store expansions. The stock trades at 12.9x next year's earnings. We also saw positive news from Indonesian beer producer and Heineken subsidiary [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/). Revenue growth in the latest quarter accelerated to +22% year-on-year and earnings per share growth to +36% year-on-year. The stock trades at 12.7x forward P/E. Here is what the latest portfolio looks like as of 30 October 2024\. I’ve added one new position: _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-b56/ Last updated: 2024-10-28T02:16:11.000Z _This post is for subscribers only._ ### Kaonavi (4435 JP) URL: https://www.asiancenturystocks.com/kaonavi-4435-jp/ Last updated: 2026-07-31T01:56:35.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Kaonavi at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Kaonavi**](https://finance.yahoo.com/quote/4435.T/?ref=asiancenturystocks.com) *(4435 JP —US$182 million)* is a Japanese developer of talent management software. Talent management is a subcategory of the human resources technology market. The recruitment industry makes up the largest part of the industry. The other part is managing people after their employment. And that’s where Kaonavi fits in. Kaonavi’s software helps companies manage their employees by helping design the organization structure, staffing, evaluations, surveys, training, internal recruitment, etc. This software has been a massive success. Kaonavi’s revenues have grown at a 35% compound annual growth rate in the past five years. It’s been steadily ramping up its marketing expenditures, on which it enjoys a 10x return. The churn rate is only 5% per year － and falling. Kaonavi is clearly doing something right. So what’s Kaonavi’s edge? In my view: user-friendliness. Its initial “hook” was the ability to view each employee's pictures and key details. While that feature is somewhat of a gimmick, it does serve a purpose, and Kaonavi has now been able to build a rich feature set around it. I also think that Kaonavi’s product has significant switching costs. Exporting employee data from Kaonavi’s software is challenging, so customers are more or less tied to the system. With an ever-increasing number of features, the software's stickiness should improve further. Alpha Consulting’s Talent Palette is a competitor, but so far, they haven’t competed much for the same customers. The long-term outlook is positive. The penetration rate of talent management software in Japan is only 23%. There are reasons to believe this number could eventually reach 60%. You can also estimate the upside by looking at the number of companies in Japan with 100 or more employees: more than 60,000 compared to Kaonavi’s current user base of 3,677\. I also think there’s an upside in the current average revenue per user of JPY 187,000/month (US$1,228/month). The near-term picture is also encouraging: - Kaonavi just released a complementary labor management product called “Roum Mate”, built on software recently acquired through M&A. Kaonavi thinks this software could eventually reach the same sales and market share as the core talent management system. - It’s also launched a new budget control system called “Yojitsutic”. This system centralizes budget data, helping management track the performance of each division and keep employees aligned towards key performance indicators. - The last quarterly billings number suggests a large uptick in new orders, perhaps thanks to the release of these new products. - The number of Google search queries is now rising +37% year-on-year, with momentum exceeding competitor Talent Palette's. Kaonavi’s stock now trades at 2.3x EV/Sales, an incredibly low multiple for a Software-as-a-Service stock. This multiple represents half of its historical multiple and also half of those of its peer group. With long-term operating margin guidance of 20%+, the stock trades at \~10x business model margin-adjusted EV/EBIT. With top-line growth of 20-30%, we should see its multiples contract steadily. On my numbers, the stock will reach an EV/EBIT of 4.5x by 2029e. Investors are concerned about competition. For example, [here](https://japaninvesting.substack.com/p/plus-alpha-consulting-4071-jp) is one bearish take. Indeed, Kaonavi’s software is not protected by patents. However, switching costs are high, and the company is gradually improving the platform’s feature set. A low churn rate of 5% and a high LTV/CAC of 10x suggest that growth is going to continue. Another concern might be that parent Recruit will use Kaonavi’s software for their own benefit. That’s certainly possible. On the other hand, you could equally well argue that having a powerful company like Recruit as a parent should help Kaonavi succeed over the long run. That’s the interpretation that I personally favor. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Complete guide to Japan's SaaS industry URL: https://www.asiancenturystocks.com/complete-guide-to-japans-saas-industry/ Last updated: 2025-12-02T04:41:35.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f38145ff-74ad-4a7c-8aa5-55eb1505f039_788x443.jpg) Source: Getty Images # Summary - The Japanese Software-as-a-Service (SaaS) industry has dozens of companies listed, and many of them are growing rapidly with decent unit economics. - This post is an “initiation of coverage” of the industry, discussing the SaaS business model, how to think about the sector, industry trends and the investable universe of stocks. - Ideally, a SaaS company should have a best-in-class product, a large total addressable market, high switching costs, high sales productivity and a low valuation multiple. - Some of the key trends in the industry include a catch-up of the still-low penetration rate of SaaS products, a continuous shift from on-premise to cloud, a government digital transformation push, outsourcing of software development, and disruption from generative AI tools. - The investable universe of stocks spans horizontal ERP providers such as OBIC, accounting software providers such as freee, vertical SaaS companies such as Temairazu and collaboration software developer Cybozu. I go through each of them in depth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) In 2011, Marc Andreessen said that [software is eating the world](https://a16z.com/why-software-is-eating-the-world/?ref=asiancenturystocks.com). However, Japan didn’t get the memo. A conservative, hardware-centric culture continues to permeate the Japanese IT industry. However, a few dozen listed software developers are pushing the country into the new era of software-first products. I’m speaking of Software-as-a-Service (SaaS) companies that charge for their software using subscription models. While I’m generally skeptical about software companies, I think the SaaS model is attractive. Subscription revenues are recurring, stable, and predictable. Online mass distribution leads to high margins at the horizon. The total addressable market is often large, providing a whitespace for growth. I’ve spent the last week trying to understand the sector. Many others have written thoughtful commentary on SaaS companies, including [Made in Japan](https://madeinjapan.substack.com/), [Japan Business Insights](https://japanbi.substack.com/), [Nippon Nuggets](https://jcvpartners.substack.com/) and [Find the Moat](https://findthemoat.com/?ref=asiancenturystocks.com). This post can be seen as an “initiation of coverage.” Given the plethora of opportunities in Japan’s SaaS industry, I plan to write about it for years to come. ``` Table of contents 1. Software-as-a-Service: the basics 1.1. The SaaS business model 1.2. Acquiring new customers 1.3. Retaining customers 1.4. Monetizing customers 2. Stock picking among SaaS names 2.1. Best-in-class product 2.2. Large total addressable market 2.3. High switching costs 2.4. High sales productivity 2.5. Low valuation multiples 3. Trends in Japan’s SaaS industry 3.1. Rising SaaS penetration 3.2. A shift from on-premise to SaaS 3.3. The government’s digitalization push 3.4. The rise of Vertical SaaS 3.5. Outsourcing to Vietnam and elsewhere 3.6. Disruption from generative AI tools 4. The investable universe of stocks 4.1. Horizontal ERP 4.2. Vertical ERP 4.3. Collaboration software 4.4. Data services tools 5. Conclusion ``` # 1\. Software-as-a-Service: the basics ## 1.1\. The SaaS business model Software-as-a-Service (SaaS) is not an industry per se － it’s more of a delivery mechanism for software. In the past, software was sold through one-off licenses that made up the majority of the cost. The software was installed on customers’ computers. Over time, they would pay maintenance fees to receive continuous support until the software became outdated. Internet connectivity changed this entire model. By storing data online (“on the cloud”) rather than on-premise, it could suddenly be accessed from anywhere. Customers now pay monthly or yearly for access to the software. And any updates are made seamlessly without any disruption to customer workflows. The benefits of the SaaS model are multifold: - There’s no need to send out individuals to install the software on-premise - It reduces the up-front costs for the customer - Small companies can scale up their expenses slowly, in line with revenues - Clients can then access the software from any device, e.g. with a web browser - The cost of SaaS products also tends to be low in absolute terms, given the low marginal cost of production - And finally, the software is updated continuously without any disruptions So, how about vendors － will they benefit, too? In theory, the transition should be helpful － if they gain enough scale to pay for initial development costs. Many SaaS companies earn gross margins of close to 80-90%. Even if a SaaS company isn’t profitable today, it might become profitable at scale. On the other hand, competition is greater online. And the switching costs of moving from one service to another are much lower than if the software has been custom-made and installed by say a system integrator on client computers. Then there’s the cost of finding customers. Sales and marketing costs frequently make up 75% － if not more － of total expenses. So, the yearly or monthly subscription fees must compensate for the often significant costs of acquiring each customer. You could also argue that SaaS companies are also in the hands of cloud service providers such as Amazon Web Services and Microsoft Azure. SaaS developers need to pay these providers for storage, computation, and other services. AWS even has a marketplace with many competitors directly with SaaS companies themselves. So, I don’t think it’s as easy as saying that SaaS is necessarily superior. But if developers can get their business models right, develop unique software that becomes deeply embedded in client workflows, and charge an amount that justifies customer acquisition cost, then they can indeed become future cash flow machines. We can broadly divide the industry into two categories: - **Horizontal SaaS**: Software designed to cater to a broad audience - **Vertical SaaS**: Software purpose-built for a particular industry Among these two, vertical SaaS solutions seem to be taking market share. Examples include data management software for hospitals or inventory management software for logistics companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/07b8f198-76b7-4cfc-abe2-add67d0ec242_1252x524.png) So, how do you find success in the industry? Logically, success must come from three separate factors: **acquiring** new customers, **retaining** customers and then **monetizing** those same customers. Each deserves a discussion of its own. --- ## 1.2\. Acquiring new customers The SaaS business model is unique because customer acquisition costs are taken upfront, while subscription revenues occur in subsequent periods. That means that SaaS company cash flows tend to be negative initially and then positive later. In other words, SaaS companies need investments to get them off the ground. ![image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6a7cd9d1-eb30-4b74-a646-60ac9f4eb401_480x348.png) Source: David Skok On the other hand, if customers pay yearly rather than monthly, the company will get an entire year’s worth of revenues on day 1\. That cash flow should help pay for some of those initial investments. Finding a new subscriber is known as **customer acquisition cost** (CAC). A SaaS company’s sales and marketing costs are a proxy for the CAC. To calculate it, take the total sales and marketing expenses and divide them by the number of new customers. Since acquiring customers is costly, faster growth leads to weaker cash flows in the short term. The new customer will bring in a great deal of revenue over his total lifetime, but initially, the company will see a squeeze on profitability and cash flow. In the words of Ron Gill at Netsuite: > *“If plans go well, you may decide it is time to hit the accelerator (increasing spending on lead generation, hiring additional sales reps, adding data center capacity, etc.) in order to pick-up the pace of customer acquisition. *The thing that surprises* many investors and boards of directors *about the SaaS model* is that, even with perfect execution, *an acceleration of growth will often be accompanied by a squeeze on profitability and cash flow*.”* So, don’t fear initial losses in the early stages of a SaaS company’s growth journey. These could be due to a mismatch in the timing of costs, with development costs, sales, and marketing expensed immediately and revenues recognized over time. To understand whether spending money on growth makes sense, you’ll need to weigh the cost of acquiring a customer (customer acquisition cost) with the lifetime revenues that the customer brings in, also known as **customer lifetime value** (“LTV”). Part of the calculation is the **churn rate** － how many stop paying within the first year. - Customer acquisition cost (CAC) = sales & marketing expense / new customers - Lifetime value (LTV) = Average revenue per user (ARPU) \* gross margin / churn rate If the LTV/CAC ratio is above 3x, ramping up spending on acquiring the customer usually makes sense. The LTV/CAC ratio will typically depend on your go-to-market strategy and will not be static. For example, for [Asian Century Stocks](https://www.asiancenturystocks.com/), the average lifetime value of a subscriber is about US$500\. CAC therefore shouldn’t be higher than US$167\. If my sales & marketing expenses are LinkedIn ads, and 1% of clicks lead to a paying customer, then I know that each ad shouldn’t cost more than $1.7 per click. For reference, a LinkedIn ad costs about US$5 per click, so this go-to-market strategy wouldn’t make sense given these numbers. ![What Is a Good LTV to CAC Ratio? | Compass East](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/918394e7-0595-425e-a303-951cdaa7d3bb_1398x800.png) An example of an LTV/CAC calculation. Source: Compass East Another way to evaluate the cost of acquiring new customers is to look at the number of months it takes to recover the cost. You should get back your money within 12 months, and ideally, as fast as 5-7 months. If the company can grow consistently by purchasing ads or through an in-house sales organization, you’ll want to ramp up that spending and enjoy that flywheel. You’ll end up with a growth machine － at least for now. The key factor driving a high LTV/CAC ratio is customer love for the product. The software needs to offer something special and perhaps be deeply embedded in the customer’s organization. Such a value proposition ultimately leads to a low churn rate and high customer lifetime value. To acquire new customers, SaaS companies employ different **go-to-market strategies**. They might spend money on ads, as mentioned above. They might spend money increasing their reach on social media or search engines. They might pay system integrators or resellers to distribute the product. Or they might employ sales staff, who engage in cold outreach to get new leads. SaaS companies should consider all of these options and evaluate each lead source's return on investment, using LTV/CAC as a yardstick. Conversion of new leads into paying customers can be pictured as a funnel that gets smaller based on some conversion rate. Many companies offer free versions of their software (the “freemium model”) and then up-sell value-added services for those who become paying subscribers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1a7b3f7d-a222-4416-b398-e5e1a6e38a57_605x384.png) Early on in the development of SaaS product, the company should be focused on securing new leads, offering free trials and converting them into paid customers. But over time, the company will want to switch its focus to retaining old customers and improve the customer lifetime value that way. --- ## 1.3\. Retaining customers The most important number that SaaS investors focus on is **Annual Recurring Revenue** (ARR). It refers to the normalized yearly revenues the company expects from its existing customers. If a company gets paid monthly, it’s known as the **Monthly Recurring Revenue** (MRR). To grow annual recurring revenues, a company needs to either find new customers (“**new ARR”**), sell more to existing customers (“**expansion ARR**”), or reduce customer losses (“**churn**”). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bf1f0732-1aea-41c2-883e-1009a969aedb_636x389.png) The net increase in the ARR is also known as **Bookings**, or simply how much new business the company has brought in on a net basis. ``` Bookings = new customer ARR + expansion ARR - churned ARR ``` Ideally, the net increase in the ARR should grow every quarter. A related metric is the **Net Retention Rate** (NRR), measuring the company’s ability to retain revenue from existing customers over a specific period of time. A high churn of a SaaS product is problematic. This means that the service is losing customers at a high rate, and those customers need to be replaced. But if the company can replace those losing customers through up-selling to existing customers, then you’ll get what’s known as **negative churn** － the holy grail in the SaaS industry. With negative churn, the company will enjoy an acceleration in revenue growth over time and a parabolic rise in revenues. In other words, each cohort of paying customers will pay more and more. Any new customers will then just add to the total, leading to an acceleration in revenues. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/01125804-8de5-47ae-87f5-3275069cb3f8_1216x758.png) Source: David Skok Fellow Substack author Lenny Rachitsky wrote about a study [on his Substack](https://www.lennysnewsletter.com/p/monthly-churn-benchmarks?ref=asiancenturystocks.com), claiming that normal business-to-consumer churn ratios are 3-5% and for business-to-consumer products, 2.5-5.0% for small-to-medium enterprises and 1-2% for large enterprises. But suppose you find a company with a high churn. What are the explanatory factors for this high churn? There can be a multitude of factors involved. For example: - The product might not provide value for customers - The software might be unreliable - The company may not provide enough customer support - The switching costs might be too low - The software might have been sold to the wrong groups of customers - The customers may have gone out of business - Or, the company might not be effectively up-selling to existing clients and thus not achieve this holy grail of “negative churn” The bottom line is this: if a SaaS company can achieve a low churn, its economics will improve materially. SaaS companies with robust revenue retention should be valued highly by the market, and they often are. Once churn is low, monetizing customers more effectively will be the next step. --- ## 1.4\. Monetizing customers Many SaaS products use a **freemium model**, where some features are free to lure customers. Once they see the value in it, they’ll be willing to pay extra for added features. In other cases, the company employs **enterprise** **sales representatives** who take inbound calls from customers or do cold outreach to get customers to pay. Pricing can be **volume-based** or **feature-based**. In the former case, customers can pay extra for higher storage in iCloud, for example, or cross-sell a related product that adds a feature they didn’t know they needed. Business-to-consumer products can cost anywhere from $4/month to $20 or even higher. SaaS products sold to enterprises such as Salesforce.com can easily cost $500/month or more. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fd6a5bd1-9f8e-4ff0-9d08-db943cfd256d_848x584.jpg) Typical costs for consumer SaaS products The problem with the business-to-consumer market is that at $5/month plans, it’s difficult to justify the costs of acquiring customers, either through time spent or through paid channels. It will also be difficult to provide customer support. So, be careful when companies try to survive with low average revenue per user (**ARPU**). It may simply not be enough to justify the cost of acquiring said users. There are ways customers can be compelled to pay more. For example, telecom operators are known to make the pricing variable or unique. If it becomes difficult to compare pricing plans with those of competitors, customers may be more willing to pay up － at least on the margin. --- # 2\. Stock picking among SaaS names Over the past week, I’ve read through dozens of write-ups on SaaS companies and found five or so factors that determine the strength of a particular idea. In no particular order, these are best-in-class products, a large total addressable market (TAM), high switching costs, high sales productivity and low valuation multiples. ## 2.1\. Best-in-class product ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7d2f507a-db76-40a2-8429-22beac364e8a_1998x1528.png) Japanese review website “IT Grid Review” Engineers talk about finding the perfect product-market fit. But it isn’t easy to quantify. At the end of the day, it’s about a fuzzy concept known as customer love. One way to find such services is to talk to customers and understand how strongly they feel about the product. Customer engagement can also be telling. For example, a high ratio between daily active users (DAU) and monthly active users (MAU) tells you that users are compelled to return daily. Then there’s the question of reputation. You don’t get fired for buying IBM. The same is probably true for many other leading vendors in each vertical. Trust is a valuable commodity, and customers tend to have the greatest trust in the incumbents. The best products tend to have 90%+ retention rates. Monthly churn should be well below 2%. To the extent the company adds customers, these new customers should have mostly positive reviews. One Japanese website with SaaS reviews is [IT Grid Review](https://www.itreview.jp/?ref=asiancenturystocks.com), a Japanese version of G2 or Trustpilot. --- ## 2.2\. Large total addressable market ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/de79670f-1250-4c90-93f6-9afd6b195fc3_1280x476.jpg) Source: Daiwa The future revenue of SaaS companies can be seen as a function of: - The number of addressable customers - The conversion rate to paid - The gross profit margin - Average revenue per user (ARPU) To get a sense of the addressable market, we can consider the number of individuals or companies that could potentially become buyers. We can also look at the penetration of similar software in other countries. Benchmarking the average cost per user is also helpful to understand the potential upside in the monetization rate. Understanding the potential for cross-selling opportunities once customers become entrenched is also helpful. --- ## 2.3\. High switching costs ![20191217N freee](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c43bd42f-c73d-4667-bd35-30668ba8177d_1560x877.jpg) The founders of Japanese accounting software suite freee Switching costs for SaaS products tend to be lower than for on-premises software. However, SaaS products sold to enterprise customers are still deeply embedded in customers’ day-to-day workflows. For example, customer information stored on OBIC’s platform is difficult to transfer to another. Much of the software in the enterprise market is also customized to the client’s wishes, even among SaaS offerings. Such high switching costs will provide the vendor with pricing power. A service with many features built into it will also be difficult to compete with. Upstarts won’t be able to match the value proposition. And once software has been built, it doesn’t require much upkeep. So, with a growing feature set, incumbents can slowly ramp up switching costs. The software product is often integrated with those of other software vendors. For example, Salesforce’s customer relationship management (CRM) system uses Application Programming Interfaces (APIs) to retrieve data from and send it to the Human Capital Management (HCM) platform Workday. Compliance with data protection regulations like GDPR and SOC2 can also hinder competition and make switching to other services less likely. On the other hand, SaaS products tend to have lower switching costs by nature. Switching from one website to another is not difficult. SaaS products in the business-to-consumer area are particularly at risk of churn. However, even for enterprise products, platforms such as AWS may figure out how to make migrations between vendors easier than they are today. --- ## 2.4\. High sales productivity ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dbec976b-1cbb-4720-b041-e073c0982631_1280x785.jpg) Key channels for customer acquisition: inbound, field sales, distribution partners and online marketing. Source: Daiwa In the early stage of a SaaS company’s development, the founder will be the person selling the product. Eventually, he or she will have to hire sales representatives who may or may not exhibit high sales productivity. You can measure productivity by looking at periodic **bookings per sales representative**. You might also want to adjust for the how many months of cash is collected up-front. And the cost incurred to reach that sales number. A related concept is **billings**, which is the amount of money invoiced in any given period. To get this number, take the revenue in one quarter and add the change in deferred revenue over the quarter, which you can find in the balance sheet. Compare the billings with those for the previous quarter. It’s a better metric than revenue since revenue is a lagging indicator. Another way to measure sales productivity is through the LTV/CAC ratio. As mentioned earlier, anything above 3x is acceptable. Another way is to look at the number of months it takes to recover the customer acquisition cost, ideally 5-7 months. Enterprise customers will offer better LTV/CAC ratios than small and medium-sized businesses and individuals. The latter are less likely to spend on premium features, and customer acquisition costs tend to be higher. Churn tends to be higher, too. --- ## 2.5\. Low valuation multiples ![What does the Rule of 40 tell about a SaaS company?](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ef3fd418-b017-41f1-9097-cb93bddcd4a2_1881x904.png) A scatterplot of how companies score on the Rule of 40 on the left. EV/Sales on the right. Source: [Tony Federov](https://www.tonyfedorov.com/rule-of-40-for-saas-companies/?ref=asiancenturystocks.com) SaaS companies are tricky to value. They incur most of the cost of acquiring a customer directly, including sales, marketing, development, etc. Yet the revenues are recognized over time as the service is used. This creates a mismatch of revenues and expenses, leading to losses in the highest-growth phase of a SaaS company. Instead, SaaS companies are typically valued as a multiple of their **Annualized Recurring Revenues** (ARR). Historically, high-growth SaaS companies globally have been valued at around 8x EV/ARR or EV/Sales, as they typically be similar. You can also weigh this multiple against a broad metric of quality, known as the Rule of 40\. Simply add up 1) the revenue growth rate and 2) the operating profit margin after deducting stock-based compensation. If the sum of these two numbers exceeds 40%, then the company exhibits a healthy balance of growth and profitability. Companies that meet this hurdle yet trade at a low ARR are, hence, worth buying. You can also look at EV/Sales with customer churn or net retention ratios to understand how sustainable revenues are. If they are sustainable, the company isn’t paying much stock-based compensation and unit economics are strong, we can probably assume that margins will improve over time. It’s difficult to say where margins will end up, though, as the LTV/CAC ratio is not static. So, the value of a particular SaaS company is difficult to pinpoint. For mature SaaS companies, the calculus becomes much simpler. Just look at them on an EV/EBIT or P/E multiple basis, bearing in mind growth and whether margins have stabilized or not. --- # 3\. Trends in Japan’s SaaS industry ## 3.1\. Rising SaaS penetration The Japanese SaaS market seems to be growing at an 11% compound annual growth rate, beating expectations a few years ago. The overall software market is clearly moving towards SaaS offerings, with packaged software becoming a thing of the past. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be760e1e-c06d-4b5c-a346-d677aadc63f8_1854x604.png) Source: [Boxil, Nihonium](https://nihonium.io/saas-adoption-in-japan/?ref=asiancenturystocks.com) But the upside is even greater than this. Much of Japan’s software is custom-made for specific clients rather than packaged and sold as a product. I’ve seen numbers suggesting that SaaS’s share of total IT spending in Japan remains low at just 5% vs. closer to 20% in the United States. That 4x upside seems to hold true for several sectors. For example, within the accounting and HR software fields, Japan’s SaaS penetration rate is just a quarter of that of the United States. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/95eb2543-53b5-4635-8f60-5b2126f99207_1052x546.png) Source: Daiwa While these are 2020 numbers, so they are slightly outdated, it’s clear that there is clearly plenty of catch-up potential. A more [recent survey](https://nihonium.io/saas-adoption-in-japan/?ref=asiancenturystocks.com) done by Boxil showed that only 34% of Japan’s companies use any SaaS tool. And if they do, they only use 1-10 SaaS tools for their businesses, rather than the 200+ used by most companies globally. Another study by [Okta](https://www.okta.com/businesses-at-work/?ref=asiancenturystocks.com) shows that the number of apps used by Japanese companies is only 35 compared to a global average of 93\. So surely, there’s got to be potential for Japan’s SaaS companies to grow. --- ## 3.2\. A shift from on-premise to SaaS ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a1cc7495-b98c-41c3-9c9b-f6f83c838854_1280x699.jpg) The market is shifting from customized on-premise software to standardized SaaS products. Source: Will Schoebs Driving this shift towards SaaS products is a move from on-premise software to cloud services. The Japanese software industry has been slow to change, having been dominated by hardware-centric manufacturing companies that place a low importance on software development. To the extent that SaaS products are developed, they’re often done so internally with sister companies or by system integrators. The software would only be used by a specific keiretsu, with software customized to its needs. The more conventional software developers include Fujitsu, NTT Data and Nomura Research Institute. Japan doesn’t have much of a venture capital industry, and that’s weighed on software innovation. However, since SaaS doesn’t require much capital investment, younger companies have been able to break through, selling low-priced software to small and medium-sized enterprises. Foreign companies such as Salesforce and Oracle have also broken into the enterprise market. With the clear benefits of SaaS, including low up-front cost, scalability, accessibility and continuous support, the industry will continue to shift away from on-premise software, though perhaps at a slow pace. --- ## 3.3\. The government’s digitalization push ![File:Fumio Kishida 20170216.jpeg](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dbef240a-d658-45de-a3c3-d1c7dbc04561_800x571.jpg) Fumio Kishida. Source: Wikipedia Commons In 2021, the Japanese government established its Digital Agency. It was a push by then-prime minister Fumio Kishida to accelerate the digitalization of government services. One such initiative is the GovCloud. Each government agency will replace its current software vendors with a cloud computing platforms such as Amazon Web Services, and then let other government agencies build applications on top of this. Many government processes remain manual but should migrate to digital soon, benefitting certain SaaS vendors in the process. In 2023, Japan’s Information Technology Promotion Agency wrote a [digital transformation (DX) whitepaper](https://www.asiancenturystocks.com/content/files/publish/wp-dx/gmcbt8000000botk-att/000108041.pdf) showing that Japan lags behind the United States. The number of companies in Japan with 100-300 employees with digital transformation teams is only 68% compared to 90% in the United States. So digital transformation hasn’t been a priority among companies either, and the government is trying to address this problem. One measure is Japan’s new [Startup Visa program](https://www.jetro.go.jp/en/jgc/reports/2022/98e899640bae5d8b.html?ref=asiancenturystocks.com), focused on attracting innovative companies to Japan. And attracting foreign entrepreneurs who want to build start-ups in the country. --- ## 3.4\. The rise of Vertical SaaS Another key trend is the rise of vertical SaaS products addressing issues relating to specific industries. We’ve products tailor-made for the construction industry, logistics, manufacturing, the hospitality industry, etc. Among Japan’s venture capital backed SaaS companies, there are only about 100 to 150 vertical SaaS businesses today. In the listed universe, examples of vertical SaaS companies include Temairazu for the hospitality industry and CYND for beauty salons. Though the fastest growing vertical SaaS companies appear to the medical and the logistics industries. --- ## 3.5\. Outsourcing to Vietnam and elsewhere Another key trend has been to shift software development offshore, including to Vietnam and India. American-listed software company Zoom has become famous for employing most of its engineers within mainland China. However, even in Japan, several publicly listed SaaS companies such as Raksul, Money Forward, and Cybozu have all located a portion of their employees abroad. --- ## 3.6\. Disruption from generative AI tools ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a83c9e50-5bfb-4084-ba8b-3cbc78de3c98_1280x591.jpg) Source: Finally, there’s an open question of whether generative AI tools and large language models will disrupt some of the current software vendors. Presumably, the ease of developing new software should devalue existing offerings. So far, the AI native companies that have emerged have focused primarily on customer support services, chat and marketing tools. Other use cases of generative AI tools include: - Improved algorithms to provide personalized recommendations based on user preferences. - Greater ease in creating AI-generated images, which should impact services such as image data banks - Automation of repetitive tasks, perhaps within the accounting field. These are the sectors that I would consider to be ripe for disruption. --- # 4\. The investable universe of stocks Japan’s listed SaaS companies enjoyed a COVID-19 bump in ARR growth. Since then, we’ve seen a normalization of demand. And consequently, SaaS multiples have come down to more palatable levels. The average EV/Sales is now well below 10x and frequently below 5x. You could argue that there’s finally value in the sector. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b7530065-6179-4e21-b496-fd7b589cae51_2006x1468.png) Source: UB Ventures Japan’s largest SaaS companies by annual recurring revenue include Rakus, Sansan, Appier, Cybozu, freee and Money Forward. In other words, the list is dominated by horizontal ERP companies, including accounting software providers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ee6ad9ee-227a-45e6-b2c0-dcb0d53539b6_2736x1344.png) Source: UB Ventures In terms of the Rule of 40, the ones that score best are hospitality booking system providers Temaizaru, Rakus and Chatwork (kubell). But bear in mind that sales growth can be volatile. And the latest sales growth numbers tend to be priced-in, anyway. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3d5f1151-96d1-4151-bda0-5c3632dd588a_2754x1452.png) To understand the investable universe of SaaS stocks, I’ve divided them into four categories: horizontal enterprise resource planning (ERP) companies, vertical ERP companies focusing on specific industries, collaboration tools, and finally, data services providers. There may be better ways to partition the universe, but it’s a good start. ## 4.1\. Horizontal ERP Japan’s largest enterprise resource planning (ERP) company is OBIC, which provides customized software solutions to its customers. OBIC’s separately listed subsidiary [**OBIC Business Consultants**](https://finance.yahoo.com/quote/4733.T/?ref=asiancenturystocks.com) *(4733 JP* － *US$3.7 billion)* is more focused on customized solutions for customers as well as cloud services. OBIC has a product called Kanjo Bugyo, which has a top market share among ERP software in Japan. The SaaS version is called Bugyo Cloud, but so far, only a small portion of its customers have completed their migration to the SaaS offering. [**Rakus**](https://finance.yahoo.com/quote/3923.T/?ref=asiancenturystocks.com) *(3923 JP* － *US$2.5 billion)* has the leading market share in several niche applications, such as expense settlement and digital invoicing systems. Other companies within the business spend management industry are SAP’s Concur and Panasonic subsidiary EasySoft. There’s a clear risk that others, such as accounting software providers Money Forward and freee, will enter the field eventually, too. Rakus’s software has middling [IT Grid Review](https://www.itreview.jp/vendors/rakus?ref=asiancenturystocks.com) scores. And the stock trades at a relatively elevated 7.3x EV/Sales. The story with accounting software developer [**freee**](https://finance.yahoo.com/quote/4478.T/?ref=asiancenturystocks.com) *(4478 JP* － *US$1.2 billion)* is more exciting. You can think of it as the Japanese version of Xero, a New Zealand accounting software developer that’s been a 30-bagger since its IPO in 2012\. Today, freee has annual recurring revenues of JPY 26 billion (US$172 million) and 532,000 customers. The monthly churn rate is currently 1.2% but 0.6% for its 200,000 corporate customers. The total addressable market is close to 7.0 million businesses, including self-employed individuals. The fees are around JPY 24,000/year (US$159/year) for self-employed individuals and much higher for corporates, with an ARPU of about JPY 50,000/year (US$330/year). These prices seem reasonable, though I wonder how much further upside there is. The stock now trades at an EV/Sales of 4.5x. Can freee’s revenues reach JPY 170 billion, giving it an EV/Sales of 1.0x with Xero-like margins of 15%? It’s plausible. However, bear in mind that Freee has diluted shareholders by 7% per year in the past few years through equity issuance and stock compensation. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d4e996c-c725-4341-8c10-4b2d684e9aa9_1468x760.png) Relative market shares of freee and Money Forward. Source: JP Morgan Competitor [**Money Forward**](https://finance.yahoo.com/quote/3994.T/?ref=asiancenturystocks.com) *(3994 JP* － *US$2.0 billion)* is said to have an inferior product to free though its product Money Forward ME (マネーフォワード) actually has a similar [IT Grid Review](https://www.itreview.jp/products/manefowadokuraudokintai/reviews?ref=asiancenturystocks.com) score to freee’s. It’s also marginally more profitable, with an EBITDA margin of -13%. I don’t see either freee or Money Forward as necessarily trading at the wrong valuations. [**Appier**](https://finance.yahoo.com/quote/4180.T/?ref=asiancenturystocks.com) *(4180 JP* － *US$1.2 billion)* is listed in Japan but is actually a Taiwanese company. It uses generative AI tools to help businesses identify potential customers. Its software is designed to improve customer engagement and drive marketing ROI higher. I have no idea whether its product is effective or not. Within the human resource management industry, competition appears to be cutthroat. One such company is [**Plus Alpha Consulting**](https://finance.yahoo.com/quote/4071.T/?ref=asiancenturystocks.com) *(4071 JP* － *US$598 million)* (“PAC”), which offers a product called Talent Palette that helps the HR department keep track of work hours, payroll and work history. It has a 4.0 score on [IT Grid Review](https://www.itreview.jp/products/talentpalette/reviews?ref=asiancenturystocks.com). The yearly churn rate is only 5.8%. The software apparently has 4,700 features, which should keep competition at bay. Key competitors include Visional (not a pure-play), Kaonavi, Freee and Money Forward. There should also be switching costs after employee data is stored in the Talent Palette database. The software is apparently strong in analyzing unstructured data, used, for example, in identifying motivated employees, though there is a risk that this feature becomes commoditized by the rise of generative AI tools. The ARPU is currently JPY 400,000 or about US$2,665\. That ARPU seems high to me. The fact that it doesn’t provide stock compensation is a major plus in my mind. The stock trades at 4.9x EV/Sales, 13.6x EV/EBIT and 30.7x P/E, with revenues doubling in the last three years. It looks compelling. There’s a great recent write-up on the stock [here](https://japaninvesting.substack.com/p/plus-alpha-consulting-4071-jp). Competitor [**Kaonavi**](https://finance.yahoo.com/quote/4435.T/?ref=asiancenturystocks.com) *(4435 JP* － *US$183 million)* has a similar product with a worse score on [IT Review](https://www.itreview.jp/products/kaonavi/reviews?ref=asiancenturystocks.com) and recent deceleration in top-line growth due to competition Visional, Freee and Money Forward. The annualized churn rate has been 7%, slightly higher than Talent Palette’s. There could be an upside in the ARPU of just JPY 187,000/year or about US$1,240/year. The stock also trades cheaply at just 2.3x EV/Revenues despite a respectable Rule of 40 score of 43%. The following VIC post [here](https://valueinvestorsclub.com/idea/Kaonavi/2223335936?ref=asiancenturystocks.com) argued that Kaonavi has “verifiably attractive unit economics”. No significant stock compensation either. If the VIC poster is correct that we could be seeing a 30% operating margin on the horizon, the stock looks very cheap indeed. Would just need to become comfortable with the quality of the product. [**Raksul**](https://finance.yahoo.com/quote/4384.T/?ref=asiancenturystocks.com) *(4384 JP* － *US$494 million)* is somewhat of a conglomerate. Its main business is providing a platform for outsourced business printing services. Raksul also owns a transportation brokerage service called Hacobell. And finally, it owns a SaaS company called Josys, which helps companies keep track of company IT resources, including both licenses and devices. Josys doesn’t seem fully owned, but Raksul will have the opportunity to buy out minorities at some point. Does the product have a moat? Unclear. In Richard Katz’s new book, he mentions Raksul as an innovative company. You can find a VIC write-up on the company [here](https://valueinvestorsclub.com/idea/Raksul/6418749966?ref=asiancenturystocks.com) and an interview with CEO Yasukane Matsumoto [here](https://jakebarfield.substack.com/p/raksul-yasukane-matsumoto-528?utm%5Fsource=publication-search). The stock does look cheap at 1.2x EV/Sales, but I’d have to do more research to understand whether the business printing service segment is on a decline or not. [**Infomart**](https://finance.yahoo.com/quote/2492.T/?ref=asiancenturystocks.com) *(2492 JP* － *US$547 million)* is a provider of an online platform that connects restaurants with wholesalers. They pay a monthly fee for access to the platform, with no further transaction costs. Growth has been tepid, and margins have contracted, with weaker gross margins and higher promotional expenses. You can find a write-up at Shared Research’s website [here](https://sharedresearch.jp/en/companies/2492?ref=asiancenturystocks.com). But I’m not keen to dig deeper. Substack Made in Japan wrote about [**Atled**](https://finance.yahoo.com/quote/3969.T/?ref=asiancenturystocks.com) *(3969 JP* － *US$82 million)* earlier this year [here](https://madeinjapan.substack.com/p/a-saas-company-trading-at-48x-ebitda). He made the case that Atled’s workflow management software products “X-point” and “Agile Works” dominate this particular niche. Processes that can be handled by the software include claims, purchase agreements and requests for time off. Employees can then track the progress and see the documentation submitted for each project until approval. IT Grid Reviews for X-point Cloud and AgileWorks are both 3.9\. The monthly churn is incredibly low at just 0.14% per month and that clearly bodes well for earnings sustainability. From that perspective, an EV/Sales of 3.0, EV/EBIT of 7.4x and P/E of 17.3x look attractive. The company is growing in the double digits, though it does seem like a low-value-added product to me. [**Wantedly**](https://finance.yahoo.com/quote/3991.T/?ref=asiancenturystocks.com) has a business social networking platform with the same name, apparently with 2 million individual users and 30,000 corporate users. It matches candidates and employers based on the employer’s vision and values. It makes money through a fixed monthly fee for corporate users and advertising revenues on top. The product has a 3.8 score on [IT Grid Review](https://www.itreview.jp/searches?utf8=%E2%9C%93&search%5Fform%5Bsearch%5Fcontent%5D=Wantedly&x=0&y=0&ref=asiancenturystocks.com), with employers saying that you can hire people who fit your corporate culture. Seems like a niche service. The stock is cheap at P/E 12.0x, but sales growth appears to be tepid. Finally, [**Teamspirit**](https://finance.yahoo.com/quote/4397.T/?ref=asiancenturystocks.com) *(4397 JP* － *US$38 million)* offers a software product for attendance management, replacing the age-old process of employees checking in and out with time cards. It also offers an expense approval and reporting feature. It’s had strength in small- and medium-sized businesses and is now refocusing its attention on larger enterprise customers. The founder has just stepped back. The stock does look cheap at 0.7x EV/Sales but is not profitable. The product has a 3.8 score on [IT Grid Review](https://www.itreview.jp/products/teamspirit/reviews?ref=asiancenturystocks.com). You can find a nice write-up on TeamSpirit at Japan Business Insights [here](https://japanbi.substack.com/p/japanese-software-industry-current?utm%5Fsource=publication-search). Overall, in this segment I’m most excited about Plus Alpha Consulting and Kaonavi, as their software should be deeply integrated with customer workflows. They’ve been good to shareholders. And their valuations look compelling, too. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/863568b4-b533-4362-849d-a2b23c1b12dc_1236x536.png) --- ## 4.2\. Vertical ERP Vertical enterprise resource planning (ERP) systems help companies in manage business processes such as accounting, logistics, payroll, customer relationships, etc. These differ from say SAP in that they only target companies within verticals such as the hospitality industry or the healthcare industry. The largest such vertical ERP developer is [**Medley**](https://finance.yahoo.com/quote/4480.T/?ref=asiancenturystocks.com)*(4480 JP* － *US$886 million)*. It has two main services: a job matching website called JobMedley, as well as a SaaS ERP product called Medical PF, targeting hospitals, clinics, pharmacies and dentist offices. Medical PF’s revenues seem to be growing rapidly － almost doubling year-on-year. It’s on the verge of becoming cash flow positive. Some of Medical PF’s features include telemedicine, an electronic medical record system, a pharmacy support system and an online medical encyclopaedia. The stock based compensation is only about 1% of sales per year and fully expensed. An EV/Sales multiple of 3.7x doesn’t seem high at all given how explosive Medley’s growth has been. There’s a great write-up on Medley at Jake Barfield’s Substack [here](https://jakebarfield.substack.com/p/medley-inc-4480jp-investment-thesis). [**Bengo4**](https://finance.yahoo.com/quote/6027.T/?ref=asiancenturystocks.com) *(6027 JP* － *US$443 million)* has several key business areas, too. It owns a platform called Bengo4, a platform that connects consumers to lawyers with 11 million monthly users. It has a similar platform for tax accountants. It also has a legal affairs portal with information sold to the 58,000 lawyer members. Finally, it offers a SaaS product called CloudSign, which allows users to electronically sign documents. I don’t understand why signing can’t take place through Adobe Acrobat or similar software. However, the [IT Grid Review](https://www.itreview.jp/products/cloudsign/reviews?ref=asiancenturystocks.com) score is 4.3, so customers clearly think otherwise. The EV/Sales of 4.3x, EV/EBIT of 31.8x and P/E of 78.2x means the stock is priced for growth. A nice little write-up on Bengo4 can be found at Nippon Nuggets [here](https://jcvpartners.substack.com/p/bengo4com-sign-of-the-times?utm%5Fmedium=reader2). [**Smaregi**](https://finance.yahoo.com/quote/4431.T/?ref=asiancenturystocks.com) *(4431 JP* － *US$365 million)* offers a Points of Sales (POS) system sold to retailers. It helps manage cash registers, inventory, customer relationships, and reservations. Users can also help analyze transaction data through visualizations. There are apparently 45,000 stores using the Smaregi POS system. It has also created an app ecosystem called the Smaregi App Market to improve the feature offering. The Smaregi [IT Grid Review](https://www.itreview.jp/products/smaregi/reviews?ref=asiancenturystocks.com) score is a whopping 4.3 stars. It can handle QR payments and credit cards. Growth has been explosive, and the operating margins have remained positive throughout. With \~40%+ revenue growth, who knows what the right multiple is? I haven’t found a good write-up on the stock, but I’m excited and want to dig deeper. Then we get to Japanese auto aftermarket software company [**Broadleaf**](https://finance.yahoo.com/quote/3673.T/?ref=asiancenturystocks.com)*(3673 JP* － *US$352 million)*. Its customers are auto maintenance shops. It has an auto parts inventory database as well as an online marketplace that connects buyers and sellers. Over half of the revenues come from license fees for the use of its software. It’s been transitioning to a SaaS pricing model, but I’m not sure how far it’s come in this transition. I’m skeptical about the product, and indeed, revenues have fallen in the past few years. Japan Business Insights wrote about Broadleaf [here](https://japanbi.substack.com/p/broadleaf-the-vertical-saas-enabled). A company that’s more of a pure-play SaaS company is [**oRo**](https://finance.yahoo.com/quote/3983.T/?ref=asiancenturystocks.com) *(3983 JP* － *US$247 million)*. It’s a provider of a SaaS ERP system called ZAC, which is designed for industries that manage business on a case-by-case basis: IT services, advertising, public relations, content production, consulting, etc. It used to offer one-off purchase options but has now completely transitioned to a SaaS fee structure. It recently launched a new SaaS management tool called dxeco, which it has high hopes for, helping to track subscriptions within each company. oRo also wants to expand internationally. The EV/Sales of 3.2x seems low, but the low sales growth suggests an underlying issue. The ZAC score on [IT Grid Review](https://www.itreview.jp/products/zac/reviews?ref=asiancenturystocks.com) is only 3.2\. There’s a great recent VIC write-up on oRo [here](https://valueinvestorsclub.com/idea/oRo%5FCo%5FLtd/7786232625?ref=asiancenturystocks.com), but it might be leaning too bullish. [**SpiderPlus**](https://finance.yahoo.com/quote/4192.T/?ref=asiancenturystocks.com) *(3983 JP* － *US$247 million)* is another vertical SaaS focusing on the construction industry. Its software helps construction companies manage projects, with site drawings, construction photographs, and inspection records all stored online and accessible through any device. A few years ago, it only had about 1,000 clients, so it does seem like a small business. But it was growing rapidly. The standard version only costs JPY 3,000/month (US$20/month), which seems minimal. The EV/Sales is only 2.4x, but the company is making losses, the cash flow is negative, and it is growing relatively slowly. It doesn’t have any reviews on [IT Grid Review](https://www.itreview.jp/products/spider-plus/reviews?ref=asiancenturystocks.com). There’s a write-up on Nippon Nuggets [here](https://jcvpartners.substack.com/p/spiderplus-construction-technology?utm%5Fsource=publication-search) from 2021, back when SpiderPlus used to trade at heady levels. Another vertical SaaS is [**Property Data Bank**](https://finance.yahoo.com/quote/4389.T/?ref=asiancenturystocks.com)*(3983 JP* － *US$247 million)*, which was covered by Made in Japan [here](https://madeinjapan.substack.com/p/a-quick-note-on-a-japanese-appfolio). The software is used by commercial property landlords to manage their assets. For example, its customers might be J-REITs or large corporations such as Japanese railway operators. Part of the revenues are non-recurring and part subscriptions. It’s been profitable almost from the beginning and remains so. It’s also worrying to see revenues decline so early in its development, though Made in Japan makes the case that it’s due to delayed orders and delayed revenue recognition. If so, the stock could be cheap-ish at 2.6x EV/Sales. I haven’t been able to find any reviews for its products, so my conviction in the product is low. [**CYND**](https://finance.yahoo.com/quote/4256.T/?ref=asiancenturystocks.com) *(4256 JP* － *US$37 million)* is a vertical SaaS product focusing on the beauty industry. It provides reservation management software with an estimated 3% market share in Japan. It acquired its second-largest competitor, Pacific Porter, in January 2023\. The ARPU per store is currently JPY 109,000/year, equivalent to US$722/year. I am not sure whether there’s an upside in this number. However, there could be an upside from their 15,000 contracted stores to the addressable market of 550,000\. The two founders seem to understand capital allocation and are advised by Sun Mountain. CYND’s key product, Beauty Merit, has 4.5 stars at [IT Grid Review](https://www.itreview.jp/products/beauty-merit/reviews?ref=asiancenturystocks.com). There’s an amazing write-up on CYND [here](https://valueinvestorsclub.com/idea/CYND/3559103006?ref=asiancenturystocks.com). At 2.1x EV/Sales, it seems like a steal. A more mature business is [**Temairazu**](https://finance.yahoo.com/quote/2477.T/?ref=asiancenturystocks.com)*(4256 JP* － *US$37 million).* A recent VIC write-up on Temairazu can be found [here](https://valueinvestorsclub.com/idea/Temairazu/7762579235?ref=asiancenturystocks.com). Like CYND, it provides a booking service for hotel rooms, helping them manage room inventories effectively across different sales channels. In other words, it’s a middleman between a multitude of booking websites and a large number of hotels. Surprisingly, Temairazu saw revenues almost flat during COVID-19, but thanks to the weak yen, they’ve now begun growing again. There’s no feedback on [IT Grid Review](https://www.itreview.jp/products/temairazu/reviews?ref=asiancenturystocks.com). The stock has an EV/Sales of 7.1x, which can be justified thanks to a whopping 74% EBITDA margin, giving it a P/E of 21.9x. I’m finding a great number of companies to be excited about here. For example, Medley is showing explosive growth and occupies a niche for itself. Smaregi’s POS system has an incredible score on IT Grid Review and is exhibiting explosive top-line growth of 40%+. I’m perhaps even more excited by CYND, which only has a 3% market share in Japan, with plenty of whitespace for further growth and an EV/Sales multiple of just 2.1x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9bee2355-c447-476a-9783-6ef1116aca52_1236x626.png) --- ## 4.3\. Collaboration software Collaboration software falls outside the realm of enterprise resource planning services, and hence I put them in a separate category. Such software can be likened to Slack or perhaps Microsoft Teams. For example, [**Cybozu**](https://finance.yahoo.com/quote/4776.T/?ref=asiancenturystocks.com) *(4256 JP* － *US$675 million)* has a product called Kintone that helps teams manage their workflows and communicate in one place. There’s also a no-code feature that helps users create web apps. There’s another product called Cybozu Office that offers email, scheduling and document management. There’s also a groupware product called Garoon that facilitates collaboration across teams across different projects. These have [IT Grid Review](https://www.itreview.jp/vendors/cybozu?ref=asiancenturystocks.com) scores of 3.7-3.8\. Kintone has become a major success, but overall, the company doesn’t meet the Rule of 40 hurdle. An EV/Sales of 3.1x is not high but in line with the peer group. [**kubell**](https://finance.yahoo.com/quote/4448.T/?ref=asiancenturystocks.com) *(4448 JP* － *US$129 million)* is a business communication app that sounds like it’s similar to Slack. It offers chat, task management, file sharing, video calls and contact management features. The [IT Grid Review](https://www.itreview.jp/products/chatwork/reviews?ref=asiancenturystocks.com) score of 3.8 is just okay, with reviewers commenting that it’s easy to use, allowing for quick communication. I doubt that it’s more convenient than Google’s G Suite or Slack, however. kubell is not profitable, though it is now cash flow positive. The EV/Sales multiple of 2.4x doesn’t seem excessive. There’s a quick introduction to kubell (formerly Chatwork) at the Nippon Nuggets Substack [here](http://nulab/?ref=asiancenturystocks.com). Finally, [**Nulab**](https://finance.yahoo.com/quote/5033.T/?ref=asiancenturystocks.com)*(5033 JP* － *US$34 million)* is yet another SaaS collaboration tool with 4 million users globally. Its flagship product is called Backlog － a project management tool targeted to software development firms. It has task management, version control, and bug tracking features. The [website](https://nulab.com/?ref=asiancenturystocks.com) and software look slick, and I’m surprised they’ve grown successfully overseas. The [IT Grid Review](https://www.itreview.jp/products/backlog/reviews?ref=asiancenturystocks.com) score of 3.9 is average, but users seem satisfied, especially when organizing multiple projects simultaneously. Nulab also has an ID management tool. Top-line growth ranged from 16% to 35% in the past few years, and the company is now profitable with a P/E of 14.8x. Seems like a complete steal to me － I wonder if there is more to the story. Out of the three, I’m certainly most attracted to Nulab, with its explosive sales growth and low valuation multiples. But there’s probably a key investor concern that I haven’t yet identified. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f172f21d-1ad7-4895-a777-c54455fd451d_1236x220.png) --- ## 4.4\. Data services tools We’re now getting to the final section of this post: data analytics, data processing tools, cyber security software, authentication software, etc. Essentially software falling into the “other segment”. For example, [**Sansan**](https://finance.yahoo.com/quote/4443.T/?ref=asiancenturystocks.com)*(4443 JP* － *US$1.9 billion)* is Japan’s leading platform for scanning and exchanging business cards. I didn’t even know this was a business, but the Japanese seem to take the exchanging of business cards seriously. In 2021, almost 3 million people had downloaded the Sansan app and registered their business cards with the platform. Sansan also connects with Salesforce, making it possible to find contact details through the Salesforce platform. I still think it’s an odd business ripe for disruption, and at 6.0x EV/Sales, I’m not interested in getting involved. The Nippon Nuggets Substack wrote about Sansan back in 2021 [here](https://jcvpartners.substack.com/p/sansan-holding-all-the-cards?utm%5Fsource=publication-search). [**PKSHA Technology**](https://finance.yahoo.com/quote/3993.T/?ref=asiancenturystocks.com)*(3993 JP* － *US$767 million)* specializes in natural language processing, image recognition and machine learning. It’s a bit fuzzy exactly how they help their clients, but it seems like they tailor-make algorithms for clients, for example, by constructing AI chatbots, voice bots, etc. It then gets paid subscription fees for the services throughout the utilization of its software. Sounds like PKSHA could either benefit from generative AI tools or be at risk for disruption. Above my pay grade, without a doubt. [**Plaid**](https://finance.yahoo.com/quote/4165.T/?ref=asiancenturystocks.com)*(4165 JP* － *US$259 million)* － not to be confused with the American fintech company with the same name － offers a digital marketing service under the Karte brand name. These provide website analytics and segmentation of website visitors. Back in 2021, Plaid had over 500 corporate customers paying Plaid to track their websites. The product helps clients understand customers' behaviour better, though I’m sure Google Analytics can provide similar services for free. It also helps display personalized content for each website visitor, boosting sales and retention, especially for e-commerce websites. The product has a 4.1 score in [IT Grid Review](https://www.itreview.jp/products/karte/reviews?ref=asiancenturystocks.com). The company remains loss-making and cash flow negative with modest share count dilution. There’s a Nippon Nuggets write-up on the stock [here](https://jcvpartners.substack.com/p/plaid-attracting-customers-and-investors?utm%5Fsource=publication-search). [**Hennge**](https://finance.yahoo.com/quote/4475.T/?ref=asiancenturystocks.com)’s*(4475 JP* － *US$257 million)* software product Hennge One allows organizations to access multiple cloud services with a single set of credentials. This should help simplify user management. It offers multi-factor authentication and IP restrictions. It also offers an email security solution. In essence, it’s a proxy for the growth of cloud services in Japan, with cloud adoption still far behind most other developed markets. I’m still not sure how strong Hennge’s moat is, however, with the value-add from the software seemingly limited. Nippon Nuggets wrote about Hennge as well, and the write-up is available [here](https://jcvpartners.substack.com/p/hennge-keeping-clouds-safe?utm%5Fsource=publication-search). [**GMO Globalsign**](https://finance.yahoo.com/quote/3788.T/?ref=asiancenturystocks.com)*(3788 JP* － *US$216 million)* is an identity and security solutions company, part of the broader GMO Internet Group. It seems like the key benefit of GlobalSign is that it facilitates digital signatures. It doesn’t meet the hurdle of the Rule of 40\. I’m not sure how much of a moat it has, and I don’t find the valuation particularly appealing either. Finally, [**Yappli**](https://finance.yahoo.com/quote/4168.T/?ref=asiancenturystocks.com)*(4168 JP* － *US$62 million)* is a no-code platform that helps companies build mobile apps easily. Clients include blue chip companies such as Toyota, Kyocera, Fujitsu, Yamaha, etc. Apparently, in 2021, the LTV/CAC ratio was 5x, suggesting that growth remained profitable at that time. Nippon Nuggets, who wrote about the company [here](https://jcvpartners.substack.com/p/yappli-mobile-tech-for-all?utm%5Fsource=publication-search) argues that it’s comparable to WIX but for mobile apps. Growth has decelerated, and the company remains negative cash flow. Customer reviews on [IT Grid Review](https://www.itreview.jp/products/yappli/reviews?ref=asiancenturystocks.com) are poor at 3.5. Neither of these companies is understandable for a generalist like me, and I therefore prefer to stay away. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45d7630f-6a18-4074-a07e-7584b5b6d12b_1236x336.png) --- # Conclusion I’ve been cautious about technology companies in the past. Fundamentals can change quickly, and switching costs are often low. SaaS companies deserve greater attention because revenues are recurring and frequently growing rapidly. The best SaaS businesses can enjoy incredible margins at scale. And while precision may not be attainable, the considerable upside for some of them can probably justify the risk. The companies I’m most excited about are human capital management software developers [**Plus Alpha Consulting**](https://finance.yahoo.com/quote/4071.T/?ref=asiancenturystocks.com) and [**Kaonavi**](https://finance.yahoo.com/quote/4435.T/?ref=asiancenturystocks.com), as they should enjoy switching costs. Given their growth, [**Medley**](https://finance.yahoo.com/quote/4480.T/?ref=asiancenturystocks.com) and [**CYND**](https://finance.yahoo.com/quote/4256.T/?ref=asiancenturystocks.com) seem to trade at low valuations in the vertical SaaS industry. Finally, both [**Smaregi**](https://finance.yahoo.com/quote/4431.T/?ref=asiancenturystocks.com) and [**Nulab**](https://finance.yahoo.com/quote/5033.T/?ref=asiancenturystocks.com) offer compelling services with significant potential for growth. Expect much more on the Japanese SaaS industry here on [Asian Century Stocks](https://www.asiancenturystocks.com/) in the future. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-4ec/ Last updated: 2024-10-21T02:31:26.000Z _This post is for subscribers only._ ### Links October 2024 URL: https://www.asiancenturystocks.com/links-october-2024/ Last updated: 2024-10-20T04:00:50.000Z 10 investment-related write-ups, 10 articles and 10 podcast episodes _This post is for paying subscribers only._ ### Analyze capital allocation in 10 easy steps URL: https://www.asiancenturystocks.com/analyze-capital-allocation-in-10-c2e/ Last updated: 2025-10-24T14:59:50.000Z I sent out a paywalled version of this post this morning by mistake. I meant to sent it out to all free subscribers. So here is the full post for your enjoyment. It’s also available on [the website](https://www.asiancenturystocks.com/analyze-capital-allocation-in-10/). --- **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Koshidaka when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/935e05b8-cc37-4482-9dad-bc640412647a_840x600.png) # Summary - [The Essays of Warren Buffett](https://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/0966446143/ref=sr%5F1%5F1?crid=3293M7W2W79AO&dib=eyJ2IjoiMSJ9.sBGg0rXMMU5Y4C2MxGYpQqsGPTU%5FfBE5Bp6OkEubW0A1D-BX1zzv-kIeIwKexZSgYwSSw5Vmf6SXepQZ%5FN02bHVKr3xoy3sHOOl-y54PdVG5pVCzmkvjhyGXJHk5rBSepPZTr1sSzUSn8z8ZV3Psc8P1ieIuqf-sESZoeEZrmhlxrRHWg-iCTMzbn0Y4Q9z0lschmiSJrA%5Fv6zpkc35MclRgbRplPecV3lfbcvbhNIw.Y3X9nHFrTHUqpssiSq7%5FJac59sZ3onIYmjP4Sj8sEEY&dib%5Ftag=se&keywords=The+Essays+of+Warren+Buffett&qid=1728975993&sprefix=the+essays+of+warren+buffett%2Caps%2C359&sr=8-1&ref=asiancenturystocks.com) remains one of the best books ever written about capital allocation. - In this post, I discuss ten factors mentioned in the book that help you analyze a company's capital allocation. - These factors are management’s ambitions, management incentives, return on equity, debt, retained earnings, dividends, assessment of intrinsic value, share buybacks, mergers and acquisitions, and equity issuance. - I use the example of Japanese karaoke bar operator [Koshidaka](https://finance.yahoo.com/quote/2157.T/?ref=asiancenturystocks.com) to demonstrate how you can analyze a company’s capital allocation. - I find that Koshidaka’s controlling shareholder is aligned with minorities through a sizeable stake in the company, has been able to reinvest capital at high rates of return, has engaged in sensible M&A and also added value to shareholders through Japan’s first-ever spin-off after tax laws were revised in 2017\. In a Japanese context, Koshidaka’s capital allocation appears to be strong. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Capital allocation is a major issue among Asia’s publicly listed companies. They simply do not act in the best interests of shareholders. But there are exceptions. And in this post, I will help you identify them. To that end, I’ve spent the past few days re-reading [The Essays of Warren Buffett](https://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/0966446143/ref=sr%5F1%5F1?crid=3293M7W2W79AO&dib=eyJ2IjoiMSJ9.sBGg0rXMMU5Y4C2MxGYpQqsGPTU%5FfBE5Bp6OkEubW0A1D-BX1zzv-kIeIwKexZSgYwSSw5Vmf6SXepQZ%5FN02bHVKr3xoy3sHOOl-y54PdVG5pVCzmkvjhyGXJHk5rBSepPZTr1sSzUSn8z8ZV3Psc8P1ieIuqf-sESZoeEZrmhlxrRHWg-iCTMzbn0Y4Q9z0lschmiSJrA%5Fv6zpkc35MclRgbRplPecV3lfbcvbhNIw.Y3X9nHFrTHUqpssiSq7%5FJac59sZ3onIYmjP4Sj8sEEY&dib%5Ftag=se&keywords=The+Essays+of+Warren+Buffett&qid=1728975993&sprefix=the+essays+of+warren+buffett%2Caps%2C359&sr=8-1&ref=asiancenturystocks.com). This book is the gold standard when it comes to understanding capital allocation. I then apply the key learnings from the book on Japanese karaoke bar operator [Koshidaka](https://finance.yahoo.com/quote/2157.T/?ref=asiancenturystocks.com) *(2157 JP - US$637 million)*. The purpose is to show how you can analyze a company’s capital allocation yourself. If you’re not familiar with Koshidaka, I suggest reading my [May 2024 update](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) on the company here: [Koshidaka (2157 JP) － 2024 updateDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Koshidaka when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5ac95939-7474-49b9-851e-47577a007fda_1200x800.jpg)](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) In any case, here’s the agenda for today: ``` Table of contents 1. Management's ambitions 2. Management incentives 3. Return on equity 4. The balance sheet 5. Growth capex 6. Dividend payments 7. Intrinsic value 8. Share buybacks 9. Mergers, acquisition & divestitures 10. Share issuance Conclusion ``` # 1\. Management's ambitions In Buffett’s view, the goal of management is to maximize the intrinsic value of the company. In reality, many management focus on increasing the size of their empires. Perhaps to justify higher salaries on the Forbes 500 list: > *“For a number of reasons managers like to withhold unrestricted, readily distributable earnings from shareholders — *to expand the corporate empire* over which the managers rule, *to operate from a position of exceptional financial comfort*, etc.”* So if a manager simply tries to maximize the size of his company, you might end up with value-destructive acquisitions and reinvesting capital in low-return business areas. In Buffet’s view, targeting EBITDA is even worse, since it ignores certain costs that will ultimately be borne by shareholders (depreciation & amortization): > *“*Trumpeting EBITDA* (earnings before interest, taxes, depreciation and amortization) *is a particularly pernicious practice*. Doing so *implies that depreciation is not truly an expense*, given that it is a “non-cash” charge. *That's nonsense*.”* Also check whether management is providing specific earnings targets. Buffett is not a fan of such earnings targets: > *“*Be suspicious of companies that trumpet earnings projections* and growth expectations. Businesses seldom operate in a tranquil, no-surprise environment, and *earnings simply don't advance smoothly*.”* Why? Because earnings projections tempt management teams into playing accounting games to meet the numbers: > *“Even more troublesome is the fact that *they corrode CEO behavior*. Over the years, Charlie and I have observed many instances in which CEOs engaged in uneconomic operating maneuvers so that they could meet earnings targets they had announced. Worse still, after exhausting all that operating acrobatics would do, *they sometimes played a wide variety of accounting games to “make the numbers.”*”* ![鈴木貫太郎顕彰会」「ヒストリア前橋」の仕掛け人 腰高博さんに聞く(N)｜前橋発、新しい風 「めぶく」街 。前橋の様々な話題を取り扱う前橋新聞-mebukuです。](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b17c820d-a60a-4fce-854d-0804d75f581f_1235x897.jpg) Founder Hiroshi Koshidaka So, let’s look at how Koshidaka stacks up. In a [recent interview with Nikkei](https://www.nikkei.com/nkd/company/article/?DisplayType=1&ng=DGXZQOUC181VV0Y4A910C2000000&scode=2157&ba=1&ref=asiancenturystocks.com), founder Hiroshi Koshidaka said that his goal is to reach a 30% market share in Japan: > *“*The goal is to increase this to 30% in the future*… I want Manekineko to *become the unrivaled name when it comes to karaoke*, and will open more stores in the Kinki region and elsewhere in the future.”* Further, in the company’s [latest earnings report](https://www.asiancenturystocks.com/content/files/en/ir/news/auto%5F20241010596346file.pdf), it an earnings per share target for the fiscal year ending 31 August 2025 of JPY 92 per share. So it doesn’t look like the Koshidaka is focusing on the right metrics here. I’d say this is a common problem with Japanese companies. An ameliorating factor is that Hiroshi Koshidaka does seem to care about improving the customer experience through innovation and providing a unique value proposition. When it comes to capital allocation, there is a risk that once the market becomes saturated, that Koshidaka will continue to expand despite lower returns on reinvested capital. I’d prefer to see management target specific return hurdles rather than reaching a, say, 30% market share. --- # 2\. Management incentives In Buffett’s view, management should be compensated based on profitability, adjusting for the amount of capital employed in the business. In his own words: > *“Executive performance should be *measured by profitability,* after profits are *reduced by a charge for the capital employed* in the relevant business or earnings retained by it.”* So, what does the ideal compensation structure look like? In one of his letters, Buffett praised the approach taken by shoe company HH Brown: > *“A distinguishing characteristic of H.H. Brown is one of the most unusual compensation systems I've encountered—but one that warms my heart: A number of key managers are *paid an annual salary of $7,800*, to which is *added a designated percentage of the profits of the company* after these are *reduced by a charge for capital employed*. These managers therefore truly stand in the shoes of owners.”* If management compensation is solely focused on earnings, it will be tempted to reinvest as much capital as possible, returns be damned: > *“If the widget company consistently earned a superior return on capital throughout the period, or if capital employed only doubled during the CEO's reign, the praise for him may be well deserved. But *if return on capital was lackluster and capital employed increased in pace with earnings, applause should be withheld*.”* Buffett is also critical of stock options. He thinks that fixed-price options incentivize management teams to retain earnings rather than pay them out as dividends. They also ignore the cost of capital. > *“Managers regularly engineer ten-year, fixed-price options for themselves and associates that, first, totally ignore the fact that *retained earnings automatically build value* and, second, *ignore the carrying cost of capital*”* And what’s perhaps even worse is that fixed-price stock options provide incentives for excessive risk-taking. Management will make money on the upside and not get penalized on the downside. > *“No owner has ever escaped the burden of capital costs, whereas a holder of a fixed-price option bears no capital costs at all. An owner must weigh upside potential against downside risk; *an option holder has no downside*.”* Stock options are also problematic if granted to individuals who are not responsible for the overall company’s performance, for example to mid-level managers. > *“First, stock options are inevitably tied to the overall performance of a corporation. Logically, therefore, they *should be awarded only to those managers with overall responsibility*. Managers with limited areas of responsibility should have *incentives that pay off in relation to results under their control*”* ![編集長インタビュー】コシダカホールディングス代表取締役社長 腰髙 博｜企業家倶楽部](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d689f22-9071-4651-80f7-9867943c48ad_1024x538.jpg) Looking at Koshidaka, the disclosures regarding its compensation structure are close to non-existent, but there are clues in its prior disclosures. Before the spin-off of its sister company Curves, Koshidaka justified the transaction by stating that it wanted to link management’s compensation to the value of the shares: > *“Enabling the introduction of *equity compensation linked to the value of the shares* of the spun-off company.”* Koshidaka has been much more cautious when it comes to granting share options. Koshidaka’s [financials](https://www.koshidakaholdings.co.jp/en/ir/library/result.html?ref=asiancenturystocks.com) show that the number of Treasury shares was exactly flat from 2020 to 2023, with no stock options provided to its management team during that time. However, in July and August 2024, Koshidaka targeted share buybacks of 660,000 shares for the specific purpose of granting employee stock options. This number is, however, small compared to the total shares outstanding of 82 million. The latest [balance sheet statement](https://www.asiancenturystocks.com/content/files/en/ir/news/auto%5F20241010596346file.pdf) also shows provisioning for future bonus payments. These bonus payments have an almost 1:1 correlation with Koshidaka’s earnings per share, suggesting that they’re based primarily on earnings without any adjustment for the incremental amount of capital employed. But in absolute terms, total bonuses of \~US$2 million are not material. In any case, founder Hiroshi Koshidaka and his family own 14% of the company, so at least he’s aligned through share ownership. So to summarize, I think Koshidaka’s alignment with minorities is decent. There’s a controlling shareholder who manages the company with an iron fist, and I don’t see any excessive issuance of fixed-price stock options. --- # 3\. Return on equity In Warren Buffett’s view, the best businesses are those that can invest large amounts of capital at high rates of return for extended periods of time: > *“The best business to own is one that *over an extended period* *can employ large amounts of incremental capital at very high rates of return*. The worst business to own is one that must, or will, do the opposite—that is, consistently employ ever-greater amounts of capital at very low rates of return.”* So what you’ll want to see is that the return on equity stays high even as the management increases the total capital employed in the business. A high return on equity can be explained by two factors: - Competitive advantages - Strong capital allocation So, if you find a company with a high return on equity, be careful concluding that it’s necessarily good at allocating capital. It may simply be an exceptional business with poor capital allocation. In Buffett’s own words: > *“Many corporations that consistently show good returns both on equity and on overall incremental capital have, indeed, employed a large portion of their retained earnings on an economically unattractive, even disastrous, basis. Their marvelous core businesses, however, *whose earnings grow year after year, camouflage repeated failures in capital allocation elsewhere.*”* ![Amazon.co.jp: 余暇産業のニューリーダー コシダカホールディングス 腰髙博のすべて : 本](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d0320cd2-d33c-43b8-b217-5af0792deb3b_749x1000.jpg) A front page of Venture Magazine featuring Horishi Koshidaka Koshidaka’s historical return on equity has been strong over time: Koshidaka’s main business of operating karaoke bars is not a monopoly. There’s no reason to think that it’s an exceptional business. That leaves capital allocation as an explanatory factor for its high return on equity. The decline in Koshidaka’s return on equity until 2014 was due to a saturation in its key markets. Hiroshi Koshidaka then shifted the company’s strategy by opening stores around key train stations. He also revamped the stores with bright lights and soundproof doors. Around this time, Koshidaka’s Manekineko karaoke chain became a pioneer of “solo karaoke” which has now gone mainstream. After this shift in strategy, Koshidaka’s return on capital started rising. While COVID-19 was undoubtedly a tough period, the karaoke business has now recovered and is stronger than ever. So to conclude, Koshidaka has reinvested most of its earnings, and done so at high returns on capital. This does seem to suggest that its capital allocation has been strong. --- # 4\. The balance sheet Buffett is careful with leverage, and especially full-recourse leverage: > *“*We use debt sparingly*. We will reject interesting opportunities rather than over-leverage our balance sheet. This conservatism has penalized our results but it is the only behavior that leaves us comfortable, considering our fiduciary obligations to policyholders, lenders and the many equity holders who have committed unusually large portions of their net worth to our care.”* At Berkshire Hathaway, debt has only been used for three purposes: > *“*Gearing up low-risk securities*: Repos as a part of certain short-term investing strategies that incorporate ownership of U.S. government (or agency) securities. Purchases of this kind are highly opportunistic and involve only the most liquid of securities.* **Borrowing against receivables*: Borrow money against portfolios of interest-bearing receivables whose risk characteristics we understand.* **Non-recourse debt*: Subsidiaries, such as Berkshire Hathaway Energy, may incur debt that appears on Berkshire's consolidated balance sheet, but Berkshire does not guarantee the obligation.”* Buffett has also stated that he wants Berkshire Hathaway to acquire companies earning a high return on equity while employing little to no debt. Such conservatism is a recurring thread in his letters. Today, Berkshire Hathaway holds almost $300 billion in cash. Buffett likes to sit on cash for two separate reasons: to withstand potential insurance losses and be able to acquire companies quickly during times of dislocations: > *“*We customarily keep at least $20 billion on hand* so that we can both *withstand unprecedented insurance losses* (our largest to date having been about $3 billion from Katrina, the insurance industry's most expensive catastrophe) and *quickly seize acquisition or investment opportunities*, even during times of financial turmoil.”"* Berkshire’s cash is typically invested in risk-free securities, such as short-term US government bills: > *“*We keep our cash largely in U.S. Treasury bills* and avoid other short-term securities yielding a few more basis points, a policy we adhered to long before the frailties of commercial paper and money market funds became apparent in September 2008”* ![カラオケまねきねこ」がメタバース店を期間限定オープン！キッズルームやライブステージなども忠実に再現 | 株式会社tenshabiのプレスリリース](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b685dc03-0d9f-4f1a-859b-6c6b19243218_1920x1080.jpg) A virtual reality karaoke service provided by Koshidaka A company like Koshidaka does not need as much of a cash buffer. While it has done bolt-on acquisitions in the past, these have been small. And there are no contingent liabilities that could lead to major losses in the future. Even during COVID-19, it remained close to cash flow positive. Koshidaka’s balance sheet looks clean, with almost no debt: JPY 4.4 billion is equivalent to US$29 million, a small number compared to Koshidaka’s operating income of around US$70 million per year. Koshidaka’s convertibles and warrants can be seen as equity rather than debt. Once converted, Koshidaka will again be in a net cash position. While I don’t like dilution, these were issued as payment to Advantage Advisors to help Koshidaka improve its digitalization strategy. I think the deal was probably in the best interests of shareholders. Koshidaka’s interest expenses have been tiny, at just JPY 37 million per year. It’s unclear how they managed to secure such cheap debt, but I certainly cannot fault them for it. Koshidaka’s balance sheet looks clean, indicative of strong capital allocation. --- # 5\. Growth capex In Buffett’s view, earnings should only be retained if they increase the market value of the company: > *“Each dollar of earnings should be retained if retention will increase market value by at least a like amount; otherwise it should be paid out. Earnings retention is justified only when *capital retained produces incremental earnings equal to, or above, those generally available to investors*.”* In practice, this means that earnings should only be retained if they generate a return on reinvested capital above the cost of capital. For example, if a company’s return on equity is consistently around 5% and still retains the majority of earnings without paying out dividends, it’s clearly doing shareholders a disservice. If a company has two business divisions, it should stop reinvesting in the lower-return division and allocate more capital to the higher-return one. The remaining capital should then be used to buy back shares or pay out dividends: > *“In such cases, shareholders would be far *better off if earnings were retained only to expand the high-return business*, with the balance paid in *dividends* or used to *repurchase stock* (an action that increases the owners' interest in the exceptional business while sparing them participation in subpar businesses)”* Management might be tempted to reinvest earnings to expand their empires and, in the process, justify higher salaries for themselves. We should, therefore, be careful with companies with low dividend payout ratios. In deciding whether to retain earnings, a company should think about where it is in its corporate life cycle. Companies with products that are finding new ways to please customers will find it easier to achieve a high return on invested capital. Meanwhile, mature businesses should probably retain less earnings and pay them out as dividends instead. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/564bc2a7-a400-4e17-ae2b-d76639b15b19_1518x894.png) Note that during inflationary periods, earnings in commodity businesses are often overstated as depreciation charges are based on historical cost rather than current cost. Conversely, as Buffett says, during inflationary periods, companies with strong economic moats will be able to earn very high returns on capital: > *“In judging whether managers should retain earnings, shareholders should not simply compare total incremental earnings in recent years to total incremental capital because that relationship may be distorted by what is going on in a core business. *During an inflationary period*, companies with a core business characterized by *extraordinary economics* can use small amounts of incremental capital in that business at very *high rates of return*.”* ![まねきねこ、カラオケ首位奪取 コロナ禍の逆張り出店 - 日本経済新聞](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be069c58-d5df-4878-b9d2-d39769759f9e_1200x630.jpg) In Koshidaka’s case, it has successfully reinvested capital at high rates of return. The company’s historical return on equity is clear evidence that its current strategy is working. A low dividend payout, therefore, makes sense. But eventually, we should hope for the payout ratio to rise as the company gets closer to saturation in its home market of Japan. --- # 6\. Dividend payments Most companies target a set dividend payout ratio. And they typically don’t explain exactly how they arrived at that number. As Buffett explains: > *“A company *will say something like*, “Our goal is to *pay out 40% to 50% of earnings* and to increase dividends at a rate at least equal to the rise in the CPI”. And that's it—*no analysis will be supplied* as to why that particular policy is best for the owners of the business”* A better approach is to make lists of potential projects capital can be invested in and then exclude those that don’t meet strict return on capital hurdles: > *“A company's management should *first* *examine reinvestment possibilities* offered by its current business—projects *to become more efficient*, *expand territorially*, *extend and improve product lines* or to otherwise *widen the economic moat* separating the company from its competitors.”* In other words, earnings should only be retained for high returns on capital projects and the remainder paid out as dividends or share buybacks: > *“Shareholders would be far better off if earnings were retained *only to expand the high-return business*, with *the balance paid in dividends* or used to *repurchase stock*”* Another consideration is the tax environment. If dividends are highly taxed, then reinvesting them might be a better course of action: > *“A shareholder in our dividend-paying scenario could turn around and *use his dividends to purchase more shares*. But he would take a beating in doing so: He would *both incur taxes* and also *pay a 25% premium to get his dividend reinvested*.”* In Asia, dividends are typically subject to withholding taxes and income taxes for the shareholders who receive them. The exception is Hong Kong, which doesn’t impose withholding taxes on either residents or non-residents. ![カラオケまねきねこ」新店舗オープン！ 会社のパーティーやイベントにも最適](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4991e153-04b3-4a89-b058-864f36ad7dd7_1654x1240.jpg) A Koshidaka store in Malaysia Koshidaka has historically not been generous with its dividends. Its payout ratio bottomed at 8% in 2011 and reached 31% by 2016\. Back in 2024, when Koshidaka found a new growth model that worked, it made sense for the company to retain more capital for growth. From that perspective, the decline in the dividend payout ratio can probably be justified. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ddbd1412-aa03-4318-a547-837056a4cf9c_2430x810.png) --- # 7\. Intrinsic value Next, we’ll be calculating the company’s intrinsic value. Why? By doing so, we’ll understand whether corporate transactions such as stock-for-stock mergers and share buybacks are value-additive or not. Compare the intrinsic value with the price of any transaction, and you’ll understand whether the company loses or benefits from it. Buffett defines “intrinsic value” as the cash that can be taken out during its life: > *“Intrinsic value can be defined simply: It is *the* *discounted value of the cash that can be taken out of a business during its remaining life*.”* In practice, that means projecting cash flows and discounting those cash flows with a rate that represents the opportunity cost of capital. Which cash flows should you discount? In Buffett’s view, you should discount the company’s “owner earnings”: > *“If we think through these questions, we can gain some insights about what may be called *“owner earnings.”* These represent (a) *reported earnings* plus (b) *depreciation, depletion, amortization, and certain other non-cash charges* such as Company N's items (1) and (4) less (c) the average annual amount of *capitalized expenditures* for plant and equipment, etc. that the business *requires to fully maintain its long-term competitive position and its unit volume*.”* In most cases, net profit = owner earnings. But in inflationary environments, since depreciation & amortization are based on historical cost, maintenance capex will exceed that depreciation and amortization. In such situations, owner earnings will end up being lower than net profit. The same is true for companies selling obsolescent products. They’ll find it difficult to maintain unit volumes without significant capex. In other words, owner earnings will be adjusted downwards if the product sold requires costly capital expenditures or greater R&D to maintain unit volumes. ![カラオケまねきねこ | 遊座大山商店街](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c744656a-59c8-48d9-a362-6037679e27a5_512x341.jpg) A Koshidaka Manekineko store Since the spin-off of Curves, Koshidaka’s capital expenditures have exceeded depreciation and amortization. One contributing factor is the spin-off of Curves in 2020, causing aggregate depreciation and amortization to drop. But a more important factor is that Koshidaka used the COVID-19 pandemic as an opportunity to secure new leases for karaoke bars in high foot traffic areas. I am not worried about Manekineko’s competitiveness: unit volumes as measured by Google search queries and as measured by same-store sales continue to go up. Let’s calculate an intrinsic value for Koshidaka. I believe that net profit is a good proxy for owner earnings. So I discount net profit at a 10% discount rate, assuming growth hits zero by 2036\. My intrinsic value estimate for Koshidaka then ends up being JPY 130 billion or JPY 1,470 per share. Bear in mind that this estimate is not precise. Who knows how fast Koshidaka will grow, and what discount rate to use. In Buffett’s words: > *“Calculations of intrinsic value, though all-important, are *necessarily imprecise and often seriously wrong*. The more uncertain the future of a business, the more possibility there is that the calculation will be wildly off-base”* But the JPY 1,470 is good enough for our purposes. We can now put its share buybacks and equity issuance into perspective. --- # 8\. Share buybacks In Buffett’s view, share buybacks are a great demonstration of shareholder and management alignment: > *“By making repurchases when a company's market value is well below its business value, *management clearly demonstrates that it is given to actions that enhance the wealth of shareholders*, rather than to actions that expand management's domain but that do nothing for (or even harm) shareholders”* He thinks that you should back your shares whenever they trade below intrinsic value: > *“There is only one combination of facts that makes it advisable for a company to repurchase its shares: First, *the company has available funds*—cash plus sensible borrowing capacity—beyond the near-term needs of the business and, second, *finds its stock selling in the market below its intrinsic value*, conservatively-calculated.”* However, with major one caveat: > *“*Shareholders should have been supplied all the information they need for estimating that value*. Otherwise, insiders could take advantage of their uninformed partners and buy out their interests at a fraction of true worth.”* In other words, as long as management is forthright and not withholding information from minorities, share buybacks are fair play. In Buffett’s view, if a company can buy back its own shares at a 50% discount to intrinsic value, then it should just go right ahead and do it. Share buybacks certainly add more value than dividends in such a scenario. In Buffett’s own words: > *“*The purchase of a share priced at $1 but with a value of $2 would rarely be inferior to any other use of corporate funds*. Alas, as often happens, the imitators stepped in and now you frequently see companies paying $2 to buy back shares worth $1\. These value-destroying share repurchases often are intended to prop up a sagging share price or to offset the simultaneous issuing of stock under stock options exercised at much lower prices.”* Conversely, if a company refuses to buy back shares despite a large discrepancy between price and intrinsic value, it may not have shareholders’ best interests at heart: > *“*A manager who consistently turns his back on repurchases*, when these clearly are in the interests of owners, *reveals more than he knows of his motivations*. No matter how often or how eloquently he mouths some public relations-inspired phrase such as “maximizing shareholder wealth” (this season's favorite), the market correctly discounts assets lodged with him. His heart is not listening to his mouth—and, after a while, neither will the market.”* If you’re a long-term shareholder, you’ll want the share price of the company buying back shares to be low for as long a period as possible, as that will enable a maximum amount of shares repurchased below intrinsic value: > *“First, we have the normal hope that earnings of the business will increase at a good clip for a long time to come; and second, *we also hope that the stock underperforms in the market for a long time as well*.”* If the share price is above intrinsic value, then share buybacks will be value dilutive. Share buybacks are often done, not because the share price is low, but because management wants to offset the dilution from stock options: > *“Sometimes, too, companies say they are *repurchasing shares to offset the shares issued when stock options granted at much lower prices are exercised*.”* A final caveat has to do with greenmailing. In some cases, management buys back shares directly from activist investors to make them disappear. In such instances, value is essentially transferred from selling shareholders to the activists and management itself: > *“Our endorsement of repurchases is limited to those dictated by price/value relationships and *does not extend to the “green-mail” repurchase*—a practice we find odious and repugnant. In these transactions, two parties achieve their personal ends by exploitation of an innocent and unconsulted third party. The players are: (1) the “shareholder” extortionist who, even before the ink on his stock certificate dries, delivers his “your-money-or-your-life” message to managers; (2) the corporate insiders who quickly seek peace at any price—as long as the price is paid by someone else; and (3) the shareholders whose money is used by (2) to make (1) go away.”* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cc41c16e-a75b-40e8-bc82-ab0332857ebb_1482x406.png) A Manekinko branch close to a Tokyo railway station Let’s now look at Koshidaka’s record in terms of share buybacks. I get this information from its cash flow statement. Most of these share buybacks occurred around 2014 when Koshidaka traded at 15x P/E and was starting to see success in its new strategy of expanding stores close to railway stations. To me, these share buybacks seem to have been well-timed. I am less positive about the 660,000 share buyback program in [July and August 2024](https://www.buffett-code.com/disclosures/0b2b7c0d69134885e6a68a/preview?ref=asiancenturystocks.com) to support a new employee stock option program. But the numbers were small, all things considered. --- # 9\. Mergers, acquisitions & divestitures In Buffett’s view, mergers & acquisitions typically do not add value to the acquiring company’s shareholders: > *“When companies purchase their own stock, they often find it easy to get $2 of present value for $1\. Corporate acquisition programs almost never do as well and, *in a discouragingly large number of cases, fail to get anything close to $1 of value for each $1 expended*.”* So what’s driving M&A activity? In his view, it’s the excitement of dealmaking: > *“Talking to Time magazine a few years back, Peter Drucker got to the heart of things: I will tell you a secret: *Dealmaking beats working. Dealmaking is exciting and fun*, and working is grubby. Running anything is primarily an enormous amount of grubby detail work . . . *dealmaking is romantic, sexy. That's why you have deals that make no sense.*”* Acquisitions are also ways for company management teams to expand their empires and in the process justifying higher salaries: > *“Most organizations, business or otherwise, measure themselves, are measured by others, and compensate their managers *far more by the yardstick of size than by any other yardstick*.”* So who benefits from M&A? Mostly the acquisition targets, management and the investment bankers and professionals representing each side: > *“The sad fact is that most major acquisitions display an egregious imbalance: They are *a bonanza for the shareholders of the acquiree*; they increase the income and status of the *acquirer's management*; and they are a *honey pot for the investment bankers and other professionals* on both sides. But, alas, *they usually reduce the wealth of the acquirer's shareholders*, often to a substantial extent”* There are exceptions to the rule. For example, Berkshire Hathaway has largely grown through acquisitions. In Buffett’s view, there are two categories of acquisitions that have added value to the acquirer: > *“Some acquisition records have been dazzling. Two major categories stand out.* *The first involves companies that, through design or accident, have *purchased only businesses that are particularly well adapted to an inflationary environment*. Such favored business must have two characteristics: (1) *an ability to increase prices rather easily* (even when product demand is flat and capacity is not fully utilized) without fear of significant loss of either market share or unit volume, and (2) *an ability to accommodate large dollar volume increases in business* (often produced more by inflation than by real growth) *with only minor additional investment of capital*.”* *The second category involves the *managerial superstars*—\[those\] who can recognize that rare prince who is disguised as a toad, and who have managerial abilities that enable them to peel away the disguise.”* So if a company is able to identify acquisition targets with franchise characteristics or buy turnaround cases at cheap valuations, then M&A can indeed add value. Buffett has tried to combine these two strategies, with great success. In author Lawrence Cunningham’s words: > *“Berkshire's acquisition policy is the double-barreled approach: *buying portions or all of businesses with excellent economic characteristics* and *run by managers Buffett and Munger like, trust, and admire*”* How can you judge whether an acquisition makes sense or not? According to Buffett, the only valid benchmark is whether an acquisition is dilutive or not when it comes to the company’s intrinsic value. > *“What really counts is whether a merger is *dilutive or anti-dilutive in terms of intrinsic business value* (a judgment involving consideration of many variables). We believe calculation of dilution from this viewpoint to be all-important (and too seldom made).”* An acquisition being earnings accretive is simply not enough. An acquisition can be earnings accretive yet still end up destroying value, as the earnings were simply not sustainable. > *“In corporate transactions, it's equally silly for the would-be purchaser to focus on current earnings when the prospective acquiree has either different prospects, a different mix of operating and non-operating assets, or a different capital structure. At Berkshire, *we have rejected many merger and purchase opportunities* that would have *boosted current and near-term earnings* but that would have *reduced per-share intrinsic value*.”* So using Buffett’s approach, analyzing mergers & acquisitions is simple: just ignore earnings per share, and instead look at whether the target was acquired above or below its intrinsic value. ![カラオケまねきねこ』沖縄の最新店・八重瀬町店をひーぷーガール “かーこー”が徹底リポート♪【PR】 | OKITIVE](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bc6fbe7c-4e64-4170-973c-d63d8ab81b7b_1200x800.jpg) The cash register of a Manekineko outlet Koshidaka has been careful in its M&A activity. Hiroshi Koshidaka has undertaken a number of bolt-on acquisitions within the karaoke segment that seems to have added value. For example, in 2021, it acquired the karaoke business of Daisyo with 43 stores. The price was not disclosed, so it’s difficult to say whether it was value-accretive to Koshidaka or not. But it seems that many of these stores were in excellent locations. The 2018 acquisition of Curves US business cost JPY 34 billion (US$312 million). It paid half of that amount through the issuance of new shares and the other half through cash. While it’s difficult to say whether this transaction made sense, I do see the potential for Curves to grow internationally. And acquisitions in related businesses tend to be more successful than those in completely unrelated areas. A positive sign for Koshidaka’s capital allocation is that it spun off Curves back in 2020\. This was the first spin-off in Japan since the law was revised in 2017. Before the spin-off, the combined company had a market cap of JPY 130 billion. Today, the combined market cap of the two companies is JPY 165 billion. So not only does the transaction seem to have been in the best interests of shareholder, it also seems to have added value to them. --- # 10\. Share issuance When it comes to share issuance, Buffett believes that new shares should only be issued if the company gets more in value than it gives: > *“Our share issuances follow a simple basic rule: *we will not issue shares unless we receive as much intrinsic business value as we give*”* Share issuance is akin to the company is selling part of itself: > *“Clearer thinking about the matter would result if a more awkward but more accurate description were used: “*Part of A sold to acquire B*”, or “Owners of B to receive part of A in exchange for their properties”.”* But management rarely thinks in those terms. They consider share issuance as being almost costless. But if they’re not willing to sell the entire company, why would they want to sell a part of it? > *“Managers and directors might sharpen their thinking by asking themselves if they would sell 100% of their business on the same basis they are being asked to sell part of it. And *if it isn't smart to sell all on such a basis, they should ask themselves why it is smart to sell a portion.*”* If the company trades above its intrinsic value, then you could argue that it should indeed issue shares. Some serial acquirer have have employed this strategy to great success, and Buffett seems to think it’s a great idea. > *“The second route presents itself *when the acquirer's stock sells at or above its intrinsic business value*. In that situation, *the use of stock as currency actually may enhance the wealth of the acquiring company's owners*. Many mergers were accomplished on this basis in the 1965-69 period. The results were the converse of most of the activity since 1970: the shareholders of the acquired company received very inflated currency (frequently pumped up by dubious accounting and promotional techniques) and were the losers of wealth through such transactions.”* But the greatest companies, such as Berkshire Hathaway, rarely trade above their intrinsic value. So I’d personally be cautious of any company issuing shares on a regular basis. ![Karaoke Manekineko Closing Down All Its Outlets But Says “It's Not Goodbye” - TODAY](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d785c495-3b39-4cb9-81ff-41d6ce89d592_1200x676.jpg) In Koshidaka’s case, they’ve been reluctant to issue shares. They only did so to acquire Curves’ international business － a transaction that, in my view, holds significant promise in terms of future expansion. Share issuance has otherwise been sparse, as evidenced by near-zero share count dilution historically. --- # Conclusion [The Essay of Warren Buffett](https://www.amazon.com/Essays-Warren-Buffett-Lessons-Corporate/dp/0966446143/ref=sr%5F1%5F1?crid=3F7C0EJQRMB91&dib=eyJ2IjoiMSJ9.sBGg0rXMMU5Y4C2MxGYpQqsGPTU%5FfBE5Bp6OkEubW0DDrCVtuwMYKi%5FuScTC3V75Bqcn8opw716KHNkExZEm0M6w1Z-3ezSzY%5FMFF%5FjvkJi5pVCzmkvjhyGXJHk5rBSeYcaqx7auRJfDQytDBOtFAcP1ieIuqf-sESZoeEZrmhlxrRHWg-iCTMzbn0Y4Q9z0aBxeIhFrpIVQe6g3zaJqawgVt%5F61sMPdIbAF%5FcbXZmU.suglfZGZjXFAQ9RjracjP-BspgBqyOH5aklsFxshFjU&dib%5Ftag=se&keywords=essays+of+warren+buffett&qid=1729050397&sprefix=essays+of+warren%2Caps%2C325&sr=8-1&ref=asiancenturystocks.com) remains the gold standard for understanding capital allocation. The key lessons from the book are that you’ll want the company to retain earnings and invest them in the projects with the highest return potential, or else pay them out as dividends. If the stock trades below its intrinsic value, it should buy back shares. And if it trades above, potentially issue shares. M&A is usually value-destructive, but there are exceptions of managers who indeed can add value through acquisitions. In Asia, capital allocation tends to be weak. But by going through the above list of ten points, I think we can find the needles in the haystack: companies where management acts in the best interests of shareholders. In my experience, a high return on equity, opportunistic share buybacks at low levels, generous dividend payouts and low share count dilution can help us identify the out-performers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Thank you for reading 🙏** If you’d like to get smarter about Asian equities and get 20x high-quality deep-dives per year, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos: [Get 30 day free trial](#/portal/signup) ### Analyze capital allocation in 10 easy steps URL: https://www.asiancenturystocks.com/analyze-capital-allocation-in-10/ Last updated: 2024-10-17T04:01:13.000Z The case of Koshidaka. Estimated reading time: 28 minutes _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-89f/ Last updated: 2024-10-14T02:35:48.000Z _This post is for subscribers only._ ### Mandarin Oriental (MAND SP) URL: https://www.asiancenturystocks.com/mandarin-oriental-mand-sp/ Last updated: 2026-07-31T01:56:18.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Mandarin Oriental at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Mandarin Oriental**](https://finance.yahoo.com/quote/1C4.F/?ref=asiancenturystocks.com)’s *(MAND SP—US$2.2 billion)* five-star hotels are some of the best in the world. But what many do not know is that Mandarin Oriental is a publicly listed entity. You can get exposure to the brand through its primary listing in London or secondary listings in Singapore or Bermuda. The company is part of the Jardine Matheson Group － an Asia-focused conglomerate with a rich history as a British trading house. The hotel operations began with the construction of The Mandarin Hotel in 1963\. Ten years later, the same group acquired The Oriental Hotel in Bangkok. By merging these two names, “Mandarin Oriental” was born, becoming a phenomenon in the global luxury hotel industry. Today, the company operates 41 hotels globally, mainly under the Mandarin Oriental brand name. Twelve of those hotels are wholly or partially owned by Mandarin Oriental. The remaining 29 hotels are owned by third parties but managed similarly to their owned hotels. The brand is incredibly strong. It’s associated with ultra-luxury experiences, up there with Four Seasons and Shangri-La. In the early 2000s, it launched an advertisement campaign with famous individuals such as Morgan Freeman and Michelle Yeoh saying, “I’m a fan.” This campaign was a massive success. Reviews for Mandarin Oriental’s hotels are strong, too, with Booking.com scores of 9.0-9.5 across its core portfolio. Here are a few highlights from those reviews: > *“*The whole experience was spectacular*. It was truly a perfect stay. The location, the room, the bed, the bathroom, room service, the gym, Sauna, and Jacuzzi have all been in use and are all amazing.”* – Mandarin Oriental, Hong Kong > > *“*Service is outstanding* \- quite possibly *the best in the world*. The rooms are excellent, extremely well appointed and designed to a high standard. A lot of thought and attention to detail has been given.”* – Mandarin Oriental, Bangkok > > *“I won't be exaggerating when I say it was *the best hotel experience my wife and I have ever* had. Everything... I mean everything... was *very close to perfection* for us.”* – Mandarin Oriental Jumeira, Dubai Growth has been slow but steady. Mandarin Oriental’s overall hotel portfolio has grown at just 3% annually. But its managed portfolio of hotels is growing much faster at around 13% per year － without needing any additional capital investments on the part of Mandarin Oriental itself. The group currently has 26 additional hotels in the managed hotel pipeline, planned for completion in the next five years. While growth suffered during the COVID-19 pandemic, the group has almost completely recovered from it. So, growth in the managed hotel portfolio should resume in the near future. What’s particularly exciting about Mandarin Oriental is that it’s now finished the construction of its commercial property, One Causeway Bay. This office tower will have four floors of retail space and unobstructed views of the Victoria Harbour. It will be completed in the second quarter of 2025. While it is true that Hong Kong’s office market remains weak, remember that the construction of One Causeway Bay has caused losses in the income statement over the past five years due to revaluation losses. And from 2025, it will finally contribute positively to the bottom line. Once completed, I believe One Causeway Bay will bring in an additional US$60-70 million operating profit. Combined with growth in the managed hotel property portfolio, I get to earnings per share of US$14 cents, implying a 2027e P/E of 12.7x. This number is significantly below the 28x pre-COVID average. The only question mark I have is Mandarin Oriental’s corporate governance. There’s a large overlap between the boards of Mandarin Oriental, its sister company, Hong Kong Land and its parent company, Jardine Matheson. Mandarin Oriental has historically paid out 70-100% of earnings as dividends, so you can expect the dividend yield to return to decent levels after One Causeway Bay is completed by the second quarter of 2025. At the same time, I can’t help noticing that the decision to redevelop Excelsior Hotel was terrible. Back in 2017, it received offers of US$3.8 billion for the hotel. Yet they decided to redevelop it into a commercial property instead, spending almost US$1 billion in capital expenditures to get a property worth no more than US$2 billion today. Another point of contention is the privatization of Jardine Strategic. In 2021, the parent company, Jardine Matheson, privatized Jardine Strategic at a 30% discount to net asset value. Minorities wanted a higher price but had limited bargaining power against the parent. With Jardine Matheson increasing its stake in Mandarin Oriental from 74% in 2018 to 80% today － breaching the 25% UK free float requirement － I suspect that Mandarin Oriental could also be privatized. The only question is: will minorities get a better deal this time around? Still, the hotel portfolio and brand are incredibly strong, and I see potential for further growth. While building One Causeway Bay may not have been a sound financial decision, it is a trophy asset that should be worth almost as much as Mandarin Oriental's entire market cap. At a 76% discount to my net asset value per share and no debt whatsoever, you can certainly add Mandarin Oriental to a long list of Hong Kong property companies trading at bargain-basement valuations. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Vote for this week's deep-dive URL: https://www.asiancenturystocks.com/vote-for-this-weeks-deep-dive/ Last updated: 2024-10-07T04:44:51.000Z 5 stocks to choose from _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-f5b/ Last updated: 2024-10-07T01:41:03.000Z A teaser post sent to free subscribers _This post is for subscribers only._ ### What's left in my CPF URL: https://www.asiancenturystocks.com/whats-left-in-my-cpf/ Last updated: 2025-11-19T07:25:55.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/whats-left-in-my-cpf/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![CPF Contributions for Employers in Singapore](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d756dd9d-9a08-44f1-bbb2-29767d28be7c_1068x692.jpg) Central Provident Fund [Subscribe](https://linktr.ee/asiancenturystocks?ref=asiancenturystocks.com) _This post is for paying subscribers only._ ### Q&A: Modern Dental (3600 HK) URL: https://www.asiancenturystocks.com/q-and-a-modern-dental-3600-hk/ Last updated: 2025-10-02T15:49:16.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. In this case, I (Michael) do not hold a position in Modern Dental at the time of publishing this article, whereas Healthy Stock Picks does. This post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fafb3d8c-a46a-4805-90f6-1c6309c68b4b_1485x988.jpg) Source: Getty Images A few months ago, the Substack newsletter [Healthy Stock Picks](https://www.healthystockpicks.com/?ref=asiancenturystocks.com) wrote about Chinese dental prosthetics company [**Modern Dental**](https://www.healthystockpicks.com/p/modern-dental-group-3600hk?ref=asiancenturystocks.com) (现代牙科集团) *(3600 HK - US$508 million)* in an excellent report, which you can download here: [Modern\_Dental\_Group\_(healthy\_Stock\_Picks)Modern\_Dental\_Group\_(healthy\_Stock\_Picks).pdf2 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/Modern%5FDental%5FGroup%5F-healthy%5FStock%5FPicks-.pdf "Download") Modern Dental’s stock price has treaded water this year － despite the recent enthusiasm for Chinese equities: And today, the stock trades at a P/E ratio of 8.9x with a dividend yield of 4.1%. Those are remarkable numbers. But why does the stock trade at these valuations? I wanted to check in with Mr Healthy Stock Picks to see what the thinks about the company today. And ask him a few questions that popped into my head when reading his deck. Let’s jump into it. [Subscribe](https://linktr.ee/asiancenturystocks?ref=asiancenturystocks.com) # 1\. Tell us about the products that Modern Dental makes. How do they function and how do they compare with those of the competition? _This post is for paying subscribers only._ ### Weekly Highlights URL: https://www.asiancenturystocks.com/weekly-highlights-d3f/ Last updated: 2024-09-30T06:08:59.000Z A teaser post sent to free subscribers _This post is for subscribers only._ ### Portfolio review September 2024 URL: https://www.asiancenturystocks.com/portfolio-review-september-2024/ Last updated: 2026-06-04T11:35:07.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update The portfolio continued rising in September, up another +5.0% month-on-month. The value of the portfolio is now up +40.2% since October 2021, equivalent to a +12.3% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d6d0e389-5e0b-479f-98bc-0c9e004b2f2c_2224x732.png) Two factors caused the value of the portfolio to go up: - US interest rates declined by 0.5%, causing the US dollar to weaken and several Asian currencies, such as the Japanese yen and the Malaysian ringgit, to strengthen. - I ramped up my position in glove maker Hartalega aggressively just before news came out that US tariffs on Chinese medical gloves will rise to 50% in 2025 and 100% in 2026\. Hartalega is the key beneficiary from these new tariffs. Though I knew that tariffs were forthcoming, I didn’t expect them to end up this high. I got lucky. In any case, the following chart from [The Transcript](https://thetranscript.substack.com/) shows the potential for further US rate cuts: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cde1bbd0-6ffa-4ebe-bd82-89692e01e560_1154x756.jpg) So, like many others, I predict that the Federal Reserve will continue to lower interest rates. That bodes well for Asia’s currencies, and for further flows into the region. Chinese stocks have also started to come alive. Especially the larger tech companies listed in the United States, with the KraneShares CSI China Internet ETF (KWEB US) up over 30% in the past month. Investors are getting excited about a set of policies released by the Chinese government to revive the market. The Wall Street Journal called it *“the most aggressive attempts at stimulus since the pandemic”*. And indeed, it was the first off-schedule meeting to discuss the economic agenda since March 2020. China’s new stimulus measures include: - Much greater fiscal stimulus, with the Ministry of Finance planning to issue CNY 2 trillion worth of special sovereign bonds to help local governments and stimulate consumption. In the past, the government has always been wary of handing out cash to consumers. But now, leading policy advisors are advocating a CNY 10 trillion stimulus package over the next two years. - Greater support for banks with a CNY 1 trillion capital injection, lower reserve requirement ratio and lower interest rates. - Reducing the down payment on second homes from 25% to 15% - Central bank loan guarantees to state-owned enterprises that buy vacant homes for conversion to social housing - Central bank lending program to insurance companies and pension funds for the buying of equities - A re-lending facility for companies that repurchase shares from the market Felix Zulauf had previously predicted that a Chinese stimulus would only come after the Fed paved the way, as the Chinese government does not want to jeopardize its currency. That prediction turned out to be correct. I don’t have a strong view of where the market is heading. But what I do know for sure is that Hong Kong equities trade at a massive discount to most other markets globally. And investors are finally starting to pay attention. In any case, here is what the latest portfolio looks like as of 26 September 2024: _This post is for paying subscribers only._ ### Live stream with Daye Deng URL: https://www.asiancenturystocks.com/live-stream-with-daye-deng/ Last updated: 2024-09-27T04:27:57.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* --- On Friday morning, September 27, 2024, I went live with independent equity research analyst [Daye Deng](https://x.com/EastAsiaStocks?ref=asiancenturystocks.com) to discuss stocks in China, South Korea, and Japan. Just click the “play” button above to watch the live stream. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/61e09666-6fc4-4f3c-b90c-ca196cec537d_1302x306.png)](https://www.eastasiastocks.com/?ref=asiancenturystocks.com) We discussed: - Daye’s recent trip to Mainland China - How Starbucks is doing in the competition with Luckin Coffee (LKNCY US) - Potential catalysts for a recovery in Hong Kong’s stock market - Chinese hospitality company Atour Lifestyle (ATAT US) - How to deal with accounting irregularities in China - Screening for stocks in Japan - The reasons for Hamamatsu Photonics’ share price drop (6965 JP) - Canon’s DUV lithography opportunity (7751 JP) Substack’s live stream feature is entirely new. So, I apologize for the initial glitches and perhaps less-than-ideal sound quality. If you enjoy live streams like this, let me know, and I’ll be happy to do more of them. Best regards, Michael _This post is for paying subscribers only._ ### Placeholder URL: https://www.asiancenturystocks.com/new-reader-start-here-6e1/ Last updated: 2026-04-17T12:38:42.000Z Asian Century Stocks is a newsletter focusing on Asian value stocks. I started it in 2021, and after 5 years, it's become one of the biggest finance newsletters in the region. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2026/04/image-91.png) A picture of me at Chijmes heritage building in Singapore **Asian Century Stocks** is read by over 20,000 investors worldwide. You'll get a perspective on Asian equities from an on-the-field Westerner with two decades of experience. You'll get regular free articles on topics as varied as [Japanese SaaS companies](https://www.asiancenturystocks.com/babies-out-with-the-saas-water/), an [El Niño in 2026](https://www.asiancenturystocks.com/the-coming-el-nino-of-2026/), and [South Korea's corporate governance reforms](https://www.asiancenturystocks.com/korean-reforms/). As well as updates on the \~500-stock watchlist, plus my top 5 links of each week. --- # What subscribers are saying ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/2025/10/image-191-1.png) *"The *best commentary* on Asian markets and a must-read for any investor interested in Asian equities."* \- Sunday's Idea Brunch *"*Excellent coverage* and analysis of value stocks throughout Asia"* \- The Anomaly Report *"Unique coverage of APAC equities from an *on-field Westerner*."* \- Byron Street Research *"*Detailed, useful and independent* stocks analysis."* \- The Kaka by Bernard Hickey *"One of the very few publications covering companies and stocks in the APAC region, and at an extremely *high level of quality*."* \- Allocators Asia *"A *great way to understand* Asian markets and stocks"* \- The Transcript newsletter *"Michael is a *deep thinker* who puts together wonderful deep dives."* \- The Consilience Compass *"*Mandatory subscription* for anyone with an interest in Asian equities"* \- Turtles Research ## Sign up for Asian Century Stocks Join 20,000+ investors reading weekly Join Free Email sent! Check your inbox to complete your signup. By entering your email you agree to the [terms & conditions](https://www.asiancenturystocks.com/disclaimer/) --- # Go deeper with a paid membership For $50/month or $350/year (save 42%), you get: - Over 20 deep dives annually on undercovered Asian equities - Monthly portfolio updates - Monthly report with the top Asian insider transactions [See what's included](https://www.asiancenturystocks.com/about/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Disclaimer**: *Asian Century Stocks is an investment education website managed by Delante Media Pte Ltd (Company Reg No. 201540836N). The company is not licensed or regulated to carry on business in providing any financial advisory service. Any information provided on this site is meant purely for informational and investor educational purposes and should not be relied upon as financial advice.* ### Weekly highlights URL: https://www.asiancenturystocks.com/weekly-highlights/ Last updated: 2024-09-24T04:01:11.000Z A teaser post sent to free subscribers _This post is for subscribers only._ ### Links September 2024 URL: https://www.asiancenturystocks.com/links-september-2024/ Last updated: 2024-09-24T04:01:09.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) This month’s links are for paid subscribers only. Over the past month on Asian Century Stocks, I’ve written about Korean noodles producer [**Samyang Foods**](https://www.asiancenturystocks.com/samyang-foods-003230-ks/), property management company [**China Overseas Property**](https://www.asiancenturystocks.com/china-overseas-property-2669-hk/) and conglomerate [**Boustead Singapore**](https://www.asiancenturystocks.com/boustead-singapore-bocs-sp-2024-update/). I also wrote industry primers on the local real estate markets in [**Singapore**](https://www.asiancenturystocks.com/complete-guide-to-singapore-reits/) and [**Hong Kong**](https://www.asiancenturystocks.com/hong-kong-property-amid-rate-cuts/). I wrote a primer on [**alternative data tools**](https://www.asiancenturystocks.com/alternative-data-for-dummies/). I recorded a third-quarter 2024 [**macro update**](https://www.asiancenturystocks.com/3q2024-update-there-will-be-blood/). I published three interviews with [**Alex Sweet**](https://www.asiancenturystocks.com/10-questions-with-alex-sweet/), [**Raghav Kapoor**](https://www.asiancenturystocks.com/interview-raghav-kapoor-co-founder/) and [**Afiq Isa**](https://www.asiancenturystocks.com/10-questions-with-afiq-isa/). And finally, I released my [**August portfolio review**](https://www.asiancenturystocks.com/portfolio-review-august-2024/). In any case, here are this month’s links: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) _This post is for paying subscribers only._ ### Samyang Foods (003230 KS) URL: https://www.asiancenturystocks.com/samyang-foods-003230-ks/ Last updated: 2026-07-31T01:55:57.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Samyang Foods at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- In South Korea, young people don’t ask prospective partners whether they want to “Netflix and chill.” Instead, they ask if they want to come over for some ramen. This shows just how important ramen is in Korean culture. Now, ramen is being exported to other countries through companies such as [**Samyang Foods**](https://finance.yahoo.com/quote/003230.KS/?ref=asiancenturystocks.com) *(003230 KS—US$2.9 billion)*, a producer of extra-spicy instant ramen. Nobody expected Samyang Foods to become the success it is today. During the Asian Financial Crisis, the company went bankrupt and had to be restructured. In the midst of the crisis, the founder’s daughter-in-law, Kim Jung-soo, was thrown into the mix. She had been a social worker, so she was an unlikely pick as a future CEO. But she proved adept at slashing costs, including selling the headquarters to help the company survive. She managed to turn the ship around. And through creative product development and marketing, Kim helped put the company on a sustainable growth path. For example, in 2006, when heading up sales and marketing, she helped introduce instant ramen with clear soup when all instant noodles had red broth. Her next masterstroke was in the spring of 2010\. She and her teenage daughter were on a stroll in downtown Seoul when they saw a long queue outside a fried rice restaurant. This particular restaurant was famous for its spicy food. Kim and her daughter observed that while customers were sweating and seemingly in pain from eating all those spices, they seemed to enjoy themselves. Back at the lab, she became determined to develop an extra spicy version of Samyang’s ramen. After months of trial and error, going through 1,200 chickens and two tons of sauce, they created the first “Buldak” (= fire chicken) instant ramen. Years later, this product went viral on YouTube, TikTok and other social media platforms. BTS fans became intrigued when singer Jimin professed his love for Samyang’s noodles. Members of Blankpink turned out to be fans of the product, too. Even Cardi B became a Buldak enthusiast, speaking highly of the product in a viral TikTok video. Thanks to all this publicity, Samyang’s Buldak ramen has become an export success. From 2016 onwards, Samyang’s export sales have gone from almost nothing to now representing 75% of total revenues. Alternative data sources suggest that growth is continuing at a rapid pace. In August, the number of Google search queries doubled year-on-year. The number of page views on Samyang Foods-related Wikipedia pages hit an all-time high. And prices for Samyang’s Buldak ramen at third-party sellers on Amazon have been high for years as the shortages persisted. So, what makes the product unique? In my view, it’s an example of successful branding. Samyang almost created the category of extra spicy ramen and now dominates it. It’s built up a portfolio of instant noodles varieties, each with its own fan base. I also think that the product is (mildly) addictive. I found evidence that capsaicin － the hot ingredient in chilli －triggers the release of endorphins and related dopamine. The spice creates a feeling of pain followed by a rush of endorphins. Given the fast pace of growth, it looks like Samyang Foods will grow its top-line revenues by +40% in 2024\. The current-year P/E will then end up at around 14x, if not lower. And once the second factory in the city of Miryang close to Busan is completed in 2025, capacity is likely to go up another \~30%. The big question is whether Buldak noodles are simply a fad. Are they here to stay? I tried the noodles myself, and I consider Samyang’s Buldak noodles to be a genuinely good product. I see plenty of evidence of repeat purchases. And it’s encouraging to see that Samyang’s revenues in each market seem to go up over time, with no sign of any boom-bust pattern. While it is possible that the current social media craze for Buldak ramen will one day end, you also have to give credit to Kim Jung-soo for popularizing the product. They’re clearly doing something right. That’s why I think we should pay attention to Samyang Foods. A greater risk to Samyang Foods is if Kim Jung-soo retires. There’s been talk of her stepping down. That would be a problem because the son likely to become a successor seems inexperienced. Further, Kim’s husband was found guilty of stealing US$3.7 million of Samyang corporate funds in 2020\. He went to prison, but they are still married. In other words, Samyang’s corporate governance is typical for a Korean food conglomerate. Still, I think that Samyang Foods is one of Asia’s most exciting growth stories. Sell-side analysts are still skeptical of the story. But the numbers paint a clear picture: the noodles are simply flying off the shelves. And while the stock price has been on a tear, a run-rate P/E of 14x is not particularly high. _This post is for paying subscribers only._ ### Hong Kong property amid rate cuts URL: https://www.asiancenturystocks.com/hong-kong-property-amid-rate-cuts/ Last updated: 2024-09-18T05:08:06.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1f049eea-1c14-48be-b8a6-a6e7c1c10055_1200x900.jpg) Source: Getty Images Hong Kong equities have been left for dead. And nowhere is the pessimism greater than when it comes to Hong Kong property stocks. On 17 September 2024, the Hang Seng Properties Index reached almost the exact same level as during the Great Financial Crisis of 2009. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ecdaa2ae-0c04-41ef-b2a1-5737185b992b_1780x790.png) Source: Investing.com Surely, there must be value to be found － somewhere. The property market has been weighed down by record interest rates. But as I’m publishing this, we will soon see whether the Federal Reserve will finally enter a rate-cut cycle. And in Asia, nobody will benefit more than Hong Kong’s top property developers. In this post, I’ll discuss each of Hong Kong’s main property markets － residential, office, retail and hospitality － and how lower interest rates will impact them. I’ll then introduce the key stocks in each of these sectors. _This post is for paying subscribers only._ ### Highlights from Asian Century Stocks URL: https://www.asiancenturystocks.com/highlights-from-asian-century-stocks/ Last updated: 2024-09-16T02:02:02.000Z _This post is for subscribers only._ ### Boustead Singapore (BOCS SP) － 2024 update URL: https://www.asiancenturystocks.com/boustead-singapore-bocs-sp-2024-update/ Last updated: 2024-09-15T04:00:35.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/boustead-singapore-bocs-sp-2024-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Boustead Singapore when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ef930f02-6aca-479b-b3eb-b6ffb3945be5_1580x1054.png) Source: Boustead Singapore _This post is for paying subscribers only._ ### Alternative data for dummies URL: https://www.asiancenturystocks.com/alternative-data-for-dummies/ Last updated: 2025-10-24T23:57:14.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/775ff592-c7e4-4f50-835b-ef7157f9ae13_900x600.png) # Summary - Alternative data (“alt-data”) can help predict the likelihood of an earnings beat. - But for alternative data not to be priced in, it needs to be obscure. Luckily, institutional investors aren’t paying much attention to alt-data yet. At least not when it comes to consumer stocks in the Asia-Pacific. - In this post, I share my 12 favorite alternative data sources, including Google Trends, Subreddit Stats, and Toolforge. - I also demonstrate how I use each of these alternative data sources by discussing the example of Sanrio — one of Asia’s hottest consumer stories. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) In [this previous post](https://www.asiancenturystocks.com/long-term-front-running/), I made the case that value investing should be combined with momentum investing. Why? Because value works best in the long term, whereas momentum works best in the short term. By combining the two, you get the best of both worlds. But momentum investing is challenging. To predict the near-term buying and selling of other investors, we need to predict events and figure out how investors will respond to them. That’s why I pay attention to alternative data (“alt-data”) sources. In this day and age, companies throw off huge amounts of information that can be readily accessed through the Internet. And much of that data is obscure enough that it’s not yet priced-in when it comes to individual share prices. In this post, I’ll introduce my favorite alternative data tools, whether free or paid. I’ll also explain how I use them in practice. To explain each of the tools more vividly, I’ll take the example of Hello Kitty-brand owner Sanrio, which I wrote about [in 2021](https://www.asiancenturystocks.com/2021-5-sanrio-company-ltd/) and remains one of Asia’s hottest growth stories. ``` Table of contents 1. Why alt-data matters 2. Introduction to Sanrio 3. My favorite alt-data sources 3.1. Google Trends 3.2. Subreddit Stats 3.3. Toolforge 3.4. TickerTrends 3.5. Social Blade 3.6. Camelcamelcamel 3.7. Idealo 3.8. StockX 3.9. Data.ai 3.10. TwitchTracker 3.11. Steamdb 3.12. Polymarket 3. Conclusions ``` # 1\. Why alt-data matters ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e1d8f41b-a305-4c38-b3ff-7580e5fcda5b_1616x909.jpg) Source: Getty Images As Benjamin Graham once said, in the near term, the market is a voting machine. Investors buy stocks when companies exceed their expectations. Or if something sparks their imagination. But to predict earnings beats is difficult. It requires us to predict the future. Factors that could have an impact on future earnings include: - New products - Meaningful price increases - New factory completions - New advertising campaigns accelerating product adoption - A change in the external environment, for example, interest rate cuts - The bankruptcy of a large competitor - A long-term building of supply scarcity - Regulation that opens up a new market for the company - Restructuring that helps unlock value - New management team changing subpar capital allocation - Overly conservative accounting being ditched - Reflexive processes, e.g. being able to buy companies cheaply through high-priced shares These factors are mostly qualitative in nature. Which is fine. I’ll look at a product and see how I feel about it. I can then make a case that, say, a new iPhone will drive growth for Apple. But to truly gain conviction that earnings are going to surprise to the upside, we need shorter-term and more reliable leading indicators. That’s where alternative data (“alt-data”) sources come in handy. They’re obscure enough for the sell-side and for investors not to take them seriously. Their usefulness is only applicable in certain situations, limiting their appeal to institutional investors. So, I use alt-data in the following way: - I first develop a theory about why a particular product will sell better over time - I then try to figure out what alt-data sources can be used to track consumer behaviors - Finally, I look at year-on-year growth numbers to understand the likely magnitude of an expected earnings beat Alt-data is best used in fast-moving industries where fads and new trends are likely to occur. That’s why I like the consumer discretionary industry. And I also like software products where usage data can be measured with great precision. --- # 2\. Introduction to Sanrio (8136 JP) Throughout this post, I’ll analyze the prospects of Japanese brand developer Sanrio. This is by no means a recommendation of stocks—Sanrio is just a convenient example to demonstrate how I use the tools below. I first wrote about Sanrio in 2021, when the latest Hello Kitty craze was just getting started. You can find my old write-up on the stock here: [Deep-dive 2021-5: Sanrio Company, LtdSanrio Company, Ltd (8136 JP) is a designer, licensor and producer of cute ("kawaii") consumer products. Its most popular brand name is "Hello Kitty".![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a9561353-4bcc-4e85-8127-81a9fc579735_1159x648.png)](https://www.asiancenturystocks.com/2021-5-sanrio-company-ltd/) I felt at the time that Sanrio had a fantastic portfolio of intellectual properties. Hello Kitty was the second-highest-grossing media franchise ever, having raked in US$80 billion to date － higher than Mickey Mouse, Super Mario, and Star Wars. What made Hello Kitty unique was the character's cuteness and distinctive look. Her lack of a mouth allowed fans to project their emotions onto her. Sanrio had been mismanaged after the founder’s son Kunihiko Tsuji passed away in 2014, causing a vacuum in the top leadership. But in 2019, the founder’s grandson Tomokuni Tsuji finally took over and started implementing a turnaround plan. A central part of that plan was a centralization of the marketing department to cross-sell each character to existing customers. He also launched a new loyalty app called Sanrio+ to collect customer data, including the customer response to new product launches. And most importantly, he went all-in on collaborations with Levi’s, Razer, Uniqlo, Balenciaga, etc. From early 2021 onwards, Sanrio’s turnaround became evident in the alt-data I had collected from Google, Instagram and Reddit. I paid particular attention to the sharp increase in Google search queries for “Hello Kitty” and noted the diversification to new characters, including My Melody and Gudetama. That success was just the beginning of an amazing turnaround for the brand. Since 2021, Sanrio’s stock price has performed beautifully: This, to me, is a demonstration of how powerful alternative data sources can be. You’d be foolish to ignore them. --- # 3\. My favorite alt-data sources ## 3.1\. Google Trends [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/62c6ae60-b46b-4b0a-804f-ea12409f57da_2140x1544.png)](https://trends.google.com/trends?geo=,,,,&hl=en-US&ref=asiancenturystocks.com) An index of Google search queries for “Hello Kitty”. Source: Google Trends **What it tracks**: Google search query volumes **Website**: [trends.google.com](https://trends.google.com/?ref=asiancenturystocks.com) **Cost**: Free My top source for alternative data is Google Trends, which gives you a sense of how much Google users are searching for a particular keyword. The indices are normalized for Google's overall search volume, so the absolute level doesn’t mean anything. Just compare the search query volume index with its historical level or compare the volumes with another keyword. Data scientist Steph Smith believes that people use Google for one of four reasons: - Know or understand something better - Find a particular website - Complete a task - Buy something In my view, when using Google Trends, you should use a keyword that captures user intent — an intent to buy a product. For example, if you try the keyword [“Buy Hello Kitty”](https://trends.google.com/trends/explore?date=all&q=Buy%20Hello%20Kitty&hl=en-US&ref=asiancenturystocks.com), you can be pretty sure that it captures an intent of a user. Or if you search for [“Hello Kitty toy”](https://trends.google.com/trends/explore?date=all&q=Hello%20Kitty%20toy&hl=en-US&ref=asiancenturystocks.com), you can be pretty sure that the user is curious about the Hello Kitty-branded toys. One trick that I’ve been using is to seasonally adjust the data. The fastest way to do that is to create separate indices for each year, containing the same search query. Here is a template that you can use: [seasonal adjustment template](https://trends.google.com/trends/explore?date=2020-01-01%202020-12-31,2021-01-01%202021-12-31,2022-01-01%202022-12-31,2023-01-01%202023-12-31,2024-01-01%202024-12-31&geo=,,,,&q=Hello%20Kitty,Hello%20Kitty,Hello%20Kitty,Hello%20Kitty,Hello%20Kitty&ref=asiancenturystocks.com). If the line for the latest year is much above the previous year, you can be pretty sure that the sales of Hello Kitty-branded products will increase year-on-year. Finally, you can use Google Trends to understand consumers better. For example, look at the [Hello Kitty](https://trends.google.com/trends/explore?date=all&q=Hello%20Kitty&hl=en&ref=asiancenturystocks.com) page and scroll down. You’ll see that users are also searching for Kuromi — a tomboy character from the My Melody universe that’s become popular recently. If you [compare](https://trends.google.com/trends/explore?date=all&q=Kuromi,Hello%20Kitty&hl=en&ref=asiancenturystocks.com) the two search query charts, you’ll get a sense of how important Kuromi is compared to the main Hello Kitty brand. By scrolling down [the main Hello Kitty page](https://trends.google.com/trends/explore?date=all&q=Hello%20Kitty&hl=en&ref=asiancenturystocks.com), you’ll also get a sense of the countries in which Hello Kitty has become popular. So, judging from the data observed here, it looks like the Hello Kitty brand is doing very well, as are the other brands in the My Melody universe. That bodes well for Sanrio’s future growth prospects. There are several individuals and publications discussing search query trends. One of my favorite Substacks on the subject is [Astutex.ai](https://astutexai.substack.com/), which costs US$10/month: [astutex.ai #AlternativeData insightsLatest Astutex Trendspotting report](https://astutexai.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) The person behind the Substack is also active on Twitter [@AstutexAI](https://x.com/AstutexAi?ref=asiancenturystocks.com). I also find the newsletter [Trending Data](https://trendingdata.beehiiv.com/?ref=asiancenturystocks.com) fascinating, as it highlights booming consumer product categories that I wouldn’t have paid attention to otherwise. Hubspot’s newsletter [Trends.co](https://blog.hubspot.com/research?ref=asiancenturystocks.com) also discusses exciting consumer trends in its weekly emails. --- ## 3.2\. Subreddit Stats [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/567531a7-cae3-4949-bd1b-b976a9ad23c6_1696x1108.png)](https://subredditstats.com/r/HelloKitty?ref=asiancenturystocks.com) Number of subscribers to the r/HelloKitty subreddit. Source: Subredditstats **What it tracks**: Number of comments and visitors to Reddit forums **Website**: [Subredditstats.com](https://subredditstats.com/?ref=asiancenturystocks.com) **Cost**: Free --- [Reddit](https://www.reddit.com/?ref=asiancenturystocks.com) is one of the largest social platforms in the world. What makes it unique is that the platform is divided into niche communities called “Subreddits”, independently moderated by their members. Whenever a product becomes popular, you’ll get subreddits pop-up catering to its fans. To find a subreddit, I usually go to Google and just search say [“Hello Kitty site:reddit.com”](https://www.google.com/search?q=Hello+Kitty+site%3Areddit.com&newwindow=1&sca%5Fesv=b3b608cbb15edcdc&sca%5Fupv=1&sxsrf=ADLYWIJDko1u-Ak5JDckpdoPZuBhSPKR4g%3A1725940007039&ei=J8HfZs6IAuiYseMPiODlgQk&ved=0ahUKEwiOuJfIu7eIAxVoTGwGHQhwOZAQ4dUDCA8&uact=5&oq=Hello+Kitty+site%3Areddit.com&gs%5Flp=Egxnd3Mtd2l6LXNlcnAiG0hlbGxvIEtpdHR5IHNpdGU6cmVkZGl0LmNvbUi5DlCiBVifDXABeACQAQCYASqgAVKqAQEyuAEDyAEA-AEBmAIAoAIAmAMAiAYBkgcAoAda&sclient=gws-wiz-serp&ref=asiancenturystocks.com). The first search result that pops up is from the subreddit [r/HelloKitty](https://www.reddit.com/r/HelloKitty/?ref=asiancenturystocks.com), which apparently has 56,000 members. It looks like their users share photos of their favorite hello Kitty merchandise. What I like to do next is to go to the [Anvaka Github tool](https://anvaka.github.io/sayit/?query=&ref=asiancenturystocks.com) to understand what other Subreddits might be relevant for a particular brand or product. In Hello Kitty’s case, it becomes clear that the main Subreddits we’ll want to track are [r/HelloKitty](https://www.reddit.com/r/HelloKitty/?ref=asiancenturystocks.com) and [r/Sanrio](https://www.reddit.com/r/Sanrio?ref=asiancenturystocks.com). [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8cc1bd21-aba2-472d-81ed-0c0b57781da5_1736x1068.png)](https://anvaka.github.io/sayit/?query=&ref=asiancenturystocks.com) Source: Anvaka Github Tool Now, if you search for r/HelloKitty in Subredditstats, you’ll be presented with the following information: 1. The number of subscribers for r/HelloKitty in absolute terms 2. The ranking of r/HelloKitty among all of Subreddits available on Reddit in terms of the number of subscribers 3. The number of comments per day on r/HelloKitty 4. The ranking of r/HelloKitty among all of Subreddits available on Reddit in terms of the number of comments per day 5. The number of posts per day in absolute terms The two charts I think contain the most value are #2 and #4, which show the relative ranking of the Subreddit in terms of the number of subscribers and the number of comments per day. We want the ranking to decrease. You can also plot the year-on-year growth in the number of subscribers to a particular Subreddit, to spot an acceleration in growth. When it comes to r/HelloKitty and r/Sanrio, their subscriber ranks are getting lower and lower, which means they’re quickly becoming among the top Subreddits on the platform. This is a positive sign for Sanrio, and probably means that its earnings growth will continue to be strong. ***Note!*** *A reader alerted me that Subreddit Stats is no longer being updated due to a 2023 change to Reddit’s API. The Hello Kitty data below only goes up to the end of 2023\. I’ve been trying to find an alternative to Subreddit Stats, but to no avail. Your best options are using scraping tools, or the Reddit data offered by TickerTrends paid service.* --- ## 3.3\. Toolforge [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bf07765d-24ea-40df-b79b-53a29bc5374d_1978x1216.png)](https://pageviews.wmcloud.org/?project=en.wikipedia.org&platform=all-access&agent=user&redirects=0&range=all-time&pages=Hello%5FKitty&ref=asiancenturystocks.com) Total Wikipedia page views for “Hello Kitty”. Source: Toolforge **What it tracks**: The number of times a Wikipedia page has been requested **Website**: [pageviews.wmcloud.org](https://pageviews.wmcloud.org/?ref=asiancenturystocks.com) **Cost**: Free Toolforge is a straightforward service: it tracks the number of times per day or per month that a particular Wikipedia page is being requested by any device. I usually click the date range and then press “All time” to see the page view trend across the longest time frame possible. To switch to analyzing articles in other languages, add a prefix before the URL, for example, switching from “en.wikipedia.org” to “ja.wikipedia.org” for Japan. In Hello Kitty’s case, we can see that [the number of Wikipedia page views](https://pageviews.wmcloud.org/?project=en.wikipedia.org&platform=all-access&agent=user&redirects=0&start=2015-07-01&end=2024-09-09&pages=Hello%5FKitty&ref=asiancenturystocks.com) has been increasingly steadily over the past few years, especially since 2021 when the hype really took off. I notice the same trend for [the Sanrio page](https://pageviews.wmcloud.org/?project=en.wikipedia.org&platform=all-access&agent=user&redirects=0&start=2015-07-01&end=2024-09-09&pages=Sanrio&ref=asiancenturystocks.com). The Japanese Wikipedia page “ハローキティ” also saw a [spike in page views](https://pageviews.wmcloud.org/?project=ja.wikipedia.org&platform=all-access&agent=user&redirects=0&start=2015-07-01&end=2024-09-09&pages=%E3%83%8F%E3%83%AD%E3%83%BC%E3%82%AD%E3%83%86%E3%82%A3&ref=asiancenturystocks.com) at the end of 2023. You can also download the data into a CSV file, open it with Microsoft Excel, plot the data in a line chart, right-click the chart line and then press “Add Trendline…”. I prefer polynomial trendlines or moving averages. Judging from Hello Kitty’s trendline, it’s still trending upwards in an exponential fashion. --- ## 3.4\. TickerTrends [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/baf055ba-a48f-424a-880f-d46e45ca9bb4_1644x1312.png)](https://tickertrends.io/?ref=asiancenturystocks.com) YouTube search and TikTok hashtag trends for “Hello Kitty”. Source: Tickertrends.io **What it tracks**: TikTok, YouTube, Reddit, Amazon, website traffic trends **Website**: [tickertrends.io](https://tickertrends.io/?ref=asiancenturystocks.com) **Cost**: US$19/month TickerTrends is a new alt-data platform I recently found out through the recommendation of Twitter user [MacroValue](https://x.com/pradeeepk/status/1830460201541263573?ref=asiancenturystocks.com). It is a paid service but affordable at just US$19/month, giving you access to both TikTok view trends and website traffic. There’s also a more expensive plan at $89/month which provides access to other social media data, including from Reddit, Instagram as well as Amazon search trends and app usage trends. Finally, Tickertrends has a paid Substack newsletter where they highlight how they use their data sets to track the latest fads. [TickerTrends ResearchTickerTrends has set out to create the “Bloomberg Terminal” of alternative data by creating a customizable, dynamic and easy to use comprehensive service and platform. Most import of all, the platform is accessible providing a service that was previously](https://tickertrends.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) Tickertrends also hosts a Discord chat group where users discuss stocks benefitting from certain trends. Click the “equity arb” tab for the discussion. Just in the past few days, users have been discussing [**Nintendo**](https://finance.yahoo.com/quote/7974.T/?ref=asiancenturystocks.com) *(7974 JP - US$63 billion)* and Japanese mayonnaise brand [**Kewpie**](https://finance.yahoo.com/quote/2809.T/?ref=asiancenturystocks.com)*(2809 JP - US$3.6 billion)*. You can find the invite link to the Discord group [here](https://t.co/bzKYCCgOiv?ref=asiancenturystocks.com). Regarding Hello Kitty, all the data across [TikTok](https://tickertrends.io/summary?type=stock&search=8136.T%2C+JPX+%2F+Sanrio+Company%2C+Ltd.&exchange=All&ref=asiancenturystocks.com), [YouTube](https://tickertrends.io/summary?type=stock&search=8136.T%2C+JPX+%2F+Sanrio+Company%2C+Ltd.&exchange=All&ref=asiancenturystocks.com), [Reddit,](https://tickertrends.io/summary?type=stock&search=8136.T%2C+JPX+%2F+Sanrio+Company%2C+Ltd.&exchange=All&ref=asiancenturystocks.com) and [Amazon](https://tickertrends.io/summary?type=stock&search=8136.T%2C+JPX+%2F+Sanrio+Company%2C+Ltd.&exchange=All&ref=asiancenturystocks.com) remain constructive. The [website traffic](https://tickertrends.io/summary?type=stock&search=8136.T%2C+JPX+%2F+Sanrio+Company%2C+Ltd.&exchange=All&ref=asiancenturystocks.com) to Sanrio.com has dropped slightly over the past two months, but it’s probably too soon to worry. The longer-term trend looks positive. --- ## 3.5\. Social Blade [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4d59deca-756f-44b6-b131-bdec293ac059_1770x1032.png)](https://socialblade.com/?ref=asiancenturystocks.com) Number of video views and monthly subscribers for the YouTube channel “Hello Kitty and Friends". Source: Social Blade **What it tracks**: YouTube, Twitch, Facebook, Instagram, Twitter, TikTok analytics **Website**: [socialblade.com](https://socialblade.com/?ref=asiancenturystocks.com) **Cost**: Free Social Blade provides social media analytics across platforms such as YouTube, Twitch, Facebook, Instagram, Twitter, and TikTok. While the platform is free, it requires you to register with your own user name. Unlike TickerTrends, on Social Blade, you’ll need to find the social media accounts you want to track yourself. I typically search for accounts that are large enough to contain a signal among the noise. Small channels can grow quickly, but if a product-related account with 50 million followers is doing poorly, that may be because of the brand itself. For example, when it comes to Hello Kitty, I searched on YouTube for the brand and found the channel [Hello Kitty & Friends](https://www.youtube.com/@HelloKittyandFriends?ref=asiancenturystocks.com). It has 2 million subscribers and content published weekly. I then typed in “@hellokittyandfriends” in the search bar after selecting “YouTube” and was presented with two charts with monthly video views and monthly gained subscribers. The number of video views remains high, though the number of gained subscribers has dropped since late 2023, in line with weaker website traffic. I then searched on Google for “Instagram Hello Kitty” and found an Instagram account called [@hellokitty](https://www.instagram.com/hellokitty/?hl=en&ref=asiancenturystocks.com) with 4.1 million followers. The number of monthly gained followers reached a peak in early 2023 and has now dropped somewhat. Meanwhile, there’s a [@hellokitty](https://www.tiktok.com/@hellokitty?lang=en&ref=asiancenturystocks.com) account on TikTok with 3.3 million followers. According to Social Blade, the number of monthly “likes” on TikTok has dropped since early 2024\. It does look like Hello Kitty is still popular, but that it experienced a peak in its viral growth back in late 2023. --- ## 3.6\. Camelcamelcamel [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ade53b97-67bc-42ab-a258-c5a847cacce1_1586x768.png)](https://camelcamelcamel.com/product/B0CB92B1VK?context=search&cpf=new&ref=asiancenturystocks.com) Source: **What it tracks**: Amazon product price histories **Website**: [camelcamelcamel.com](https://camelcamelcamel.com/?ref=asiancenturystocks.com) **Cost**: Free I like to check second-hand prices for the most popular products because those are determined not by MSRPs but rather by the supply & demand for particular items. If a product is in high demand, you bet that second-hand prices will soon start to reflect this new reality. Camelcamelcamel used to provide Amazon product rankings but this feature has been discontinued. An alternative data source is [Jungle Scout](https://www.junglescout.com/pricing/?ref=asiancenturystocks.com), which I think costs US$29/month. On Camelcamelcamel, the first item that appears when I search for [“Hello Kitty”](https://camelcamelcamel.com/search?sq=Hello+Kitty&ref=asiancenturystocks.com) is the [Hello Kitty Care Bears plush toy](https://camelcamelcamel.com/product/B0CB92B1VK?context=search&cpf=new&ref=asiancenturystocks.com). If you scroll down and click “3rd Party New”, you’ll see this item's second-hand prices. The price has gone down by over half over the past year. This could be due to greater supply or lower demand. I hesitate to draw any conclusion from this data. --- ## 3.7\. Idealo [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/af70285e-1800-4528-a750-9936c602ee31_1128x876.png)](https://www.idealo.de/preisvergleich/OffersOfProduct/203616232%5F-squishmallows-hello-kitty-30-cm-jazwares.html?ref=asiancenturystocks.com#pricedevelopment) Price history of a Jazwares Squishmallows Hello Kitty plush toy. Source: Idealo **What it tracks**: Germany product pricing data **Website**: [idealo.de](https://www.idealo.de/?ref=asiancenturystocks.com) **Cost**: Free Idealo is a German price comparison website with 10 million monthly active users. Search for a product you want, and then click on it. At the top-right-hand corner of the screen is a price chart. Click “1J” (1 Jahre = 1 year) for a 1-year price history, and you’ll see whether prices have increased or dropped. To take an example from the Hello Kitty universe, the Jazwares Squishmallows Hello Kitty 30cm plush toy currently costs EUR 24.39 on eBay. One year ago, it cost EUR 24.99. To me, that data doesn’t contain much signal. But if prices were skyrocketing, then I’d probably conclude that Hello Kitty is in the early stages of a fad cycle. Not the case right now. --- ## 3.8\. StockX ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d066fa38-d79e-4dc2-a543-00d463d8c40d_2276x632.png) The price of a pair of Adidas Samba Hello Kitty special edition sneakers. Source: StockX **What it tracks**: Top prediction market **Website**: [stockx.com](https://stockx.com/?ref=asiancenturystocks.com) **Cost**: Free StockX is a marketplace for sneakers, handbags, action figures and other collectibles. It’s particularly helpful for analyzing footwear brands such as Nike or Crocs. You can track the prices of particular sneaker editions and see how they have evolved over time. If you scrape data from the platform, you can probably construct price indices for entire brands of products and compare them with each other. If you search for [“Hello Kitty”](https://stockx.com/search?s=Hello+Kitty&ref=asiancenturystocks.com) on StockX, you’ll find a range of Hello Kitty-branded products. They’ve done a host of partnerships in the past few years years, with Nike and others. Scroll down to the bottom and you’ll find historical price charts for each of them. While prices for particular special editions can be volatile, by tracking a number of them you’ll get a feeling of whether a particular brand is popular. --- ## 3.9\. Data.ai [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7bf729ed-f09f-497f-9155-107f05c2c29d_2142x978.png)](https://www.data.ai/apps/ios/app/1491147459/rank-history?app%5Fslug=1491147459&market%5Fslug=ios&vtype=day&countries=JP&device=iphone&view=rank&legends=2&date=2024-06-13~2024-09-10&ref=asiancenturystocks.com) The iOS app store ranking for Sanrio+. Source: Data.ai **What it tracks**: iOS, Google Play app store download and engagement data **Website**: [data.ai](https://www.data.ai/?ref=asiancenturystocks.com) **Cost**: Recent app store rankings free, revenue & download data \~US$25-40k/year AppAnnie and SensorTower used to be the two go-to sources for app engagement and download statistics. They’ve recently merged into one entity called Data.ai, which continues to provide similar services. The free version is limited, but it still enables you to search for individual apps, see how they rank and whether the ranking has changed in the past 90 days. I usually search for a particular company to see what apps they have developed. In this case, the most important property to measure, in my view, is Sanrio+, the membership app that gives discounts and special deals to Japanese customers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce22968d-f68c-4230-a00f-85f5892d43ca_2198x1116.png) With limited history, the data provided by Data.ai is not particularly helpful. But if you’re willing to fork up the estimated US$25-40,000 for a full subscription, you can glean insights from their download or app engagement metrics, especially the historical charts that show you how a particular app is trending. --- ## 3.10\. TwitchTracker ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ab5e6563-0413-49a6-9cce-5ce431d59224_2310x700.png) Source: TwitchTracker **What it tracks**: Twitch viewer statistics **Website**: [twitchtracker](https://twitchtracker.com/?ref=asiancenturystocks.com) **Cost**: Free Twitch is a live streaming platform focused on video games. Users watch live streams where a gamer plays a game while interacting with viewers. TwitchTracker provides the number of users for each channel at any given point in time. These statistics help you compare today’s viewership to that of other games and historically. In Hello Kitty’s case, I didn’t find any relevant channels that could help us understand the popularity of the brand. TwitchTracker is mostly useful for tracking video game franchises. --- ## 3.11\. Steamdb [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b11dd692-857b-4620-af46-19c9f8d487f2_1880x926.png)](https://steamdb.info/app/370600/charts/?ref=asiancenturystocks.com#6y) Source: Steamdb **What it tracks**: Steam engagement data **Website**: [steamdb](https://steamdb.info/?ref=asiancenturystocks.com) **Cost**: Free Steam is an app store for video games and a platform for playing them. It’s an alternative to the Nintendo, PlayStation, and Xbox app stores. Steamdb measures user engagement on the Steam platform, so it’s only helpful for games that are actually released on Steam. Search for the game and then click “Charts” on the left-hand side. The only Hello Kitty-branded game I found was [Hello Kitty and Sanrio Friends Gaming](https://steamdb.info/app/370600/?ref=asiancenturystocks.com). The game only has one concurrent player globally, so this particular game clearly isn’t moving the needle for Sanrio. Had we been analyzing a video game developer, Steamdb would have been more helpful. --- ## 3.12\. Polymarket [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e2376ca8-8fdb-46ca-a1c1-dc361ed04493_1282x1046.png)](https://polymarket.com/event/how-many-fed-rate-cuts-this-year?tid=1725957110185&ref=asiancenturystocks.com) Polymarket’s predictions for the percentage points of Fed rate cuts in 2024\. Source: Polymarket **What it tracks**: Top prediction market **Website**: [polymarket.com](https://polymarket.com/?ref=asiancenturystocks.com) **Cost**: Free Polymarket is a prediction market where users bet against each other on future events. They deposit money onto the platform and keep their deposits in USDC. They then win or lose money depending on the odds and the outcome of particular bets. For our purposes, Polymarket is helpful because it provides market-determined odds for specific outcomes. In Sanrio’s case, there’s nothing that can even remotely help us predict the potential for an earnings beat or raise of guidance. But it can help you understand the odds of broader macro questions. For example, users on the platform now predict a 75bps rate cut before the end of 2024\. That probably means that the Japanese Yen will continue to strengthen, which matters for anyone investing in a yen-denominated asset such as Sanrio. --- # Conclusion My number one conclusion from digging into alternative data sources over the past ten years is that [Google Trends](https://trends.google.com/?ref=asiancenturystocks.com) reigns supreme. It’s incredibly helpful for understanding a product's popularity. In my experience, if a brand's search query index increases exponentially, its earnings are unlikely to disappoint. The only caveat is that Google is not used in certain geographies, such as China, South Korea, and Russia. I’ve also become a big fan of [TickerTrends.io](https://tickertrends.io/?ref=asiancenturystocks.com), particularly its YouTube and website analytics. [Toolforge](https://pageviews.wmcloud.org/?ref=asiancenturystocks.com), [Subreddit Stats](https://subredditstats.com/?ref=asiancenturystocks.com) and [Social Blade](https://socialblade.com/?ref=asiancenturystocks.com) are less helpful, but can also provide additional data points to help support your case. What alternative data sources do you use? Let me know in the comment section below. And if you’ve spotted any exciting new trends, I’d be curious to hear too: [Leave a comment](#ghost-comments-root) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### 9 Questions with Afiq Isa URL: https://www.asiancenturystocks.com/10-questions-with-afiq-isa/ Last updated: 2025-10-24T15:00:13.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b8397ac3-8c8f-46bf-844c-7530943e9cbe_960x540.png) Today, we’ll be talking to financial Afiq Isa. I know Afiq from [Twitter](https://x.com/pelabursaham?ref=asiancenturystocks.com), where he writes about Malaysian equities as well as broader trends in the Asia-Pacific. Interest in Malaysia has picked up after Interactive Brokers [announced](https://finance.yahoo.com/news/interactive-brokers-allows-clients-trade-155900347.html?ref=asiancenturystocks.com) they would offer full trading access to all of its clients. I therefore reached out to Afiq to hear his view on Malaysian equities. Where does he see opportunities? And what are the key themes on his mind currently? # 1\. Hi Afiq! Thanks for participating. Can you tell us about yourself and your background? And what do you focus on today? I’m a private investor and trader with more than a decade’s professional experience covering markets in Malaysia, Hong Kong, and Southeast Asia in various capacities. I mainly trade equities and derivatives with a short-to-medium term timeline. I had a brief stint in stockbroking before becoming a financial journalist at The Edge, Malaysia’s leading business weekly, and then at The Star, the country’s largest newspaper. I then spent some time in Hong Kong writing on bank risk management and Basel regulatory frameworks that were impacting global financial institutions with a large presence in Asia. I returned to Malaysia to work for the regional investment banking arm of Malayan Banking Bhd, the country’s largest bank, before setting off to develop and trade my own ideas. My current focus is on identifying tradeable and investable trends in industries that are undergoing structural shifts. For most of Southeast Asia, it’s manufacturing and services – with a special focus on aviation, utilities, healthcare and tourism in a post pandemic context. --- # 2\. For readers unfamiliar with the Malaysian market, how would you characterize it in terms of the market cap composition, sector focus, growth potential, etc? Malaysia is an export oriented economy with a diverse manufacturing base. It’s the only net oil exporter in Southeast Asia, and the second biggest crude palm oil exporter in the world. You may also have heard about how the ‘Big 4’ glove makers had a once-in-a-generation thousand percent rally at the onset of Covid, though in recent years Chinese upstarts are eroding their once dominant market positioning. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/974cea80-7533-46a6-9829-905b954392af_2121x1414.jpg) Source: Getty Images The Malaysian stock market reflects this diversity, with most of the major players in these sectors being listed entities. The majority have market capitalizations of US$1 billion or less, at least until recently, which made them a favourite for retail investors and small/mid cap oriented growth funds. Newly emergent catalysts and greater confidence in the country’s economic prospects have triggered a broad based rally in the stock market in 2024\. The benchmark FBMKLCI index is up +14% this year and has heavy weightage on financials. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b4beb7b9-226a-44ea-a53c-614d4413c3f9_1678x734.png) The benchmark FTSE Bursa Malaysia KLCI Index. Source: Trading View As proxies to the economy, it is no surprise that the banks are catching the attention of fund managers who are previously underweight on EMs. Property, construction, and utility stocks have been especially strong too, with some of them recording double to triple-digit percentage rallies over the past year. The prominence of new data center projects in Malaysia are relevant to all three sectors, whose valuations have re-rated in recognition of their earnings growth potential. Aside from data centers, the promise of greater connectivity between Singapore and Johor via the upcoming RTS Link have driven up property and land prices in the southern state. [Johor's property market is heating upDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/343fd110-afc3-420b-bbe8-dcb4160867cd_1274x847.jpg)](https://www.asiancenturystocks.com/johor-the-next-shenzhen/) In other parts of Malaysia, particularly the northern industrial hubs, mainland China companies are reportedly setting up joint ventures to manufacture and export products made in Malaysia, as the threat of harsher US sanctions on mainland made goods loom large. At the same time, the country benefits from the ‘[China plus one](https://en.wikipedia.org/wiki/China%5FPlus%5FOne?ref=asiancenturystocks.com)’ concept with foreign companies diversifying away from China to set up base in friendly Southeast Asia geographies. --- # 3\. What do you think are the biggest issues facing Malaysia today? And to what extent do you think Prime Minister Anwar Ibrahim is well-placed to deal with them? Narrowing the fiscal deficit is a must as the country has been grappling with a subsidy burden for fuel, electricity, and food that costs it nearly US$18 billion annually. It all comes down to decreasing government expenditure and increasing revenues, as well as possessing the commitment to stay the course. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5dc2271a-21aa-4e55-8976-be2efd68e8bb_1664x778.png) Malaysia’s fiscal deficit as a percentage of GDP. Source: Trading Economics Malaysia still has a low tax base of only 11% of GDP, hence there have been rumours of the return of a broad based goods and services tax (GST) to boost the nation’s coffers. The recent liberalization of diesel prices this year was a good start, but a lifting of blanket subsidies on petrol stokes fears of inflation, aside from it being a politically sensitive matter for the ruling government. Ultimately, the intended shift from broad based to targeted subsidies towards lower income groups will save the country tens of billions of dollars in the long run. The Prime Minister has been making bold moves to rectify the government’s finances as well as undertaking an uncompromising push to tackle systemic corruption. After two years in power, he remains popular among Malaysians who are keen to see real change after the disappointments of the Najib Razak era (which culminated in the [1MDB scandal](https://en.wikipedia.org/wiki/1Malaysia%5FDevelopment%5FBerhad%5Fscandal?ref=asiancenturystocks.com)), and the successive government collapses that occurred during the Covid years. --- # 4\. The Malaysian currency, the Ringgit, has been incredibly strong recently. Do you know why, and do you expect the trend to continue? The central bank had been encouraging companies with overseas cash holdings to repatriate their income back to Malaysia for conversion into the ringgit. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/83345ed3-d9bb-4aff-a31a-b74c178b79bb_1674x732.png) Malaysian Ringgit/US Dollar exchange rate. A lower number implies a stronger Ringgit. Source: Trading View Beyond this, the expectation of the Fed rate cuts has driven emerging market currencies higher, and the ringgit is no exception. Its outperformance may be due to greater foreign capital inflows – but this time with the intent of staying onshore for longer. August 2024 saw the highest monthly inflows into equities by foreign investors in more than two years. A strong ringgit may also attract more flows into local sovereign notes, which is already a regional outperformer. Confidence in both public and private sector initiatives is key. Microsoft, Alphabet, Amazon, ByteDance, and Japan’s NTT Data Group have announced major infrastructure spending in Malaysia this year totalling billions of dollars. Favourable policies and tax breaks are bound to attract greater FDIs here. Stable politics and lack of geopolitical minefields also put Malaysia in a more favourable position to Thailand or the Philippines right now, inflows wise. I expect to see the ringgit strengthen over the long term should these tailwinds persist. --- # 5\. What’s your strategy when it comes to your own portfolio? Where do you see value currently within the Malaysian equity markets and what are your favorite themes? Like many Malaysians, I have significant investments in local equity funds that basically track the performance of the FBMKLCI as domestic institutional investors are major shareholders in the big cap names. Separately, I currently focus on volatility trading strategies in Malaysian equities, crude palm oil and other vegetable oil futures. From time to time I’d also build countertrend positions in Hong Kong or Japanese equity index exposures if these markets make significant price moves. For the most part I track assets that are exhibiting extreme volatility, either due to macro factors or corporate announcements. Mean reversion and multi year breakouts are my main hunting grounds, and the relationship between news and prices has been my professional focus since my journalism days. In past years I used to be a very active momentum trader with high turnover, but nowadays I find more attractive opportunities in buying into extreme weakness, or selling into extreme strength. These types of opportunities do not come by very often, so I’m learning to sit tight and wait for a good setup. --- # 6\. Malaysian crude palm oil prices have been rising recently. What do you think is the reason for this? Do you have a view on the supply & demand outlook for palm oil, and which companies are better-placed than others? The major positive trend is India. It has taken up the slack from China and has become the world’s biggest importer of palm oil. Local Indian refining capacity is underutilized due to uncompetitive pricing, leading to larger imports of refined palm oil products as well. Indonesia’s recent commitment on a higher biodiesel blend – which will prioritise domestic consumption over exports – is a big deal as it will put Malaysian planters at an advantage as importers seek supply security from other major producers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9dc92999-5ee3-4090-bace-b07852bc7410_1672x730.png) Malaysian crude palm oil futures in Ringgit/ton. Source: Trading View However, upside for crude palm oil is capped by the abundant availability of alternates such as soybeans, whose prices are at multi year lows. The crude palm oil price trend is largely flat since the commodities price shock of the 2022 Ukraine invasion. I expect prices to remain rangebound at the MYR 3,500-4,000 range until a truly significant catalyst emerges, such as a long term price recovery in soybeans, or a significant growth in China import demand for crude palm oil. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fbb2d5b8-03b2-49c2-8103-ee15ba0e91a6_1586x628.png) View from a Kuala Lumpur Kepong plantation. Source: KLK Personally I admire two planters in particular: [**United Plantations**](https://finance.yahoo.com/quote/2089.KL/?ref=asiancenturystocks.com) *(UPL MK － US$2.5 billion)* and [**Kuala Lumpur Kepong**](https://finance.yahoo.com/quote/2445.KL/?ref=asiancenturystocks.com) *(KLK MK － US$5.4 billion)*, storied names with decades of experience, capably managed, and adequate capital reserves to undertake expensive replanting exercises to improve overall fresh fruit bunch yields. Kuala Lumpur Kepong in particular had been adept in M&A with its 2021 takeover of IJM Plantations; another bid for Boustead Plantations last year were rebuffed. Securing land bank for the long term is essential as Malaysia no longer allows deforestation of land for plantation activities. This may yet lead to more consolidation in the industry, as cash-starved planters consider selling their land bank to cash rich names in order to finance their own replanting. --- # 7\. You recently discussed the boom in data center construction in Johor Bahru. Are there any obvious beneficiaries of this trend? The data center angle is a multi-sector thematic. In the short term, major landowners in Johor state such as [**UEM Sunrise**](https://finance.yahoo.com/quote/5148.KL/?ref=asiancenturystocks.com)*(UEMS MK － US$1.0 billion)*, [**SP Setia**](https://finance.yahoo.com/quote/8664.KL/?ref=asiancenturystocks.com) *(SPSB MK － US$1.3 billion)* and [**Tropicana Corp**](https://finance.yahoo.com/quote/5401.KL/?ref=asiancenturystocks.com) *(TRCB MK － US$759 million)* have already recognised proceeds from land sales for data center construction. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/01dae40b-98d8-4a9a-9989-1a7161cc1d18_1294x712.png) A data center at Sedenak Tech Park in Johor. Source: Princeton Digital Group [**Gamuda**](https://finance.yahoo.com/quote/5398.KL/?ref=asiancenturystocks.com)*(GAM MK － US$1.0 billion)*, [**IJM Group**](https://finance.yahoo.com/quote/3336.KL/?ref=asiancenturystocks.com)*(IJM MK － US$2.3 billion)*, and [**Sunway Construction**](https://finance.yahoo.com/quote/5263.KL/?ref=asiancenturystocks.com)*(SCGB MK － US$1.2 billion)*, who are among the country’s largest listed construction companies, have recently announced major contracts to build data centers. These names had long been in property and infrastructure developments, so the data center ventures are a new growth avenue for them. Another major trend is in utilities. Data centers are set to drive electricity demand nationwide, just like what happened in Singapore over the past few years. Keep in mind that industrial electricity tariffs in Malaysia are among the cheapest in the region, which is another reason for the rush in data center newbuilds here. There is currently interest in further variations of the data center thematic. This includes not only the power plant operators, but companies that supply power cables and wires, ones that undertake substation works, and those with expertise in facilities management. Additionally, more pipelines need to be constructed to connect industrial users to the water source, and data centers are notorious for their consumption requirements. Water operators throughout Malaysia had recently increased tariffs partly to finance upgrading works, so in theory suppliers of pipes and water infrastructure companies stand to benefit. Notably, [**YTL Power International**](https://finance.yahoo.com/quote/6742.KL/?ref=asiancenturystocks.com) *(YTLP MK － US$6.7 billion)*, the utility giant which had announced a data center collaboration with Nvidiautilizing the next gen Blackwell chips, had recently bought a majority stake in [**Ranhill Utilities**](https://finance.yahoo.com/quote/5272.KL/?ref=asiancenturystocks.com)*(RAHH MK － US$401 million)*, the listed Johor state water operator, ostensibly to ensure adequate infrastructure to accommodate DCs over the long term. --- # 8\. Do you have any favorite books that you’d recommend to help us learn more about Malaysia and its stock market? I recommend [Malaysian “Bail Outs”? Capital Controls, Restructuring and Recovery](https://www.amazon.com/Malaysian-Capital-Controls-Restructuring-Recovery/dp/9971693194/ref=sr%5F1%5F1?crid=3N798NY5AMKED&dib=eyJ2IjoiMSJ9.okGqg%5FLmnd9vO3qswGoYSA.v%5FwBU2uvPwgFmFEOnIJb2jwU1C2ka02dErqF2DKhf6k&dib%5Ftag=se&keywords=Malaysian+%E2%80%9CBail+Outs%E2%80%9D%3F+Capital+Controls%2C+Restructuring+and+Recovery&qid=1725847227&sprefix=malaysian+bail+outs+capital+controls%2C+restructuring+and+recovery+%2Caps%2C586&sr=8-1&ref=asiancenturystocks.com) by Wong Sook Ching, KS Jomo & Chin Kok Fay (published by NUS Press Singapore). The book covers the Malaysian response to the 1997-1998 financial crisis and the much-criticized capital controls. Malaysia’s undertaking of government led corporate rescues and recapitalization of banks predated the US experience during the global financial crisis, and it’s interesting to note that whether because of or despite the interventionist policies, both economies have prospered in the decades since. For those wanting to learn about Malaysia’s stock market, I recommend subscribing to [The Edge Malaysia](https://theedgemalaysia.com/?ref=asiancenturystocks.com): [![The Edge Malaysia - Make Better Decisions](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f48eb1e4-bbda-4d91-bc46-f0d84b428977_275x183.jpg)](https://theedgemalaysia.com/?ref=asiancenturystocks.com) An annual subscription costs less than US$50, and the write-ups are insightful, with a mix of scoops and in-depth company profiles as well as CEO interviews you can’t find anywhere else. --- # 9\. Where can readers follow your work and commentary? You can find me on X [@pelabursaham](https://x.com/pelabursaham?ref=asiancenturystocks.com), usually sharing esoteric data points on market trends, Southeast Asia tourism, and HK/China retail in search of investable angles. --- **Respondent’s disclaimer*: The comments above constitute my personal views only, and all names mentioned here are not to be construed as recommendations to buy or sell any of the aforementioned securities.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### China Overseas Property (2669 HK) URL: https://www.asiancenturystocks.com/china-overseas-property-2669-hk/ Last updated: 2026-07-31T01:55:37.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in China Overseas Property Holdings Limited at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- China’s property market is in the midst of a downturn. However, one segment of the market has not only survived but flourished — the niche of state-owned property management companies. The topic of today’s discussion will be state-owned property manager [**China Overseas Property**](https://finance.yahoo.com/quote/2669.HK/?ref=asiancenturystocks.com)(“COPL”) *(2669 HK － US$2.0 billion)*, an affiliate of property developer [**China Overseas Land & Investment**](https://finance.yahoo.com/quote/0688.HK/?ref=asiancenturystocks.com)(“COLI”)*(688 HK － US$17 billion)*. COPL takes care of properties after they’ve been completed. It offers basic services such as security personnel, cleaning, repairs and maintenance, gardening, etc. It’s also moving into value-added services like helping owners rent out their flats. Most property managers are affiliated with specific property developers. For example, China Resources Mixc Life is affiliated with China Resources Land, Country Garden Services is associated with Country Garden, and COPL is affiliated with developer COLI. After COLI completes a project, COPL typically takes over its day-to-day management. After the initial contract runs out, properties typically end up in the hands of so-called “property owners’ associations,” which represent the interests of individual apartment owners. These associations typically meet every two or three years to decide whether to renew their contracts with COPL. The business’s attractive features include its stability, high cash flow, and high return on reinvested capital. Today, COPL earns a return on equity of 37%. One explanation is that it’s a service business that doesn’t require much capital. Another is that the switching costs are high. Since majority votes are needed to replace property managers, it almost never happens. My impression is that the industry-wide churn has been less than 2%. So what’s the catch? In late 2020, the Chinese government introduced its three-red lines policy, which limited the amount of debt developers could take on. The companies that exceeded the limits had to deleverage. And being cut off from credit from China’s state banks, they started defaulting on the offshore bonds en masse, leading to a wholesale restructuring of the industry. While the property management industry remains stable, it was also affected by the government crackdown. Companies like Shimao Services and Jinke Services engaged in related party transactions to funnel money out of their property management companies to save their affiliated property developers—to no avail. But my point is this: every single developer that’s gone bankrupt is a private enterprise. COPL’s affiliated developer, COLI, is doing just fine. In fact, the state-owned developers are benefitting from the current crisis, being able to acquire assets from their private sector counterparts on the cheap. If you go through the numbers, it becomes clear that COPL is managed just like any other state-owned enterprise. The dilution in the share count has been exactly zero since the spin-off in 2015\. They chose a spin-off over an equity carve-out since they didn’t think COPL needed more capital. And its related party transactions are few and far between. COPL’s financial track record has been decent, too. It’s been compounding revenues at a 26% annual rate in the past five years. Its earnings per share have grown at a 27% annual rate. State-owned property managers such as COPL are winning, most likely benefitting at the expense of their private sector counterparts. That’s fundamentally positive for COPL’s longer-term growth prospects. While it is true that sister company COLI has seen its contract sales drop \~30%, that drop only reduces the *growth* in total gross floor area managed, not the total amount. Plus, the majority of the total gross floor area managed now comes from third parties, so the net impact of the property downturn on COPL’s growth remains minimal. In fact, COPL is guiding for an almost 20% increase in GFA in 2024\. Based on this number, I project a P/E ratio of 9.1x for 2024e and 8.3x for 2025e, far below the historical level of 21x. Some investors worried about a related party transaction in 2023\. But it was eventually cancelled. The truth is that most Chinese state-owned enterprises, including say CNOOC and Shanghai International Airport, have had related party transactions in the past. But they’re usually done on favorable terms. In COPL’s case, I don’t see much to worry about. There’s been a slight drop in non-resident value-added services earlier this year due to a drop in completions. However, that revenue drops in the ocean compared to COPL’s main business, which is basic property management services. So, from what I can tell, COPL’s outlook actually remains rather positive. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Interview: Raghav Kapoor, Co-founder & CEO of Smartkarma URL: https://www.asiancenturystocks.com/interview-raghav-kapoor-co-founder/ Last updated: 2025-10-26T14:27:04.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this video is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in the video are our own and do not represent the organizations we work for. They are also subject to change without notice. You are advised to discuss your investment options with your financial advisers to understand whether any investment is suitable for your specific needs. We may, from time to time, have positions in the securities covered in the articles and videos on this website. Again, this is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Today, I have the great pleasure of talking to Raghav (“Raj”) Kapoor, CEO and co-founder of [Smartkarma](https://www.smartkarma.com/?ref=asiancenturystocks.com), an investment intelligence platform based in Singapore. In the interview, he discusses: - His background and what he focuses on today - Why he founded Smartkarma, how he uses it daily - Their recent acquisition of commodities data and insights platform [Helixtap](https://helixtap.com/?ref=asiancenturystocks.com), and why he’s bullish on rubber - What he’s learnt from spending decades investing in Asian equities - Why he became constructive on Philippine equities in 2023 - Why he’s cautious about the Indonesian Rupiah and who might benefit - The long-term case for Vietnam - Stocks mentioned: [Digiplus](https://www.google.com/url?q=https://www.smartkarma.com/entities/digiplus-interactive-corp/research&sa=D&source=docs&ust=1725506052305682&usg=AOvVaw1Tp4JhhgwWRrqCqtJQhSCD), [Keepers Holdings](https://www.google.com/url?q=https://www.smartkarma.com/entities/the-keepers-holdings-inc/research&sa=D&source=docs&ust=1725506052305757&usg=AOvVaw3qw3yvy478v-tV6LtAhuGR), [Ayala Land REIT](https://www.google.com/url?q=https://www.smartkarma.com/entities/areit-ayalaland-reit/research&sa=D&source=docs&ust=1725506052305786&usg=AOvVaw0W6BriW8fhKsDhtCV1vkFD), [Philippines Stock Exchange](https://www.google.com/url?q=https://www.smartkarma.com/entities/philippine-stock-exchange-inc/research&sa=D&source=docs&ust=1725506052305805&usg=AOvVaw0vG8kbzvPxC57bLE12Sa6Y), [Cardig Aero Services](https://www.google.com/url?q=https://www.smartkarma.com/entities/cardig-aero-services-tbk-pt/research&sa=D&source=docs&ust=1725506052305818&usg=AOvVaw18K8SeCnHFxZyz9v9jnY4p), [Pacific Textiles](https://www.google.com/url?q=https://www.smartkarma.com/entities/pacific-textiles-holdings/research&sa=D&source=docs&ust=1725506052305831&usg=AOvVaw30o4BrQKbPT2BHZnfXynPt), and more. - A book recommendation: [Breath](https://www.amazon.com/Breath-New-Science-Lost-Art/dp/0735213615/ref=tmm%5Fhrd%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.Wv0Ce03-7iWkqB-iDKhh8Js-Pc7oMrzu8ClrPItcOrtZI6ehMvnCTazh9NAYKaD-nzIqMkae8HsPwq83erLSXVjpqlIWMc5Y2ZUmrOy413LIuwAWWHgBK83VsDV1WuavDxBb6c63xenw0U8kb4fIVidfy1FNwEYWb6DdOcgLilujxRIvx91T6yri0Px6XB3S8bdPKZyIWcghNgCgENmjyQ.0uLE03Crt2ZRt1cTDDbFezJCrimroTEaCtw0STk5A80&qid=1725497922&sr=8-1&ref=asiancenturystocks.com) by James Nestor For more information on Smartkarma, just click the link below: [![Press Kit | Smartkarma](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/620d85f3-5405-4aea-8b06-56219d187fd6_516x98.png)](https://www.smartkarma.com/?ref=asiancenturystocks.com) *All views expressed are my own and do not necessarily reflect those of Smartkarma. The information provided herein is for informational purposes only and does not constitute investment advice. Please consult with a qualified financial advisor before making any investment decisions. In addition, Smartkarma standard disclaimers apply.* --- Appendix. Raghav’s 15-point investment criteria: 1. ⁠Stick to proven growth — Smartkarma’s 3/5/10-year track records and smart scores are key 2. ⁠Invest in quality market leaders, not bargains 3. ⁠Choose businesses with strong alignment with shareholders — look for a history of growing dividends 4. ⁠Focus on solid unit economics — ROIC is more telling than ROE 5. ⁠Steer clear of low-margin businesses 6. ⁠Avoid companies with heavy debt 7. ⁠Stay away from businesses with regulatory risks 8. ⁠Be early, stay independent — even if it feels lonely 9. Be a big fish in a small pond — play where you have an edge 10. ⁠Build strong management relationships — they help you weather tough times and build conviction 11. ⁠Don’t hold positions smaller than 3% 12. ⁠Don’t chase trends 13. ⁠Focus on areas of change — markets often overlook them 14. ⁠Stick to simple investment ideas 15. ⁠Prioritize growing portfolio dividends — ignore short-term market fluctuations if dividends are rising organically ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio review August 2024 URL: https://www.asiancenturystocks.com/portfolio-review-august-2024/ Last updated: 2026-06-04T11:36:18.000Z *\\Hi! Welcome to a *subscriber-only edition* of Asian Century Stocks — a newsletter about value stocks in the Asia-Pacific. For more information, check out my* [***Table of Contents***](https://www.asiancenturystocks.com/table-of-contents/) *and* [***About***](https://www.asiancenturystocks.com/about) *pages.* [Subscribe now](#/portal/signup) --- **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update The portfolio did well in August, rising another +2.3% to an all-time high. The value of the portfolio is now up +34.2% since October 2021, equivalent to a +10.8% compound annual growth rate: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2e6a40a7-8d32-4b5d-b581-ee871f96fc7d_1864x614.png) Most of the recent performance has come from the weakening US Dollar, with the DXY Index having broken down due to Powell’s recent dovish commentary. On the other hand, the strong US Dollar has been a headwind for the past three years. Perhaps that headwind is finally starting to go away. In early August, the Japanese market crashed in an epic down-move. It was sparked by a small rate hike and guidance of reduced quantitative easing, causing carry trades to unwind and the yen to appreciate almost 10%. Since Japan is an export economy, earnings estimates took a hit, and share prices slumped. Luckily, I had no exposure to Japanese exporters, and my portfolio wasn’t impacted much. While the Nikkei has rebounded, I fear that investors are underestimating the negative effect of the stronger yen on Japanese earnings estimates. [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/) seems almost unstoppable, with its 10x P/E and almost 20% earnings growth. And that’s after rising over 50% in the past year. Thai cinema operator [**Major Cineplex**](https://www.asiancenturystocks.com/major-cineplex-update-major-tb/) rebounded nicely in August thanks to the recent share buyback programs and hope for a better 2025 Hollywood movie slate. In terms of negatives, I saw disappointments at [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/), [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/) and [**SBS Transit**](https://www.asiancenturystocks.com/2021-2-sbs-transit-ltd/). In the former two cases, the issues seem cyclical. For SBS Transit, it was simply a case of earnings growth turning out to be less impressive than I had originally anticipated. In any case, here is what the latest portfolio looks like, dated 29 August 2024: _This post is for paying subscribers only._ ### Complete guide to Singapore REITs URL: https://www.asiancenturystocks.com/complete-guide-to-singapore-reits/ Last updated: 2024-08-27T04:30:17.000Z Singapore's REIT market has been hit by higher interest rates, but that headwind seems to be dissipating. Estimated reading time: 33 minutes _This post is for paying subscribers only._ ### 10 Questions with Alex Sweet URL: https://www.asiancenturystocks.com/10-questions-with-alex-sweet/ Last updated: 2025-10-24T15:00:41.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/47114198-a5f8-4836-8a50-71bc01c45689_1152x648.png) # 1\. Hi Alex! Thanks for participating. Can you tell us briefly about your background and how you ended up working as a fund manager? You’re welcome! I started out as a Treasury civil servant under Gordon Brown, but quickly switched from policy analysis to equity analysis. Bernstein on the sell side was my first finance job, which gave me a thorough grounding in high quality research. In 2007 I joined Highclere, a long-only international small cap boutique, just a year after it was founded. I spent the next 16 years covering companies across Europe and Asia, first as analyst and latterly as portfolio manager, responsible for the $2bn International Smaller Companies fund. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e07c9aa6-7560-4b85-aafb-b5a57b55b264_388x206.png)](https://highclereinvestors.com/?ref=asiancenturystocks.com) --- # 2\. What types of stocks did you focus on at Highclere and how did you generate ideas given the massive scope of your investment universe? The universe was indeed huge, at 6,000 or more possible companies. I concentrated on the quality businesses that could deliver sustained profitable growth. Luckily, this narrowed it down to just the top 10-20% or so, a more manageable number to choose from. I also enjoyed discovering unknown names that were improving and would transition into the top tier in time. --- # 3\. In your view, how has investing in Asia been different than in other regions? Which is your favorite market? Any pitfalls we need to look out for? Global investing makes sense for diversification. Japan in particular sometimes moves in the opposite direction from other developed markets. As a stock picker, I love the depth of Japan, Taiwan and Australia, all with so many small-cap names and such inefficient coverage that gems and bargains can be found amidst the dross. Corporate governance pitfalls vary by country. E.g. poor capital allocation in Japan, abuse of minority investors in Korea, occasional excessive remuneration schemes in Australia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ba8e779d-9f53-4030-a0bf-662f51002405_880x852.jpg) Source: Getty Images --- # 4\. How do you think about portfolio management, trading and deciding how much to allocate to an individual position? I like a sensible degree of diversification, which delivers steady returns despite volatility at the individual name level. Idea generation is my strong point, so I can come up with around 50 to 80 really good ideas globally. My time horizon is three to five years, and portfolio turnover would correspondingly be 20% to 40% per year. --- # 5\. Any tips on how to conduct management interviews? Favorite questions that you like to ask them? My approach is to understand the history and background in order to see where the company is headed. So when meeting a company for the first time, I will start by asking them to tell me the story in their own words. I love to hear managers talk about other listed companies, whether as suppliers, customers or rivals. It’s invaluable to learn which names are admired – or the reverse – within the industry. --- # 6\. What advice would you give someone who wants to get into the fund management industry and eventually become a portfolio manager? Keep an open mind about exactly what route to take! If the real passion is analysing businesses, then management consultancy, accountancy, and of course investment banking have proved to be alternative routes into the industry, alongside the scarce direct entries into equity research. --- # 7\. Earlier this year, you started a Substack newsletter called “Sweet Stocks”. What’s the focus of your Substack and what's been your experience writing on Substack so far? After I left Highclere, I needed to invest my own portfolio in a disciplined manner. Writing up my ideas and offering them out for scrutiny and feedback has accomplished this. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9f9e6339-9de8-4d76-9fa9-19b97636b51e_1148x786.png)](https://sweetstocks.substack.com/) The Sweet Stocks Substack newsletter I set myself a challenging goal to publish a new write-up each week. It’s been exhilarating, and has also reaffirmed to me how much I enjoy researching companies and wrestling with stocks. --- # 8\. Out of the Asian ideas on your Substack － including Katitas, Kobe Bussan, SITC, Daiwabo, Iwatani and USS － if you had to put a large percentage of your portfolio in any of those stocks, which one would it be, and why? I own five of these names. [Kobe Bussan](https://sweetstocks.substack.com/p/kobe-bussan-hard-discount-winner?utm%5Fsource=publication-search) (along with its franchisee partner G-7) is the biggest weight, as I expect their Gyomu discount supermarkets will keep taking market share for many years to come. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/90db391c-06f6-4725-848c-83582ed29a41_1284x970.png) Source: [Real Estate Japan](https://resources.realestate.co.jp/living/where-to-buy-foreign-groceries-in-osaka-supermarket-guide/?ref=asiancenturystocks.com) [Daiwabo](https://sweetstocks.substack.com/p/daiwabo-wholesale-excellence?utm%5Fsource=publication-search) and [Katitas](https://sweetstocks.substack.com/p/katitas-flipping-attractive?utm%5Fsource=publication-search) are solid holdings, while [SITC](https://sweetstocks.substack.com/p/sitc-the-ryanair-of-container-shipping?utm%5Fsource=publication-search) and [Iwatani](https://sweetstocks.substack.com/p/iwatani-much-better-than-it-looks?utm%5Fsource=publication-search) are starter positions that I am considering when to increase. For [USS](https://sweetstocks.substack.com/p/uss-japans-car-auction-winner?utm%5Fsource=publication-search), I held back due to the rather low long-term growth outlook. --- # 9\. What are your plans for the future, both in terms of your Substack, investing and perhaps running a fund in the future? I’d like to keep sharing my research on the Substack for the foreseeable future. This exercise has proved to me that investing is my passion. Therefore I am open to taking on a new institutional role, if the right opportunity arises. That could be joining an existing high-quality team, and / or offering a new global all-cap strategy alongside great partners. --- # 10\. How can people follow your work or get in touch with you? You can find me on the [Sweet Stocks Substack](https://sweetstocks.substack.com/), on X with the username [@sweetstocksblog,](https://x.com/sweetstocksblog?ref=asiancenturystocks.com) and also on [LinkedIn](https://www.linkedin.com/in/alex-sweet-cfa/?original%5Freferer=https%3A%2F%2Fwww%2Egoogle%2Ecom%2F&originalSubdomain=uk&ref=asiancenturystocks.com). [Sweet StocksInternational equity write-upsBy Alex Sweet](https://sweetstocks.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *Thanks for reading Asian Century Stocks. Consider becoming a subscriber. You’ll get 20x high-quality deep-dives per year, thematic reports and full portfolio disclosure － all for the price of a few weekly cappuccinos:* [Get 30 day free trial](#/portal/signup) ### 3Q2024 update: There Will Be Blood URL: https://www.asiancenturystocks.com/3q2024-update-there-will-be-blood/ Last updated: 2025-10-26T14:28:17.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) I put together a presentation discussing recent events in Asia and how I look at the broad picture for equities in the region. Here are my key conclusions from the above video presentation: # 1\. The case for Asia Asian equity markets remain relatively inexpensive. There’s been no real outperformance, no froth, and plenty of opportunities, in my view. Typically, Asian equities tend to outperform in periods of dollar weakness. We’ve recently seen the DXY index break down, which could herald greater flows to international markets outside the US. I think the US presidential election in November 2024 will be important because Donald Trump is openly advocating a weaker dollar and lower interest rates. If US interest rates indeed start to drop, we should see the dollar weaken sequentially. Out of the Asian equity markets, I’m seeing particular value in Hong Kong, the Philippines, and Singapore. These markets trade at 10-12x P/E ratios. While the economic backdrop is mixed, there are always some companies whose fundamentals are trending in the right direction. --- # 2\. Japan carry trades partially unwound It’s obvious that the Japanese yen is cheap. When I travelled to Tokyo a few weeks ago, I was shocked by the US$3 lunch bowls and the US$100 hotel rooms. A studio apartment costs no more than US$700 per month. In late July this year, the Bank of Japan raised its short-term benchmark rate to 0.25% and said it would reduce its balance sheet. This event wreaked havoc in markets, with the yen strengthening 10% in days and the Nikkei crashing before staging a partial recovery. The narrative that emerged was that we had seen a forced unwind of carry trades funded by borrowing in the Japanese yen. There were also rumors that a major institutional investor had lost many billions of dollars in a matter of days. But in any case, the weakness of the Japanese yen has fundamentally been due to the interest rate differential between Japan and the rest of the world. While that differential remains high, it is clear that at least the US-Japan rate differential has started to narrow. And that means that a USDJPY exchange rate of 162 will probably mark the bottom for the yen. The driver of this future strengthening is likely to come from a lower Fed Funds rate. - The US job market is starting to deteriorate. Job losses typically precede recessions as laid-off individuals stop spending on discretionary items. - It’s also becoming clear that inflation is no longer much of an issue. CPI ex-shelter is increasing at just 2%, which is in line with the target. Since the shelter component has an 18-month lag, we should see headline CPI drop to that level by April 2025. The implications of a stronger yen probably mean that export-heavy indices like the Nikkei 225 will probably underperform. Meanwhile, local services companies and importers are likely to benefit from a stronger yen if and when the US-Japan interest rate differential continues to narrow. --- # 3\. Deflation in China is getting serious Money supply metrics for the People’s Republic of China continue to weaken. Year-on-year growth in total social financing and bank loan growth have decelerated throughout the past three years, and this trend seems to be continuing. Policymakers, most importantly Xi Jinping, have publicly stated that he does not want to stimulate the economy by offering cash to consumers. Instead, credit is increasingly directed towards manufacturing in the hope that it will improve the Chinese economy's competitiveness. But excess capacity is pushing prices lower and the PRC is now experiencing full-on deflation. Government bond yields are now getting closer to 2%, suggesting weakening nominal growth. The GDP deflator has now been negative for 4 quarters in a row. One reason for the current weakness in the Chinese economy is an accelerating decline in property prices, not unlike Japan after the bubble burst in 1990\. Just like in Japan, banks in China assess borrower creditworthiness based on the amount of collateral given, and such collateral is typically property. Now that property prices are weakening, creditworthiness is taking a hit, causing lenders to become more cautious. Falling property prices also lead to a negative wealth effect. In second-quarter earnings calls, luxury goods companies report weakness in the Chinese market as customers don’t feel as rich as they once did. So, from a top-down point of view, the positives are few and far between. Investors are taking the queue and moving their capital to other emerging markets, including India and South Korea. --- # 4\. Electric vehicles may not win I’m making a case that fully electric vehicles are simply overhyped at this stage, and the entire industry is set up for disappointment. The popularization of electric vehicles has been driven by government subsidies rather than consumer enthusiasm. While it is true that Chinese vehicle exports are booming, most of them are internal combustion engine vehicles. From my understanding, the data also includes exports of foreign brand vehicles, such as Toyota and Tesla, from factories in China. So, I’d be cautious in concluding that the boom in exports that we’ve seen is necessarily due to a renaissance in the popularity of Chinese passenger vehicles. Instead, data from Thailand, Belgium, Peru, and elsewhere show that electric vehicles are proving difficult to sell and are piling up as inventory on dealer lots. The fundamental problem is that electric vehicles don’t really have a killer app other than high torque. They cost at least US$5,000 more to produce than hybrids, and the batteries depreciate much faster. Long charging times can be alleviated through overnight charging, but such charging stations are not always available and costly to install. The range issue also produces anxiety. The CO2 emissions profile is also in question, with only a modest improvement compared to hybrids and reliant on the grid's electricity sources. What seems clear to me is that consumers in China and beyond are increasingly favoring plug-in hybrids. If so, expect metals such as platinum and palladium to be reassessed in a more positive light. And hybrid-focused companies like Toyota and its joint venture partner Astra International would be well-placed to meet that demand. --- # 5\. Malaysia is the prime FDI beneficiary Over the past half a century, Asia has clearly become the manufacturing hub of the world. East Asia’s infrastructure is excellent, and populations tend to be highly educated and hard-working. I also think that when supply chains are complex, distances matter. So if an iPhone is assembled in a Foxconn factory in Dongguan and requires 1,000 components, it certainly helps that those components can be shipped in a matter of days from nearby, including Taiwan, South Korea, and Japan. Therefore, manufacturing is unlikely to move out of the region completely. But as China continues to turn inwards, multinational companies are directing greenfield investment elsewhere, most importantly to Southeast Asia and India. I want to make the case that Malaysia is particularly well-placed to serve as a manufacturing hub for European and American corporations, especially those operating in the semiconductor or electronics industries. Malaysia has excellent infrastructure, an English-speaking population, and a weak currency, making labor costs reasonably competitive. We’ve already seen record-high greenfield foreign direct investment in Malaysia since 2022, and this trend is likely to continue. All that capital expenditure will likely benefit the local economy, especially near key manufacturing hubs around Penang and the Klang Valley. --- # 6\. Vietnam is turning authoritarian On 3 August 2024, the Communist Party of Vietnam welcomed new general secretary Tô Lâm. The previous General Secretary, Nguyễn Phú Trọng, had been in charge since 2011 and led the party in a more ideological direction, with the party reasserting control. The end of his reign was marked by a three-year anti-corruption campaign that was no doubt meant to consolidate control over the party and the government. Tô Lâm is likely to represent a further shift towards party control. He comes from a public security background and does not seem driven by ideology. While some assume he’ll take a more pragmatic approach, other analysts worry that under Tô Lâm, Vietnam will become more authoritarian, in line with the precedent set by the People's Republic of China’s Xi Jinping. Tô Lâm is on good terms with both Putin and Xi. He’s now publicly espoused Xi’s ambition of creating a partnership of countries under the banner of a “community of a shared future.” That leads me to think that under Tô Lâm, Vietnam will likely end up partnering with the Russia-Iran-China axis of countries. If we do end up in a new Cold War, which is becoming increasingly likely, we might one day see controls on the flow of individuals and capital across borders. My personal preference is to invest at home or in countries similar to my own to reduce the risk that capital will one day get stuck in a hostile, foreign jurisdiction. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Click the “Download” button below to access the full PowerPoint presentation:** [3q2024 Update3q2024 Update7 MBdownload-circle](https://www.asiancenturystocks.com/content/files/api/v1/file/e6536d4f-0c27-46fd-b9b2-47de6dbe2e8b.pdf "Download") If you like this content and would like to join Asian Century Stocks, click to subscribe: [Get 30 day free trial](#/portal/signup) ### Links August 2024 URL: https://www.asiancenturystocks.com/links-august-2024/ Last updated: 2024-08-19T04:01:11.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) What a month. I hope you survived the yen carry trade shock intact and are doing well. Over the past month, I’ve written about yogurt brand [Yakult](https://www.asiancenturystocks.com/yakult-honsha-2267-jp/), printing company [Lion Rock](https://www.asiancenturystocks.com/lion-rock-group-1127-hk/), Indonesian automaker [Astra International](https://www.asiancenturystocks.com/astra-international-asii-ij-2024/), and luggage brand [Samsonite](https://www.asiancenturystocks.com/samsonite-1910-hk-2024-update/). I also wrote a [portfolio review for July 2024](https://www.asiancenturystocks.com/portfolio-review-july-2024/) and discussed [Johor’s property market](https://www.asiancenturystocks.com/johor-the-next-shenzhen/) and the [platinum group metals](https://www.asiancenturystocks.com/the-anti-ev-commodities/). To access these posts, just click the button below: [Get 30 day free trial](#/portal/signup) In any case, here are my favorite links from the past month: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - Best Anchor Stocks analyzing [**Nintendo**](https://www.bestanchorstocks.com/p/understanding-nintendos-drop?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&ref=asiancenturystocks.com)’s slump *(🇯🇵* *7974 JP - US$64 billion)* - Longleaf on the [**ESR Group**](https://www.asiancenturystocks.com/content/files/commentary/2q24-asia-pacific-commentary.pdf) take-private transaction *(🇭🇰 1821 HK - US$6.2 billion)* - Sweet Stocks on Japan car auction operator [**USS**](https://sweetstocks.substack.com/p/uss-japans-car-auction-winner) *(🇯🇵* *4732 JP - US$4.2 billion)* - Turtles on [**Lufax**](https://www.turtlesresearch.com/p/trying-to-make-sense-of-lufax?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com), which is now paying large dividends *(🇨🇳 LU US - US$2.5 billion)* - Tidefall Capital on the value of BIAL in [**Fairfax India**](https://www.asiancenturystocks.com/content/files/%5Ffiles/ugd/8a849d%5Fab6e316d55794d4d978aa20301c30d6e.pdf)*(🇮🇳* *FIH/U CN - US$1.9 billion)* - TGV Partners Fund on buybacks in [**FILA Holding**](https://x.com/StockCompil/status/1820008018429526511?ref=asiancenturystocks.com) *(🇰🇷 081660 KS - US$1.9 billion)* - Idea Hive with an update on [**Sun Corporation**](https://ideahive.substack.com/p/latest-developments-at-6736-t-and?r=2xe91&utm%5Fmedium=ios&triedRedirect=true)*(🇯🇵* *6736 JP - US$893 million)* - DaBao on KTV operator [**Cashbox Partyworld**](https://x.com/DaBao%5F/status/1818484753550696785?ref=asiancenturystocks.com) *(🇹🇼 8359 HK - US$394 million)* - East72 on Aussie sports analytics firm [**Catapult**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2024/07/e72dt-quarterly-report-june-2024.pdf) *(🇦🇺 CAT AU - US$360 million)* - Ennismore on Hong Kong restaurant chain [**Tam Jai**](https://www.asiancenturystocks.com/content/files/media/624/ennismore-global-equity-fund-july-2024.pdf)*(🇭🇰 2217 HK - US$168 million)* - Patch Together on flower firm [**Universal Engeisha**](https://substack.com/home/post/p-147833622?ref=asiancenturystocks.com) *(🇯🇵* *6061 JP - US$118 million)* - Taranvir on Japan Home Centre retailer [**IH Retail**](https://jattcapital.substack.com/p/hk-stock3-discounted-retailer-in) *(🇭🇰 1373 HK - US$110 million)* - Cluseau on HR-tech company [**Human Holdings**](https://x.com/blondesnmoney/status/1818845343708021177?ref=asiancenturystocks.com) *(🇯🇵 2415 JP - US$104 million)* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - [**PYN Elite Fund**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2023/08/en%5Fpyn%5Fe.pdf) on investing in Vietnam / Southeast Asia over 20 years (45 pages) - [**Rock & Turner**](https://rockandturner.substack.com/p/phil-carret-learn-from-the-best?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)’s profile of famed investor Phil Caret (17 mins) - Six book recommendations from [**Eagle Point Capital**](https://eaglepointcapital.substack.com/p/reading-roundup-july-2024) (16 mins) - [**The International Investor**](https://theinternationalinvestor.substack.com/p/discover-asias-top-art-and-auction) with an overview of Asian art auction houses (5 mins) - A few tweets on [**Xi Van Fleet**](https://x.com/MikeFritzell/status/1822602348079796507?ref=asiancenturystocks.com)’s new book Mao’s America (4 mins) - [**Mostly Borrowed Ideas**](https://x.com/borrowed%5Fideas/status/1820502599789068383?ref=asiancenturystocks.com) on Bangladesh’s recent coup d’état (3 mins) - A few tweets about [**Asif Suria**](https://x.com/MikeFritzell?ref=asiancenturystocks.com)’s new book on special sits investing (2 mins) - [**Made in Japan**](https://x.com/InvestInJapan/status/1819373331034054966?ref=asiancenturystocks.com) with a few Japanese stocks he’s paying attention to (1 mins) - [**Buyside Digest**](https://www.buysidedigest.com/hedge-fund-database/?ref=asiancenturystocks.com)’s list of hedge funds globally with associated letters (table) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**Ryan O’Connor**](https://youtu.be/Xbanu0BMXa8?si=srLADwDiY%5FH4sHeO&t=4004&ref=asiancenturystocks.com) on why he’s invested in Nintendo, from 1:07” forward (1:40 hours) - [**John Armitage**](https://open.spotify.com/episode/2eBbPlf56vKzGTu1S7d0sD?si=95461ae74b464a4f&ref=asiancenturystocks.com) thinks Japan is mostly a macro trade, also talks AI etc (59 mins) - [**Brad Setser**](https://open.spotify.com/episode/4md4fuicrFktzixFzoE41R?si=dec02a0396bb4e92&ref=asiancenturystocks.com) explains the yen carry trade and what’s in hold for Japan (58 mins) - [**Alex Feng & Jason Quan**](https://youtu.be/ExIrjDdI5Pk?si=jIgZJaNcZjTDuG6p&ref=asiancenturystocks.com) on the case for Samsonite (49 mins) - [**Yours truly**](https://open.spotify.com/episode/5O0mS6xsiDeVPgcz544LSE?si=c6519b0c7c6d4c80&ref=asiancenturystocks.com) on the Security Analysis podcast talking Asian stock ideas (47 mins) - [**Chris Wood**](https://www.youtube.com/watch?v=zmMzTp%5FuuuY&ref=asiancenturystocks.com) on the Money Maze podcast discussing Japan, China, EMs (42 mins) - [**Bloomberg Big Take Asia**](https://open.spotify.com/episode/0A2PdAxNWOBVHsmKhefRXF?si=98d7848abf504e2d&ref=asiancenturystocks.com) on how CICC changed with new leadership (17 mins) - [**Whitney Baker**](https://www.bloomberg.com/news/videos/2024-07-24/whitney-baker-on-emerging-market-outlook-video?ref=asiancenturystocks.com)’s outlook on how EMs will benefit from a weaker USD (6 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fd0179d0-2d5a-4a35-b2e9-a9fda759e9ce_1100x85.png) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bdea1c50-93fb-408e-a2df-272c72fff785_883x635.png) The US equity market cap has completely decoupled from the rest of the world. Source: Goldman Sachs --- My favorite write-ups this month include: _This post is for paying subscribers only._ ### Astra International (ASII IJ) － 2024 update URL: https://www.asiancenturystocks.com/astra-international-asii-ij-2024/ Last updated: 2025-11-19T07:40:22.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/astra-international-asii-ij-2024/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Astra International when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![All-Flash Boosts Decision Analysis | Huawei Enterprise](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/824a1f68-ae68-4448-a3f9-4c767d968c94_1404x909.png) Astra’s headquarters in Jakarta. Source: Astra International In less than a year, Indonesia has transformed from one of the hottest stock markets in Asia into a relative pariah. One company that’s suffered recently is the Indonesian automotive conglomerate Astra International. It has a 56% market share and is widely regarded as one of the best-managed companies in Indonesia. From this perspective, it’s surprising that the stock trades at just 6.1x P/E. I’ve written about Astra’s parent, Jardine Cycle & Carriage, in the past. But this time, I want to revisit the story from the perspective of Astra to understand why the company has become out of favor. And to explore what might change over the next few years. ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Financials 2.2. The post-2021 auto sales recovery 2.3. A boom and bust in heavy equipment sales 2.4. A series of acquisitions 3. What will change for Astra? 3.1. Cautious guidance 3.2. Interest rate declines 3.4. Electrification of vehicles 3.5. Indian and Chinese demand for coal is rising 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap I wrote about Astra’s parent [**Jardine Cycle & Carriage**](https://finance.yahoo.com/quote/C07.SI/?ref=asiancenturystocks.com) *(JCNC SP － US$8 billion)* )(“Jardine C&C”) back in 2021\. It’s listed in Singapore and owns several consumer-related businesses, the largest of which is Indonesian automaker [**Astra International**](https://finance.yahoo.com/quote/ASII.JK/?ref=asiancenturystocks.com)*(ASII IJ － US$13 billion)*. Here’s my presentation on Jardine C&C from back then: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/38847fd7-a718-49ea-bbed-fc58d6c90abc_2366x1328.png)](https://www.asiancenturystocks.com/deep-dive-2021-16-jardine-cycle-and/) My key points were as follows: - Jardine Cycle and Carriage, also known as “Jardine C&C”, is a holding company in the Jardine Matheson Group focused on consumer-related investments in Southeast Asia. - Jardine C&C’s most important asset is a 50% stake in Indonesia’s largest automaker, Astra International. Other parts of Jardine C&C included an 11% stake in Vinamilk, a small stake in engineering firm Refrigeration Electrical Engineering, shares in Siam City Cement, and Vietnamese automaker THACO. However, Astra represented 73% of NAV and was, hence, the main focus of my presentation. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d0a619f7-2ab1-4898-ae88-5e66a4fd1e65_1906x748.png) - So, who is Astra? It’s the local partner of Toyota and Daihatsu in Indonesia, engaged in both vehicle production and distribution. Thanks to strong execution, it now controls a 50%+ market share in the Indonesian auto market. This market dominance reminds me of Maruti Suzuki in India, which also assembles and distributes vehicles in a fast-growing emerging market and trades at a P/E ratio of 26x. - As fund manager Michael McGaughy recounts [here](https://michaelmcgaughy.blogspot.com/2013/08/astra-and-sinar-mas-22-year-perfomance.html?ref=asiancenturystocks.com), Astra’s founding family has a great reputation in Jakarta business circles. Astra is known for treating its minority shareholders well. - The long-term case for the Indonesian auto market was and remains compelling. The car ownership rate was just 60 vehicles per 1,000 individuals compared to over 200 in China and 600 in Europe. That low penetration has been driving single-digit volume growth for decades. - Astra is also involved in the distribution of heavy equipment through its subsidiary, United Tractors. It primarily sells Komatsu-branded heavy equipment to Indonesian coal miners and operates coal mines, both on its own and for third parties. - COVID-19 hit the auto market as consumers stayed at home. There was also a headwind to auto sales between 2015 and 2019\. Coal prices had also been low throughout 2020 and 2021\. But I thought there would eventually be an end to the pandemic and that the currency would stabilize. I predicted a return to country-wide auto sales volumes of over 1 million vehicles annually. - My numbers at the time showed a sum-of-the-parts valuation of Jardine C&C +49% above the then-prevailing share price. With my projection of a recovery in Indonesia’s auto market, I predicted a P/E ratio for Jardine C&C of around 6-7x. --- # 2\. Update since my first write-up ![Press Release - Inilah Pemenang Lomba Foto Astra dan Anugerah Pewarta Astra 2023](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/42b7795b-84b7-405e-afc3-35f2d94f2ec1_1600x1068.jpg) Source: Astra International Since my first presentation of Jardine C&C back in August 2021, the share price has risen about 30% from about SG$20/share to SG$26. Jardine C&C’s Indonesian auto subsidiary Astra International has performed worse, especially considering that it’s denominated in Indonesian Rupiah － a currency that has dropped 12% against the Singapore Dollar over the past three years: So, what’s the explanation for this decline? In my view, two separate factors: _This post is for paying subscribers only._ ### Lion Rock Group (1127 HK) URL: https://www.asiancenturystocks.com/lion-rock-group-1127-hk/ Last updated: 2026-07-31T01:55:17.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Lion Rock Group, Left Field Printing or JcbNext at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- During my trip to Hong Kong a few months ago, I had the privilege of meeting “CK Lau”, the Chairman and founder of [**Lion Rock Group**](https://finance.yahoo.com/quote/1127.HK/?ref=asiancenturystocks.com)*(1127 HK － US$146 million)*. Lion Rock Group is one of the largest book printers in the world. CK Lau built up the business from scratch by setting up printing operations in China back in 2005\. Since then, he’s made a series of acquisitions, all at mid-single-digit P/E multiples or lower. CK Lau is a brilliant individual. At his previous company, Cinderella Media, he generated annual returns for shareholders of 23% per year over 13 years. Today, he focuses on building Lion Rock into a printing industry behemoth. The company has three separate businesses working together to satisfy the demands of book-readers or publishers: - Printing operations in China, Malaysia and Australia through subsidiaries 1010 Printing, Opus Group and Papercraft - Print services, helping publishers with one-stop solutions for delivering physical books through subsidiaries Asia Pacific Offset and Regent Publishing Services - Publishing, through UK publisher Quarto Book printing is a slow-growing industry at best. E-books and audiobooks will probably continue to take market share, though at a very slow pace. On the other hand, the industry's decline enables proactive individuals like CK Lau to buy businesses on the cheap. He’s also proven himself nimble enough to cut costs and keep them profitable despite the industry headwinds. It also helps that Lion Rock focuses on coffee table books, cookbooks, and children’s books, as they’re less likely to be replaced by e-books. The printing operations experienced headwinds during COVID-19 as its Malaysian plant had to close down and freight costs shot up to record levels. At the same time, during COVID-19, many rediscovered a love for reading. Today, Lion Rock has experienced a full recovery from the pandemic. Lion Rock’s forward guidance has always been conservative. However, in the meeting with Lau, he was positive, stating that he was *“looking at the golden years for the printing business”*. I think he was referring to the fact that paper prices will likely remain low, and several subsidiaries, such as Quarto and Papercraft, have been restructured and become profitable. I think it’s plausible that we’ll see some margin pressure from recent increases in freight costs related to the Houthi attacks in the Red Sea. In the medium term, I wonder whether paper prices might rise if and when the Japanese yen strengthens. But I think the forward P/E will still be just 6.5x with a 7.0% dividend yield. A wild card is whether Donald Trump wins the US election and hikes tariffs on China-printed books. If so, Lion Rock would have to shift production from China to Malaysia. Lion Rock could also lose market share to Eastern European-based printers. Other listed entities in Lion Rock’s corporate structure include Lion Rock’s Australian printing operations, separately listed as [**Left Field Printing**](https://finance.yahoo.com/quote/1540.HK/?ref=asiancenturystocks.com) *(1540 HK － US$32 million)*. Left Field is an illiquid stock producing commodity books like black-and-white novels. But then again, it dominates the Australian market for book printing with an estimated 90% market share. That’s enabled it to raise prices in the past few years. And Left Field is less exposed to the risk of US tariffs on Chinese books. Then there’s Malaysia-listed investment holding company [**JcbNext**](https://finance.yahoo.com/quote/0058.KL/?ref=asiancenturystocks.com) *(JCB MK － US$49 million)*, one of Lion Rock's larger shareholders. On my numbers, the stock trades at a 34% discount to net asset value and has a 14% exposure to Lion Rock. At the end of the day, Lion Rock is a bet on CK Lau. Despite his age of 72, he’s still very much involved in the business and wants to grow it further. It’s unusual to find such a capital allocator running a company at a P/E multiple of just 6.5x. We’ll see how long that continues to be the case. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### The anti-EV commodities URL: https://www.asiancenturystocks.com/the-anti-ev-commodities/ Last updated: 2024-08-07T04:00:21.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/451c3063-f918-42ae-8ed2-35a8c4cd3db9_1483x990.jpg) Raw platinum ore. Source: Getty Images # Summary - The expression “platinum group metals” or “PGMs” refers to the six metals: platinum, palladium, rhodium, ruthenium, iridium and osmium. The reason they’re often grouped together is because they have similar characteristics in that theyr’e durable and resistant to corrosion. - While there’s some industrial and jewelry-related demand for platinum, the demand for PGMs primarily comes from catalytic converters used in gasoline vehicles. Some worry that we’re transitioning to electric vehicles and that the demand for PGMs will, therefore, be in secular decline. - But I want to add some nuance to the discussion, pointing out that the demand for electric vehicles remains relatively muted outside of China. Instead, hybrids, including plug-in hybrids, seem to offer the best of both worlds in terms of low prices and convenience. - If hybrids end up winning, that matters a great deal for the demand for PGMs, because they contain 10% more metal than conventional gasoline vehicles. In addition, tighter emission standards in India and elsewhere also increase the demand for catalytic converters. - Meanwhile, the supply of PGMs continues to tighten, especially for platinum. Production is going down, and no major projects are on the horizon. Further, the lead time for new projects is about 8-10 years. That sets the market up for higher prices over time, especially if Russia restricts supply or the US Dollar weakens. - Towards the end of the post, I discuss ways one can get exposure to the platinum group metals, including miners and funds. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) American Express calls its premium credit card “The Platinum Card”, in reference to how scarce and valuable it is. And platinum is indeed a scarce metal. If you take all platinum mined throughout history until today, it would only fill an Olympic-sized swimming pool up to your ankles. The same is true for platinum’s sister metals palladium, rhodium, ruthenium, osmium, iridium which are frequently referred to as Platinum Group Metals (PGMs). In the June 2024 issue of the [Boom, Gloom & Doom Report](https://www.gloomboomdoom.com/gbd-report/what-is-it/?ref=asiancenturystocks.com), Marc Faber wrote about platinum and related metals. He argued that the market is heading for a substantial supply shortfall while prices are touching all-time lows. I wanted to dig into his arguments, and see where he’s coming from. So in this post, I’ll discuss what the platinum group metals are and the key drivers of the market. ``` Table of contents 1. The demand for platinum group metals 2. The supply picture 3. Intersection between supply & demand 4. The investable universe of PGM assets 5. Conclusion ``` --- # 1\. The demand for platinum group metals **Platinum** is one of the rarest metals on earth － roughly [30x more rare](https://platinumjewelry.com/rare/?ref=asiancenturystocks.com#:~:text=Platinum%20is%2030%20times%20more,would%20barely%20reach%20your%20ankles.) than gold on the earth’s crust. But the demand for platinum in jewelry lags behind that of gold and silver. It doesn’t have the same sheen and patina tends to form over time. It’s also more easily faked and difficult to distinguish from say tungsten. What makes platinum special is its durability and resistance to corrosion. It can be hammered or pressed into a shape without cracking or breaking. For example, one gram of platinum can apparently be stretched into a thin wire that’s over a mile long without losing its toughness. In addition, the high melting point of 1,768 degrees Celsius means that it can withstand harsh environments without any degradation. That makes it perfect for industrial applications, in particular for catalytic converters in the automotive industry. So what are the Platinum Group Metals (“PGMs”)? In the periodic table, platinum is often grouped together with palladium, rhodium, ruthenium, iridium and osmium. ![Platinum and 150 Years of the Periodic Table | GraniteShares](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ac11aa7f-1a06-41bd-9ea7-bc9b5aa16896_867x558.jpg) The six Platinum Group Metals in the periodic table The common denominator between these six metals is that they all have a high melting point, extreme mechanical strength and stable electrical properties. They’re frequently interchangeable in industrial applications. And in nature, they’re almost always found in some combination of each other. ![What Are the Platinum Group Metals? — Reclaim, Recycle, and Sell your Precious Metal Scrap](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/29adf4a5-56e1-471e-a063-87d94148cf0e_449x304.jpg) In reality, only three of the PGMs are finding much practical use, namely platinum, palladium and rhodium. These three and sometimes referred to as the “3E”, where the letter E stands for “elements”. ![Antonio de Ulloa - Wikipedia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a3d788c3-001d-45bd-bcfa-d205222b7a5a_220x258.jpg) Spanish explorer Antonio de Ulloa The use of platinum took off after Spanish explorer Antonio de Ulloa’s 1735 expedition to Quito, Ecuador. He spent ten years in South America, keeping a diary of what he observed on the trip, including witnessing the use of a variety of metals. In particular, he described a new metal which he called “Platina”: > *“In the district of Choco are many mines of lavadero or wash gold. Several of the mines have been abandoned on account of the *Platina, a substance of such resistance* that when on anvil of steel, it is *not easy to be separated*. Nor is calcinable, so that the metal enclosed within this obdurate body could only be extracted with infinite labor and charge.”* Platinum later became named “The white gold”, “The Little Silver” or the “Seventh metal”, as it was only the seventh known metal at the time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/73d57386-37d0-4725-84c6-32df7291148a_1024x680.jpg) Close-up of a Platinum rock. Source: Getty Images Initially, scientists didn’t know what to do with the metal. Someone suggested using platinum for telescope mirrors, because it resists the vapors of the air. But the heft of the metal made it unsuitable for this particular use. So it was only through the discovery of x-rays in 1895 that platinum started to be used in industrial applications thanks to its excellent heat resistance. Platinum’s sister metal **palladium** was discovered and classified by Englishman William Hyde Wollaston after importing crude platinum ore imported from South America in 1802\. He found a way to extract the palladium from the ore, though keeping the discovery to himself for years to make money out of it. Eventually, the truth got out, however. He also discovered **rhodium** just a few years later. This time around, he published his findings in a publication that announced the discovery to the world. The mining of PGMs was modest until the 1950s. But then came the invention of “catalytic converters”. These would turn nitrogen oxide and other exhaust fumes into water, carbon dioxide and nitrogen, significantly reducing the smog created by automobiles. A key ingredient in making these “catalytic converters” was platinum, helping speed up the reaction without degrading in the process. The catalytic converter was the “killer app” that caused demand for the PGMs to skyrocket. Since the 1950s, production has gone up in pretty much a straight line: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/080f4aa4-3e3e-4c75-9dd3-a16f1b9a4d39_1280x726.jpg) Source: Bernstein The US Clean Air Act in 1970 also it pushed automakers to install catalytic converters into their vehicles. And by 1975, all US cars were required to have catalytic converters. Soon, they became mandatory in other countries, too. The next shift came in the 1980s when three-way catalytic converters were invented. Instead of platinum, these would contain a mixture of platinum, palladium and rhodium. This shift caused the demand for palladium to skyrocket. In fact, palladium is even more effective than platinum when it comes to reducing tailpipe emissions. ![The Auto Catalyst Precious Metals Dilemma - Precious Metals Commodity Management LLC](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e8e969f2-16fa-49a7-ac89-c7b7d4a94204_745x486.png) Source: Precious Metals Commodity Management Since the late 1990s, diesel engines have become popular in light-duty vehicles as they’re more fuel-efficient. Since diesel engines require more platinum than palladium, demand for platinum rose a bit. And then diesel engines fell out of favor yet again over the past ten years. So why do I call the platinum group metals “anti-EV commodities”? Because catalytic converters account for 83% of all demand for palladium, 90% for rhodium and 40% for platinum. It is the major factor driving the demand for the PGMs as a whole. Now, electric vehicles do not contain any catalytic converters because hydrocarbons are not used as fuel in the first place. That’s made investors nervous about the metal, assuming that an “electric vehicle transition” would bring the end to the use of PGMs. But I think that view is misguided. While electric vehicles are fine to drive, it is not obvious at all that they’re going to be cheaper than conventional gasoline vehicles anytime in the foreseeable future. The biggest difference in cost between gasoline vehicles and electric vehicles is procuring an engine vs a battery. An internal combustion engine costs around US$2,000, whereas a battery costs around US$7,000\. And the battery degrades roughly twice as fast as an engine. So you end up with an initial cost that’s perhaps US$10,000 higher. That could change, but a significant portion of the cost is from raw materials, which are unlikely to get much cheaper. While electricity is cheaper than gasoline, we also have to consider the range issue, flammability and long charging times. Electric vehicles haven’t shown the typical S-curve demonstrated by new inventions like the smartphone. A McKinsey study showed that 40% of US electric vehicle buyers want to return to internal combustion engine cars. Electric vehicles also [sit much longer](https://x.com/MikeFritzell/status/1820303243966382105?ref=asiancenturystocks.com) on US dealer lots. My conclusion is that there simply isn’t much demand for them. I think government subsidies and mandates are required the success of electric vehicles. From what I can tell, only in China is the government forceful enough to bridge the still-wide gap in the value proposition of an internal combustion engine vehicle and an electric vehicle. Perhaps the calculus will change with the commercialization of solid state batteries, but that is by no means a certainty. I don’t think the CO2 calculus is straightforward, either. Lifetime CO2 emissions require electric vehicle miles driven to exceed a certain level before bcoming favorable for electric vehicles. If we really want to reduce CO2 emissions, we should push for public transport subway systems and reform zoning laws to create denser cities, not subdisize the purchase of electric vehicles. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2350b2db-bdd1-43bf-a938-6e4c0b652e3b_680x624.png) Soruce: [Manhattan Institute](https://manhattan.institute/article/electric-vehicles-for-everyone-the-impossible-dream?ref=asiancenturystocks.com) But the data is clear on one point: hybrids are actually popular among consumers. Google search queries for hybrids [remain higher than for battery electric vehicles](https://trends.google.com/trends/explore?date=all&q=Buy%20hybrid,Buy%20EV&hl=en&ref=asiancenturystocks.com). Hybrids seem to offer the best of both worlds: a better CO2 lifetime emissions profile, lower gasoline consumption and the cost is only about US$2,000 more than a conventional vehicle. Globally, the share of hybrids doubled in 2023 from 3% to 6%. Meanwhile, the growth in the sales of battery electric vehicles seems to be decelerating, going from 12% to 13% in the past year. The deceleration in growth has been most evident outside of China. But even in China, hybrids seem to be taking over, with plug-in hybrids now representing 30% of new energy vehicle sales. What impact will hybrids have on the demand for PGMs? It will be positive, as they contain 10% more metals due to needing more frequent cold starts and shifts between engines. Assuming a global electric vehicle sales mix of 34% by 2050, you’d see a pattern of flat gasoline / hybrid vehicle volumes until the 2030s. And given the higher demand for PGMs in hybrids, there will be actual growth in the demand for PGMs. ![Picture](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6641069a-9f24-4d49-92c2-fca92306288e_1100x565.png) Source: Precious Metals Commodity Management The big wild card is fuel cell vehicles, which use hydrogen as fuel instead of gasoline. So-called fuel cells take the hydrogen from the tank and combine it with oxygen from the air, producing H20 － water. If we were to adopt fuel cell vehicles today, carbon emissions would drop significantly. The hydrogen itself needs to be produced. Today, most of is made through fossil fuels, e.g. natural gas. But you can also produce hydrogen through electrolysis: putting electricity through water. In any case, platinum is needed for both electrolysis and the fuel cells within each vehicle. So, a shift to fuel cell vehicles, even if just on the margin, would increase the demand for platinum significantly. Unfortunately, it seems like a pipe dream. Fuel-cell electric vehicles are more expensive. The hydrogen is costly as it requires compression to liquid form. Hydrogen is also explosive, which is why air-ships never took off in the wake of the Hindenburg disaster. At the end of the day, gasoline is incredibly energy-dense, easy to transport, and abundant. That’s why I think gasoline is here to stay, at least for now. And that means that the demand for PGMs is likely to stay flat or slightly increase. In the short-term, the picture is mixed. Gasoline vehicle production is likely to recover to 2019 levels as the automotive chip shortage was weighed down sales during COVID-19\. And now, high interest rates are preventing consumers from buying vehicles. Still, the following chart from Anglo American shows that the sum of gasoline vehicles and hybrids sold rose by +8% in 2023 and is likely to rise further. Meanwhile, sales of hybrids are beating expectations. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7bace208-018a-473a-83f3-c830ddcdc9b1_1228x505.png) Source: Anglo American Another driver of demand for PGMs will be tighter emission standards. China introduced its China 6 standard in 2021\. India also introduced tougher emission standards in 2020 in line with Euro 6 norms, pushing the demand for catalytic converters higher. So, we know that the demand for palladium and rhodium is likely to stay flat or slightly higher in the next ten years thanks to tighter emission standards and the increased popularity of hybrids, including plug-in hybrids. But platinum is special among the PGMs, because 60% of its demand comes from non-catalytic converter sources. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5ccf7d51-339e-4c2c-bd28-0f25603642fa_936x334.jpg) If you look at correlation charts, you’ll find that the demand for platinum jewelry is highly correlated to that of gold. The demand tends to go up during periods of inflation. It can almost seen as a gold proxy for that reason. While a significant portion of the demand for platinum in industrial applications comes from recycling, it’s also the case that demand for platinum moves with the cycle. Unlike gold, platinum is also sensitive to economic growth and consumer confidence. And that’s why the demand for platinum might go down a bit if we truly are entering into a global recession. --- # 2\. The supply picture ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a2629f6a-d7e6-4729-9e96-9501d6867152_1498x968.png) Source: [MDPI](https://www.mdpi.com/2075-163X/10/6/558?ref=asiancenturystocks.com) Almost 90% of platinum group metals come from South Africa, Zimbabwe and Russia. In South Africa, you have the **Bushveld complex** with deposits that are over 2 billion years old. Then you have the **Great Dike** in Zimbabwe. Finally, you have the **Norilsk** PGM deposits in Siberia, whose palladium is mined as a by-product of nickel. While there are also promising deposits in Canada and Australia, production from these remains small. Historically, most of the increase in PGM production has come from South Africa and Russia, with Canada and Zimbabwe playing a much smaller role. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2d5c505a-c6ef-4d73-a5db-23562484f14d_1422x886.jpg) As you can tell, production has gone up over time. But in the past ten years, world platinum production has been declining from around 8 million ounces in 2011 to less than 6 million ounces in 2024\. From my understanding, the cuts have mostly taken place in South Africa. You might want to adjust for recycled platinum as well, but even this number has dropped due to lengthening replacement cycles for autos. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/78a47a07-23c7-4d6c-a708-f4d9bbe918cd_1428x868.png) Source: Statista The decline in production is also seen for Palladium, whose supply has been flat to down in the past decade to about 6 million ounces. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0fd35122-90b4-4a42-8279-f883c4ba7b1a_1414x878.png) Source: Statista And production is likely to shrink further. The World Platinum Investment Council estimates that 25% of all PGM miners are making losses right now. Major producers Anglo American Platinum plans to lay off 17% of the workforce. Sibanye Stillwater announced it’s going to cut 2,600 jobs in South Africa. And Impala is reducing workforce at its mine in Canada. Why? Because prices are too low to make mining worthwhile. The cost curve for platinum group metals suggests that prices above US$1,500 per ounce are around the 12 million mark. From my understanding, the total production number includes all 6E PGMs. That compares to a platinum price of US$944/ounce currently and a palladium price of US$851/ounce. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3ee899b0-5bf7-47d4-b47f-e34ebbafb4fb_1280x738.jpg) Source: World Platinum Investment Council But we also need to consider the fact that Russia, South Africa and Zimbabwe are not exactly the most stable countries on earth. If either of them are cut off from global supply, for example Russia, in the case of a global hot war, then the upside to PGM prices could be significant. We already saw that potential impact on palladium prices from Russian supply disruptions after the war in Ukraine, when palladium prices went up 5x before falling back to earth. Further, Norilsk Nickel recently stated that it’s facing difficulties in obtaining the required equipment to continue production. It expects PGM production to reach a 5-year low in 2024\. It doesn’t help that nickel prices have dropped recently. During COVID-19, worldwide mining inflation shot up by +25% per year momentarily. However, the PGM cost curve benefitted from the weak South African Rand, which has dropped roughly 50% vs the US Dollar in the past decade. The [real effective exchange rate](https://fred.stlouisfed.org/series/RBZABIS?ref=asiancenturystocks.com) hasn’t dropped as much but remains low. If the US Dollar starts a weakening cycle, which is my base case, then the cost curve will have to shift upwards, causing PGM prices to rise. Looking forward, there’s nothing on the horizon that would suggest a change in the overall supply picture. It takes 8-10 years for a new project to come online and there is no meaningful pipeline in place. The next major projects coming into production include Generation Mining’s Waterberg in 2024 and Marathon in 2025 as well as Ivanhoe’s Platreef in 2025\. They don’t seem to change the overall supply picture all that much. --- # 3\. Intersection between supply & demand So there’s no doubt that PGMs are out of favor. Marcelo Lopez of L2 Capital in Brazil recently reported going to the Shanghai Platinum Week where only three out of 500 participants were investors. Nobody’s interested. He says the event reminded him of going to the Nuclear Association Symposium in 2019, which also only had three investors participating. Since then, uranium prices have quadrupled. Since 1900, due to its scarcity, platinum has on average traded at almost twice the price of gold. But today, that number has shifted to an almost 60% discount to gold per ounce. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea5b307a-9b44-4b34-8a53-982376e60100_1280x616.jpg) “Le Shrub” makes the great point that the platinum/gold ratio has reached an all-time low. Source: [Shrubstack](https://www.shrubstack.com/p/platinum-group-metals-an-asymmetric?utm%5Fsource=publication-search) Why? I presume it’s because of the decline in the demand for diesel engines, especially in Europe, where they used to be popular. Platinum is used in catalytic converters for diesel engines, whereas palladium tends to be used in gasoline engines. Due to a lack of new supply, PGM inventories are likely to tighten further. The World Platinum Council expects that platinum demand will outstrip supply by 6% this year, and that these shortages will persist through 2028. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fef53a91-a9a9-4110-91c3-4b9c6e4fc373_1280x596.jpg) Source: World Platinum Investment Council Inventories are currently falling and are likely to decline by 30% by year-end 2024, according to the same source: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a293c67a-7e78-4d31-856b-b1f5275ef873_1280x602.jpg) Source: World Platinum Investment Council A representative from the World Platinum Council said that platinum prices are likely to respond at some point: > *“The *ongoing deficit* should *tighten market conditions*… Ultimately we can expect this to be *reflected in price expectations*”* For now, platinum prices remain rangebound, as they have been since 2016: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0699610e-d3e8-4f16-bdc1-dd3648e98e22_1712x1082.png) Source: Trading View Palladium is also out of favor. Marcelo Lopez reports that 20% of annual palladium production is shorted, making it one of the most shorted metals in the world. The EV narrative has investors betting on a secular decline in palladium prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/03e668af-29b0-4b02-9c2b-21d2c6c6f7a0_1280x766.jpg) Source: L2 Capital The supply of palladium is expected to be less tight, with a deficit of 1.3 million ounces this year but then flip into a surplus in 2026\. Inventories aren’t nearly as tight as for platinum. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/76806b5d-d49b-4e94-981a-faabaaf73ee1_1158x586.png) Source: World Platinum Investment Council This might explain why palladium prices are still higher than their previous bottom in 2016: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce209bd6-0af9-4136-b742-063a750d55ea_1714x1088.png) Source: Trading View The demand for catalytic converters seems to be inelastic. There are no substitutes other than among the PGMs themselves, and since there’s only about US$100 worth of platinum in a vehicle, the number could easily double or triple without really affecting the demand for a product that’s essentially become mandatory. The only question mark, in my mind, is whether a global recession might cause the demand for industrial commodities, including platinum, to drop. The Chinese economy is weak and monetary policy in the rest of the world appears to be tight. It might be too early to become truly bullish, despite the ever-tightening supply for platinum. --- # 4\. The investable universe of PGM assets ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/092d9d2c-8730-4887-82b0-fdc78ffee832_1024x698.jpg) Platinum from the Krastsvetmet Precious Metals production facility in Krasnoyarsk, Russia. Source: Getty Images Among the investable universe of platinum group metal assets, you’ll find coins, funds as well as mining companies focusing on these metals. There are three major mining companies with exposure to PGMs: _This post is for paying subscribers only._ ### Yakult Honsha (2267 JP) URL: https://www.asiancenturystocks.com/yakult-honsha-2267-jp/ Last updated: 2026-07-31T01:54:59.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Yakult Honsha at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Our friends at recently wrote about Japanese yogurt giant [**Yakult Honsha**](https://finance.yahoo.com/quote/2267.T/?ref=asiancenturystocks.com)*(2267 JP － US$6.1 billion)*. Their write-up was brilliant, so I wanted to dig into Yakult myself. And hopefully, add something to the discussion. Yakult Honsha is a Japanese producer of probiotic yogurt drinks, which have become so iconic that the brand name has become synonymous with the product itself. The drinks are typically sold in 65 milliliter bottles costing about US$0.3 each. Since Yakult drinks contain over 10 billion live bacteria of the proprietary lactobacillus casei “Shirota” strain, they’re marketed as health products that can help improve your gut. I think the health benefits of Yakult drinks might be overstated. But then again, studies show that they can help alleviate constipation and improve stool consistency. So, if you’re experiencing gut issues or taking antibiotics, drinking Yakult will probably help. The tiny bottles have become a major business for the company. They now sell over 40 million bottles per day across 38 countries. Yakult is especially popular among children who like the sweet taste of the product. It helps that Yakult doesn’t contain much lactose, so even lactose-intolerant individuals can consume it. Other than its strong brand, Yakult also owns intellectual property. From my understanding, other companies are unable to use the same lactobacillus casei Shirota strain in their products. That’s helpful because this particular strain of bacteria can survive in the acidic environment of the stomach and reach the intestines, where it can help restore balance in the gut microbiome. The company is also special in that it uses a group of contractors called “Yakult Ladies,” who sell the product home-to-home in return for a 25% commission. These ladies are typically housewives who want extra work during idle hours. Visiting customers is also a social activity, helping customers and the ladies alike. Since the Yakult Ladies are not company employees, Yakult can benefit from their hard work without taking much risk. I think Yakult's long-term outlook is excellent. The use of antibiotics continues to rise, especially in emerging markets. This trend is likely to lead to more gut problems, and probiotic drinks will help alleviate such issues. The stock price has underperformed, however, and I think that’s partly related to their shrinking business in China. Yakult used to sell 8 bottles in China per day and now they’re down to just 5. It’s unclear why Yakult is losing its position in the Chinese market when it’s doing so well elsewhere. Chinese consumers seem to be choosing local alternatives from Yili, Mengniu and others over Yakult, perhaps due to their lower prices. In Japan, Yakult is firing on all cylinders. In 2019, it introduced a new product called “Yakult 1000” through its Yakult Ladies network with much higher bacterial count. Two years later, a similar product called “Y1000” was released to supermarkets and convenience stores across Japan. The product was so popular that it sold out practically everywhere. As East Asia Stock Insights pointed out, these new products are a game changer for Yakult’s Japan segment margins. Since Yakult 1000 and Y1000 average selling prices are over twice as high, the blended average selling price for Yakult’s Japan business has risen by 50%, causing margins to rise from 8% in 2019 to almost 21% today. I think there’s a case to be made that the shortages should be easing now that Yakult has just completed a new factory in Fuji Oyama that will bring up the daily production of Yakult 1000 and Y1000 to 4.3 million bottles per day, over 10% of Yakult’s total capacity. Yakult is also doing well in the United States, where average selling prices are much higher. A new factory in Georgia slated for 2026 will enable Yakult to launch nationwide, likely pushing sales higher. The stock isn’t exactly “cheap” at 17x P/E. But historically, Yakult has traded closer to 32x, as Japanese investors have always considered the company to enjoy a strong economic moat. You might also argue that Yakult’s capital allocation is about to improve. Since the new CEO Hiroshi Narita joined in 2016, Yakult’s share count has declined by a whopping 16%. The dividend payout ratio has also increased from 21% to 34%. That’s still a low payout ratio, but it's certainly a step in the right direction. So, if you consider the improved capital allocation, perhaps there’s also value in the US$1.2 billion net cash position on top of the 8.8% of shares outstanding held as Treasury shares. The net cash could be put to good use, perhaps through share buybacks. And the Treasury shares might one day be cancelled. For reference, Yakult’s EV/EBIT is only 11x. I don’t see many risks on the horizon. Yakult has indeed faced difficult competition in China from Yili and others. But Yakult is hardly the only foreign company that has suffered from increased nationalism in China since 2019\. In my view, Yakult’s China segment is almost a write-off at this point and doesn’t contribute much to earnings anyway. The heavy competition that Yakult has faced in China is unlikely to be an issue in other markets. For example, in Singapore, Yakult has been competing against Vitagen for many years, yet parents like myself know the difference between the real deal and its slightly cheaper copycat. Most likely, Yakult will continue to see margin expansion from higher average selling prices in Japan while continuing to grow steadily across Indonesia, Vietnam and the United States. It’s a steady grower, with volumes likely to increase as Yakult’s new factories gradually come online. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Portfolio review July 2024 URL: https://www.asiancenturystocks.com/portfolio-review-july-2024/ Last updated: 2026-06-04T11:36:46.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Welcome back! The value of my Asia-focused portfolio gained +1.4% last month and is now up +31.2% since inception in October 2021, equivalent to a compound annual growth rate of +10.2%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0a2852b1-e667-4262-8cf8-dfdecd8a86bb_1566x518.png) Hong Kong equities continue to be weak, however. Chinese bond yields keep going lower, suggesting that the economy is suffering from negative momentum. That said, my stocks in Hong Kong have very little exposure to China, and they have held up okay. The biggest outperformer in the last month was karaoke bar operator [**Koshidaka**](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/), which started a bull run just as the Japanese Yen began to strengthen. [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/) also continues to creep higher as its recent positive result is being digested by the market. Here’s what the portfolio looks like as of 29 July 2024: _This post is for paying subscribers only._ ### Samsonite (1910 HK) － 2024 update URL: https://www.asiancenturystocks.com/samsonite-1910-hk-2024-update/ Last updated: 2024-07-28T04:06:13.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Samsonite when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/92268049-b88c-478b-8b53-573c1e3d53ee_750x527.png) Source: Samsonite.com # Summary - I first wrote about Samsonite in July 2022\. It’s the world’s biggest luggage brand, with a 15% market share across its key brands: Samsonite, Tumi, and American Tourist. - Back then, the global travel recovery was still uncertain. However, as the recovery materialized, Samsonite’s revenues recovered nicely. Meanwhile, margins have hit an all-time high thanks to robust cost control. - Samsonite now trades at a headline P/E of 8.7x. Management has initiated a buyback program, stating that it considers the shares undervalued. Plans are now in place to unlock that value, with any event likely to occur before the end of 2025. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Global travel has been hot this summer. The primary beneficiary could be the global luggage giant Samsonite, which trades as an orphaned security on the Hong Kong Stock Exchange at a headline P/E ratio of 8.7x. So what’s going on? In this post, I’ll discuss why the share price has declined and what might change in the coming two years if management executes its current plan. ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Samsonite’s post-COVID-19 recovery 2.2. The weaker 1Q2024 numbers 2.3. Improved capital allocation 3. What will change for Samsonite? 3.1. Still-positive guidance 3.2. The new strategy to unlock value 3.3. A new product line-up 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap I first wrote about Hong Kong-listed luggage maker [**Samsonite**](https://finance.yahoo.com/quote/1910.HK/?ref=asiancenturystocks.com) *(1910 HK － US$4.0 billion)* back in 2022, when the post-COVID travel recovery was just getting started. [Deep-dive 2022-19: SamsoniteDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Samsonite at the time of publishing this article. Note that this is disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8dd9cecb-3db0-470a-82c3-01963962ac4e_2694x1514.png)](https://www.asiancenturystocks.com/deep-dive-2022-19-samsonite/) Here’s a summary of that presentation: - Samsonite is the world’s leading luggage brand, with an overall market share of around 15%. Its top three brand names include Samsonite, Tumi, and American Tourister, covering every segment from affordable luggage to premium varieties. Samsonite’s biggest market is the United States, at 32%, followed by China at 8% and India at 7%. - It’s originally from the United States, formed in Denver, Colorado in 1910\. After a short period of private equity ownership, it relisted in Hong Kong in 2011 to take advantage of the high valuation multiples in the market at the time. That makes Samsonite an unusual security: listed in a market where none of its peers are. Few analysts are paying attention to it. - Samsonite outsources 90% of its production to third parties, many of them in China or Vietnam. That outsourcing rate is positive from a cost point of view but has also reduced the differentiation and quality control of Samsonite products. - Before COVID-19, the global luggage market grew in the mid-single digits, with Samsonite enjoying a stable market share. Samsonite had tried to grow through acquisitions, but most were expensive. For example, Samsonite acquired Tumi at 17.7x EBITDA. - Previous CEO Ramesh Tainwala was ousted in 2018 due to short-seller Blue Orca pointing out aggressive accounting, fake credentials, and related-party transactions. There was some truth to those allegations, though they were minor. Most of these issues are in the rearview mirror. - Other problems also emerged for Samsonite. In 2019, US President Trump introduced tariffs on Chinese travel goods. Samsonite had much of its production in China then and couldn’t respond quickly. It had to move a large part of its production to Vietnam, which was costly and disruptive. - COVID-19 was the final nail in the coffin, hurting the global luggage industry as potential travellers stayed at home and spent their money on consumer electronics and household goods instead. - Given that borders had opened up and given the bullish predictions made by industry associations like IATA, I thought there was a good chance that the travel industry would recover. - I also noted that Samsonite had been proactive in cutting costs, laying off 37% of its employees and reducing its company-operated stores by 22%. - I predicted a forward P/E of 13-14x, far below the historical level of 20x, with peers trading at even higher multiples. - A concern at the time was Samsonite's debt load. US interest rates had just begun rising, and the EBITDA interest coverage ratio of 4.1x was a bit on the tight side. - Samsonite was well on its way to recovery. And in many investors’ view, it remains a brand that’s likely to stand the test of time. --- # 2\. Update since my first write-up ![Tested like Samsonite': Samsonite's new campaign motivates the audience to brush off adversitie](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1a63248b-8776-4c72-bd7f-b5c698d04bbb_1200x675.jpg) Source: Samsonite’s Youtube channel Samsonite’s stock price has risen about +23% since my last write-up in July 2022\. However, this performance hides significant volatility, which was first sparked by rumors that the company was going to be acquired. A decline in the stock price soon followed, and it is now down about -30%. The reasons for this decline were three-fold: _This post is for paying subscribers only._ ### Johor's property market is heating up URL: https://www.asiancenturystocks.com/johor-the-next-shenzhen/ Last updated: 2025-11-19T07:32:08.000Z [Click to view in your browser](https://www.asiancenturystocks.com/johor-the-next-shenzhen/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/343fd110-afc3-420b-bbe8-dcb4160867cd_1274x847.jpg) Residential apartment blocks in Johor Bahru, with Singapore in the background in the upper left corner of the picture. Source: Getty Images # Summary - Johor is Malaysia's southernmost state. Its new chief minister, Onn Hafiz Ghazi, recently announced plans to launch a Johor-Singapore Special Economic Zone to recreate Shenzhen's success in China. - The plan is still sparse on details. But marrying Singapore's capital and expertise with the low labor costs and abundance of land in Malaysia makes perfect sense. - In the near term, linkages between Singapore and Johor will also improve thanks to a new railway line from Singapore’s Woodlands MRT to Bukit Chagar in Johor. This will make it easier for Malaysians to live in Johor and commute to work in Singapore. The total travel time across the border is expected to be around 15 minutes. - Towards the end of the post, I’ll discuss some companies that will benefit from these increased linkages between Singapore and Johor. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) One of China’s first Special Economic Zones was the city of Shenzhen － just across the border from Hong Kong. Shenzhen has been an immense success story. From 1980, when it became a Special Economic Zone, until today, its population has grown from 300,000 to over 17 million. It’s now one of the wealthiest and most developed cities in China. In 2022, a new chief minister in the southernmost Malaysian state of Johor said he wanted to create a new Shenzhen in Southeast Asia and would introduce a special economic zone just across the border from Singapore. It’s a brilliant idea: a marriage between the capital and expertise of Singaporean businesses and Malaysia's low land and labor costs. It’s still in the early days, but Singapore and Johor are becoming more integrated for every year that passes. And the 2026 completion of a new rail link between Singapore and Johor is going to increase the linkages further. That’s going to be positive for Johor’s property market. ``` Table of contents 1. The state of Johor 2. Brief history of SG-Johor co-operation 3. The KL-Singapore high-speed railway 4. The new RTS Link 5. The Johor-Singapore SEZ 6. Early signs of progress 7. The investable universe of stocks 7.1. Property 7.2. Transport 7.3. Utilities 8. Conclusion ``` --- # 1\. The state of Johor ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d9f7da1c-a8a9-4b99-824f-1c20fdde3a2f_1600x838.png) Source: Google Maps “Johor” is the southernmost state of Malaysia － just across the border from Singapore. It’s largely agricultural but has something that Singapore does not: cheap labor and plenty of lands. People have lived on the Malay Peninsula and Johor for at least 2,000 years. The predecessor of the state of Johor was formed in 1511, just southeast of the new Portuguese colony of Malacca. At that time, a royal residence was set up in Johor Lama in the deep south. The state of Singapore was created when British colonialists agreed to recognize Abdul Rahman Muazzam Shah as the legitimate heir to the Johor throne in 1818\. In return, they asked for permission to set up a trading post on the island. Eventually, Singapore became a British colony. Johor’s economy was and continues to be largely agricultural. Around the turn of the 19th century, cultivation of rubber and oil palm took off. Tin mining also became a major industry around the same time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d878e87b-b2bc-4154-a8cd-c453b0055926_1060x707.jpg) An oil palm plantation in Johor. Source: Getty Images More recently, a manufacturing economy has also emerged. Key industries include metal fabrication and machinery, furniture, petroleum, and food and beverages. That said, Johor remains a middle-income state. The GDP per capita is only about MYR 33,000 annually, equivalent to US$7,000 and slightly below the Malaysian average. But that’s also the opportunity. In the past few decades, Johor’s economy has increasingly become intertwined with that of neighbouring Singapore. A large part of the foreign direct investment into Johor now comes from Singapore companies. Meanwhile, hundreds of thousands of Malaysians live in Johor and commute to Singapore daily for work. In other words, Johor is the hinterland that Singapore never had. --- # 2\. Brief history of SG-Johor co-operation The dream of Johor becoming a Shenzhen of Southeast Asia is hardly new. In 1989, Singapore’s former prime minister, Goh Tok Chong, announced a new initiative called the **Indonesia-Malaysia-Singapore Growth Triangle** (SiJoRi). This was a new partnership between Singapore, Johor, and the Riau Islands in Indonesia, which included the tourist destinations Batam and Bintan. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b73d2ec1-5931-4aa5-b8e7-9165d4303d4a_838x760.png) Source: Sparke et al (2004) The idea was that government policies would enable labor-intensive industries to move from Singapore to Johor to take some pressure off the rising wages in Singapore. In the following years, Singapore invested heavily in Batam's infrastructure, including the Batam Industrial Park and industrial estates in Johor. Ferry services between Singapore and the Riau Islands were also launched. Free Trade Zones were set up in Batam and Bintan, with tax incentives for companies there. Customs clearance procedures were simplified. Singapore also made it easier for Malaysians and Indonesians to work there. But overall, the triangle turned out to be a disappointment. Tourism from Singapore to Batam and Bintan did indeed pick up. Johor’s manufacturing industry has continued to grow, but perhaps not as much as initially hoped for. The next attempt to link Johor’s economy to that of Singapore was the **Iskandar Malaysia** program in 2006\. The name “Iskandar Malaysia” refers to the southernmost part of Johor, just on the border of Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2ad6d01b-d594-401a-8e30-4048b4bfe4fe_645x534.jpg) Source: Iskandar’s web portal The 2006 initiative introduced 100% tax exemption for promoted activities in education, creative industries, financial services and business process outsourcing. For example, multimedia equipment manufacturers enjoyed zero import duty and zero sales tax. The initiative also introduced a 200% tax deduction on investment activities. In practice, Iskandar Malaysia may have had some success in attracting investment, especially in manufacturing. However, as a percentage of GDP, the 2006 impact on foreign direct investment was not noticeable. However, we did see a significant pick-up in residential real estate investment during this era. Part of the reason is that the region introduced flexible foreign ownership rules, allowing foreigners to own 60% of their properties. The most famous example of a residential real estate project from this era is artificial island “Forest City”. It’s a 60:40 joint venture between Chinese property developer Country Garden and the Johor state. It’s a massive project, initially meant to house 700,000 people across 700 residential towers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d48f9be4-9495-4e40-9e71-880f888b5762_1282x852.png) A Forest City sales room. Source: Reuters The island is entirely man-made, using sand imported from other parts of Malaysia or overseas. International schools announced plans to set up affiliates on the islands. Prices for flats were surprisingly cheap at just US$2,700 per square meter. Importantly, Chinese buyers could get free 10-year visas through Malaysia’s My Second Home (MM2H) program, providing a path for emigration. However, in 2016, the Chinese government tightened its restrictions on capital outflows. And when former President Mohamad Mahathir returned to power in 2018, immigration also became more difficult. Today, Forest City is a virtual ghost city. Only 8-9,000 people live there today, and the shops are practically all closed. Country Garden itself has defaulted on its offshore debt, and it looks like the Chinese state will take over its assets. Forest City’s property management company has ceased to look after the beaches, and crocodiles apparently roam freely. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7e6f28ed-069d-403f-a857-e832588d726d_1612x802.png) That said, Forest City remains a duty-free zone, meaning alcohol is cheaper than in other parts of Malaysia. It, therefore, attracts young people wanting to purchase beer and cigarettes. The post-2006 property boom also touched other parts of Johor. The inventory of unsold residential property rose throughout the 2010s until a peak in 2022\. Only now are we seeing the property market become more balanced again. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/366ccacc-1693-4748-8387-78f525ab7662_1280x859.jpg) Residential property inventory. Source: NAPIC, RHB --- # 3\. The KL-Singapore high-speed railway In 2010, former Malaysian Prime Minister Najib Razak proposed a high-speed railway connecting Kuala Lumpur with Singapore. It had been a dream project for many years, and it was expected to cut travel time from 7 hours to just 1.5 hours. Representatives from Singapore and Malaysia signed a memorandum at a ceremony in 2016, promising to bring the high-speed railway to fruition by 2026\. The project's estimated cost was US$11 billion, with funds coming from both Singapore and Malaysia. When Mohamad Mahathir came to power in 2018, he shelved the project, citing the high cost and few benefits. Some people believe the project was shelved for political reasons due to the 1MDB scandal that had brought down Najib. Mahathir claimed that the project was delayed until Malaysia’s state finances were in a better position. Last year, the Malaysian government met with several private companies to understand whether they might be interested in co-financing the high-speed railway. A government official said that: > *“The prime minister gave me a very clear instruction ... we have no problem implementing that \[HSR\] project, but *it must be a private sector project*”* If the project is revived, the railway would link Singapore’s Jurong East with Johor’s Iskandar Puteri － where Legoland Malaysia is － with Malacca and Kuala Lumpur in the north. It might even pass by the Kuala Lumpur International Airport. Travelling across the Malaysian Peninsula would become far smoother than it is today. ![main news image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/023114a3-8cdb-4edc-a3d4-c077bc345676_1200x800.jpg) Source: The Edge The total travel time from Singapore to Iskandar Puteri in Johor would be about 15 minutes, making it a viable － though expensive － option for commuters. It’s still unclear whether the Kuala Lumpur-Singapore high-speed rail project will proceed. If it does, expect a completion date well into the 2030s. --- # 4\. The new RTS Link ![RTS Link Mega Project Malaysia - Singapore](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a59bc6b1-8279-48f9-9e15-4469b5783998_1280x720.jpg) Source: [SCM Southern Corridor Malaysia](https://www.youtube.com/watch?app=desktop&v=dh9arjy4m-Y&ref=asiancenturystocks.com) A project that will almost certainly go ahead is the new Rapid Train System (“RTS”) from Singapore’s Woodlands MRT station to Bukit Chagar in Johor Bahru － the city center just north of the border from Singapore. This RTS rail connection project began in 2020 as a joint venture between Singapore transport operator SMRT and Malaysia’s Prasarana. It will cost about MYR 10 billion, equivalent to US$2.1 billion, and be completed by December 2026. In the past, the only way to get to Johor was by motorcycle, car or bus across the Johor Causeway. But now, you’ll be able to walk from the Woodlands MRT station into the RTS Link and 15 minutes later arrive in Johor Bahru. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fdde7120-659e-4d80-89e7-0bc4b4dc8c34_960x900.jpg) Source: Straits Times While this new railway might seem like a minor improvement, the devil is in the details. Notably, the customs, immigration and quarantine facilities on both the Singapore and Malaysian sides will be co-located in the same buildings. So passengers will only have to clear immigration at their points of departure, saving a significant amount of time. QR codes will be implemented to speed up immigration clearance. In the past, commutes from Johor Bahru to Singapore could take 1 to 2 hours, depending on the traffic. But now, with the RTS Link, you’ll be in Woodlands in 15 minutes, including only 5 minutes in transfer. The railway will serve roughly 10,000 passengers per hour in each direction. This is a small number compared to the 350,000 people crossing the border each day. However, from the RTS Link alone, authorities expect congestion on the Johor causeway to drop by 35%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6138df49-20e4-4422-b73e-563f2597dc52_830x468.jpg) A similar ART system is being tested in Putrajaya, Malaysia. Source: Bernama Further into the future, there’s also talk of an Autonomous Rapid Transit (ART) system in Johor. This system will be a train-bus hybrid running on normal roads using rubber wheels that follow a route through sensors along a virtual track. The carriages would be purchased from China’s CRRC. A light rail transit with similar routes has previously been discussed, connecting several key areas in Johor to the RTS Link at Bukit Chagar station. If implemented, this public transport network would further improve connectivity to Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e3260cf1-8396-4c08-9b35-4d23a6be0050_1174x800.jpg) Source: MRT Corp, Johor State Government, CNA This Autonomous Rapid Transit system is still in the proposal stage. It would cost MYR 20 billion, or over US$4 billion, and would be finished in the 2030s, so that’s still far in the future. --- # 5\. The Johor-Singapore SEZ ![5 things to know about Johor's new chief minister Onn Hafiz Ghazi - CNA](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/92ce9b02-92e1-47f6-9154-b58218f326a4_1200x676.jpg) Source: Instagram/onnhafiz The latest chapter in the increased linkages between Singapore and Johor is the promise of new chief minister Onn Hafiz Ghazi to create a Special Economic Zone. He announced this plan on 11 January 2024, with representatives from both Singapore and Malaysia present during his speech. The idea is to combine Singapore’s capital and advanced manufacturing capabilities with Johor’s access to low-cost labor, abundant energy and excess land resources. The Johor-Singapore Special Economic Zone will encompass an area of 3,505 square kilometers and six local councils. From my understanding, it’s going to include the entire area north of Singapore known as Iskandar Malaysia together with Pengerang, where a large-scale petrochemical plant was recently built. Iskandar Malaysia includes the key areas of Iskandar Puteri, Johor Bahru, Kulai, and Pasir Gudang. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6173a619-874c-429c-a35d-1001b055b100_1836x892.png) Source: Google Maps Earlier this year, Onn Hafiz went with a delegation to Shenzhen to meet with 40 potential Chinese investors and the local Communist Party secretary. Johor is trying to learn from Shenzhen’s experience to recreate its success. In Onn Hafiz’s own words: > *“I am confident that with the help of the JS-SEZ, *Johor can become the Shenzhen of South-East Asia*. In terms of geographical makeup, Shenzhen-Hong Kong is quite similar to Johor-Singapore.”* The focus sector for this new special economic zone will include: - Machinery & equipment - Food processing - Electrical and electronics - Chemical & petrochemical To get foreign companies to invest, Onn Hafiz plans to set up a one-stop business/investment service center to streamline the application processes for companies seeking licenses. However, details are still lacking. The Johor government is currently seeking feedback from the public, and the next step will be to provide more details at the 11th Malaysia-Singapore Leaders Retreat in September 2024\. The agreement will be signed at the end of 2024. Meanwhile, Malaysia’s current prime minister, Anwar Ibrahim, is also talking about designating Forest City as a special financial zone to spur Johor’s economy. Incentives for workers will include multiple entry visas, fast-track entry for those working in Singapore and a flat income tax rate of 15% for knowledge workers. --- # 6\. Early signs of progress The plans for a Johor-Singapore Special Economic Zone have yet turned into reality. But foreign direct investment into Malaysia has already shot up. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/357b0d46-c47e-4963-8bc4-2755c8b6b3b3_1280x545.jpg) Source: Jefferies Apparently, the main sources of this foreign direct investment are [Singapore, China and South Korea](https://www.bernama.com/en/news.php?id=2298305&ref=asiancenturystocks.com). Much of these investments have occurred in the service sector, including data centers － a growth industry for Malaysia. Within the manufacturing sub-segment, investments have primarily occurred in electronics, machinery, equipment, and chemicals. Malaysia is one of the beneficiaries of the new “China Plus One” trend of multinational companies diversifying their operations beyond China to other countries such as Vietnam, Thailand or Malaysia. The supply chain disruptions during the COVID-19 pandemic were a wake-up call. It also helps that Malaysia’s currency － the “Ringgit” － remains cheap, with its real effective exchange rate recently hitting multi-decade lows: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/54a47b73-5fee-4e5b-9577-c808cfef461e_2604x740.png) Another important development is that rental costs for condominiums in Singapore have shot up, in many cases over 50% since 2022\. Buying a property in Singapore has also become more expensive, with higher prices and foreigner’s additional buyer’s stamp duty rising from 30% to 60%. So, it would be natural for Malaysians in Singapore to look for alternatives to their living arrangements. Back in 2019, nearly 1 million Malaysians were living in Singapore. I think that many of them will be attracted to the more comfortable lifestyle of Johor, where even landed houses remain cheap, comparatively speaking. While Johor property prices have tripled, they remain low. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7cc8c0bb-36f4-4754-a958-94f7944fb3e4_1188x700.png) Source: TODAY, Malaysia’s National Property Information Centre For example, renting one room in Singapore costs at least SG$700-800 per month. But if you pay a similar amount in Johor, you can get [an entire 3-4 bedroom apartment](https://www.channelnewsasia.com/singapore/johor-property-market-remains-hot-singapore-buyers-have-their-work-cut-out-making-right-investment-big-read-4363096?ref=asiancenturystocks.com#:~:text=Data%20from%20Malaysia's%20NAPIC%20shows,more%20than%20tripled%20on%20average.) for that price. Buying a property is reasonably cheap, too. A two-bedroom unit at the conveniently located R&F Princess Cove costs about MYR 800,000, or roughly US$170,000\. A similar unit in Singapore would cost around three times that amount. --- # 7\. The investable universe of stocks So, who will benefit from the increased linkages between Singapore and Johor? ## 7.1\. Property _This post is for paying subscribers only._ ### Links July 2024 URL: https://www.asiancenturystocks.com/links-july-2024/ Last updated: 2024-07-22T04:01:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Over the past month on Asian Century Stocks, I’ve published [personal travel notes from Tokyo](https://www.asiancenturystocks.com/travel-notes-tokyo/) ($), a review of Trevor Sykes’ book [Mining for Money](https://www.asiancenturystocks.com/mining-for-money/), a [portfolio review for June 2024](https://www.asiancenturystocks.com/portfolio-review-june-2024/) ($) and two deep-dives on [Fu Shou Yuan](https://www.asiancenturystocks.com/fu-shou-yuan-1448-hk/) ($) and [Pacific Textiles](https://www.asiancenturystocks.com/pacific-textiles-1382-hk/) ($). Check them out! [Get 30 day free trial](#/portal/signup) And now, a series of investment-related links that I think you’ll enjoy: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - Moatless Musings on [**Kweichou Moutai**](https://realmoatlesscapital.substack.com/p/kweichow-moutais-impossible-trinity?publication%5Fid=2505621&post%5Fid=145551429&isFreemail=true&r=6gq23&triedRedirect=true) *(🇨🇳* *600519 CH - US$264 billion)* - Sweet Stocks on petrol station operator [**Viva Energy**](https://sweetstocks.substack.com/p/viva-energy-retail-transformation?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇦🇺* *VEA* *AU - US$3.2 billion)* - Robin’s Substack on furniture retailer [**Nick Scali**](https://open.substack.com/pub/robinresearch/p/nick-scali-aunck?r=2xe91&utm%5Fmedium=ios) *(🇦🇺* *NCK AU - US$824 million)* - Koneko on wealth manager [**Noah Holdings**](https://konekoresearch.substack.com/p/noah-holdings-chinas-largest-private?r=2xe91&utm%5Fmedium=ios&triedRedirect=true)*(🇨🇳* *NOAH US - US$478 million)* - Altay Capital on the recent buyback in [**Sohu**](https://altaycap.substack.com/p/sohucom-inc-nasdaq-sohu-a-net-net?r=2xe91&utm%5Fmedium=ios&triedRedirect=true) *(🇨🇳* *SOHU US - US$443 million)* - The Compound & Fire Substack on [**ZIGExN**](https://arnoldweenink.substack.com/p/zigexn-high-quality-against-a-crazy)*(🇯🇵* *3679 JP - US$397 million)* - Quercus Fund on [**Tianjin Development**](https://www.asiancenturystocks.com/content/files/static/64bff86e8d9ac05c4df92a13/t/664f85ca93cc9d2e3d3898d7/1716487626675/quercus%5Ffund%5F-%5F2024%5Fsecond%5Fletter%5Fto%5Fshareholders.pdf)*(🇨🇳* *882 HK - US$254 million)* - Dirtcheapstocks on software developer [**Azeus**](https://dirtcheapstocks.substack.com/p/an-unlikely-investor?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&triedRedirect=true)*(🇸🇬* *AZEUS SP - US$225 million)* - Blogger Myles Kuah on [**International Cement Group**](https://x.com/finphysnerd/status/1805581217338900774?s=46&ref=asiancenturystocks.com)*(🇸🇬* *ICG SP - US$86 million)* - Bargain Stocks Radar on [**San Miguel Brewery HK**](https://www.bargainstocksradar.com/p/issue5-3-cheap-oddball-stocks?ref=asiancenturystocks.com)*(🇭🇰* *236 HK - US$53 million)* - Walnut’s Substack on [**PharmX Technologies**](https://walnutscapital.substack.com/p/pharmx-technologies-ltd-phxax?r=2xe91&utm%5Fcampaign=post&utm%5Fmedium=web&triedRedirect=true)*(🇦🇺* *PHX AU - US$22 million)* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - A deck of ideas from the [**Weird Shit Investing 2024 Conference**](https://www.undervalued-shares.com/special-offers/books/free-ebook-weird-shit-investing-2024-manual/?ref=asiancenturystocks.com) (59 pages) - [**Harding Loevner EM Equity Fund**](https://www.asiancenturystocks.com/content/files/fileadmin/EM/2024/hl-em-equity-quarterly-report-2q24.pdf)’s 1Q2024 letter on HDFC Life etc (12 pages) - [**Packer & Co**](https://www.asiancenturystocks.com/content/files/media/newsletters/packerco%5Fjune2024.pdf)’s 2Q2024 letter on CNOOC, Chinese car exports, etc (6 pages) - Fascinating travel notes from [**Asia Frontier Capital**](https://www.asiafrontiercapital.com/travel-reports-2024/july-2024.html?ref=asiancenturystocks.com) in Turkmenistan (16 mins) - **Pyramids and Pagodas** travel notes from Manila: [Part 1](https://www.pyramidsandpagodas.com/p/manila-trip-report-an-emerging-pacific?ref=asiancenturystocks.com) & [Part 2](https://www.pyramidsandpagodas.com/p/manila-trip-report-an-emerging-pacific-77a?ref=asiancenturystocks.com) (20 mins) - [**Leonid Mironov**](https://leonidmironov.substack.com/p/new-prosperity-a-look-at-where-china) with some thoughts on the Chinese economy in 2024 (17 mins) - Argyle Street’s [**Kin Chan**](https://amchamhk.online/2024/05/21/hong-kong-is-far-from-over/?ref=asiancenturystocks.com): Hong Kong is far from over (10 mins) - [**Koneko Research**](https://konekoresearch.substack.com/p/hong-kong-landlords-equity-implied) on cap rates for listed HK property landlords (7 mins) - [**Ross & Van Compernolle**](https://www.rossvancompernolle.com/document/musings/441/the-perfect-thai-play?ref=asiancenturystocks.com) on opportunities in ASEAN oil & gas (6 mins) - [**Asian Century Stocks**](https://www.asiancenturystocks.com/resources-for-asia-focused-investors/): updated resources for Asia-focused investors (1 min) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**Evan Tindell**](https://open.spotify.com/episode/6erur7KieHm6UJjDuy4Dbn?si=43a4923b4f3941b7&ref=asiancenturystocks.com) on his approach to value investing, including in Japan (1:23 hours) - [**John Haskell**](https://youtu.be/Quk9Sz210ws?si=R1Y2RDkK8xFxUUNp&ref=asiancenturystocks.com) on Vietnam real estate, Hong Kong-listed ESR Group (1:03 hours) - [**Dan Rupp**](https://www.youtube.com/watch?v=lGIFsOr920I&ref=asiancenturystocks.com) of Parkway Capital on Haier Smart Home’s D-share (53 mins) - [**Fraser Christie**](https://open.spotify.com/episode/5PVYoEOrWwmo6irRVjtoY4?si=202bd17b436e4f4e&ref=asiancenturystocks.com) of TDM Growth Partners on Mineral Resources (52 mins) - Jefferies’ [**Chris Wood**](https://www.youtube.com/watch?v=HwOUV6mV0jA&ref=asiancenturystocks.com) making the case for Indian equities (48 mins) - Fidelity’s [**Gary Monaghan**](https://open.spotify.com/episode/4FieNdUK3hfJSafhNAlNsx?si=VKPRr5RTQxez2URsOdOXCA&ref=asiancenturystocks.com) is bullish on TSMC, FPT and HDFC (42 mins) - Artisan Partners’ [**David Samra**](https://open.spotify.com/episode/51MLUcR1HLpxDVAopDKnsl?si=1461241871464abb&ref=asiancenturystocks.com) on where he’s finding value globally (35 mins) - [**Anne Stevenson-Yang**](https://www.youtube.com/watch?v=rOv28ZfHzS8&ref=asiancenturystocks.com) on China’s economic position globally (27 mins) - [**Jonathan Shih**](https://www.youtube.com/watch?v=SJefJmTyrOw&ref=asiancenturystocks.com) of HK’s Key Rock Capital on his career, Japanese stocks (23 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8b9ec6c2-a081-4a90-8936-ba71a0ff80e9_1100x85.png) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be0b1c2d-959b-426b-9d9a-7a6ba46edd6e_1200x823.jpg) Chinese companies have started buying back shares in size. Source: Smartkarma, Goldman Sachs --- My favorite write-ups this month include: _This post is for paying subscribers only._ ### Pacific Textiles (1382 HK) URL: https://www.asiancenturystocks.com/pacific-textiles-1382-hk/ Last updated: 2026-07-31T01:54:40.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Pacific Textiles at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Hong Kong activist investor David Webb just bought a 5.0% position in Hong Kong-listed [**Pacific Textiles**](https://finance.yahoo.com/quote/1382.HK/?ref=asiancenturystocks.com)*(1382 HK － US$299 million)*. Pacific Textiles is the preferred supplier of knitted fabrics for Japanese fast-fashion brand Uniqlo. It also sells knitted fabrics to lingerie companies like Victoria’s Secret, Calvin Klein, Triumph, and Maidenform. When most people think of textile businesses, they picture factory floors full of young people cutting and sewing fabrics. But that’s only the downstream part of the industry, and it tends to be labor-intensive and commoditized. What Pacific Textiles does is to run relatively automated factories producing fabrics from yarns. It’s a capital-intensive business that relies on machinery to run 24/7\. But it also tends to be highly profitable, with Pacific Textiles earning 20-30% returns on equity for most of its history. The only problem with fabric manufacturing is that it requires high utilization rates. Pacific Textiles was founded in 1997 and did well until 2015\. But then, several issues emerged: - Vietnam joined the Trans-Pacific Partnership, enabling it to import cotton from the United States and elsewhere at zero duties. That cotton continues to be roughly 30% cheaper than in China’s regulated markets. - Reports of forced labor in China’s Xinjiang province and a US ban in 2022 caused several Western brands to switch away from Xinjiang cotton. - China's costs have increased significantly due to the government pushing for higher minimum wages and stricter environmental standards. That’s been especially problematic for Pacific Textiles, which sells to Japan with its depreciating currency. Since 2015, Pacific Textile’s share price has dropped over 80% despite having no debt during most of that period. So why has David Webb taken a 5.0% position in the company? Analysts at Smartkarma have [tried to untangle the story](https://www.smartkarma.com/insights/pacific-textiles-1382-hk-material-benefits?ref=asiancenturystocks.com), and I think they’re spot on. There are two parts to the earnings recovery story: - In April 2024, Pacific Textiles just opened a massive new factory in Nam Dinh, Vietnam, with an expected capacity of 80 million pounds of fabric, adding 30% to the total capacity. And this new factory is likely to reach full utilization soon. - Management is also guiding for a recovery in their legacy factory in Panyu, China. Pacific Textiles’ US customers have dealt with a post-COVID inventory build-up as customers moved their spending to services. But orders are now coming in again. The transition to Vietnam will take years, and the Nam Dinh factory will only take them halfway there. In any case, fundamentals will improve as the new factory ramps up throughout the fiscal year 2025, which ends on 31 March 2025\. If I’m right about the yen eventually strengthening, that will probably also help Pacific Textiles’ margins. In my base case, I see Pacific Textiles ending up with a 2026e P/E of 4.4x. The company is targeting a dividend payout ratio of 70-90%. Historically, they’ve paid out 95% on top of share buybacks. My base case for the dividend yield is for it to end up at 18%, far higher than for most of its peers. My initial concern with Pacific Textiles is that its controlling shareholder, Toray Industries － a Japanese conglomerate － might care more about scale than profitability. After Toray became a shareholder in 2017, profits have gone in the wrong direction. But Pacific Textiles is not the only China-based fabric producer that’s suffered in the past few years. It’s been a multi-year trend. Except this time, Pacific Textiles is starting to be on the right side of it. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Travel notes: Tokyo URL: https://www.asiancenturystocks.com/travel-notes-tokyo/ Last updated: 2024-07-16T04:59:22.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/travel-notes-tokyo/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b643f973-04a9-4a60-b20e-8c6be1303c9c_772x579.png) Shibuya, Tokyo at night I just came back from a week in Tokyo, Japan. It was a last-minute trip with the sole purpose of finding new ideas. While I didn’t secure any company meetings, I met plenty of people and obsessively browsed the [Japan Company Handbook](https://www.amazon.co.jp/-/en/TOYO-KEIZAI-INC-ebook/dp/B0D34ZJ9P4/ref=sr%5F1%5F1?crid=2FSP4ROFBLU2A&dib=eyJ2IjoiMSJ9.8VIFAplZOePPzcgTwNXZ3j9giUm-Y%5FpmsSE8xyMFCqRvRDCMaN2mBj3xQC8mtiuHgv3Z8IYmaXaa4guI3VXu8A.oUDw7D5AGh%5FZF9U%5FYIgWR767%5FLpu%5FQ1fL1lLC8ekgdQ&dib%5Ftag=se&keywords=Japan+Company+Handbook+2024&qid=1721095776&sprefix=%2Caps%2C224&sr=8-1&ref=asiancenturystocks.com) to vet the ideas that I accumulated throughout the week. In this post, I will summarize my main takeaways from the trip. ``` Table of contents 1. Japan has stagnated 2. A new era for Japan 3. A booming market for M&A 4. Nikkei in 2024 5. Financial innovation 6. Discount retailing 7. Conclusion ``` # 1\. Japan has stagnated It’s pretty clear that Japan’s economy has stagnated since the 1990s: _This post is for paying subscribers only._ ### Fu Shou Yuan (1448 HK) URL: https://www.asiancenturystocks.com/fu-shou-yuan-1448-hk/ Last updated: 2026-07-31T01:54:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Fu Shou Yuan at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Fu Shou Yuan**](https://finance.yahoo.com/quote/1448.HK/?ref=asiancenturystocks.com)*(1448 HK － US$1.4 billion)* is China’s largest death care provider, conducting funerals and operating cemeteries across 40 cities in 19 provinces. The company was founded in Shanghai in 1994 by taking over assets from a collectively owned enterprise. And its Shanghai operations continue to be important for the business, representing close to 50% of revenues. Fu Shou Yuan’s main business is selling burial plots to families of recently deceased individuals. It also sells funeral services, sells its landscaping expertise to third parties and constructs cremation machines for sale in China and beyond. Its pricing power is strong. Families tend to look for cemeteries close to where they live. In China, filial piety is a virtue and caring for the elderly is taken seriously. In addition, people will typically want to be buried close to their deceased partner or other family members. And finally, the decision on where to bury your loved one is often taken in haste and during emotional duress. In other words, price is not the key determinant in people’s decision on where to buy a burial plot. In his 1987 book One Up on Wall Street, Peter Lynch mentions that one of his favorite stocks was funeral services operator Service Corporation, which had been a 40-bagger in the previous decade. Service Corporation was a serial acquirer, buying up small funeral homes at low multiples and consolidating them into a single entity. Fu Shou Yuan has some of the same characteristics. It’s acquired cemeteries and funeral operations across China, compounding revenues at +16% per year and earnings per share at +12% per year. One key driver of that performance is that prices for burial plots have increased roughly 5-6% per year. Fu Shou Yuan’s operating margin is now 52%, among the highest in the global death care industry. The return on equity has been steady at around 16% despite a large net cash position representing almost 100% of shareholders’ equity. There’s every reason to think that growth will continue. China’s elderly population will grow at roughly +4% per year － making it one of the fastest-aging populations in the world. Supply remains restricted, with no new cemetery land approved in Shanghai since 2009\. And the company’s land bank remains large. Finally, Fu Shou Yuan is also moving towards the international practice of pre-selling burial plots, partly in cooperation with insurance companies. That has increased the number of potential customers multiple-fold. I expect a short-term pullback in earnings due to the exceptionally strong pent-up demand for funerals and burial plots in 2023 after China’s zero-COVID lockdowns were lifted. We already saw weak numbers in the second half of 2023. Assuming a soft 2024 and a recovery thereafter, I get to a 9.2x P/E by 2027 － much lower than the historical average of 21x. With the new guidance of a 60% dividend payout ratio, I foresee a dividend yield of around 6.5%. Its valuation multiples are significantly lower than its peers. For example, privatizations in the global death care industry have historically taken place at around 15.8x EV/EBITDA － a huge premium to Fu Shou Yuan’s current multiple of 4.7x. So what are the risks? I think they’re mostly political. Fu Shou Yuan was formed in 1994 when Chairman Bai Xiaojiang took over a collectively owned enterprise. In 2003, he was accused of misappropriating state property and detained for two years. Many institutional investors refuse to touch Fu Shou Yuan for that reason. That said, many of China’s greatest enterprises were formed in this way － by privatizing state assets, with certain insiders benefitting disproportionately. It’s also clear that the ruling Communist Party prefers cremation over burials. Cemeteries occupy valuable urban land that can be used for housing and other purposes. The Party doesn’t like superstition or religious practices that are at odds with Marxist ideology. Visiting the graves of opposition leaders can be seen as a political statement. It was for that reason that many Cultural Revolution-era cemeteries were razed to the ground. But I don’t want to overplay these issues. Fu Shou Yuan is clearly a best-in-class cemetery operator, bringing international practices into China. I doubt that the government will want to disrupt the status quo. I think it’s more likely that the government will simply not allow new cemeteries to be built. That would be a positive development for Fu Shou Yuan. It would cause supply to become even more scarce and enable them to charge even higher prices. For that reason, I expect Fu Shou Yuan’s earnings to continue to rise at a steady rate. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Book review: The Money Miners URL: https://www.asiancenturystocks.com/mining-for-money/ Last updated: 2025-10-24T15:01:44.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5f0a367f-0266-44b7-814c-c16ec382e288_768x432.png) # Summary - I read Trevor Sykes book The Money Miners recently. It’s a book about Australia’s 1968-70 speculative mining bubble. Consider it a historical reference book about a bygone era. - I realize this is a wonky subject. But then again, there is almost nothing out there in the public domain about past mining stock bubbles. So consider this a rare glimpse into an obscure topic. - The book discusses a number of key events during the boom and subsequent bust, including how the tungsten mine of Attunga were tampered with, the nickel find that caused the share price of early-stage exploration company Poseidon to rise 350x in just six months, how uranium miner Queensland Mining deceived the market and the rise and fall of investment house Mineral Securities. - If there’s any lesson from the bubble, it’s the importance of not getting swept away by the crowd and being aligned with insiders and promoters, the difficulty of valuing mineral resources and finally, being careful of companies that are reliant on markets for their funding. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Bronte Capital’s John Hempton has said that one of his favorite books is [The Money Miners](https://www.amazon.com/Money-Miners-great-Australian-mining-ebook/dp/B084VD4WBS/ref=sr%5F1%5F1?crid=3GIQN4WLBI5T5&dib=eyJ2IjoiMSJ9.pUhWIp06deD9oxC9wi-cyA.MMdgD4GmhyrEFF8c%5FzJDPwDAyMHGoZFm1O2Fv2L-LXw&dib%5Ftag=se&keywords=the+money+miners+trevor+sykes&qid=1719810570&sprefix=the+money+miners+trevor+sykj%2Caps%2C289&sr=8-1&ref=asiancenturystocks.com) by Trevor Sykes. That book is a first-hand account of the great Australian mining boom from the late 1960s to 1970\. At that time, speculative fever took over the nation. Many hundreds of millions dollar were gained and subsequently lost. I took the book with me on my summer break in Europe. And here are my key takeaways from the book － my attempt to distil the knowledge into a single post. Enjoy! ``` TABLE OF CONTENTS 1. A short history of mining 2. First discovery of nickel 3. Mine salting at Attunga 4. Speculation heats up 5. Poseidon 6. The crescendo 7. Uranium in Nabarlek 8. The collapse of Mineral Securities 9. The aftermath 10. Conclusion ``` # 1\. A short history of mining Australia’s mining industry began with the discovery of gold close to Adelaide and Melbourne in the late 1840s. People from around the world flocked to Australia, hoping to strike gold and get rich. You could say that the nation was almost built on the back of the mining industry. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cc570daf-1b41-4916-8bf5-6cdaaa804925_1416x870.png) The population of Australia. Source: Statista By the 1850s, 40% of the world’s gold came from Australia. In the subsequent decades, mining became increasingly complex. A greater variety of resources were mined and at increasing depths. This shift necessitated the purchase of machinery and the construction of infrastructure. And to fund that spending, mining companies were formed. They issued capital and the shares were then bought and sold in local exchanges in mining towns across Australia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e8fe9a3-fb2b-4fab-8d41-1d57dbca3b87_1992x1090.png) Miners and speculators trading shares in a mining town. Source: Little Dot Studios For example, in 1883, seven men got together to fund a mine in Broken Hill in New South Wales. There was considerable excitement about the discovery of silver and lead in the area. Famously, one of the men lost his 1/14th share of the Broken Hill mine in a poker game to a stranger passing by. The Broken Hill mine later became known as BHP, which is now one of Australia’s largest companies. The shares lost in the poker game are now worth about US$9 billion. The second gold rush started in 1893 when gold was found in Kalgoorlie, Western Australia, roughly 600 kilometers west of Perth. This time, the boom attracted not only British and Chinese, but also low wage workers from Italy and the Balkans. During the 1890s gold rush, mines were increasingly located deep underground and owned by corporations. For that reason, miners were less likely to be prospectors themselves, but rather low-wage workers from, say, Italy and the Balkans just trying to eke out a living. The industry benefitted greatly from the 1898 construction of a water pipeline from Perth to Kalgoorlie. A series of pumping stations helped get the water uphill into the desert, alleviating the water shortages that had beset early Kalgoorlie mines. There was a short gold rush during the Great Depression when Australia’s currency was taken off the gold standard in 1929 and devalued against the British pound. Gold prices rose and the mining industry saw a temporary resurgence. Another key event in the industry was when prospector Lang Hancock flew his aircraft across the desert of Western Australia in 1953\. He suddenly encountered a severe storm and was forced to descend below the clouds. On his descent, he happened to see a massive wall of iron ore stretching as far as the eye could see. ![Lang Hancock recounts his iron ore discovery while flying over the Hamersley Range in the Pilbara. - ABC News](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5f8f2e29-3c7a-4330-9da2-ae867544aa3f_862x485.jpg) The Pilbara iron ore deposit. Source: ABC Hancock’s discovery would become the Pilbara iron ore deposit, found to have 20 billion tons of high-grade iron ore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a0c8b29d-431f-4d93-88b3-3cc260b66fbe_1386x1236.png) A map with the key areas of exploration mentioned in the book. Source: Google Maps Hancock was smart enough to sign a royalty deal with Rio Tinto that gave him a piece of the profits - an income stream that’s lasted to this day. His daughter Gina Reinhart now has a net worth of US$31 billion, now one of the richest women in the world. In the 1960s, the mineral sands industry grew rapidly. BHP found oil together with Esso in the Bass Strait in 1966\. And then, a small company called Western Mining Corporation struck nickel on the shores of Lake Lefroy in Kambalda － Australia’s first-ever discovery of nickel. The boom in the nickel industry is the subject of Trevor Sykes book. It sparked one of the greatest financial bubbles in history, or certainly in Australia. --- # 2\. First discovery of nickel > *“Nothing in the financial world *ignites public imagination* more fiercely than the sudden *discovery of a precious new commodity*.”* Western Mining Corporation was formed during in 1933, focusing primarily on gold during the depths of the Great Depression. But in the subsequent decades, its fortunes fluctuated and it became known as the company “going nowhere”. In the 1950s, a geologist at Western Mining started taking samples down south from Kalgoorlie in an area called Kambalda. ![Company Overview - Lunnon Metals](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/da114cd4-3b25-4d55-8122-a8d90577f92d_745x1024.png) A map of Kambalda today. Source: Lunnon Metals The samples from Kambalda were not tested at the time. But ten years later, one of them was sent in for “assay” － the testing of an ore to see how much metal it contains － and found to contain 0.7% nickel. This was a high enough grade to make a mine economically viable. Western Mining Corporation announced its nickel discovery in 1966 and began serious exploration. It was to become Australia’s first-ever nickel mine. The timing of the discovery was fortuitous. Nickel had initially been used for tableware, but later on, other uses were found in stainless steel, aerospace, and the munitions industries. Importantly, this was the time of the Vietnam War, which had sparked demand for nickel. Meanwhile, the supply of nickel had been restricted due to the under-capacity of existing mines. This supply and demand picture created the perfect conditions for a sustained rally in the price of nickel. --- # 3\. Mine salting at Attunga The mining index started rallying in 1968, gaining 70% in a single year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b16315c9-37f6-467e-9b82-c7a7d6143727_1148x908.png) Source: Simon (2003) The economy was stronger than ever, with low unemployment and optimism in the air. It was at this time that a sleepy Tasmanian tin miner called Endurance Mining caught the attention of speculators across the nation. A couple of Sydney entrepreneurs took over the company and started looking for ways to make money. In New South Wales, a geologist had just taken a sample from an area called Attunga and sent it in for assay. The results were promising, with an average grade of 1.44% tungsten oxide over a total depth of 600 feet. Endurance Mining took notice and purchased an option on Attunga. The market became excited about the prospects of a potential tungsten mine. Endurance’s share price rallied from AU$1 to AU$10 in a short period of time, with the market cap hitting AU$15 million at the peak. The turnover of the stock was enormous, with small retail investors trying to get in on the deal. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/90cbd5e2-42f5-4f80-885c-826a21083a0a_1280x798.jpg) In February 1969, the company’s geologists confirmed 500,000 tons of tungsten ore with an average grade of 1.4%. One of the directors said how promising the discovery was: > *“We don’t need a geologist to prove there’s a million tons of ore under this hill - *you can see it*.”* Endurance then acquired the whole of Attunga Mining’s issued capital through a merger of equals. But something was afoot. Right after publishing the February assay result, directeors started selling shares worth more than AU$5 million AU$75 million in today’s dollars. This marked the peak in Endurance’s share price. The problem with the assay was that the positioning of the drill holes and their angles created a false picture of the ore body. In other words, the data didn’t provide an accurate picture of the discovery. By June 1969, when the share price had already dropped 90%, the news hit the market. Three separate laboratories confirmed that the grade had been grossly exaggerated. Instead of 500,000 tons, Attunga only had 13,600 tons of tungsten ore, with grades ranging from 2.2% to 3.0%. It later turned out that someone on the inside had tampered with the February assay. The person had added tungsten to the sample in a practice called “mine salting”, which involves sprinkling metal over an orebody to make the grade seem higher than it really was. So Attunga proved to be a big scam, one of many that would plague that bull market of the late 1960s. --- # 4\. Speculation heats up BHP made further discoveries in 1968, and its share price almost doubled that year, bringing the rest of the oil board with it. Investors became enthusiastic about oil stocks. ![Offshore Australia 1960s - 1970s | Ships Nostalgia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1bd0fa2d-287a-4f6d-a8c7-ae966f734565_1920x1503.jpg) Dr Lewis Weeks － the discoverer of the Bass Strait oil field － estimated that Australia’s oil reserves amounted to 2,500 million barrels of oil, 50% more than previously thought. The news of BHP’s oil find caused excitement in the market. Soon after BHP’s rally in 1968, dozens of blank check companies were formed to explore for oil & gas. These would merge with actual exploration companies and enable vendors to sell their shares to the market. It was during this time that speculators became enamored with IPOs. They would buy shares in floats and then sell shares quickly after listing. Many of them would pop upon listing, creating significant gains for the ones participating. Among retail investors, there was intense competition to be on a broker’s “float list” — getting the first call to buy shares. In reality, however, the largest quantities of shares tended to be reserved by the brokers’ own families, employees, and friends. The free market price of nickel started rising from early 1969 onwards, from £1,500 per ton in January to £2,000 by March. ![Poseidon bubble - Wikipedia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9ea77bec-fa8e-42cd-b024-fae0c35df1be_600x485.gif) Source: Wikipedia After a nickel miner strike in Canada, the free market price skyrocketed to £4,250 per tonne and eventually £7,000\. The nickel rally was on. --- # 5\. Poseidon > *“It’s easy. You can breathe, can’t you - you can make money.”* The company that came to be associated with the nickel boom the most was a small Kambalda miner called Poseidon. The name came from a racehorse that might have been the best three-year-old to ever race in Australia － winning three separate competitions in a single year in 1906\. Later on, when a group of Italian miners worked on a claim in Tennant Creek in the Northern Territory, they named it “Poseidon” in memory of the racehorse. Poseidon was initially trying to extract wolfram in a Northern Territory mine. But by 1966, it was destitute, losing tens of thousands of dollars yearly. At that time, a man called Boris Ganke offered to buy 70,000 shares of Poseidon at AU$2.5-3.0 cents each, ending up with 100,000 shares. Another mining engineer with the name of Norm Shierlaw formed a syndicate that separately bought 400,000 shares in Poseidon. Shierlaw was a veteran prospector who had traded on the Kalgoorlie Stock Exchange back in the day. He and Ganke became bedfellows in this practically worthless stock with only AU$200,000 in the bank. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce774e78-4eb4-4615-ad3e-b6b8ad9b73a1_1280x918.jpg) Norm Shierlaw and Boris Ganke in 1969 Poseidon’s fortunes changed when it hired full-time prospector Ken Shirley － an old friend of Norm Shierlaw. Ken lived in a caravan, living a lifestyle of moving around the bush to make new discoveries. His travels took him to Mount Windarra north of Kalgoorlie. He discovered minerals and pegged 41 claims along an iron formation stretching 11 kilometers. In April 1969, Shirley sent in samples from Mount Windarra for assay and found 0.5% copper and 0.7% nickel together with associated platinum. The consulting geologists who analyzed the sample called it *“very encouraging”* and *“intensely interesting”*. Rumors started spreading about Windarra. The owner of a butcher shop in a nearby town heard that the guys at Poseidon was up to something. And so he bought 25,000 shares in August for himself and his family. Shortly thereafter, Poseidon started percussion drilling another kilometer south of Mount Windarra. The geologists saw a change in the color of the sludge coming out of the hole. 30 of the 36 samples contained more than 1% nickel. They kept these facts to themselves, but somehow the news found their way to the stock exchanges, with the share price slowly creeping upwards from AU$1.2 to AU$1.5\. When asked by the stock exchange why the stock had risen, the board said that they were *“unable to explain the sharp increase in the price of the shares”*. But secretly, Shierlaw was scooping up Poseidon shares himself, at times soaking up half of the turnover at the Adelaide Stock Exchange. Meanwhile, the Chairman of the Perth Stock Exchange heard about the rumors and bought 2,100 shares for himself. At this time, the price had already risen to AU$2.0 per share. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5cb7c296-3b6e-4891-9b76-04c037541e31_930x1424.png) A map of what would later become the Windarra mine On 29 September, Poseidon’s directors made their first public announcement about the discovery at Windarra. It said that the second drill hole had encountered nickel and copper but didn’t mention anything about the grade. Just a few days after, on 1 October, they issued a more comprehensive statement showing 3.6% nickel at depths of 145-185 feet. This meant that Poseidon had struck nickel － the biggest nickel discovery in the history of Australia. The announcement sparked a massive rally in the price of Poseidon. On 2 October, speculators flooded the Sydney Stock Exchange building after hearing about Poseidon in the press. Many of them were unable to reach the trading floor. On that day, on of the boards collapsed but prices continued to be updated on it will the staff refastened the ropes. Speculators didn’t want to miss an opportunity to buy. ![The Poseidon mining company bubble has ...](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5affcac-f7db-40a3-8f31-9948e11faf61_275x183.jpg) Source: ABC In Melbourne, the trading floor was packed as well. Speculators had to bring binoculars to be able to see what prices were quoted. Some allegedly started using walkie-talkies to relay information to friends in nearby telephone booths from which orders could be made. With some investors left out of the Poseidon rally, they scrambled to find “the next Poseidon” by looking at the companies that owned claims in nearby areas. Such claims are acquired through so-called pegging when physical pegs mark out the boundaries of a new mining lease. Once pegged, the owner must make minimum capital expenditures to maintain it. Brokers pushed the theory of the so-called “nickel shield”: that the entire area is full of nickel, so whoever managed to get claims before others could potentially get rich. The rush for leases around Windarra caused prospectors to peg new claims over others. Some were pulling out their rivals claim pegs and throwing them away. When Poseidon had announced its drill result there had only been three mining groups in the district. One month later, there were 20. For example, Victoria-based miner Bendigo acquired mineral tenements adjoining Poseidon. Once the news hit the market, its share price nearly doubled from AU$90 cents to AU$1.6\. Insiders quickly flooded the market with a block of shares priced at AU$1.5 each. Stories like these were commonplace. To separate fact from fiction, investors started touring mines through a new charter aircraft industry. For AU$1,975 or around AU$30,000 in today’s money, companies like Bizjet would take you on a five-day tour of selected mine sites across the country. Flying over a new discovery was often enough to get a glimpse of potential mineralization. And it was faster and more comfortable than travelling across the bush. You also saw the rise of newsletters like “Mineral Exploration in Western Australia”, which offered paid subscribers access to on-the-ground research on new mineral discoveries. The newsletter cost AU$1,000 per year, about AU$15,000 in today’s money. The authors would fly over the mines of listed companies or go look for black sludge coming from drill holes. By mid-October, Poseidon’s share price had reached AU$23, up almost a thousand times since Boris Ganke initially bought his shares. The next morning, in early trading, one operator shouted across the floor: “Buy Poseidon at AU$30”. And suddenly, the price shot up to AU$31, up another eight dollars above its previous price. The volume of trading in October 1969 was immense, reaching 30 million shares per day, causing the Sydney Stock Exchange computer to break down. This was a massive number. Even the much larger New York Stock Exchange didn’t handle more than 10 million shares per day at the time. The magazine cover indicator also reared its ugly head, with The Economist writing a headline about the mining boom that said: *“Australia: a Beaut of a Boom”*. Part of the contributing factor to the boom was the rise in margin trading. It was made worse by the fact that there was considerable time before a cash settlement would occur. In the intervening period, the speculator essentially had more margin to play with before he needed to part with his cash, thus multiplying the leverage. On 19 November 1969, Poseidon made an announcement confirming the strike length and width of the discovery. But strangely enough, it didn’t give any details about the assays from the drill holes. Despite the lack of information, the market took the report positively, causing Poseidon’s share price to rise further to AU$55. Broker research departments issued reports, dreaming and imagining what Poseidon could be worth. These valuation exercises went along these lines: - If the strike length was 1,500 feet, the width was 65 feet, and the depth was 500, that meant a total orebody of 48 million cubic feet, assuming the orebody is a neat rectangular block - The orebody contained 13 cubic feet to the ton, which meant about three million tons of ore - With an average grade of 2.0-2.5% nickel, the orebody could contain about 70,000 tons of nickel - At an average price of AU$5,000 per ton, the orebody could be worth AU$350 milllion - There will also be costs involved, including for labor, equipment, finance, infrastructure, etc. Say around AU$200 million. - Over a mine life of 15 years, you could then calculate an income stream over time of the remaining AU$150 million worth and figure out that you could get earnings of AU$10 million per year - Capitalize that number, and you could have justified a share price of AU$60 for Poseidon. Others, like Panmure Gordon in London, ended up with a value of AU$380/share. Using a forward P/E multiple against expected earnings from Mount Windarra, the price didn’t seem so high. And speculators therefore felt comfortable bidding up the price to even higher levels. --- # 6\. The crescendo > *“The *rising flurry of new flotations* has always been one of the *signs of the closing stages* of a particular boom market”* The speculation in mining stocks reached a crescendo around Christmas of 1969\. Early in the morning each day, investors would line up outside brokerage offices in the hope of being able to put in an order. Phone lines to brokerage offices were overwhelmed and there was almost no way to get through. At Poseidon’s annual meeting in December 1969, long queues also formed outside the event. When the doors opened, 500 people rushed into the building. But due to a lack of seats, about 200 of them had to stand at the back while the meeting went on. At the AGM, a discussion started about a potential rights issue to fund future capital expenditures. Instead, a share placement was proposed to a select number of individuals at AU$5 per share － a massive discount to the then-prevailing share price of AU$100 － suggesting severe dilution without raising much capital. This was a huge problem because Poseidon had struck nickel but not enough capital to actually develop the mine. A geologist speaking at the AGM mentioned that the zone in which the drilling had taken place indicated four million tons of ore. Participants flooded out of the meeting trying to calculate what 2.4% times 4 million tonnes might imply in terms of nickel resources. Enthusiasm boiled over. Investors rushed out of the AGM to public telephone booths to call their brokers. At the start of the AGM to the end, the share price ran from AU$112 to AU$130\. Once the press caught wind of the story, the price rallied further to AU$185. No one rang a bell at the top of the market, but some lone voices expressed concern about how far the market had run: - A London stock broker called R. Davie said that *“A lot of Australian stocks, to put it mildly, are highly suspect”*. - Melbourne firm A Holst & Co predicted that in a few years’ time, the majority of present *“gambling stocks”* would be bitter memories to those who continued to hold them. In February 1970, Poseidon reached a market capitalization of AU$700 million, or about AU$10 billion in today’s money. This represented about 3x the market cap of the Bank of New South Wales. And one-third the value of BHP, even though Poseidon hadn’t even begun developing any mine. Right around that time, Poseidon insiders, such as the consulting geologist firm Burrill Investments, began selling their shares in the company. A geologist told brokerage firm Patrick & Co that he thought the stock was grossly overvalued and that Poseidon was facing very serious water problems, which would cost a fortune to rectify. Following his advice, Patrick advised its clients to start selling the stock. Poseidon’s stock price peaked at around AU$280 per share. The market was waiting for Poseidon to announce how it would fund the development of its mine in Windarra. Yet nothing was announced. Meanwhile, the share price started declining. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4c42ec3c-a239-49dc-ba84-c5289ae8ac0d_1410x1062.png) Source: Simon (2003) By the end of February, almost all other speculative stocks on the board had also fallen significantly, with some losing half their value. What led to this sudden change in sentiment? - A major contributing factor was that nickel prices peaked and started declining from late 1960s onwards. The higher prices would eventually provide an incentive to search for new orebodies. Mines started coming online in a number of new number of new countries. World production of nickel skyrocketed. - At the tend of 1969, there were 145 mining stocks listed in Sydney, compared with just 86 at the start of the year. And there were another 100 more mining companies queuing up to float and eventually list on the exchange. Supply eventually met the demand for scrip. - Another factor was higher capital costs as Australian interest rates rose sharply - Yet another factor was rising inflation as the operating costs of a mine shot up It didn’t help that Poseidon’s eventual grade was almost half what was originally reported, with the grade falling from 3.6% to 2.4%. Combine that with much lower nickel prices and sharply higher development costs, and you have all the ingredients of a boom turning to bust. --- # 7\. Uranium in Nabarlek > *“Profit making is neither illegal nor immoral. The *means of achieving it can be*.”* After falling in the early parts of the 1970s, the non-ferrous metals index finally rebounded temporarily. The Western Australian government imposed a ban on pegging in February 1970 due to excess paperwork, and that ban was finally lifted in June 1970. Around this time, the mining world was astounded by a statement from the Chairman of Queensland Mines that his company had discovered 55,000 short tons of uranium oxide in Nabarlek in the Northern Territory. This would qualify Nabarlek as the world’s richest deposit of uranium. The work in Nabarlek began in April 1970, with an airborne survey showing a cluster of strong anomalies. 12 foot trenches were dug, revealing signs of uranium oxide including one area with 72% uranium oxide. This was a phenomenally rich find. But the information was kept secret and not released to the public. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/96b1ed83-236b-41ee-bff6-701e61efc4d8_1440x840.png) In August, Queensland Mines’ directors visited Nabarlek and were impressed by it. And the share price started creeping up. The Sydney Stock Exchange asked the directors if they knew the reason for the a share price spike. And on 1 September, Queensland Mines replied that they had found reserves of 55,000 short tons of uranium oxide. The stock moved exponentially higher. From a low of AU$7.2 in August, the share price of Queensland Mines rose to AU$11.2 in early September and then to AU$43 by the end of the month. The problem was that the 55,000-ton estimate was not based on assays but simply extrapolated from a single sample which happened to have 70% grade uranium oxide. The number would prove to be highly misleading. Japanese trading companies Mitsui and Mitsubishi did their own surveys and found that Queensland Mining’s estimate was wildly inadequate. Brokers sent their own geologists, too, and couldn’t believe the number reported. It took an entire year until August 1971 before Queensland Mines admitted that the reserves were not expected to exceed 9,000 tons of ore, 1/6th of that originally estimated. While they knew that the initial estimate was wrong, they had resisted correcting the mistake on the grounds that it would destroy confidence in the company and the prospects of negotiating a sales contract. As it turns out, the Chairman of Queensland Mines had made AU$290,000 selling shares in the company to the public while those inaccurate numbers remained in the market. In today’s dollars, those profits would be worth around AU$4 million. --- # 8\. The collapse of Mineral Securities > *“Those who controlled Minsec wrote their own death warrant in classic terms.”* The downfall of Queensland Mining brought down one of the most renowned investment companies of that era: Mineral Securities, also known as “Minsec”. It was formed by geologist Ken McMahon and run by director Tom Nestel. During the bubble, Minsec became the heaviest share trader in the entire country, building a large portfolio of mining shares. Tom Nestel was a Yugoslav that was widely seen to have a golden touch when it comes to picking stocks. He could be rude at times and didn’t like small talk. But his colleagues respected his abilities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6dd5a1de-92a2-43f1-9e54-807803406bc3_1280x674.jpg) Tom Nestor in his office at Mineral Securities When Minsec was formed in 1965, it was capitalized with only AU$300,000\. However, through trading profits, it amassed an 8 figure portfolio and eventually moved on to acquiring controlling positions in larger mines. When Poseidon struck nickel in 1969, Minsec was initially short the stock and then flipped long once they realized the extent of their mistake. During the short four months of the rally, Minsec made an AU$12 million profit, and much of it from Poseidon. However, as the market peaked in February 1970, Minsec had become too big in relation to the market itself, operating with immense leverage. When the market topped, it became almost impossible to find blocks of buyers. Liquidity dried out. Minsec was stuck. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/77b87b52-cf0d-4d17-bb00-0a7ba2486ea8_1280x789.jpg) Source: The Money Miners Minsec survived the early 1970s slump. But by mid-year, Tom Nestel became positive and Minsec doubled-down on its holdings, hoping for a rebound. It bought more shares in Poseidon. It also accumulated a large AU$17 million stake in Queensland Mines after the discovery of Nabarlek. All this buying caused Minsec to run short of cash. It found it difficult to finance its manic pace of buying. Their solution was to take on more debt. The problem was that none of Minsec’s holdings paid any dividends, so it had to finance interest payments by trading profits. The problem was exacerbated by the fact that Minsec borrowed through the money markets, with many of its loans callable at a moment’s notice. The debt kept rising: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/daad0b95-5412-4cb7-a97c-37ca2c3a9ded_1280x566.jpg) As the value of its portfolio began dropping, Minsec became desperate. It sold a stake in mining company Robe River to a fellow brokerage firm, which then resold the stake to Minsec’s own subsidiary. By doing so it essentially marked up value of its stake, creating a fictious profit in the process. Minsec also directed its mutual funds to buy shares in Minsec itself. But it was too late. In late 1970, news spread that Minsec had borrowed AU$31 million to buy AU$35 million worth of shares in a weakening market. Brokers started asking their clients to sell their shares in the company. As prices kept dropping, lenders asked Minsec to put up more collateral for its loans. And finally stopped lending altogether. Minsec finally defaulted on its obligations. The company was suspended from the Sydney Stock Exchange on 4 February 1971, never to return. Even as the company dug itself deeper into its debt hole, Tom Nestel kept hoping for a rebound. He bought shares in Minsec in his personal account all the way until late January 1971\. When asked why he was buying shares in a failing company, he replied: > *“I had confidence in the company and its future. *I still believed* in the philosophy *that had carried the company along so successfully*.”* What he did not realize was that the rules of the game had changed. What had worked in a bull market did not work so well once the value of the portfolio declined and lenders lost confidence. Minsec was a bull market phenomenon. --- # 9\. The aftermath > *“I saw bank booms, land booms, silver booms, Northern Territory booms, and they all had one thing in common - *they always burst*.”* In author Trevor Sykes’ own words, the collapse of Minsec set off one of the greatest panics in Australian history. Word got out that Minsec had borrowed AU$70 million in short-term money from money markets, with many of those loans callable at any point in time. After interest rates rose and share prices evaporated the value of Minsec’s portfolio, lenders wanted their money back. After Minsec’s default, lenders took over collateral and sold that collateral on the market, causing prices to fall further. Then the lenders became targets themselves. Many of them had borrowed in the short-term money markets, causing runs and a sudden loss of trust. Brokerage firms such as Patrick & Co failed as well, after their proprietary trading led to losses and customers default on purchase orders. It became a domino of failing businesses. Eventually, the prime minister had to step in and provide lending support. Looking back at the failure of Minsec, author Trevor Sykes believes that their mistake was that they had: - Borrowed short and invested long - Investe in equities in a falling market - Bought shares they couldn’t finance through their cash reserves - Had allowed their leverage to rise to unreasonable levels In his view, very few of the participants in the mining boom were outright thieves. They were just optimists and gamblers who were willing to take risks. Looking back at the 1969-70 mining boom, not a single major deposit was discovered. Though it is true that the AU$850 million raised during the boom did help fund the development of new mines. In the subsequent five years, Poseidon turned out to be a massive disappointment to investors. It soon realized that it would need AU$50 million to develop its Windarra mine, yet it only had AU$2 million left in cash and liquid assets. The solution was to team up with Western Mining Corporation, which took a 50% stake in the project. But Poseidon incurred debt in the process. It tried to deal with its debt problems by its stake in the mine. But nobody wanted to buy it. And so in 1976, Poseidon defaulted on its debt and was delisted from the Australian exchanges. During the bankruptcy, Poseidon’s 50% interest in Windarra was sold to Shell Australia for AU$30 million. But by that time, nickel prices had declined so much that Windarra had become only marginally economic. With these lower nickel prices, Shell saw no way of making the mine financially viable and it therefore shut down Windarra in 1978\. The Poseidon dream was gone. Perhaps the biggest lesson from the bust was that most exploration companies fail. The book quoted one study from Ontario Canada on mining claims between 1907 and 1953\. About 6,600 mining companies had been formed during those 46 years, but only 348 reached production stage. Out of those, 294 failed to show a taxable profit. And only 54 companies ended up paying a dividend. In other words, the success rate was less than 1%. --- # 10\. Conclusion Australia’s late 1960s mining boom was a period of mass hysteria and speculative excess. Insiders made fortunes, and retail investors were mostly left with the carcasses. Exploration companies are valued based on the quality of their resources. But it’s not enough to take management numbers at face value. It’s probably worth getting a second opinion. And err on the side of caution, given the large number of assumptions that go into the value of a discovery. I’d also avoid blank-check companies and investment vehicles. They tend to serve promoters rather than their investors, as we saw in the case of Minsec’s mutual funds. Finally, I’d be mindful of what George Soros calls “reflexivity”. If miners are reliant on the market to raise capital for development, then a high share price can increase the likelihood of taking a mine to completion. But if the share price drops, it can get difficult, as we saw with Poseidon. Reflexivity also matters for companies with leverage, especially those relying on short-term funding that has to be rolled over. If there is a sudden loss of trust, then the company might have to liquidate assets to fund debt repayments. Such forced selling can quickly cascade into bigger losses. The book was illuminating, highlighting the dangers of getting involved in early-stage exploration companies. If there’s any lesson to be made, it’s the importance of not getting swept away by the crowd. And not get taken advantage of by insiders, who are often just as keen on mining for money in investors’ pockets as they are on mining for actual metals in the field. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Thank you for reading 🙏** If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Portfolio review June 2024 URL: https://www.asiancenturystocks.com/portfolio-review-june-2024/ Last updated: 2026-06-04T11:37:17.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Welcome back. The value of my Asia-focused portfolio dropped a bit in June, down -0.6% and now +29.4% since inception in October 2021, equivalent to a compound annual growth rate of +10.0%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/99419c90-96e0-462c-a3bf-7d6be13037bd_2182x722.png) We saw a rise in Hong Kong equities until mid-May and then a subsequent decline. My Hong Kong restaurant stocks [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) and [**Fairwood**](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) both declined together with the index. On the plus side, Hong Kong equities remain incredibly cheap. [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/)continued to outperform and [**Fuji Corp Miyagi**](https://www.asiancenturystocks.com/fuji-corp-miyagi-7605-jp/) has rallied back to its all-time high. In any case, here’s what the portfolio looks like as of 27 June 2024: _This post is for paying subscribers only._ ### Links June 2024 URL: https://www.asiancenturystocks.com/links-june-2024/ Last updated: 2024-06-19T10:36:02.000Z First of all, let’s do a recap of what I’ve been writing the past month on Asian Century Stocks: a [review of Pulak Prasad’s book What I Learned About Investing from Darwin](https://www.asiancenturystocks.com/what-i-learned-about-investing-from/) ($), an [interview with Jon Y at Asianometry](https://www.asiancenturystocks.com/10-questions-with-jon-y-at-asianometry/), an article on [Korea’s Corporate Value Up program](https://www.asiancenturystocks.com/value-up/) ($) and deep-dives on [MTR Corporation](https://www.asiancenturystocks.com/mtr-corporation-66-hk/) ($) and [Kansai Paint](https://www.asiancenturystocks.com/kansai-paint-4613-jp/) ($), along with a [portfolio update for May](https://www.asiancenturystocks.com/portfolio-review-may-2024/) ($). As always, feel free to subscribe if you want full access: [Get 30 day free trial](#/portal/signup) And now, a series of investment-related links that I think you’ll enjoy: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - Idea Hive on Japan activist situation [**Sun Corp**](https://ideahive.substack.com/p/new-portfolio-idea-7dd?r=2xe91&utm%5Fmedium=ios&triedRedirect=true)*(🇯🇵* *6736 JP - US$14 billion)* - Harris Associates on pallet provider [**Brambles**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/sites/2/documents/international-strategy-commentary.pdf)*(🇦🇺* *BXB AU - US$13 billion)* - Sweet Stocks on online travel agent [**Webjet**](https://sweetstocks.substack.com/p/webjet-dont-stop-me-now)*(🇦🇺* *WEB AU - US$2.3 billion)* - Superfluous Value on [**Mandarin Oriental**](https://superfluousvalue.substack.com/p/mandarin-oriental-dont-lose-money?r=2xe91&utm%5Fmedium=ios&triedRedirect=true)*(🇭🇰* *MAND SP - US$2.3 billion)* - Bonhoeffer on [**Lotte Chilsung**](https://www.asiancenturystocks.com/content/files/2511717cdf1bae9a0638c942a/files/3d3319a0-b0c2-2e09-e927-03850984e429/bonhoeffer%5Fpartner%5Fletter%5Fq1%5F2024.pdf)’s prefs*(🇰🇷* *005305 KS - US$981 million)* - Robin’s Substack on [**Jumbo Interactive**](https://robinresearch.substack.com/p/jumbo-interactive-aujin)*(🇦🇺* *JIN AU - US$701 million)* - Arar Fund on Korean video gamer maker [**Gravity**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2022/05/investor-letter-arar-fund-may-2024-public.pdf)*(🇰🇷* *GRVY US - US$590 million)* - Matrice Memos on dealership group [**China Yongda**](https://matricememos.substack.com/p/china-yongda-automobiles-services)*(🇯🇵* *3669 JP - US$412 million)* - Sohra Peak on the share price drop in [**Duratec**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2024/05/sohra-peak-capital-partners-partnership-letter-q1-2024.pdf)*(🇦🇺* *DUR AU - US$181 million)* - Undervalued Shares on holdco [**Yoma Strategic**](https://www.undervalued-shares.com/weekly-dispatches/yoma-strategic-betting-on-peace-in-myanmar/?utm%5Fsource=twitter&utm%5Fmedium=social&utm%5Fcampaign=wd20240607)*(🇲🇲* *YOMA SP - US$171 million)* - Dungeon Investing on Japanese game developers [**Nihon Falcom**](https://www.dungeoninvesting.com/p/cheap-j-rpg-makers-nihon-falcom-3723?ref=asiancenturystocks.com)*(🇯🇵* *3723 JP - US$71 million)* and [**Nippon Ichi Software**](https://www.dungeoninvesting.com/p/cheap-j-rpg-makers-nihon-falcom-3723?ref=asiancenturystocks.com)*(🇯🇵* *3851* *JP - US$32 million)* - Praya’s Substack on [**Left Field Printing**](https://prayavalue.substack.com/p/left-field-printing-hkex1540)*(🇭🇰* *1540 HK - US$32 million)* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - [**Japan Business Insights**](https://japanbi.substack.com/p/building-japans-first-next-generation?publication%5Fid=57491&utm%5Fcampaign=email-post-title&r=dn6j8&utm%5Fmedium=email) with thoughts on Japan’s defense industry (36 mins) - [**Jam Invest**](https://jaminvest.substack.com/p/hk-15-the-experts?r=2xe91&utm%5Fmedium=ios&triedRedirect=true): 15 experts provide their views on Hong Kong equities (30 mins) - Argyle Street’s [**Kin Chan**](https://amchamhk.online/2024/05/21/hong-kong-is-far-from-over/?ref=asiancenturystocks.com) on why Hong Kong is far from “over” (10 mins) - [**East Asia Stock Insights**](https://www.eastasiastocks.com/p/china-trip-notes-52765?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com) with travel notes from a trip to Mainland China (10 mins) - Some thoughts from [**Citrini**](https://www.citriniresearch.com/p/recent-thoughts-on-china?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) on the potential in Chinese stocks (10 mins) - [**Pyramids & Pagodas**](https://open.substack.com/pub/pyramidsandpagodas/p/manila-trip-report-an-emerging-pacific?r=2xe91&utm%5Fmedium=ios) with travel notes from a trip to the Philippines (9 mins) - [**Mat Roiss**](https://roiss.substack.com/p/diary-from-hong-kong-and-shenzhen?r=2xe91&utm%5Fmedium=ios&triedRedirect=true) with some thoughts from his trip to Hong Kong (9 mins) - [**The International Investor**](https://theinternationalinvestor.substack.com/p/investing-idea-discover-southeast?r=2xe91&utm%5Fmedium=ios&triedRedirect=true) with a few suggestions on fast-growing businesses in Southeast Asia (3 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**BBC**](https://www.bbc.co.uk/programmes/w13xtvt4/episodes/player?ref=asiancenturystocks.com): Excellent series discussing the 1997 Bre-X gold scam (\~40 mins x 9) - [**Dan Tennebaum**](https://open.spotify.com/episode/0lXP7um0g5ZmEhsLv2Nsvg?si=ebe34a3d445c475a&ref=asiancenturystocks.com) on what it’s been like to build a fund manager in India (1:24 hrs) - Asia-based investor / former poker player [**David Orr**](https://open.spotify.com/episode/5lF6FDgP0nPIrRa7NDO6Pv?si=d6580490b48a4bfa&ref=asiancenturystocks.com) on shorting stocks (1:10 hrs) - [**Lyn Alden**](https://open.spotify.com/episode/6tMsgNzjvhkOrZSxVMYDUI?si=bfdd623d7b274aa9&ref=asiancenturystocks.com) providing the case for owning gold (1:07 hours) - [**Business Breakdowns**](https://open.spotify.com/episode/3GxQXzqn1Irqc1rE4gIyee?si=338670d6125548fb&ref=asiancenturystocks.com)on Korean e-commerce company Coupang (1:03 hours) - [**Mat Roiss**](https://open.spotify.com/episode/0PdxG8tvOMseEAMw3LAJKZ?si=4988dbc0513f4584&ref=asiancenturystocks.com) on Value Hive, discussing his recent trip to Hong Kong (1:01 hours) - [**Jeff Gundlach**](https://www.youtube.com/watch?v=Gg0qF2r9T1c&ref=asiancenturystocks.com) makes a parallel between today and 1968 (52 mins) - Vlogger [**Sabbatical**](https://www.youtube.com/watch?v=9OX63krRwx8&ref=asiancenturystocks.com)showing how Cambodia/Sihanoukville has changed (49 mins) - [**Odd Lots**](https://open.spotify.com/episode/77Ycky2NbTvBPlJbzXf6Ep?si=48f6f505ca394dd2&ref=asiancenturystocks.com) on how Indonesia has cornered the global nickel market (49 mins) - [**WSJ**](https://open.spotify.com/episode/4Q6SHBK9LswblQuTZ8Wq9v?si=b6a14ba90d46495d&ref=asiancenturystocks.com) on the coming IPO of Chinese fashion e-commerce retailer Shein (17 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8b9ec6c2-a081-4a90-8936-ba71a0ff80e9_1100x85.png) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/53a731c2-c699-48f6-a083-012bd7bd3f99_377x423.jpg) Chinese property prices are now falling rapidly, causing a negative wealth effect and a deterioration in collateral values. Source: Macrobond --- My favorite write-ups this month include: _This post is for paying subscribers only._ ### Book review: What I Learned about Investing from Darwin URL: https://www.asiancenturystocks.com/what-i-learned-about-investing-from/ Last updated: 2024-06-18T09:01:37.000Z Parallels between evolution and investing. Estimated reading time: 27 minutes _This post is for paying subscribers only._ ### 10 Questions with Jon Y at Asianometry URL: https://www.asiancenturystocks.com/10-questions-with-jon-y-at-asianometry/ Last updated: 2025-10-24T15:02:07.000Z # **1\. Jon’s background** **Question: Hi Jon! Thanks for participating. Can you tell us briefly about your background and what you’re focusing on now? What brought you to Taiwan, and how is everyday life compared to the United States?** After college, I worked in Silicon Valley for about 10 years. Nothing special. Just another guy on the street. I was mostly working in marketing and advertising, though I tried to be a programmer for half a year. That did not do well. After a rough time at one company, I stopped working and did freelance work for a year. I decided then that I was going to go to Asia. But where? Not sure, I sent applications to companies in Shanghai, Hong Kong, Taipei and Singapore. Taipei gave me the best offer. I enjoy life in Taipei. It was very hard to leave the United States and the Bay Area - I actually like it way more than others - I just like it here in Taiwan too. Taiwan is a more chill place than places like Bangkok or Singapore, though I like those cities as well. --- # **2\. Advice for budding Youtubers** **Question: Your YouTube channel has been immensely successful, having almost 700,000 subscribers. What has it been like to build a YouTube channel while working full-time in another role? What advice would you give others who want to follow the same path?** I only left my full time job two years ago. I think the key thing is to learn the workflow as best as you can, and optimize every possible second. Every time I sit down at the laptop to work, it is a bit of a race since my time is always very limited. You want to know exactly what you want to do and get it done. I do a lot of work in my head or on my phone as well. --- # **3\. Taiwan invasion risk** **Question: Since you’re a resident of Taiwan, I have to ask: how do you perceive the potential risk of a CCP takeover? Are foreign investors overestimating the risk? And what would a takeover mean for the local semiconductor industry, in your view?** A takeover would be pretty devastating, naturally. There is no doubt that any conflict would destroy the fabs, if not physically then in other ways. Let’s leave it at that. I try not to prognosticate on Cross-Strait relations. It is an easy way to look really stupid. I just try to frame it in this way: Living in Taiwan, you take on this massive existential risk that has existed for 75 years. But at the same time, you enjoy reduced everyday life risks. For instance, petty crime is basically absent here. I can leave my laptop in the Starbucks unattended to go to the bathroom. Life is good here on a daily basis. You must strike a balance. --- # **4\. Nvidia and generative AI** **Question: You made** [**a video**](https://youtu.be/TRZqE6H-dww?si=C5PM5hQsWod2oR70&ref=asiancenturystocks.com) **about how Nvidia beat the competition from ATI and Intel in the graphics card market. Since then, they’ve found other use cases, including those in generative AI. Do you consider the current boom in demand for GPUs sustainable, and where do you see Nvidia 10 years from now?** Unless we see signs that AI is going to be widely adopted by ordinary customers and people, I don’t think this boom is sustainable. Microsoft and Apple and Google are shoving AI down people’s throats, but is it a “push” or a “pull”? Go back to the PC revolution. The Apple II was an immediate hit when it came out. The IBM PC was an instant hit when it came out. They couldn’t keep up with the orders. These were items with instant impact on everyday lives. Can we say the same thing about Generative AI? Right now we are seeing this massive capital expenditure by the big rich tech giants. Sequoia has this slide that says that much of the revenue in the AI industry has accrued to Nvidia, $25 billion or so, but the income derived from consumers is just like $4 billion. You can’t build roads forever. Eventually people have to drive on them. --- # **5\. TSMC’s dominance in foundry** **Question: According to** [**this video**](https://youtu.be/SP7PMmetpyw?si=306MrALF853yQyEC&ref=asiancenturystocks.com)**, ASML and Apple worked closely with TSMC to develop EUV lithography machines, giving them a lead in the current generation of high-end logic chips. Do you expect TSMC to continue to dominate the industry in the high NA EUV era and beyond, or will Intel or Samsung eventually regain lost market share?** Samsung and Intel did not lose market share to TSMC. They never had it in the first place. TSMC created the space and held it for decades. TSMC was not the leading customer for Low-NA EUV either. Samsung was and they presented ASML CTO Van den Brink with a phone saying “this phone has a chip made with EUV”. TSMC came in after Samsung and somehow outcompeted them to the 5-nm class node and beyond. EUV and other lithography systems are tools - like ovens for a kitchen. The real differentiation is in the recipe and the line cooks making it. Something to add. I think Intel is going to need a lot of money to scale up their fabs and that is going to weigh on the stock. Ben Thompson pointed out that during the years when Intel was falling behind in the industry, the stock did very well. Now the opposite will happen. Intel the business will improve a great deal. Intel the stock … well. --- # **6\. China’s competitiveness in foundry and memory chips** **Question: The Chinese government just launched a $48 billion semiconductor investment fund. What do you think is the likelihood that Chinese companies like SMIC or YMTC will catch up in the foundry and the memory chip markets?** I think it is pretty clear right now that they are and will be dominant in memory, DRAM and NAND. Their NAND technology is leading the world, particularly in 3D NAND. I have said that we will be feeling these companies’ impact in the market someday, but Samsung and Hynix are still dominant. So long as there are tensions between China and the United States, I think there is going to be hesitancy by western companies to buy Chinese-made memory for their products. Just imagine that headline in the New York Times or WSJ. As for foundry, I think SMIC will struggle to run economical nodes against TSMC. TSMC will invest $30 billion in CapEx and run over 10 million wafers this year. It is hard to compete against that - since volume in semiconductors is everything. But I would bet that SMIC can run the table on virtually everyone else, if allowed to. --- # **7\. India’s pharmaceutical industry** **Question: You made** [**another video**](https://www.youtube.com/watch?v=WkylI-78U6c&ref=asiancenturystocks.com) **on the Indian pharmaceutical industry. What’s been their key reason for success? And what do you think are the chances that they’ll eventually move up the value chain towards the discovery of new drugs in direct competition with Astra Zeneca, Novartis, etc?** I think it has a lot has to do with policy. India seems to be a country that goes where its policymakers decide to go. I have not heard rumblings about new changes in pharmaceutical or moving up the chain. Government seems more interested in electronics and semiconductors. Probably the better choice to be honest. More exportable and less beholden to regulation. Taiwan has been trying to do industrial policy for health and medicine for decades and it hasn’t worked. --- # **8\. Japanese and Korean conglomerates** **Question: In two separate videos** [**here**](https://www.youtube.com/watch?v=5%5F-Ac68FKG4&ref=asiancenturystocks.com) **and** [**here**](https://youtu.be/hWCcvOE84Ao?si=5bP4jT7vY8sqSaTa&ref=asiancenturystocks.com)**, you detailed how conglomerates in Japan and Korea gained favors from their respective governments in their early stages of development. What caused the formation of these conglomerates, and how have they remained strong until now?** I am fascinated by the idea of these conglomerates being formed. They exist because of a mix of industrial policy and “right person, right time”. New government takes over and needs money. They have these public assets - mines or industry or whatever - and transfer them to private hands for money. So the seed of these conglomerates are privatized public assets. But now it is up to the private entrepreneur to build up these assets into big companies. Sometimes they can do it, sometimes they can’t. But the government makes it easy for them by giving them cheap loans of foreign currency. And the ones who do manage to make the best - like the Daewoo Group or Samsung people - get more cheap money to build up other things. So it is kind of like “best guy out of the Octagon” situation. I think these conglomerates will remain successful so long as their founders and/or second generation founders remain. After that, we get into the softer generations - those with no memories of the steppe - and I think that’s when things start going wrong. --- # **9\. Abolishing money** **Question: I loved** [**your video**](https://www.youtube.com/watch?v=bWWqhsh848E&ref=asiancenturystocks.com) **about how the Bolsheviks in the Soviet Union tried to abolish money. What did Lenin try to achieve by abolishing money, and what do you think we can learn from that historical episode?** Lord, I remember this video ha! I think what I learned is that the Bolsheviks really did believe in Communism, and I admire their will to try and bend society towards their vision. It was a crazy time back then, when Lenin and this small party of folks were trying to consolidate their grip over a sprawling empire. I certainly am glad I didn’t live through it. --- # **10\. Where readers can find you** **Question: Where can people go to interact or learn more about you? And can you tell us about your Substack newsletter and what readers can expect from it?** Just watch the YouTube channel. That is the best way to see me. I’m also on X and Instagram. I have a newsletter but I need to post more on it. Jon’s YouTube channel: [Asianometry](https://www.youtube.com/@Asianometry?ref=asiancenturystocks.com) Jon’s Substack newsletter: [The Asianometry Newsletter](https://www.asianometry.com/?ref=asiancenturystocks.com) Jon’s Twitter account: [@asianometry](https://x.com/asianometry?ref=asiancenturystocks.com) Jon’s Instagram account: [@asianometry](https://www.instagram.com/asianometry/?ref=asiancenturystocks.com) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### MTR Corporation (66 HK) URL: https://www.asiancenturystocks.com/mtr-corporation-66-hk/ Last updated: 2026-07-31T01:54:04.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in MTR Corporation at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**MTR Corporation**](https://finance.yahoo.com/quote/0066.HK?ref=asiancenturystocks.com)*(66 HK - US$21 billion)* is the operator of Hong Kong’s world-famous MTR subway system. It runs 99 MTR stations and 68 light rail stops, handling over 5 million passengers each day. And it’s a complete monopoly, with zero competition in the rail sector. The company has been given a concession to run the MTR system for 50 years, from 2007 to 2057\. Chances are high though that it will be extended for another 50 years at no extra cost. If so, MTR will retain its monopoly until 2107. What makes MTR unique is that it only only operates Hong Kong’s MTR system, it also builds property in and around its stations. For example, it has retail shops in each station that it leases out to third parties. It builds shopping malls that cater that Hong Kong’s daily commuter. And it also teams up with property developers who build residential developments close to MTR’s station buildings. This is a fantastic arrangement, because MTR doesn’t take any development risk yet shares in the profits of those developments. MTR’s subway system is known for being one of the best in the world. The punctuality rate is 99.9%. Trains arrive every 2 minutes during peak hours. Ticket prices are relatively affordable. While the company sometimes receives criticism in media, it’s clear that the subway system is superior to that of almost any other country on earth. Its success in Hong Kong has enabled it to expand overseas. And it now operates similar public transport systems in Mainland China, Australia, Sweden and the United Kingdom. There should be the potential for further growth overseas. In Hong Kong, ridership will probably grow around 2-3% per year as the MTR system continues to take market share from buses. On top of that, we should see ticket prices rise up to 3% per year. So a mid-single digit growth in public transport revenues seems reasonable to me. On top of profits from from MTR’s retail properties and development arm. The stock price has dropped about 40% in the past year. That’s highly unusual for high-quality blue chips in Hong Kong. I’ve concluded that this drop in the share price is due to three separate factors: - The rise in interest rates has caused housing affordability to weaken and property prices to decline. That was the primary reason why the Tung Chung East package tender failed to attract any bids in October 2023\. This then led to MTR Corporation’s property development profits falling 80% and the overall profit falling 21%. - Investors reacted negatively to the new Fare Adjustment Mechanism, which adjusts ticket prices according to MTR’s profits in its property development arm. - MTR Corporation exited two commuter train services in Stockholm as they had been racking up losses. While I concede that the high interest rate environment continues to be a headwind, I doubt it’ll last for much longer. The European Central Bank and the Bank of Canada just cut rates, and I think the Federal Reserve is not far behind. Lower US interest rates would feed through Hong Kong interbank rates and cause Hong Kong borrowing costs to drop. The removal of additional buyer’s stamp duties from 30% to zero earlier this year should also have a positive impact on the sales of Hong Kong properties to wealthy Mainland Chinese. It does seem like Hong Kong property developers have become more positive towards land banking since the news about the reduced stamp duties. In my view, the new Fare Adjustment Mechanism is a non-issue. While the formula now takes property development profits into account, high profits will, at most, impact the fare hikes by 20 basis points － a minuscule portion of MTR’s total profits. In the meantime, ridership continues to recover from COVID-19\. Tourists are coming back to Hong Kong. And the retail segment will benefit from the two new shopping malls ”The Wai” in Tai Wai and “Southside” in Wong Chuk Hang. They have already increased the lettable area in the shopping mall segment by +18%. The stock has dropped almost 40% and now trades at a Price/Book of just 1.0x, close to its 2009 lows. Brokerage firm CLSA estimates that the stock trades at a 45% discount to its NAV/share of HK$45\. On my numbers, I project a 2026e P/E of 13x with a dividend yield of 5.8%. The biggest risks seem to be political. The HKSAR government must take voter concerns into account when setting policy. There is a risk that it pushes harder for lower ticket prices or excessive capital expenditure to improve the network coverage. In fact, the capex guidance for 2024-2026 seems excessive to me. However, the government also relies on MTR’s generous dividends to fund itself. I think it’s happy with the status quo. Why rock the boat? While I agree with David Webb and others that it would be better if MTR could set its fares, at least it’s able to monetize its public transport network through its property development arm. As well as use new construction to build up a portfolio of high-quality retail properties. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Portfolio review May 2024 URL: https://www.asiancenturystocks.com/portfolio-review-may-2024/ Last updated: 2026-06-04T11:37:48.000Z **\\Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Finally, some positive news is coming out of Hong Kong. The index has rallied since April despite continued negative news flow. My portfolio gained +3.0% and is now +30.2% since inception in October 2021, equivalent to an IRR of +10.6%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/196823bc-22fa-4ecd-b2c5-e3ec184ddc8e_2448x796.png) Chinese oil exploration and production company [**CNOOC**](https://www.asiancenturystocks.com/cnooc2022update/) hit another all-time high, and I decided to sell my shares in favor of other opportunities. Hong Kong restaurant operator [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) announced profit numbers and they beat expectations. And Philippine win maker [**Ginebra San Miguel**](https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/)also rallied after positive earnings. Here’s what my Asia-focused portfolio looks like as of 30 May 2024: _This post is for paying subscribers only._ ### Value... Up? URL: https://www.asiancenturystocks.com/value-up/ Last updated: 2024-05-30T04:01:24.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/value-up/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/55030843-2586-4dee-bd65-de5c8a06f546_1061x707.jpg) Source: Getty Images # Summary - The valuation disparity between Korean and Japanese equities has increased in recent years. This so-called “Korea discount” is due to conflicts of interest between controlling shareholders and minorities. - Poor minority protection is the heart of the problem. High dividend and inheritance taxes have exacerbated it. - Korea’s new Corporate Value Up program is a step in the right direction. However, since participation is voluntary, I don’t expect a wholesale shift in corporate governance. - Individual companies might take some positive actions, including repurchasing discounted preference shares, selling cross-holdings, or canceling treasury shares. - Towards the end of the article, I discuss 5 companies I’m paying attention to. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Three years ago, I expressed the view that the Korean stock market showed [characteristics of a bubble](https://www.asiancenturystocks.com/koreas-stock-market-is-a-bubble/). Since then, we’ve had a large decline and a stabilization in the main KOSPI index. The key driver here is the consumer electronics boom we saw during COVID-19\. But now, we’re starting to see a second driver of returns: corporate governance is slowly moving in the right direction. In this post, I’ll discuss Korea’s ongoing corporate governance reforms and their implications for the Korean stock market. ``` Table of contents 1. The Korea Discount 2. Mechanisms for minority abuse 3. The Corporate Value Up program 4. The odds of success 5. Implications for investors 6. Conclusion ``` --- # 1\. The Korea Discount The [”Korea Discount”](https://www.sciencedirect.com/science/article/abs/pii/S0927538X1930722X?ref=asiancenturystocks.com) refers to the fact that South Korean companies tend to trade at depressed valuations. This discount has been around for decades, but it’s become even larger in the last few years. Today, South Korea’s benchmark KOSPI Index trades at just 1.0x book － way below Nikkei 225’s 2.1x book and the MSCI All Country World Index’s 3.0x book. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5e4a68b-88c7-4e15-8f94-c10140a090bc_894x520.png) Source: Mobius Capital Partners That Korean stocks are this cheap probably surprises many foreigners, who typically view Korea as a technology and manufacturing superpower. Samsung, Hyundai, and LG have become household names worldwide. Even these highly successful companies trade at large discounts. Samsung Electronics － a world leader in memory chips, television sets and smartphones － trades at just 1.5x book and 12x forward P/E. Hyundai Motor trades at 0.7x book at 5x forward P/E. On an index level, it gets even worse. Within Korea’s KOSPI index, almost two-thirds of the stocks trade below book value, compared to less than 40% in Japan and only 3% in the S&P 500. The main culprit seems to be a low return on equity. That’s related to the fact that many of Korea’s industries are capital-intensive manufacturing businesses, along with poor capital allocation that hasn’t served the interests of minority shareholders. Korea’s capital markets don’t function properly. 90% of the listed companies are controlled by families, and their control tends to be absolute. In the early stages of South Korea’s development, the government openly supported its large conglomerates, known locally as chaebols. They frequently received support through bank loans, licenses and protection from foreign competition. This support of family-owned businesses might have been fine when their highly entrepreneurial, original founders were still in charge. But today, many of Korea’s large corporations are controlled by second- or third-generation leaders who are frequently not well-equipped to run them. The focus is often on maintaining control rather than maximizing shareholder value. And as long as that remains the case, the Korean discount will probably remain. --- # 2\. Mechanisms for minority abuse The main way that families remain in control is through convoluted corporate structures. A family might own 50% of a holding company, which in turn owns 50% in yet another holding company that owns the actual operating assets. Since the family controls each of the companies’ boards, they can also set the agenda for the operating company. For example, in Samsung Electronics’ case, the Lee family continues to control it even though it only has 4.8% direct ownership: ![DECODED] Samsung, a giant in transition](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9116dee7-8566-44f7-bef4-36db84ae70d9_1200x900.jpg) Source: Samsung Electronics It achieves this through the control of Samsung C&T, Samsung Life, and Samsung Fire & Marine, all of which own additional shares in Samsung Electronics. High inheritance taxes of 60% are part of the issue. After a patriarch dies, the next generation must find a way to sell down shares without losing control. That’s frequently when companies set up holding companies, and corporate structures start to become complex. Holding companies tend to own key intellectual property in the group, making it virtually impossible to separate them from the operating company. For example, take the case of Sempio Foods, a company I wrote about a few years ago. It’s one of Korea’s largest manufacturers of soy sauce. Sempio Company, with ticker 007540 KS, is the holding company in the group, and Sempio Foods, with ticker 248170 KS, is the operating company. Through this structure, the Park family can assert control over the operating company. Meanwhile, the key brand names are all owned by the holding company, giving it bargaining power against minority shareholders in the operating company. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1b0440a8-c567-4c8b-b1b4-3cbf1a03e36e_2776x1124.png) The high inheritance taxes also provide incentives to keep stock prices low. The tax payment that the next generation is faced with is based on the total market value of shares owned. So, in this transition, families will try their best to keep aggregate market caps low to minimize inheritance taxes. To achieve this, many families will keep dividend payments to a minimum. Corporate leaders often refer to dividends as “leakage”, revealing how they view minority shareholders: not as equals but as providers of cheap capital. The following chart from [Dalton Investments](https://www.businesswire.com/news/home/20190220005344/en/Investor-Group-Issues-%E2%80%9CProposals-to-Korea%E2%80%9D-to-Help-Increase-Returns-for-Shareholders-in-Korean-Equities?ref=asiancenturystocks.com) shows that Korea’s dividend payout ratio from 2011 to 2017 was just 17% vs 45% for the world as a whole: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7379071d-953b-44d8-966b-5d13d892edee_1281x786.jpg) Source: Dalton Investments South Korean tax laws also make dividend payments unattractive. Dividend income is included as part of overall income in tax assessments. In other words, dividend income is taxed at the top marginal tax rate of 49.5%, above a threshold of KRW 20 million per year (US$15,000). So paying out dividends not only weakens the family’s ability to maintain control, it also leads to cash leakage to minority shareholders and unnecessarily high tax bills. The other option for capital returns is share buybacks. And you do see share buybacks take place frequently. The problem is that acquired shares are rarely cancelled. Instead, they frequently stay on the balance sheet as treasury shares. Although such shares cannot be used as voting power, they are often sold to third parties on good terms with controlling families. It’s rare to find a company trading below book value that does not have a significant portion of its shares outstanding in un-cancelled treasury stock. Another way to cement control is through the issuance of preference shares. In Korea, these are akin to non-voting common shares. As I wrote in the following article in 2022, they tend to trade at massive discounts to their common share counterparts, probably because they help raise capital for families without diluting their control. [Korean preference sharesDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may from time to time have positions in the securities covered in the articles on this website. This is disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/14f11c2c-2d31-470c-adee-bd82e7bbf91e_724x483.jpg)](https://www.asiancenturystocks.com/koreanprefs/) So why do families care so much about control? Probably because money can funnelled out of listed companies without breaking any law. For example, unscrupulous individuals can make share prices go down on purpose and force minority shareholders to sell to them. Perhaps by merging a listed entity with a larger, more expensive and highly indebted related party. In Korea, minorities will find it difficult to prevent such underpriced takeovers. Day-to-day related party transactions are also difficult to stop. They do not need minority shareholder approval, and they’re typically only disclosed after the fact in an annual filing. For example, if a holding company owns the group’s key brand names, then the pricing of royalties can easily move capital from one entity to another. Certain shareholders activists have tried to deal with these problems. For example, in 2015, Paul Singer’s Elliott Management tried to stop the 2015 merger between two Samsung Group companies, Samsung C&T and Cheil Industries, which were underpriced and aimed to preserve the Lee family's influence. But Elliott failed to stop the transaction. At the end of the day, it seems like controlling shareholders hold the upper hand. Anyone putting up a public fight can be sued for defamation, and in Korea, defamation includes any statement, even if it’s technically true. My conclusion is that companies know exactly what needs to be done to close the “Korea discount.” They just don’t want to since doing so would be contrary to their own interests. The government could certainly act, but the question is whether reducing tax rates is politically feasible. Korea’s conglomerates － the chaebols － are likely to put up a fight if and when greater protections are finally introduced. --- # 3\. The Corporate Value Up program ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/57fe10f3-935b-451b-bb67-bfbb1461c448_896x597.jpg) Lee Bok-hyun. Source: The Korea Herald I’ve started paying attention to Korea’s corporate governance issue because Korea’s Financial Services Commission (FSC) has launched a reform program known as ”Corporate Value Up” or simply “Value Up.” The program was announced in February 2024 and touted as a solution to closing the valuation gap between Korean equities and regional counterparts such as Taiwan and Japan. The timing of the initiative has led many to conclude that Korea’s financial regulators have become envious of the success that the Tokyo Stock Exchange has had with its reform agenda and are now trying to copy its approach. Given South Korea's and Japan's valuation disparities, closing this discount could lead to a massive upside. The Value Up program will ask listed companies to submit plans on how they aim to enhance corporate value and shareholder returns. The purpose is to get them to pay higher dividends, reduce cross-holdings, and improve their capital allocation. These plans will be submitted early. In late May 2024, the Korea Exchange introduced guidelines for the Value Up program on its [Korea Investors' Network of Disclosure (KIND) website](https://engkind.krx.co.kr/valueup/notice.do?method=valueupResoroomMain&ref=asiancenturystocks.com). According to these guidelines, companies are encouraged to provide yearly reports on how they plan to improve corporate values. In these reports, there will be disclosures of what each company plans to do to improve its corporate values and a set of financial indicators to track their progress. Some actions that will be encouraged include expanding R&D investment, reshuffling business portfolios, improving shareholder return via treasury stock cancellation and higher dividend payouts, selling underperforming assets and linking compensation schemes for executives to their corporate value-up plans. In my mind, the key question is whether companies will be keen to participate in it. The program is voluntary, so what’s in it for them? One of the key carrots is supposed to be tax incentives. The head of FSC, Lee Bok-hyun, has said that he wants the Value Up program to be included in the tax reform bill that will be presented to the National Assembly in July 2024. Tax incentives could include lower inheritance taxes, a fixed dividend tax rate of, say 15.4%, or tax incentives for companies that prepare and communicate their Corporate Value Up plans. There could also be obligatory share cancellations after share buybacks and tax benefits for Individual Savings Accounts investing in Korean equities. A key hurdle will be that the Korean public is seemingly obsessed with wealth redistribution, as highlighted in the Oscar-winning movie Parasite. Lowering taxes would be a stab in the back of voters, who typically hope for the rich to pay more rather than less. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cead2497-af1e-4a87-84cb-44289425ec4b_956x556.png) Source: IMDb Another setback was the April 2024 legislative election, where the opposition won a landslide victory against President Yoon Suk-yeol’s People Power Party. Since the Corporate Value Up program is essentially his initiative, it is not clear whether he has parliamentary support for it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f74f0916-ed1b-440e-a855-0c3b479a01aa_1614x894.png) So, while Yoon Suk-yeol is certainly pro-business, he has been unable to implement most of the deregulation policies that he has tried to push since becoming President in 2022. There have been positive reforms on the margin. Yoon abolished the previous registration system for foreign investors. He’s also mandated English disclosures for listed companies and liberalized foreign exchange trading, enabling foreign brokerage firms to trade the Korean won. These initiatives will improve foreign investors' access to Korean equities. Interactive Brokers apparently wants to offer its customers trading access to Korean equities. But getting companies to improve their corporate governance will be a tougher nut to crack. The initial guidelines for the Corporate Value Up program were disappointing because they lacked concrete numbers on what the tax incentives were going to be. Another carrot will be a new stock market index of companies that score best in corporate governance practices or show progress in their attempts to do so. This new “Korea Value-Up Index” is expected to be launched in September 2024\. The National Pension Service of Korea and others will launch ETFs tracking the index in the fourth quarter of 2024\. This should help allocate capital to companies that do better for their minority shareholders. In any case, Vice Chairman of the Financial Services Commission Kim Soyoung has emphasized that this is only the beginning of the reforms, with more to come shortly. --- # 4\. The odds of success ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/978eeca5-026c-40e0-a9ef-32be0f238d1f_1024x683.jpg) A newspaper discussing the impeachment of former President Park Geun-hye. Source: Getty Images This is not the first time that Korea’s financial regulators have tried to implement corporate governance reforms. For example: - Under President Park Geun-hye from 2013 to 2017, the government tried to implement policies that improved shareholder returns. But after her impeachment, those plans were shelved. The public was largely against any reforms because tax reductions would disproportionately benefit the rich. - Under President Moon Jae-in from 2017 to 2022, the government also tried to effect reform but had limited success due to strong opposition from Korea’s chaebols and the interruption from the COVID-19 pandemic. Considering these failed reforms, it’s probably wise to be skeptical. At the heart of the issue is the fact that the families that control Korea’s chaebols have interests that diverge from those of minority shareholders. For example, why would families want their companies to be part of an index that pushes up their share prices and thus leads to higher inheritance tax rates? And why would they willingly give up control of the companies they run? Public pressure could lead specific companies to act, for example, by buying back discounted preference shares, selling non-core holdings, and cancelling treasury shares on their balance sheets. This would help on the margin. But for a wholesale improvement in capital allocation, you’ll need much stronger financial incentives, including lowering inheritance and dividend taxes and making engaging in related party transactions more difficult. There are success stories in the region. In Taiwan, individuals and corporations pay only a 10% withholding tax on dividends. Taiwan’s inheritance taxes are also low. Corporate governance is generally better, with higher dividend payout ratios and straightforward corporate structures. However, public opposition to lower taxes means that revolutionary change is unlikely. Especially given that Yoon Suk-yeol’s People Power Party does not hold a majority in the National Assembly. And opposition from chaebols means that an improvement in minority protections is unlikely. Another question mark is that Lee Bok-hyun, who spearheaded the Value Up initiative at the Financial Services Commission, is likely to leave and move to the presidential office. There is top-down support for the program, but it’s unclear whether it’ll be enough. --- # 5\. Implications for investors ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/03d012f8-1e84-4192-8094-ab8f9e4a700b_1060x707.jpg) The Seoul cityscape. Source: Getty Images The benchmark KOSPI index has performed nicely this year on expectations that the Value Up reforms will unlock value. Over US$10 billion has been spent on net foreign buying of Korean equities, with low-price/book stocks rising the most. Korea is a retail-driven market, and many are now bidding up the share prices of banks, insurance companies, brokerage firms, carmakers, and capital goods companies. Some chaebols have started to cancel treasury shares, and banks have raised dividend payouts. _This post is for paying subscribers only._ ### Kansai Paint (4613 JP) URL: https://www.asiancenturystocks.com/kansai-paint-4613-jp/ Last updated: 2026-07-31T01:53:45.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Kansai Paint at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Kansai Paint**](https://finance.yahoo.com/quote/4613.T?ref=asiancenturystocks.com)*(4613 JP - US$2.9 billion)* is the world’s 8th largest paint manufacturer with a special focus on automotive paint. It’s one of the major suppliers of Toyota, Daihatsu, Suzuki, and several others. Since most Japanese automakers are global, Kansai Paint serves them in many markets, including India, where key client Maruti Suzuki is growing like wildfire. Kansai Paint’s automotive paint segment accounts for 40% of total revenues. Kansai Paint also has a large architectural paint franchise with a large presence in emerging markets like India and South Africa. These are sold to contractors or directly to consumers through distributors like paint shops. This segment represents 28% of revenues. Finally, it has a large and growing industrial paint business focusing on Japan and Europe. This paint is used in anything from heavy machinery to pipelines, electrical components, furniture, railway carriages, aircraft, etc. It’s currently 25% of revenues but has grown in importance. I believe Kansai Paint has a solid franchise, but the economic moats of consumer-facing paint companies like Sherwin Williams and Asian Paints are probably stronger. In contrast, Kansai Paint’s strength lies in its R&D and connection to key automakers, who are unlikely to switch as long as the company continues to deliver. What I find refreshing about Kansai Paint is that its new leadership is rational regarding capital allocation. The new CFO, Takahara Shigeki, is obsessed with improving the company’s return on equity, which has increased from 10% to 13%, and it will probably be even higher when the next medium-term plan is announced later this year. The new leadership has also actively sold underperforming assets in Africa and the Middle East and used the proceeds to buy back shares or further invest in core markets in Europe and India. This strategy seems to be working well, with Kansai Paint’s financial results beating expectations. Today, the stock trades at an EV/EBITDA multiple of 7.5x, equivalent to a P/E of 13x. That multiple is lower than the global peer group’s 20x, though I do think that a small discount is warranted to, say, Sherwin Williams and Asian Paints, given its lower consumer exposure. Kansai Paint’s EV/EBITDA multiple is also at a historical trough compared the median level of 10x, even though the company’s capital allocation is far better today than it’s been in the past. I project mid-single-digit top-line growth, driven by Kansai Paint’s 25% exposure to the fast-growing Indian market, especially for autos, where Maruti Suzuki is likely to grow for decades. India’s car penetration is only 24 per 1,000 people compared to a world average of 300\. Indian annual paint consumption of 4kg per capita has a decent upside compared to Japan’s 10kg. I also think global auto production is recovering due to the industry’s supply chain issues during COVID-19. In addition to modest top-line growth, I see slight operating margin expansion to 9% and modest share buybacks that will reduce the P/E multiple from 13x to 10x by FY2027. The only question mark is new competitor Aditya Birla’s aggressive investments into the Indian paint sector, which will likely compress return on capital for some time. The decorative paint industry is said to have a strong economic moat, and that theory is now put to the test. I’m skeptical that the new brand Birla Opus can make much headway against Kansai Paint’s 100-year-old brand name, but I will admit that the price war will be a challenge in the near term. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Links May 2024 URL: https://www.asiancenturystocks.com/links-may-2024/ Last updated: 2024-05-20T04:01:27.000Z Welcome back. As you may have noticed, I’ve settled on writing links round-up emails once per month. To access prior issues, go to [the main page](https://www.asiancenturystocks.com/) of my Substack and click “Links” at the top of the screen. Since last month, I’ve had time to write a review of the book [Spy the Lie](https://www.asiancenturystocks.com/spy-the-lie2/), a [2Q2024 macro update](https://www.asiancenturystocks.com/macro-update-for-the-2nd-quarter/), a post with [Travel notes from Hong Kong](https://www.asiancenturystocks.com/travel-notes-hong-kong/) ($), a deep-dive on [Best Mart 360](https://www.asiancenturystocks.com/best-mart-360-2360-hk/) ($) and updates on [Koshidaka](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) ($) and [IMAX China](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/) ($), along with a [portfolio update for April](https://www.asiancenturystocks.com/portfolio-review-april-2024/) ($). Subscribe to get full access: [Get 30 day free trial](#/portal/signup) In any case, here are investment-related links for May 2024 that I think you’ll enjoy: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - Third Point Capital on Taiwanese foundry [**TSMC**](https://www.asiancenturystocks.com/content/files/f/166217/x/785ef96e1a/third-point-q1-2024-investor-letter%5Ftpil.pdf)*(🇹🇼* *2330 TT - US$672 billion)* - Saltlight Capital on WeChat developer [**Tencent**](https://www.asiancenturystocks.com/content/files/documents/sltwwf%5Fletter%5F1q%5F2024.pdf)*(🇨🇳* *700 HK - US$470 billion)* - Investing in China on **Kuaishou** *(🇨🇳 1024 HK - US$32 billion)*, [Part 1](https://investinginchina.substack.com/p/unlocking-growth-in-chinas-lower) & [Part 2](https://investinginchina.substack.com/p/unlocking-growth-in-chinas-lower-d57) - Bos Invest discussing HK conglomerate [**CK Hutchison**](https://bosinvest.substack.com/p/why-i-still-hold-ck-hutchison)*(🇭🇰 1 HK - US$21 billion)* - Global Stock Picking on the bid for [**L’Occitane**](https://www.globalstockpicking.com/2024/05/03/loccitane-973-hk-call-to-action/?ref=asiancenturystocks.com)*(🇭🇰 973 HK - US$6.0 billion)* - Pyramids and Pagodas on [**GDS Holdings**](https://www.pyramidsandpagodas.com/p/gds-holdings-gdso-9698hk-leading?ref=asiancenturystocks.com)*(🇨🇳* *GDS US - US$1.8 billion)* - Sweet Stocks on Japanese IT distributor [**Daiwabo**](https://sweetstocks.substack.com/p/daiwabo-wholesale-excellence?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇯🇵* *3107 JP - US$1.6 billion)* - Acid Investments on cinema stock [**IMAX China**](https://acidinvestments.substack.com/p/flagging-a-potentially-interesting?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇨🇳* *1970 HK - US$352 million)* - Value Zoomer on [**Centurion Corporation**](https://valuezoomer.substack.com/p/centurion-corporation?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇸🇬* *CENT SP - US$338 million)* - One Foot Hurdle on [**Taiwan PCB Techvest**](https://1foothurdle.substack.com/p/8213tw-large-scale-pcb-manufacturer?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇹🇼* *8213 TT - US$328 million)* - Made in Japan on software company [**Atled**](https://madeinjapan.substack.com/p/a-saas-company-trading-at-48x-ebitda?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2)*(🇯🇵 3969 JP - US$71 million)* - Value Investing Blog on [**Macau E&M Holding**](https://www.valueinvestingblog.net/macau-e-m-holding/?ref=asiancenturystocks.com)*(🇭🇰 1408 HK - US$11 million)* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - [**Yours truly**](https://www.undervalued-shares.com/weekly-dispatches/hong-kong-investor-trip-what-we-learned/?ref=asiancenturystocks.com) interviewed by Swen Lorenz at Undervalued Shares (21 mins) - **Seraya Investment**: The case for Japan [Part 1](https://serayainvestment.substack.com/p/the-case-for-japan-part-1) & [Part 2](https://serayainvestment.substack.com/p/the-case-for-japan-part-2) (21 mins) - [**Noah Smith**](https://www.noahpinion.blog/p/why-is-china-producing-so-many-export?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) speculates why China’s goods exports are going up fast (14 mins) - [**Arjun Murti**](https://arjunmurti.substack.com/p/obliterating-peak-oil-demand-a-progress?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) on supply & demand for crude oil (14 mins) - [**Continuous Compounding**](https://continuouscompounding.substack.com/p/how-to-navigate-japanese-filings): How to navigate Japanese filings (8 mins) - [**Edelweiss**](https://edelweiss.substack.com/p/the-cazique-of-poyais-a-real-estate) on the 1820’s Poyais scam, a classic in financial history books (7 mins) - [**Jam Invest**](https://jaminvest.substack.com/p/hk-14-singapore-a-z?r=2xe91&utm%5Fmedium=ios&triedRedirect=true) on Singapore’s Haw Par, Credit Bureau Asia, SUTL, ThaiBev (6 mins) - [**Richard Katz**](https://richardkatz.substack.com/p/boj-stands-pat-yen-weakens-to-almost?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) discussing the weakness in the Japanese yen (5 mins) - [**Joe Studwell**](https://eig.org/joe-studwell-qanda/?ref=asiancenturystocks.com) on the lessons from industrial policy in Asia (5 mins) - [**Weighted Capital**](https://www.weightedcapital.com/p/2024-may-week-19?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com) on AEM, Pentamaster and Left Field Printing (4 mins) - [**Michael Dunne**](https://newsletter.dunneinsights.com/p/when-every-car-is-made-in-china?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) talks about a future where every car is made in China (4 mins) - [**Variant Perception**](https://blog.variantperception.com/p/the-structural-limits-of-fiscal-policy?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) on the limits of fiscal deficits in developed markets (5 mins) - [**Polen Emerging Markets Growth**](https://www.asiancenturystocks.com/content/files/sites/default/files/2023-09/polen%5Fglobal-emerging-markets-growth%5Fcommentary%5F0.pdf)’s 1Q2024 letter on HKEX, Mandiri (5 pages) - David Tepper’s [**Appaloosa**](https://x.com/maksim%5Fp%5Fm/status/1790836962586173770?s=46&ref=asiancenturystocks.com)’s latest 13F has made big bets on China tech (1 min) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**Leonid Mironov**](https://open.spotify.com/episode/2wid5000imZfdkblgMOVOX?si=60c0b71f5bbe4c77&ref=asiancenturystocks.com) provides a bullish view on Chinese equities (2:19 hours) - [**Mark Hart**](https://www.youtube.com/watch?v=LuwekXgMlDQ&ref=asiancenturystocks.com) on his research process and views on China in 2024 (1:19 hours) - Rare interview with [**Angus Tulloch**](https://www.youtube.com/watch?v=1c787kjmh30&ref=asiancenturystocks.com) on his long career investing in EMs (1:09 hrs) - [**Charles Gave & Anatole Kaletsky**](https://research.gavekal.com/content/webinar-forward-to-the-1970s-investing-for-an-inflationary-age/?ref=asiancenturystocks.com) on similarities with the 1970s (1:05 hours) - Ex-SAC [**Arvind Sanger**](https://open.spotify.com/episode/55KwZDiKkVz7uKTCn3WT7K?si=4e991d0d4d9a43eb&ref=asiancenturystocks.com) on where we are in the energy cycle (59 mins) - TRG’s [**Nick Rohatyn**](https://open.spotify.com/episode/4xuPnNuNMgj1eZLqs8aHKo?si=e546d17d1e7142df&ref=asiancenturystocks.com) on emerging market bonds and more (51 mins) - [**Pierre Andurand**](https://open.spotify.com/episode/3pXskbytmPHrYnniYaMv1E?si=dc8221cfd9b648a4&ref=asiancenturystocks.com) on the recent tightness in cocoa markets (49 mins) - [**Brad Setser**](https://open.spotify.com/episode/2ySC88GZm0MOqyApJoIGbw?si=fcb7b46cf78a454c&ref=asiancenturystocks.com) on the Japanese yen and the Chinese yuan (32 mins) - Economist’s [**David Rennie**](https://open.spotify.com/episode/6CKpKxF8W7ggxvG9Cd2amt?si=9d3c82b7879f4cd8&ref=asiancenturystocks.com): Why are Chinese running to Japan? (31 mins) - [**Asianometry**](https://www.youtube.com/watch?v=p35A583Ohvs&ref=asiancenturystocks.com) on Indonesia’s Salim Group, the owner of Indofoods, etc. (29 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8b9ec6c2-a081-4a90-8936-ba71a0ff80e9_1100x85.png) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d6e1cc44-b869-43ee-b591-41f82f59436f_1200x675.png) FXI short interest hit a high in early 2024\. Source: [Chartstorm](https://www.chartstorm.info/p/off-topic-chartstorm-new-bull-in?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) --- My favorites out of the above links are: _This post is for paying subscribers only._ ### IMAX China (1970 HK) － mid-2024 update URL: https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/ Last updated: 2024-05-19T04:24:22.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/imax-china-1970-hk-mid-2024-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in IMAX China when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e02f66a0-3643-4df0-bca2-ecc18beb62f1_2560x1707.jpg) Source: IMAX Corporation # Summary _This post is for paying subscribers only._ ### Macro update for the 2nd quarter of 2024 URL: https://www.asiancenturystocks.com/macro-update-for-the-2nd-quarter/ Last updated: 2024-05-16T06:01:54.000Z Here’s another quarterly macro update, discussing some of the themes that I’ve been paying attention to in the past few months. Today’s topics: - Positive interest rates in Japan - Takeaways from my Hong Kong trip - The case for gold - Indonesia under Prabowo And don’t forget to subscribe! Just click the button below 🙂 [Get 30 day free trial](#/portal/signup) ### Best Mart 360 (2360 HK) URL: https://www.asiancenturystocks.com/best-mart-360-2360-hk/ Last updated: 2026-07-31T01:53:26.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Best Mart 360 at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Best Mart 360**](https://finance.yahoo.com/quote/2360.HK?ref=asiancenturystocks.com)*(2360 HK - US$235 million)* is a Hong Kong retailer of leisure food with 170 outlets in Hong Kong, Macau and Mainland China. I first heard about the stock from Twitter user “Arena Man Capital” [here](https://x.com/ArenaManCapital/status/1783018081742397880?ref=asiancenturystocks.com). You can think of Best Mart as a mix between a supermarket and a convenience store. It offers most other food, beverage and household products you might need, including grains, confectionaries, snacks, bakery products, wine, dried fruits, nuts, shampoos, etc. The name “Best Mart 360°” refers to the company’s drive to offer the best quality at the best prices. And on my numbers, Best Mart 360 is significantly cheaper than the competition. For example, 500 grams of almonds cost only HK$49 compared to about HK$70-80 at ParknShop and Wellcome. A Toblerone costs only HK$10 compared to HK$16-20 at local supermarkets. It achieves these low prices by sourcing its products from the grey market — from whatever country and brand is the cheapest at any given time. Best Mart also avoids selling perishables such as fruits and vegetables, focusing instead on products with long shelf lives and lower expiry risks. Its stores are also small, thus saving on rent. Best Mart’s Google Review scores are average, but most comments are positive, emphasizing a limited selection of products at low prices. Customers go there for wine, chocolate and snacks. There is a leisure food competitor called 759 Store, owned by [**CEC International**](https://finance.yahoo.com/quote/0759.HK?ref=asiancenturystocks.com) *(759 HK - US$19 million),* listed on the Hong Kong Stock Exchange. Its margins are weak at just 3% vs Best Mart’s 10%. The explanation is probably that 759 Store focuses exclusively on Japanese products, offers perishables that depreciate fast and doesn’t buy as much from the grey market. It also doesn’t focus as much on habit-forming products such as wine, chocolate and coffee. Best Mart’s success is evident in its financial metrics. It earns a return on equity of 49%. Its sales per store are the highest in the industry. The payback period on a new store is less than 1 year. This success has meant that Best Mart has steadily expanded its store count at a 17% annual rate over the past five years. By increasing the penetration of private label products to 16%, it has compounded earnings per share at an even greater rate, at around 23% annually. Best Mart’s valuation multiples are currently low at just 8.1x P/E and 10.6% dividend yield. These are incredible numbers, considering that it enjoys a clean balance sheet with a solid net cash position. Is there a catch? Yes, maybe: - In 2019, Best Mart was targeted by anti-government protesters due to co-founder Hugo Lam’s alleged links with Fujianese gangs. Both of Best Mart’s co-founders are from Fujian province in China. The rumor remains unsubstantiated, but Hugo is close to the senior CCP leadership, and it’s plausible that he might have helped quell the protests. - In 2023, the two co-founders sold the majority of their holdings, equivalent to 49% of the total shares outstanding, to the Chinese state-owned enterprise “China Merchants Group,” which is involved in food distribution. An executive from that company has now become Best Mart’s new Chairman. It’s possible that Best Mart’s margin could suffer if it were to start trading extensively with China Merchants Group. Now that the SOE controls the board, it’s also possible that the company’s capital allocation will shift. But I think the base case is that the business will continue growing as it has in the past. Co-founders Hugo Lam and Hui Chi Kwan are still running the business daily. The 2024 guidance is for the store count to grow by 9%. Together with same-store sales in the low-single digits, you’d end up with low double-digit top-line growth. On the positive side, China Merchants could help grow the store network in mainland China through both directly operated- and franchisee stores. Having Beijing’s back could also help politically and in terms of support from lenders and landlords. The bottom line is that Best Mart seems to have a winning formula. Now, it’s just a matter of expanding the store network to satisfy the demand for its low-priced and attractive selection of products. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Koshidaka (2157 JP) － 2024 update URL: https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/ Last updated: 2024-05-08T04:00:39.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/koshidaka-2157-jp-2024-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Koshidaka when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5ac95939-7474-49b9-851e-47577a007fda_1200x800.jpg) # Summary - I first wrote about Koshidaka three years ago, when it was experiencing its first-ever loss as a public company due to Japan’s COVID-19 lockdowns. - Koshidaka operates low-cost karaoke bars throughout Japan under the brand name *“Manekineko”*. It’s unique in that it allows customers to bring in food and drinks from outside, and its membership fees are low. This strategy helped it grow its market share from 5% to 10% in the decade before COVID-19. - The company has recovered from the COVID-19 pandemic, with revenues far above pre-COVID. Koshidaka is firing on all cylinders, and superstar CEO Horishi Koshidaka is optimistic about the future. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Koshidaka’s financials 2.2. Shift in the store count 2.3. Bath houses and other revenues 2.4. Business alliance with Advantage Advisors 3. What will change for Koshidaka? 3.1. Stabilization after a bout of revenge spending 3.2. Store expansion 3.3. The Entertainment Infrastructure Plan 3.4. Private Entertainment Rooms 3.5. Koshidaka Digital 3.6. Koshidaka’s new “welltainment” business 3.7. Alt-data check 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap I first wrote about [**Koshidaka**](https://finance.yahoo.com/quote/2157.T?.tsrc=fin-srch&ref=asiancenturystocks.com) *(2157 JP - US$457 million)* about three years ago － long enough that many people have probably forgotten the story at this point: [Deep-dive 2020-7: Koshidaka Holdings Co LtdKoshidaka Holdings (2157 JP) is a karaoke-operator run by serial entrepreneur Hiroshi Koshidaka. The man has an incredible track record and he continues to put his entire focus on the company. The main part of the business is a chain of karaoke bars run under the brand name "Maneki-neko". While the karaoke industry is stagnant, Koshidaka has managed to consolidate the industry. They focus on the lower-end market, offering easy-to-use equipment, clean facilities, low prices and convenience by allowing visitors to bring their own drinks. The strategy of building karaoke boxes around key railway stations and very densely populated urban areas has served them well. ROEs are very high by Japanese standards. Koshidaka has managed to double its market share from 5% to 10% in the past decade, despite a slow-growing overall market.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b15adc81-c903-4662-aea9-f8dd0cc6a7d9_1024x579.jpg)](https://www.asiancenturystocks.com/2020-7-koshidaka-holdings-co-ltd/) But here’s a summary of how I viewed the company back then: - Koshidaka is one of Japan’s largest operators of karaoke bars, focusing specifically on the lower-end segment. Most of its karaoke bars carry the “Manekineko” brand name, which is a type of porcelain cat “まねきねこ” with a waving hand that’s supposed to bring good luck. - What makes Manekineko unique compared to its larger competitor, Big Echo, is that Koshidaka allows customers to bring outside food and drinks. Each customer just needs to buy 1 item from the menu. Koshidaka’s karaoke equipment is easy to use, its facilities are clean, and the membership fees are low at only JPY 200/year. Many of its outlets are close to railway stations. Finally, many of the outlets are larger, allowing for economies of scale in selling, general, and administrative expenses. - These benefits have helped Koshidaka gain market share from 5% to 10% in less than a decade before COVID-19 despite flattish growth for the overall industry. Koshidaka’s book value compounded fast, with a 20% return on equity. Koshidaka had also engaged in bolt-on acquisitions at reasonable multiples. The plans were to open 30 stores annually, representing store growth of about 5-6%. Before COVID-19, Koshidaka’s top-line growth used to be +13%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b88d3e7d-ab8f-42b6-96d9-d847133936c5_1464x652.png) - Another kicker is that smaller competitor Shidax had exited the karaoke industry in 2018, leaving room for Koshidaka to fill the void. In addition, on 1 September 2019, Koshidaka banned cigarette smoking across all its outlets as it believed cleanliness would benefit its brand and attract more customers to its outlets. - Karaoke is a steady, almost recession-proof business. But Japan’s karaoke industry was hit hard by Japan’s COVID-19 lockdowns. However, I speculated that the restrictions would one day ease, perhaps after the governments planned vaccination drive. - Other than karaoke bars, Koshidaka also runs “onsen” bath houses representing roughly 5% of total pre-COVID revenues. Koshidaka’s bath house business is a no-growth business but cash flow generative. - Koshidaka also had a small property management business, owning the three buildings Sport Nagoya, AQERU Maebashi Commerce & Business Complex and Fleuret Hanasaki building in Yokohama. - Founder Hiroshi Koshidaka built the company from scratch and continued to manage it as CEO. At the time, he owned 14% of the business and had a great reputation within Japan as a super-star CEO. - In 2020, Koshidaka spun off its gym operation [**Curves**](https://finance.yahoo.com/quote/7085.T?ref=asiancenturystocks.com) *(7085 JP - US$447 million)* into a separately listed company. Curves was, in fact, Japan’s first-ever spin-off and a sign that Koshidaka cares about its minority shareholders. I wrote about Curves in the following post: [Curves Holdings (7085 JP)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Curves Holdings at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6743ba27-a949-4039-b1de-936a627094c7_801x450.png)](https://www.asiancenturystocks.com/curves-holdings-7085-jp/) - Right after the spin-off, given that 90% of the tax basis was attributed to Koshidaka, I speculated that many investors would sell their Koshidaka shares rather than Curves. And indeed, Koshidaka’s share price dropped to low levels. - I foresaw a 2024e P/E of 6.8x, lower than the industry average of about 15x. - Koshidaka’s balance sheet is clean, with a modest net debt position, though convertibles and warrants will likely lead to a net cash position soon. --- # 2\. Update since my first write-up ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/62da14cd-e9ac-4727-a864-52ea0d37f7b6_794x570.jpg) Koshidaka’s stock price has rallied nicely over the past three years, roughly doubling in price, though coming off by roughly 40% since the peak in 2023: *The rest of this post is for premium subscribers only. To access it, click the button below to join a community of 435 subscribers and get over 20 deep dives yearly. See you on the other side!* ## 2.1\. Koshidaka’s financials _This post is for paying subscribers only._ ### Travel notes: Hong Kong URL: https://www.asiancenturystocks.com/travel-notes-hong-kong/ Last updated: 2024-05-05T06:11:44.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c2a5f4bb-177a-458a-b364-5bedc38105c7_1600x1200.png) I spent most of the past week in Hong Kong, meeting companies and catching up with other investors. The trip was organized by Swen Lorenz from [Undervalued-shares.com](https://www.undervalued-shares.com/?ref=asiancenturystocks.com) who writes a famous newsletter and also runs an asset management business called [Sarnia Asset Management](https://sarnia-am.com/?ref=asiancenturystocks.com). We met with 12 companies, on top of a meeting with Bernstein oil & gas analyst Neil Beverage and Internet analyst Robin Zhu. In this post, I’ll provide some reflections from the trip, along with conclusions from each of the meetings. If you have any questions, feel free to ask them in the comment section at the bottom of the post. [Leave a comment](#ghost-comments-root) ``` Table of contents 1. The Manhattan of Asia 2. Feedback from company meetings 2.1. Natural Food International 2.2. Galaxy Entertainment 2.3. China Shineway 2.4. Perfect Medical 2.5. Anta Sports 2.6. Sino Land 2.7. Hong Kong Exchanges and Clearing 2.8. Plover Bay Technologies 2.9. Bank of East Asia 2.10. Lion Rock 2.11. Lever Style 2.12. Hypebeast 3. Conclusion ``` # 1\. The Manhattan of Asia ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f598dff0-0afa-45ea-acb8-84390d0b8d21_1424x1068.jpg) The view from the bar “aqua” in Tsim Sha Tsui Last weekend, I took a Cathay Pacific flight from Singapore to Hong Kong to visit companies together with Swen Lorenz and a number of other investors. For me, it was the first time visiting since 2019\. After COVID-19 broke out, Hong Kong’s borders were closed for three years. And during that period, Hong Kong introduced a National Security Law, that eventually led to roughly 4% of the population leaving. The first sight that struck me when landing at the Hong Kong International Airport was the massive amount of construction taking place. The airport is undertaking a US$18 billion project to build a second terminal building and a third runway. Once completed in 2026, the project will increase the airport’s capacity by 50%. Wasted money, perhaps, but it does signal that the government expects air travel to grow. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2bdee6e1-7d39-430c-bd89-51d22b528d8a_1630x1222.jpg) A sight from one of the runways of Hong Kong International Airport After checking into my hotel in Sheung Wan on Hong Kong Island, I felt that there were fewer people than when I last came in 2019\. My trip covered part of China’s May holiday, which runs from 1 May to 5 May. Yet, I didn’t see many Chinese tourists on the streets. _This post is for paying subscribers only._ ### Portfolio review April 2024 URL: https://www.asiancenturystocks.com/portfolio-review-april-2024/ Last updated: 2026-06-04T11:38:21.000Z **\\Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Tough month. Practically every single stock in the portfolio weakened. The primary driver was the strength of the US Dollar strengthened. The only stock that did well was [**CNOOC**](https://www.asiancenturystocks.com/cnooc2022update/), which happens to earn its revenues in US Dollar. My portfolio lost -2.6% in April in US Dollar terms and is now +26.5% since inception in October 2021, equivalent to an IRR of +9.7%. To be clear, this is an actual portfolio that represents a majority of my personal savings. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/57a0711e-f58e-48e3-8692-8c67e9229298_1956x638.png) One of the biggest losers was [**L’Occitane**](https://www.asiancenturystocks.com/loccitane-973-hk/), whose share price dropped a bit before it was suspended. It’s now been two weeks and counting. My Hong Kong restaurant stocks declined further. [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/) dropped over 10% as well. I suspect that drop is related to the settlement of a lawsuit with former partner GGAM. But as mentioned above, the real issue has been the strong US Dollar. Here is the DXY index, which measures the strength of the US Dollar against six other currencies: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/68d884be-65dd-46b3-9db3-c64125441f89_1472x542.png) Heres’ how my Asia-focused portfolio looks like, as of 25 April 2024: _This post is for paying subscribers only._ ### Book review: Spy the Lie URL: https://www.asiancenturystocks.com/spy-the-lie2/ Last updated: 2025-10-19T01:10:28.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/spy-the-lie2/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/00a4abf0-0f0a-46cc-b292-66fce23cd6e2_1920x1080.png) # Summary - The book [Spy the Lie](https://www.amazon.com/Spy-Lie-Former-Officers-Deception/dp/1250029627/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.ZKXdynDv1gAydY9O62f-yckuMet-dR8Vf6IdybAV5CanFLUHMEd%5Fwxu4mARQgkMIZ5qGYHe3vNwiXM0awxCmZgaUUXF4%5FCVaFCYL-4wlNwOZXol8mxWpmxHnte67XAq3HjycGXgxO9Vnm2XycoUNfA9cXox0dvEwynscQLzNGGcBWtA9pMD%5FYrh2V4iPSOcqwt7F4qV4ZHg-LVeIgme6WsrakyBdUR3uGLQCJ%5FPIm2k.YnWxeb1vANoNamRmKg4TZlOV1zjaPqo-4VBDV4OnStU&qid=1713627029&sr=8-1&ref=asiancenturystocks.com) describes tactics you can use to determine whether someone is lying. - Identifying deception involves asking a question and then looking and listening for reactions to that question. - These reactions can be verbal, such as failures to answer the question, failing to deny an allegation, attacking the person asking the question, inappropriate reactions, using qualifiers and efforts to influence your views on them. - Reactions can also be non-verbal, such as delays in answering, grooming behaviors, face movements or shifts in a person’s anchor points, or a disconnect between body language and what the person is saying. - If you find clusters of verbal or non-verbal red flags, you’re gaining confidence that the other person is probably telling a lie. The next step will be to dig deeper and perhaps even get a confession from the person. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) A few weeks ago, a short-seller friend recommended me a book called [Spy the Lie](https://www.amazon.com/Spy-Lie-Former-Officers-Deception/dp/1250029627/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.ZKXdynDv1gAydY9O62f-yckuMet-dR8Vf6IdybAV5CanFLUHMEd%5Fwxu4mARQgkMIZ5qGYHe3vNwiXM0awxCmZgaUUXF4%5FCVaFCYL-4wlNwOZXol8mxWpmxHnte67XAq3HjycGXgxO9Vnm2XycoUNfA9cXox0dvEwynscQLzNGGcBWtA9pMD%5FYrh2V4iPSOcqwt7F4qV4ZHg-LVeIgme6WsrakyBdUR3uGLQCJ%5FPIm2k.YnWxeb1vANoNamRmKg4TZlOV1zjaPqo-4VBDV4OnStU&qid=1713627029&sr=8-1&ref=asiancenturystocks.com). The book describes techniques to tell whether someone is lying or not. It was written by a former CIA interrogator who conducted thousands of meetings with suspects that might endanger US national security. I think the book can also be helpful for investors, too. Understanding whether a management team is being truthful can help you gain conviction that the numbers are real and as positive as they say they are. ``` Table of contents 1. The Model 2. Questions to ask 3. Verbal behaviors 4. Non-verbal behaviors 5. Unreliable signals 6. Deception in practice 7. Conclusion ``` # 1\. The Model The book [Spy the Lie](https://www.amazon.com/Spy-Lie-Former-Officers-Deception/dp/1250029627/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.ZKXdynDv1gAydY9O62f-yckuMet-dR8Vf6IdybAV5CanFLUHMEd%5Fwxu4mARQgkMIZ5qGYHe3vNwiXM0awxCmZgaUUXF4%5FCVaFCYL-4wlNwOZXol8mxWpmxHnte67XAq3HjycGXgxO9Vnm2XycoUNfA9cXox0dvEwynscQLzNGGcBWtA9pMD%5FYrh2V4iPSOcqwt7F4qV4ZHg-LVeIgme6WsrakyBdUR3uGLQCJ%5FPIm2k.YnWxeb1vANoNamRmKg4TZlOV1zjaPqo-4VBDV4OnStU&qid=1713627029&sr=8-1&ref=asiancenturystocks.com) was written by three former CIA officers. The main author, Philip (“Phil”) Houston, specialized in polygraph tests, sitting down with people under investigation to assess whether they were lying or not. A polygraph test is a lie detector, measuring a person’s pulse, perspiration or breathing pace after being asked a question. If they experience a fight-or-flight response, it will show up in the measurements. But it’s possible to detect cues of lying even without using a polygraph. In the book, Phil and his co-authors describe **verbal cues,** such as evading the question, and **non-verbal** ones, like touching your face. The assessment begins with a question and then waiting for cues that might either signal truthfulness or deception: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/44d46963-da2e-4f67-926d-ab8b3679f4d0_1278x618.png) This process from start to finish is what’s referred to in the book as **The Model**: - First, ask a question like *“Did you do your homework?”* This serves as a **stimulus** for potential reactions from the subject. - In the first five seconds after delivering the stimulus, look and listen for clusters of **deceptive behaviors**. These could include pretending not to understand the question (*“What homework?”*), moving to a different sitting position, closing eyes, etc. The greater the number of deceptive behaviors, the greater our confidence that the person is indeed lying. The Model doesn’t provide clear answers, though. You can never be 100% sure that someone is lying without actual evidence. But if the deceptive behaviors add up, you’ve identified a potential problem area, and you’ll need to dig deeper. Handled correctly, you might even get a confession out of the subject. The model should be applied rigorously. Only pay attention to deceptive behaviors occurring right after stimuli. You should ignore other truthful statements as they cause us to form biased views of the person. Discipline is needed. --- # 2\. Questions to ask Before a question, you can start with a **prologue statement** that provides legitimacy and rationalization for the coming question. This can also help minimize the issue in the subject's eyes and make the person more cooperative. For example, here is a prologue statement used before a question to increase the chances that a person will admit to having used drugs: > *“The next thing I need to ask you about is drug use. Now, before we get into that, let me explain *why it’s important that we ask this question*, and what we’re looking for. First of all, *we know that a lot of folks have tried things*. That’s not a particular concern to us. What we are worried about is if someone has a significant drug problem.”* The question should be aimed at discovering the truth about a particular matter. Phil and his colleagues suggest that a question should fulfil the following criteria: - **Short**: to provide less time for the other person to think through an alibi - **Simple**: the person has to understand your question; otherwise, any reactions to it won’t contain any signal - **Singular**: keep to one question only; otherwise, the person will avoid answering the one that could be incriminating to him - **Straightforward**: the more upfront you are, the more likely the other person is going to trust you, increasing the likelihood of cooperation Questions can be **open-ended** (*“What drugs have you taken?”*) or **closed-ended** (*“Have you ever smoked marijuana － Yes/No?”*). Open-ended questions are best in the beginning to set a foundation for a future discussion. And closed-ended questions are best towards the end to get to the actual truth. To get the answers you’re looking for, you’ll want to ask questions the accused is unlikely to have prepared for. One trick is to ask **presumptive questions**, which presume some wrongdoing. For example, murder suspect OJ Simpson was asked, *“What happened at Nicole’s last night?”* － presuming that he was indeed at victim Nicole’s house. The only correct answer in this instance would have been *“I wasn’t there”*. Anything else could be a red flag. You can end the questioning by asking **follow-up questions** like *“What else?”* or *“Tell me more”*. To uncover lies of omission, ask them: *“What haven’t I asked you that you think I should know about?”* Once you detect a lie, you don’t necessarily have to dig into the issue. You can also **broaden your focus** by asking more general questions to get a fuller picture. Using the drug example above, for instance, if a subject admits to having smoked marijuana, you can ask him what other drugs he or she has tried. That will be perceived as less confrontational, more conversational － as if you’re two good buddies, just chatting back and forth. **Negative questions** should absolutely be avoided. They’re leading questions that give the person a way out. For example, if you ask, *“You’ve never smoked marijuana, have you?”* the temptation will be too great to just say *“No.”* Finally, avoid **complex and vague** questions. If your questions aren’t clear, you won’t get any clear answers either. --- # 3\. Verbal behaviors Now that you’ve asked a question, the next step will be to spot deceptive behaviors within the first 5 seconds. People will rarely lie straight to your face (“lies of commission”). They’ll go to great lengths to avoid it. Instead, they’ll most often leave out a part of the truth to deceive you (“lies of omission”). Or try to influence your perceptions of them (“lies of influence”) so as to minimize the crime. The first deceptive behavior you should pay attention to is **failure to answer**. If people don’t answer your questions, it’s usually because they don’t want to lie to your face. However, be careful － there is a risk that they simply didn’t understand your question. For example, check out the following video, where a Shark Tank contestant is asked whether he can give a discount (from 6:26 to 7:40). He refuses to answer the question, which suggests he cannot provide a discount. Later on in the same video, a mother is asked where her missing child might be (from 7:40 to 9:00). In both of these cases, a failure to answer signals deceptive behavior: Another type of deceptive behavior is **denial problems**, such as failing to deny a serious allegation. For example, if a man is accused of cheating on his spouse, instead of saying *“I didn’t do it”*, he might say something along the lines of *“I would never do something like that”* － a non-specific denial that allows him to avoid lying straight to your face. Alternatively, instead of denying the allegation, subjects might provide a long-winded answer in an attempt to create confusion and cover up a lie. If the subject **repeats the question** asked, that might be a sign of trying to buy time while thinking of an alibi. Repeating a question can also be a way to fill in an awkward moment of silence. They’re afraid they might be caught lying. A similar tactic is to provide a **non-answer statement**. For example, people might buy time by saying, *“That’s a good question”* or *“I’m glad you asked that,”* while thinking through an alibi. If a person provides **inconsistent statements**, at least one of the statements must be false. For example, have a look at the following interview. Former senate candidate Christine O’Donnell was asked whether she supported “Don’t Ask Don’t Tell” policies. She replies that she’s not talking about policies, but also that she’s promoting policies that are *“mostly fiscal, mostly constitutional”*, two statements that are inconsistent with each other: When people go into **attack mode**, that’s a sign that they have something to hide. They might attack your credibility or competence and try to get you to back off. Another problematic behavior is when people reply with **inappropriate questions** rather than answering the question asked. In the book, Phil tells the story of when he accused a man of stealing a computer. Instead of denying it, the man replied *“How much did it cost?”*. This question had nothing to do with the theft. Instead, it reflected a concern that he might be facing felony charges. Sometimes, the person accused of something provides **answers that are overly specific**. For example, if you ask a CEO how the last quarter was, and he replies by saying that a small division of his company did well － that’s a red flag. He’s clearly trying to shift attention away from the fact that the last quarter wasn’t as strong as he would have liked. Another example: in the following interview, former US President Bill Clinton is asked whether he had a twelve-year affair with a woman. He stutters and then replies that *“the allegation is false”*. He provided a specific answer to a specific question, and his answer was technically true since his affair only lasted for 11.5 years: Sometimes, subjects might exhibit **inappropriate levels of politeness** to make the other person like him or her. If we like them, we’re more likely to believe in what they’re saying. People who are accused of something might also try to diminish the importance of the issue. They might say, *“Why is everybody worried about this?”* and perhaps even joke about it. It’s a way to lower their anxiety and guilt. In the book, this tactic is referred to as an **inappropriate level of concern**, i.e. they’re not being concerned enough. For example, in this clip, Scott Peterson laughs when asked whether he murdered his wife. Clearly, he exhibited an inappropriate level of concern. Another sign of deception is a **process or procedural complaint**. For example, asking *“How long is this going to take?”* or *“Why are you asking me this?”*. Such complaints are simply a way to buy time and deflect the question. Sometimes, a deceptive person will **refer to previous statements**, for example, by saying, *“I would refer you to my earlier statement…”* or *“As I told you before…”* These referral statements are ways to build credibility and deflect the question. People who are accused of something might also **invoke religion** to dress up the lie. They might say, *“I swear to God”* or *“God knows I’m telling the truth.”* in an attempt to gain credibility and make it seem like they’re telling the truth. Another type of deception is to display **selective memory**. If people say that they don’t remember, then that provides them with an alibi － we can’t force somebody to remember. They might say *“Not that I recall”*, *“To the best of my knowledge”*, *“Not that I’m aware of”* and *“As far as I know”*. Here’s an example of a man not remembering a particular text message he sent: If a person uses **qualifiers** such as *“not really”*, *“basically”*, *“probably”*, *“usually”*, *“for the most part”*, etc, it’s a sign that they’re withholding information about the specific circumstances of the case to avoid lying. Other qualifiers such as *“frankly”*, *“truthfully”*, *“to tell you the truth”*, etc. are used to enhance credibility. Finally, a person accused of something might resort to **convincing statements** to get others to believe he or she is an upstanding individual. For example, the person might say: > *“I would never do anything like that”* > > *“Why would I risk my life for a few measly dollars?”* > > *“I have a great reputation”* > > *“It’s not in my nature to do something like that.”* > > *“I always try to do the right thing.”* > > *“I love you, I would never do anything to hurt you”*. Such statements appear convincing, but they’re intended to mislead and do not answer the actual question being asked. If you’re faced with convincing statements from the subject, the best way to deal with them is to agree and repeat them. And then go back to the original question by saying something along these lines: > *“Yes, I know you love your kids. I think that’s evident to everybody. But, we want to talk to you now about what really happened. We want to go over your story again”.* Even though they’re trying to convince you they’re upstanding individuals, you don’t want to let them off the hook. --- # 4\. Non-verbal behaviors The majority of communication is non-verbal, i.e., it occurs through your body language. And there are certain non-verbal behaviors that tend to be associated with deception. Let’s go through them one by one. First, if there’s a **noticeable delay** in an answer to a simple question, there might be a problem. If you ask a person: *“Seven years ago, did you rob a gas station?”* and there is a 5-second delay to the answer, there’s a problem here. The answer should come immediately, preferably along the lines of *“No!”* If there’s a **disconnect** between verbal and non-verbal behaviors, then that might indicate a problem. For example, if a person nods his or her head sideways while saying *“Yes”*, that could be an issue, at least not outside of India. If people want to cover up their tracks, they might unconsciously **hide their mouths or eyes**. They might pull up their hand to their mouth and cover it. Or simply close their eyes. **Clearing the throat or swallowing** before answering a question might be a symptom of anxiety. That anxiety exhibits itself through discomfort or dryness in the mouth, part of the fight-or-flight instinct. If subjects respond with **facial movements**, that’s another sign of anxiety. They might put a hand to their face, bite their lips or pull their ears. What’s happening physiologically is that the body is rerouting circulation to vital organs. The diminished blood supply to the face causes irritation in the capillaries, and they will consequently want to scratch their faces. Anxiety also causes people to move their bodies, especially the **anchor points** which anchor the body to the floor. Examples of so-called anchor points include feet if a person stands up or buttocks if sitting down. For this reason, it’s best if interviews take place in chairs that have wheels and can move around to amplify any behaviours that occur in response to your questions. **Grooming gestures** are also used to dissipate anxiety. Subjects might adjust their ties, shirt cuffs or glasses, straighten their shirts or move the hair behind their ears. Here are some examples of unconscious behaviors that reflect building anxiety. In this example, we see a man putting his hand to his face, exhibiting grooming gestures as well as shifts in his anchor point: --- # 5\. Unreliable signals There are also several behaviors that are unreliable when it comes to judging whether someone is lying or not. So, be careful when drawing any conclusions from them: - Failing to make **eye contact** is commonly seen as a sign of deception. But there could be many reasons why a person doesn’t want to maintain eye contact, including shyness. - **A closed posture** is another potentially false signal. The person might simply be cold or reflect a closed personality type. Similarly, clenched hands could be a signal of anxiety but also a sign that the person is afraid of authority figures. - **Nervous tension** could also be due to many other factors, including medication. The person might be neurotic. The same is true of blushing or twitching. - Some people think that it’s possible to observe the **baseline** of a particular person’s behavior and then watch out for deviations from that baseline. For example, if people belong to a certain group, then judge them based on their affinity to that group. The problem with that method is that our behaviors are incredibly complex, and you can’t attribute all deviations to deception. So to summarize, it’s better to stick to more rigorous models, focusing on behaviors that have been proven to be associated with lying. Like the verbal and non-verbal behaviors described above. --- # 6\. Deception in practice The book ends with an analysis of an interview with Congressman Anthony Weiner when he was accused of sending sexual text messages to female college students despite being of age and in a committed relationship with children. These Twitter messages came out to the public. Anthony Weiner claimed his account was being hacked and promised to prosecute whoever was responsible for the hacking. Have a look at the following video and see if you can detect any deceptive behavior on the part of Anthony Weiner: In answer to [the first question](https://youtu.be/RFlExAqOKAA?si=QYzk9wbjxFNeXhN1&ref=asiancenturystocks.com) at 0:08, Anthony Weiner fails to answer the question, uses qualifiers such as *“I think”* and *“pretty”*, downplays the issue by calling it a prank and uses referral statements to gain credibility and try to get out of the questioning. In his answer to the second question at 0:36 about why he’s not asking law enforcement to investigate the supposed hacking of his accounts, Weiner touches his nose with his hand and then fails to answer the question again, instead downplaying the issue with an unrelated rhetorical question that seems intended to mislead. In response to [the third question](https://youtu.be/RFlExAqOKAA?si=qTaAhtUpL%5FSDm0Hv&t=43&ref=asiancenturystocks.com) at 0:52, Weiner attacks the interviewer by saying, *“Do you want to do the briefing?”* and then uses an inappropriate level of politeness by saying, *“Sir,”* again, not answering the question. In response to [a later question](https://youtu.be/RFlExAqOKAA?si=RLy7fFjlkU7I4ieN&t=93&ref=asiancenturystocks.com) at 1:50, Weiner fails to answer another question, uses referral statements to gain credibility and again attacks the interviewer by saying *“Why don’t you let me do the answers and you do the questions”*, which doesn’t make any sense since they are asking questions. He’s getting frustrated at this point. In [the follow-up question](https://youtu.be/RFlExAqOKAA?si=wBFv40gIkOFaILnl&t=131&ref=asiancenturystocks.com) at 2:17, he ridicules the question, shows an inappropriate level of concern for what is a serious allegation, and again fails to answer the question asked. In [answer to the question](https://youtu.be/RFlExAqOKAA?si=l8saoCyW%5FrsEqhwM&t=162&ref=asiancenturystocks.com) at 2:57, Weiner claims that there is a tactic of someone out there who’s out to get him framed, making a convincing statement that he’s the victim, even though he’s the person who made the statement that his Twitter account was being hacked. Again, he fails to answer the question asked. Later on, in [a question about why Weiner hasn’t asked the police to investigate](https://youtu.be/RFlExAqOKAA?si=XZUdCaLbyp00TYgr&t=232&ref=asiancenturystocks.com) the hacking, at 4:00 Weiner uses the “frankly” qualifier to gain credibility. He also provides another convincing statement: that all he’s trying to do is serve his constituents and the country. Fair enough, but he’s just trying to gain credibility and still not answering the question asked. To summarize, Anthony Weiner was lying through his teeth. He avoided answering the questions asked, tried to change the subject, showed signs of being anxious, tried to downplay the issue by joking around, then attacked the interviewer and used qualifiers and convincing statements to seem like a decent person. But he was guilty of the accusations, and his evasive behavior gave it away. --- # 7\. Conclusion Identifying deception involves asking a question and then looking and listening for reactions to that question. - These can be verbal, such as failing to answer the question, failing to deny an allegation, attacking the person asking the question, inappropriate reactions, use of qualifiers, and efforts to influence your views on them. - Non-verbal reactions include delays in answering, grooming behaviors, face movements or shifts in a person’s anchor points, or a disconnect between body language and what the person is saying. You’ll need to find a cluster of red flags — at least two are necessary to determine that the person is lying. Now that you’ve identified a lie, the next step is to dig deeper to get closer to the truth. I hope this post was helpful to you. If you’re interested in reading the entire book, you can find it on Amazon [here](https://www.amazon.com/Spy-Lie-Former-Officers-Deception/dp/1250029627/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.ZKXdynDv1gAydY9O62f-ySaxd4H1HPMsUbI4bKcWCuV9dMeBS1BzKj6uD2Nb4%5FWFy4Zsvj81L6d%5Fa-0NLIPlEnvX%5F0GrrjWce%5FTuAH2cSjCZXol8mxWpmxHnte67XAq3HjycGXgxO9Vnm2XycoUNfA9cXox0dvEwynscQLzNGGcBWtA9pMD%5FYrh2V4iPSOcqxC-hQ-DBz1iQj6ctxkdN9D6lSwBFocTwAbzz4%5FJ18Dg.u7yum6AUltavgRZRZKvktMDJ8Tl8TLIytMd25MwYm-E&qid=1713922235&sr=8-1&ref=asiancenturystocks.com). I highly recommend it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Thank you for reading 🙏** If you would like to receive 20x high-quality deep-dives per year and other thematic reports, subscribe to Asian Century Stocks － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Links April 2024 URL: https://www.asiancenturystocks.com/links-april-2024/ Last updated: 2024-04-23T04:06:03.000Z It’s been a month ago since my last links round-up post. The accumulation of great content means that today’s edition will be packed with ideas. I hope the list is not too daunting for you. Enjoy! ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d98eae3-1248-4446-a2a4-87a14b871d17_1100x85.png) - Caro-Kann Capital on Kazakh fintech firm [**Kaspi**](https://www.asiancenturystocks.com/content/files/ac05183f374c1c6d262f310e6/files/302012e1-82de-6931-6e3d-e7caae885201/2023%5F12%5Fcaro%5Fkann%5Fcapital%5Finvestor%5Fletter%5F4q%5F2023.pdf)*(🇰🇿* *KSPI LN - US$22 billion)* - Oasis goes activist on FMCG firm [**Kao Corporation**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/oasis-a-better-kao-presentation-eng.pdf)*(🇯🇵* *4452 JP - US$19 billion)* - Sweet Stocks on Chinese shipping company [**SITC**](https://sweetstocks.substack.com/p/sitc-the-ryanair-of-container-shipping) *(🇨🇳* *1308 HK - US$5.4 billion)* - East72 on Kadoorie’s [**Hongkong & Shanghai Hotels**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2024/04/e72dt-quarterly-report-march-2024.pdf) *(🇭🇰* *45 HK - US$1.3 billion)* - Pyramids and Pagodas: update on [**PAX Global**](https://www.pyramidsandpagodas.com/p/pax-global-0327hk-2023-results-disappoint?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com)*(🇭🇰* *327 HK - US$864 million)* - Healthy Stock Picks on [**Modern Dental**](https://healthystockpicks.substack.com/p/modern-dental-group-3600hk)*(🇨🇳* *3600 HK - US$568 million)* - Mat Roiss on bubble tea cafe [**Nayuki Holdings**](https://roiss.substack.com/p/the-bubble-tea-market-nayuki-holdings) *(🇨🇳* *2150 HK - US$493 million)* - The Quercus Fund on SOE [**Tianjin Development**](https://www.asiancenturystocks.com/content/files/static/64bff86e8d9ac05c4df92a13/t/656f2044a63477792dfa5efa/1701781624072/quercus%5Ffund%5F2023%5Fannual%5Fevent.pdf) *(🇨🇳* *882 HK - US$222 million)* - Oriental Value on beauty center chain [**Water Oasis**](https://orientalvalue.substack.com/p/water-oasis-1161-hk)*(🇭🇰* *1161 HK - US$116 million)* - Dungeon Investing on 2nd hand retailer [**Mandarake**](https://www.dungeoninvesting.com/p/mandarake-2652t-profiting-from-the?ref=asiancenturystocks.com)*(🇯🇵* *2652 JP - US$110 million)* - Sweet Stocks on supplements [**Vita Life Sciences**](https://sweetstocks.substack.com/p/vita-life-sciences-healthy-returns)*(🇦🇺* *VLS AU - US$84 million)* - One Foot Hurdle on Taiwan furniture ODM [**FY Group**](https://1foothurdle.substack.com/p/6807-tw-a-true-one-foot-hurdle-with)*(🇹🇼* *6807 TT - US$74 million)* - TAMIM All Cap Fund on roll-up [**Embark Education**](https://www.tamim.com.au/uploads/6/6/0/7/66077715/tamim%5Faustralia%5Fall%5Fcap%5Fmarch%5F2024.pdf?ref=asiancenturystocks.com)*(🇦🇺* *EVO AU - US$70 million)* - Made in Japan on SaaS stock [**Property Data Bank**](https://madeinjapan.substack.com/p/a-quick-note-on-a-japanese-appfolio)*(🇯🇵* *4389 JP - US$50 million)* - Jam Invest on HK skincare retailer [**Mi Ming Mart**](https://jaminvest.substack.com/p/hk-12-dollars-trading-for-pennies?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) *(🇭🇰* *8473 HK - US$18 million)* --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66979f84-e1b0-4000-ab51-292e2c72ba9f_1100x85.png) *(estimated reading time)* - [**Nicholas Lardy**](https://www.foreignaffairs.com/united-states/china-still-rising?utm%5Fmedium=social&ref=asiancenturystocks.com): China is still rising, as its private sector is doing okay (6 mins) - [**Massif Capital**](https://research.massifcap.com/p/deep-dive-chinese-industrial-production?ref=asiancenturystocks.com) on China’s industrial policy under Xi Jinping (10 mins) - [**Harris Kupperman**](https://pracap.com/on-china-why-the-real-risk-is-cny-5-not-9/?ref=asiancenturystocks.com) believes the CNY will strengthen to 5 to the USD (10 mins) - [**East Asia Stock Insights**](https://www.eastasiastocks.com/p/japanese-parent-child-listings?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) on Japanese parent-child listings (5 mins) - [**Altay Capital**](https://altaycap.substack.com/p/i-emailed-my-portfolio-companies)’s portfolio companies about their TSE reform compliance (10 mins) - [**Dungeon Investing**](https://www.dungeoninvesting.com/p/researching-japanese-stocks?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) with a few tips on researching Japanese equities (11 mins) - Excellent commentary from [**Auscap**](https://www.auscapam.com/wp-content/uploads/bsk-pdf-manager/2024/04/Auscap-Funds-Newsletter-April-2024.pdf?mc%5Fcid=5489763bab&ref=asiancenturystocks.com) on Australian interest rates (20 pages) - [**Vietnam Holding**](https://www.asiancenturystocks.com/content/files/media/kzkboa4h/vnh-investor-report-march-2024.pdf)’s 1Q2024 letter discussing the Vietnamese economy (2 pages) - [**Ross & Van Compernolle**](https://www.rossvancompernolle.com/document/fund-commentaries/432/1st-quarter-2024?ref=asiancenturystocks.com)’s 1Q2024 letter on Southeast Asian stocks (6 mins) - [**Kathmandu Capital**](https://www.asiancenturystocks.com/content/files/static/63465dbda3a3280f2afb25eb/t/6610791fdef3ec084b078bd4/1712355616003/kc%5F1q24%5Fletter%5Fto%5Finvestors.pdf)’s 1Q2024 letter on NagaCorp, Kaspi, etc (5 pages) - [**Krohne Capital**](https://krohnecapital.com/index.php?page=acymailing%5Ffront&ctrl=archive&task=view&id=170&userid=844-rgIdQAsV29x01x&noheader=1&noheader=1&ref=asiancenturystocks.com)’s 1Q2024 letter discussing Matahari, MAP Aktif, etc (6 mins) - [**Mat Roiss**](https://roiss.substack.com/p/hong-kong-part-2-7-large-caps-i-actually?utm%5Fsource=%2Finbox&utm%5Fmedium=reader2) on Fu Shou Yuan, Tencent, Xiaomi, Haidilao, First Pacific, etc. (6 mins) - [**Turtles Substack**](https://www.turtlesresearch.com/p/update-on-active-ideas?r=2xe91&utm%5Fmedium=ios&triedRedirect=true&ref=asiancenturystocks.com) with updates on Noah, Dada Nexus, Halyk, Lufax, etc (8 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8e0a8de-8686-4b68-b17f-eeef7e9a4bb7_1100x85.png) *(listening time)* - [**Mark Mobius**](https://www.youtube.com/watch?v=Ml07VAw6AG4&ref=asiancenturystocks.com) likes India, skeptical about HK stocks, thinks JPY will drop (9 mins) - [**Russell Napier**](https://open.spotify.com/episode/47mfYEWaZtL0BxUMnntwMx?si=74d5e7ca8f0841ca&ref=asiancenturystocks.com) thinks the CNY will decline, worried about geopolitics (58 mins) - Arcus Investment’s [**Peter Tasker & Mark Pearson**](https://www.youtube.com/watch?v=XhmIrOTtVOI&ref=asiancenturystocks.com) on Japanese stocks (40 mins) - [**M&G Japan**](https://open.spotify.com/episode/3rKNJKrCEpWQpzYW66bPHH?si=eec86c202c594c3c&ref=asiancenturystocks.com)’s Carl Vine discussing Sanrio, Nintendo, Nidec, etc (37 mins) - Journalist [**Ryan Takeshita**](https://open.spotify.com/episode/7CmX5ax9XvR8LwG8Ckd7eR?si=47266260559d410e&ref=asiancenturystocks.com) on Japan’s burgeoning start-up scene (46 mins) - Tiger grand-cub [**Chris Hansen**](https://open.spotify.com/episode/1cr5uwUolyn47eXY4toMtl?si=d4d6fcbac4634757&ref=asiancenturystocks.com) on why he’s bullish on Indian stocks (1:29 hours) - [**Rob Vinall**](https://open.spotify.com/episode/2ctAq7Ws2mkh2vvA8VZXwS?si=b70e1484d2ca4d56&ref=asiancenturystocks.com) with reflections from his recent trip to China… leaning bullish (21 mins) - Excellent episode with Professor [**Steve Tsang**](https://open.spotify.com/episode/0gXQmKje2iOPLFNMxghvi8?si=9PtsVkD4RN-dvTCNZJ7HKQ&ref=asiancenturystocks.com) on Xi Jinping’s ambitions (40 mins) - CSIS’s [**Ilaria Mazzocco**](https://open.spotify.com/episode/7aDK0lhF0emIE3w6ju5rHm?si=0840fe2b5c9c4da1&ref=asiancenturystocks.com) on the ongoing boom in Chinese EV exports (39 mins) - Pzena’s [**Allison Fisch & John Goetz**](https://open.spotify.com/episode/2JRSGAMpI6H9PtLh3vR5ft?si=c06ed0cf75a24f49&ref=asiancenturystocks.com) on Weichai Power, COLI, Man Wah (29 mins) - Petra Capital’s [**Chan Lee & Albert Yong**](https://www.youtube.com/watch?v=1ucZhjBCbY4&ref=asiancenturystocks.com) on Korean value stocks (50 mins) - Australia’s Airlie’s [**Will Granger**](https://youtu.be/oDcXZ9WBVk8?si=pGeAQw0GXKag2K7Y&ref=asiancenturystocks.com) on Tabcorp, Gentrack, News Corp (8 mins) - Journalist [**Johan Nylander**](https://open.spotify.com/episode/2bkuQmzbJng2BeLeZoSR4y?si=fHfNhz-KTii55PsAD57-dA&ref=asiancenturystocks.com) on the long-term bull case for Mongolia (34 mins) - Rare interview with legendary resources investor [**Pierre Lassonde**](https://www.youtube.com/watch?v=YMWeAbZQSEE&ref=asiancenturystocks.com) (39 mins) --- ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8b9ec6c2-a081-4a90-8936-ba71a0ff80e9_1100x85.png) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0ad8c032-3363-4495-9f89-b8dbc24149dc_1079x784.jpg) We’re now in the midst of a global rate cut cycle. Source: Game of Trades --- Here are some of my favorites out of the above links: _This post is for paying subscribers only._ ### Lao Feng Xiang B-share (900905 CH) URL: https://www.asiancenturystocks.com/lao-feng-xiang-b-share-900905-ch/ Last updated: 2026-07-31T01:53:06.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Lao Feng Xiang at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Lao Feng Xiang**](https://finance.yahoo.com/quote/900905.SS?ref=asiancenturystocks.com)*(900905 CH - US$2.1 billion)* is the largest jewelry manufacturer and retailer in China, with an estimated market share of 7.5%. The company has a long history dating back 175 years. The name “Lao Feng Xiang” means “old phoenix” in mandarin Chinese, symbolizing rebirth. It was one of the earliest manufacturers and retailers of precious metals in Shanghai, and it was famous for its gold jewelry, utensils, pearls, jades, and diamonds. Celebrities would often wear Lao Feng Xiang jewelry to special events. After the Communist Revolution in 1949, the jewelry industry suffered a slump as wearing gold was considered “bourgeois”. However, the business restarted after Deng Xiaoping’s reforms in the early 1980s. Lao Feng Xiang eventually ended up listed on the Shanghai Stock Exchange where it remains today. Lao Feng Xiang’s niche is traditional gold jewelry. The designs tend to be simple and timeless, in contrast to, say, Chow Tai Fook’s more trendy designs. Customers buy Lao Feng Xiang’s jewelry not only as accessories but also as investments － to protect their capital from inflation. And the company has been immensely successful. Over the past 20 years, it’s compounded revenues at 20% and earnings at 32%. While the numbers for the past ten years have been more modest, the industry has suffered significant headwinds after the gold bubble burst in 2012\. In light of these headwinds, Lao Feng Xiang has performed admirably. Since 2022, China’s gold market seems to have woken up, thanks to the depreciation of the Renminbi against the US Dollar. In 2024, gold trading volumes hit a new high. Shanghai gold prices now trade at a premium to world prices. China’s central bank is also aggressively buying gold. As for Lao Feng Xiang itself, most of the growth has historically come from new store openings. They have about 6,000 stores across mainland China, and they’re now expanding at a rate of 500 to 600 stores per year, implying high single-digit growth. Almost all of these stores are operated under a franchisee structure, with Lao Feng Xiang selling the products to them at marked-up prices, along with modest joining fees and fixed brand usage fees. Whether we’ll see positive same-store sales is unclear, but at least Lao Feng Xiang has maintained its market share compared to Chow Tai Fook, and gained market against most of the other companies in the industry. On my conservative numbers, Lao Feng Xiang’s US Dollar-denominated B-share trades at a 2026e P/E of 5.7x with a 7.0% dividend yield, assuming that management sticks to its guided 40% payout ratio. Note that the B-share is identical to the A-share except that foreigners can buy it and that it trades in US Dollars rather than Chinese Yuan. The B-share currently trades at a 65% discount to the despite identical voting and cash flow rights. Management has previously said it intended to convert the B-share to a Hong Kong listing. While these plans seem to be on hold for now, if executed, it would most likely lead to an uplift in the valuation multiple. The biggest question mark in my mind is the resignation of former Chairman Shi Lihua in 2022\. While Lao Feng Xiang is a state-owned enterprise and is run as such, I still can’t help thinking that Shi has been a part of the company’s success since he took over in 2001. Another risk is that the market seems to be getting saturated, with Chow Tai Fook expanding aggressively on the mainland over the past five years. Then again, it’s clear that the industry is enjoying a resurgence now, thanks to the renewed interest in gold. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### The Silver Economy URL: https://www.asiancenturystocks.com/senior-spending/ Last updated: 2024-04-17T05:26:19.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/senior-spending/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/529c0b93-7143-492d-928f-53c1de9a8ff9_724x482.jpg) A man with silver gray hair in central Taipei. Source: Getty Images **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* # Summary - In developed Asia, a large part of the population is about to retire, causing massive shifts in consumption patterns. Specifically, they’ll shift their spending from transport and eating out to healthcare. - Healthcare, nursing homes, insurance companies, gyms, golf, special interest travel and deathcare are some of the beneficiaries of Asia’s aging populations. - I also discuss a few listed companies likely to be affected by this trend. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Over the weekend, I read an article in the Wall Street Journal about [how golf is booming](https://www.wsj.com/sports/golf/golf-boom-driving-ranges-topgolf-4a3b883d?ref=asiancenturystocks.com) thanks to baby boomers reaching retirement age. The US baby boomer generation was born from 1946 to 1964 and remains the largest demographic cohort due to post-war baby-making. These baby boomers are now retiring, causing a big shift in consumption patterns as they stop working and focus on leisure activities instead. [![America's morphing age pyramid | Pew Research Center](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f67e0c50-e5a6-4525-8d39-e8cb42b9b027_525x500.gif)](https://www.pewresearch.org/age-pyramid/?ref=asiancenturystocks.com) This begs the question of whether Asian countries will see a similar effect as their population become older. Several countries in this part of the world have population pyramids that resemble that of the United States. As people retire in these countries, companies selling into the [Silver Economy](https://en.wikipedia.org/wiki/Silver%5Feconomy?ref=asiancenturystocks.com) － catering to those with gray hair － will probably thrive. In this post, I’ll discuss exactly what those companies might be. ``` Table of contents 1. Asia's demographics 2. Spending patterns 3. Beneficiaries of senior spending 3.1. Healthcare 3.2. Nursing homes 3.3. Financial services 3.4. Hobbies & fitness 3.5. Travel 3.6. Deathcare 4. Conclusion ``` --- # 1\. Asia’s demographics ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2ca338be-2147-4ade-85cb-ee3d79f67443_724x483.jpg) Source: Getty Images Asia has a population of 4.8 billion people, with China and India representing more than half of this number. Overall population growth is 0.6% per year. But this number masks significant differences between developed and developing Asia, East Asia vs South- and Southeast Asia and urban and rural Asia. It’s hard to generalize across such a diverse region. Developed Asia － which includes countries and regions like Japan, South Korea, Taiwan, Hong Kong and Singapore － is rapidly aging. For example, in Japan, the number of elderly people aged 65 and older is expected to increase until 2044, growing about 2% per year and then falling gradually. Look at the following population pyramids: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8177da1e-ab5c-4c56-a58f-d722ce323759_3612x1284.png) Population pyramids for developed Asia Pacific countries and regions In Japan, the biggest bump in age brackets is between 70 and 74\. In other words, peak retirement has already happened. However, in South Korea, Taiwan, and Hong Kong, the biggest bump in their population pyramids is in the 60-64-year-old bracket, which means that a large proportion of their populations are currently retiring. That has important ramifications for their economies. In Developing Asia, population pyramids are far more favorable: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8899ac75-f01a-4113-be9d-b53e405abb66_3602x1276.png) Population pyramids for developing Asia Pacific countries and regions These actually look like the “pyramids” they were named after, with many more young people than the elderly. The only real exception is Thailand, whose population is ageing with a bump around the 50-54-year-old bracket. So, to summarize, the above demographic profiles suggest that the Silver Economy will likely grow the fastest in East Asia, specifically in Japan, South Korea, Taiwan and Hong Kong. And given that the [retirement age](https://tradingeconomics.com/country-list/retirement-age-men?continent=asia&ref=asiancenturystocks.com) in the region is typically anywhere from 58 years old (Indonesia) to 65 years old (Japan), there’s a huge number of people in these countries retiring right now. And many of the companies serving them are thriving. --- # 2\. Spending patterns ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/53a63255-53af-4474-87ad-465346a77007_1280x720.jpg) Source: Nikkei According to Franco Modigliani’s 1957 life cycle hypothesis, consumption throughout your life tends to be relatively constant. However, incomes vary with age, peaking around 40 and then falling into retirement. In this model, any short-fall has to be dealt with by either borrowing or drawing down savings: ![life-cycle-hypothesis](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/da7a2cc3-68d3-4deb-8455-581a28c1a014_600x377.jpg) Modigliani made the case that finance would help smooth spending over a lifetime through student loans, mortgages, and pension solutions. The ability to smooth spending is, therefore, dependent on the maturity of the financial systems in each country. I’ve looked into the data, and it seems like the life cycle hypothesis is not entirely accurate. Actual dollar spending tends to go down into retirement. Numbers that I’ve seen suggest a drop of about 20% from pre-retirement to people 75 and older. There are a few reasons for this. After people stop working, they’ll no longer incur work-related expenses such as transport and eating out. Their mortgages will often have been paid off. And with the children moving out, they’ll no longer need to pay for their education. Another discrepancy concerns savings. According to Modigliani’s model, wealth peaks around the age of retirement, and people then dis-save until wealth reaches zero around the end of their lives: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7eeccd3c-600d-4ac2-8a5f-3ccc0e26e904_600x406.jpg) However, data shows that the elderly tend to hoard wealth in retirement rather than running it down quickly. That’s understandable: we no longer know how long we’ll live, and many elderly wish to donate their remaining wealth to their children. This is another reason spending decreases into retirement in actual dollar terms. However, there are spending categories that tend to go up after people start working. According to survey data from the Japan Ministry of Internal Affairs and Communications study, for example, retirees tend to spend far less on transport and education but **more on healthcare**. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/48fbcc48-3a8a-4382-a47c-0a6f51f38311_769x731.jpg) According to a [2019 study](https://dr.ntu.edu.sg/bitstream/10356/152339/2/What%20older%20people%20need%20in%20Singapore.pdf?ref=asiancenturystocks.com) from Singapore, the elderly tend to spend more in absolute dollars on **healthcare** and **food & and non-alcoholic beverages**. Conversely, they spend far less on public transport. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7c05f4c3-f15a-47b2-9d5b-9ad358fbc7c4_1232x1230.png)](https://dr.ntu.edu.sg/bitstream/10356/152339/2/What%20older%20people%20need%20in%20Singapore.pdf?ref=asiancenturystocks.com) --- # 3\. Beneficiaries of senior spending But let’s look deeper into the specific categories that I think the elderly will spend more money on as they age. I’ll also discuss the listed companies that I believe will benefit. ## 3.1\. Healthcare ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fb5dae81-ff12-4b03-b526-543afd0899e9_672x486.jpg) Source: Shimizu Hospital _This post is for paying subscribers only._ ### 10 Questions with Chris Beselin URL: https://www.asiancenturystocks.com/10-questions-with-chris-beselin/ Last updated: 2025-10-24T15:02:47.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b8d23be3-810b-404a-b79e-e19e6ddbaca8_1920x1080.png) Today, I’ll be interviewing Chris Beselin, who runs a Vietnam-focused activist fund and two tech businesses from his base in Ho Chi Minh City. I know Chris from Stockholm School of Economics, where we both studied in the mid-2000s. Just to be transparent, I also served on the board of Endurance Group from 2015 to 2017. In this conversation, I’m interested in Chris’s thoughts on investing in Vietnamese equities, the country's future, and entrepreneurship in general. ``` Table of contents 1. Background 2. Learnings from being CEO at Lazada Vietnam 3. Vietnam's success 4. Experience investing in Vietnam 5. Misconceptions about Vietnam 6. Corporate governance 7. Where he finds value 8. Long-term compounders 9. The anti-corruption campaign 10. Where can readers go to learn more ``` # 1\. Could you tell us about yourself - your background, how you ended up in Vietnam and what you’re doing right now? My background originally is from European activist investing, with a firm called Cevian Capital - I believe its Europe's largest activist investor. I left Cevian to do a turnaround as CEO for a small retail chain in Sweden and thereafter I relocated to Vietnam in early 2012 to start up the e-commerce group Lazada from scratch in Vietnam. I was the first CEO in Lazada Vietnam and later also CEO in Lazada Malaysia during a turnaround period. Subsequently, the Lazada group was sold to Alibaba for just above US$3 billion. After Lazada, I moved on to start up a number of businesses of my own in Vietnam and Southeast Asia. We started the first local activist investment fund, Endurance Capital, in Vietnam in 2015 and in parallel we built up a range of tech-related companies from scratch in the region. Some of them we started under our listed investment company, fram^ (which IPO’d on Nasdaq First North in Sweden in 2017). All in all, we have started 10-15 companies in Southeast Asia and exited 4: Fram IT dev, Pangara, Intrepid and Lazada - the latter two are both among the top 15 largest tech exits in Southeast Asia to date, at least if you believe Tech In Asia. 😉 Today, I'm primarily CIO for Endurance Capital and Chairman of Fram and Intrepid. --- # 2\. What did you learn from your time as CEO of Lazada in Vietnam? There were endless struggles and learnings. We were aiming to build the company at such a high pace and were hiring 100s of new people to keep up with that pace. That type of ramp-up inevitably creates chaos, fire fighting and struggles – which in turn fosters learning after learning the hard way. 😉 If I had to pick three core learnings straight off the bat it would probably be i) with enough willpower, most timelines (both short and long) can be compressed to 1/10th or less of what was estimated from the outset, ii) never take no for an answer and iii) the critical importance of a robust company culture, both as a competitive advantage (as everything else can and will be copied by competition) and as a perpetual performance driver. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bc689e46-893a-40a9-b897-550b4d11b815_1364x764.png) Lazada’s office in Ho Chi Minh City. Source: [Office Snapshots](https://officesnapshots.com/?ref=asiancenturystocks.com) Lazada was an exhilarating and intense experience. After 3-4 years from starting up, the company was about to enter a very different phase, being in the process of being acquired by a large corporation (Alibaba) and all the changes and bureaucracy that come with it. At a juncture like that you should really ask yourself if you are ready to go all in for 3-4 years more (given new post-transaction incentive programs and similar that typically come into place) and if it’s your type of challenge or not. I’m not a big-corporate operator kind of person or leader - I much prefer the earlier phases where it’s much more about rapid ramp-up and scaling (e.g. from 0 to 500 employees) to the phases thereafter where it’s a lot about managing an evermore complex organization and bureaucracy. Don't get me wrong - the latter one also requires extraordinary skills which I deeply admire, it's just not my preferred phase of organizational development in the CEO role. There are however other roles that interest and deeply excite me in those phases, e.g. executive Chairman, board member and/or active investor. In parallel, I had also gotten to know Vietnam and Southeast Asia, as well as its "growth model", talents and stock markets quite well by that time and I had a feeling that it could be the perfect backdrop for building new businesses and helping listed ones unlock tremendous long term value. --- # 3\. Why do you Vietnam has been so successful as an economy - why has it developed faster than almost any other nation on earth? There are a range of factors, of course, but just to outline a few: It’s a balanced economy and growth model - it's not your typical emerging market, where the economy is overly dependent on one or a handful of commodities. Rather, the Vietnamese growth model has multiple core engines: its one of the most trade-focused economies in the world (measured as (export+import)/GDP) with free trade agreements signed with countries representing 60% of global GDP, it has a young and well-educated population where English proficiency is on par with e.g. India and South Korea, it has a sizeable and confident middle class that is rapidly growing and it has a stable government that has been focused on pro-market deregulations for the past 35 years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1927c3ff-8811-46c3-a7e3-eaf1cf2727b5_1592x920.png) Vietnam’s PISA scores stand out compared other countries at its level of development. Source: The World Bank, 2015 And in contrast to what many people think from the outset, Vietnamese exports are primarily engineering-driven (as opposed to lower value-add textiles and similar). Around 45% of the exports are electronics, smartphones, laptops and machinery components. In this sense, my conviction is that Vietnam is much more the next South Korea or Japan than the next China. To me, this all boils down to the fact that the number one asset of the country is its young, savvy and hungry engineering population (ca. 100,000 engineers are educated per year in Vietnam, of which around 50% are within software). The attractiveness of the Vietnamese engineering talent pulls foreign capital to invest in onshore engineering-centered manufacturing, which in turn has vast ripple effects on the employment of thousands of additional factory workers around the engineers. --- # 4\. What has your experience been investing in Vietnam so far? Any success stories you’d be willing to share with us? We've been investing in the Vietnamese stock market via Endurance Capital for almost a decade. We are collaborative activist investors, so we both take financial exposure in our target companies (typically as a top 3-10 owner) and offer support with resources (both via board seats and from outside of the board in a direct and close dialogue/collaboration with management teams). In this context, we have had both financial success stories and mishaps/learnings as well as activist ones. So far we have managed to outperform most benchmarks and peers over e.g past 5 years - in this sense, overall perhaps the success stories have outweighed the mishaps in a purely financial sense. Some of our more successful investments have been a locally leading securities broker and a niche chemicals company. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f509cff2-b7b1-4486-93a1-00667a671d15_1466x796.png) Cumulative gross performance of the Endurance Capital Vietnam I Fund in USD terms. Source: [Endurance Group](https://endurance-group.com/performance.html?ref=asiancenturystocks.com) On the activist side, I would perhaps highlight a locally leading car retailer where we managed to implement most/all of the agenda we set out to do (selling non-core real estate, improving margins, improving IR, consolidating minority ownership in subsidiaries etc) and were represented through two board seats, well aligned with a large group of other shareholders and the company's management team - the final exit was done at a significant premium to the market price, which was a positive ending to the story. --- # 5\. What misconceptions do you think foreigners typically have about the country? I think there are many. Just to name a few: The first one is perhaps "Vietnam is almost like China, but smaller and less developed". I went through a bit of the difference in the fabric of the economies and demographics previously, but then there is also the very important difference in politics. Geopolitically, Vietnam is not and will never be or perceive itself to be a global superpower like China - it doesn’t have any geopolitical ambitions outside its own borders like China has. Vietnam is primarily interested in developing its economy through trade and FDI, this in turn means that Vietnam in practice benefits from being geopolitically neutral between East and West and by trading/being friends with "everyone". So far the country has managed this balance very astutely for decades. ![Foreign Direct Investment in Vietnam 2023: Challenges are Yet to Come - Australian Institute of International Affairs - Australian Institute of International Affairs](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/42e745af-a0a7-46c2-a884-7ad28fd3cfb7_2147x1400.png) Foreign direct investment into Vietnam. Source: [Australian Institute of International Affairs](https://www.internationalaffairs.org.au/australianoutlook/foreign-direct-investment-in-vietnam-2023-challenges-are-yet-to-come/?ref=asiancenturystocks.com) Another common misconception (particularly for Westerners growing up during the Vietnam War) is that "Vietnam is just getting back on its feet after the recent war". Obviously, this perspective is wildly outdated, but it’s still surprisingly common among foreign visitors. To put it into perspective, perhaps a suitable analogy is if you would have been saying/thinking similar things about France or the UK in the mid 90s... (also then ca. 50 years from the end of the Second World War, just like Vietnam is today 50 years away from its war ending in 1975). --- # 6\. Your fund has an activist angle - what’s been your experience working together with management teams to improve corporate governance practices? In general, this aspect has been surprising us in a positive sense. There is first of all a general openness for outside ideas, as long as a) they are backed up by sound fundamental reasoning and/or data, b) they can be realistically implemented, c) there is a willingness to be part of the execution of implementing them, and d) there is a long term perspective in the investment to see it through (99% of public investment funds can't credibly commit to these aspects as they trade in and out of holdings on a monthly/quarterly basis, driven by the liquidity requirements of a e.g. the common UCITS-structure or similar). In addition, over the years we've been positively surprised regarding the robustness of the Vietnamese legal framework for shareholder influence. It is reasonably straightforward to exert influence while participants and stakeholders respect the frameworks for e.g. nominating board directors, voting via proxy at AGMs etc. --- # 7\. In the vantage point of 2024, where do you see currently see value in the Vietnamese market? At Endurance Capital, we hold a concentrated portfolio of companies (around 10 at any one point in time). Hence, I think much more in terms of individual company names than in terms of sectors. That being said, banks in Vietnam have done tremendously well this year and there is/was great value there as a sector, and particularly in the most well-governed names. I also see recovery potential in consumer-related names that had a tough 2023 - e.g. retail and related. Fairly soon I think we will see broad based recovery in the listed export names as well, given how strong export data have been YTD on a country level, but of course depending a bit on industry and target country mix of each particular exporter. We are also slowly seeing recovery in real estate, but I don't think we are fully there for rapid take off just yet. Let's watch. --- # 8\. Any stocks you’d be potentially willing to hold forever (i.e. long-term compounders)? With our funds, we have a 3-5 year holding horizon (can be longer in individual cases), so it’s not the typical approach we take. That being said, I’m doing some work at the moment for my personal investments where I’m specifically deep-diving into long term compounders (both in and outside of Southeast Asia). So I'll have to get back to you on that one ;) --- # 9\. What is your view on Vietnam's recent anti-corruption campaign - what are the potential implications for investors in the country? Overall, I see this as something positive for the country in the long run (albeit I strongly disagree with the practice of capital punishment anywhere in the world). Corruption in any country is a great and very challenging inhibitor of growth. Over the past decade, Vietnam has done tremendous heavy lifting to root out corruption. For sure, they are far from done. That being said, the fact that they dared to take down the president twice for corruption-related issues shows the world that there is a deeply rooted and serious will to tackle the problem head-on (even if it short-term means scaring markets and risk losing international face temporarily). ![Vietnam tycoon Truong My Lan sentenced to death in $12.5bn fraud case](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d3e96b8e-d3f5-42da-bdd2-aa10b9e6a5a1_770x513.jpg) Vietnam tycoon Truong My Lan, a target of the anti-corruption campaign. Source: AFP I was looking at some data the other day from Transparency International - over the past decade, Vietnam has jumped from 2.7 to 41 (today being just below the global average) on their corruption index, PCI (higher score means "cleaner") - that's a good 15x improvement in roughly a decade. --- # 10\. Where can people learn more about you and Endurance Capital? Please visit us at [endurance-group.com](http://endurance-group.com/?ref=asiancenturystocks.com) or reach out to myself at christopher.beselin@endurance-group.com ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### IH Retail (1373 HK) － 2024 update URL: https://www.asiancenturystocks.com/intl-housewares-retail-2024-update/ Last updated: 2024-04-14T04:00:38.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/intl-housewares-retail-2024-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in IH Retail when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1b42978b-9de0-425b-872f-bb160a40d7bd_750x563.png) Source: Google Maps # Summary - I wrote about Hong Kong-based retailer IH Retail back in mid-2023\. The company operates houseware discount stores in Hong Kong, Macau and Singapore under the “Japan Home” and “JHC” brand names. - Since mid-2023, the stock price has fallen over 50% due to lower sales of pandemic supplies after Hong Kong eased its COVID-19 restrictions. - In this post, I discuss exactly what went wrong since 2023 and what might happen in the future. In the final part of the post, I also project earnings into 2027 and discuss the valuation multiples the stock would end up trading at. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. IH Retail’s financials 2.2. New store openings 2.3. Employee share awards 3. What will change for IH Retail? 3.1. Shenzhen revenge travel 3.2. Rising labor costs 3.3. The threat from e-commerce 3.4. The private label offering 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap International Housewares Retail (“IH Retail”) is a stock I wrote about in July 2023\. Here’s the presentation I put together on the company back then: [International Housewares Retail (1373 HK)Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in IH Retail at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/video_upload/post/134800491/d3893c5e-8a4b-4a7e-8d72-11ea8576560b/transcoded-00000.png)](https://www.asiancenturystocks.com/international-housewares-retail-1373/) And here’s a short summary of that presentation: - International Housewares Retail is a Hong Kong-based discount retailer of houseware goods with 380 stores across Hong Kong, Macau, Singapore and several other countries. Hong Kong represents roughly 90% of revenues, and the rest comes from Macau and Singapore. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e4948f6d-2354-4e5b-a4a8-2de4f936ae6b_2498x1246.png) - These stores operate under the “Japan Home Centre” / “JHC” / “日本の家“ brand names, selling products that are priced so cheaply the stores might well be dollar stores. The way the company can achieve such low prices is by cutting out the middlemen and dealing with over 200 factories in China directly. Over 40% of IH Retail’s products are private label goods, and that’s probably part of its success story, along with the fact that its inventory turnover is high. Since listing, the company has enjoyed an average average return on equity of 24%. - The company’s same-store sales growth had been around 5%, though there was slow growth in the total store count, with organic growth of about 7% per year altogether. - I knew at the time that Hong Kong had experienced emigration following the introduction of the 2020 National Security Law and that Hong Kong’s population had shrunk. But I envisaged a future whereby immigration from the Chinese mainland could make up for this population loss, especially if the government’s plan on building affordable housing for millions of people in the New Territories ever comes to fruition. - I suspected that IH Retail’s profits would drop due to the onset of the COVID-19 pandemic. It had earned excess profits during COVID thanks the selling of face masks and rapid antigen test kits under the “SMILE 365” brand name. And during COVID-19, it also earned high-margin revenues from its e-commerce site, on top of government subsidies. - But in the longer term, I believed that IH Retail would do well. Discount retailers have so far survived the onslaught of competition from e-commerce websites quite well as delivery costs can often exceed the price of an individual item. Discount retailers also offer a treasure hunt experience. And a feeling of comfort knowing that whatever you pick, it’s not going to break the bank. - On 2025 numbers, I predicted a P/E ratio of 11.1x and, assuming a stable 85% dividend payout ratio, with a dividend yield of about 8%. - I noted that IH Retail’s two co-founders kept buying shares in the open markets. I also noted that famed activist investor David Webb had been a long-term shareholder in IH Retail and continued to add to his position. Webb has an eye for well-governed companies, and I think that’s probably what attracted him to IH Retail, too. --- # 2\. Update since my first write-up ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f4b16e53-50e4-4f5b-9757-eaf5ee4a8321_720x480.jpg) Due to a post-COVID weakness in earnings, IH Retail’s stock price has tanked and is down over 50% in less than a year: ## 2.1\. IH Retail’s financials So what happened? Here are the company’s financials up until the first half of FY2024, ending 30 April 2024. _This post is for paying subscribers only._ ### Closed-end funds at a discount URL: https://www.asiancenturystocks.com/closed-end-funds-at-a-discount/ Last updated: 2024-04-10T05:17:18.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/closed-end-funds-at-a-discount/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/37860e35-a3d6-441b-8261-ff33b189c57e_728x524.png) # Summary - Closed-end funds are actively managed investment vehicles that rarely receive new money from investors. Instead, they trade like stocks and often at discounts to their net asset values. - While the risk of trading at a discount to net asset value may seem to suggest that closed-end funds are inferior, I also think that the lack of redemption pressure allows fund managers to invest for the long term, even in illiquid securities, if they choose to. - I have compiled a list of 49 closed-end funds focusing on equities in the Asia-Pacific region, most of which are listed in the United Kingdom or the United States. - Towards the end, I highlight five closed-end funds worth paying attention to. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Here’s a quick note on closed-end funds in the Asia-Pacific region. In Alice Schroeder’s book [The Snowball](https://www.amazon.com/Snowball-Warren-Buffett-Business-Life/dp/0553384619/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&dib%5Ftag=se&dib=eyJ2IjoiMSJ9.yY3ETWzKvG9pIMc9gl4NqEkM9ypE0K2%5FdcIwz2dN1EnjTe2HrpNp4mBWKmi9WBdLy2yckI4JiNQ4sXnwUY7r24PupxntTUaNDvWrNmmqE0SSrMFqox5QSV2l7nhLhOJdRhWOx5Zymd9psM2GVwRzG-IMJi3iNcNRMM2X1wjr0uVt8AguYnv5B82m2SsUMavidDD-OPD29HV258B14gcqilZv10hHk8Z16Ec6tMcVE5g.GF7CFoIjTwjs18Id7tErHuPsgmfiU4S0WPoCaceF-kc&qid=1712558707&sr=8-1&ref=asiancenturystocks.com), Warren Buffett spent a summer in 1950 analyzing closed-end funds. He’d go to his father’s brokerage office and browse investment company handbooks. At the end of the summer, he apparently put two-thirds of his personal portfolio in two closed-end mutual funds that traded at large discounts to net asset value. That begs the question: can we find similar discounts among closed-end funds in the Asia-Pacific? In this post, I’ll try to answer that question. I’ll also discuss why you might want to consider closed-end funds. And why ETFs are not necessarily the answer for those looking for funds to invest in. ``` Table of contents 1. What are closed-end funds? 1.1. Introduction 1.2. Pros and cons of closed-end funds 2. Valuing closed-end funds 2.1. Opportunity cost 2.2. Cycles in popularity 2.3. Fees and operating expenses 2.4. The accuracy of valuation marks 2.5. Catalysts 3. Universe of closed-end funds in Asia 4. Five highlighted funds 5. Conclusion ``` --- # 1\. Closed-end funds ## 1.1\. Introduction Equity funds can be divided into three main categories: open-ended funds, exchange-traded funds (ETFs) and closed-end funds: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/27a76828-a4ab-4d7e-90ba-b9147192e1cd_2066x892.png) **Open-ended funds** continuously take in money from investors, issuing new shares to them or shrinking the share count in the process. Any investment or redemption will be dealt with at the end of each business day at the calculated net asset value of the fund. Investors in **Exchange-traded funds** (ETFs) don’t deal with the fund directly. Instead, they buy the ETF on the secondary market. If the price of the ETF diverges from net asset value (NAV), authorized participants (banks) will create or redeem shares to remove the discount. That means ETFs will typically trade close to NAV, at least in normal circumstances. **Closed-end funds** are actively managed investment vehicles traded on stock exchanges. They do initial public offerings like normal companies, selling a fixed number of shares to investors. Once they’re listed, they don’t deal with investors directly. Instead, investors will need to sell their shares on the secondary market. And that means that the price can sometimes significantly deviate from the fund's net asset value. These closed-end funds have existed since 1893\. They became popular during the US stock market bubble in 1928-29 and then fell out of favor after the Great Depression. In Asia, closed-end funds became popular in the 1980s, though more recently, new money seems to be flowing into ETFs instead. --- ## 1.2\. Pros and cons of closed-end funds Today, most investors seem to think that open-ended funds are superior to closed-end funds and that ETFs are superior to both. But I think there’s nuance to that question. While open-ended funds can be bought and sold at NAV, buyers often have to pay load charges to access the fund. In times of distress, when facing heavy redemptions, open-ended funds are forced to sell their holdings at whatever price the market is offering, whether those prices are attractive or not. They’ll essentially lock in losses at the worst possible moment. I also think that exchange-traded funds remain untested. There’s often a liquidity mismatch between underlying assets and the ETF itself. As long as prices are stable and demand for the ETF, there is no problem. But at the end of the day, heavy price-insensitive selling of an ETF can also cause prices of the underlying assets to plummet, locking in losses as well. I’d stick to ETFs that do not suffer from liquidity mismatches. So, I think there’s a case to be made for closed-end funds, which, in the right hands, can afford to be long-term and value-oriented. They’re particularly suitable for illiquid asset classes such as emerging market equities. They can also provide access to specific markets that foreigners will find difficult to access on their own. There is a risk that closed-end funds will end up trading below net asset value. So alignment with the fund manager is crucial to ensure that the fund is not simply seen as a permanent capital vehicle designed to collect fees into perpetuity. I favor the ones that base their fees on the market price of the closed-end fund rather than the net asset value since the manager will then be keen to close the discount. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d00b5b1b-d943-41bc-94af-db1596221b1d_2852x698.png) --- # 2\. Valuing closed-end funds US-based closed-end funds have traded at a 4% discount to net asset value in the past two decades: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/79057a6e-1113-4031-8db3-c4e2f53a2126_1280x500.jpg) Source: Morningstar And they almost never trade above net asset value. So expect a small discount, on average. Closed-end funds investing in illiquid, private equity-type assets can often trade as much as 50% below net asset value and stay there, sometimes for decades. Why do these discounts persist, and what are the factors that go into them? I think it’s a combination of changes in opportunity costs, the popularity of different asset classes, fees and operating expenses, dubious valuation marks, and a lack of catalysts due to sometimes poor corporate governance. ## 2.1\. Opportunity cost Historically, these net asset value discounts have been high during times of distress. They were high in 2008 and were also high during COVID-19\. I think that reflects a combination of risk-aversion and high uncertainty about what the underlying assets are worth. Today, we also see risk-free rates much higher than the 10-year average. Why invest in risky assets when you can enjoy a decent return with close to zero credit risk? High interest rates become especially problematic if the fund itself has leverage, as it will also need to pay higher interest expenses. --- ## 2.2\. Cycles in popularity During the BRICs bubble of 2007 to 2010, closed-end funds traded up significantly. For example, a major India fund ended up with a 35% premium to NAV as investors couldn’t get enough of it. Retail investors tend to chase either yield or short-term outperformance. So expect a higher discount when the yield is low, or the recent performance has been weak. --- ## 2.3\. Fees and operating expenses Fees to the manager detract from value, and calculated NAVs do not take the net present value of future fees into account. They all charge **management fees**, but also **operating expenses** such as administrative costs, custodian fees, legal fees and marketing expenses, which are charged directly to the fund. For that reason, I like to look at the total expense ratio. Certain closed-end funds will also charge **performance fees** against a specific benchmark, which can subtract significantly from value, all else equal. These funds often trade at 20% discounts, if not more － for good reason. --- ## 2.4\. The accuracy of valuation marks Sometimes, portfolio holdings can be illiquid and, therefore, difficult to value. There may not be identifiable peers that can help investors understand the underlying value. For private equity assets, the manager will have leeway in how the assets are valued. For example, changing the discount rate can cause the NAV of the fund to shift significantly. That can introduces a conflict of interest, and I totally get why investors can be skeptical of valuation marks. --- ## 2.5\. Catalysts The final point is that corporate governance probably explains the majority of the worst offenders in terms of wide NAV discounts. They’re managed by investment advisors who control the fate of the fund. Since they’re earning a decent fee from an investment vehicle that could theoretically live on forever, why rock the boat? There are exceptions, specifically so-called term trusts, which are closed-end funds with a fixed termination or maturity date. I very much prefer those. If a discount persists and the manager wants to deal with that problem, it can convert the closed-end fund to an open-ended fund, or it can be liquidated, merged, etc. And they can also buy back shares, provided that the mandate allows it to do so. --- # 3\. Universe of closed-end funds in Asia So to summarize, NAV discounts are cyclical based on the popularity of particular assets and shifts in the interest rate environments. But they also reflect the net present value of future fees, the likelihood that the manager will treat minority investors well. And finally, whether the manager is likely to outperform its benchmark. Over the past two days, I’ve tried to identify all the closed-end focusing on equities in the Asia-Pacific region. Here’s the final list that I’ve come up with: _This post is for paying subscribers only._ ### Micro-Mechanics (MMH SP) URL: https://www.asiancenturystocks.com/micro-mechanics-mmh-sp/ Last updated: 2026-07-31T01:52:47.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Micro-Mechanics at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Micro-Mechanics**](https://finance.yahoo.com/quote/5DD.SI?.tsrc=fin-srch&ref=asiancenturystocks.com)*(MMH SP - US$147 million)* is a manufacturer of precision tools used in the back-end processes of semiconductor chip manufacturing. The company’s founder, Chris Borch, is an American who was sent to Singapore as an expat working for a semiconductor equipment maker. After two years, he left his job and used his US$600 of savings to build a precision manufacturing company in the back of a hat factory in suburban Singapore. Fast-forward to today, his company, Micro-Mechanics, is now a major producer of parts for the back-end of semiconductor chip manufacturing across its five manufacturing plants. Such parts include: - Die ejector needles to separate the die by pushing it out from the wafer - Rubber tips to pick up dies from wafers and place them onto leadframes - Dispensing nozzles to spread out adhesive on leadframe before dies are placed on them - Wire bond clamps, wedges and wire cutters, used in the wire-bonding process to provide electrical connections between the chip and external leads While these products may seem like commodities, they’re anything but. Chips are becoming smaller and smaller, and extreme precision is therefore needed for the tools involved in their making. The parts are also mission-critical, and any defect can be very costly for customers. This has provided Micro-Mechanics with pricing power. Micro-Mechanics’ moat can be observed through its financial track record. For most of its history, it’s enjoyed 60% gross margins and 30% operating margins. And its return on equity has historically stayed between 20% and 30%. Growth has been steady, though not spectacular, at around 8% per year in the past two decades. The driver seems to have been higher global chip sales volumes, as well as more complex packaging. Dies have increasingly been stacked on top of each other, requiring multiple layers of wire bonding. As chips become smaller, the technological barriers to entry have also increased, enabling Micro-Mechanics to gain market share. It currently enjoys an 11% global market share in its core segments. The company benefitted from COVID-19\. Sales of consumer electronics boomed, and the electronics industry benefitted. However, fearing production and supply chain issues, customers ordered too many parts, and inventory was built up. That’s led to a slack in new orders, and Micro-Mechanics revenues have therefore dropped significantly. Its share price is now close to its March 2020 lows. It will be difficult to judge exactly when the current downturn ends, as I see no clear signs of a turnaround yet. However, it is a cyclical industry, and Micro-Mechanics seems to be entrenched in its customers' businesses. The turnaround will come sooner or later. I estimate that Micro-Mechanics will likely end up with a 2026e P/E of 11.7x. The multiple has historically been volatile, so it’s hard to say what a reasonable multiple might be. The only real question mark in my mind is the promotion of Chris Borch’s son, Kyle Borch, to Deputy CEO, overseeing the Asian operations. Micro-Mechanics has won many awards for how it operates, specifically when it comes to corporate governance. However, promoting the founder’s 30-year-old son to become Deputy CEO doesn’t like a decision entirely based on merit. Shortly thereafter, long-time CFO Chow Kam Wing and COO Low Ming Wah resigned on the same day. This is presumably a sign of discontent. I believe that Micro-Mechanics is one of the best-run companies in Singapore. The 50%+ drop in the share price since 2021 is primarily due to a cyclical downturn and an associated inventory build-up. Whether Micro-Mechanics will thrive long-term will depend on how well Kyle Borch eases into his new role. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Indonesia after Jokowi URL: https://www.asiancenturystocks.com/indonesia-after-jokowi/ Last updated: 2025-10-13T14:25:02.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/indonesia-after-jokowi/) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7c11b14b-42d8-4652-a8e7-69524fad5c2c_1485x990.jpg) Source: Getty Images **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* # Summary - Prabowo Subianto will become Indonesia's president in October 2024\. He has pledged to continue President Jokowi’s reforms, including building a new capital in East Kalimantan and pushing for the continued industrialization of the commodity base. - However, given Prabowo’s background as a military commander during the years of former dictator Suharto, it’s not clear what his long-term ambitions are. He has spoken favourably of Suharto, which begs the question of whether we’ll see a return to Suharto-era policies, including greater state ownership and state control. - At the end of the post, I’ll also discuss the likely implications of Prabowo’s presidency on the Indonesian stock market and the currency. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) In the past few days, I’ve been hooked on Netflix’s new drama [Cigarette Girl](https://www.imdb.com/title/tt21279114/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fq%5FCigarette%2520Girl&ref=asiancenturystocks.com) on Netflix. It’s taken Indonesia by storm, depicting the lives of kretek cigarette makers in a quiet town in the 1960s, a few years before the rise of Suharto. I argue that Indonesia faces a similar political shift today, from democracy to authoritarianism. On 14 February 2024, former defence minister Prabowo Subianto was elected the new President. He has a military background, having served former dictator Suharto and speaks favorably about that era. Analysts seem to think Prabowo represents continuity, but I’m not so sure. We will know what his intentions truly are only when he takes office in October 2024\. In this post, I’ll discuss Prabowo’s rise and its implication for Indonesian equities and the currency. ``` Table of contents 1. Jokowi’s legacy 2. The 2024 General Election 3. Prabowo Subianto 4. Investment implications 4.1. The broad perspective 4.2. Individual stocks 5. Conclusion ``` --- # 1\. Jokowi’s legacy ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/43a4477e-d2c2-49a1-9be1-af3e609ec14b_1024x683.jpg) Source: Getty Images Since 2014, Indonesia has been run by businessman-turned-politician Joko Widodo, also known as “Jokowi.” He was the first Indonesian present who didn’t come from a military background or a prominent Indonesian family, and he’s been almost universally liked by the Indonesian people. He was born in a poor neighborhood in Surakarta (also known as Solo) in Central Java. Being a diligent student, he secured a seat at a university. After building a furniture export business called Rakabu, he set his sights on politics and first became mayor of Solo and then president of the entire country. During Jokowi’s tenure, there’s been significant positive change: - He’s pushed to construct **infrastructure** such as toll roads, ports, airports, etc. For example, between 2015 and 2018, the Jokowi administration built 718km of new toll roads, compared to 229km during the preceding decade. Examples of such roads include the Trans Java Toll Road, connecting Jakarta with Surabaya and other cities across Java. Construction on a new subway in Jakarta began in 2013\. Indonesia now has a high-speed rail between Jakarta and Bandung. A new airport called Kertajati Airport is being built in the Eastern part of Jakarta. And most of these projects were financed domestically without burdening the government budget too much. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/13b56d14-9ce9-4bfe-a701-9fa1cdd65be6_2880x985.png) - Thanks to Jokowi, a new city called **Nusantara** is being built on the island of Kalimantan. It will replace Jakarta as Indonesia’s capital city. Construction began in 2022\. The purpose of this new city is to redistribute development to Kalimantan, a poorer part of the country, and ease the burden on Jakarta, which is both the commercial capital and the centre of government. The first 6,000 servants are expected to move to Nusantara by the end of 2024. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7c459ce4-d51b-47cd-9480-50804642d92e_1362x594.png) - There’s been an **industrialization of the commodity base** by forcing companies to undertake refining processes within the country, including for nickel and bauxite. The number of Chinese-based nickel smelters for example has gone up significantly. - Jokowi’s proposed **Omnibus Law on Job Creation** was finally passed in 2023 after amendments. It’s intended to increase foreign direct investment into Indonesia by dealing with some of the hurdles that businesses have been facing. For example, it makes it easier to hire and fire employees, abolishes minimum wages by sector, lowers the corporate income tax, makes it easier for companies to acquire land, offers tax breaks for companies undertaking investments, relaxes foreign ownership restrictions, etc. Foreign direct investment into Indonesia has now started to rise, driven primarily by investments from China. But there’s also the potential for multinationals to relocate production from China to Indonesia as part of the broader trend of “friendshoring”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b6bb3325-cc12-44f9-9fed-c006e2005b93_1280x550.jpg) Source: Jefferies Jokowi has been hugely popular. Opinion polls have given him net approval ratings above 60% for most of his presidency, higher than Narendra Modi's. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e160235b-698e-4f0a-8917-236629c42d0e_698x718.png) Source: The Economist But there’s also been clear regression in several areas. For example, in the run-up to Indonesia’s 2024 General Election, Jokowi tried to remove the two-period term limit, enabling him to stay on as President. There was a huge popular backlash against these efforts, and he had to step back from his ambition to stay on as President. He then tried to engineer other ways to maintain power, including nominating two of his sons to compete in the election. His 36-year-old son Gibran Rakabuming (“Raka”) teamed up with defense minister Prabowo Subianto. Jokowi’s second son, 28-year-old Kaesang Pangarep, was made head of a youth-oriented political party called the Indonesian Solidarity Party. When his son Gibran encountered legal challenges to his vice presidency, Jokowi influenced the Constitutional Court through his brother-in-law to remove the 40-year minimum age requirement so that he could qualify. Under Jokowi, critics were often charged with defamation. The Islamist opposition party Prosperous Justice Party (PKS) faced investigation and criminal charges that seemed to be part of a power struggle. Jokowi also undermined the authority of the anti-corruption commission, probably to consolidate his own power. The question is, what will happen now, given that Jokowi is about to resign and his current defense minister, Prabowo Subianto, is taking over as president? --- # 2\. The February 2024 General Election ![Survei GRC: Prabowo Ungguli Ganjar dan Anies di Pilpres 2024](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1e0f7908-e1f1-4c58-a418-028c8b5d90da_1280x720.png) Prabowo Subianto, Anies Baswedan and Ganjar Pranowo. Source: Kaltim Today On 14 February 2024, Indonesia held a General Election. Voters across the country elected a President, Vice President and lawmakers. Prior to the election, three major alliances had been formed: - Jokowi’s defense minister and former general **Prabowo Subianto**, supported by his political party Gerindra, Golkar and semi-Islamist party National Mandate Party. Prabowo is a centrist who campaigned on the promise to continue Jokowi’s reform agenda. - Former Jakarta governor **Anies Baswedan** was supported by a coalition of the the National Democratic Party (NasDem), the Islamist Prosperous Justice Party (PKS) and the National Awakening Party (PKB). Baswedan pushed an economic plan that focused on labor intensive industries such as making shoes and furniture. - Former Central Java governor **Ganjar Pranowo** who was supported by Jokowi’s party Indonesian-Democratic Party of Struggle (PDI-P) and the Islamist United Development Party (PPP). Pranowo pushed for greater spending on education and healthcare. In October 2023, Jokowi’s son Gibran Rakabuming － often jokingly referred to as the “nepo baby” － would team up with defense minister Prabowo and serve as his Vice President. In Indonesia, Vice Presidents don’t have much power, but the nomination represented an implicit endorsement by Jokowi of Prabowo’s presidency. The population became convinced he would be the safe choice for those who wanted continuity and stability. As expected, Prabowo thus won with a landslide, gaining 58.6% of the votes: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cc808506-87ed-4a2b-a3df-734606373ec5_706x710.png) Source: Wikipedia In the parliamentary elections for the People's Consultative Assembly, Jokowi’s centrist party, PDI-P, received most of the votes, followed by centre-right Golkar and right-wing Gerindra. The Islamist parties PKB, PKS, PAN and PPP received roughly 30% of the votes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/59dae01d-782d-42bc-9dd0-be3a465e3379_708x448.png) The fact that Prabowo’s party Gerindra only ranked third shows you how much he benefitted from his association with Jokowi. On his own, he would not have won the election. But as much as Jokowi would like to control Prabowo, his bargaining power will be limited once Prabowo takes over 20 October 2024\. Longer-term, it’s clear that Indonesia will be heavily influenced by Prabowo’s own ambitions and ideas. --- # 3\. Prabowo Subianto ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4dae294-6d57-42b7-a580-b98c1cdc6c42_1280x852.jpg) In his campaign, Prabowo cultivated a lighter touch, for example, by publishing Instagram videos of himself cuddling with a cat and dancing during his political rallies. His social media campaign portrayed him as “gemoy”, a new Indonesian slang word that translates as “supercute” or “cuddly”. This was a break from his past. Prabowo is a tough man from a military background. He comes from a prominent family that broke with Indonesia’s founding leader Sukarno. Prabowo spent much of his childhood abroad, in Zurich, London, Hong Kong and Kuala Lumpur. After he returned to Indonesia, he quickly rose through the ranks of dictator Suharto’s military forces and eventually became its commander, helping Suharto maintain control against both internal and external threats. He married one of Suharto’s daughters in the 1980s and was thought to be Suharto’s natural successor. Though they later divorced, Prabowo maintained his grip over the military. As a military commander under Suharto, Prabowo’s track record isn’t exactly clean. He was allegedly involved in the kidnapping and likely death of 20 or so pro-democracy students in the run-up to Suharto’s resignation. Some argue that he engineered riots in 1998 in a bid to take over the leadership after the fall of Suharto. Prabowo was also integral in suppressing dissent in East Timor and Papua. Prabowo denies all of these allegations and has not been formally charged. After having been pushed out of the army following Suharto’s fall in 1998, he tried to make a comeback by founding the Gerindra party in 2008\. He teamed up with established politician Megawati Sukarnoputri to become her Vice President in the 2009 presidential election but lost that election. He lost again in the 2014 election against Jokowi. And in 2019, he surprisingly teamed up with Islamist parties. But failed yet again. Instead, he was chosen by Jokowi to become his defense minister. He finally achieved his dream of becoming president in 2024. This background makes it clear that Prabowo is an opportunist. He’s power-hungry and feels entitled to his current position. In the coming six months, many analysts believe he’ll be forming a coalition so broad that there practically won’t be any opposition. He’s seen as a puppet of Jokowi, as he’s vowed to finish Jokowi’s existing policies like moving the capital city to Kalimantan and push for FDI into nickel smelting and other commodity industries. He apparently promised to only control two ministries: defense and oil & gas. But let’s see how long this situation lasts. Once Prabowo has consolidated power, through legal means or otherwise, I think he will forge his own path. In his 2015 book The Paradox of Indonesia, Prabowo rhetorically asked why a nation so rich in natural resources had so many poor people. The book argued that Indonesia’s government officials, media, and even religious leaders had become corrupt and that vested interests had taken over the country. He lamented that Indonesia had lost its way after the fall of dictator Suharto. [![Pandangan Strategis Prabowo Subianto: Paradoks Indonesia ...](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eac2fb48-69b6-4289-b6c0-a1ee3403b7f4_200x275.jpg)](https://www.tokopedia.com/find/buku-paradoks-indonesia?ref=asiancenturystocks.com) This language suggests that Prabowo might want to repeat Suharto’s economic agenda of state control and investment-led growth. And that’s probably not long-term bullish for Indonesian equities. Another worrying sign is that Prabowo has advocated creating a new entity to receive tax revenues outside the finance ministry, equivalent to setting up an Indonesian equivalent to America’s Internal Revenue Service (IRS). The risk here is that it would mean a loss of control for the Ministry of Finance and greater control for himself. Given Prabowo’s connection to Suharto, the main worry is whether he’ll eventually push for a return to the 1945 constitution, which was in force during the Suharto years of 1966 to 1998\. This would essentially abolish elections and reinstate dictatorship. There is no doubt that Prabowo is about to become a powerful man － it’s only question of how powerful he’ll become. Jokowi seems to be hoping that his son Gibran will become Indonesia’s next president in 2029 or 2034\. Other influential politicians like Megawati Sukarnoputri are also likely to oppose any consolidation of power into the hands of Prabowo, providing some checks and balances in the system. For now, at least. --- # 4\. Investment implications ## 4.1\. The broad perspective The broad Indonesian stock index [Jakarta Composite](https://finance.yahoo.com/quote/%5EJKSE/history?period1=639360000&period2=1712016000&interval=1d&filter=history&frequency=1d&includeAdjustedClose=true&ref=asiancenturystocks.com) had a forceful recovery from COVID-19 with recent enthusiasm for consumer stocks: Indonesian bank stocks such as Bank Rakyat and Bank Central Asia have done particularly well, with their earnings growth exceeding the rest of the index. Banks now represent almost half of the MSCI Indonesia index ETF. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3719735c-5161-4e2f-a437-54903ed67fe7_1280x942.jpg) Source: PGM Global However, Indonesia’s economic growth has faltered a bit since the initial recovery from COVID-19\. After spikes in Indonesian coal and palm oil prices in 2022, they’ve faltered more recently, and this decline has started to trickle down into weaker consumer spending. Recent interest rate hikes seem to have been engineered to avoid a depreciation of the Indonesian Rupiah due to high US interest rates and election uncertainty. The inflation rate has already come down to healthy levels. The only reason why Bank Indonesia hasn’t acted yet is because economic growth remains strong at around 5.0%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/02e1d1ca-fc36-4103-92ab-e92f62b09a24_1280x957.jpg) Source: PGM Global There are some signs that households are starting to suffer. Rice, sugar and palm oil prices remain elevated compared to the pre-COVID levels, impacting household consumption. The subsidized fuel price hike in 2022 caused a one-time increase in inflation that also hurt households. Since early 2022, El Niño weather patterns have also negatively impacted farming, as the limited water supply caused delays in planting. Farm earnings have, therefore, suffered. Election-related spending might have helped a bit. In a bid to gain popularity, Jokowi sent out 10kg of rice per month to 21 million families in addition to cash handouts, and those have helped on the margin. Bank Mandiri has estimated that such election-related spending has exceeded 1% of GDP, but it’s not clear how much of that spending ended up in ordinary people’s pockets. So, the economy is somewhat weak, primarily due to a sequential weakness in commodity prices and high interest rates. But foreigners still favor Indonesia as an investment destination, with cumulative foreign net buying back to near the peak, with some selling since August due to election uncertainty: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/323cba62-f9f8-4a27-b8b3-d94cbce11c8f_1280x697.jpg) Source: Jefferies And Indonesian equities remain cheap compared to alternatives such as India. MSCI Indonesia’s Price/Book multiple is now just above 2.0x, a discount to its peak in 2014. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6e83caf8-9fad-44e3-82b7-6e4543c36163_1280x473.jpg) Source: Jefferies A big question mark for the currency is the likely resignation of conservative finance minister Sri Mulyani Indrawati. Except for a short episode of debt monetization during COVID-19, she built a reputation for fiscal orthodoxy, and it’s unclear who will replace her. Historically, Indonesia’s twin deficits － the current account and the fiscal － have caused the currency to depreciate over time, and I suspect that the Rupiah will probably depreciate under Prabowo. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1eff4623-60e9-4586-a716-2bd8df53340e_1280x538.jpg) Source: Jefferies The big question, of course, is whether Prabowo is serious about his plans to return to Suharto-era economic policies. State ownership and state-led development would be negative for long-term productivity and the health of Indonesia’s private sector. But that’s a longer-term question that probably does not matter much in the short-to-medium term. --- ## 4.2\. Individual stocks Let’s discuss how the election might impact the prospects for individual companies. The most obvious beneficiaries of Prabowo’s presidency are the companies involved in the construction of the new capital city, Nusantara, or infrastructure projects. CLSA has previously said that residential property development in Nusantara is going to benefit [**Ciputra**](https://finance.yahoo.com/quote/CTRA.JK/?ref=asiancenturystocks.com)*(CTRA IJ - US$1.5 billion)*, [**Summarecon**](https://finance.yahoo.com/quote/SMRA.JK/?ref=asiancenturystocks.com) (SMRA IJ - US$549 million), and [**Bumi Serpong**](https://finance.yahoo.com/quote/BSDE.JK/?ref=asiancenturystocks.com)*(BSDE IJ - US$1.3 billion)*. State-owned construction companies such as [**Pembangunan Perumahan**](https://finance.yahoo.com/quote/PTPP.JK/?ref=asiancenturystocks.com) *(PTPP IJ - US$175 million)* might also benefit. From my understanding, though, Indonesian cement companies have limited exposure to Kalimantan, a market that’s instead dominated by Chinese cement producers like [**Anhui Conch**](https://finance.yahoo.com/quote/0914.HK/?ref=asiancenturystocks.com) *(914 HK - US$15 billion)*. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/db565183-2fe4-4cba-9dd6-e30bcc4bb39c_1236x274.png) Funders of Probowo’s own campaign include Garibaldi Thohir, who owns [**Merdeka Battery Materials**](https://finance.yahoo.com/quote/MBMA.JK/?ref=asiancenturystocks.com) *(MBMA IJ - US$3.3 billion)*. However, other companies in the EV battery supply chain also stand to benefit, including other nickel miners and processors. Prabowo has pledged to help Indonesia become a high-income economy by 2045 by tapping into Indonesia’s natural resources. So nickel miners such as [**Vale Indonesia**](https://finance.yahoo.com/quote/INCO.JK/?ref=asiancenturystocks.com) *(INCO IJ - US$2.6 billion)* should also benefit. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/64b85a2c-5424-4be0-836c-668b8308b7a5_1236x142.png) During his campaign, Prabowo promised students free lunch and milk. Dairy companies such as [**Ultrajaya**](https://finance.yahoo.com/quote/ULTJ.JK/?ref=asiancenturystocks.com) *(ULTJ IJ - US$1.2 billion)* and [**Cisarua Mountain Dairy**](https://finance.yahoo.com/quote/CMRY.JK/?ref=asiancenturystocks.com) *(CMRY IJ - US$2.4 billion)* should stand to benefit, though the impact of the program on their businesses will probably be small. Finally, Prabowo has said he’s comfortable with a higher debt/GDP ratio. That seems to imply greater budget deficits and higher credit growth. The system-wide loan-to-deposit ratio is only 85% so there’s definitely room for growth. Banks such as [**Bank Central Asia**](https://finance.yahoo.com/quote/BBCA.JK/?ref=asiancenturystocks.com) *(BBCA IJ - US$77 billion)* \- and [**Bank Rakyat Indonesia**](https://finance.yahoo.com/quote/BBRI.JK/?ref=asiancenturystocks.com) *(BBRI IJ - US$54 billion)* would benefit from higher credit growth, though also face the headwind of lower interest rates in the near term. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ead1cf80-71ea-47fc-963e-9c03c9ee3d3b_1238x148.png) Gun to my head, I would probably buy a dairy company like Ultrajaya or a bank like Bank Rakyat, given their superior return on equity. When doing the research for this post, I feared that Prabowo’s involvement with Islamic parties in the 2019 election might mean that he would want to introduce a ban on the sales of alcohol. But Prabowo is not a conservative Muslim and is unlikely to push this agenda. While Islamic parties now control 30% of the parliament and PPP / PKS / PAN combined less than 20%, they won’t gather enough votes to make it happen. Neither of the major parties in Prabowo’s current coalition supports a full alcohol ban. --- # 5\. Conclusion I see Prabowo as a similar man to Xi Jinping, who was initially seen as a reformist and pro-business. The big question is whether checks and balances in the political system can stop Prabowo from consolidating his power. As a former military commander, I think he’s primarily driven by power rather than ideology. In the short-to-medium term, I don’t think Prabowo’s ascent is going to matter much at all. Prabowo says he’s comfortable with a greater debt/GDP ratio, and it seems plausible to me that credit growth will accelerate, benefitting banks. On the other hand, I think interest rates are going to come down again in the next 1-2 years, causing net interest margins to compress. I also believe that greater fiscal deficits and a step away from the fiscal orthodoxy of current finance minister Sri Mulyani Indrawati is going to cause weakness in the Indonesian Rupiah. But other than that, Indonesia will keep growing steadily. There are always opportunities in any political system that’s pro-business and reasonably stable. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio review March 2024 URL: https://www.asiancenturystocks.com/portfolio-review-march-2024/ Last updated: 2026-06-04T11:38:56.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update My portfolio was down slightly in March 2024, with a negative -0.2% month-on-month and +29.8% since inception in October 2021, equivalent to an IRR of +11.2%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e20c7330-cf86-4bb3-ade5-9927cc101cdb_1568x526.png) But underneath this seemingly stable performance, there’s been significant volatility. The Japanese stock market has been on fire while many Hong Kong small caps have continued lower. The share price in [**CNOOC**](https://finance.yahoo.com/quote/0883.HK/?ref=asiancenturystocks.com) increased, potentially due to buying from government entity Central Huijin. [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK?.tsrc=fin-srch&ref=asiancenturystocks.com)also moved higher, with signs of a large buyer continuing to accumulate shares. It feels like something is about to happen at L’Occitane. On the negative side, my Hong Kong restaurant stocks [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) and[**Fairwood**](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) continued to almost 20-year lows, despite a strong top-line recovery following the end of the COVID-19 pandemic. Indonesian chocolate maker [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/) dropped further due to the challenge of higher cocoa prices, though I think they will peak soon. Here is my current Asia-focused portfolio as of 29 March 2024: _This post is for paying subscribers only._ ### Sony (6758 JP) － 2024 update URL: https://www.asiancenturystocks.com/sony-6758-jp-2024-update/ Last updated: 2024-03-29T05:05:50.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/delfi-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Sony when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6882e3eb-9871-4c34-a948-0b6ae37f1748_1402x928.png) Source: Sony # Summary - I’ve written about Japanese entertainment conglomerate Sony in the past, most recently in 2022 when I did a deep-dive on the stock. You can find that report [here](https://www.asiancenturystocks.com/deep-dive-2022-17-sony/). - It’s a high-quality business. The PlayStation 5 console dominates its market, and Sony is strong across its record labels, Hollywood movie studios and image sensor segments. Sony’s consumer electronics products face competition, but management is dealing with this threat proactively. - Since I last wrote about Sony, the stock price has gone sideways. Revenues have grown strongly, at least in yen terms, but there have been losses in the sales of PlayStation 5 hardware consoles due to their bulky nature and the strength of the US Dollar. - Sony’s management team has just said that it expects the sales of its PlayStation 5 hardware consoles to peak. That’s fundamentally positive for earnings growth. We’ll now see the sales of high-margin software titles take over the mantle thanks to a much larger installed base of PlayStation 5 consoles than in the past. - I also expect the market to be positively surprised by the success of Helldivers 2, which was primarily financed by Sony and released on 8 February this year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Last few years financials 2.2. A management reshuffle 2.3. The weakening of the Japanese yen 2.4. New PlayStation Plus tiers 2.5. The fight for game exclusivity 2.6. The larger iPhone 15 image sensor 2.7. The Zee merger termination 2.8. Spin-off of financial services 3. What will change for Sony? 3.1. PlayStation 5 sales 3.2. New games in the pipeline 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap I’ve written about Japanese entertainment conglomerate Sony two times in the past. The first time I was trying to answer a reader's question about Sony. My conclusion was that the Sony PlayStation 5 was early on in its console cycle and that earnings per share typically goes up through such cycles. [Reader question: Sony?Disclaimer: This article constitutes the author’s personal views only and is for entertainment purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. This is a disclosure - not recommendations to buy or sell stocks.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/04c604ff-cdb3-44da-9bec-449d3a102083_1454x968.png)](https://www.asiancenturystocks.com/sony/) I then dug deeper with my June 2022 post on [**Sony**](https://www.asiancenturystocks.com/deep-dive-2022-17-sony/) *(6758 JP - US$106 billion)*. You can find that full report here: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/91b4a172-95e2-494f-89aa-350d3fc519de_1916x1078.png)](https://www.asiancenturystocks.com/deep-dive-2022-17-sony/) Here’s a summary of the report: - Sony is a Japanese entertainment conglomerate with six separate businesses: - **Video games**: Driven by the Playstation 5 video game console with its associated game app store. However, Sony also owns game developers and publishes games on behalf of others. - **Music publishing**: Sony has a huge library of recorded music and copyrights and is one of the three dominating companies globally, along with Warner Music and Universal Music. It grows in the high single digits, driven by demand from streaming platforms like Spotify. - **Film production**: Sony owns Columbia Pictures. It had some tough years in the 2010s but rebounded strongly after the 2017 hire of Anthony Vinciquerra, who has almost single-handedly turned it into one of the most successful Hollywood studios. It also benefits from the demand for online streaming services like Netflix. - **Smartphone image sensors**: Around 50% market share in the market for smartphone image sensors, which convert light into images through image processing chips. Sony is the sole supplier of image sensors to Apple’s iPhone product, showcasing its capabilities. - **Consumer electronics**: Sony also sells cameras, TVs, smartphones and other consumer electronics. This is a segment with high competition and stagnating demand as “software is eating the world”, [in Marc Andreessen’s words](https://a16z.com/why-software-is-eating-the-world/?ref=asiancenturystocks.com). - **Financial services**: Sony runs Japan’s first-ever online-only bank and a life insurance business. It’s done well but will most likely be spun off at some point. - Sony’s music, film, and image sensor businesses had grown around the 10% mark. The consumer electronics business has faced losses for many years due to these issues, including competition from smartphones. My conclusion was the same as in my first post: the real driver of Sony’s earnings had been its video gaming business. - The PlayStation 5 was released in late 2020 and has held much promise. but in its first 1-2 years, it faced significant production issues due to shortages of semiconductor chips. When I wrote about Sony in 2022, I saw those chip shortages easing. I predicted that the sales of Sony’s PlayStation 5 consoles would potentially double. It also looked like PlayStation 5 was winning the console war against Microsoft’s Xbox X/S. And I thought it was early in its console cycle. With each console buyer typically buying 8-10 games each, I conjectured that we would see a spike in Sony’s earnings over the next few years. - Back in 2022, Sony’s former CFO, Kenichiro Yoshida, had just taken over as CEO after Kazuo Hirai. I felt positive about Yoshida because he was a numbers guy and led several reforms, including a system with detailed KPI for staff remuneration. - I forecasted a 2026e P/E of 11x, a decent discount to the global peer group’s 16x and Sony’s historical average P/E multiple of 16x. - The biggest risk, as I saw it, was that Microsoft would aggressively be courting users, lowering prices for games and game subscription services and making more of its games exclusive to Xbox. I also wondered whether some of the revenues from streaming services like Spotify and Netflix came from venture capital funding and whether such funding would disappear someday. However, the data suggested that most segments were doing well and that PlayStation 5 was winning the console war. --- # 2\. Update since my first write-up Sony’s share price has been flat since 2022, with a drop in between, despite the weakening of the Japanese yen and a rallying Japanese stock market. This surprised me, even though I’m aware that the starting valuation wasn’t necessarily low. Part of the enthusiasm for the PlayStation 5 was probably priced in. And what we saw after the COVID-19 pandemic was a decrease in user engagement as people played fewer games. However, another factor weighed on Sony’s earnings, and I’ll discuss that in greater detail below. ## 2.1\. Last few years financials Let’s look at Sony’s financials. Since June 2022, revenues have grown strongly, but we’ve seen margin pressure, with the operating margin going from 11% to below 8% more recently: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d873d0ea-0eed-48b4-bf63-136a7e020498_2640x888.png) On the revenue side, the main driver was the PlayStation 5 console's sales exceeding expectations. Revenues in the music and pictures segment were steady around the 10% per year mark. The weakening of the Japanese Yen from 2022 onwards also significantly benefited overall revenues. _This post is for paying subscribers only._ ### Links round-up URL: https://www.asiancenturystocks.com/links-round-up-e3d/ Last updated: 2024-03-25T03:30:44.000Z Asia investment-related write-ups, articles and podcasts _This post is for paying subscribers only._ ### Pentamaster International (1665 HK) URL: https://www.asiancenturystocks.com/pentamaster-international-1665-hk/ Last updated: 2026-07-31T01:52:29.000Z --- A few weeks ago, Olivier at [Emerging Value](https://emergingvalue.substack.com/) wrote about [**Pentamaster International**](https://finance.yahoo.com/quote/1665.HK?.tsrc=fin-srch&ref=asiancenturystocks.com)*(1665 HK - US$246 million)* and his write-up caught my attention. Pentamaster is one of the largest manufacturers of automated test equipment (ATE) for electronic devices. Such devices include non-memory products such as semiconductor chips, electro-optical sensors, power modules and LED lights. In the past, such work would have been done manually, but since the 1980s, machines from Pentamaster and others perform this task automatically at high speed. The company is also involved in factory automation projects. It builds custom-made equipment to automate manufacturer processes such as material handling conveyor belts, high-speed sortation systems, warehouse storage systems, etc. Pentamaster was founded by Malaysian engineer Chuah Choon Bin in 1991\. He had worked for Intel and National Semiconductor and then decided to jump ship and become a supplier to them instead. The company grew slowly then benefitted significantly from the devaluation of the Malaysian Ringgit after the Asian Financial Crisis in 1997\. And since then, it’s slowly moved up the value chain. Malaysia listed parent Pentamaster Corporation has risen roughly 20x since its IPO in 2003. Now, Hong Kong-listed [**Pentamaster International**](https://finance.yahoo.com/quote/1665.HK?.tsrc=fin-srch&ref=asiancenturystocks.com) is the operating company in the group. It was listed in 2018, supposedly to gain credibility in their attempt to gain Chinese customers. Kuala Lumpur-listed [**Pentamaster Corporation**](https://finance.yahoo.com/quote/7160.KL/?ref=asiancenturystocks.com) is better thought of as the family holding company. Since 2018, Pentamaster International’s revenues have risen at a +11% compound annual growth rate. And growth seems to be accelerating. The company’s contract liabilities - which reflect deposits on new sales orders - rose +37% in 2023\. And Pentamaster is now building a third factory that will quadruple Pentamaster’s total factory floor area and expand its factory automation business. The company sees potential in the automation of medical device manufacturing plants, and in the testing of automotive chip components. On my conservative estimates, Pentamaster International trades at a 2026e P/E ratio of 6.1x on top of a 3.1% dividend yield. And this is despite Pentamaster having a fortress balance sheet with plenty of cash and an 18% return on equity. For some odd reason, its parent [**Pentamaster Corporation**](https://finance.yahoo.com/quote/7160.KL/?ref=asiancenturystocks.com)*(PENT MK - US$638 million)* trades at a much higher multiple, at 27.6x near-term earnings. Its market cap its materially higher, even though the two companies’ consolidated revenues and profits are virtually the same. I don’t fully understand why this disparity has emerged. Some people point to a weak Hong Kong stock market. Others think it’s because Pentamaster International is not covered by many analysts, and that it doesn’t have many peers in the Hong Kong stock market. When asked about the valuation disparity, management says they don’t understand it either. The risks are mostly related the cyclicality of earnings. For example, between 2005 and 2010, Pentamaster’s revenues dropped for five years straight. While Pentamaster has moved up the value chain since then, a similarly protracted downturn cannot be ruled out. Though, near-term leading indicators, including management’s own guidance, remains positive at this point. Another risk relates to the currency. I believe that Pentamaster benefitted from the weaker Malaysian Ringgit from 2015 onwards. If the Ringgit were to strengthen compared to, say, the Renminbi, then Malaysia’s low labor costs would be less of an advantage to Pentamaster than they are currently. But that’s a question for the future, because right now Pentamaster seems to be taking market share, if anything. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Book review: Wild Ride URL: https://www.asiancenturystocks.com/chinas-capitalist-experiment/ Last updated: 2025-10-24T15:03:13.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c105244d-f568-4272-b3e9-6ccb8585aa9e_768x432.png) I just read a great new book by analyst Anne Stevenson-Yang. It’s called [Wild Ride](https://www.amazon.com/Wild-Ride-history-opening-closing/dp/173942431X/ref=sr%5F1%5F1?crid=25K79G0W8PCXV&dib=eyJ2IjoiMSJ9.D90sO3vngCqCoUK5pCgsjE2s%5FEQyKbtxSCP-uxBiJ8JaMBuybmZXODYhrL7%5FPtfX-MUoMqhVNcSz0ak0dTNL5BGe9MuqWfyY7o2U2LTE7TCJZH5J0mjEOGTfKhn0Tms%5F7nhEKd3uX0DQTrchNoJDydgbaESNsA69e-NF4BWV1vc%5FhUUgcOOHuPM3w6SNvYi23QxxXVA5IJmlxHLeVbWG4MR7-RAzXQCtVkVV5S7U5EJsK6F3T52EkiarHQow6Sn6VBS%5FTkNSxPwCXRkzVYSAhXXa-7GVmFyS5wr61k2FMjw.akpvnyU42AseIMfIT8INmRUqYhGn3Ii5wl7hiHdYnV0&dib%5Ftag=se&keywords=wild+ride&qid=1710815467&sprefix=Wild+Ride%2Caps%2C365&sr=8-1&ref=asiancenturystocks.com) and is available for pre-order on Amazon. The book tells the story of China’s economic miracle from the late 1970s until today － how Deng Xiaoping’s reforms unleashed a wave of entrepreneurship and led to China’s economy becoming one of the largest in the world. However, it also discusses some of the system's fragilities and how the country now seems to be turning inwards again. And this is also the story of Anne’s life, which has mirrored China’s capitalist experiment in more ways than one. ``` Table of content: 1. Anne Stevenson-Yang 2. The First Decade (1979 to 1988) 3. The Gilded Age (1989 to 1998) 4. The Go-Go Years (1999 to 2008) 5. The Crisis (2009 to 2018) 6. The Retraction (2019 onwards) 7. Conclusion ``` # 1\. Anne Stevenson-Yang Anne Stevenson-Yang came to China in 1985\. She had been working as a journalist for BusinessWeek in New York but wanted a change of pace. Once in Beijing, she joined the Chinese state publication China Pictorial － a propaganda magazine distributed to embassies overseas. ![Cover China Pictorial 12Th Issue 1962 Features Chinese Painting Showing – Stock Editorial Photo © ChinaImages #241045802](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/24cbe640-3399-4049-8c47-3483ff3b3a25_425x600.webp) A cover of an issue of China Pictorial from November 1985 Her initial enthusiasm for Chinese-style socialism soon turned to disillusionment. For example, she learnt that healthcare was only available for the privileged urban class. The food was basic. And there was a housing shortage, with her young and unmarried colleagues sleeping at the office with no other alternatives. At the magazine, she met a Beijing native Hindi translator called Zhifang Yang and ended up marrying him and attaching his surname to hers. But during those years, she increasingly felt living in close contact with her Chinese in-laws, trying to fit in and understand the language. So, they went back to the US for several years to recharge. In 1993, an investment association called the US-China Business Council contacted Anne and asked if she might be interested in a position for her in Beijing. Her new role would be to promote foreign direct investment into China. She would meet with foreign businessmen and learn about the trials and tribulations they went through trying to make it big in the Middle Kingdom. Over the next 20 years, she would witness the country transform into a modern economy. Anne herself built several successful businesses, including an online media business, a CRM software company, a publishing company, and a short-seller research firm called J Capital － which is how I learned about her in the first place. In the book, she recounts being excited about the changes that were taking place in China at the time. The population welcomed foreigners with open arms, keen to learn about new technologies and absorb capital from overseas. She witnessed the fruits of Deng Xiaoping's reforms from 1979 onwards. This is the story of how those reforms affected not just her but the Chinese population at large. --- # 2\. The First Decade (1979 to 1988) ![要70年代的劲松小区1.jpg](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b9feb4b3-f481-4841-9cec-e9955b1d8579_1833x1185.jpg) Beijing in the 1970s. Source: [Beijing.gov.cn](https://ghzrzyw.beijing.gov.cn/zhengwuxinxi/zxzt/zysj/zzjzlsyb/202006/t20200601%5F1912430.html?ref=asiancenturystocks.com) China under Mao Zedong was a closed-off, repressive society. Meat was a once-in-a-week luxury. Cooking was done outside. And personal freedoms were more or less non-existent. For example, your boss could permit or deny weddings, housing, and travel and even sentence you to labour camps. Women had their menstrual cycles monitored and had to apply for permission to get pregnant. This was an era drastically different from today. After Mao died in 1976, a power struggle ensued. Ultimately, Mao’s former ally, Deng Xiaoping, emerged victorious from this struggle. One of his first tasks was to open up the economy to the outside world. For this, he would need hard currency. ![China upgrades reform and opening-up in new era - CGTN](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/36156362-8dbc-4fb0-94f7-34f273bea5fe_650x450.jpg) Deng Xiaoping. Source: CGTN Practical considerations took priority in those early years. When Deng Xiaoping travelled to the United States in 1979, he ordered an inventory of all hard currency in China’s banks. He came up with only US$38,000 － hardly enough to pay for his delegation. This was a low point for the Chinese economy. Deng recognized that China needed exports. Japan, Korea, and Taiwan became wealthy by promoting the export of manufactured goods. So Deng adopted a twin strategy of promoting exports in special economic zones while shielding ordinary Chinese from foreign cultural influences. This worked beautifully, at least in the beginning. Deng’s special economic zones were newly incorporated entities acting as quasi-governments. What made them different was that their managers were rewarded by meeting targets focused on the scale of capital investment and gross tax revenues. Such incentives aligned the interests of the managers of these special economic zones and the foreign companies looking for inexpensive labor. Initially, foreign influence was kept at bay. Foreign nationals were required to live in special compounds, use separate medical facilities, and even use special currencies. Romantic relationships between foreigners and Chinese were forbidden as well. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/68d36a01-b784-4d91-8444-5a1c97b63f38_1104x708.png) The Special Economic Zone Shenzhen in the 1980s. Source: [Joe Chan](https://twitter.com/ChanJoe18/status/1739499009520329193?ref=asiancenturystocks.com) The special economic zones in the Southern parts of the Guangdong province, such as Shenzhen, were particularly successful. One of the reasons was that they were near port facilities. But perhaps even more importantly, they had access to financial powerhouse Hong Kong, with its banks and talented entrepreneurs. While, of course, having access to hundreds of millions of workers from inland provinces. In fact, Shenzhen became a model for the China that was about to develop. It was the first city to abolish the food coupon system, thus allowing residents to buy food with their own money. And residents were soon allowed to lease their own land. Markets weren’t as liberal as they are today. Initially, foreign companies had to use a special currency that was traded at a huge premium to the Renminbi, China’s market price. And they also had to sell their products to state-owned enterprises at officially determined prices. Another important part of Deng’s reforms was allowing farmers to grow whatever they pleased after meeting some quota. They could then sell any surplus in newly established markets. This unleashed immense rural income growth of 12% per year throughout the 1980s. A similar system was later introduced to state-owned enterprises as well. They were now allowed to retain profits, either for reinvestment or pay them out as bonuses to employees. Managers suddenly realized they had incentives to increase revenues and profits, and some became wealthy. Living in Beijing at the time, Anne recounts how supermarkets started opening in the city, with various fruits on offer. You could soon find any clothing you wanted － not just a single color and a single size. Some households were even able to install telephones. But beneath the surface, discontent was growing. Students were devouring books brought in from overseas. They were clamoring not only for economic gains but also for political reforms. By 1987, Beijing students regularly held marches from the university districts to Tian’anmen Square to protect against political restrictions. Those protests would soon change the course of history, though perhaps not in the way the students intended. --- # 3\. The Gilded Age (1989 to 1998) The crackdown on the student demonstrations in Beijing in June 1989 led to a significant political shift. For two years after the massacre, the country closed off, and dissidents were hunted down and jailed. Anyone who participated in the protests was either disappeared, jailed, demoted or unable to attend university or get a good job. After the student protests, the Communist Party shifted its strategy to maintaining control. It upped its propaganda efforts, conveying that if the party were to collapse, China would end up in total anarchy. In the aftermath of Tian’anmen, a communication system was established that improved the party's control over the provinces. Tax collection and audits were tightened, and a criminal detection and surveillance system was developed. In the two years that followed, many entrepreneurs questioned the country's direction. But by 1992, Deng Xiaoping had reasserted control from the more conservative, leftist faction of the Communist Party. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c7c42cda-96e4-40db-8783-bd3425d1ec16_1280x838.jpg) A poster of Deng Xiaoping demonstrating his commitment to further reforms Through a tour to the Southern part of China, he implicitly confirmed his commitment to reform, signalling to entrepreneurs that their activities would be encouraged, essentially taking private entrepreneurship out of the regulatory grey zone it had been in for so many years. One of Deng’s buzzwords during this era was “to get rich is glorious” (致富光荣). You no longer had to be ashamed of pursuing wealth; it was promoted from the top down. The Communist Party bet that as long as people felt their livelihoods improved, they would not rock the boat. The restive students who protested at Tian’anmen Square would now focus on economic opportunity rather than spiritual dissatisfaction. After his come-back in the early 1990s, Deng picked out young talent Zhu Rongji to push for further reforms. In a long list of achievements, Zhu Rongji managed to: - Cut the government bureaucracy in half - Privatize housing - Sell off 2/3 of the companies in the state sector - Unify the dual currencies used prior to 1994 - Introduce a nationwide tax system - Take control of the appointment of all provincial-level governors During this era, it became normal for Chinese officials to seek best practices from other countries. Zhu Rongji was one of the proponents of such overseas trips. Everyone seemed to be getting into business. For example, the People’s Liberation Army (PLA) divested 20,000 companies under its umbrella, including farms, airlines, coal mines, hotels, etc. Former military men became the presidents of these companies, some of whom became household names such as ZTE and Huawei. 1991 marked the year when stock markets sprung up in Shanghai and Shenzhen. With the help of the government and senior executives, assets were consolidated into unified group structures and floated on exchanges. Many became rich in the process. For example, Zhu Rongji’s son, Levin Zhu, became the head of the highly successful investment bank China International Capital Corporation (CICC). The children of Deng ended up overseeing the formation of an independent military-industrial complex. And the children of Li Peng built a new breed of independent power producers. The list goes on and on. --- # 4\. The Go-Go Years (1999 to 2008) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aa68881c-3ac5-42cc-94d0-a5f6df003977_1320x750.png) China’s accession to the WTO in 2001\. Source: Hinrich Foundation After the reforms of the 1990s, China’s economic growth really took off. Exporters in China’s coastal regions benefitted from the country’s admission into the WTO, and Chinese returnees started businesses left and right. The outsourcing of manufacturing from Western countries to China was driven partly by the low labor costs but also by world-class infrastructure and lax environmental regulation. This lower cost structure made it difficult for companies that *did not* have a presence in mainland China to survive. In 2007, Anne started a short seller research firm called J Capital. This company would go on to serve institutional investors in uncovering fraud among Chinese companies listed overseas. In this era, emerging markets like the BRIC countries were in vogue. Foreign investors clamored for Chinese exposure and got hurt in the process. Some notable frauds that Anne came across during this time included: - Mazu Alliance: a company dedicated to the worship of a goddess called Mazu - Kuangchi Science: a company building apparatuses for space tourism - China Cord Blood: a company offering storage of umbilical cord blood) Since the penalties were nearly non-existent, more and more such companies took advantage of foreign capital while the opportunity existed. Why not? It was also during the 2000s that the property boom really kicked into high gear. In the late 1990s, Zhu Rongji instituted reforms that allowed state-owned enterprises to sell worker housing back to tenants for a pittance. As prices rose throughout the 2000s, tenants now held significant household equity, which they could then leverage to buy new, even fancier, commodity housing. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d417ffc1-579c-496e-b77e-05adff8bf149_1273x848.jpg) A neighborhood with modern apartment blocks in China. Source: Getty Images A change in the tax structure also incentivized local governments to promote construction. In the mid-1990s, the central government established its own offices to collect taxes directly. In other words, local governments had less ability to raise taxes themselves, instead relying on remittances from the central government. Local governments thus became cash-poor. To fund their spending programs, they instead set up local government financing vehicles (LGFVs), which used land as collateral for borrowing. And since they were government entities, they were seen as quasi-sovereign borrowers enjoying full access to loans from state banks. Over time, the number of LGFVs grew to over 10,000\. They operate urban infrastructure, subway systems, water and gas utilities, etc. Some of them are profitable, but many of them are not. And who will eventually foot the bill for this extravagant spending? During the 2000s, it was entirely rational for households to invest in properties. Incomes grew over 10% per year, and property prices increased even faster. Compare those numbers with the financial repression experienced by depositors, who received a paltry 2% in interest on their savings. Property was clearly the better option. The privatization of China’s housing market, which provided collateral for new loans, created one of the biggest credit booms the world has ever seen. Later on, in just five years, more credit was created than the entire value of the US banking system. The boom in private sector entrepreneurship reached a crescendo around the Beijing Olympics in 2008\. This was when the world decided that China’s time had finally come. The US$1 billion opening ceremony was choreographed by famous director Zhang Yimou, and factories were closed for months to ensure clean air during the Olympics. But Anne believes that the 2008 Olympics marked a turning point in China’s development and that it marked a return to heavy-handed politics: > *“The Olympic experience brought me to understand that China had not changed institutionally, and that *the post-1979 experiment with capitalism was just that*: an experiment that, *when deemed to be no longer useful, would be discarded*.”* --- # 5\. The Crisis (2009 to 2018) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c7c171e9-04e6-4996-8035-cbd2c418a253_1336x890.png) Source: Bloomberg After the Great Financial Crisis of 2008, the Communist Party leadership unleashed a CNY 4 trillion stimulus program that brought forward demand for infrastructure and spending targets. At this point, it was already becoming clear that the capital stock for infrastructure was starting to exceed those of most other developing or even developed economies. By 2012, China had 8x the length of highways per unit of GDP as that of Japan. At the time, more than 70% of China’s airports were failing to cover their own costs, even though such costs tend to be modest. The stimulus was so large that officials had to compel local governments to spend the money and not just hold the cash. To get the money into circulation, banks hired call centers to offer unsecured loans to consumers. The Chinese lending machine also went overseas. Anne describes the Belt and Road Initiative as an extension of China’s domestic economy, with high-level national targets needing to be met through aggressive lending. Recipients such as Venezuela, Sri Lanka, and Ecuador went into distress, and the loans are still being worked through. Meanwhile, with the state pushing for big stimulus packages, the government increasingly directed economic resources. Concepts such as *“advance of the state, retreat of the private sector”* (国进民退) became more common, reflecting a shift in the economy away from private sector entrepreneurship. Another effect of the credit boom was the creation of immense wealth. Today, Beijing has more billionaires than any other city － even compared to New York. The leadership must have asked themselves whether entrepreneurs like Jack Ma could one day threaten Communist Party supremacy. And indeed, with the emergence of Xi Jinping, the state has started to reassert control. State companies are now receiving most of the loans from China’s banks. State media is now talking of “national rejuvenation”, trying to unite the country around nationalist sentiment and acceptance of a *“moderately prosperous lifestyle”* (小康社会). This is a clear break from the era of Deng Xiaoping’s reforms when getting rich was perhaps the greatest virtue in life. --- # 6\. The Retraction (2019 onwards) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5aa03555-4daf-483c-90d1-986b445f88f9_1484x990.png) The onset of COVID-19 caused the government to use control methods that have not been seen since the surveillance state of the 1980s and earlier. During COVID-19, people were told to keep others in check, just like with the Village and Street Committees during the Mao era. The Party had one over-arching goal: to minimize the spread of COVID-19, with other considerations taking the back seat. But the pandemic masked another important shift: the end of the real estate miracle. With property prices now sluggish and lending cut off from private developers, residential new starts have now dropped by more than half. And a lack of land sales means that local governments are experiencing cash shortages. She also believes that China will now move away from trade with Western nations and instead try to carve out a sphere for itself - not unlike during the Cold War. In her own words: > *China and Russia may nudge us into a world where dictatorships *try to develope their own transportation networks* to further insulate themselves from Western sanctions.”* Further, she believes that a Russia-Iran-China bloc is currently being formed and that China’s financial system could serve as a bedrock for trade within the bloc: > *“If, however, China were someday to shrink its network of trading partners to other dictatorships like Russia and North Korea, *its dedicated financial system could become the principal one used for trade* among those nations.”* In other words, Anne believes that China is withdrawing from its informal pact with Western nations about open trade, with the experiment in Western-style capitalism that commenced in 1979 over. The Chinese economy is now morphing into a different system, one where the state reigns supreme and will become an influential partner in a new trading bloc formed by China’s current geopolitical allies. --- # 7\. Conclusion Anne moved back to the United States in 2014\. By this time, her children with Zhifang had already grown up, and she decided it was time to head home, partly because of personal considerations but also because she no longer felt safe. It seems to be true that China’s development has occurred in fits and starts, in periods of opening up and closing off. Perhaps we are now in one of those latter periods. I’m not convinced the change will be as dramatic as some might fear. Private companies face weakening construction activity, reduced access to credit and meddling by Communist Party committees. But many of them are doing well, and I wouldn’t rule out continued global market share gains in specific sectors of the economy despite weaker headline GDP growth. A return to Mao-era governance seems unlikely. While China under Xi has certainly become less free-wheeling than in the past, that doesn’t necessarily mean that the capitalist experiment is over. Though let’s see － only time will tell. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Thank you for reading 🙏** If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Prosus (PRX NA) URL: https://www.asiancenturystocks.com/prosus-prx-na/ Last updated: 2026-07-31T01:52:10.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Prosus at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Prosus**](https://finance.yahoo.com/quote/PRX.AS?.tsrc=fin-srch&ref=asiancenturystocks.com)*(PRX NA - US$76 billion)* is an Amsterdam-listed investment holding company with a 25.2% stake in Chinese Internet company [Tencent](https://finance.yahoo.com/quote/0700.HK?.tsrc=fin-srch&ref=asiancenturystocks.com) *(700 HK - US$337 billion)*. Its parent company, Naspers, began as a newspaper publisher in 1915 and then became a book publisher. In the 1980s, a young Naspers executive named Koos Bekker formed a pay-TV business that became a major success. In 1997, he began investing in Internet-related businesses, including the 2001 deal to acquire 33% of Tencent for just US$34 million. Fast-forward 20 years, and Tencent has become one of the most successful growth stories ever. The value of that initial 33% stake (later upped to 50%) has gone up over 3,000x. Tencent is an incredible company. It controls the WeChat messaging platform and has interests in social media, e-commerce, games, online streaming services, payments, and more. Tencent’s founder and CEO, Ma Huateng, is known for being savvy and has always had a cordial relationship with the government. To what extent is Naspers simply a *“clown that fell into a gold mine”*? In other words, can the success of the Tencent investment be repeated? In 2014, Koos Bekker resigned from Naspers, and a Dutch former McKinsey consultant named Bob van Dijk took over. Shareholders protested against van Dijk and his management team's empire-building tendencies. In a desperate attempt to close the NAV discount, Naspers spun off its Internet assets into a separate company called Prosus and relisted them in Amsterdam. But the NAV discount persisted. I thought the NAV discount would never go away. But since 2022, there’s finally been some green shoots emerging. Prosus has begun a share buyback program funded by selling its stake in Tencent. Whenever the NAV discount becomes too large, it will aggressively buy back Prosus shares. In 2023, Bob van Dijk resigned—or, more likely, was fired by Koos Bekker. The new interim CEO is a young former Goldman Sachs and SoftBank executive named Ervin Tu. Judging from his public appearances, he seems laser-focused on improving shareholder value. Today, 74% of Prosus’s gross asset value comes from Tencent. The remaining assets are venture-like investments in food delivery companies like Delivery Hero, classifieds businesses like OLX, payment companies like PayU, education technology companies like Stack Overflow, and e-commerce companies like Romania’s EMAG. While many of them remain loss-making, their profitability has improved nicely under the supervision of Ervin Tu. Since the buyback program began in 2022, the discount has narrowed from 50% to 35%. There are signs that the share buybacks will stop if the discount narrows too much, but they’re still ongoing. Does Prosus deserve a 35% discount? Well, on the negative side: - Judging from the peer group, NAV discounts like these are not uncommon. You have similar NAV discounts at [Kinnevik](https://finance.yahoo.com/quote/KINV-B.ST?.tsrc=fin-srch&ref=asiancenturystocks.com) and [Groupe Bruxelles Lambert](https://finance.yahoo.com/quote/GBLB.BR/?ref=asiancenturystocks.com). - Prosus has two share classes with differential voting rights, so you would expect the ones with lower voting rights to trade at a discount to the liquidation value Meanwhile, on the positive side: - Selling shares of Tencent does not lead to any tax consequences - The valuation marks seem reasonable to me - The corporate overhead is minimal compared to the gross asset value - The leadership under Koos Bekker and Ervin Tu is top-notch So it’s not entirely clear to me that there should be much discount. The risks here are related to the venture capital cycle. It looks like it’s turning down. There are also political risks for Tencent in China if it has to donate more capital to the Communist Party’s common prosperity drive. But in any case, it looks like capital allocation at Prosus is finally improving. And I say that as someone who has previously been frustrated with Bob van Dijk and the way Prosus used to be run. I have much greater faith in Ervin Tu and how he’s trying to increase NAV/share while narrowing the discount to said NAV. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Delfi (DELFI SP) － 2024 update URL: https://www.asiancenturystocks.com/delfi-update/ Last updated: 2024-03-13T04:02:11.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/delfi-update/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Delfi when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![Delfi adapts its chocolates to modern tastes, Companies & Markets - THE BUSINESS TIMES](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0dcb6e6a-da18-4bdb-a753-c8bf5bdf730a_960x640.jpg) CEO John Chuang with Delfi’s key products. Source: The Business Times # Summary - Delfi is the leading chocolate producer in Indonesia, with an estimated market share of 45%. It owns brand names such as Delfi, SilverQueen, Ceres, and ChaCha and the rights to the Van Houten brand name in Southeast Asia. - Indonesia is one of the fastest-growing chocolate markets in the world. Its growth is projected to remain high in the single digits for the foreseeable future. - The company’s earnings rebounded strongly after Indonesia’s COVID-19 social distancing restrictions. But more recently, margins have compressed for reasons that are not completely clear. There’s talk of competition and a need for higher promotional spending. - The big elephant in the room is the 2023 spike in cocoa prices. Delfi hedges 9-12 months forward, but higher prices may eventually hit the bottom line. - On my numbers, Delfi trades at a 2026e P/E of 8.8x with a projected 6.3% dividend yield. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 2.1. Delfi’s post-COVID recovery 2.2. New products 2.3. Alt-data update 2.4. Insider buying 2.5. New analyst coverage 3. What will change for Delfi? 3.1. Cocoa prices 3.2. Underlying chocolate demand 3.3. Capital expenditures 3.4. Ozempic 3.5. Succession planning 3.6. Potential buy-out? 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap My initial report on Indonesian chocolate producer [**Delfi**](https://finance.yahoo.com/quote/P34.SI?.tsrc=fin-srch&ref=asiancenturystocks.com) *(DELFI SP - US$416 million)* was published in April 2021\. You can find the full report here: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c728bc99-789b-4ee3-8f7f-51475f9094b1_1170x654.jpg)](https://drive.google.com/file/d/1gX3ZL62DTFceGO5T0rCYT-3u1JLzgJ0x/view?usp=drive%5Flink&ref=asiancenturystocks.com) My 2021 Q&A with Delfi’s investor relations team can be found [here](https://www.asiancenturystocks.com/q-and-a-with-delfi-ltd/). In my original report on Delfi, I noted the following: - Delfi is Indonesia’s leading chocolate company, with an estimated market share of 45%. It owns several brand names, such as SilverQueen, Ceres, Delfi, Goya, and Van Houten (Southeast Asia and Oceania only). Delfi also distributes a variety of consumer products in Malaysia in what is known as its “agency” business for companies such as Toblerone, Kellogg’s, etc. - The company sells its chocolates across Indonesia through a distribution system with access to 400,000 points of sale. Since Indonesia is a tropical country, the products are designed to withstand extreme heat and the lack of proper cold-chain logistics. - There was room for growth. Indonesia’s chocolate consumption per capita is only 1/4 of Japan's and 1/15 of the United States. The population grew almost 1% per year, with an average age of 30. - Delfi was and continues to be run by three brothers in the Chuang family, who have controlled Delfi for over half a century. They’ve paid generous dividends over the past few decades with a dividend payout ratio of 60%. It has a fortress balance sheet with a large net cash position. - At the time of writing, Delfi’s share price had dropped significantly. One of the reasons was the significant depreciation in the Indonesian Rupiah from 2013 to 2015\. Another reason was a reduced number of SKUs from 2015 onwards as the company adjusted to a world with modern grocery stores holding fewer product varieties. Delfi also opened a massive new factory in 2016, significantly increasing the cost base. Finally, Delfi was hurt by COVID-19 as certain mom-and-pop stores had to close down. Other buyers were cautious in buying inventory that might expire within 12 months. - Delfi’s forward P/E multiple at the time was only 12x, about half of the level of its global peers. And CEO John Chuang had been buying shares in the company, suggesting faith in the business. - In my initial report, I noted that industry acquisitions had typically taken place at P/E multiples of 20x to 30x. Delfi seemed to be open to a takeover. Given that John Chuang’s children were not involved in senior positions and he was in his mid-70s, a tie-up with a multinational could eventually make sense for Delfi. --- # 2\. Update since my first write-up ## 2.1\. Delfi’s post-COVID recovery Since my initial report on Delfi in April 2021, the share price rallied to a peak of SG$1.44 as the company recovered from COVID-19\. More recently, the share price has dropped to around SG$0.90, which I think is related to the headwind of sharply rising cocoa prices. Delfi’s performance over the past few years has been excellent. Revenues are now 22% above the pre-COVID level, even in US Dollar terms, Delfi’s reporting currency. You can tell from the following chart that operating profit (red line) has also rebounded strongly since 2021\. Delfi has been growing nicely. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eaecced2-e949-4c6a-a156-d394105c0d09_2128x744.png) If you’re wondering why revenues dropped in 2011, Delfi divested its cocoa ingredient business to Switzerland’s Barry Callebaut in that year. But adjusting for this revenue drop, Delfi has performed satisfactorily, especially since 2018. Here is Delfi’s income statement, showing how the business has grown over the past few years: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fd5ad67d-a347-4226-9bfa-8294aa9b8864_2104x756.png) As you can tell, revenues have grown nicely, most recently at +12.7% year-on-year. Delfi’s strong revenue growth was mostly due to the opening of Indonesia’s economy after heavy social distancing restrictions during COVID-19\. Delfi’s premium brands, including its Van Houten-branded chocolate bars, are doing well. But the gross profit margin fell further, from 30.5% in 2022 to 28.5% in 2023: The gross profit margin dropped in 2019 due to the adoption of a new accounting standard where trade promotions are now counted as part of net sales. If you adjust the margin for the shift in the account of trade promotions, the 2018 level would have been 29%. Delfi explained the recent margin compression by stating that it had to spend more on marketing to address heightened competition and to push new product launches: > *“These declines can be attributed to *higher marketing expenses*, partly to address *heightened competition* in Indonesia, and to fund more *brand building initiatives*.”* In 2018, Delfi [acquired a regional license](https://www.just-food.com/news/delfi-buys-van-houten-chocolate-brand-licence-for-us13m/?ref=asiancenturystocks.com) for the Van Houten brand for US$13 million, allowing it to market chocolates in certain key markets in Asia and Oceania with the Van Houten brand name. Van Houten is an old European chocolate brand now owned by the Barry Callebaut group in Switzerland. Delfi has been pushing this brand, as long as its other premium chocolate varieties, through its distribution channels, partly through greater trade promotions. But also note that Delfi’s inventory balance almost doubled in 2022, with company-wide inventory days going from 83 to 126\. Since cost of goods sold is calculated by deducting end-of-year inventory, it’s possible that an overvaluation of inventory in December 2022 caused Delfi’s gross profit margins to go up in 2022 and then down 2023. The 2023 results also mask incremental weakness in Delfi’s margins towards the end of the year. In the second half of 2022, revenue growth decelerated to just +9.0% year-on-year, while Delfi’s net profit dropped -14.1% year-on-year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1b6aeb2b-ff57-4f92-bd87-c02da653624e_2110x828.png) The gross profit margin weakened further to 27.3% in the second half of 2023, and again, this seems to be due to competition and investments in new brands. The big elephant in the room is cocoa prices. They’ve gone up significantly since late 2022\. Delfi is downplaying the issue but it’s clear to me that cocoa must become a challenge to the company at some point, if it hasn’t already. --- ## 2.2\. New products Delfi’s product innovation continues to impress me. They’re heading in the right direction, in my view. For example, in 2021, Delfi launched the Van Houten Dark Milk variants with more cocoa and less sugar. While people in the region typically do not like dark chocolate, its popularity is growing. The new varieties include dark milk chocolate, dark milk almond, dark milk hazelnuts, 52% cocoa almonds and dark milk fruit & nut. I’ve tried these and will continue to buy them. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3769b6b3-b608-4f5e-86ad-42bff7b4407d_1080x814.png) On the SilverQueen side, Delfi launched two new flavors in 2021: Very Berry and Matcha Green Tea. These are yoghurt chocolate products with cashew nuts inside. These two new flavors were also launched under the Goya brand name in the Philippines. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1acacfd1-49d3-43ff-ba0f-f058fc5955bc_868x450.png) Goya also launched two other flavors: Black Cookie Crunch and Winter Chill: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3ab93e4e-2bb4-458f-b98b-1c9bc678ee87_1820x352.png) For Delfi’s M&M style chocolate product ChaCha, Delfi launched several collaborations with Mickey Mouse, Frozen, Toy Story and Tsum Tsum to drive sales: ![Coklat ChaCha Minis Surprise Edisi Disney Tsum Tsum Toys](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c119a652-3118-4916-b376-5663b6d809a8_1280x720.jpg) In 2022, Delfi created an entirely new brand called 7+, a cereal brand catering to consumers searching for healthier snacking options: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/56e72853-dede-4fc3-b0d3-b9de5faae397_948x524.png) In 2023, Delfi’s JV with Orion launched the O’Rice snacking product and has expressed a positive view on it. These are rice crackers, which remind me of what Want Want is selling in China. ![Delfi Orion Krekers Rice O'Rice O Rice Orice Seaweed Crackers Rice | Shopee Singapore](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/529cf7c8-baf5-4daf-8a8d-e4abd0e65ec0_526x526.jpg) And finally, in late 2023, Delfi launched a vegan version of Van Houten chocolate with no dairy, eggs or honey. The flavors on offer include coconut almond, salted caramel and finally, almond & berries: ![Van Houten Vegan 45gr - Chocolate Bar - Almond Berries/Salted Caramel - Chocolate](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66abf517-734f-4f48-b381-f85bc22ef26a_800x800.jpg) To be honest, I think that very few of these products will become successes. Delfi’s growth is primarily driven by SilverQueen, which has become a hit product. And the Van Houten brand certainly has potential. But in any case, it’s great to see that Delfi continues to innovate. --- ## 2.3\. Alt-data update The number of Google search queries for the key SilverQueen brand rose nicely throughout 2022 and 2023\. The spike during Valentine’s Day in February 2024 was much lower than in prior years, and I’m not sure why. There’s been talk about competitors spending more on advertising and promotion, but as far as I can tell Mayora Indah is mostly focused on wafers and cookies with Mayora Indah’s Beng Beng chocolate product not visibly taking market share. --- ## 2.3\. Frequent personnel changes In mid-2022, I noticed that Delfi advertised for a larger number of job positions at its Bandung factory than before, including project engineers and maintenance personnel. At the time, I speculated that a recovery in production volumes might be taking place. There’s also been a shake-up in the board and among senior executives: - In early 2022, Tan Chay Kee was promoted to become the new Chief Operating Officer for Delfi. He was previously the Group Financial Controller for Delfi’s predecessor, Petra Foods, from 2003 to 2009, then worked at other companies before coming back to Delfi in 2022. - Delfi’s group head of engineering and projects, Michael Roberts Wynne, stepped down in 2022\. He had led the COVID-19 task force in the prior few years. It seems like his resignation was due to personal reasons rather than any dispute with Delfi’s senior management team, as we wanted to move back to Europe after 20 years in Asia. - In late 2022, Graham Nicholas Lee became an independent director. He’s an accountant with four decades of experience and is originally from Australia. - In 2023, independent directors Mike Dean and Koh Poh Tiong resigned from the board without any immediate replacement. Later, in 2023, Lee Meng Tat was instead appointed as an independent director after having served as the head of non-alcoholic beverages at Fraser & Neave. Some investors expressed concern about this high management turnover. But I think this reflects that the Chuang family runs Delfi, and they have high expectations of their staff. Since I believe in John Chuang, I’m not particularly worried about this turnover. --- ## 2.4\. Insider buying In January 2023, the controlling shareholder “Berlian” - owned by the Chuang brothers - had acquired an additional 2.4 million shares, increasing their position to 52.4%. At the time, the share price was hovering around the SG$0.80 level, suggesting a decent entry price. You can find the related SGX disclosure [here](https://links.sgx.com/FileOpen/%5FeFORM3V2%5FAerodrome.ashx?App=Announcement&FileID=744475&ref=asiancenturystocks.com). --- ## 2.5\. New analyst coverage In 2023, we saw several brokers initiating coverage of Delfi: - In February 2023, [Lim & Tan](https://www.businesstimes.com.sg/companies-markets/brokers-take-lim-tan-securities-initiates-coverage-delfi-buy?ref=asiancenturystocks.com) initiated coverage, commenting that the valuation multiple was “undemanding” and that it was generous in its dividend payouts. Further, it noted that Delfi had an extensive distribution network and a first-mover advantage in a market with significant growth potential. - Also, in February 2023, [UOB Kay Hian](https://www.businesstimes.com.sg/companies-markets/brokers-take-uobkh-initiates-coverage-delfi-buy?ref=asiancenturystocks.com) initiated coverage and valued the stock at a 17x P/E in line with its long-term average level. UOB noted Delfi’s high recent growth and generous dividends. - In October 2023, RHB’s analyst [Alfie Yeo](https://sginvestors.io/analysts/research/2023/10/delfi-rhb-securities-research-2023-10-03?ref=asiancenturystocks.com) initiated coverage, calling it a “strong Indonesian consumer play” and saying that it could eventually become a takeover target. I don’t pay much attention to sell-side analysts, but I find it interesting that there’s been a pick-up in interest in the stock. The weak analyst coverage of Delfi has been a key differentiating factor between itself and Jakarta-listed competitor Mayora Indah. Perhaps the sell-side is finally starting to pay attention to the company. --- # 3\. What will change for Delfi? ## 3.1\. Cocoa prices The big elephant in the room for Delfi is the sudden spike in cocoa prices from late 2022 onwards, rising from US$2,400/ton to now over US$7,000\. I sense speculative euphoria, with industry analysts now predicting prices going above US$10,000. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b2a882b5-e29c-43bf-908f-247086cb83d0_1696x814.png) US cocoa prices. Source: Trading Economics _This post is for paying subscribers only._ ### PropertyGuru (PGRU US) URL: https://www.asiancenturystocks.com/propertyguru-pgru-us/ Last updated: 2026-07-31T01:51:53.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in PropertyGuru at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**PropertyGuru**](https://finance.yahoo.com/quote/PGRU?.tsrc=fin-srch&ref=asiancenturystocks.com)*(PGRU US - US$577 million)* is a Singapore-based operator of real estate listing websites. Think of it as the Zillow of Southeast Asia. Its websites and apps match property owners with potential buyers or renters. 37 million users visit PropertyGuru’s platforms yearly, where they can access 2.9 million property listings. PropertyGuru dominates the real estate portal industry across Singapore, Malaysia, Thailand, and Vietnam. PropertyGuru Singapore contributes half of the revenues and remains the group's crown jewel. I’m generally wary of software companies, but PropertyGuru enjoys an incredible brand in its home markets. It’s the website most consumers visit when they’re looking for a new home, which forces real estate agents to put their listings on the website to make sure they reach as many eyeballs as possible. I spoke to a Singapore-based real estate agent yesterday and asked her why she continued to use PropertyGuru to list her properties. She said that 99% of potential buyers or renters come from PropertyGuru, so she has no choice but to pay up. There are no real alternatives. PropertyGuru makes money by selling subscriptions to real estate agents and asking them to pay extra to have their listings show up at the top of the search results. Other features help agents find buyers and tenants quicker or at better prices. The company tried to list in Australia in 2019 at 14x EV/Sales but failed due to weak demand. Instead, the company was listed on the New York Stock Exchange in 2022 via a Special Purpose Acquisition Company (SPAC), which raised cash through an IPO and then merged with PropertyGuru. The only problem is that no one covers the company, and American micro-cap investors probably don’t understand the strength of PropertyGuru’s platforms. After raising capital at a US$1.8 billion valuation, the market cap has now dropped to US$577 million, with an enterprise value of just US$349 million. The long-term story is excellent. The online advertising penetration rate for property listings remains low in Southeast Asia, lagging behind those of Australia and other developed markets. And the cost of listing a property on PropertyGuru’s platforms remains far lower than in the UK or Australia, even after accounting for lower property prices. Most of the growth will come from higher listing fees and higher costs for property agents if they want their listings to gain greater visibility in the search results. Here’s how I’ve triangulated the upside: - Since PropertyGuru gets paid by property agents and not directly from the pockets of the home sellers, it probably won’t be able to monetize as much as say Sweden’s Hemnet or Australia’s REA Group. - However, the UK’s Rightmove, whose business model is comparable, has a listing fee/average home price of 0.10% vs PropertyGuru’s 0.05%. - Rightmove’s EBITDA margins are 76% vs PropertyGuru’s 10%. - The depth revenue — products that give advertisers greater visibility in the search results — is only 41% for PropertyGuru in Singapore vs. 80% for REA Group in Australia. Based on this reasoning, it’s reasonable to expect roughly twice as much revenue per agent over time, which would lead to a significant margin uplift, given operating leverage. Today, the stock trades at 2.7x EV/Revenues, far below Rightmove’s 11.5x and REA’s 16.3x. Whether or not PropertyGuru can close the gap will depend on whether it ultimately reaches profitability. There are several signs of improvement: - In 2023, PropertyGuru exited its loss-making Indonesia segment - It also shut down its loss-making FastKey business. - It’s now been profitable at the net income level for two quarters in a row. - In January 2024, it hired a new Chairman, Ray Ferguson, who previously served as the CEO of Standard Chartered Bank’s Singapore business. Bankers tend to be focused on profitability. - In February 2024, another 5% of the staff was let go. So, PropertyGuru is clearly in cost-cutting mode. That doesn’t mean that closing the margin gap will be easy. Mortgage rates are currently high, and Singapore’s cooling measures continue to keep transaction volumes low. The share dilution is also higher than I’d like, at around 6% per year. But in the shareholder register, you’ll find private equity giants such as Texas Pacific Group (TPG) and Kohlberg Kravis Roberts (KKR), as well as Australia’s REA Group. Surely, they’ll want to see their investment monetized at some point. We could eventually see the company being taken over. Or have investors pay attention to the stock now that the company is finally becoming profitable. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Druckenmiller's gold miner bet URL: https://www.asiancenturystocks.com/druckenmillers-gold-miner-bet/ Last updated: 2024-03-06T05:53:52.000Z Estimated reading time: 25 mins _This post is for paying subscribers only._ ### Links round-up URL: https://www.asiancenturystocks.com/links-round-up-3b4/ Last updated: 2024-03-04T05:35:02.000Z Asia investment-related write-ups, articles and podcasts _This post is for subscribers only._ ### Links round-up URL: https://www.asiancenturystocks.com/links-round-up-cfd/ Last updated: 2024-03-03T06:07:15.000Z Asia investment-related write-ups, articles and podcasts _This post is for paying subscribers only._ ### Portfolio review February 2024 URL: https://www.asiancenturystocks.com/portfolio-review-february-2024/ Last updated: 2026-06-04T11:39:26.000Z **\\Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update The portfolio had a nice rebound in February 2024, rising +2.7% month-on-month and +30.1% since inception in October 2021, equivalent to an IRR of +11.7%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/22e33a7f-05fc-4683-9a49-e972d521e243_2650x874.png) One explanatory factor was the jump in the share price of Hong Kong-listed cosmetics company [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK?.tsrc=fin-srch&ref=asiancenturystocks.com) after private equity firm Blackstone was rumored to place a bid for the company. Chinese oil & gas company [**CNOOC**](https://finance.yahoo.com/quote/0883.HK/?ref=asiancenturystocks.com) also moved higher for reasons I don’t fully understand. Finally, Philippine equities have slowly moved higher in the past few months. A notable event is the recent reduction in stock transaction fees from 0.6% to 0.1%, causing investors to pay attention to the market again. Here is what my current Asian portfolio looks like as of 29 February 2024: _This post is for paying subscribers only._ ### What I read in February 2024 URL: https://www.asiancenturystocks.com/what-i-read-in-february-2024/ Last updated: 2024-02-28T04:30:28.000Z Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Travel notes: Western Australia URL: https://www.asiancenturystocks.com/travel-notes-western-australia/ Last updated: 2025-10-19T01:13:32.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d2ab7bc7-aa1e-45b3-8752-544d816f3f57_2016x1512.png) A view from King’s Park overlooking Perth’s Central Business District I spent the last week in Western Australia on a short holiday. I didn’t meet any companies while there, but I thought I should still share some thoughts with you about the trip. ``` Table of contents 1. A trip down south from Perth 2. The investable universe of stocks 3. Five highlighted stocks 4. Conclusion ``` # 1\. A trip down south from Perth We arrived in Perth last Monday. It’s the capital of the state of Western Australia and the city where most of Australia’s mining firms are based. Perth was one of the original colonies in Australia, but it initially failed to gain popularity due to the inhospitable environment. It can get hot. When we arrived, the temperature was 43 degrees Celsius (109 degrees Fahrenheit). ![](https://substack-post-media.s3.amazonaws.com/public/images/aa7e424d-df4b-4093-9db9-abdf2a0f0fb0.heic) In Perth, we rented a car and drove down to the area around Margaret River - a sleepy town that’s become the center of a burgeoning wine district. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9ccabbb7-ad3e-4911-bb0a-23b3d8135080_1140x1832.png) Around Margaret River, we explored some of the wineries. The first one was established in 1967, and today, there are over 200 wineries in the region. The climate is similar to California, and similar grape varieties are used here. And Margaret River has been a success - while only 3% of Australia’s wine is produced in the region, 20% of the country’s premium wines come from here. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/142653d3-b6fc-4216-a687-22c8fb8c0a14_2016x1512.png) The Will’s Domain Winery in Margaret River We also visited several beaches from Busselton to Dunsborough, Eagle Bay and down south to Gnaraup. Absolutely beautiful, with some of the whitest sand I’ve ever seen. ![](https://substack-post-media.s3.amazonaws.com/public/images/017d5e94-8645-4d3d-9c69-fe9ac2d72dcb.heic) Bunker Bay beach, west of Busselton Another observation is that there were hardly any people around. The region is sparsely populated. Which brings me to my next observation. That we’re going to see significant population growth in the Southwestern part of Australia in the next few decades and centuries. Western Australia has a population of just 2.7 million people, and the vast majority of those live in Perth. Compare that to Asia’s 4 billion population. We met several foreign workers who said they dreamed of becoming Australian citizens. They love the weather, the beautiful nature, and the fact that people speak an easy-to-learn language. And while property prices are high, at least people can buy freehold properties and use them to build household equity. ![GDP per capita of Australian states Cred : Danishmapper on Instagram! : r/MapPorn](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2a9eaa8e-67de-48f9-9de1-2fa6aff5b1ed_1080x1080.jpg) Another surprise is that Western Australia’s average GDP per capita is US$90,000 per year. Western Australians are as wealthy as Norwegians. And you can tell that residents are living comfortably. Australia uses a [point system](https://immi.homeaffairs.gov.au/visas/getting-a-visa/visa-listing/skilled-independent-189/points-table?ref=asiancenturystocks.com) for immigration, prioritizing skilled immigrants and those who are likely to integrate well into Australian society. This system seems to have helped Australia attract individuals who play by the rules. Tourism will be more challenging to develop. We were told that a direct 5-6 hour flight from Singapore to Busselton Margaret River Airport will be available from late 2024 onwards. That will help bring in Singaporeans. But for the rest of the world, Western Australia is a remote location that might not be worth spending tens of hours travelling to. It’s a shame because it’s a fantastic place to visit. --- # 2\. The investable universe of stocks Most of Western Australia’s 172 publicly listed companies above US$50 million market cap are either junior miners or services companies. But there are a few exceptions. I hoped to find tourism-related companies or cheap consumer businesses that will likely grow with the population. But unfortunately, they are few and far between. In any case, let’s dig in. Here is the full sample of publicly listed stocks with headquarters in Western Australia: _This post is for paying subscribers only._ ### New posts from Asian Century Stocks URL: https://www.asiancenturystocks.com/new-posts-from-asian-century-stocks-e35/ Last updated: 2024-02-18T05:28:39.000Z A reminder of the best recent posts _This post is for subscribers only._ ### Ginebra San Miguel (GSMI PM) URL: https://www.asiancenturystocks.com/ginebra-san-miguel-gsmi-pm/ Last updated: 2026-07-31T01:51:35.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Ginebra San Miguel at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Ginebra San Miguel**](https://www.marketwatch.com/investing/stock/gsmi?countrycode=ph&mod=search%5Fsymbol&ref=asiancenturystocks.com)*(GSMI PM - US$838 million)* is the leading gin producer in the Philippines. It’s also the largest gin producer globally, selling 37 million cases annually. The company dominates the gin market with an estimated 95% market share. But if you define the spirits market more broadly, there is competition from rum (Tanduay) and brandy (Emperador). Geographically, gin is more popular on the northern island of Luzon, while rum is more popular in the southern parts of Visayas and Mindanao. The biggest draw of Ginebra is the low price. A 700ml bottle of gin costs 120 Philippine pesos, or roughly US$2\. The taste is a bit rough around the edges, but for the price — I can’t complain. The way Ginebra can achieve this low price is through scale. It owns a large distillery and five bottling plants strategically located nationwide. It has a distribution network with 141,000 points of sale. It also enjoys consumer mindshare through a 190-year-old brand that’s become almost synonymous with gin itself. And finally, it owns the leading basketball team in the Philippines, providing free marketing for the product. Gin in the Philippines remains a growth story. Spirits consumption still lags that of Thailand and many Western countries. The demographics are excellent, with a fast-growing drinking-age population. Ginebra’s yearly top-line growth over the past five years has been +16%, driven by high single-digit volume growth plus price increases. The analysts at [Smartkarma](https://www.smartkarma.com/entities/ginebra-san-miguel-inc/research?ref=asiancenturystocks.com) have been all over the stock since 2021\. There have also been a few write-ups at [Value Investors Club](https://valueinvestorsclub.com/search/ginebra%20san%20miguel?ref=asiancenturystocks.com). They correctly predicted that Ginebra would regain market share after its failures in the early 2010s when it faced strong competition from brandy product Emperador Light. New General Manager Emmanuel Macalalag has been able to premiumize the product offering and grow volumes while keeping costs in check. That has led to margin expansion and rapidly growing profits. On my projection, with +11% yearly top-line growth and some further margin expansion, I get to a 2025e P/E ratio of 6.6x. With management’s new guidance of a 50% dividend payout ratio, I get to a forward dividend yield of 7.6%. The stock has traded around 8x P/E for over half a decade. Many ask themselves why investors aren’t willing to pay for the stock. From what I can tell, controlling shareholder Ramon Ang seems to have a decent reputation. He was hand-picked by Marcos's crony Eduardo Cojuangco to run the company and has done an excellent job at it. There are recurring related party transactions between the ListCo and the packaging arm of parent San Miguel, though these are not necessarily detrimental to minority shareholders. The 2008 purchase and subsequent sale of San Miguel’s non-alcoholic beverages business does look odd, costing the ListCo about PHP 3 billion. Whether these problems are enough to warrant a 50%+ discount to the valuation multiples of Ginebra San Miguel’s peer group is unclear. I’m personally impressed by Emmanuel Macalalag and consider him a safe pair of hands. The foreign ownership is only 5.4%. Who knows, perhaps foreign investors could warm up to owning the shares again. The most popular international retail brokers to buy Philippine stocks include Monex Boom Securities in Hong Kong and Phillip Securities in Singapore. The full list of brokers able to assist you with buying Philippine stocks is available [here](https://www.asiancenturystocks.com/the-best-asian-retail-broker/). **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Macro update for the 1st quarter of 2024 URL: https://www.asiancenturystocks.com/macro-update-for-the-1st-quarter/ Last updated: 2025-10-26T14:23:21.000Z Here’s another quarterly macro update, discussing some of the themes that I’ve been paying attention to in the past few months. Just click on the “play” button to watch. Today’s topics: - Is Hong Kong “over”? - A Philippine Investment Boom - The Korean discount If you any questions on the topics mentioned in the video, feel free to ask them in the comment section below: [Leave a comment](#ghost-comments-root) ### Links round-up URL: https://www.asiancenturystocks.com/links-round-up/ Last updated: 2024-02-12T04:02:51.000Z The best recent Asia investment-related content anywhere on the Internet _This post is for paying subscribers only._ ### Hong Kong's death has been exaggerated URL: https://www.asiancenturystocks.com/hong-kongs-death-has-been-exaggerated/ Last updated: 2025-12-03T12:49:54.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/hong-kongs-death-has-been-exaggerated/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c40bd8a4-173d-416b-93f2-fcfdbbc3f934_1200x899.jpg) Source: Getty Images # Summary - Investor sentiment in Hong Kong is worse than it’s been for over a decade. There’s a perception that the city is changing － or perhaps even dying. - I think that view is probably misplaced. Hong Kong of tomorrow will certainly look more like a typical Chinese city than it used to be. But it retains several advantages, including low tax rates, a currency with an open capital account, and infrastructure more efficient than any other major city. - While the Chinese economy is suffering from the pains of an implosion in construction activity, Hong Kong’s economy is actually fine. Tourists have returned, and retail sales are on a path to recovery. Hong Kong is now enjoying positive net migration. High interest rates weigh on the economy, but those rates could drop from mid-2024 if you believe in the latest Fed Dot Plot. - I reviewed the list of Hong Kong-listed companies with market caps above US$50 million and identified ten stocks that trade at low valuation multiples. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you’ve followed market prices, you will have noticed that Hong Kong’s Hang Seng index is now back to its October 2022 lows: What investors are asking themselves right now is whether there might be any diamonds in the rough in Hong Kong. Whether there are any stocks with solid fundamentals that just happen to have been sold down in this ongoing bear market. In this post, I’ll discuss the case for Hong Kong's equities: why the market has crashed, what investors are concerned about, what could potentially cause them to change their views, and the risks I’m seeing ahead of us. Towards the end, I’ll also discuss ten stocks that trade at low valuation multiples despite solid fundamentals. ``` Table of contents 1. The opportunity set 2. Timeline of the current bear market 3. Hong Kong remains the centre of Asia 4. Hong Kong’s economy is recovering 5. Potential risks for Hong Kong 6. Hong Kong domestic small caps remain cheap 7. Ten highlighted stocks 8. Conclusion ``` --- # 1\. The opportunity set China has the deepest, most liquid capital markets in the Asia-Pacific. You can broadly divide the market into so-called “A- or B-shares” listed on mainland Chinese exchanges such as Shanghai and Shenzhen, American Depositary Receipts (ADRs) of Chinese companies listed in the United States and Chinese companies listed in Hong Kong. For a broad overview of these markets, check out the [introduction to Asia-Pacific markets](https://www.asiancenturystocks.com/introduction-to-asia-pacific-markets/) I wrote back in 2022. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6df291b5-4c38-4287-bf54-d140e2386994_2244x1054.png) Foreigners have the following options when it comes to Chinese equities: - You can buy mainland-listed [A-shares](https://en.wikipedia.org/wiki/A-share%5F%28mainland%5FChina%29?ref=asiancenturystocks.com) through the HK Connect program. These shares can be purchased through platforms such as Interactive Brokers, but are limited to the stocks listed [here](https://www.hkex.com.hk/Mutual-Market/Stock-Connect/Eligible-Stocks/View-All-Eligible-Securities?sc%5Flang=en&ref=asiancenturystocks.com). - You can also buy so-called [B-shares](https://en.wikipedia.org/wiki/B-share%5F%28mainland%5FChina%29?ref=asiancenturystocks.com), traded on the Shanghai or Shenzhen stock exchanges but denominated in foreign currencies. Only a few B-shares are listed. Those tend to be sleepy companies with little analyst coverage. - You can buy [American Depositary Receipts (ADR)](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/), the corporate structure used by most Chinese companies listed in the United States. I wrote about that market [here](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/). - Finally, you can buy equities in Hong Kong. The majority of the companies listed here are from mainland China, and those are referred to as [Red Chips](https://en.wikipedia.org/wiki/Red%5Fchip?ref=asiancenturystocks.com) or H-shares. It’s a massively large market, with an aggregate market cap of almost US$7 trillion. Mainland-listed Chinese equities (A-shares) have typically traded at a premium to their Hong Kong counterparts (H-shares). But this so-called “A-share premium” has reached its[ highest level ever](https://www.hsi.com.hk/eng/indexes/all-indexes/ahpremium?ref=asiancenturystocks.com) at 57%. In other words, Chinese-listed equities in Hong Kong are far cheaper than on the mainland. This disparity between mainland-listed shares and Hong Kong-listed shares has remained for decades. I don’t think it will change. The most likely culprit is excess liquidity within mainland China, which has a closed capital account. Due to the scarcity of assets, Chinese capital has no option but to invest in overpriced equities. Investors in Hong Kong stocks have more options available to them. It’s also possible that if the Renminbi were measured at market exchange rates, A-shares would actually be valued similarly to their Hong Kong counterparts. I wrote about this theme [here](https://www.asiancenturystocks.com/duallisted/) in 2021. Foreigners can also buy Chinese equities listed in the United States. Most of the listings are of depositary receipts representing underlying shares in the Cayman Islands or elsewhere. The problem with these stocks is twofold. - One is that a US SEC agency called the PCAOB has required full access to Chinese audit papers or else, Chinese ADRs might face delistings. If a company is large enough, it can relist in Hong Kong and change its primary listing to there. But investors also face the risk of take-private transactions below intrinsic value. I wrote about that theme [here](https://www.asiancenturystocks.com/chinese-adrs-are-safe-from-delisting/). - Variable-interest entities have never been fully tested in Chinese courts. They operate in a legal grey zone and don’t provide as much protection as owning actual shares. For these reasons, I think you could well argue that Hong Kong equities offer the best opportunities for savvy stock pickers. They’re cheaper than A-shares and usually represent direct ownership of underlying companies. So, in this post, I’ll discuss the current opportunity set in Hong Kong as I see it. --- # 2\. Timeline of the current bear market The current bear market for Hong Kong stocks began in 2018\. The Hang Seng index peaked on 26 January 2018 around the 33,000 level. Around that time, the Trump administration in the United States reacted against perceived unfair trading practices of the People’s Republic of China, including property theft and forced technology transfers. For those reasons, the Trump administration raised tariffs on US$50 billion worth of Chinese goods in June 2018\. This marked the start of a series of escalations which ended in October 2018 with weighted average trade tariffs on both sides of about 20%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a85a1f78-6a70-4c73-a451-adae4babf8a3_1748x1014.png) In the initial stage, Chinese manufacturing companies were hardest hit. Meanwhile, tech companies such as Alibaba and Tencent continued to be favored by overseas investors. In mid-2019, anti-government protests broke out in Hong Kong. Citizens protested against a proposed National Security Law that would take away the independence of Hong Kong’s judiciary. From this point onwards through COVID-19, tourism in Hong Kong ground to a halt. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c1ae2fcc-c197-4175-a11c-fd1da57484c8_1217x684.jpg) A 2019 democracy rally in Hong Kong. Source: Getty Images The next stage in the current bear market for Hong Kong stocks was Trump’s Executive Order 13959, which I wrote about [here](https://www.asiancenturystocks.com/us-sanction-removal-bets/). This executive order prohibited US investors from investing in listed Chinese military-linked companies. Stock prices of state-owned enterprises, such as China’s telecom operators, fell precipitously. COVID-19 led to a shift in investor sentiment. Old-world companies were discarded, while tech companies benefitted from a trend towards people working from home. A speculative frenzy erupted in Chinese tech companies such as Meituan and Tencent. This speculative frenzy happened just as General Secretary Xi Jinping began a crackdown on China’s largest tech platforms. I wrote about that theme [here](https://www.asiancenturystocks.com/will-china-become-socialist-again/). While initially seen as a response to Alibaba’s Jack Ma criticizing the government in a famous speech, it soon became clear that the crackdown was not limited to Alibaba. No major tech platform was safe. In the subsequent years, around a dozen major tech CEOs resigned, willingly or not. Companies like Tencent and Alibaba contributed CNY 50 billion each to help further the government’s cause of “common prosperity”. Bytedance and others donated so-called “golden shares” to government entities, and those entities gained board representation. Chinese tech stocks began a three-year bear market. In July 2021, the Chinese government banned for-profit tuition companies, which were officially aimed at reducing academic pressure on students. The stock prices of companies such as New Oriental and TAL Education dropped like stones. Around the same time, the government implemented a new policy in the property market called the “Three Red Lines”, which forced China’s overleveraged private property developers to deleverage. They were essentially cut off from all funding sources, and their offshore bond prices now signal bankruptcy across the board. The destruction of wealth was massive: private developers Evergrande and Country Garden alone had debts of over US$500 billion. I wrote about that theme [here](https://www.asiancenturystocks.com/china2022cycle/). Since then, China’s construction problem has essentially been dealt with. At the peak, residential new starts reached almost 25 million apartments per year, compared to aggregate contract sales of no more than 11 million. This meant a gradual build-up of inventory that the government found difficult to deal with. Now that China’s private property developers have been cut off from credit, construction has been curbed. Residential new starts are down 60%. And contract sales have also dropped as new homebuyers are hesitant to put in deposits on buildings that may or may not be completed. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/95af2d0b-8f27-4693-8ccd-42137bf9e942_732x626.png) Source: Haver Analytics After Xi Jinping gained a third term at the Party Congress in October 2022, it seems Chinese citizens have lost faith in the economy. There is anecdotal evidence of a shortage of money in local governments, which previously relied on land sales for revenues. Many young people have resorted to simpler lifestyles, a trend known as [lying flat](https://en.wikipedia.org/wiki/Tang%5Fping?ref=asiancenturystocks.com). This despondency was beautifully captured in analyst Dan Wang’s 2023 letter, available [here](https://danwang.co/2023-letter/?ref=asiancenturystocks.com). I’ve lived through a few cycles in the Chinese economy. In 2013, investor sentiment in the A-share was similarly weak. What saved the market then was retail speculation and an acceleration in credit growth from late 2014 onwards. The problem today is that property construction used to represent 29% of GDP, according to Professor [Kenneth Rogoff](https://www.asiancenturystocks.com/content/files/sites/scholar-harvard-edu/files/rogoff/files/nber%5F27697%5Fpeak%5Fchina%5Fhousing%5F1.pdf). That’s no longer the case. The implosion in residential new starts has naturally hurt employment and consumer confidence. The state could theoretically make up for this shortfall in spending, but credit growth remains weak, with the November 2023 print in [the single digits](https://www.bloomberg.com/news/articles/2024-01-05/china-pledges-rapid-sustainable-credit-growth-through-2024?ref=asiancenturystocks.com). Part of the problem is that the link between credit and spending might have been broken. Before Xi Jinping became General Secretary of the Communist Party, most lending was to [private borrowers](https://www.piie.com/blogs/china-economic-watch/chinas-private-firms-continue-struggle?ref=asiancenturystocks.com), according to Nicholas Lardy. ![Flow of Loans to nonfinancial enterprises by ownership, 2010–16](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cc65b6fd-79a5-45ab-9ad2-5ed86578856f_1024x593.png) While the data series was discontinued in 2016, there’s every reason to think that most lending is now to China’s state-owned enterprises. In other words, there’s a lack of credit in the private sector. I’m not sure what’s going to change the calculus. But the tools are at Xi’s disposal. And I remember how gloomy the outlook was during the Great Financial Crisis in 2008 and the Eurozone crisis in 2012\. The solution will only seem obvious with the benefit of hindsight. --- # 3\. Hong Kong remains the centre of Asia The National Security Law in June 2020 was indeed a watershed moment for Hong Kong’s judiciary. Now that individuals seen to be endangering national security can be extradited to mainland China, there’s a fear that they will no longer receive fair trials. But let’s look at the positive side of things. In reality, the National Security Law has really just had two major effects. One is emigration, and the other is stopping public demonstrations. Since 2020, roughly 400,000 people have left Hong Kong, according to [this data](https://webb-site.com/dbpub/hkpax.asp?t=1&p=1&ref=asiancenturystocks.com) from the Hong Kong Immigration Department. But, if you calculate the cumulative number, net migration has actually started to decrease: In other words, people are now moving back to Hong Kong. These could be individuals who avoided Hong Kong during COVID-19 and are now willing to return. They could also be people who changed their minds about living overseas, knowing that Hong Kong is a great place to make money. In the early 1990s emigration wave, many of those who left for Vancouver or elsewhere ultimately came back to Hong Kong. While it’s certainly negative that hundreds of thousands of people have left Hong Kong, it’s not implausible that mainland Chinese immigration could make up for the shortfall. In fact, Hong Kong’s residential rents rose 8.1% in 2023 due to immigration from the mainland. For now, the Hong Kong legal system remains reliable. The conviction rate for Magistrate’s courts in Hong Kong was [54%](https://www.asiancenturystocks.com/content/files/rpdb/en/uploads/2023/ISSH/issh24%5F2023%5F20231016%5Fen.pdf) last year, far higher than mainland China’s [99.95%](https://www.scmp.com/news/china/politics/article/3242181/chinas-public-prosecutors-warned-be-alert-risk-popular-backlash-over-handling-cases?ref=asiancenturystocks.com). This seems to suggest that Hong Kong judges are still independent. Hong Kong still ranks #23 in [WJP’s Rule of Law Index](https://www.asiancenturystocks.com/content/files/sites/default/files/documents/hong-kong-sar.pdf), ahead of the United States. Between Hong Kong and Singapore, the former remains a far larger financial hub. The aggregate market cap of Hong Kong-listed companies is 10x that of Singapore. Its assets under management are US$2.2 trillion - far higher than Singapore’s US$1.5 trillion. There are 2,000 licensed asset managers in Hong Kong vs just 1,200 in Singapore. A key competitive advantage for Hong Kong is that its currency is freely convertible and pegged to the US Dollar. This enables the Chinese government and its companies to raise overseas capital while maintaining capital controls within mainland China. It’s also the case that Hong Kong’s taxes are uniquely low: - The highest marginal income tax is 17%. - There is no capital gains tax. - There is no withholding tax on dividends or interest income. - There is no GST. - There is no estate duty. - There is no wealth tax. - There is a 15% tax rate on rental income but with a standard deduction of 20%. - Most import duties to Hong Kong are zero, making imported goods cheap. - The stamp duty for purchasing residential property is 15% for foreigners and 7.5% for locals, but this stamp duty could soon be removed. For these reasons, the PwC and the World Bank recently ranked Hong Kong as [the region with the most friendly tax system in the world](http://In fact, in 2020, accounting firm PwC and the World Bank ranked Hong Kong as the country with the most friendly tax system, second only to Bahrain.). The Hong Kong government remains committed to its low-tax policy. Hong Kong has agreed to implement a minimum corporate tax rate of 15% from 2025, but so has many other major economies. The budget deficit is projected to continue at over HK$100 billion in FY2025, but 3% of GDP remains modest. While I don’t want to minimize the political shift that has taken place, for Hong Kong companies, it will be mostly business as usual. Hong Kong will continue to attract the ultra-wealthy through its low taxes, and it will continue to be used to raise capital for companies in China and beyond. --- # 4\. Hong Kong’s economy is recovering ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/449c22ce-70a2-41cf-9b4f-df7ef76d726e_1485x990.jpg) Source: Getty Images After Hong Kong’s zero-COVID policy was lifted at the end of 2022, the economy has actually been on a solid footing. Hong Kong’s retail sales grew +16% year-on-year in 2023, though remaining almost 20% below the peak in early 2019: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cb3833eb-8865-41d2-892b-bb23aac5246e_1624x786.png) YoY growth in Hong Kong retail sales. Source: Trading Economics A major component in Hong Kong retail sales comes from tourism to Hong Kong, which is now back to around 70% of the pre-COVID level: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0f2b909d-da51-4c73-8355-2f9641747c96_1622x796.png) Hong Kong tourist arrivals by month. Source: Trading Economics But don’t expect a full recovery in tourism spending. Before 2019, a large portion of Hong Kong retail sales to tourists comprised goods smuggled into mainland China. In 2021, China’s border controls tightened up significantly, and most of such business now occurs through legitimate channels. I wrote about such smuggling [here](https://www.asiancenturystocks.com/winners-of-chinas-daigou-crackdown/). One business that is booming is Hong Kong life insurance products sold to mainland Chinese visitors. Related premiums already exceed the pre-COVID-19 level, suggesting strong demand for USD-linked policies. The Hong Kong private sector PMI has been around the 50 mark over the past few months and 51 in December, suggesting an expansion in private sector economic activity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/84f220eb-ed34-434d-ba34-d120e3b62652_1422x874.png) Hong Kong’s real GDP grew +4.3% in the fourth quarter of 2023\. Hong Kong’s export growth has now [turned positive](https://tradingeconomics.com/hong-kong/exports-yoy?ref=asiancenturystocks.com) at +11% year-on-year. The unemployment rate remains just 2.9%, suggesting that jobs are plentiful. [Commentary](https://www.hkeconomy.gov.hk/en/situation/development/index.htm?ref=asiancenturystocks.com) from the Hong Kong government: > *“The Hong Kong economy *continued to revive in the fourth quarter of 2023*, with *inbound tourism and private consumption* remaining the key drivers. According to the advance estimates, real GDP grew by 4.3% in the fourth quarter of 2023 over a year earlier…”* > > *“Looking ahead, the difficult external environment will continue to pose pressures on Hong Kong’s exports of goods in 2024\. The situation may stabilise later in the year if advanced economies *cut interest rates* as expected. Meanwhile, *visitor arrivals should increase further* as handling capacity continues to recover, with additional boost from the Government’s efforts to promote mega events.”* This wording suggests a positive outlook for the future, especially if US interest rates drop as expected and visitor arrivals continue to increase. --- # 5\. Potential risks for Hong Kong What’s weighing on the Hong Kong economy is the interest rate environment. Since the Hong Kong currency is pegged to the US Dollar through a currency board arrangement, it effectively imports its monetary policy and interest rates from the United States. Here is a chart of the interbank rates currently prevailing in Hong Kong, also known as HIBOR: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e232a619-378a-435b-b195-c82c223e3699_2062x954.png) Now that HIBOR has reached over 4% borrow rates for households and companies remain above the nominal income growth in the economy. In my view, that means that monetary policy remains restrictive. We’ll see what happens to interest rates, but I personally believe that US interest rates will be coming down. Starwood Capital’s [Barry Sternlicht](https://www.youtube.com/watch?v=7waMPlHugYI&ref=asiancenturystocks.com) recently pointed out that CPI is a lagging measure because it calculates rents with a 14-month lag. US inflation rates are coming down fast, and the Federal Reserve will likely react once CPI goes below 2.0% later this year. The Fed Dot plot is already pricing in rate cuts, and such rate cuts will directly lead to lower mortgage rates. On that note, Hong Kong Chief Executive John Lee cut the stamp duty for purchasing residential property by half in October last year. This stamp duty was first introduced in 2010 and has been a primary reason why Hong Kong’s residential property transactions have been weak since that point in time: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dae27920-a2e8-4c14-896c-2f4f080e57b2_1280x547.jpg) Hong Kong residential property transactions are at multi-decade lows due to current stamp duties. Source: Jefferies However, given how dependent the Hong Kong government is on land sales, it’s possible that the stamp duty will be reduced to zero when the new budget is announced later this month. This would be a perfect time to do so, given the recent build-up in unsold residential in already-completed projects. Lower interest rates and lower stamp duties should support the Hong Kong housing market. Which, admittedly, is still expensive at the current 3.5% cap rate. Another challenge for Hong Kong has been the strong Hong Kong Dollar. China’s Renminbi has declined roughly 10% decline against the Hong Kong Dollar, causing as many as 200-300,000 Hong Kong people to cross the border each weekend, spending their money on Shenzhen restaurants and nightlife instead of in Hong Kong. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3832b924-6bd8-41bf-a82e-ba82177027aa_1280x547.jpg) Hong Kong restaurant receipts remain below the 2019 level, partly due to weekend trips to Shenzhen. Source: Jefferies But if US interest rates drop in the future, it’s not implausible that the Hong Kong Dollar will yet again weaken against the Renminbi. I certainly would not assume that the current situation will persist forever. Regarding the judiciary, a major risk is an update to Hong Kong’s National Security Law. The updated law could expand the government’s ability to prosecute residents for vaguely worded offenses like “colluding with foreign forces”, “publishing misleading statements” and close down civil society organizations. Chief Executive John Lee promises that people [can still criticize the Hong Kong government](https://www.nbcnews.com/news/world/hong-kong-article-23-national-security-law-rcna136492?ref=asiancenturystocks.com) and express their opinions as long as they do not endanger national security. Reading between the lines, it sounds like you’ll still be able to say what you wish as long as you don’t challenge party supremacy. Another longer-term worry is geopolitics. If a war were to break out in Taiwan or elsewhere, US sanctions could be imposed on Hong Kong. It could lose its special trade status. Import tariffs would be imposed, and it would be subject to the same export controls as China. If the Hong Kong Dollar were to be de-pegged to another currency. But as long as the currency remains freely convertible, Hong Kong will continue to retain its competitive advantage as a hub for raising overseas capital. --- # 6\. Hong Kong domestic small caps remain cheap When I look at Hong Kong equities, I like to divide them into: 1. Companies with exposure to mainland China 2. Companies with exposure to other countries 3. Domestic Hong Kong companies earnings their revenues in Hong Kong Dollar Above, I’ve tried to argue that China’s economy remains weak. The construction industry has imploded, and I’m unsure whether residential new starts will ever recover. Consumer confidence is weak. But the Hong Kong economy is doing just fine. And if you believe that the Federal Reserve will cut interest rates － as I do － Hong Kong will be one of the prime beneficiaries in Asia. Domestic Hong Kong companies should do well in that scenario. If you want to go the ETF route, there are several indices to choose from. But [MSCI China](https://www.ishares.com/us/products/239619/ishares-msci-china-etf?ref=asiancenturystocks.com) has a large exposure to mainland Chinese companies. [Hang Seng China Enterprises Index](https://www.hangsenginvestment.com/en-hk/individual-investor/our-products/etf-listed-details/?TrustNo=H0E281&FundClass=B&FundUnit=NA&ref=asiancenturystocks.com) is similarly focused on mainland Chinese companies. Comparatively speaking, the [Hang Seng Index](https://www.blackrock.com/hk/en/products/284479/ishares-core-hang-seng-index-etf?ref=asiancenturystocks.com) is the one index that has slightly more exposure towards domestic Hong Kong equities. Today, the Hang Seng trades at a P/E of 8.4x － close to its October 2022 lows and at a similar level as in the Great Financial Crisis of 2008\. This number is extreme. The top 10 holdings of the Hang Seng include HSBC, Alibaba, Tencent, AIA and a few other companies. And the P/E multiples for these companies are low as well: If you want to track this index, two of the options are the iShares Core Hang Seng Index ETF (3115 HK) or The Tracker Fund of Hong Kong (2800 HK). If you want to dig deeper though, you can find companies with almost no exposure to the mainland Chinese economy. Not only will you gain exposure to an economy that’s performing better, I also believe that Hong Kong offers greater safeguards for investors when it comes to corporate governance. I trust the numbers more. In the past few days, I’ve gone through the list of the 1,500 or so Hong Kong-listed equities with market caps above US$50 million. I then tried to identify those those that little to no exposure to mainland China and put them in a separate tab called “HK-Overseas stocks” in the following spreadsheet. [Hong Kong Equities 2024Hong Kong Equities 2024142 KBdownload-circle](https://www.asiancenturystocks.com/api/v1/file/49d7046b-66f4-4bd2-9dbc-dbcde8d681ce.xlsx "Download") --- # 7\. Ten highlighted stocks I’ll now focus on the ten stocks within this list of Hong Kong-listed companies with large exposure to the Hong Kong economy. All of these stocks are well-run businesses trading at remarkably low valuation multiples. ## 7\. 1\. AIA Group ![Brand spotlight: AIA Group is a household name with an ambition to make HK and APAC healthier | Marketing-Interactive](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5f01fc98-e847-4a0a-b4e2-ec8113ed8039_800x450.jpg) [**AIA Group**](https://finance.yahoo.com/quote/1299.HK?p=1299.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(1299 HK - US$91 billion)* is a Hong Kong-based insurance company with presence all over Asia. It was founded by American entrepreneur Cornelius Vander Starr in 1919 and was based in Hong Kong after China became communist in 1949\. After AIG ownership, it was spun off as a separate entity in 2010. While AIA has a mainland presence, what makes AIA unique is that it offers USD-linked policies to visitors to Hong Kong. They are, therefore, benefitting from Chinese capital flight. From 2019, it’s been allowed to operate in mainland China without a local partner, enabling it to grow much faster on the mainland than in the past. China’s life and non-life insurance market penetration rates remain low at just 4% vs South Korea’s 11%. The fact that AIA controls its distribution network provides it with an edge. Finally, AIA should benefit from the currently high interest rate environment given that its assets are mostly plain vanilla developed market corporate and government bonds. AIA’s forward P/E ratio right now is a modest 13.3x. The near-term picture looks positive as Chinese tourists return to Hong Kong. The only worries, perhaps, are more intense competition in mainland China from the likes of separately listed [**Prudential**](https://finance.yahoo.com/quote/2378.HK/?ref=asiancenturystocks.com) *(2378 HK - US$29 billion)*. There are also ongoing concerns about a tightening of Chinese capital flows to Hong Kong. --- ## 7.2\. Bank of China Hong Kong ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e0669e0-2c0e-4f78-ab54-236c27313e9f_1232x850.png) [**Bank of China Hong Kong**](https://finance.yahoo.com/quote/2388.HK/?p=2388.HK&ref=asiancenturystocks.com) *(2388 HK - US$25 billion)* is the international arm of the Chinese state bank “Bank of China”. It’s separate from its parent in that it focuses on overseas markets. It’s now the second-largest commercial bank in Hong Kong and is fully backed by its parent bank, the Bank of China. It’s one of the three note-issuing banks in Hong Kong and enjoys a unique competitive advantage in being the PBOC-appointed clearing bank for Renminbi transactions in Hong Kong. It’s also the preferred lender of Chinese state-owned enterprises in Hong Kong. What’s more, it doesn’t face the same kind of pressure as mainland Chinese banks in falling Chinese interest rates. And it probably doesn’t face the same pressure in doing “national service” either － a common concern among investors in Chinese financials. It also benefitted from the rise in Hong Kong's interest rates. Its Hong Kong exposure will probably work to its advantage as the economy is now recovering from COVID-19\. So far, the bank’s asset quality has been better than those of its peers. The P/E ratio is currently 6.3x, and with a payout ratio of about 40%, you’re looking at a dividend yield of 6-7%. --- ## 7.3\. CK Hutchison ![Hong Kong's richest man announces retirement - Chinadaily.com.cn](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6090ff31-4275-4ec5-8715-1006e97053b6_600x400.jpg) [**CK Hutchison**](https://finance.yahoo.com/quote/0001.HK/?p=0001.HK&ref=asiancenturystocks.com) *(1 HK - US$20 billion)* is one of Hong Kong’s largest conglomerates, owned by the city’s richest man Li Ka-Shing and run by his son Victor Li. I first wrote about the company in 2022 [here](https://www.asiancenturystocks.com/?sort=search&search=ck%20hutchison) and a 2023 update [here](https://www.asiancenturystocks.com/ck-hutchison-update-1-hk/). The company has five main businesses: infrastructure assets like electric utilities, ports, telecom operators, retail, as well as oil & gas exploration and production. Its China exposure is only 8%, Hong Kong 5%, and the rest is mostly in Europe and the rest of Asia. The stock has dropped significantly since its peak in 2018\. Initially, during the COVID-19 pandemic, the issues were weak foot traffic in the company’s retail stores and low energy prices. But those problems have now been mostly resolved, while CK Hutchison was instead hit by high US interest rates and a strong US Dollar. The company mostly borrows in US Dollar-linked currencies and has a large exposure to Eurozone assets. CK Hutchison has been and remains a levered entity. The stock is now trading at low multiples: 0.29x book and 5.9x forward P/E, with a forward dividend yield of 5-7%, even if interest rates remain at this level. I personally think that US interest rates will start to drop by the second quarter of this year, in which case fundamentals would then start to improve. --- ## 7.4\. Swire Pacific ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d32047f7-714d-4f59-b474-57509600cf8d_1996x850.png) [**Swire Pacific**](https://finance.yahoo.com/quote/0087.HK/?ref=asiancenturystocks.com) (87 HK - US$10 billion) is the main operating company of the Swire Group, a trading company turned property conglomerate. I wrote about the company in late 2022 [here](https://www.asiancenturystocks.com/deep-dive-2022-24-swire-pacific-b/). Swire Pacific is the parent of Swire Properties, which owns the commercial properties Pacific Place in Admiralty and Taikoo Place in Quarry Bay. It also owns a number of high-quality retail properties in tier 1 cities in mainland China. In my view, these assets are top-notch, second to perhaps only Hong Kong Land or Wharf. Other than properties, Swire Pacific also owns a stake in Hong Kong’s leading airline Cathay Pacific, aircraft maintenance business HAECO, and a Coca-Cola bottling business in Greater China. The past few years have been tough for Swire Pacific as office rents have come down and vacancy rates hit a multi-decade high in 2023\. Retail rents are down as well. Meanwhile, Cathay Pacific was hurt by Hong Kong’s closed borders but has recovered nicely since early 2023. Back in 2022, I valued the B-share at HK$27/share. While the share price has increased slightly, it still trades well below HK$10/share. The dividend yield is now 6.5%. With the B-share, you’re investing alongside the family, given that it owns a disproportionate amount of B-shares. And Swire Pacific has also been buying back B-shares over the past year and a half. The only question marks have been the high-interest rate environment and the weak office market, with high vacancy rates. I was also surprised by the related party transaction whereby Swire Pacific sold its US Coca-Cola business to parent John Swire & Sons. It was sold at a decent price, but it would have been better if the assets had been sold in a competitive bidding process. --- ## 7.5\. L’Occitane ![7 Tips When Choosing A Fragrance – Sol de Janeiro](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/db584fe5-70a9-459f-a58e-2ab7cbd87633_1000x700.jpg) [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK/?p=0973.HK&ref=asiancenturystocks.com) *(973 HK - US$5.3 billion)* is a Hong Kong-listed cosmetics firm with roots in France and sales across the United States, Europe And Asia. I first wrote about the company in 2023 [here](https://www.asiancenturystocks.com/loccitane-973-hk/). The flagship brand L’Occitane en Provence has a great following among the older female demographic. In the past decade, it’s also acquired several other brands, including Elemis and Sol de Janeiro, which has become a smash hit in its home market of the United States, where it’s become one of Sephora’s most popular brands. Sol de Janeiro’s *“Bum Bum Cream”* and *“Brazilian Crush Fragrance Mist”* are selling like hotcakes, pushing the brand’s revenue to grow over 200% year-on-year. On my numbers, the stock trades at a 2025e P/E ratio of 13x. That’s well below the peer group’s 22x level and where the stock used to trade. In August 2023, parent company L’Occitane International, controlled by Austrian businessman Reinold Geiger, entered negotiations to acquire the shares it did not own. But it eventually gave up on those ambitions, allegedly due to Geiger not wanting to pay more than HK$26 per share. But the latest rumor is that Blackstone is [considering a bid](https://www.reuters.com/markets/deals/blackstone-considers-bid-luxury-skin-care-company-loccitane-bloomberg-news-2024-02-05/?ref=asiancenturystocks.com) on L’Occitane. How much they’re willing to pay remains to be seen. But a P/E of 13x does not seem like a particularly high number. A shareholder called Butler Hall Capital argues that [the right price is closer to HK$45/share](https://www.asiancenturystocks.com/content/files/Resource/Download/d1fe56e0-43a5-4b0b-9b35-7c030f69d976.pdf). --- ## 7.6\. Cafe de Coral ![Deep-dive 2022-30: Café de Coral (341 HK)](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8a72d83d-3aee-42f3-9f41-438d1097a29a_1200x630.jpg) [**Cafe de Coral**](https://finance.yahoo.com/quote/0341.HK/?p=0341.HK&ref=asiancenturystocks.com) (341 HK - US$605 million) is Hong Kong’s largest fast-food operator after McDonald’s, serving a mix of Hong Kong and Western fare at affordable prices. What initially attracted me to Cafe de Coral is its strong brand name. I think the Cafe de Coral's brand recognition among Hong Kong people is better than perhaps any restaurant in the city. I also think it’s managed professionally with decent treatment of minority shareholders. The problem with Cafe de Coral is Hong Kong’s zero-COVID policy and closed borders. But those were removed in late 2022, and tourism has now recovered roughly 70% of its pre-COVID highs. Meanwhile, the stock has languished, continuing to a ten-year low of around HK$8.0/share. While margins are still low, I believe they will eventually return to the 8% operating margin level. That implies a P/E ratio of about 8x, much lower than the historical level of 20x. With an 80% typical payout ratio, Cafe de Coral would pay a dividend yield of around 10%. --- ## 7.7\. Tai Cheung ![Hotel | Tai Cheung Holdings Limited 大昌集團](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9de4a985-909a-4b20-aa31-9727021d39ad_840x560.jpg) [**Tai Cheung**](https://finance.yahoo.com/quote/0088.HK/?p=0088.HK&ref=asiancenturystocks.com) *(88 HK - US$268 million)* is a Hong Kong-based property developer and manager. It owns 35% of the Sheraton Hotel in Tsim Sha Tsui, which overlooks Victoria Harbour. As well as several residential developments on Hong Kong Island. The Sheraton building was recently renovated, and the residential plots are in fantastic locations on The Peak and close to Repulse Bay. Further, Executive Chairman David Pun Chan has historically treated minority shareholders well, even though the company is decidedly sleepy in the turnover of its investments. The problem for Tai Cheung has been weak tourism to Hong Kong, causing revenue per room at Sheraton to drop. Then, high interest rates in Hong Kong caused the demand for property to weaken, causing residential property prices to drop over 20%. But those two issues might eventually be resolved. The stock trades at almost 80% discount to a conservative estimate of its net asset value. The Price/Book is about 0.3x, lower than its longer-term historical level of 0.3-0.5x. The dividend yield is currently 7.3%, but there’s a good chance the dividend per share will go up now that tourists are returning to Hong Kong. That said, I will admit that the prices for Tai Cheung’s luxury developments are high by international standards. But Tai Cheung has no debt, so the downside risks seem limited. And Hong Kong remains a compelling destination for the ultra-rich, given its low tax rates. --- ## 7.8\. Plover Bay Technologies ![CAREERS | Plover Bay Technologies](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/663f333e-3c7d-4b9c-8056-e4d78baee900_992x482.jpg) [**Plover Bay Technologies**](https://finance.yahoo.com/quote/1523.HK/?p=1523.HK&ref=asiancenturystocks.com) *(1523 HK - US$283 million)* is a Hong Kong-based developer of SD-WAN routers, selling them under the “Peplink” brand name. These routers are used to create private and secure computer networks. The benefit of using SD-WAN routers rather than leased lines is that the former uses software to direct traffic through the most efficient routes. It can use DSL, 5G, Starlink and many other connecting technologies. From what I can tell, Plover Bay seems to be competing successfully. The SD-WAN industry is growing fast, above 20% per year, and Peplink seems to be matching industry growth rates with a historical revenue CAGR of 23%. It’s comforting to know that Gartner sees Peplink as one of the stronger brands in the SD-WAN industry, characterizing it as having “strong viability”. It’s also worth noting that a large share of Plover Bay’s revenue now comes from recurring warranty & support services revenues. The stock trades around 10x P/E with a dividend yield of 8.5%. The balance sheet is also clean, with a decent net cash position. These numbers are almost unheard of for a well-run company in an exciting, fast-growing industry benefitting from the popularization of 5G services and Starlink. I will say that I don’t feel comfortable investing in technology companies, as I find it difficult to judge whether a company has competitive advantages. But I do think most investors will agree that a company of Plover Bay’s calibre typically trades at far higher multiples than 10x. If you’re interested in Plover Bay, check out Pyramids and Pagodas’ recent interview with the company’s CEO Alex Chan [here](https://www.pyramidsandpagodas.com/p/interview-with-alex-chan-founder?ref=asiancenturystocks.com). --- ## 7.9\. Pentamaster International ![Pentamaster sees strong orders | The Star](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/17808364-7151-4383-9a5c-dbe5f936766c_620x413.jpg) [**Pentamaster International**](https://finance.yahoo.com/quote/1665.HK/?p=1665.HK&ref=asiancenturystocks.com) *(1665 HK - US$255 million)* is the Chinese subsidiary of Malaysia’s Pentamaster Corporation. Aaron Pek at Value Investing Substack wrote about the company [here](https://valueinvesting.substack.com/p/pentamasterhk), and there’s also a VIC write-up on the stock available [here](https://valueinvestorsclub.com/idea/Pentamaster%5FInternational/0855778856?ref=asiancenturystocks.com). While the main business is focused on China, Pentamaster International’s customers seem more international, which is why I included it in this list. Pentamaster provides automated testing solutions for the semiconductor, telecom, automotive and electronics industries. Some of its products include warehouse automation systems, factory automation solutions, inspection and testing equipment for the medical device industry, automated testing equipment for semiconductor wafers and contract manufacturing of complex machinery. Its growth has been impressive, though with significant cyclicality. Revenues have gone up sevenfold over the past ten years. The Hong Kong share Pentamaster International now trades at a P/E of 7.9x, a huge discount to its Malaysian parent Pentamaster Corporation’s 31.2x. The multiple is also low compared to most of its OSAT or semicap peers. --- ## 7.10\. IH Retail ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f4b2b733-df74-464d-aa12-00de1bfdce04_1551x1071.png) [**IH Retail**](https://finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com) *(1373 HK - US$138 million)* is a Hong Kong-based discount retailer. I first wrote about the company in mid-2023, with the report available [here](https://www.asiancenturystocks.com/international-housewares-retail-1373/). It has 380 shops operating under the "Japan Home Centre” brand name, mostly in Hong Kong. The products are mostly home-related, sourced from mainland China and sold at cutthroat prices. Roughly 40% of the products are private label goods, and that helps them maintain low prices. In my experience, the products are often shockingly cheap. Same-store sales growth has historically been around 5% per year. In mid-2023, I predicted that profits would drop somewhat now that Hong Kong is healing from the COVID-19 pandemic. The reason was my view that COVID had been a period of excess consumption of home-related goods. Japan Home Centre had also sold face masks in its stores, and this profit stream would disappear. The profit decline was even worse than expected and the share price corrected almost 50% from mid-2023. If my long-term forecast is correct, IH Retail trades at a 2025e P/E of 5.8x. Given a typical payout ratio of 80%, a forward dividend yield will probably end at around 14%. The real question is when EPS will bottom out after the company’s post-COVID malaise. For what it’s worth, major shareholder David Webb just tweeted [a picture](https://x.com/webbhk/status/1756142909953601935?s=20&ref=asiancenturystocks.com) implying his continued support for the company. --- # 8\. Conclusion In my view, the public perception of Hong Kong as a dying city is probably misplaced. The fact that Hong Kong equities have reached multi-decade lows should open up opportunities for savvy stock pickers. I’ve argued that Hong Kong’s economy is actually on a solid footing. Companies focused on the local Hong Kong market should do fine in the current environment, especially if US interest rates drop from mid-2024 onwards. After reviewing the list of Hong Kong-listed companies with market caps above US$50 million, I narrowed it down to ten companies that trade at low multiples. These are, in the order of the highest market cap to the lowest, [**AIA**](https://finance.yahoo.com/quote/1299.HK?p=1299.HK&.tsrc=fin-srch&ref=asiancenturystocks.com), [**Bank of China Hong Kong**](https://finance.yahoo.com/quote/2388.HK/?p=2388.HK&ref=asiancenturystocks.com), [**CK Hutchison**](https://finance.yahoo.com/quote/0001.HK/?p=0001.HK&ref=asiancenturystocks.com), [**Swire Pacific**](https://finance.yahoo.com/quote/0087.HK/?ref=asiancenturystocks.com), [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK/?p=0973.HK&ref=asiancenturystocks.com), [**Cafe de Coral**](https://finance.yahoo.com/quote/0341.HK/?p=0341.HK&ref=asiancenturystocks.com), [**Tai Cheung**](https://finance.yahoo.com/quote/0088.HK/?p=0088.HK&ref=asiancenturystocks.com), [**Plover Bay Technologies**](https://finance.yahoo.com/quote/1523.HK/?p=1523.HK&ref=asiancenturystocks.com), [**Pentamaster International**](https://finance.yahoo.com/quote/1665.HK/?p=1665.HK&ref=asiancenturystocks.com) and [**IH Retail**](https://finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com). Those stocks are the ones I’m paying the most attention to right now. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Straco Corporation (STCO SP) URL: https://www.asiancenturystocks.com/straco-corporation-stco-sp/ Last updated: 2026-07-31T01:51:15.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Straco Corporation at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Straco Corporation**](https://finance.yahoo.com/quote/S85.SI?p=S85.SI&.tsrc=fin-srch&ref=asiancenturystocks.com)*(STCO SP - US$300 million)* is a Singapore-based developer of tourism assets. The stock is illiquid and can probably only be purchased for personal accounts. But I wanted to mention a few words about Straco given that I own the stock myself, in a personal pension account (known as “CPF” in Singapore). Straco was started by businessman Wu Hsioh Kwang, who moved to China in the 1980s and saw the country's potential early on. The company developed a cable car system in the 1990s and partly through the backing of Singapore sovereign wealth fund Temasek, it developed an aquarium in Shanghai and made several other acquisitions. Today, Straco owns four key assets: 1. Its flagship asset is a large-scale aquarium in central Shanghai called the [Shanghai Ocean Aquarium](https://en.wikipedia.org/wiki/Shanghai%5FOcean%5FAquarium?ref=asiancenturystocks.com) 2. An aquarium on Gulangyu near Xiamen in China’s Fujian province called [Underwater World Xiamen](https://www.tripadvisor.com.sg/Attraction%5FReview-g297407-d2004029-Reviews-Xiamen%5FUnderwater%5FWorld-Xiamen%5FFujian.html?ref=asiancenturystocks.com) 3. A [cable car](https://www.trip.com/travel-guide/attraction/xi-an/lishan-cableway-station-61113026/?ref=asiancenturystocks.com) up Lishan Mountain near Xi’an in China’s Shaanxi province 4. And finally, it owns the iconic Ferris wheel [Singapore Flyer](https://en.wikipedia.org/wiki/Singapore%5FFlyer?ref=asiancenturystocks.com) In my view, these assets are almost irreplaceable. The two aquariums are in the middle of Shanghai and Gulangyu. Singapore Flyer is just a few hundred meters from the popular tourist attraction Marina Bay Sands. Lishan Mountain is the site of the famous Terracotta Army Museum, which has significant cultural significance. There is some growth potential in all of these assets. Before COVID-19, domestic tourism in China grew by over 10% annually. Inbound tourism to Singapore grew by about 6% annually. Those are decent numbers. And with high incremental margins, additional visitors should contribute significantly to the bottom line. The main problem for Straco in the past few years has been COVID-19\. All of Straco’s assets shut down during the pandemic. And it was only by 2023 that they truly started to recover. While tourism to Singapore is still 20% off its pre-COVID levels, the numbers are trending in the right direction. Straco’s management team sees particular potential in the Singapore Flyer: - In 2019, its operating margin was only 16% vs 71% for its aquariums. In other words, it was still under-earning. - While the visitor numbers have not been disclosed, I believe they were just north of 1 million per year in 2019, compared to total capacity of 7.3 million. - Straco has the option to continue leasing the land under the Flyer until 2049. - It’s also working with the government and third-party companies to redevelop the terminal building to make it more attractive to tourists. I think the asset’s key problem has been weak foot traffic in the immediate surrounding areas. But that could change with redevelopment and clever marketing. In a full-recovery scenario, the stock would trade at a P/E of 10x and an EV/EBIT of 5x. With pre-pandemic free cash flows of almost SG$50 million and an enterprise value of SG$309 million, I see a free cash flow yield of about 14%. Some investors complain about the build-up of cash on the balance sheet. But Straco has historicalled allocated capital intelligently. Prior M&A has been successful. For example, it bought the Singapore Flyer at almost half its replacement cost. Straco has been generous with dividends as well. While the parent shares the name “Straco” with the ListCo, I haven’t found any related party transactions or similar issues. There are minority interests in the Singapore Flyer, Shanghai Ocean Aquarium and the Lintong Lixing Cable Car, however, and I have not been able to identify who they are. Another issue is concession renewals. Straco’s two aquariums in China will see their leases expire in 2034 and 2037\. It’s still unclear whether these leases can be renewed and at what cost. Investors are also concerned about the low maintenance capex spent by Straco throughout the 2010s. An incident at Singapore Flyer in 2018 and a technical issue in 2022 are evidence of mismanagement. I’m not so sure the low maintenance capex will cause much problems in the future. The Singapore Flyer had interruptions in 2008 and 2010 － even before Straco acquired the asset in 2014. I believe that the company’s 2023 earnings will be strong. China’s domestic tourism is on fire, and Singapore is, according to several surveys, the top destination for Chinese travelling overseas. I also look forward to higher ticket prices at the flagship Shanghai Ocean Aquarium. And a potential refurbishment of the Singapore Flyer that will take the asset closer to its full potential. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Portfolio review January 2024 URL: https://www.asiancenturystocks.com/portfolio-review-january-2024/ Last updated: 2024-02-01T04:00:50.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update In January 2024, the portfolio dropped -1.3% month-on-month and +26.6% since inception in October 2021, equivalent to an IRR of 10.9%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8239543b-7ffa-4d5b-bd75-ff2f479c435d_2636x858.png) We had a bit of a “puke” in Hong Kong equities in January, causing the share prices of [**Fairwood**](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) and [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) to drop further. Chinese ADRs such as [**Niu Technologies**](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/) also dropped. Hong Kong has become a deep value market. Election jitters also caused Indonesian beer giant [**Multi Bintang**](https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/) to weaken. On the positive side, Chinese oil exploration and production company [**CNOOC**](https://www.asiancenturystocks.com/cnooc2022update/) rose during the month after the government said it would incorporate share prices in the performance evaluation of China’s listed state-owned enterprises. In any case, a few weeks ago I sat down and thought about how a perfect portfolio might look like if I were to redesign it from scratch as of January 2024\. Through this exercise, I came up with the following model portfolio: _This post is for paying subscribers only._ ### What I read in January 2024 URL: https://www.asiancenturystocks.com/what-i-read-in-january-2024/ Last updated: 2024-01-28T04:02:32.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fa816d59-8349-41e3-a94e-886e49af7588_1912x1270.jpg) Source: Getty Images # Summary - A large number of Japanese companies in this month’s haul of write-ups. Japanese stocks have become popular again, after many years of neglect. - I’ve already discussed [**Fuji Corporation**](https://valueinvestorsclub.com/idea/Fuji%5FCorporation/7577466773?ref=asiancenturystocks.com) and the stock continues to trade at a low P/E. The newest write-up just reinforces my view that Fuji has competitive advantages compared to its peers. - Philippine gin producer [**Ginebra San Miguel**](https://valueinvestorsclub.com/idea/Ginebra%5FSan%5FMiguel%5FInc./6914558800?ref=asiancenturystocks.com) also seems inexpensive at 7.1x P/E with no obvious negatives as far as I can tell. - Another stock that caught my eye is [**Sega Sammy**](https://www.dungeoninvesting.com/p/sega-the-year-of-the-blue-hedgehog?ref=asiancenturystocks.com). I always felt that Sega Sammy had too much pachinko exposure for my liking. And that it would waste money on its ambition to build a casino in Yokohama. But the reality with Sega Sammy is quite different: the vast majority of its profits come from its video game and entertainment business, and it’s doing well. Yet the P/E remains low at just 8.0x and its balance sheet remains robust. ``` Table of contents 1. HDFC Bank (HDB US) 2. Sysmex (6869 JP) 3. Sega Sammy (6460 JP) 4. Fuji Corporation (7605 JP) 5. Round One (4680 JP) 6. Ginebra San Miguel (GSMI PM) 7. Cromwell Property (CMW AU) 8. Tower Limited (TWR NZ) 9. Beenos (3328 JP) 10. Asagami Corporation (9311 JP) ``` ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) # 1\. HDFC Bank (HDB US) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be360ba6-0248-40c6-acb1-93491cfea641_1382x914.png) In early January, Krish Mehta from Enam Holdings pitched [**HDFC Bank**](https://moiglobal.com/krish-mehta-hdfc-bank-202401/?ref=asiancenturystocks.com) at the Manual of Ideas Best Ideas 2024 conference *(HDB US - US$133 billion)*. I wrote briefly about HDFC last year [here](https://www.asiancenturystocks.com/i/136807919/hdfc-bank-hdb-us). Krish’s view is straightforward: HDFC Bank is the largest private sector bank in India and arguably the best-managed banks in the entire industry. It’s cross-cycle cycle credit costs have been the lowest among its peers. It also has a high deposit/branch ratio. This has given it a 2%+ return on assets allowing it to compound capital at a decent pace. The ListCo’s recent merger with parent HDFC Limited － which owns mortgages, and mutual fund and insurance businesses － could provide cross-selling opportunities as 70% of HDFC Limited’s customers do not yet bank with HDFC Bank. That’s the bull case, anyway. [This article](https://valuepunks.substack.com/p/hdfc-bank-an-update) from Value Punks provides some more nuance. HDFC Bank’s share price dropped in mid-January after its quarterly earnings failed to meet expectations. Value Punks believe that the following factors could create short-term headwinds: - They think other private banks such as ICICI and even public banks such as SBI have improved their risk culture over the past five years. - Due to a change in tax policy, HDFC’s current customers are moving away from bank deposits to mutual funds. - The exit of superstar CEO Aditya Puri is a question mark. Why did he resign just before the ListCo’s merger with its parent? It seems obvious to me that parent HDFC Limited was the lower-quality institution among the two, given its lower net interest margin and its reliance on wholesale funding. Value Punks also point out that the mortgage market is getting competitive. So the merger might have been value destructive. Is the stock cheap? Well, the forward P/E is currently 14.6x, which would imply a 17% return on equity. But underlying deposit growth has deteriorated, and NIM rose just 4% year-on-year in the latest quarter. I’m not sure if the current P/E is necessarily wrong. --- # 2\. Sysmex (6869 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d330e74b-1126-4ea3-8e7a-3a963a9b023f_1512x588.png) wrote about Japanese testing equipment maker [**Sysmex**](https://www.eastasiastocks.com/p/sysmex-corp-6869-part-1?ref=asiancenturystocks.com) *(6869 JP - US$11 billion)*. It’s a fascinating business. The company dominates the market for hematology equpiment which are used to analyze blood samples for red and white blood cells, hemoglobin and other components of blood. It’s taken market share from previous market leader Beckman Coulter, now owned by Danaher. Growth has been in the 9% range over the past eight years. But growth could accelerate thanks to a novel blood-based test for Alzheimer’s and a new product refresh from 2022. That said, Sysmex’s return on equity has dropped from about 20% to 11% over the past few year. There are some fears about competition from Mindray in emerging markets business. Sysmex’s 50-60% global market share seems to suggest a strong moat, but the key question is whether the technology can be replicated by their Chinese competitors. At 38x P/E, there’s not much room for error, in my view, and I’d rather stay on the sidelines. --- # 3\. Sega Sammy (6460 JP) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/42d58280-38ab-454e-9f7a-3ca190ca5036_1462x812.png) _This post is for paying subscribers only._ ### New posts from Asian Century Stocks URL: https://www.asiancenturystocks.com/new-posts-from-asian-century-stocks-add/ Last updated: 2024-01-26T12:47:11.000Z A reminder of the best recent posts _This post is for subscribers only._ ### Fraud in Asia URL: https://www.asiancenturystocks.com/fraud-in-asia/ Last updated: 2025-10-24T15:03:50.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/fraud-in-asia/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/075751c9-c05f-4055-aa4e-7a779aaaa5cc_1920x1080.png) # Summary - Tan & Robinson’s book [Asian Financial Statement Analysis](https://www.amazon.com/Asian-Financial-Statement-Analysis-Irregularities/dp/1118486528/ref=sr%5F1%5F1?crid=3LKAWRWP42Q6H&keywords=Asian+Financial+Statement+Analysis&qid=1705902218&sprefix=asian+financial+statement+analysis%2Caps%2C325&sr=8-1&ref=asiancenturystocks.com) is probably the definitive book on how to spot fraud and misrepresentation in this part of the world. - Be careful of companies with high margins, poor cash flows, fast-growing balance sheets and complex corporate structures with frequent related party transactions. - I have great respect for the detailed work that short-sellers carry out. In my experience, high-profile short-seller reports should always be taken seriously. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Perhaps the most important factor for any investment in Asia is assessing corporate governance. There are few books on the subject, making it difficult to navigate. I was thrilled to read Chinhwee Tan and Tom Robinson’s [Asian Financial Statement Analysis](https://www.amazon.com/Asian-Financial-Statement-Analysis-Irregularities/dp/1118486528/ref=sr%5F1%5F1?crid=3LKAWRWP42Q6H&keywords=Asian+Financial+Statement+Analysis&qid=1705902218&sprefix=asian+financial+statement+analysis%2Caps%2C325&sr=8-1&ref=asiancenturystocks.com). The book is from 2014 and discusses real-world examples of fraud and misrepresentation across Asia. Tan has experience as a forensic accountant and collaborated with his former professor, Tom Robinson, to write this book. And in my view, it remains the best book on the subject. In this post, I’ll discuss what I learned from the book and what you should be careful of when investing in the region. ``` Table of contents 1. The basics 1.1. Overstating earnings 1.2. Overstating financial position 1.3. Overstating operating cash flow 1.4. Managing earnings 1.5. Corporate governance issues 2. Case studies 2.1. Satyam 2.2. Sino-Forest 2.3. Longtop Financial 2.4. Olympus 2.5. Oriental Century 2.6. RINO International 2.7. Oceanus 2.8. China Biotics 2.9. West China Cement 2.10. Harbin Electric 2.11. Renhe Commercial Holdings 2.12. Duoyuan Global Water 2.13. Winsway Coking Coal 2.14. PUDA Coal 2.15. Sino-Environment Technology Group 2.16. Real Gold Mining 2.17. Fibrechem Technologies 3. Conclusions ``` # 1\. The basics Let’s start with the basics. Modern commerce is built on accounting, specifically the double-entry accounting system developed by Luca Pacioli in the 15th century. Just like fingerprints are used to solve murder cases, double-entry accounting can determine where a financial crime has occurred. The so-called [accounting equation](https://en.wikipedia.org/wiki/Accounting%5Fequation?ref=asiancenturystocks.com) tells us that: ``` Assets = Equity + Liabilities ``` This is important because it means that if any item changes on the asset side of the balance sheet, you’ll also see an effect on the liability side and vice versa. Changes to balance sheet items can give us clues of what’s happening. The three financial statements － the income statement, the balance sheet and the cash flow statement － are interrelated. ![Bitesize Finance: Investing 101-How to read a company's earnings report - Bitesize](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5a798853-abde-48fb-90ae-777e6c8f0240_688x325.png) The three financial statements. Source: [Bitesize Finance](https://bitesizebkk.co/bitesize-finance-earnings-report/?ref=asiancenturystocks.com) For example, net profit from the income statement ends up in retained earnings on the balance sheet. Cash flow from operations is derived from the net profit figure. It also ends up as cash on the balance sheet. So, you’ll need to review all three financial statements if you want to get a grip on the changes in the conditions of a firm. Tan & Robinson argue that there are five categories of accounting games that companies can play: ## **1.1\. Overstating earnings** Companies can boost earnings through either aggressive revenue recognition or deferral of expenses. They can also reclassify non-operating income as revenues or operating expenses as “restructuring costs”, but it’ll be obvious the second you open the income statement. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2d36e99b-e90b-490b-97db-940ee6a51aca_1752x346.png) Regarding **aggressive revenue recognition**, search for the footnote describing those policies and compare them to the company’s peers. You’ll also spot aggressive revenue recognition on the balance sheet. Since profits from fictitious revenues end up in retained earnings on the balance sheet, accounts receivables will typically grow. So, you should compare the year-on-year growth in accounts receivable with those of the revenue line. Or look at the number of receivable days vs the company’s peers. The rise in retained earnings can also be matched by entirely fake cash balances. In that case, they’ll have to produce fake documentation and try to hide the fact that the cash isn’t bringing in any interest income. And you should be particularly careful of companies that classify cash in unusual ways, like the Indian IT company Satyam did. When it comes to **understating expenses**, dishonest companies either avoid reporting them altogether or defer them to a later period. For example, they might have sister companies taking on the burden of payroll. Understating expenses also leads to higher retained earnings on the balance sheet. And it’ll often be matched on the asset side through overvalued inventory. You’ll spot this trick by comparing the number of inventory days with the company’s peers. Understating expenses can also be done by capitalizing costs rather than expensing them. For example, costs might end up in property, plant & equipment or in unusual categories like “deferred customer acquisition costs”. It’s worth looking at strange movements in such balance sheet items and see whether they should be written down. **Key takeaways**: Earnings manipulation takes place through aggressive revenue recognition or understating expenses, and to spot them, you should review balance sheet items like accounts receivables and inventories. --- ## **1.2\. Overstating financial position** This takes us to the next point: companies can manipulate the size of their balance sheet, often to improve leverage ratios or specific ratios like return on equity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fe7f7f69-2d84-4b79-a7d8-9d4d612c972f_1574x348.png) For example, a company could move liabilities off the balance sheet through special purpose vehicles (SPV). After the SPV has been de-consolidated, the leverage doesn’t seem as high. However, the company might still guarantee the debt inside the SPV and thus still be liable. Another common way to reduce perceived leverage is to enter into operating leases. Today, IFRS 16 forces the capitalization of operating leases, too. But outside of IFRS 16, classifying a lease a operating rather than capital lease will help improve leverage ratios. A typical example is an airline leasing aircraft and not consolidating the debt onto its balance sheet. But what I’ve most commonly found in Asia is that companies reduce their ownership in subsidiaries below 50% and then opt for equity method accounting. This type of accounting removes the debt from the balance sheet and only records the subsidiary’s net assets. It’s common in the Chinese property development industry. Management can also play around with assets measured at “fair value”. For example, there’s some leeway in measuring the value of financial assets, biological assets, land and buildings, etc. You’ll have to go through the footnotes to understand which methods are used and whether those methods are appropriate for that particular situation. **Key takeaways**: Companies can use tricks to hide true indebtedness. Look for keywords such as “equity method”, “special-purpose entities”, “joint ventures”, “associated companies”, “nonconsolidated entities”, “guarantees”, and “commitments” to spot such games. --- ## **1.3\. Managing earnings** While companies can fabricate earnings through various methods, they can also shift earnings from one period to another. They use specific balance sheets like accruals or deferrals to achieve this. The purpose might be to protect the share price by covering up a weaker quarter. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/013f3bc6-fc44-4ef8-88e2-19275f5479d8_1946x342.png) Here are the balance sheet items that are typically used to manage earnings volatility: - **Accounts receivables**: Change estimates for bad debt expense and earnings will change a bit on the margin. - **Deferred revenues**: Avoid recording revenue later, even though the funds have already been received. - **Accounts payables**: Take on more expenses in the current period even though the company hasn’t paid for them yet. This can include payroll, rent, taxes, etc. - **Deferred expenses**: For example, classifying marketing expenses as “deferred customer acquisition costs” is common in the insurance industry. - **Deferred taxes** arise from differences in how profits are recorded in the financial and tax statements. Watch out for deferred tax assets since they could imply profitability issues. - **Contingencies & reserves**: A company can set up cookie-jar reserves after an acquisition, enabling it to save income for a future year. **Key takeaway**: If a company records very little margin volatility, you might want to dig deeper into these accruals and deferral items to see whether the company might smoothen earnings through accounting tricks. --- ## **1.4\. Overstating operating cash flow** Tan & Robinson make the case that some companies actively try to move around items in the cash flow statements to boost operating or free cash flow. For example, they might stop paying suppliers or selling accounts receivables and classify that sale as operating cash flow. Or classify operating expenditures as capital expenditures. I pay great attention to the operating cash flow and try to compare it with the net income. This ratio should be higher than 1x on average, since you add depreciation & amortization to net income to get to operating cash flow. But if you do, just be aware that operating cash flow can be manipulated in particular years. You’ll also want to check the free cash flow, i.e. the operating cash flow less capex to understand cash generation. If it’s consistently negative, you’ll probably want to see a high return on equity to prove that the capex yields some return. **Key takeaways**: Check the items in cash flow statements to make sure they belong in the right section, for example interest income should be in the financing section and not the operating section. --- ## 1.5\. Corporate governance issues This final category has to do with how insiders can enrich themselves at the expense of minority shareholders. Tan & Robinson argue that we should look at the following factors when assessing corporate governance in the region: - **Board governance**: A board with a majority of external, independent board members. - **Shareholders rights**: Equal voting rights given to minority shareholders - **Interlocking ownerships**: Cross-shareholdings and other relationships between companies in the group. - **Related-party transactions**: Transactions between companies within the larger group or between management and the ListCo. - **Structure**: Variable interest entity structure or direct ownership of equity? - **Excessive compensation**: Management enriching themselves at shareholders’ expense. - **Personal use of assets**: For example, the CEO’s family lives in a property owned by the company. - **Lack of transparency**: Disclosures are insufficient to understand major transactions or the condition of the company. - **Auditor issues**: Qualified opinion, auditor hired by management for consulting services or too close of a relationship with the firm, etc. **Key takeaways**: Always check the corporate structure, related party transactions and other conflicts of interest. --- # 2\. Case studies Now, let’s jump into the juicy part of the book, where Tan & Robinson discuss precedents. And most importantly, what you could have done to spot each fraud. ## 2.1\. Satyam ![Satyam Founder Ordered to Pay Back Alleged Accounting-Fraud Gains - WSJ](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c8029d1f-7597-43dd-b4bb-44eacb56e986_602x402.jpg) India’s [**Satyam**](https://en.wikipedia.org/wiki/Satyam%5Fscandal?ref=asiancenturystocks.com) used to be one of the largest IT consultancies in the world prior to the Great Financial Crisis of 2008\. That fiscal year ending in March, revenues grew at a rate of +46% year-on-year. But the company was found to have falsified revenues. The clue was that its accounts receivables grew much faster than revenues. Short-term receivables grew +51% year-on-year, long-term receivables +80% year-on-year and unbilled revenues +111% year-on-year. An unusual item on the balance sheet called “investments in bank deposits” was treated separately from cash. It didn’t earn much interest, which was suspicious in and of itself. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e1dbd5e8-a949-4e1c-b5b7-b00614181d7f_1454x954.png) From Satyam’s 2008 balance sheet. Source: [Satyam 10-K 2008](https://www.sec.gov/Archives/edgar/data/1106056/000114554908001441/u93288e20vf.htm?ref=asiancenturystocks.com) **Key takeaway**: If you see fast growth in accounts receivables or unusual cash items, check the revenue recognition policies and whether reported growth is realistic or not. --- ## 2.2\. Sino-Forest ![Former Sino-Forest CEO was 'controlling mind' behind alleged frauds: lawyer | CBC News](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/640231de-bfc7-445a-978b-397ede703b04_780x439.jpg) The [**Sino-Forest**](https://en.wikipedia.org/wiki/Sino-Forest%5FCorporation?ref=asiancenturystocks.com) scandal was high-profile and kicked off investigations of many Chinese frauds in North America in 2011-2013\. Several high-profile investors, such as John Paulson and Richard Chandler, were hurt by the downfall of Sino-Forest. It was supposedly China's largest private forestry operator, with 790,000 hectares of forestry assets. The company had listed on the Toronto Stock Exchange through a reverse merger and then raised about US$3 billion through debt and equity. By 2011, it traded at a market cap of US$4.5 billion. It showed amazing financial metrics with EBITDA margins as high as 60-70%. In June 2011, Carson Block’s firm, Muddy Waters, released a report accusing Sino-Forest of fraud, and the stock fell by over 80%. An independent committee was formed to investigate the fraud allegations. And in the end, only 18% of the timber holdings were confirmed by plantation rights certificates. The investigation also found that most of the revenue came from related parties that acted as middle-man between Sino-Forest and its customers. These were described as “authorized intermediaries” though not identified. So, what was the giveaway? The lack of cash flows in Sino-Forest’s financials. It invested heavily in Timber Holdings, funded by debt and equity raises. The timber holdings balance rose by +43% in 2010\. And the fact that it used “authorized intermediaries” meant no third-party verification of its transactions. It’s also worth noting that management only owned about 3% of the company － a tiny amount compared to outside shareholders. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/691a959d-f756-4151-a816-87cef1064473_1216x454.png) Source: Tan & Robinson **Key takeaway**: Watch out for companies with a lack of cash flow, inexplicably high margins and unidentified intermediaries acting on behalf of customers. --- ## 2.3\. Longtop Financial ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e5e19694-f04f-4f04-b577-402a90ad6ebb_1632x520.png) Chinese banking software developer [**Longtop Financial**](https://marketswiki.com/wiki/Longtop%5FFinancial%5FTechnologies?ref=asiancenturystocks.com)was brought down by Andrew Left’s Citron Research in 2011\. It had reported operating margins of 49% and impressive growth. However, Citron pointed out a few issues with the company. It had set up a new business called Xiamen Longtop Human Resources that employed the majority of staff at Longtop Financial. But its accounts weren’t consolidated into the ListCo. This sister business was fully disclosed in its SEC filings. After Citron released its report, Longtop announced a share buyback. Auditor Deloitte responded by trying to verify its cash holdings. But as soon as they went to Longtop’s banks, Longtop fired its auditor on the spot. After Citron confirmed that its SEC financials did not match those of its government SAIC filings, NYSE suspended the stock from trading. In hindsight, the warning signs should have been Longtop Financial’s high gross margins of almost 70% － way higher than any of its peers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9714724f-584b-4f0b-85d6-c50d08c8a3cb_970x592.png) Longtop’s gross margins vs its peers. Source: [Citron Research](https://www.asiancenturystocks.com/content/files/public-ckfinder/Short-sellers/Citron-Research/citron-research%5Flongtopfinancial%5Fcitron-reports-on-longtop-financial-%5F28nyse%5Flft%5F29%5Fapr26-2011.pdf) Clearly, Longtop had simply shifted costs to its sister company, Xiamen Longtop Human Resources. It was also noteworthy that the owner had transferred 70% of his shares to employees and friends after the IPO, perhaps to pay off hidden liabilities. After its IPO, it had engaged in 20 acquisitions, most of which were unprofitable entities and purchased from unidentified individuals. **Key takeaway**: Watch out for companies with inexplicably high operating margins and with tight relationships with sister companies whose accounts aren’t consolidated into the ListCo. --- ## 2.4\. Olympus ![Olympus's Culture Was 'Rotten,' Outside Panel Finds - The New York Times](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7ec348cd-6a8f-4b5b-b233-68bcabca2480_600x370.jpg) [**Olympus**](https://en.wikipedia.org/wiki/Olympus%5Fscandal?ref=asiancenturystocks.com) is a Japanese manufacturer of precision machinery － no doubt one of the highest-quality companies in Japan. However, in 2011, it was discovered that the company had covered up a significant loss on its balance sheet after Japan’s bubble burst in 1990\. The loss was about JPY 100 billion or nearly US$1 billion at the then-prevailing USD/JPY exchange rate. Olympys’s trick was this: its 1990s loss had been kept off its books by transferring the financial assets not consolidated into the ListCo. These other companies bought the assets above fair market value using money borrowed from Olympus. Later, when changes in accounting rules forced Olympus to consolidate these companies, it was forced to acquire them at high valuations. The only clue was significant goodwill on Olympus’s balance sheet after repurchasing the overvalued assets. Goodwill is recorded whenever an asset is acquired above book value. And in Olympus’s case, the difference between the price and book value was significant. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c0ad59d5-4c22-4f49-b8db-948dbddefbaa_1270x1898.png) Source: [Olympus Annual report 2010](https://www.asiancenturystocks.com/content/files/ir/data/brief/n100524ae%5Fn%5Fcorrected.pdf) The story unravelled after a new CEO joined in 2011, and he alleged that management had significantly overpaid for acquisitions. He was fired, but an investigation proved him right, and write-downs soon followed. The stock dropped by over half and remained weak for several years. **Key takeaway**: Watch out for when goodwill exceeds equity by a significant margin. --- ## 2.5\. Oriental Century ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d9f39b70-2c27-4ab9-b8d2-f278d6009eac_1652x698.png) [**Oriental Century**](https://theedgemalaysia.com/article/%E2%80%98oriental-century-selling-assets-too-cheaply%E2%80%99?ref=asiancenturystocks.com) was a Singapore-listed operator of schools in China, including Oriental Pearl College, Humen Oriental and Nanchang Oriental. In 2006, Singapore’s Raffles Education bought a 29.9% stake in Oriental Century but remained a passive investor. The first of the schools was owned by a related party called Dongguan Baisheng, owned by the CEO Yuean Wang and other insiders. The ListCo earned a management fee for operating Oriental Pearl College but did not own the asset. After the Great Financial Crisis in 2009, Oriental Century restated its past results. CEO Yuean Wang acknowledged that two of the schools had operated at losses, that the company had inflated sales and cash balances and also diverted money to a related party. Wang was swiftly terminated as CEO, and the CFO quit as well. A PwC audit showed that revenues over the preceding five years had been just CNY 20 million, compared to the reported CNY 329 million. The company was liquidated the following year. **Key takeaways**: Be careful of transactions with related parties, especially when they’re owned by senior executives. Not owning all operating assets within the ListCo should be a warning sign. --- ## 2.6\. RINO International ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/468bc02d-78bc-4fb5-abfa-8afb3744d624_1264x684.png) [**RINO International**](https://www.bloomberg.com/news/articles/2011-04-11/sec-suspends-trades-in-rino-international-amid-fraud-allegations?ref=asiancenturystocks.com) was another target of Carson Block’s Muddy Waters. The company was engaged in wastewater treatment equipment with amazing gross margins of 35-40% － way higher than the peer group’s 20%. RINO’s corporate structure was complex: it owned one variable-interest entity, which in turn owned three other entities, all consolidated into the ListCo. So, the consolidated accounts should have given a true picture of the company’s condition. But as Muddy Waters pointed out, RINO’s property, plant & equipment were minuscule at just 4.7% of total assets and a small fraction of revenues. Carson had retrieved SAIC filings showing that reported revenues were only about 5% of those reported in its SEC filings. He also proved that RINO had not fulfilled the terms of the VIE agreement. **Key takeaways**: Be careful of companies producing commodity products yet show margins. Low PP&E/revenues was another warning sign. Also, be careful of companies operating with VIE structures, especially when they’re not operating in sensitive sectors like the finance or software industries. --- ## 2.7\. Oceanus ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/28e07720-34fd-494e-a5f4-f77207df0a29_1984x734.png) [**Oceanus**](https://www.valuebuddies.com/thread-763-page-7.html?ref=asiancenturystocks.com) is a Singapore-listed food supplier of seafood such as abalone from its two farms in China. It was listed in Singapore in 2008 through a reverse merger. In the following two years, it showed strong top-line growth of 17% per year and the book value of its abalone assets more than doubled in two years to US$180 million. By 2011, it had achieved a market cap of US$310 million and an enterprise value of US$530 million. But in late 2011, it issued a profit warning and wrote down its abalone assets by US$140 million. It explained the write-down by saying it had seen an unexpected increase in the mortality rate of its 200 million abalone population, with 42 million abalones perishing vs 6 million the previous year. In actuality, between 2008 and 2010, Oceanus’s volume of abalone sold actually decreased, but the rising value made up for it. The company had essentially overstated the number of abalones, their size and the growth in the valuation of these biological assets. Meanwhile, the cash balance dropped from US$88 million in 2009 to US$4 million by 2011\. The founder, Ng Cher Yew, had been a director of 3 companies that were dissolved or struck off the company register. **Key takeaways**: Watch out for improper valuation of biological assets, as they’re frequently wrong. Check the background of the CEO and whether he’s been involved in fraud in the past. --- ## 2.8\. China-Biotics ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/104d44cd-4cb0-4116-b90f-30833e8e0c3a_1972x278.png) [**China-Biotics**](https://www.saxenawhite.com/cases/china-biotics-inc/?ref=asiancenturystocks.com) was a Shanghai-based maker of food supplements that went public in 2006 through a reverse merger. It produced probiotics, specifically acidophilus in pill format, for sale in mainland China. It also sold probiotics in bulk to the dairy and animal feed industries. In 2010, revenue grew by +50% year-on-year with gross margins of 70%. And it had a sizeable cash balance of US$132 million. In early 2009, a short-seller pointed out that its 70% gross margins were hard to believe and that it had found large discrepancies with its SAIC filings. Later, private investigators found that many stores China-Biotics claimed to own did not exist. Finally, in 2011, auditor BDO resigned. It said it could not verify the cash balance that China-Biotics claimed to own and refused to certify the company’s 2011 numbers. After failing to file a 10-K, it entered into a trading halt. The give-away was China-Bioti’s high margins. It was also suspicious that its inventory days were just nine days. It suggested a lack of inventory to support the scale of the business. An industry organization confirmed that China-Biotics had no footprint to speak of. It also accrued tax liabilities because it probably didn’t have taxable income in the eyes of the tax authorities. **Key takeaways**: Watch out for companies with frequent CFO turnover, inexplicably high margins, low inventory days and low tax payments. --- ## 2.9\. West China Cement ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cd25bf29-cccc-430e-a90c-c89ba2e04a08_778x224.jpg) [**West China Cement**](https://finance.yahoo.com/quote/2233.HK?p=2233.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) is a Shaanxi-based cement company which had 17 production lines with a total capacity of 23 million tons. It was listed on AIM in 2006 and then relisted on the Hong Kong Stock Exchange in 2010. In 2012, it was targeted by Soren Aandahl’s Glaucus Research, who called it a “blatant fraud”. It believed that its 20 percentage point margin premium to its competitors was unreasonable and that it had been overpaying for loss-making cement factories from unidentified individuals (CNY 350/ton of capacity vs peers’ CNY 60 per ton). Glaucus also pointed out that West China Cement had high auditor and management turnover. It turns out that Glaucus was mostly correct. West China Cement’s selling prices were actually lower than those of the industry, and its costs were comparable. Several management team members had a checkered past at Sino Vanadium, Norstar Founders Group and others. However, the company continues to operate and remains listed on the Hong Kong Stock Exchange. **Key takeaways**: Be careful of companies with unreasonably high margins, with frequent M&A transactions and individuals with a track record of mismanagement. --- ## 2.10\. Harbin Electric ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e87ebe4a-25da-4956-a5b4-364a6784a7d6_894x550.png) [**Harbin Electric**](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2011/08/hrbn-independent-forensic-acounting-report.pdf) is a Heilongjiang-based electric motor manufacturer selling to global OEMs or integrated systems. It grew through the acquisitions of companies such as Weihai Hengda and Advanced Automation Group Shanghai. Growth was rapid in 2010, though with negative operating cash flow. In 2010, the board received a proposal for a management buyout by the CEO and Baring Private Equity. The CEO entered a term loan facility with China Development Bank, collateralized by his shares. Short-sellers question Harbin Electric’s numbers. They found mismatches between SEC and SAIC filings. However, despite doubling revenues in 2010 to US$500 million, it could not disclose a single verifiable large customer. And its operating margins of 20% were far higher than any of its peers. It also entered into consulting agreements with undisclosed individuals. Yet despite these concerns, the privatization was completed as planned, and the company is now private. **Key takeaways**: Whether Harbin Electric was a fraud remains unknown. But in any case, be careful of companies with negative cash flows, unreasonably high margins and no verifiable customers. --- ## 2.11\. Renhe Commercial Holdings ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff8dac16-07cd-4c1b-b91c-45bccdbe59a9_1320x746.png) [**Renhe Commercial Holdings**](https://www.asiancenturystocks.com/content/files/file/announvement/eng/201042722181520959.pdf) was a developer of underground shopping centers. It supposedly installed furniture, fixtures and equipment in government-owned underground bomb shelters and used those spaces for commercial purposes. It was listed in Hong Kong in 2008 and saw tremendous revenue growth in 2011 of +96% and gross margins of +70%. But Renhe’s operating cash flows were weak, with a majority of profits coming from one-off gains and sucked up by rising accounts receivables. It also issued shares repeatedly throughout 2009, partly to finance the acquisition of agricultural wholesale markets from the controlling shareholder. It also sold five projects to undisclosed projects and recorded accounts receivables for them, yet never collected any cash. **Key takeaways**: Be careful of business models not proven elsewhere. Check whether net profits are earned in cash. Also, be careful of companies engaging in M&A, especially with undisclosed parties. --- ## 2.12\. Duoyuan Global Water [**Duoyuan Global Water**](https://www.gmtresearch.com/en/library/companies/duoyuan-global-dgwiy-us/?ref=asiancenturystocks.com) was a US-listed Chinese supplier of water treatment equipment. The company showed strong growth and was audited by Langfang Zhongtianjian, which had a shoddy track record. In 2011, Carson Block’s Muddy Water issued a report claiming that its revenues were overstated by 100x, with actual revenues less than US$800,000\. He had been to its factory in Hebei province and saw few signs of human activity, counting only 240 employees. He also found that Duoyuan’s distributor network was non-existent. And finally, it engaged in related-party transactions with the company’s CEO, Wenhua Guo. A warning signal was when 4/6 independent directors resigned after management refused to provide more information after Muddy Water’s report. There were also incorrect classifications in the cash flow statement. Also, Duoyuan had zero work-in-progress inventory, which is unusual for a manufacturing company. **Key takeaways**: The low inventory was a warning sign, as were repeated related party transactions. --- ## 2.13\. Winsway Coking Coal ![image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2f10bc3d-784f-43bb-a6d0-69b33b255840_749x499.jpg) [**Winsway Coking Coal**](https://www.reuters.com/article/idUSL3E8CJ4VE/?ref=asiancenturystocks.com) is a supplier of coking coal in Inner Mongolia. It was listed on the Hong Kong Stock Exchange in 2010\. It accumulated a debt burden that still looked reasonable with just 2x total debt/EBITDA and an EBITDA interest coverage ratio of 7.5x. In 2011, an outfit called Jonestown Research accused Winsway of overstating its coal inventory by HK$ 1 billion in 2011 and engaging in undisclosed related party transactions with a company that had previously been a subsidiary of Winsway. By doing so, it could claim higher revenues and explain away the lack of cash on the balance sheet. A warning sign was that the company's promoter had only listed a part of the group, keeping the most valuable parts to himself. The complex corporate structure created scope for mismanagement. That said, it’s not clear whether Jonestown was correct. KPMG signed off on Winsway’s financials, and Winsway acquired a large Canadian coal miner called Grand Coal in a joint venture while also selling the CEO’s 30% stake to state-owned enterprise CHALCO. From my understanding, Winsway has recently changed its name to E-Commodities Holdings. **Key takeaways**: Be careful of complex corporate structures and relationships with middle-man distributors and suppliers that may or may not be related parties. --- ## 2.14\. PUDA Coal ![China's Puda Coal Inc. executives charged with fraud | Corruption.Net](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dc5e4863-94e3-4bae-9067-52023185627d_350x200.jpg) [**PUDA Coal**](https://www.nytimes.com/2012/02/24/business/sec-charges-reveal-fraud-in-chinese-company.html?ref=asiancenturystocks.com) was a coal company providing coking coal to steel manufacturing in China’s Shanxi province owned by a certain Chairman Zhao. It had two segments: coal mining and coal washing. It was listed through a reverse merger in 2005 and then raised capital twice in 2010\. It appeared to be a profitable, well-run company. But in 2011, GeoInvesting and Alfred Little published a report on PUDA, stating that it was, in fact, an empty shell company that had failed to disclose the transfer of PUDA’s 90% stake in Shanxi Coal to the Chairman. It later sold part of that stake to CITIC Trust. The auditor resigned. And the stock went to zero. The most obvious warning sign was that Chairman Zhao operated a separate company called Resources Group and also owned six mines in the Pinglu Project, where PUDA received most of its coal. **Key takeaways**: Be careful of complex corporate structures, especially when senior management owns related businesses. --- ## 2.15\. Sino-Environment Technology Group ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66734a6a-b062-4ee8-b2e1-e63e46988f47_708x180.png) [**Sino-Environment**](https://www.asiancenturystocks.com/content/files/public-ckfinder/hall-of-shame/Sino-Environment-Technology/makyuenteen-corpgov-v1%5Fsino-environment--an-s-chip-scandal%5Fapr2012.pdf) (SinoEnv) was a Singapore-listed Fujian company operating in the industrial waste gas and wastewater industries. It was controlled by the CEO, Sun Jiangrong. It had reported cash holdings of SG$40 million within mainland China. In 2008, CEO Sun defaulted on an SG$120 million loan from hedge fund Stark Investments, which had been collateralized by his holdings in SinoEnv. This forced him to sell his entire stake and lose control. After the new owners took over, PwC performed an audit. It found that SG$85 million of transactions made by SinoEnv were made without approval from the board, including for four waste power plants where construction had not yet begun. **Key takeaways**: In this case, it’s unclear what could have warned you about the mismanagement of the company. --- ## 2.16\. Real Gold Mining ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8d481f6f-88ec-472f-996e-e67e14f479dd_1690x416.png) [**Real Gold Mining**](https://www.scmp.com/article/968913/accounting-mystery-mining-firm?ref=asiancenturystocks.com) was a miner based in China’s Inner Mongolia. It was listed on the Hong Kong Stock Exchange during the gold fever in 2009 and raised more capital in 2010\. With the proceeds from these capital raises, it acquired several other miners. A 2011 article in the South China Morning Post pointed out that the company’s 2009 accounts did not match those of its SAIC filings. Soon thereafter, the shares were suspended. It turned out that approximately HK$1.5 billion of company funds had been funneled to majority shareholder Wu Ruilin on top of personal loans to him. The ListCo had also acquired two phosphorus mines from him personally for HK$520 million. Trading in the stock was halted in 2011. Other than the M&A transactions with Wu, the giveaway was that out of the five major customers disclosed in the IPO prospectus, only one confirmed that it had a real connection with Real Gold. **Key takeaways**: Try to verify a company’s key customers. Also, be careful of frequent related party transactions. --- ## 2.17\. Fibrechem Technologies ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fe6c19a5-18be-4ba2-b010-d4135986753b_1538x730.png) [**Fibrechem Technologies**](https://www.gmtresearch.com/en/library/companies/fibrechem-technologies-ltd-fbcm-sp/?ref=asiancenturystocks.com) was a Singapore-listed company producing polyester fibers and microfiber at three plants in China’s Fujian province. Up until 2008, it appeared to be growing rapidly with high margins. However, in 2009, auditor Deloitte refused to sign off on the company’s financial statements due to difficulties determining cash and accounts receivables. The CEO then resigned. Three years later, an investigation uncovered accounting irregularities with overstated assets and a non-existent cash balance, which may have been embezzled. Fibrechem also had improper disclosure of assets and liabilities. It also uncovered a transfer of a controlling stake in a subsidiary out of reach of creditors. The warning signs were excessive cash reserves about the company’s size. In addition, it kept borrowing money despite its large cash position. And the operating margins were double those of its closest peers. **Key takeaways**: Question companies selling commodity products at high margins. And question companies with large cash piles that keep raising more debt for some reason or another. --- # 3\. Conclusions Tan & Robinson’s book [Asian Financial Statement Analysis](https://www.amazon.com/Asian-Financial-Statement-Analysis-Irregularities/dp/1118486528/ref=sr%5F1%5F1?crid=3LKAWRWP42Q6H&keywords=Asian+Financial+Statement+Analysis&qid=1705902218&sprefix=asian+financial+statement+analysis%2Caps%2C325&sr=8-1&ref=asiancenturystocks.com) was like a blast from the past. I highly recommend it if you want to up your game when spotting fraud and misrepresentation. The main takeaway from the case studies in the book is to be careful of companies with inexplicably high margins, poor cash flows, fast-growing balance sheets and complex corporate structures with frequent related party transactions. Trying to avoid fraud altogether is difficult. But I’m hopeful that if we’re mindful of the typical warning signals, we can at least avoid the worst offenders, the ones that actually end up going to zero. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) *If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos.* [Get 30 day free trial](#/portal/signup) ### IMAX China (1970 HK) URL: https://www.asiancenturystocks.com/imax-china-1970-hk/ Last updated: 2026-07-31T01:50:32.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in IMAX China at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**IMAX China**](https://finance.yahoo.com/quote/1970.HK?p=1970.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(1970 HK - US$313 million)* is the Chinese subsidiary of America’s IMAX Corporation － a leading provider of high-end cinema equipment. The Chinese business is separately listed in Hong Kong under the ticker 1970 HK. It’s been given an exclusive license to sell IMAX theater systems to exhibitors within Greater China. IMAX offers more immersive cinema experiences thanks to massive screens, steep seating arrangements, taller aspect ratios, better resolution and surround sound. By selling IMAX as a better experience for the customer, it’s managed to carve out a niche for itself. And the business has become highly profitable as well, with operating margins well above 40%. I think the explanation is that studios with blockbuster content are willing to pay IMAX for the conversion of their movies since they don’t want to miss out on revenues from IMAX’s now sizeable footprint. And customers are willing to pay extra when watching movies such as Oppenheimer or Dune since they know they’ll get the best experience. That said, on my numbers it seems like IMAX is already charging quite a bit for their services and theaters with IMAX equipment don’t seem that profitable. I suspect that IMAX’s pricing power has pretty much been exhausted. In the future, growth will probably rely on greater scale rather than higher prices. Since IMAX China’s IPO in 2015, the share prices has been on a long-term slide. The main reason is that installation revenue hit a peak shortly after the IPO. At that time, recurring revenue streams like maintenance and film conversion fees were small relative to the total, failing to make up for falling installations. But today, over 70% of IMAX China’s revenues are recurring, so they are on a much better footing. And while China’s cinema industry was hit by COVID-19, it’s now in a clear recovery mode. Management guidance is positive and they expect a stronger pipeline of Hollywood blockbusters and for consumers to return to cinemas. The stock trades at around 7.5x P/E on a forward-looking basis. But if you take into account the sizeable net cash position of 20% of market cap, you get to a lower number. For reference, IMAX China’s EV/EBIT multiple is likely to end up at around 5x. That’s undeniably a low multiple. Some investors fear that IMAX China will be caught up in geopolitics. Hollywood content represent roughly 75-80% of IMAX box office revenues in the country. But new CEO Daniel Manwaring is ex-CAA and has strong relationships with all the Chinese studios. The transition is taking place and regardless of what content ends up on the big screen, IMAX will be there to serve customers. Another issue is corporate governance. In 2023, parent company IMAX Corporation tried to privatize IMAX China at a bargain-basement price of just HK$10/share. But luckily minority shareholders rejected the offer. In an earnings call with IMAX Corporation shareholders, its CEO Richard Gelfond said that dividends from IMAX China to its minorities were akin to “cash leakage”. In his own words: > *“There is also cash leakage because we paid a dividend out of China and obviously close to 30% of that went outside the IMAX Corporation. So after this transaction, we'll have the ability to keep that cash as well.”* I understand his perspective but it sounds like he’s not respecting minority shareholders as equals. Parent IMAX Corporation needs the cash sitting in IMAX China. There a fear that it will play around with transfer pricing to get that cash to the parent while avoiding said “cash leakage”. That said, the value in IMAX China is obvious to many investors. It’s a hell of a business and brand name. And IMAX China’s P/E ratio is now just 7.5x, which compares favorably to the parents’ 21.7x. We’ll see whether the gap will ever close. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Naming and shaming in Japan URL: https://www.asiancenturystocks.com/naming-and-shaming-in-japan/ Last updated: 2024-01-17T04:11:04.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/naming-and-shaming-in-japan/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/09919019-b805-450e-be99-3026ae13f835_1485x990.jpg) Source: Getty Images Japan has been in a bear market for many years. But now, the twin locomotives of a weak currency and structural reform are finally pushing the Nikkei higher. In this post, I’ll discuss the structural reform part of the equation: how Japan’s corporate governance reforms unlock value from those overcapitalized balance sheets, and discuss the companies leading the way. ``` Table of contents 1. Keiretsu capitalism 2. Abenomics 3. The Prime Market 4. Naming & shaming 5. Early signs of success 6. Potential beneficiaries 7. Conclusion ``` # 1\. Keiretsu capitalism During Japan’s early industrialization phase, you saw the rise of Japanese conglomerates, including Mitsui and Mitsubishi. These became known as [zaibatus](https://en.wikipedia.org/wiki/Zaibatsu?ref=asiancenturystocks.com) － family-controlled groups of companies that dominated entire industries. But due to their association with the Japanese war apparatus during the Second World War, they were eventually dismantled. In their place, a new commerce system arose, with companies forming around Japan’s largest banks. These new groups of companies became known as [keiretsus](https://en.wikipedia.org/wiki/Keiretsu?ref=asiancenturystocks.com) － groups of companies surrounding a particular bank. ![Keiretsu - Meaning, Example, Advantages, Vs Zaibatsu & Chaebol](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cb5de53d-6710-4bd5-b1b9-caec28941d71_714x449.png) A graphical representation of a keiretsu, with a bank forming the core. Source: Wall Street Mojo In keiretsus, banks provided businesses with loans and transferred their employees to important positions in the firms they lent to. And within each keiretsu, companies would buy shares of the others in the group. The environment became predictably clubby. Don’t believe me? Read [this article](https://diamond.jp/articles/-/310265?ref=asiancenturystocks.com) about the keiretsu formed around Mitsubishi UFJ Bank in Kyoto. And it’s just one of many. These arrangements pushed companies to grow at all costs, favoring management, clients, suppliers and the banks － practically everybody except minority shareholders. The result was poor capital allocation across Japan’s corporate sector. According to [numbers from Michael Mauboussin](https://www.asiancenturystocks.com/content/files/2020/09/michael-mauboussin-e28093-research-articles-and-interviews-2015-2016.pdf), from 1980 to 2013, Japan’s capital allocation was among the worst of any major region in the world. It was characterized by low returns on capital, low dividend pay-out ratios, few share buybacks, and practically no market for corporate control. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/288fcaf4-aa38-4ff4-a16b-923f2631458e_1786x564.png)](https://www.asiancenturystocks.com/content/files/2020/09/michael-mauboussin-e28093-research-articles-and-interviews-2015-2016.pdf) How capital has historically been deployed in Japan vs other regions globally. Source: Credit Suisse The following chart from the OECD drives home the point that Japanese companies have been underperforming. Bloated balance sheets, an accumulation of cash and unnecessary cross-shareholdings caused their returns on capital to lag those in Europe and the United States: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/120fa239-5267-4d39-9e97-182ce2713c7a_1280x597.jpg) Source: OECD --- # 2\. Abenomics ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bd069c08-c1d6-44a7-8401-860e5e7240c1_1024x683.jpg) Source: Getty Images The first signs of real change came with the election of Prime Minister Shinzo Abe. In 2013, he introduced a new economic plan, which came to be known as “Abenomics”. This reform plan rested on “three arrows” aiming to revive Japan’s stagnating economy: 1) aggressive monetary policy, 2) flexible fiscal policy and 3) structural reform. The structural reform agenda was broad, including deregulation, labor market reform, free trade agreement and greater R&D. He also oversaw the introduction of two new documents that are now seen as having kicked off Japan’s corporate governance reform: - **The Stewardship Code** in 2014 required fund managers to put clients’ interests first when voting in board meetings. For example, soon after it was introduced, voting proxy services firm ISS announced that it would recommend voting against the management of any company with a return on equity below 5%. This put real pressure on management teams to perform. - **The Corporate Governance Code** in 2015 reformed listing rules and emphasized long-term value creation and ESG factors. This law was inspired by the UK’s shareholder-friendly corporate governance code. It discusses how the board is responsible for improving capital allocation and not just letting cash accumulate on the balance sheet. And it pushed for independent directors. Since 2015, we’ve seen some improvement in the capital allocation of Japanese companies. For example, the dividend payout ratio has risen further: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff84774a-bd8c-4974-82c5-642abae08eac_1028x554.png) Source: GMO There were also other signs of positive change. The number of poison pills － a takeover defense mechanism meant to entrench corrupt management teams － fell drastically. We saw the emergence of shareholder activism, with the number of shareholder proposals by activists rising almost five-fold. And it’s become the norm to have at least 1/3 independent directors on company boards. --- # 3\. The Prime Market The next phase in Japan’s corporate governance reforms came in 2021 when the Tokyo Stock Exchange announced a new listing structure. From now onwards, listed companies would move from the previous categories “1st section”, “2nd section”, “JASDAQ”, and “Mothers section” into the following three: - **Prime**: High market cap and liquidity and strong corporate governance - **Standard**: Market cap and liquidity above a certain level - **Growth**: For companies with business plans to achieve high growth It wasn’t just a change in the names of the sub-markets of the Tokyo Stock Exchange. Japan’s listed companies would need to meet certain standards to qualify for a Prime Market listing. ![About 30% of TSE’s First section companies do not meet listing requirements](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/284ba8b5-f09e-4a82-9f24-ea80e276c9b0_587x572.png) Source: Nikko Asset Management To become a member of the Prime Market, they had to meet certain criteria such as a minimum market cap of tradable shares (>JPY 10 billion), a minimum tradable share ratio of 35%, divesting their cross-holdings and communicating with foreign investors in English. For the Standard Market, the requirements were now having free-floating shares worth JPY 1 billion, a free-float ratio above 25%, ensuring that at least 2/3 of directors were independent and disclosures in English. If companies don’t meet the criteria by 2025, they’ll be “designated for supervision” and given a 1-year grace period to get back on track. If they still don't meet the criteria at the end of this year, they’ll face a potential delisting. An important detail in the 2021 document is that the exchange quietly shifted the definition of “tradable shares”. Since then, tradable shares no longer included shares owned by Japanese commercial banks, insurance companies or corporations. This definition might seem minor, but it’s important: if companies face greater pressure to increase the market cap of tradable shares, they’ll be forced to reduce cross-shareholdings. Japan’s keiretsu arrangements are being further weakened. And minority shareholders are seeing their bargaining power improve. --- # 4\. Naming & shaming ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/29ab50d9-9d14-409f-8f0d-b2ba374ef069_1190x668.png) Source: Japan Exchange Group The latest stage of Japan’s corporate governance reform might prove the most effective. In early 2023, a Tokyo Stock Exchange document requested companies trading below book value to come up with. capital improvement plans － to devise a strategy conscious of their cost of capital and share prices. This was a radical shift because now, companies will also have to take the market value of their shares into account when allocating capital. Roughly 50% of Japan’s TOPIX constituents have a price/book ratio below 1x. And 65% of the Russell Nomura Total Value Index trade below book. Just imagine what would happen to Japan’s stock market if the number of below-1x price/book stocks fell to the US level of 3%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c7304fc4-8c57-48fb-8ea4-385252e5a217_1280x825.jpg) The distribution of companies trading at different Price/Book brackets. Source: MAN Group An 8% return on equity is the magic number to achieve this valuation. And so, the exchange is now pushing companies to consider this metric when allocating capital. Low-price/book companies will not necessarily be delisted, but a weak return on equity will lead them to become potential targets. In early 2024, it upped the ante by publicly naming the companies that have complied with its new rules. Conversely, the companies that haven’t met the new standards of the exchange will essentially be shamed into submission. Now that the pressure is on these low price/book companies, I think they’ll finally take action. They’ll try to improve the profitability of businesses, sell underperforming subsidiaries, raise their valuations through greater investor communication, hike dividend payout ratios further, and sell their cross-shareholdings. --- # 5\. Early signs of success ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1952f600-b9ef-4f82-8b32-d271c23d1bae_1400x788.png) Yoshiaki Murakami, one of Japan’s leading activist investors The Tokyo Stock Exchange’s reforms are already bearing fruit. For example: - The share of Japanese companies with two or more independent directors has climbed from 22% in 2014 to 99% today. - The share of companies with investor materials in English has climbed from 80% in 2020 to 97%. - Cross-holdings have reached a record low. - And the number of companies announcing buybacks last year rose to 992 － a huge number compared to the 3,000 or so companies listed in Japan. Of the 1,650 companies listed on the Prime Market, roughly 40% have announced steps to improve their capital allocation. For the Standard Market, the numbers are less impressive, with only \~19% having announced or said that they’re considering some measures to comply with the new rules. A few examples of such companies: - Electronics company [**Takachiho Koheki**](https://finance.yahoo.com/quote/2676.T?p=2676.T&.tsrc=fin-srch&ref=asiancenturystocks.com) set a goal of returning all profits to shareholders through dividends until it achieves its target return on equity of 8%. - [**Kyocera**](http://./?ref=asiancenturystocks.com) announced a share buyback and a plan to exit low-margin businesses. - [**Kansai Paint**](https://finance.yahoo.com/quote/4613.T/?p=4613.T&ref=asiancenturystocks.com) pledged to cut cross-shareholdings and boost returns to investors. - Oil distributor [**Idemitsu**](https://finance.yahoo.com/quote/5019.T/?p=5019.T&ref=asiancenturystocks.com) set a return on equity target of 8% and revised it to 10%. So far, the sectors with the greatest disclosure have been the financial services sector and energy. Conversely, retailers and IT companies have not been as keen to submit disclosures on how they’re planning to improve their capital allocation: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/632c394e-06d2-48d8-9202-2133012d8fd5_1564x1420.png) Average return on equity, Price/Book and TSE disclosures by sector. Source: Japan Exchange Group In any case, investors seem optimistic. Singapore-based activist investor Yoshiaki Murakami said in a recent interview that the Tokyo Stock Exchange’s push for better capital allocation will help them in their crusade against entrenched management teams. A visit by Warren Buffett to Japan in April 2023 also helped improve investor sentiment. He’s looking to buy more Japanese companies. And the Tokyo Stock Exchange is not standing still. More measures will be released regularly. Expect more companies to be shamed if they fail to live up to the now-higher standards of the exchange. --- # 6\. Potential beneficiaries *The last section of this article is only available to premium subscribers. To read on, please subscribe by clicking the button below:* _This post is for paying subscribers only._ ### Tai Cheung (88 HK) URL: https://www.asiancenturystocks.com/tai-cheung-88-hk/ Last updated: 2026-07-31T01:45:42.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Tai Cheung at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Tai Cheung**](https://finance.yahoo.com/quote/0088.HK?p=0088.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(88 HK - US$261 million)* is a small Hong Kong property developer. It owns 35% of the Sheraton Hotel and several higher-end residential developments on Hong Kong Island. The stock was recently mentioned by the French Substack [Patrimoine en Actions](https://patrimoineactions.substack.com/p/chaque-crise-cache-des-opportunites), and it’s also a long-term holding of Spain’s [Horos Asset Management](https://www.asiancenturystocks.com/content/files/wp-content/uploads/letter-to-our-co-investors-4q19.pdf). I met with Tai Cheung several times in a previous job and have a decent impression of the company and its management team. Tai Cheung has a storied history. It was founded in 1952 by a certain Edward TT Chan, who fled Guangzhou during the Second World War and ended up in Hong Kong. He was initially involved in the construction business and became a trusted partner to several Hong Kong tycoons needing his expertise. But by the 1970s, Tai Cheung had transformed into one of the top 5 Chinese-owned property developers in Hong Kong. When Edward passed away in 1981, his son David Pun Chan took over the business. Since then, Tai Cheung has become more sleepy but still well-managed and generous with dividends. It stands out among its Hong Kong property developer peers as having decent corporate governance. The last few years have been tough, though. The troubles began with the anti-government protests in 2019 and then escalated when Hong Kong’s borders were closed in response to COVID-19\. After that, the Hong Kong government introduced a National Security Law that caused roughly 4% of the population to emigrate. And from 2022 onwards, interest rates have risen almost 500 basis points, causing residential property prices to drop about 20%. Due to these events, Tai Cheung’s own share price has dropped almost 70% from the peak. Tai Cheung has an excellent portfolio of assets that are strategic in many ways: - A 35% stake in Sheraton Hotel, located right next to the Kowloon Harbourfront and overlooking the skyline on the other side of Victoria Harbour. - A residential project on 3 Plunkett’s Road near The Peak, with amazing views and only a few minutes away by car to Central. - Another residential project called PULSA in Repulse Bay, with eight newly built ultra-luxury villas with perfect views over the ocean. - A construction project on Praya Road near a marina and the only luxury development on the island Ap Lei Chau. - Strata-title properties in Metropole Square in Sha Tin and an industrial property in California. If you add up the value of these properties, you get to a number close to HK$15/share － far higher than the current share price of HK$3.3\. I calculate a discount of 79%. Will that value ever be realized? Well, on the positive side, Tai Cheung is generous with its dividends, paying out 7.3% and potentially over 10% if the company ever reverts to its pre-COVID dividend per share of HK$0.35. The outlook has also turned more positive. Hong Kong’s borders have opened up, and tourist arrivals are now back to 60% of their pre-2019 levels. And the halving of Hong Kong’s stamp duties for residential properties in October 2023 to just 15% has sparked a rise in the number of transactions. While interest rates remain high, I personally believe that inflation pressures are subsiding. The market is pricing in several cuts to the US Fed Funds Rate in 2024, and HIBOR is likely to follow its downward path. Some will argue that the 2020 National Security Law has permanently damaged Hong Kong’s ability to attract the ultra-wealthy to its shores. But I believe Hong Kong remains unique －at least in a Chinese context. There is no place like it within mainland China. And the fact that the Hong Kong Dollar is freely convertible gives the special administrative region a competitive advantage against Shanghai and Shenzhen. In any case, Tai Cheung’s discount to NAV is now at such levels that a lot of negativity has already been priced-in. The only question is if and when investor sentiment will ever turn positive again. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### The cocoa question URL: https://www.asiancenturystocks.com/the-cocoa-question/ Last updated: 2025-10-24T15:04:06.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/the-cocoa-question/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7e9bff0a-8b4d-4b1b-859a-23594da3d473_1485x990.jpg) Source: Getty Images # Summary - In the past year, cocoa prices have spiked to elevated levels. The culprit has been heavy rainfall in West Africa, leading to poor cocoa crops. - There’s nothing suggesting that the tightness in the cocoa market will end anytime soon. Sea temperatures and the cocoa stock-to-grindings ratio remain at extreme levels. But if history is any guide, the cocoa market will return to balance within three years. - High cocoa prices are a big headwind for processors like [**Barry Callebaut**](https://finance.yahoo.com/quote/BARN.SW/?p=BARN.SW&ref=asiancenturystocks.com) and chocolate manufacturers like [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com). But they’ll eventually be able to pass on the higher costs to consumers, which typically takes about two years. - The valuation multiples for Asian chocolate manufacturers such as [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com) and [**Orion**](https://finance.yahoo.com/quote/271560.KS/?p=271560.KS&ref=asiancenturystocks.com) remain lower than the global average, even though they have less exposure to geographies where the weight-loss drug Ozempic is popular. This strikes me as an anomaly. It probably reflects global investor preference for “quality stocks” in either the US or continental Europe rather than here in Asia. But that could change. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Cocoa prices have increased in the past year, leading to higher costs for chocolate producers like [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com) and [**Hershey**](https://finance.yahoo.com/quote/HSY/?p=HSY&ref=asiancenturystocks.com). Prices are now roughly twice as high as they were in 2017. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d1439835-fb5a-4609-965c-1fc340533c78_1702x836.png) ICE cocoa prices per ton. Source: Investing.com The culprit for this increase in cocoa prices is extreme rain in West Africa, which has caused poor crops and a supply deficit. The question is how long the current tightness in the cocoa market will last and when we should expect future prices to return to earth. This will impact chocolate producer margins, including those of Delfi. The current increase in cocoa prices is a repeat of the 2008-2011 period, leading to a temporary drop in margins for chocolate makers. # Introduction to cocoa Cocoa is a key ingredient in chocolate － a US$47 billion industry. We consume 3 million tons of cocoa beans yearly, most of which is via chocolate. The attraction of chocolate is its mood-enhancing effects through phenylethylamine, anandamide and caffeine, which can provide a feeling of euphoria. Consumption has occurred for several millennia, first in the Amazon rainforest of Ecuador and later on in present-day Mexico. Back then, it was mostly consumed as a beverage. For example, Spanish records suggest that Aztec emperor [Moctezuma II](https://en.wikipedia.org/wiki/Moctezuma%5FII?ref=asiancenturystocks.com) consumed 60 portions of cocoa beverages each day. ![20 Downright Bizarre Details About the History of Chocolate that We Love to Sink Our Teeth Into](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e4f592cb-ee2d-4d3d-8391-ced4d18fe83e_700x519.jpg) From the Codex Zouche-Nuttall, Mexico, c.1200-1521\. Source: Mexicolore Christopher Columbus encountered cocoa on his fourth voyage to the Americas and then spread the beans to Europe. After using it as medicine, entrepreneurs realized they could take away some of the bitterness by adding sugar to it. And voila, chocolate was born. The raw ingredient of cacao comes from the cacao tree, [theobroma cacao](https://en.wikipedia.org/wiki/Theobroma%5Fcacao?ref=asiancenturystocks.com). These carry [cacao pods](https://specialtyproduce.com/produce/Cacao%5FPods%5F12945.php?ref=asiancenturystocks.com), which ripen twice a year and contain 30-40 cacao beans each nestled in sweet, white pulp. To extract the cacao, farmers scoop out the beans and place them in boxes covered with leaves to spark fermentation. After fermentation, the beans are dried in the sun for about a week before they’re cracked open to reveal the cacao nibs inside. These nibs are eventually ground into a thick paste called chocolate liquor. The raw ingredient is known as “cacao” and the end product is known as “cocoa”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/36a7e068-b0bc-4b07-bef5-ee4f1a36319a_1650x1096.png) The three main varieties of cocoa beans: Forastero, Trinitario and Criollo. Source: Wikipedia There are three main types of cacao trees: Forastero, Trinitario and Criollo. 80-90% of modern chocolate comes from beans from the Forastero trees, which tend to be hardy and disease-resistant. Criollo, on the other hand, is a prized variety that’s less bitter and more aromatic. It tends to be expensive. Trinitario is a genetic mix of the two. These cacao trees thrive in hot, humid climates near the equator. The fact that cacao trees need a specific climate 10-20 degrees from the equator has led a few countries to completely dominate the supply, primarily Côte d'Ivoire and Ghana. Roughly 70% of all cocoa is produced in these two countries. Ghana cocoa tends to be fruitier with floral notes, and Ivorian cocoa is nuttier with an earthier flavor. ![Where should our next bar come from?? 🍫 🌍 . This is the 'Cocoa Belt'. . The cocoa belt is a narrow band 20 degrees either side of the equator. Cacao plants …](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b644a805-6969-4ddf-8c27-40ecd4b126be_809x424.jpg) Outside of West Africa, there’s also some cocoa cultivation in South America, and Indonesia has also emerged as a major grower. These countries tend to focus on premium varieties. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5c69b7bd-f367-4611-811a-d8857be21b12_1280x954.jpg) West Africa has dominated the supply of cocoa. Source: ICCO The cocoa supply chain is simple: - Farmers harvest cocoa beans from pods on cacao plants, then ferment and dry them before selling them to intermediaries. - Traders such as Cargill, Barry Callebaut and Olam export the packaged cacao beans to processing factories close to customers in Europe, North America, etc. The top 5 exporters totally dominate the trade, including, for example, 80% of Côte d'Ivoire supply. - The processing companies winnow, roast and grind cocoa and convert it into cocoa liquor, cocoa butter or cocoa cakes, which are then mixed with sugar and milk to produce chocolate. The largest processing country is the Netherlands at 13%, but Europe controls roughly 40% of the market. Here is what the process looks like from farm to table: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6add60ca-2933-4c1c-8c66-606245c182eb_1994x1258.png) Chocolate production is profitable, but the vast majority of industry economics end up in the hands of either retailers or manufacturers. Farmers, on the other hand, only get around 5-6% of the total value, a number that’s dropped from about 8% previously. ![cocoa supply chain breakdown](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/30ea8938-7711-4c34-b077-0f731d328d77_820x556.jpg) Most of the value ends up in manufacturers and retailers pockets. Source: Financial Times --- # Demand grows at a steady pace Over the past sixty years, cocoa consumption has grown at an average rate of about 2.5% per year. There’s been remarkably little variation, growing across almost all consecutive three-year periods. The chart below shows grindings (demand) measured in thousands of tons vs. a much more volatile production (supply). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eea4eaa0-abee-4c58-98bf-f35813f75cfe_1280x679.jpg) Source: Bernstein What’s driving this 2.5% yearly volume growth is greater consumption in large emerging markets such as India and China, but also smaller markets that are adopting Western eating habits, including Indonesia and Vietnam. In addition, developed market consumers are moving towards healthier and more premium chocolate products such as Lindt, which tend to contain less sugar and a higher level of cocoa. That also increases the demand for cocoa, all else equal. On the negative side, the emergence of the weight-loss drug Ozempic has raised the question of whether we might see a permanent drop in the demand for cocoa. There are signs that the demand for cocoa is weakening in markets where Ozempic is popular, including the United States. --- # The key determinants of cocoa supply ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a01e3297-b987-4f33-a5e4-0db2076375a2_1060x708.jpg) Cocoa beans out for drying. Source: Getty Images The broad picture is that cocoa bean production tends to meet demand in most years with only a few dislocations historically. However, in recent years there seems to be an underinvestment in West African cocoa trees that might damage production for years to come. It takes about five years for a cacao tree to mature and produce pods. There’s also the issue that there are no more forests in Côte d'Ivoire to clear. Part of the problem might be a lack of incentives for farmers to scale up production. Nearly 60% of world cocoa processing takes place through processors and trading houses Barry Callebaut, Olam and Cargill, which have a certain degree of bargaining power against West African traders. In the past, Côte d'Ivoire and Ghana have tried to corner the market to drive up prices. In 2018, they signed the so-called [Abidjan Declaration](https://www.swissinfo.ch/eng/society/can-a-west-african-cocoa-cartel-rise-from-the-ashes-/48133512?ref=asiancenturystocks.com#:~:text=On%20March%2026%2C%202018%2C%20the,prices%20for%20their%20cocoa%20farmers.), which was meant to become the cocoa version of OPEC － or “COPEC” as it was known. But buyers complained, and they eventually had to back down on this initiative and charge market prices instead. There’s been some hope that new techniques could help improve yields. Research in Côte d'Ivoire and elsewhere has tried to improve farming techniques. However, data on cocoa farming suggests no noticeable improvement in production yields. In the short term, what matters most for prices is the weather. For example, in the past year, West Africa has suffered from high rainfall and severe winds, making it difficult to dry cocoa beans and have caused harvests to disappoint. --- # The weather factor ![The rise of Anthony 'Chocfinger' Ward](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9bd00c08-e0ba-4ead-b78a-06a41fbcab9f_620x388.jpg) Andrew Ward, a.k.a. “Chocfinger”. Source: Clara Molden To understand cocoa prices, we’ll need to understand how the weather in West Africa impacts seasonal crops. One of the greatest cocoa traders ever is Englishman Andrew Ward, known as “Chocfinger”, referring to the fact that he controlled the chocolate market in the same way that [Goldfinger](https://www.imdb.com/title/tt0058150/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F4%5Fnm%5F4%5Fq%5Fgoldfinger&ref=asiancenturystocks.com) controlled the gold market. Chocfinger has been famously obsessed with the weather factor in predicting cocoa prices. When he was actively trading cocoa, he would set up his own weather stations on the west coast of Africa to monitor cocoa crop growth at any given time. He would also send employees to count the average number of cocoa pods per tree to get proprietary data ahead of the market. In any case, the weather in 2023 has been extreme. The so-called El Niño-Southern Oscillation has occurred for centuries, with regular warming and cooling of sea surface temperatures occurring every other year or so. The warm phase of the oscillation is called “El Niño” and the cold phase “La Niña”. But in 2023, we not only had an El Niño pattern, but temperatures rose significantly beyond what was predicted by most weather models: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bf10d3b2-ecbd-40f6-8568-c7c7c4d0e909_1107x790.jpg) Source: John Kemp Sea surface temperatures reached record highs, causing trade winds to weaken, the Atlantic jet stream to shift southward and heavy rains to occur through most of West Africa. Such rainfall has not only made it more difficult to dry cocoa beans but has also promoted black pod disease, causing beans to turn black and rot. In early 2023, an El Niño pattern was identified, and scientists expected slightly higher surface temperatures. But the actual temperatures measured ended far higher than expected, which is what caused the heavy rainfall in West Africa by the end of the year. Nobody knows what caused this massive upward shift in temperatures: perhaps lower sulphur emissions after the introduction of IMO 2020, perhaps a belated effect from factory shutdowns and restarts after COVID-19, perhaps sun spots or perhaps certain volcanic eruptions. In any case, the latest production data suggests that we’ll end up with [the second consecutive year of a supply deficit](https://www.icco.org/november-2023-quarterly-bulletin-of-cocoa-statistics/?ref=asiancenturystocks.com) in the cocoa market. The deficit is improving somewhat, though, with production for the past year up +2.6% while the demand is up about +0.2%. But the market is still tight. [Data from the International Cocoa Organization (“ICCO”)](https://www.asiancenturystocks.com/content/files/wp-content/uploads/cocoa-market-report-november-2023.pdf) shows that crops arriving at ports in Côte d'Ivoire since the start of the season on 1 October 2023 are down 35% compared to the same period last year. And in Ghana, crops from September to November were down 51%. ICCO’s commentary is bleak: > *“The rise in prices for the ongoing season has been underpinned by supply tightness. It currently seems *there is no sign of respite from price increases*.”* The best measure of whether the cocoa market is in over- or undersupply is the stocks-to-grindings ratio. This measures the inventory (stocks) of cocoa beans compared to the estimated grindings in tons for the current year. ICCO estimates that the stock-to-grinding ratio, on average, explains 83% of annual changes in cocoa prices in the long term. I view the stock-to-grinding ratio as a coincident indicator. Typically, a stocks-to-grindings ratio above 40% suggests that there are enough stocks to meet processing needs even if future harvests should turn out lower than expected. Any ratio below 35% would suggest a tight market. And today, the stocks-to-grindings ratio is 34.9%, suggesting extreme tightness in the cocoa market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bba76d98-393c-419d-9c8f-09aed9df6220_1483x990.jpg) Cocoa nibs and chocolate. Source: Getty Images On the demand side, however, we’re starting to see weakness: - US chocolate sales in the four weeks ended October 8 fell -9.2% year-on-year (source: Circana) - North American Q3 cocoa grindings fell -18% year-on-year (source: The National Confectioners Association) - Asia Q3 cocoa grindings fell -8.5% year-on-year (source: The Cocoa Association of Asia) - European Q3 cocoa processing fell -0.9% year-on-year (source: The European Cocoa Association) So, as you can tell, the weakness is particularly pronounced in North America, and I think that’s probably due to the impact of the weight-loss drug Ozempic. The Asian weakness probably has more to do with economic weakness and a customer pushback to higher prices. # The impact of record cocoa prices Cocoa beans, cocoa butter and cocoa powder have active futures markets, with London focusing on West African cocoa and New York on Southeast Asian cocoa. London prices are now just a hair off their previous peak of £3,500/ton, but still almost twice the level seen in 2017. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/37812924-7655-4088-bfd1-c3e7a4240e67_940x478.png) London cocoa bean prices for March 2024 delivery What typically happens when you see such price spikes is that farmers respond by planting more trees. ICCO estimates that a 10% increase in farmer prices on average leads to +0.6% higher supply in the same year year. Given global cocoa production of 4,938 tons per year and a deficit of 116 tons － a 2.3% deficit － it’s not difficult to see that the current high prices could encourage enough supply to bring the market back to balance again, even within 12 months. This story has played out before. There was a massive boom in cocoa prices in the 1970s and another spike in 2008\. The latter led to a decline in margins for the chocolate manufacturers, and it took them roughly four years to recover from it. Though even if prices drop, chocolate manufacturers hedge cocoa costs 2-3 years out, so the effect from the cycle tends to be lagged. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/36ab91ea-a1ab-4ba0-adb9-5e36ff062f94_1280x574.jpg) Nominal and real cocoa prices prior to the last spike. Source: Bernstein Chocolate makers have pricing power and will try to pass on the costs through 5-20% higher chocolate prices. But it typically takes about two years for them to push through price increases to the end customer. And there is also a limit to what customers are willing to pay, especially in emerging markets. The ICE futures curve is now in backwardation, suggesting lower prices ahead. But the market is not pricing in a recovery to 2022 price levels yet. To conclude, the cocoa market remains tight, with no fundamental reason to expect prices to drop right now. But, eventually, prices will drop. While surface temperatures are rising most years, 2023 was extreme, and the market will most likely get back into balance within the next three years. To track the tightness of the cocoa market, I’d suggest looking at the stock-to-grindings ratio. Whenever it goes above 40%, we should expect spot prices to come back to earth. Also, look at sea surface temperatures on a seasonally adjusted basis. Here, you can see that 2024 temperatures are the highest they’ve ever been, suggesting continued rainfall and weak crops in West Africa. Fundamentals are still strong for cocoa prices and weak for the buyers. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5b30cfc4-998b-4597-a965-ea5fbc1899fc_1179x724.jpg) Source: [Leon Simons](https://twitter.com/LeonSimons8/status/1743703241123144057/photo/1?ref=asiancenturystocks.com) --- # Implications for stocks Among the traders and processors of cocoa, we find Switzerland’s [**Barry Callebaut**](https://finance.yahoo.com/quote/BARN.SW/?p=BARN.SW&ref=asiancenturystocks.com), which deals with 2.3 million tons of cocoa and chocolate yearly. Since Barry Callebaut buys and processes cocoa beans with low margins, it should be hit by the currently high cocoa prices. And the weak share price suggests that its margins are about to get hit by the higher prices. The chocolate manufacturers have also been affected by the high cocoa prices. Roughly 40% of their cost of goods sold comes from cocoa, split evenly between cocoa beans and cocoa butter. The prices for these two products tend to be highly correlated since they come from the same source. Other, less important expenses for them include sugar and milk. Other than the cocoa price headwind, manufacturers are also facing weak demand in certain regions, either as a reaction to high prices or to the weight-loss drug Ozempic. The number of Google search queries for “Ozempic” is particularly high in North America, Brazil and Australia. Ozempic seems to be less of an issue for European chocolate consumption. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ddf656fa-440b-49dc-ada5-5a09cc61adef_890x584.png) A heatmap for Google search queries for the search term “Ozempic”. Source: Google Trends Most chocolate manufacturers trade at P/E multiples in the mid-teens, with some Asian names like as [**Delfi**](https://finance.yahoo.com/quote/P34.SI?p=P34.SI&.tsrc=fin-srch&ref=asiancenturystocks.com) and [**Orion**](https://finance.yahoo.com/quote/271560.KS/?p=271560.KS&ref=asiancenturystocks.com) significantly below the average, despite lower exposure to markets where Ozempic is popular, and despite better underlying growth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/efee24fb-9a69-4fa4-8a04-dc1312ec0903_2106x836.png) --- # Conclusion Cocoa prices have reached record highs due to rising sea surface temperature, leading to excess rainfall in West Africa and poor cocoa bean crops. Nothing is suggesting that the tightness in the market will be over anytime soon. One will need to follow sea temperatures and the cocoa stock-to-grindings ratio to understand when the tightness eventually gives way to a more balanced market. If history is any guide, the current headwind should be over within three years, even in a worst-case scenario. While rising cocoa prices lead to higher cost of goods sold for processors such as [**Barry Callebaut**](https://finance.yahoo.com/quote/BARN.SW/?p=BARN.SW&ref=asiancenturystocks.com) and chocolate manufacturers such as [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com), they will eventually be able to pass on the higher costs to consumers. That process typically takes about two years. After the 2008 price spike, chocolate manufacturers such as [**Lindt**](https://finance.yahoo.com/quote/LISN.SW/?p=LISN.SW&ref=asiancenturystocks.com) saw headwinds persist for about four years, potentially due to hedging, which tends to take place 2-3 years out. Regarding valuations, Asian chocolate manufacturers such as [**Delfi**](https://finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com) and [**Orion**](https://finance.yahoo.com/quote/271560.KS/?p=271560.KS&ref=asiancenturystocks.com) trade at lower multiples than in America, even though the impact of Ozempic seems to be much larger than for, say, Hershey. That strikes me as an anomaly. But fundamentals for Asia’s chocolate manufacturers won’t improve until the cocoa question is finally resolved. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### What I read in December 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-december-2023/ Last updated: 2024-01-07T04:00:37.000Z Estimated reading time: 20 minutes _This post is for paying subscribers only._ ### Portfolio review December 2023 URL: https://www.asiancenturystocks.com/portfolio-review-december-2023/ Last updated: 2026-06-04T11:40:50.000Z Some further help from the weak US Dollar. Estimated reading time: 21 minutes _This post is for paying subscribers only._ ### 2024 predictions URL: https://www.asiancenturystocks.com/2024-predictions/ Last updated: 2023-12-31T11:53:21.000Z Estimated reading time: 5 minutes _This post is for paying subscribers only._ ### New posts from Asian Century Stocks URL: https://www.asiancenturystocks.com/new-posts-from-asian-century-stocks-0f7/ Last updated: 2023-12-25T07:49:18.000Z A reminder of the best recent posts _This post is for subscribers only._ ### Season's Greetings URL: https://www.asiancenturystocks.com/seasons-greetings-bb0/ Last updated: 2023-12-24T06:09:10.000Z _This post is for paying subscribers only._ ### The ones that got away (Part 3) URL: https://www.asiancenturystocks.com/the-ones-that-got-away-part-3/ Last updated: 2023-12-23T04:00:25.000Z Estimated reading time: 33 mins _This post is for paying subscribers only._ ### The ones that got away (Part 2) URL: https://www.asiancenturystocks.com/the-ones-that-got-away-part-2/ Last updated: 2023-12-20T04:00:09.000Z Estimated reading time: 32 mins _This post is for paying subscribers only._ ### The ones that got away (Part 1) URL: https://www.asiancenturystocks.com/the-ones-that-got-away-part-1/ Last updated: 2023-12-17T05:37:53.000Z Estimated reading time: 31 mins _This post is for paying subscribers only._ ### Curves Holdings (7085 JP) URL: https://www.asiancenturystocks.com/curves-holdings-7085-jp/ Last updated: 2026-07-31T01:44:57.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Curves Holdings at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Curves Holdings**](https://finance.yahoo.com/quote/7085.T?p=7085.T&.tsrc=fin-srch&ref=asiancenturystocks.com)*(7085 JP - US$407 million)* is a Japanese fitness chain that dominates the niche of serving elderly women. It was part of karaoke bar operator Koshidaka before being spun off in 2020\. It has about 2,000 locations in Japan, most of which are franchisees that pay royalties to Curves. Curves Fitness was invented by Americans Gary and Diane Heavin of Waco, Texas in 1992\. In the early 2000s, Koshidaka executive Takeshi Masumoto travelled to the United States, was impressed by the fitness chain, and wanted to bring the concept to Japan. In the following 20 years, he built a Japan franchisee operation for Curves. In 2018, eventually acquired the global franchisor that controls most markets outside of the United States and Oceania. And finally, Koshidaka spun off Curves in 2020, hoping it would flourish as a stand-alone entity. Unfortunately, this was right before Japan entered a COVID-19 lockdown that decimated the demand for fitness services. The number of club memberships fell from 822,000 to just 600,000. That said, Curves is still outperforming the industry. It’s been taking market share from traditional full-service gyms like Renaissance and Central Sports. And women universally love the service, with Google Review scores consistently above 4.5/5.0\. The churn is minimal at just 2.4%. I’ve been investing in Japan for a long time, and I’ve never seen customers as enthusiastic about a service as they are about Curves. Part of the attraction is how safe women feel at Curves’ gyms. The company targets elderly women who are not good at exercising but want to stay in shape as they age. They feel supported by friendly instructions that help them with diet advice, a feeling of community, and more. The fact that men are not allowed into the gyms also helps them feel safe. It’s also well-established that spun-off entities tend to outperform the average company. It signals shareholder orientation and better aligns interests between management and minority shareholders. Takeshi Masumoto is a talented individual, and I’m hopeful he’ll perform better on his own than under the weight of the larger Koshidaka organization. We’re also seeing a strong recovery from COVID-19\. As of September 2023, the number of members reached close to 800,000 - more or less the same as before COVID-19\. And the revenues/members are significantly higher, thanks to greater sales of merchandise, including protein powder, to the clubs’ members (about half of the group revenues). I would characterize Curves as a GARP stock (growth at a reasonable price). The stock trades at 1.9x forward-looking EV/Revenues. If you agree that operating margins will likely return to around 20%, then the EV/EBIT will end up close to 10x and the P/E in the low double digits. Curves Japanese peers trade closer to 21x P/E. Prior to COVID-19, management guided for an expansion of about 100 outlets per year, which would imply 5% volume growth. But merchandise sales are also helping to push revenue per member higher. In addition, two new products will be launched in FY2024, one diet-related and the other an entirely new product line. I also think there’s significant growth potential outside Japan. For example, Curves only has about 150 locations in Europe, compared to 2,000 in Japan. And customer reviews for Curves gyms in Europe are just as positive as in Japan. It’s also worth noting that when Curves acquired the global franchisor Curves International, it paid JPY 34 billion for it - roughly half of the current market cap. The largest risks I’m seeing are related to renewed outbreaks of COVID-19 and further social distancing restrictions. Investing in franchise operations can also be tricky because we don’t know how profitable the franchisees are. It looks like Curves subsidized part of their advertising expenditures during COVID-19, at least, suggesting some stress. But in any case, Curves trades at a reasonable valuation of around 10x EV/EBIT on a normalized basis, and I think there’s significant growth potential, especially overseas. It’s also encouraging to see a management guide for “full-scale multi-store expansion” in the near-term future. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Macro update for the 4th quarter of 2023 URL: https://www.asiancenturystocks.com/macro-update-for-the-4th-quarter/ Last updated: 2025-10-26T14:22:36.000Z A few days ago, I spoke at a conference here in Singapore about the key macroeconomic trends that will have an impact on Asian equities in 2024. I wanted to share some of the key insights with you, and to a broader audience. In the future, I’m planning to do similar macro updates once every quarter. These videos will be available here on the Substack as well as on YouTube. If you any questions on the topics mentioned in the video, feel free to ask them in the comment section below: [Leave a comment](#ghost-comments-root) ### China worries URL: https://www.asiancenturystocks.com/china-worries/ Last updated: 2023-12-03T04:36:59.000Z Dissecting four of the most common pushbacks against investing in Chinese equities. Estimated reading time: 19 mins _This post is for paying subscribers only._ ### Portfolio review November 2023 URL: https://www.asiancenturystocks.com/portfolio-review-november-2023/ Last updated: 2026-06-04T11:41:48.000Z This feels like an inflection point. Estimated reading time: 24 minutes. _This post is for paying subscribers only._ ### What I read in November 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-november-2023/ Last updated: 2023-11-26T03:31:33.000Z Estimated reading time: 18 minutes _This post is for paying subscribers only._ ### The Asian pet industry URL: https://www.asiancenturystocks.com/the-asian-pet-industry/ Last updated: 2023-11-22T04:00:28.000Z The rise of COVID-era "fur babies". Estimated reading time: 14 mins _This post is for paying subscribers only._ ### New posts from Asian Century Stocks URL: https://www.asiancenturystocks.com/new-posts-from-asian-century-stocks/ Last updated: 2023-11-19T08:20:30.000Z A reminder of the best recent posts _This post is for subscribers only._ ### Fairfax India (FIH/U CN) URL: https://www.asiancenturystocks.com/fairfax-india-fihu-cn/ Last updated: 2026-07-31T01:44:38.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Fairfax India at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Fairfax India**](https://finance.yahoo.com/quote/FIH-U.TO?p=FIH-U.TO&.tsrc=fin-srch&ref=asiancenturystocks.com)*(FIH/U CN - US$2.6 billion)* is an investment vehicle on the Toronto Stock Exchange focusing on publicly traded and private companies in India. The company was formed in 2014 by Fairfax Financial. Founder Prem Watsa met with Prime Minister Narendra Modi and was impressed with the person and his reform agenda. While Fairfax Financial had invested in India for several decades, they decided to raise US$1.1 billion and make a large bet on the country's future. That bet has turned out well. Since its inception, Fairfax India has deployed its capital across several investments and compounded the tangible book value per share at 11% after any accrued fees. While Prem Watsa is ultimately in charge of Fairfax Financial, the organization is decentralized. The team that manages Fairfax India includes Fairfax Financial subsidiaries Hamblin Watsa Investment Counsel and India-based Fairbridge Capital. A key person in the organization is CEO Chandran Ratnaswami, a long-term Prem Watsa associate and an alumnus from IIT Madras. Together, they ran the Hamblin Watsa Asia Fund from 2000 to 2015, compounding the fund’s capital at a yearly rate of almost 20%. That bodes well for the future. A common complaint about the structure of Fairfax India is its high fees. Parent Fairfax Financial charges a 1.5% management fee on top of a 20% performance fee over a hurdle rate of 5% with a high watermark, measured in US Dollars. While those fees are certainly high, they also provide a certain degree of alignment. Talent doesn’t come cheap. The reason I use the word “talent” is because the portfolio looks terrific. The most important asset is a 54% stake in Bangalore International Airport (BIAL), the operator of the only airport in the fast-growing city of Bengaluru in Karnataka. It has a 41-year remaining concession life, doubled its capacity through a second terminal, and owns 460 acres of land that can be developed into hotels, retail establishments, parking garages, etc. Most importantly, the airport operates on a “hybrid-till” regulatory framework, which allows it to charge whatever it wants for 60% of non-aeronautical revenues, i.e. for its duty-free shops, car parks, advertising, etc. Airports at their best are shopping malls with captive audiences, able to charge whatever they want. Airports of Thailand is an example of such an airport, but BIAL is a comparable asset, in my view, and growing much faster. The other companies in the portfolio include a financial services business called IIFL that grows fast but appears to have weak internal controls, a PVC manufacturer called Sanmar Chemicals, a Kerala bank called CSB Bank, which Fairfax successfully turned around and a 1% stake in the National Stock Exchange of India - an incredible asset that’s already turned into a 6-bagger since Fairfax India’s 2016 investment. Fairfax India’s book value per share is currently US$20.9 - significantly higher than the current share price of US$12.6\. But dig into the details, and you’ll find that the valuation marks are usually overly conservative. For example, the discount rate used in Fairfax India’s terminal value assumptions is 11-20%, compared to sub-10% for most private equity funds. If you value the portfolio closer to current market values, you’ll get a value per share closer to US$30. Of course, there are valid reasons to expect a discount to NAV, including high management and performance fees and a potential liquidity discount. But even if you add a typical 25% Asian Holdco rebate, the NAV discount is still above 40%. Before COVID-19, that discount used to be zero. Realizing how big of a discount Fairfax India trades at, management has started to buy back shares aggressively. Since 2021, the share count has dropped 9%, and management is guiding for further buybacks at current levels. Investors in Fairfax India can look forward to the IPO of the Bangalore International Airport holding company “Anchorage” by September 2025\. I also expect significant passenger traffic growth in the coming years as flight traffic in India continues to grow by leaps and bounds. The risks investors are taking seem to be relatively minor. There are conflicts of interest in that parent Fairfax Financial invests in Indian companies by itself. There is a risk that Narendra Modi will lose the election in 2024, though I doubt it. Other risks, such as a new pandemic or a weaker Indian rupee, are possible events, but nothing I would model in at this point. So, to summarize, Fairfax India is a terrific portfolio trading at a deep discount to intrinsic value and managed by talented value investors. While the fees are certainly high, one could argue that rewarding Prem Watsa and his team for strong performance is better than the alternative. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### SUTL Enterprise (SUTL SP) URL: https://www.asiancenturystocks.com/sutl-enterprise-sutl-sp/ Last updated: 2026-07-31T01:44:20.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in SUTL Enterprise at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**SUTL Enterprise**](https://finance.yahoo.com/quote/BHU.SI?p=BHU.SI&.tsrc=fin-srch&ref=asiancenturystocks.com)*(SUTL SP - US$42 million)* is a Singapore-listed marina operator that’s most famous for its One°15 Marina in Sentosa Cove. It’s a FinTwit favourite and has been mentioned before by [Huat Fearful & Greedy](https://huat.substack.com/p/hf-and-g-issue-6-july-2020-10-bagger), [Mokapu Capital](https://mokapucapital.com/sutl-enterprise-set-for-growth/?ref=asiancenturystocks.com) and [David Katunarić](https://themikrokap.substack.com/p/marina-mania). The company is a part of Singaporean conglomerate SUTL Global, which distributes consumer products across Asia. When the founder's son took over in the early 2000s, he saw potential in Singapore’s private marina industry. In 2003, he bid for a contract to operate a marina on the island of Sentosa. In 2015, the marina business was injected into a listed subsidiary of SUTL, now called “SUTL Enterprise”, that’s become a pure-play marina operator. SUTL’s flagship ONE ̊15 Marina in Sentosa Cove has berths for 270 yachts and 14 mega-yachts, together with a clubhouse for 3,800 members. The membership entrance fee alone is about SG$60,000 per person. Having your yacht in the marina can cost SG$50,000 per year or more. Customers seem to be happy to pay these prices. The One°15 Sentosa Cove marina is 97% occupied, and in the past, the waiting list for club membership has been more than 2 years long. The reason why customers are willing to pay is that there aren’t many alternatives. Certainly not on Sentosa, where only some landed houses have waterfront berths and those that do, can’t accommodate larger yachts. Another competitive advantage for the One°15 Marina in Sentosa Cove is that it offers a customs, immigration and quarantine facility, enabling visitors to enter the country directly through the marina. SUTL’s corporate structure is complex. The parent SUTL Group is much larger and probably has bargaining power. CEO Arthur Tay controls both the ListCo and its parent. SUTL Enterprise was listed through a reverse merger, meaning fewer information disclosure requirements than companies that have gone through the IPO route. On the other hand, Arthur Tay does seem to care deeply about his legacy and reputation. I think he means well. In the past few years, SUTL Enterprise has been generous with dividends. There haven’t been many related party transactions either. In the past few years, SUTL Enterprise has had a tough time. A failed project in Malaysia has weighed on earnings since 2019\. Several new marina projects in China and Indonesia were delayed due to COVID-19\. And F&B, banquet and hospitality revenues slumped as tourism ground to a halt. But these issues are now in the past. SUTL shut down their Malaysian operations, and their assets in the JV are being liquidated. The Nirup Island project, a few kilometres from Singapore, has just been completed and will contribute to earnings from 2025\. And the Sentosa Cove marina has been upgraded to accommodate more super-yachts. Thanks to these developments, SUTL’s earnings have been on an upward trajectory. I don’t expect fast growth. The company has guided for 7-10% yearly price increases in the past, though I think mid-single-digit price increases would be a more reasonable assumption. A key driver for these price increases is the limited supply of marinas and the amount of capital flowing into Singapore each year from other parts of the world. The new projects in China, Indonesia and potentially Thailand could also boost revenues in the medium term. I foresee a 2023e P/E ratio of 7.1x and a dividend yield of 7.7%. Most cash is restricted and should not be counted as part of net debt. But even if you deduct the “deferred membership income”, you still get to an EV/EBIT multiple of just 5.0x － almost unheard of for a moaty asset in this part of the world. The worst-case scenario for SUTL Enterprise is that the One°15 Marina in Sentosa Cove leasehold expires in 2034 with no extension. The company is trying to engineer an extension of the lease, and I think they will probably be successful. I doubt that the government would take a property where SUTL has invested more than SG$70 million without compensation. The government should also be pleased that One°15 Marina is ranked as one of the best marinas in the world. But legally, the government has the right to take over the land upon the expiry of the lease. In any case, I don’t think the valuation assumes much success in extending the lease. If you discount cash flows in the remaining 10-year term, they’ll easily exceed the market cap. Also, the current liquidation value exceeds SUTL’s market cap by some margin. Finally, note that the stock is illiquid. But it should not be impossible to accumulate a small stake for a personal account. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### China Tower (788 HK) URL: https://www.asiancenturystocks.com/china-tower-788-hk/ Last updated: 2026-08-16T03:03:44.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in China Tower at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**China Tower**](https://finance.yahoo.com/quote/0788.HK?p=0788.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(788 HK - US$16 billion)* has been discussed on VIC several times, most recently by “gocanucks97”. I’ll go through the story in detail and provide my assessment of what I think will happen to earnings. The company is a state-owned enterprise that owns virtually all telecommunication tower infrastructure in China. It was formed in 2014 when China’s three large telecom operators injected their assets into this entity. They’re also the company’s three largest customers. The government wanted to reduce the duplication of resources and increase efficiency in the sector. In my view, it also wanted to level the playing field between leading telecom operator China Mobile and its weaker competitors China Telecom and China Unicom. China Tower provides towers to telecom operators where they place antennas and other network equipment. China Tower oversees these sites with hundreds of thousands of service personnel to ensure service continues uninterrupted. The tower industry is enjoying several tailwinds. Data consumption keeps going up at a rapid rate. As cities grow, it becomes increasingly more difficult to find land on which to build towers. And perhaps most importantly, the industry is moving towards higher frequency spectrums. Due to the laws of physics, higher frequencies require more base stations, increasing the demand for towers. China Tower’s profits are a function of: 1. The number of towers it operates (about 2.1 million) 2. The prices it charges for tenants 3. The number of tenants per site (roughly 1.8x) The number of towers has gone up but at a slow pace. Prices haven’t gone up much either, as China Tower’s contracts do not contain price escalators. But on the third point, the company benefits from more tenants per site despite the heavy co-location discounts given to each tenant. I expect EBITDA to grow around 6% per year on a secular basis, driven by co-location. But the real kicker will come from lower depreciation charges in the next 2-3 years. The story is this: when tower assets were initially injected into China Tower in 2015, the depreciation schedule applied to those assets was only 6-10 years, compared to their useful economic lives of 10-25 years. That means that once the initial assets have been fully depreciated, expenses will drop by about 10-15 billion. Sell-side analysts fully understand this story, and the consensus is for net profit to triple in the next few years. I expect a 2026e P/E ratio of 5.7x and a dividend yield of 10.6%. The company has committed to a 50%+ payout ratio, and I’m assuming 60% from here onwards. The EV/EBITDA (after deducting capital leases) of 4.2x is far lower than the global peer group’s 14.3x. Regarding risks, one should know that China Tower is a state-owned entity that the Chinese government fully backs. State banks support through low-cost loans, and they want the company to maintain its monopoly so that resources are best utilised. On the other hand, China Tower is not owned directly by SASAC, the holding company for state-owned enterprises. Instead, it’s owned by China’s three largest telecom operators, and that introduces a conflict of interest. They have strong incentives to keep prices low and capital expenditures high. Still, it’s a monopoly that’s likely to see its earnings go up by 3x in the next few years. The big question is whether these rapidly rising earnings will cause investors to pay attention. **Click the “Download” button below to access the full PowerPoint presentation** _This post is for paying subscribers only._ ### Portfolio review October 2023 URL: https://www.asiancenturystocks.com/portfolio-review-october-2023/ Last updated: 2026-06-04T11:42:15.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/portfolio-review-october-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Painful month. The portfolio's value fell by -4.1% month-on-month and is now +21.4% since inception in October 2021, equivalent to an IRR of +10.0%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cd012eff-84f6-4875-a1ab-221eb353bd0a_2662x894.png) There’s been weakness almost across the board. [**L’Occitane**](https://www.asiancenturystocks.com/loccitane-973-hk/)’s share price dropped further after a planned bid failed to materialise in early September. [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/) fell due to an unexpected equity raise. [**Niu Technologies**](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/) fell significantly due to weak sales volumes in the third quarter of 2023. The only positive news was from [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/), whose earnings surprised positively thanks to the end of Hong Kong’s COVID restrictions late last year. Here is the portfolio as of 30 October 2023: _This post is for paying subscribers only._ ### What I read in October 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-october-2023/ Last updated: 2023-10-29T04:01:00.000Z Estimated reading time: 17 minutes _This post is for paying subscribers only._ ### Markus Husemann-Kopetzky on Pricing URL: https://www.asiancenturystocks.com/pricing-power-revisited/ Last updated: 2025-12-23T09:12:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/798b6995-ef80-4837-8f29-279bbc6aff8f_960x540.png) # Summary - In the past week, I’ve been fascinated by Markus Husemann-Kopetzky’s new book [Handbook on the Psychology of Pricing](https://www.amazon.com/Handbook-Psychology-Pricing-persuasion-entrepreneur-ebook/dp/B07HNDSQ35/ref=sr%5F1%5F2?crid=1078XY20EBEHD&keywords=handbook+of+pricing&qid=1698294035&s=audible&sprefix=handbook+of+pricing%2Caudible%2C410&sr=1-2-catcorr&ref=asiancenturystocks.com). The book provides examples of pricing strategies companies use to raise prices. - In this post, I argue that the pricing strategies mentioned in Husemann-Kopetzky’s book mostly revolve around reducing the risk or perceived pain of purchase, making customers feel like they’re getting a good deal or being part of a community. - At the end of the day, if you can make customers feel positive about a purchase, chances are you’ll also be able to raise prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Warren Buffett popularised the term [economic moat](https://en.wikipedia.org/wiki/Economic%5Fmoat?ref=asiancenturystocks.com), which he defines as competitive advantages that protect a business from competition. The theory goes that if the economic moat is strong, the company will have bargaining power against its customers and be able to raise its prices. In a speech, Buffett spoke about pricing power in the following way: > *“If you've got the *power to raise prices without losing business* to a competitor, *you've got a very good business*. And if you have to have a prayer session before raising the price by a tenth of a cent, then you've got a terrible business. I've been in both, and I know the difference.”* But the question is, how can we assess whether a company has the ability to raise prices? Is it all about bargaining power? A new book by researcher and former management consultant Markus Husemann-Kopetzky called [Handbook on the Psychology of Pricing](https://www.amazon.com/Handbook-Psychology-Pricing-persuasion-entrepreneur-ebook/dp/B07HNDSQ35/ref=sr%5F1%5F2?crid=1078XY20EBEHD&keywords=handbook+of+pricing&qid=1698294035&s=audible&sprefix=handbook+of+pricing%2Caudible%2C410&sr=1-2-catcorr&ref=asiancenturystocks.com) argues that companies can use a variety of tricks to raise prices without much pushback from consumers. He believes that pricing is as much about psychology as it is about about, say, the industry structure. I’m inclined to agree. In some cases, like with Microsoft Windows, there’s no clear alternative, and the company can raise prices without much pushback. But for other companies like Costco, it’s not as clear that its products are differentiated. Instead, they’re forced to use clever pricing strategies to make their customers willing to spend. In this post, I will discuss Markus Husemann-Kopetzky’s book on the strategies that companies use to raise prices. And I will make the case that, on a fundamental level, these strategies tap into our emotions. You can then think about these strategies when you 1) judge whether a company’s new products or services will be successful and 2) assess whether a management team is skilful in setting prices and helping their company earn a return on its capital. ``` Table of contents 1. Introduction to pricing theory 2. Chasing dopamine 3. Avoiding pain 4. Feeling you’re part of a community 5. Conclusions ``` # **1\. Introduction to pricing theory** The traditional theory of pricing is that demand curves － the relationship between volume and price － are downward sloping. In other words, that a low price leads to high demand and that a high price leads to low demand. However, studies show that many demand curves look nothing like the typical model. Instead, they have a variety of shapes that traditional economics has found difficult to to explain: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e6da9f57-7ccf-43db-a292-c86bfa02de22_2036x892.png) Psychological biases are the determining factors behind these demand curves. For example: - Customers may demand a minimum price to avoid the risk of buying counterfeits - They may prefer to buy expensive luxury goods to signal status to their peers - In many cases, customers are indifferent as to whether a widget costs $2 cents or $3 cents, because the price is low compared to their overall budget The levers that companies can pull to increase prices include prices, payment, the context in which the product is sold, various nudges and other techniques to create wanted outcomes. --- # **2\. Chasing dopamine** Have a look at the following chart, showing a price scale from high to low: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d8ab8a7f-39bd-4f8a-993d-7dc628d85986_866x696.png) A customer’s **willingness to pay** is the maximum a company can charge for its products. And the company’s **willingness to sell** is the minimum that it accepts. Where the actual price ends up between these two extremes determines company profit and the “customer delight” － or, in economic parlance, consumer surplus. But are the willingness to pay and the price paid the only factors determining how we feel about a transaction? Probably not. In 1973, Professor KB Monroe argued that how we feel about a transaction concerns perceived fairness. Experience tells us that a product should cost around a certain price level. And if the price is too high or too low in comparison to this price － which he called the **internal reference price** － we’d feel cheated. An example might illustrate what this concept is about. Let’s say you’d be willing to pay $4,000 for an iPhone. That’s how much your iPhone is worth to you. But you also know that a normal iPhone costs around $1,000\. So if a seller asked you for a higher amount, you’d feel cheated. In this example, $4,000 is your willingness to pay, and $1,000 is your internal reference price. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/34d41f6d-d9b0-49d8-ba06-243adef7ca4b_1844x1116.png) Price paid vs the internal reference price impacts purchase likelihood. Source: KB Monroe (1973) In 1985, psychologist Richard Thaler coined the term **transaction utility**, referring to the value you gain from the transaction. In technical terms, that would be the difference between your internal reference price and the price actually paid. In our iPhone example, if we pay $950 for our iPhone that we feel should cost $1,000, then we enjoy transaction utility of the difference between the two numbers: $50. My main point is this: consumers are partly driven by wanting to make good deals. The rush of dopamine they feel is not just about getting value out of the product; it’s also about feeling good about the transaction itself. From that perspective, companies should try to raise internal reference prices as much as possible so that customers feel they’re getting good deals. If they can make us think an iPhone is worth $1,200, we’ll feel even better about our $950 purchase. The most common method to increase internal reference prices is through **association**. For example, Nike has used sponsorships with athletes to make customers feel like they’re buying something special. IKEA markets itself as a Swedish brand, as it knows the country has a positive image in most parts of the world. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c0e4a19a-29ba-46b2-9c90-fd85c160b9a9_1494x756.png) The [Ebbinghaus illusion](https://en.wikipedia.org/wiki/Ebbinghaus%5Fillusion?ref=asiancenturystocks.com). The right-hand side circle appears bigger due to the contrast with surrounding circles. Product association works with the same principles. Source: Ebbinghaus (1901) Then there’s this psychological concept called anchoring, whereby consumers get influenced by whatever arbitrary number you present. So companies can expose them to any high number, even before they get a chance to evaluate the price. Almost without fail, they’ll start thinking that the price offered is not too bad after all. This is the purpose of stating manufactured suggested retail prices (MSRP) in an advertisement. Then, offer customers discounts from this MSRP so that they feel they’re getting a good deal. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b98d104e-2d47-4dc9-baed-1b8c338fa2e8_1146x762.png) Source: Cars.com Companies can also make the price paid seem lower than what it is. People typically purchase more of a product costing $1.99 than $2.00\. The reason is that “99” is associated with discounts, so we think we’re getting a good deal. Also, we read from left to right and “1” feels materially lower than “2”. Just be aware that discounts and “99 prices” can also devalue the product in the eyes of consumers. A perception that the product can only be sold at a discount will eventually lower consumers’ internal reference prices. You could well argue that internal reference prices are more easily determined for utilitarian products such as consumer electronics. Their performance can often be quantified to the nth degree. Discounting such products will not hurt too much. But when it comes to emotion-driven purchases such as perfumes, flowers, luxury watches and sports cars, consumers have no idea what they could be worth. When it comes to internal reference prices, the sky is the limit. And for such products, it’s best to avoid any perception of discounting. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/10d83fa1-753a-4b6b-b39a-4a0dc64d12b8_1286x1216.png) Richemont famously destroyed hundreds of millions of dollars worth of wristwatches to avoid any perception of discounting. Source: The Guardian Here are some other ways that people can perceive a price to be lower than it really is: - Taking off the cents from a “$2.00” price into “$2” makes the price look smaller - Taking off the comma sign of a number with four characters or more, e.g. “1,000” to “1000”, makes it seem smaller - A smaller font size helps drive home the point that the price is low - A discounted price in a different colour drives home the point that it’s different - Stating prices as a unit per time makes it seem smaller; e.g. instead of “$10 per month”, you can state the price as “$0.30 cents per day.” - Quoting the price as a series of instalment payments makes the price seem lower. - The presence of a sale sign makes prices seem lower than what they are - High numbers sound more impressive, so consumers, for example, will prefer a 50% bonus pack to a 35% discount. - Companies also use the phrasing “save up to x%” to make discounts seem larger. Professor KB Monroe also found that consumers don’t react much to small price differences. He coined the term **just-noticeable difference**. Empirical evidence shows that prices need to go up at least 6-10% before we start noticing the price change. And conversely, a discount probably needs to be higher than 6-10% for people to feel like it’s material. In any case, shopping is a game. And don’t be fooled into thinking that the act of consumption purely drives consumers. In many cases, we buy because we enjoy getting good deals. In other cases, we see purchases as a route to self-actualisation. We want to feel like we are making progress. Collectors will often tell you that they’re driven by the “thrill of the chase”, driven by the ups and downs of dopamine in their bodies. So companies need to consider that when setting prices and making customers feel good about their purchases. --- # **3\. Avoiding pain** Israeli psychologists Daniel Kahneman and Amos Tversky developed **prospect theory**, a framework that predicts how people derive value from purchases. In simple terms, prospect theory says that the utility you get from small gains is lower than the negative utility you experience from losses. In other words, losses hurt more than gains make us feel good. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c20b1d84-87e1-4cae-b490-6b656ea4a9c7_894x630.png) Prospect theory: losses hurt a great deal, so we try our best to avoid them. Source: Kahneman and Tversky (1979) Kahneman and Tversky performed studies that proved this theory in quantitative terms. Losing $10 has as much of a negative impact on our brain as winning $25 feels good. This has important implications for pricing. In setting prices, companies will want to **change reference points** to see fees as gains rather than losses, for example, instead of saying that a credit card company adds a surcharge. You can turn the whole argument around and say that paying by cash enables a discount. That framing will feel a lot better for consumers. Or by emphasising the positive experience from consuming a product rather than its price. I believe that a key reason why people pay for certain products is to **lower the risk of a poor purchase**. Our willingness to pay is especially high when we can’t determine the quality of the product and the risk of a faulty product is high. That’s why we don’t mind paying extra for clean food or brand-name medicine. And since we know that established brands have incentives to keep their quality control high, we rely on brands to lower the purchase risk. This is where brand pricing power comes from. The fact that consumers **infer quality from high prices** means that setting prices too low might cause them to be sceptical. Research shows that people seem to think that low-priced wine tastes worse, even though it’s identical to a higher-priced wine in a sample. Another way to lower the purchase risk is by going with **compromise options**. By choosing the middle option, we feel we’re not going towards any particular extreme, thus reducing risk. This effect is particularly strong when consumers must justify their purchases to a third person. As they say, “Nobody ever got fired for choosing IBM”. This fear of future regret also explains why we buy insurance and like **money-back guarantees**. Most of us know that AppleCare does not make sense purely financially, but we’d hate to end up in a position where our phones break down and need expensive repairs. I think the potential pain of future regret also influences our preference for scarce products. We feel that if we don’t buy the product now, we might miss out on it in the future. Companies often play up the **scarcity** factor by stating that the product can only be purchased today or that only a few items are available. ![Secret Perk to Booking Paid Flights Through Citi ThankYou Portal | Million Mile Secrets](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f97deb90-cf27-460d-93b8-7152e375eb4e_600x436.jpg) An airline stating that there’s only 1 seat left at the price. Source: Million Mile Secrets Of course, scarcity can also provide a quality cue. Because if inventory is running low, others must see value in the product. And perhaps you should see value in it, too. The fear of future regret also plays a part in the success of Uber. Consumers much prefer fixed rates to variable rates that depend on usage, like taxi meters. This **flat-rate bias** seems to be because people don’t want uncertainty and potential surprise losses. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/32822494-9cfc-4ed9-8eec-958f260d1494_640x478.jpg) A Hong Kong taxi meter, bringing anxiety to many. Source: [Lydia’s blog](https://lydsblg.blogspot.com/2016/04/hong-kong-taxis.html?ref=asiancenturystocks.com) You can also reduce the pain associated with a payment by changing the payment option. It’s been shown that by **paying with credit card** instead of cash, consumer willingness to pay goes up by 100%. And that’s also true for Apple Pay. The friction goes away. And that’s even more true for airline miles and loyalty cards, almost seen as monopoly money. Finally, consumers hate exerting effort. They generally do not want to spend time researching the advantages and disadvantages of a particular product and instead rely on heuristics to go about their days. Companies are well advised to use prices and discounts that they can **deal with easily**. For example: - Show savings after the price since that’s how they typically perform subtractions. - When division takes place, use divisible numbers, i.e. not prime numbers. - Instead of discounts, tell them what the revised prices are so that they don’t have to perform any computation. To summarise, lowering the pain of purchase is worth a lot. Raising the internal reference price will help. But also taking away transparency and friction in the payment process, lowering the risk of uncertainty through brands and reducing the risk of future regret through money-back guarantees and warranties. --- # **4\. Feeling you’re part of a community** Robert Cialdini’s studies quoted in his book [Influence](https://www.amazon.com/Influence-New-Expanded-Psychology-Persuasion/dp/B08RLT11Q3/ref=sr%5F1%5F1?keywords=Influence&qid=1698292328&sr=8-1&ref=asiancenturystocks.com) showed the power of **reciprocity**. This means the practice of exchanging things with one another for mutual benefit. Cialdini points out that if someone does something for us, we feel indebtedness to that person. And we then feel compelled to return the favour given to us. So from a company’s point of view, you’re well advised to give a gift or a warm welcome. The consumer is then more likely to spend money in return. Given this strong tendency to return favours, companies should consider essentially giving away products for free instead of charging a low amount. Free perfume samples in magazines are one example. But the same is true for free trials for online subscriptions, where readers feel like they’re getting something for free. And they’ll probably be more likely to become fully paid subscribers. This tendency towards reciprocity is tightly connected with a need to feel like we’re part of a community. The consumption of certain conspicuous products such as smartphones, wristwatches and handbags is tightly connected with a sense of **belonging to certain groups**. In other words, by purchasing a product, you confirm your identity as part of that group. ![American Express Commercial, Mar 26 1988 - YouTube](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/af9c05d8-0e7b-4f80-a858-b43977400057_480x360.jpg) An American Express ad, playing up the fact that owners of a card belong to a special community of people. Source: Blendeture YouTube channel Scarcity plays a part here as well. Limiting the supply of products makes it seem like we’re a part of an even more exclusive club. To buy a Rolex today, you’ll need to be on a waitlist for years before getting the opportunity to pay the full retail price. And once you finally get your Rolex, you bet you’ll value it higher than you would have otherwise. --- # **5\. Conclusions** The pricing strategies in Markus Husemann-Kopetzky’s book revolve around reducing the risk or perceived pain of purchase and making customers feel like they’re getting a good deal or being part of a community. I don’t believe a company needs one of Morningstar’s 5 economic moats to be valuable. I think pricing is partly about bargaining power, creating positive emotions, and avoiding negative emotions across the customer journey. Many highly successful companies, such as Lululemon and Crocs, sell commodity products, yet they continue to be highly successful at what they do. Their ability to raise prices has nothing to do with barriers to entry but rather clever pricing strategies that make everybody feel better off after the transaction. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Hartalega update (HART MK) URL: https://www.asiancenturystocks.com/hartalega-update-hart-mk/ Last updated: 2023-10-22T04:16:02.000Z [Click to view in your browser](https://www.asiancenturystocks.com/thai-beverage-update-thbev-sp/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Hartalega when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/555f6239-572c-42ec-8c3f-20bc9bfc3e06_874x629.png) Source: Hartalega # Summary - Hartalega is one of Malaysia’s largest producers of disposable gloves. They’re primarily sold to the North American and European healthcare industries but also labs, food & beverage companies, etc. - The glove industry enjoys secular demand growth of about 10% per year. But since the outbreak of COVID-19, the industry has experienced a boom-bust period that has yet to end. The current cycle was made worse because glove makers accumulated cash during the pandemic and used it to expand capacity. - Today, the industry suffers from oversupply. Average selling prices are at rock-bottom levels, and customer inventory remains higher than normal. - There are now early signs that average selling prices are bottoming out. Some customers are starting to restock their inventories. In my view, it will most likely take about 2-3 years for supply & demand to return to balance. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 3. What will change for Hartalega? 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap My initial report on Malaysian rubber glove maker [**Hartalega**](https://www.asiancenturystocks.com/deep-dive-2023-7/) *(HART MK - US$1.5 billion)* was published in April 2023\. You can find the full report here: [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/70059be3-54bb-412c-9cf5-4532efb1b478_1492x840.png)](https://www.asiancenturystocks.com/deep-dive-2023-7/) In that report, I wrote that: - Hartalega is one of the largest producers of disposable gloves globally. It focuses on synthetic “nitrile” gloves made from oil derivatives. - Nitrile gloves are stronger than latex gloves, less likely to be punctured, and can take a broader range of hazardous materials. They’re also suitable for those with latex allergies. These benefits have enabled the nitrile glove industry to take market share. And that’s enabled Hartalega to grow rapidly in the past twenty years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6b60773a-b730-4748-80e3-02351a47f52d_2016x654.png) - Growth will be driven by demand from emerging markets. The per capita consumption of gloves in Asia is only 10 pieces per year compared to around 150 in developed markets. And bear in mind that Asia has a population of over 4 billion people. Sales volumes in the glove industry could continue for many decades to come. - Hartalega is known as a low-cost operator with significant scale within the industry. Hartalega’s profits per 1,000 pieces of gloves remain far higher than the industry average, enabling it to survive even challenging market conditions. - Founder Kuan Kam Hon continues to be active in the company, enabling it to stay at the forefront of R&D regarding process and materials technology. Investors have described management as being *“all about business”*. The company also has a unique corporate culture, with employees identifying as *“hartanians”*. It’s a well-run operation. - The glove industry enjoyed a boom-bust period during COVID-19\. Demand rose rapidly in the initial stages of the pandemic, partly driven by stockpiling to meet exponential demand for medical-grade gloves. Average selling prices shot up to stratospheric levels. Glove makers such as Intco expanded their capacity to meet this higher demand. But as the world got vaccinated and developed herd immunity, demand fell. The result is that today, the industry suffers from oversupply and high customer stockpiles. - You could argue that this oversupply is part of a typical industry capital cycle. Hartalega’s Chinese competitors do not have competitive advantages other than perhaps state support. Capex for the industry as a whole is now back to pre-COVID levels. At some point, underlying volume growth of around 8-10% per year will probably cause industry supply & demand to fall back into balance. - At the time of the report, Hartalega’s stock price had dropped 60% from its pre-COVID levels despite having accumulated cash of MYR 2 billion (\~US$420 million) during the pandemic. Using fairly conservative assumptions given Hartalega’s expansion plans, I calculated a P/E ratio of 10.8x against FY2027 earnings. And given the company’s net cash balance sheet, I predicted an EV/EBIT in the mid-single digits. - In my assessment, the main risk was that competitors such as Intco would expand without regard for profits. Sell-side pushed this narrative at the time. But I didn’t see much evidence of any irrational capex. --- # 2\. Update since my first write-up ## 2.1\. The latest quarterly update Since my Hartalega report earlier this year, the share price has traded sideways, down just a few percentage points. The stock has dropped almost 50% since its pre-COVID levels. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/67f0992b-f0f3-48da-abbb-1266b621c0aa_1896x882.png) _This post is for paying subscribers only._ ### China Overseas Land & Investment (688 HK) URL: https://www.asiancenturystocks.com/china-overseas-land-and-investment/ Last updated: 2026-07-31T01:43:43.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in China Overseas Land & Investment at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**China Overseas Land & Investment**](https://finance.yahoo.com/quote/0688.HK?p=0688.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(688 HK - US$22 billion)* － also known as “COLI” － is one of China’s largest property developers. You might wonder why I bother spending time on the Chinese property market, now that it's in the midst of a crisis. But I want to make the case that the story is more complex than what media is portraying. After China’s residential property market was liberalised in 1998, construction took off almost exponentially. And the floor space under construction rose 15 times in the subsequent two decades. Eventually, construction activity became so high that the number of new starts exceeded actual sales by over 10 million apartments per year. The result was a build-up of unfinished and unsellable properties in lower-tier cities. The solution to the over-construction problem came in August 2020\. At that time, the People’s Bank of China met with 12 property developers and asked them to improve their balance sheets. The developers had to adhere to three requirements － “Three Red Lines” － including the net gearing ratio, the liability-to-asset ratio and the cash-to-short-term debt ratio. It just so happens that almost all of China’s private property developers failed these requirements and, therefore, had to deleverage. One by one, they’ve started to default on their offshore debt and enter bankruptcy proceedings. But despite the negative headlines, China’s state-owned enterprise (“SOE”) developers including COLI, China Resources Land and Yuexiu are doing just fine. They continue to enjoy low-cost funding from China’s state-owned banks. And buyers feel at ease buying properties from the SOE developers, knowing that they're not going to fail. Make no mistake though: COLI has also had its fair share of challenges. Its earnings dropped in 2022, due to difficulties of completing projects during the zero-COVID policy. Ordinary citizens have also found it difficult to access the mortgage market. So using the lens of the 2008 Great Financial Crisis to assess the Chinese property market. We're not necessarily going to see transaction volumes and home prices fall. We're just witnessing a top-down effort to deal with the overconstruction problem by cutting off the access to credit for certain developers. In fact, I'd argue China’s state-owned developers might even benefit from the crackdown. Almost all of them have gained market share in the past two years, as buyers have shunned companies like Evergrande due to the fear of construction delays. And we’re now seeing signs of state-owned developers buying assets from their private counterparts at low valuations. So let's talk about COLI. The company has a national footprint but a large exposure to tier 1 and 2 cities. These cities enjoy positive migration flows, tight supply and high prices. COLI has a large land bank in these cities, ensuring sellable resources for years to come. The compang also has a commercial property segment that ensures stable rental income when contract sales are weaker. The stock now trades at a 5.2x 2024e forward P/E, a slight discount to its historical level. It trades at a discount to NAV of about 56%, which compares to roughly zero before COVID-19. After weakness during the zero-COVID period of 2022, COLI’s contract sales is now exhibiting fast growth, with management guiding for a +20% rise in contract sales in 2023 and for rental income to recover. Given 1-2 year time lags for projects to be completed, we're almost certain to see a strong rebound in earnings in 2024. The only question mark is the gross profit margin. It's come down quite a bit since 2019\. Margins are a function of land prices and the average selling price 3-4 years later when three projects are actually sold. The higher the inflation rate, the better. For now, China’s monetary and fiscal policy remains restrictive. But once the current crackdown is over, I would imagine that mortgage lending will finally reaccelerate. And if that happens, COLI and the other SOE developers will be some of the key beneficiaries. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Australia's coming housing bust URL: https://www.asiancenturystocks.com/australias-coming-housing-bust/ Last updated: 2023-10-11T05:10:38.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/83a0dca1-4222-4ed7-86fe-523fb7ff7948_1003x565.jpg) Source: Getty Images # Summary - Australia has enjoyed an unprecedented housing boom driven by low interest rates, a boom in commodity exports and immigration from mainland China. - Housing has now become unaffordable. Affordability ratios, rental yields and the value of the housing stock/GDP are now close to the bubble levels. - The rent 410bps spike in interest rates will cause serious pain among Australia’s 2.0 million landlords who are relying on capital gains to help pay for their mortgages. - China’s closing off from the rest of the world from 2016 onwards suggests that immigration to Australia will probably be on a slow decline in the next decade or two. - It’s hard to predict how a housing bust might play out, but probably through a combination of a weaker Australian Dollar, weaker household spending and building non-performing loan ratios among the Australian banks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) # The backdrop ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2f37c2de-bb56-4b68-96dd-abc1e02e1f71_1061x707.jpg) Source: Getty Images Australia has enjoyed a 30-year bull market in housing. The bull market began after the recession of 1991, which was sparked by a record-high interest rates of 17%. At the peak, unemployment reached 11% and took several years to recover. But that recession also sowed the seeds of an economic recovery and a boom that lasted almost 30 years. Since the 1991 recession, Australian housing prices have now gone up roughly +270%: ![Is the Great Australian Dream Dead? - Foxy Home Staging](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9797d7cf-98b1-43f6-862b-1d5b035b5bf4_839x775.jpg) The first leg-up came around the year 2000 when the government introduced the [First Home Buyer Grant](https://en.wikipedia.org/wiki/First-time%5Fhome%5Fbuyer%5Fgrant?ref=asiancenturystocks.com): one-off grants to first homeowners that satisfy certain eligibility criteria. For example, in New South Wales, new home buyers can get an AU$10,000 grant provided that the home's total cost does not exceed AU$600,000\. This grant was later increased in 2009 in response to the Great Financial Crisis. In the mid-2000s, Australia enjoyed a boom driven by a seemingly insatiable demand for commodities in mainland China. Strong demand for Australian iron ore, coal and other commodities caused nominal GDP growth to remain in the high single digits for most of the 2000s. But the boom was also driven by migration flows from mainland China and elsewhere. Many Chinese saw Australia as a desirable place to live. You can tell from the following chart that net overseas migration accelerated from the mid-2000s onwards, with the population growing 1-2% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/605efe60-c823-4ef8-8ee4-351dc8f614f5_709x474.jpg) In 2008, the government relaxed the rules for non-resident investors in the Australian housing market, making it easier for them to buy property. New rules also relaxed the credit guidelines for temporary residents, allowing them to buy homes with just 10% deposits. The boom was also driven up by the gearing up of Australian households. Today, Australia’s household debt of 180% of income is far beyond the levels experienced by the United States before the Great Financial Crisis. Measured against GDP, Australia now ranks the [second-highest](https://en.wikipedia.org/wiki/List%5Fof%5Fcountries%5Fby%5Fhousehold%5Fdebt?ref=asiancenturystocks.com) of any country after Switzerland. This debt introduced enormous financial instability. ![Household debt is Australia's Achilles Heel, and it could yet cause problems - Shane Oliver | Livewire](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/06565175-3ac5-4994-a30e-9d876c5f4196_701x415.png) What’s worse is that 70% of Australia’s mortgage debt is on variable rate terms. So once interest rates rise, higher interest payments will immediately impact household spending power and possibly cause a recession. During most of the 30-year boom, dwelling completions stayed around 150,000, just in line with household formation. These provided enough housing for about 400,000 people, assuming an average household size of 2.7x individuals. Once immigration took off, dwelling completions rose to well over 200,000, and the housing market ended up in a frenzied state of activity: ![Why housing construction will fall into 2021 - MacroBusiness](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/305e0d54-3c42-42c6-a011-91c75e30de2d_959x676.png) This boom in construction was spurred on by a peculiarity in Australian tax laws that enabled so-called “negative gearing”: using losses from rental properties to offset taxable income from labour. This practice is now widespread: out of roughly 2 million landlords in Australia, over 1.3 million Australians own loss-making rental properties. These individuals presumably hope for capital gains to offset any losses they make on their rental properties. But this type of speculative finance could lead to a frenzy of selling if and when property prices start falling. Today, the affordability of Australia’s residential property market can be measured in a few different ways: - The Australian housing market is worth roughly [400% of GDP](https://asia.nikkei.com/Economy/Australia-s-huge-housing-market-keeps-central-bank-on-knife-edge?ref=asiancenturystocks.com), just below Japan’s 1989 peak of around 500%, similar to China’s level today. Counting just the land － the most interest-rate sensitive asset － you get to 320%, the same level as Japan in 1989. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bf2294b8-7140-4534-8c3c-32c572a33078_360x233.jpg) - According to the Demographia International Housing Affordability Survey, Sydney and Melbourne rank as some of the [least affordable cities](https://www.asiancenturystocks.com/content/files/dhi.pdf) based on the median house price/median household income (known as the “affordability ratio”). Australia has a median affordability ratio of 8.2x, up from about 3-4x before the boom started in the early 1990s. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6a78478b-350b-4998-868a-c552a9b76743_1164x874.png) Source: Demographia International Housing Affordability Survey - In Australia’s largest cities, rental yields are now [between 3-4%](https://www.statista.com/statistics/1297624/australia-house-rental-yield-by-capital-city/?ref=asiancenturystocks.com), meaning that any investor in rental property would need over 30 years to get back money once maintenance is taken into account. Before the boom, residential property yields were closer to 6%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/983e72dd-38af-4014-bae7-b23d1ff90cad_1404x868.png) Source: Trading Economics In any case, these three measures all suggest severe overvaluation of the property market. And once credit and immigration stop supporting the market, it’s hard to say where the floor will be. --- # Clouds are forming ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/24306d78-33ea-4097-9e7a-e8393df4788d_1061x707.jpg) Source: Getty Images Housing markets tend to weaken in either of two scenarios: - When interest rates rise sharply or - When people lose their jobs This is especially true when debt levels are high, and a large portion of borrowing has occurred at variable rates. I will argue that Australia will likely face both challenges simultaneously. The following chart shows how Australia’s policy rate － RBA cash rate － has recently spiked from zero to 4.1%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c6b40a68-fa2f-4aa3-ba55-5c73d35cca3e_1248x854.png) For context, a typical mortgage rate now costs 6.6% compared to just above 2% in 2021 － the highest level since 2012. With a median home price of AU$913,000, a 25-year repayment term and an assumed 80% loan-to-value ratio, a borrower will be looking at a [monthly payment of almost AU$5,000 per month](https://moneysmart.gov.au/home-loans/mortgage-calculator?ref=asiancenturystocks.com), including amortisation. But with typical salaries of AU$60,000 and combined household gross income of AU$120,000, the monthly mortgage payments will eat up 61% of household disposable income after tax, according to my numbers. Correct me if I’m wrong. In the past, I’ve considered any number above 30% a red flag. RBA’s rate hikes are made worse by an ongoing mortgage rate reset. During the COVID-19 years, the RBA offered banks low-cost fixed-rate loans to the major banks for three years. Almost AU$200 billion was lent through this program, enabling banks to lend at fixed rates at under 2% for years. But most of those loans are maturing in 2023, and mortgage rates will reprice higher. We’re seeing early signs of mortgage delinquencies rising, though from low levels. According to Moody’s, the delinquency rate among the bottom third percentile went up 0.6 percentage points from May 2022 to May 2023. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/027a0a5c-ad15-4143-b687-8f0b2cb0326f_658x544.png) And in mid-2023, we started seeing an uptick in the number of new listings added to the market for sale, suggesting pain among existing homeowners: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ace12223-78eb-48fb-be99-be4f9e15b7f3_638x511.jpg) On the income side, fundamentals are also deteriorating. Real wages have declined since 2021 due to high inflation and a weaker economy. Australia’s Achilles' heel is that it primarily exports commodities like coal, iron ore, and hydrocarbons. Roughly a third of Australia’s exports are to mainland China, making the economy susceptible to China’s housing market. ![Is India a substitute market for Australia since we're trying to decouple with China on exports such as beef, barley, wine, and coal? - Quora](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/75209652-6c23-4fc3-ad4b-0d01d502c848_602x553.jpg) In my view, China’s construction boom is probably over. The bonds of China’s private property developers are weak across the board, suggesting widespread default. They are not going to ramp up capex anytime soon. General Secretary Xi Jinping has repeatedly emphasised that property is for living － not for speculation. I would not assume that construction activity will recover anytime soon. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9f67d9f2-fd15-486d-86fe-822a573f6393_564x636.jpg) This weakness in construction implies low demand for industrial commodities for the foreseeable future. Now, when it comes to employment, Australia’s job market is still strong. However, early signs are showing that the job market is rolling over. For example, the number of [job vacancies](https://tradingeconomics.com/australia/job-vacancies?ref=asiancenturystocks.com) has now started decreasing and trending in the wrong direction: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2349f82b-1eef-4430-868e-0e0cd26a2012_1634x810.png) The big wild card is how long migration from mainland China can support the property market. As of August 2023, the number of Chinese nationals that took up short-term residence in Australia [rose to 276,000](https://www.scmp.com/economy/china-economy/article/3235525/chinese-migrants-australia-top-pre-pandemic-levels-lured-jobs-property-and-improved-economic-ties?ref=asiancenturystocks.com), exceeding the pace of immigration in the same period in 2019\. In theory, such newcomers will need 100,000 homes annually, providing at least short-term support for the market despite the hike in interest rates. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/abfda38c-579b-4100-b40d-b2cbc49d4e60_1006x932.png) Source: NAB Residential Property Survey 2Q2023 But let’s not overemphasise the impact of overseas buyers on the Australian property market. Their share of the market has gone from about 8% at the peak to just about 3% today. A tightening of capital controls from 2016 onwards caused this decline. It’s no longer a simple matter to get money out of China. I would not expect such demand to last forever. --- # The potential casualties ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/183a2c97-d7a6-46de-ba30-5ab182e4a2b0_1520x1007.jpg) Source: Getty Images _This post is for paying subscribers only._ ### Plover Bay Technologies (1523 HK) URL: https://www.asiancenturystocks.com/plover-bay-technologies-1523-hk/ Last updated: 2026-07-31T01:43:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Plover Bay Technologies at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Plover Bay Technologies**](https://finance.yahoo.com/quote/1523.HK?p=1523.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(1523 HK - US$318 million)* is a Hong Kong-based developer of SD-WAN routers under the “Peplink” brand name. A friend of the publication [@DaBao](https://twitter.com/DaBao%5F?ref=asiancenturystocks.com) mentioned it as a long-term compounder, and I was intrigued enough to dig deeper. Companies and government organisations use SD-WAN routers to create computer networks. Compared to using leased cables to connect an organisation, SD-WAN routers direct traffic using software. It can also use various new technologies, including DSL, 5G and Starlink. This approach to creating private networks lowers costs and increases reliability. They also enable connectivity from even remote locations. These benefits have enabled the SD-WAN router industry to grow around 30% annually. As a niche service provider focusing on wireless SD-WAN routers, Plover Bay has been able to ride with growth with a revenue CAGR of 23% and EPS CAGR of 27% since 2013. Plover Bay’s business model is built on bundling its hardware with software features such as a cloud service offering and charging for them on a subscription basis. Thanks to this approach, switching costs have become low. And revenues have become predictable, increasingly growing in line with the installed base of routers. From what I can tell, Plover Bay’s corporate governance is excellent. The founder has a decent reputation in the industry. The company has a simple corporate structure. The dividend payout ratio is exceptionally high. And the accounting is straightforward, with strong free cash flow generation. The only question mark I have is the 2022 divestitures of two strata-title office properties in Hong Kong for about US$1 million to the founder. But these transactions were done at a 4.1% cap rate, which I consider fair, if not overpriced. There is some risk that the founder will now jack up rents. But I don’t think these transactions are material. My biggest question is whether hungry competitors could replicate Plover Bay’s technology. Its production and distribution are both outsourced to third parties. But there are several mitigating factors: - Gartner featured Plover Bay’s Peplink brand in its September 2023 report on SD-WAN routers. It characterised Peplink as having “strong viability” as a company in its niche of wireless WAN use cases for enterprise customers. - Their bundling of software and hardware into subscriptions should imply switching costs. That makes Plover Bay more of a solutions provider than a pure commodity hardware developer. - Plover Bay also has hundreds of patents in its key markets of the United States and Europe. On my estimates, which assume top-line growth of around 12% per year and a small decline in operating margins from the current 30%, I get to a 2026e P/E of 9.4x. In such a scenario, with a 90% dividend payout ratio, we should expect the dividend yield to rise to about 9.6%. Most competitors trade at far higher multiples. In 2020, Ericsson acquired the competitor Cradlepoint for US$1.1 billion, equivalent to an EV/Sales of 8.0x. This multiple exceeds Plover Bay’s 2024e EV/Sales of 2.5x by a wide margin, potentially because investors are shunning the Hong Kong market due to a perceived slowdown in China. **Click the “Download” button below to access the full PowerPoint presentation** _This post is for paying subscribers only._ ### What I read in September 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-september-2023/ Last updated: 2023-10-04T04:58:18.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/what-i-read-in-september-2023/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fa816d59-8349-41e3-a94e-886e49af7588_1912x1270.jpg) # Summary - I read a total of 14 write-ups in September, most of which were either released publicly on Value Investors Club (with a 45-day lag) or on a variety of Substacks. - Among the large caps in this sample, I think both [**JD.com**](https://finance.yahoo.com/quote/JD/?p=JD&ref=asiancenturystocks.com) and [**China Tower**](https://finance.yahoo.com/quote/0788.HK/?p=0788.HK&ref=asiancenturystocks.com) might trade below my personal estimates of fair value. - I can also see an upside to my estimates of fair value for [**Ossia International**](https://finance.yahoo.com/quote/O08.SI/?p=O08.SI&ref=asiancenturystocks.com) and [**Ming Fai**](https://finance.yahoo.com/quote/3828.HK?p=3828.HK&.tsrc=fin-srch&ref=asiancenturystocks.com). But then again, I’m not sure whether these companies enjoy any competitive advantages. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) # Midea (000333 CH) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5cd3525d-bb49-419f-9391-52ea99289e64_1458x692.png) [**Midea**](https://finance.yahoo.com/quote/000333.SZ/?p=000333.SZ&ref=asiancenturystocks.com) *(000333 CH - US$52 billion)* is one of China’s three leading home appliance manufacturers. User “fw51” wrote up the stock on Value Investors Club in early June and the write-up is available [here](https://valueinvestorsclub.com/idea/Midea%5F/7156081271?ref=asiancenturystocks.com). Midea sells refrigerators, washing machines, air conditioners, kitchen appliances, etc. Since its 2016 acquisition of German robotics maker Kuka, it’s also present in the industrial automation market in direct competition with Fanuc and ABB. Midea is definitely at the top of the Chinese home appliance industry and might eventually dominate it globally. It’s taken market share over the past decade thanks to quality control and customer service. I also Midea’s capital allocation is decent, with a 20%+ return on equity and industry-leading margins. I hope that the costs are all taken within the ListCo. Judging from Google search query data, the consumer mindshare of Midea is growing internationally, with a chart that goes from the [bottom left to the top right](https://trends.google.com/trends/explore?date=all&q=Midea&hl=en&ref=asiancenturystocks.com). That’s encouraging to me. The stock now trades at a forward 2024e P/E of 10.4x with a dividend yield of 5.0%. An incredibly low level for the Chinese A-share market, considering Midea’s market-leading position. Its Western peers, such as Electrolux, have historically traded closer to 15x. The big question mark regarding Midea is its exposure to the Chinese property market. Construction activity has plummeted, with new starts [down by more than half](https://tradingeconomics.com/china/housing-starts?ref=asiancenturystocks.com). Out of Midea’s product portfolio, roughly 41% of the demand has come from replacement demand and the rest from construction of new property. Surely Midea must be hurt somehow? One alleviating factor is that many Chinese apartments remain empty shells until the new owners move in. So many home appliances are not purchased until the new owners move in. Therefore, I suspect the hit to Midea’s revenues will be far less than the drop in new starts. So far, so good. Midea’s first-half 2023 revenues showed year-on-year growth of +8%. Still, I can’t help thinking that Midea must have been a beneficiary of China’s construction boom. I will want to wait a bit longer before entering, just to be safe. And that goes for Haier’s D-share as well － another Chinese home appliance stock that trades at a low multiple. --- # JD.com (JD US) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2efa1583-4ca0-4890-89f8-cf4438a1cf8a_1176x776.png) _This post is for paying subscribers only._ ### Portfolio review September 2023 URL: https://www.asiancenturystocks.com/portfolio-review-september-2023/ Last updated: 2026-06-04T11:42:46.000Z [Click to view in your browser](https://www.asiancenturystocks.com/portfolio-review-august-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update Another weak month. The portfolio's value fell by -1.9% month-on-month and is now +26.6% since inception in October 2021, equivalent to an IRR of +12.8%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/15c67ed3-0723-44b5-b770-6445f654dff0_1730x590.png) There’s been a confluence of factors holding the portfolio back. The US Dollar has been strong, with the DXY index at a [one-year high](https://www.marketwatch.com/investing/index/dxy?ref=asiancenturystocks.com). But Chinese equities have also been unusually weak, with [**Cafe de Coral**](https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/) and [**Fairwood**](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) continuing to languish. The failed bid for [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK/?p=0973.HK&ref=asiancenturystocks.com) also contributed negatively to the portfolio. On the positive side, trading volumes in the Philippines seem to have picked up since the launch of GCash’s single-stock trading feature, benefitting the [**Philippine Stock Exchange**](https://www.marketwatch.com/investing/stock/pse?countrycode=ph&ref=asiancenturystocks.com). Here is the portfolio as of 30 September 2023: _This post is for paying subscribers only._ ### Travel notes: Chiang Mai URL: https://www.asiancenturystocks.com/travel-notes-chiang-mai/ Last updated: 2023-10-01T06:26:24.000Z Meeting Marc Faber, a FinTwit contact and thoughts on Thai consumer brands. Estimated reading time: 8 minutes _This post is for paying subscribers only._ ### 10 Questions with InflationX URL: https://www.asiancenturystocks.com/10-questions-with-inflationx/ Last updated: 2025-10-24T15:05:48.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1071ea6c-6f4b-4db5-8c17-930d414b2ce8_1344x756.png) Today, I’ll be interviewing InflationX, an anonymous Twitter account of a veteran fixed-income investor who has spent much of his career in the Asia Pacific. I want to find out what the current US rate hike cycle means for bonds, equities and currencies in the region. Let’s dive in. ``` Table of contents 1. Background 2. Inflation outlook 3. Growth outlook 4. Fed policy 5. Ways to express a lower rates bet 6. TIPS vs USTs 7. Taking on credit or prepayment risk 8. Sovereign bonds in Asia 9. Asian FX 10. Where can readers go to learn more ``` # **1\. Can you tell us briefly about your background and what you’re focusing on right now?** I spent some time in fixed income on the buy side originally, but I have been investing in equities over the last decade. In equities, I am typically looking for low valuations and/or high upside situations. This approach has taken me to energy, mining and other cyclical industries in recent years. These are generally not buy-and-hold names/sectors and you have to navigate the macro or commodity-specific cycle. Occasionally, a cycle can last quite long. One example I like to cite is Frontline's 55x total return from 1998 to 2008\. It was a powerful and durable tanker cycle. This year, I went back to my origins and have spent most of my time researching and purchasing fixed-income securities. There will be a better time (and price) to buy cyclicals and commodities, while bonds offer value. I have advocated [reflationary trades](http://inflationhedge.cc/the-sound-of-inflation/?ref=asiancenturystocks.com) in 2020, but the cycle is going into reverse now. --- # **2\. What’s your outlook for US and global inflation, and what factors do you see as the most important to push inflation in either direction?** On a medium-term time horizon (5-10 years), there will be upward pressure on inflation from several sources. Given the geopolitical tensions with China, supply chains are being reconfigured, no longer optimizing for the lowest cost. The green transition will require many years of significant investment and will result in higher costs, at least in the interim. Finally, the declining demographic profile should lead to a lower supply of people to work. So, I would expect inflation to average higher this decade than last. However, in the short-term (12-18 months), the economic cycle is going to drive inflation and growth lower, and there may be an opportunity in bonds/rates at this juncture. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/adf5aa5a-f0e7-46bd-ba6f-a9388b6a6075_1600x878.png) --- # **3\. What’s your outlook for economic growth in the US and other major economies now that interest rates have gone up quite a bit?** There is a famous chart from Bank of America, which shows how every major rate hiking cycle during the past half century, ended in some kind of crisis (LatAm Debt in '82, Market crash in '87, Tequila crisis in '94, LTCM in '98 etc). This cycle has seen the steepest and quickest increase in rates, not just in the US but across the world (with some notable exceptions in Asia). This monetary tightening takes place as the world has much more debt than before, while growth rates are lower than in the past. It also comes after a decade of ZIRP. I do not see how we do not end up in a crisis. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/00afb564-e9d2-4f82-913a-236adf44989e_637x401.jpg) There is a well-telegraphed yet inevitable maturity wall of debt coming due. 2023 was a light year for refinancing, but during 2024 & 2025, many corporates have maturing debt, which will need to be refinanced at much higher interest rates. Some of these companies' capital structures are already stretched, and higher interest rates will lead to defaults. There is plenty of evidence that a default cycle has started already, particularly but not only in the US. It will get worse every quarter rates stay at these levels. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fc9768a1-76ff-4a9c-b745-40aecdb3a090_1145x831.png) --- # **4\. What are Jerome Powell’s current incentives, and what is he trying to achieve?** Central banks are navigating a difficult and volatile environment. They missed the inflation upturn in 2021 because they were focussing on the rear-view mirror. After a decade of very low inflation, a sudden pick-up in inflation was bound to surprise almost everyone. The fiscal roller coaster since COVID has not helped. Jerome Powell and his peers at central banks can only focus on one task at a time - tightening or easing - and they only make the switch when they have a high degree of certainty, which usually comes too late. Interest rates famously impact the economy with "long and variable lags", and it will be another while before recent hikes show up in GDP data. By the time Jerome Powell can say with certainty that the inflation dragon has been slain, the economy will be in recession. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/41f81ea2-27ea-48aa-b993-4865c6c90fb0_736x529.png) Source: Bloomberg --- # **5\. What are some of the ways to express a view on lower interest rates, and where do you personally see the best risk-reward?** There is a group of retail investors who have done well in stocks and don't see the point of owning bonds at all. I think this view is misguided, and there are good reasons why Bridgewater and other firms have done so well with 60/40 (60% equity + 40% bond) portfolios over the years - bonds and equities are often negatively correlated. Bonds often go up just as equities fall (2022 was a notable exception). In addition, there were few reasons to own bonds for the past decade as yields were too low, but that has changed. There is a reasonable "margin of safety" in this space now. Broadly speaking, fixed-income is attractive. It's not difficult to construct a very safe portfolio yielding 6-7% in USD or GBP (5%-6% in EUR). There was a sea-change in this respect over the past two years, when ZIRP was the norm, and the high-yield credit index (the riskiest part of FI) yielded less than 4%. But it's not just about clipping coupons. There is potential for price appreciation. The price of long-end bonds (20-30 year maturities) are much more sensitive to interest rate movements and could deliver 30%+ returns in a recession or market panic scenario. The most aggressive ETFs in this space - ZROZ - could retrace half of its drop and rally 50%. This would imply 30-year rates falling back to around 3%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7e72cd69-ead8-4356-a42d-3e2c64f6b66d_564x393.png) The copper/gold ratio has diverged from 10-year Treasury yields, potentially suggesting lower yields ahead. Source: The Daily Shot --- # **6\. What’s your view on inflation-linked bonds compared to US Treasuries?** I suspect inflation-linked bonds (TIPs) will be a good investment for the next 5-10 years. With yields at CPI+2% currently, TIPs provide inflation protection and income. Nominal treasury bonds should be a good trade over the next 18-24 months. There will be disinflation pressure in the next few quarters, which will favour treasuries over TIPs. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bfeb23d2-a696-4e34-91ef-69a926ab4707_1080x632.jpg) Source: Federal Reserve --- # **7\. Would you move up the risk curve into agency bonds, mortgage bonds or corporates?** Agency bonds are like treasuries with prepayment risk. They can be called by the issuer, and you may get your money back way before maturity. They carry no credit risk (the same rating as the US government). Currently, you get paid a lot to take this prepayment risk. Current coupon agency bonds offer yields around 6.4% vs. 4.6% on 30-year treasuries. That's very generous. [This piece](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2023/08/convexity-maven-the-big-o.pdf) by the "Convexity Maven" covers the opportunity in some detail. Corporates only offer an average yield pick-up compared to history. In a flight-to-quality scenario, corporates lag as credit spreads widen. From an income perspective, safe investment-grade bonds are fine, but if you are betting on economic trouble over the next year or two, treasuries are a cleaner bet. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c1caece7-d13b-4554-8a89-bfc9e84d2e49_728x561.png) Source: Variant Perception --- # **8\. What’s your take on sovereign bonds in Asia, especially given your outlook for the Fed Funds Rate and the increased indebtedness that we’ve seen in the past 10 years?** The US and Europe have experienced a surge in inflation post-covid and a rise in bond yields. Asia, for the most part, has not experienced either (Japan being a different story altogether), so the opportunity is less clear, and the pick-up in yield vs. Treasuries is historically low and, in most cases, negative. Indebtedness is another challenge and not just an Asia-specific problem. Jamie Dimon recently said that governments are spending like [drunken sailors](https://www.cnbc.com/2023/09/11/jamie-dimon-huge-mistake-to-think-economy-will-boom.html?ref=asiancenturystocks.com). Others have expressed similar concerns. Debt dynamics are definitely worrying. But the end game is probably some time away. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b4f74656-47e9-455f-877f-28716b233629_1299x657.png) Source: Apollo --- # **9\. If and when the Fed embarks on another easing cycle, how would you expect the exchange rates of the larger Asian currencies to move? Will the reversal of any carry trades matter for FX?** The biggest risk for Asian currencies is now, as the FED hikes and the rate advantage of the US dollar grows, leading to capital outflows from Asia. As recent quarters have shown, China is vulnerable to capital outflows despite a closed capital account. The yield differential vs. Japan is huge and has driven the yen to multi-decade lows. Eventually, Asia should benefit from interest rate cuts by the FED, but that will probably only happen after a recession, which will be disruptive. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/693d2c01-34e7-4547-ade3-00d4f88fef33_1145x655.png) --- # **10\. Where can people go to interact with or learn more about you?** I am based in Kuala Lumpur, but I also spend time in Thailand, Taiwan and Singapore. I am [@InflationX](https://twitter.com/InflationX?ref=asiancenturystocks.com) on Twitter/X. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Kimly (KMLY SP) URL: https://www.asiancenturystocks.com/kimly-kmly-sp/ Last updated: 2026-07-31T01:43:04.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Kimly at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Kimly**](https://finance.yahoo.com/quote/1D0.SI?p=1D0.SI&.tsrc=fin-srch&ref=asiancenturystocks.com)*(KMLY SP - US$297 million)* is a Singapore-based operator of “coffeeshops”, a type of food court found in residential areas. The company leases spaces from the government agency Housing & Development Board, sets up a food court and sub-lets stalls to individual operators. However, it retains some of the more lucrative food stalls, including drinks (alcohol) and snacks. That business model has worked well, with a return on equity of over 20% in the past five years. Kimly trades at a 2024e forward P/E of about 12x, far below the global peer group. The big question is what type of multiple a company like this deserves. Does it have an economic moat, or will competitive pressures eventually push the return on equity down to the cost of capital? While barriers to entry are low, I think leasing and sub-letting food stalls help bring in foot traffic to Kimly’s highly profitable drinks and snacks stalls. By inviting third-party food stalls to its coffee shops, the company can also offer its customers a greater variety of foods. I also think that the execution has been decent. Kimly’s headquarters are in a nondescript building in the far north of Singapore at the same location as a central kitchen. Its margins have remained at the top of the industry for many years, suggesting strong cost control. There’s a case to be made that greater Singapore public housing (“HDB”) construction will accelerate after the pandemic, from 2021’s level of 17,000 flats closer to the low 20,000s. I don’t think it’ll make a huge difference, except for a slight increase in organic growth. There are a few parts of the story that aren’t exactly clean: - Kimly’s effective tax rate was 5% before the IPO, suggesting that taxable earnings might have been lower than those reported in the financial statements. - And while insiders did not sell any shares in the IPO, the pace of M&A has been elevated, with at least two announced related party transactions. One of those transactions involved the ListCo buying a company 30% owned by the founder. - There are also recurring related party transactions where the ListCo rents properties from a company owned by either the founder or one of the directors. Kimly benefitted somewhat from rent concessions during COVID-19\. Some investors also argue that its coffeeshops benefitted from the work-from-home trend during COVID-19\. For those reasons, I project a slight margin decline to around 12%. Combined with about \~4% organic growth, I see the P/E falling to about 11x with a dividend yield slightly above 5%. The biggest risks are inflation pressures, changes to Kimly’s ability to hire foreign workers or any expensive M&A transaction if and when such a transaction occurs. **Click the “Download” button below to access the full PowerPoint presentation** _This post is for paying subscribers only._ ### Introduction to the global wristwatch market URL: https://www.asiancenturystocks.com/introduction-to-the-global-wristwatch/ Last updated: 2025-10-02T07:04:41.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/introduction-to-the-global-wristwatch/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/12d2f625-c432-4c6e-8e8e-3584a23440bb_1019x734.png) Source: MING Watch # Summary - The watch industry has hundreds of years of history, with challenges and technological progress. But people continue to want to tell the time. - The Apple Watch created significant challenges for the lower end of the market, causing luxury wristwatch brands to focus on the higher end instead. - The luxury segment also benefitted from China’s credit boom, which now appears to be slowing - especially as speculation in the housing market has cooled down. - Another key trend is towards watch collecting, which benefits those companies adept at playing that game. Casio has been a master of introducing limited edition models and colourways to get buyers excited. But Swatch Group has also entered the game after orchestrating its successful MoonSwatch collaboration between Swatch and Omega. - There was a boom in wristwatch sales during COVID-19, which I think was related to the stimulus unleashed during those years. That boom has now turned into a bust, implying lower earnings for the watch retailers that benefitted from it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) When researching watchmaker Casio last year, I dived deep into the world of wristwatches. While challenged by the rise of smartwatches, I became convinced that the industry offers opportunities. For that reason, I’ve decided to provide an overview of the industry: its history, how companies make money and what the future holds for them. ``` Table of contents: 1. A brief history of watches 2. Recent trends 2.1. Smartwatches 2.2. A polarisation of the industry 2.3. The Swiss monopoly fraying at the edges 2.4. China’s credit boom 2.5. Speculation 2.6. Social media marketing 2.7. Vertical integration 3. The universe of listed watch stocks 3.1. Wristwatch brands 3.2. Wristwatch retailers 4. Conclusion ``` # 1\. A brief history of watches Let me provide a short history of the industry. In the past, time has been a way to measure the impact of the sun on our lives. The first attempts to measure time were sundials that used shadows to indicate the progression of time throughout the day: ![Stone Sundial](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/78992fb2-3c17-45bc-8c33-b4c392c1df17_480x306.jpg) An Egyptian sundial from around 1500 BC. Source: Wikipedia But the most important innovation was the water clock, which enabled “regulation” - ensuring that each block of time was consistent throughout the day. Much like a modern hourglass, water clocks enabled us to measure time in a uniform, dependable fashion. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/249da1cf-9d45-4c57-8bfe-c8c36cd17122_1366x906.png) Greece’s “Tower of the Winds” in Athens, the world’s first water clock enabling visitors to tell the exact time of the day. The first mechanical clock was invented in 1275 as part of the Salisbury Cathedral in Britain, and several hundred years later, we got pocket watches worn in the waistcoat for maximum protection. These mechanical clocks worked by letting a mainspring unwound, moving gears throughout connected to hands that would then tick along a 12-hour dial. But wristwatches came much later. They were seen as feminine and not suitable for men. The first actual wristwatch was created by Abraham-Louis Breguet for the Queen of Naples in 1810\. But it was really a piece of jewellery, a **dress watch** if you will. In this era, watchmaking moved to Switzerland, specifically in the Vallée de Joux in the Jura Mountains close to Lausanne. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4bb02b7-092b-4930-bee0-e30f0a8ef5b8_1720x452.png) It was a war that popularised the wristwatch for men. In the late 19th century and early 20th century, naval officers started wearing pocket watches on wrists. And then, in World War 1, soldiers started wearing **field watches** to tell the time while freeing up their hands for combat. The problem with these early watches is that they had to be wound daily by hand. A revolutionary invention came in 1923 with the invention of self-winding **automatic** movements. With these, simply by moving your wrist, the watch would charge itself and keep time with little effort for the wearer. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8f2f29e-cc4f-4025-a555-895955d723ff_1646x756.png) A sketch of how a mechanical watch movement works: motion moves a rotor, charges a mainstream, unwinds, working through gears that impact an escapement and finally, a balance wheel pushes hands forward. Rolex invented the first waterproof watch in 1926 through its “oyster case”, which prevented water from seeping in. That led to **dive watches** in the 1940s and 50s, first with the Panerai and then Blancpain and Rolex’s Submariner. Then, from the late 1960s onwards, we saw the first **automatic chronographs**, which are used to time events like car races. Examples include the Zenith El Primero, Rolex Daytona and Tag Heuer Monaco. A major shift in the industry was the invention of the **quartz watch** in the 1960s and the popularisation of it by the Seiko Astron in 1969\. These quartz watches replaced the mechanical movement with a battery-driven mechanism that used quartz crystals to create a periodic thrust on the watch hands. In the following 15 years, these cheap and reliable quartz watches caused a crisis for the Swiss watch industry. The number of Swiss watchmakers dropped from 1,600 to just 600\. In 1983, the two biggest Swiss watch groups, ASUAG and SSIH, merged to form Swatch Group in a last attempt to save the industry. Even James Bond started wearing a digital watch. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/83e72f43-e630-4218-90b0-c37a844d5283_1102x618.png) The Pulsar digital watch, worn by James Bond in the movie Live and Let Die in 1973 Swiss mechanical watches staged a comeback by becoming luxury items. Swiss watch exports grew strongly up until the early 2010s. More recently, the watch industry has faced some challenges. One such challenge was Xi Jinping’s anti-corruption campaign in 2012\. At that time, the Chinese government banned using public funds to purchase luxury goods. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/94bba9b7-26fb-48be-ba21-39275218dcef_3180x834.png) The second challenge came in 2015 with the “Apple Watch” **smartwatch**. Its key selling point was health & fitness tracking and the ability to check messages. On the other hand, it required daily charging. It’s become a major success, taking market share from the lower end of the luxury wristwatches, the segment around CHF 1,000 and lower. And some even question whether we need to wear a watch in the first place when we can tell the time perfectly fine on our smartphones. Technological progress if forcing the industry to evolve. --- # 2\. Recent trends ## 2.1\. Smartwatches Today, smartwatches continue taking market share as they become more capable. An index of the number of Google search queries for the Apple Watch is now higher for the Apple Watch than any of the major watch brands: Rolex, Omega, Casio and others: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45e520cd-f290-4f6b-9d04-59f51fa05b1e_1732x580.png) Around 40 million Apple Watches are sold each year. Not much compared to the total production of 1.2 billion watches, but significant compared to the 20 million or so higher-priced watches exported from Switzerland each year. What’s the appeal of the Apple Watch? - First of all, it’s stylish. Wearing a watch is not all about status; it’s also about showing your good taste and being up-to-date on the latest trends. Potential partners might assume that a person who pays attention to clothing will also pay attention to other parts of his life, including his relationships and career. - Another appeal of the Apple Watch is its functionality: the feeling of control, being able to glance at calendar events or messages by just raising your hand. Another way to illustrate the Apple Watch's challenge on the industry is the return on invested capital (ROIC) by the largest companies in the industry. Pure-play watchmakers Richemont and Swatch have both seen their ROIC fall, but especially Swatch, given its larger exposure to the entry-level segment. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/08b8eefb-462f-476d-baee-1e81d45999c0_3092x1590.png) Source: Bernstein And other fitness trackers are popping up as well. Garmin running watches, Fitbit fitness trackers, Oura rings and Whoop bands also take wrist space from competing wristwatches. --- ## 2.2\. A polarisation of the industry Even since the Apple Watch was released in 2015, Swiss watch export volumes have been in structural decline: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d57fb583-82df-4c41-a59a-f73de81c9c48_1330x652.png) Source: Monochrome Watches And the data is clear: it’s mostly the lower-end watches that are suffering from this new competition. Here’s a chart from Bernstein showing how the Swiss luxury watch market has shifted from mid-priced watches to luxury. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/460b1922-51c8-48a2-9d5a-3fc98ad64003_1774x1558.png) Source: Bernstein At the lowest end of the market, you have low-maintenance quartz watches produced by the likes of Casio, Timex and Titan. And at the higher end, you’ve got the likes of Rolex and Omega trying to sell watches not as necessities but rather luxury products. This is the polarisation I’m referring to. The middle segment is essentially dying. Why would anyone spend thousands of dollars on a luxury wristwatch? Usually to signal status or as a marker of achievement. We want to feel special. And since most mechanical wristwatches are made by hand, they will continue to be expensive and perceived as such. At the same time, the industry will remain fragmented since there is no universally perfect solution to the problem of telling time. Apple Watches are technologically impressive but require daily charging. Quartz watches offer less functionality but require close to zero maintenance. And while mechanical wristwatches offer sex appeal, they’re usually not as accurate as their much cheaper quartz alternatives. The largest Swiss watch brands have shifted their approach to adapt to this new reality. Companies like Rolex have started increasing their prices at nearly 2x GDP growth and introducing more luxurious materials. They’ve started to manage the supply of watches actively to avoid discounting and maintain a perception of exclusivity. And they’ve also started to play up their heritage through clever storytelling. Such story-telling usually brings out older iconic models from the back catalogue and explains why they’re special. Such vintage reissues have become popular in the past few years, with Longines, Tudor and Seiko focusing on such campaigns. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3c707302-c590-4f3b-b22a-a9eaa42f5549_1370x910.png) Longines 2019 heritage collection The trend towards smaller watches below 40mm case sizes is also part of this strategy of returning to the past. Buyers deserting the Apple Watch tend to want something different, and vintage reissues promise them a different value proposition, a return to simpler times. --- ## 2.3\. The Swiss monopoly fraying at the edges Luxury wristwatches are still mostly produced in Switzerland, especially in the higher-priced category. Swiss watchmakers created the industry in the 19th century, with brands such as Patek Philippe, Longines and Rolex becoming industrial powerhouses in the early 20th century. Within Europe, Switzerland is facing competition from Germany. After the fall of the Berlin Wall in 1989, the watch factories in the East German town of Glashütte were revived, leading to the rise of German brands like A. Lang & Söhne, Nomos and Glashütte Original. And East Asia is taking market share as well. The “Swiss Made” label only means that 60% of the components were produced in Switzerland. The rest usually come from China, Hong Kong and Taiwan. From the 1960s onwards, Japanese watchmakers like Seiko and Casio seized upon the opportunity presented by quartz watch innovation by taking market share in the lower-end segment. Today, Seiko is muscling into luxury wristwatches through its well-regarded Grand Seiko brand. The big question now is whether Chinese brands can undercut Swiss and Japanese competitors through manufacturing prowess. For example, former state-owned watchmaker Tianjin Seagull has started to produce mechanical watch movements directly competing with Swatch Group’s movement manufacturer ETA, though with poor accuracy. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1497ca7e-6024-4546-b0b7-78b3b3b481a8_1406x1046.png) The Tianjin Seagull 1963 People’s Liberation Arm field watch reissue --- ## 2.4\. China’s credit boom Some argue that there’s a correlation between M2 money supply and the consumption of luxury goods. I haven’t seen hard data to prove this point. The intuition is this: when a new loan is issued, wealth is concentrated into the hands of the few, enabling the purchase of high-ticket items like wristwatches. Growth in the money supply could explain the boom in luxury goods consumption in China in the past 10-15 years. In the past 20 years, Chinese banking assets have increased by over 10x. ![China's Banking Assets Are $52 Trillion, Growing By $40 Trillion Since 2008: "This Is What Hyper MMT Looks Like" - NXTmine](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/06af33a4-cf7a-4992-9dd8-d47168d67bb0_1256x671.jpg) Source: NXTmine, Bloomberg A 2013 Beijing-based Fortune Character Institute survey suggested that 46% of all luxury goods sales globally were to Chinese individuals. The ratio between luxury goods consumption and GDP has also been out of whack for China. Not unlike Japan in the late 1990s when that country had represented roughly 25% of global sales. It’s possible that some of these purchases of luxury wristwatches were done to funnel capital out of the country. Experts say that Rolex is so popular among mainland Chinese because they consider it equivalent to cash, given the liquid second-hand market for Rolex watches. If you travel with a Rolex watch to Hong Kong, you can easily sell it on the second-hand market and convert the proceeds to the US Dollar. The government is clamping down on this practice, though, by making it more difficult to purchase high-priced luxury goods items and also making it more difficult to bring them across the border. Weakness in China’s property market now puts the credit growth story in question. Most state-owned enterprises are already over-levered, and private companies in China no longer have much access to credit. Meanwhile, households remain relatively indebted. And home prices are already expensive, at least in tier 1 cities. --- ## 2.5\. Speculation There’s been a bubble in the luxury wristwatch market in recent years. I believe it was caused by cash handouts given out during COVID-19. Indices of second-hand prices for luxury wristwatches like those from Rolex almost doubled into 2021 before deflating again: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c3a6129a-9bfe-4fca-a39c-5d224889ff09_1248x888.png) A price index for luxury wristwatches from WatchCharts.com In 2021, some shoppers started seeing watches as inflation hedges or investments. It reminds me of similar trends for Moutai rice wine, vintage cars and art. An index of Google search queries for [watch investing](https://trends.google.com/trends/explore?date=all&q=Watch%20investing&hl=en&ref=asiancenturystocks.com) peaked in late 2020 and has now returned to normal levels. The bubble is deflating. At the bubble's peak, the waiting time for the privilege of buying a Rolex increased to 2-4 years and has returned to just 3-4 months. I believe that the bubble episode caused dealer profits to become unsustainably high: - Some authorised dealers convinced potential buyers of sought-after Rolex Daytonas or Patek Philippes to buy lower-priced items first to get ahead in the queue. - There are also signs that some perhaps authorised dealers might have resold watches directly to the grey market, capturing some of the spread between the MSRP and the second-hand market price. Whatever the reason, it’s plausible that the bubble boosted watch dealer profits. They might have resold watches to the grey market or just pushed consumers to buy watches to qualify for waitlists. It’s also plausible that consumers have been speculating on watches in the hope of near-term gains. Such momentum-buying tends to dry up in the down phase of any speculative episode. --- ## 2.6\. Social media marketing Young people in the developed world have almost entirely [stopped watching TV](https://www.theguardian.com/tv-and-radio/2017/jul/07/ofcom-young-people-watch-a-third-less-broadcast-tv-as-they-move-online?ref=asiancenturystocks.com). Instead, eyeballs are flocking to YouTube and platforms like Bilibili. The number of monthly active users on YouTube is now nearing [3 billion people](https://www.demandsage.com/youtube-stats/?ref=asiancenturystocks.com#:~:text=YouTube%20Monthly%20Active%20Users.,at%20least%20once%20a%20month.). I think this shift is having an immense impact on how consumers make purchase decisions regarding watches. They take cues from influencers on Instagram, TikTok or YouTube. These days, brands send watches to influencers for “review”, hoping the products will go viral. And maintaining relationships with these influencers becomes crucial for brands’ marketing efforts. I also believe that social media marketing has created a boom in watch collecting. A Google search query index for [watch collecting](https://trends.google.com/trends/explore?date=all&q=Watch%20collecting&hl=en&ref=asiancenturystocks.com) has increased significantly in the past three years. Collectors are motivated by the thrill of the hunt - seeking a dopamine hit as the collection approaches completion. Acquiring a watch provides a sense of accomplishment. The concept of [hedonic adaptation](https://en.wikipedia.org/wiki/Hedonic%5Ftreadmill?ref=asiancenturystocks.com) suggests that once a collector obtains a coveted piece, dopamine will return to baseline levels, requiring him or her to continue collecting to achieve the same level of satisfaction. Collecting is a never-ending pursuit. And it’s not just rich individuals collecting. The success of Swatch’s Moonwatch collaboration and the ever-increasing colourways of Casio G-Shocks show you that the collecting trend is also starting to show up in the sub-CHF 500 category. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7dee467c-0ddd-4bfe-83ac-1caeb54e7d16_1600x958.png) The Swatch Group’s highly successful MoonSwatch collaboration --- ## 2.7\. Vertical integration Rolex’s [acquisition of watch retailer Bucherer](https://www.businesstimes.com.sg/lifestyle/rolex-buy-bucherer-major-retail-move-swiss-giant?ref=asiancenturystocks.com) a few weeks ago took the industry by storm. Rolex has traditionally only been a watchmaker, relying on authorised dealers to distribute its watches. However, acquiring Bucherer marks a shift in Rolex’s strategy, potentially moving towards vertical integration. In the luxury goods industry, vertical integration has been a long-term trend pioneered by LVMH, Richemont, etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7cce7ef1-0f23-4de6-8727-3f11119fb954_1280x782.jpg) Source: Bernstein Why are we seeing this trend? Partly because price discipline helps maintain a perception that a product is valuable, difficult to obtain and scarce. In psychology professor [Robert Cialdini](https://www.amazon.com/Influence-New-Expanded-Psychology-Persuasion/dp/0062937650/ref=tmm%5Fhrd%5Fswatch%5F0?%5Fencoding=UTF8&qid=1695117142&sr=8-1&ref=asiancenturystocks.com)’s best-selling book Influence, he made the point that consumers value a particular item more if it’s perceived to be **scarce**. We’re particularly attracted to scarce resources when competing with others for them. And we feel special when we obtain them. Today, watchmakers are trying to unify prices across wholesale channels when there's instant price discovery online. But that’s difficult unless you control distribution via your website or fully operated offline stores. The need to control prices is why Richemont bought back inventory from the wholesale after Xi Jinping’s anti-corruption campaign from 2012 onwards. Discounts would have ballooned without these buybacks, hurting brand perception. --- # 3\. The listed universe of watch stocks So, how can companies stand out and win in the industry? In my view, there are a few levers to pull: - First, they need to create **stories** around iconic, distinctive watch models that can help build a perception of scarcity. They need marketing that brings images, memories or feelings to mind. The Omega Moonwatch is marketed as the first wristwatch worn on the moon. Stories like this make consumers think their watch is special - something they should treasure. ![Speedmaster Professional "Moonwatch" 50th Anniversary Limited Edition](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6d427758-10b6-44b8-93cb-85eaf42a2a93_2000x1333.jpg) - Second, to maintain that scarcity factor, brands have to tread carefully by actively **managing the supply of watches** in the retail and wholesale channels. This includes not stuffing the wholesale channel and controlling inventory through extensive data collection. - Third, by **controlling the shopping environment** by building beautiful stores and shopping experiences, companies can improve the perception of brands in the eyes of consumers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1412e917-a43a-4a53-9719-064126b6aa46_1700x804.png) A Rolex store in Singapore The company that’s done best at achieving these four factors is undoubtedly Rolex and its sister brand, Tudor. The Rolex brand name has enormous consumer mindshare the world over. Supply has historically been managed well. They operate through a system of authorised dealers that control the shopping experience. This chart from Bernstein, with data from Chrono24, shows the discounts vs. premiums that different brands enjoyed in the second-hand market in 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/63359b98-8191-4db9-9285-dbd87d500592_1512x2018.png) Source: Bernstein As you can tell, Rolex is one of the few brands that traded at a premium, together with Patek Philippe and Audemars Piguet, which sells the Royal Oak luxury wristwatch. Most other brands, such as those by Swatch and Richemont, are sold at deep discounts in the secondary market, suggesting weaker brand perception. The luxury wristwatch makers in the chart above are mostly based in Europe, with Swatch and Richemont listed in Zurich, LVMH, and Kering in Paris. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4795fd69-6207-4a37-a561-9ec44164e627_3362x1114.png) In the United States, you have several tech-focused watchmakers, including Apple, Garmin and Fossil. In Japan, Casio, Citizen and Seiko tend to be more focused on quartz watches, but Seiko, in particular, is also moving into higher-end mechanical wrist-watches. India’s Titan produces watches primarily for the local market. Meanwhile, most of the listed watch retailers are based in either Hong Kong or Singapore, cities with historically low sales tax and a large concentration of wealth. The supply chain is simple, with many components produced in-house among the larger groups: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ec513463-2af7-4805-b28c-40c4cefa09c1_2950x1772.png) Mechanical wristwatches are typically assembled by hand in Switzerland, while the manufacturing of quartz watches tends to have a greater degree of automation. Mechanical wristwatch movements are often produced by third-parties, such as Swatch-owned ETA or Citizen-owned Miyota. These movements are sometimes modified by the purchaser and then combined with cases, dials, and bracelets to create a watch. Outsourcing the manufacturing of movements to ETA saves on cost but also commoditises the product. Meanwhile, certification institutes like COSC and METAS help ensure regulation, i.e., that watches are accurate within certain parameters. Distribution typically occurs through authorised dealers, the wholesale market, or multi-brand watch retailers. Authorised dealers work with specific brand names, getting privileged access to watches in return for maintaining high professionalism and price discipline. However, authorised dealer contracts can be revoked at any time, making the value of their cash flow streams uncertain. Thanks to the Internet, we now have online watch reselling platforms like Chrono24 and Carousell. As well as grey market dealers such as Jomashop or Shopify stores run by Instagram or YouTube watch influencers. The raison d’être for these grey market dealers is that they can arbitrage differences in prices and taxes across regions and help brands eliminate excess inventory. Though at the risk of hurting the brand. ## 3.1\. Wristwatch brands The titans of the wristwatch industry are Rolex and Patek Philippe. However, neither of these are publicly listed companies. The largest listed entities have not performed as well in the competition with the Apple Watch. For example, [**Richemont**](https://finance.yahoo.com/quote/CFR.SW/?p=CFR.SW&ref=asiancenturystocks.com) *(CFR SW - US$74 billion)* has an incredible stable of brands, including Cartier, Panerai, Vacheron Constantin, IWC, Jaeger-LeCoultre Mont Blanc, A Lange & Söhne and more. After its 2008 spin-off of British America Tobacco, Richemont is almost exclusively focused on jewellery and wristwatches. However, its return on equity remains barely higher than the cost of capital. ![Hands-On: Santos de Cartier Chronograph XL | SJX Watches](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dee8a31a-5665-41d2-9461-1f9203f411ef_1600x1067.jpg) A Cartier Santos. Source: SJX. The [**Swatch Group**](https://finance.yahoo.com/quote/UHR.SW/?ref=asiancenturystocks.com)*(UHR SW - US$14 billion)* was formed through the merger of two major Swiss watchhouses that failed in the early 1980s after the quartz crisis and were revived by Nicholas Hayek through the 1980s and 1990s. Its ownership of movement maker ETA provides a competitive advantage, though it has recently lost market share. It owns Omega, Longines, Tissot, Hamilton, Blancpain, Glashütte Original, Rado, Certina, etc. It’s lost market share in recent years due to its exposure to products at similar prices to the Apple Watch, but it’s had recent success with the marketing of its new MoonSwatch collaboration. ![OMEGA Seamaster Diver 300M 60 Years of James Bond in stainless steel](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c7271462-8c14-4303-92dd-e94e5e2639b7_893x502.jpg) There are also several fashion houses owning wristwatch brands. Bernard Arnault’s [**LVMH**](https://finance.yahoo.com/quote/MC.PA/?p=MC.PA&ref=asiancenturystocks.com) *(MC FP - US$393 billion)* entered the watch industry by acquiring Zenith, Tag Heuer, Hublot and Bulgari brand names from 1999 onwards. [**Kering**](https://finance.yahoo.com/quote/KER.PA/?p=KER.PA&ref=asiancenturystocks.com)*(KER FP - US$57 billion)* owns Ulysse Nardin and Girard-Perregaux, two watch brands that are not particularly relevant in consumers’ eyes. But through its ownership of Gucci, Balenciaga, Bottega Veneta, etc., it’s achieved a return on equity at the top of the industry. In the smartwatch category, you have [**Apple**](https://finance.yahoo.com/quote/AAPL?p=AAPL&.tsrc=fin-srch&ref=asiancenturystocks.com)’s *(AAPL US - US$2.7 trillion)* Apple Watch, which dominates the industry with its smartphone compatibility and vivid OLED screens. Kansas-based [**Garmin**](https://finance.yahoo.com/quote/GRMN/?p=GRMN&ref=asiancenturystocks.com) *(GRMN US - US$20 billion)* used to produce navigation systems for vehicles, before pivoting into smartwatches in the past ten years with great success. Other American watch brands like [**Fossil**](https://finance.yahoo.com/quote/FOSL/?p=FOSL&ref=asiancenturystocks.com) *(FOSL US - US$115 million)* and [**Movado**](https://finance.yahoo.com/quote/MOV?p=MOV&.tsrc=fin-srch&ref=asiancenturystocks.com) *(MOV US - US$594 million)* are struggling. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/03cab5ac-e950-4769-99d2-02762a411760_1136x678.png) Japanese watchmakers were hit hard by this new competition from the Apple Watch. [**Seiko Group**](https://finance.yahoo.com/quote/8050.T/?p=8050.T&ref=asiancenturystocks.com)*(8050 JP - US$14 billion)* is perhaps the most well-known watch manufacturer in Japan, selling watches under the Seiko as well as the Grand Seiko brand names, increasingly moving upmarket as brand recognition has improved. [**Citizen Watch**](https://finance.yahoo.com/quote/7762.T/?p=7762.T&ref=asiancenturystocks.com) *(7762 JP - US$1.6 billion)* has been selling cheap quartz but reliable watches in the past few decades and, therefore, has been hit hard by the smartwatch trend. The brand recognition is not nearly as strong as with Seiko’s. Ownership of movement maker Miyota provides a competitive advantage. [**Casio**](https://finance.yahoo.com/quote/6952.T/?p=6952.T&ref=asiancenturystocks.com) *(6952 JP - US$2.1 billion)* is most known for its G-Shock line of rugged digital watches, which, in my view, dominate the lowest end of the watch market. It’s also been adept at appealing to collectors with an ever-increasing variety of G-Shock colourways and material choices. I wrote about Casio in October 2022 here: [Deep-dive 2022-27: Casio Computer (6952 JP)Watch now (23 mins) | Disclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Casio Computer at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/38b09384-ebdd-4a61-86ec-4f1948a4de7b_437x314.png)](https://www.asiancenturystocks.com/deep-dive-2022-27-casio-computer/) I’m personally seeing continued growth at Apple and Garmin if and when they introduce new features to their products, including [continuous glucose monitors](https://www.asiancenturystocks.com/glucose-monitors-will-become-mainstream/) and better battery life. In line with my view of the increasing polarisation of the market, I also think that luxury brands such as Rolex, Tudor, Moser, Patek and others will continue to do well thanks to regular price increases. At the other end of the market, I think Casio will survive by dominating the lower-end niche and appealing to collectors. Whether the company will grow in absolute terms is another question, though. Due to China's zero-COVID policy, Casio trades at a high multiple but against a low base. Some believe the “MoonSwatch” collaboration between Omega and Swatch diluted the Omega brand name. But one could also argue that Swatch Group is finally starting to appeal to the collector’s market. Rising Google search queries for the Omega brand indicate a potential turnaround. Swatch Group now trades at a forward P/E of 13x. I also think that Grand Seiko will continue to take market share. Grand Seiko's manufacturing prowess is up there with the top Swiss brands, at least regarding dial complexity. Seiko Group Corporation now trades at a P/E of 12x and benefits from the weak yen. However, the return on equity for the Swatch Group, Casio and Seiko are not impressive. Certainly not in comparison to the French luxury houses Kering and LVMH. Bigger changes to their corporate strategies would be needed for them to compound capital at truly high rates. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/24b04be6-25fb-45e1-846d-8c7572723d8a_1696x548.png) --- ## 3.2\. Wristwatch retailers ![About Us | Oriental Watch Holdings Limited](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7faf9faa-fca3-4e59-bbce-bd4982275f75_751x314.jpg) An Oriental Watch store in Hong Kong. Source: Oriental Watch Wristwatch retailers are essentially middlemen between brand owners and customers. They add value by service execution and lowering the customer's purchase risk. If you buy through Torneau or Oriental Watch, you can be sure you’re buying an authentic product. And if something happens to the watch, you know where to get it fixed. But watch retailers must manage their relationships with brands, which is easier said than done. Break Rolex’s trust and your entire business model is at risk. Therefore, watch retailers' economic moats are not nearly as strong as the brands' owners. Retailers benefitted from customer largesse during COVID-19, when many households received direct cash payouts from their governments. On the other hand, borders were shut, making it difficult for Chinese to visit Hong Kong or Singapore to buy watches. Singapore’s watch retailers might benefit from capital and individuals moving from Hong Kong and mainland China to Singapore. We can observe this flow of capital through Singapore’s FX reserves, which rose from 2019 onwards. I only found one listed wristwatch retailer in Europe: the UK’s [**Watches of Switzerland**](https://finance.yahoo.com/quote/WOSG.L?p=WOSG.L&.tsrc=fin-srch&ref=asiancenturystocks.com) *(WOSG LN - US$1.8 billion)*. It offers the typical luxury wristwatch brands such as Rolex, Patek Philippe, Omega, Cartier, etc. In Hong Kong, you’ll find Rolex dealer [**Oriental Watch**](https://finance.yahoo.com/quote/0398.HK/?p=0398.HK&ref=asiancenturystocks.com) *(398 HK - US$265 million)*, Emperor Watch *(887 HK - US$155 million)*, [**Citychamp Watch & Jewellery**](https://finance.yahoo.com/quote/0256.HK/?p=0256.HK&ref=asiancenturystocks.com) *(256 HK - US$639 million)* and China’s [**Hengdeli**](https://finance.yahoo.com/quote/3389.HK/?p=3389.HK&ref=asiancenturystocks.com) *(3389 HK - US$107 million).* I don’t think valuation multiples are helpful indicators for watch retailers right now since their earnings might not be sustainable, boosted by the watch market bubble we observed from 2020 onwards. It is unclear whether their high profitability was driven by stock market gains, crypto speculation, or high second-hand prices for luxury wristwatches. But in any case, the bubble has probably not deflated entirely just yet. Regarding the listed watch retailers, I’m personally treading with extreme caution. But I’m keen to cover Singapore’s listed watch retailers sometime soon. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/03a30576-631b-46ae-a40b-baf290fa4aaf_1694x426.png) --- # 4\. Conclusion Most of the impact of the Apple Watch has already been felt. But one cannot rule out innovation that will further impact the lower end of the watch market. Some companies, such as Casio and Swatch Group, may be able to counter this challenge by appealing to collectors. But otherwise, the watch market faces continued pressure to move upwards in price. And for that, you need to manage brand names skillfully. Rolex and Patek Philippe are among the only companies that have achieved strong brand perception and pricing power. Speculative activity and an unsustainable boom in watch purchases benefitted the listed watch retailers during COVID-19\. We’re now seeing the tail end of that boom. There’s also a risk of Rolex starting to compete with them now that it’s started to get into retailing itself. That said, watch retailers such as Hour Glass and Cortina have been highly profitable across the cycle and might be worth covering in the future. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Thai Beverage update (THBEV SP) URL: https://www.asiancenturystocks.com/thai-beverage-update-thbev-sp/ Last updated: 2023-09-17T05:14:08.000Z [Click to view in your browser](https://www.asiancenturystocks.com/thai-beverage-update-thbev-sp/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Thai Beverage when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/49be9984-1e35-40c7-8a28-deddb4869410_728x524.png) Source: Photographer [Sithipong Tiyawarakul](https://sithwashere.com/2020/03/04/ruang-khao-spirits/?ref=asiancenturystocks.com) # Summary - Thai Beverage (“ThaiBev”) is a monopoly in Thailand’s spirits market with an almost 90% market share and ownership of important brands such as Ruang Khao. It also owns the Thai beer brand Chang and the Vietnamese beer brand Saigon. - ThaiBev’s recovery from COVID-19 is now almost complete. The beer segment has benefitted from the reopening of entertainment venues. And its food segment has enjoyed a strong rebound as consumers have returned to its restaurants. - While the Progressive Liquor Act has not passed parliament, the barriers to entry in Thailand’s beer sector have been lowered. ThaiBev will probably see greater competition in the Thai beer segment. - The stock trades at a consensus 2024e P/E of 12x, far lower than the global peer group’s 20x. Do note that ThaiBev has a significant amount of debt, so enterprise value multiples do not show as much discount. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ``` Table of contents: 1. Quick recap 2. Update since my first write-up 3. What will change for ThaiBev? 4. Valuation multiples 5. Conclusion ``` # 1\. Quick recap My initial report on Singapore-listed [**Thai Beverage**](https://finance.yahoo.com/quote/Y92.SI?p=Y92.SI&.tsrc=fin-srch&ref=asiancenturystocks.com) *(THBEV SP - US$11 billion)* was published in early 2022. You can find that (free) report here: [Deep-dive 2022-9: Thai BeverageDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Thai Beverage at the time of publishing this article. Note however that this is disclosure and not a recommendation to buy or sell.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/69e83668-4aa1-4abc-8f56-3d29df620007_1568x884.png)](https://www.asiancenturystocks.com/deep-dive-2022-9-thai-beverage/) My reasoning in that report was that: - Thai Beverage (“ThaiBev”) completely dominates Thailand’s spirits market with an almost 90% market share. Its rum and whisky products are ubiquitous in Thailand and especially popular among the working-class population. - ThaiBev’s foray into beer hasn’t been profitable. It sells beer under the Chang brand name, which means “elephant” in Thai. The Thai beer segment’s margins remain far lower than of Thai Beverage’s spirits division. And I don’t see that changing anytime soon. - The company also owns a 54% stake in SABECO, the largest beer producer in Vietnam with a market share of 41% and brands such as Saigon and 333. - One of ThaiBev’s competitive advantages is its ownership of several important brands such as Ruang Khao, SangSom rum, Mekhong and Chang. But the company also benefits from regulatory restrictions, including heavy import duties, foreign ownership restrictions, and environmental regulations preventing new plant construction. I also think that Thai Beverage has benefitted from its incredible distribution network with access to 400,000 points of sale across Thailand. - Capital allocation hasn’t been perfect. Thai Beverage has made several high-priced acquisitions, including Vietnam’s SABECO at 35x EBITDA, a minority stake in Fraser & Neaves and Burmese spirits producer Grand Royal. It also reinvested capital into ThaiBev’s beer business, which has a high market share but isn’t particularly profitable. I believe the company would have been better off paying out that cash as dividends or buying back its shares. - When I wrote the report, ThaiBev’s shares traded at 16x P/E, much lower than the global peer group’s 24x. However, I also noted that the company had significant net debt at 5x EBITDA. - Catalysts that I identified in my write-up included a post-COVID Thailand tourism recovery, a Singapore BeerCo spin-off and a potential disposal of ThaiBev’s stakes in Fraser & Neaves and Frasers Property Limited. --- # 2\. Update since my first write-up ## 2.1\. Operational update Since my report in April last year, ThaiBev’s share price performance has been lacklustre. The share price is down 18% since that point in time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5d3c5bf-dd15-4937-95d4-ad9605239696_2034x844.png) And this share price weakness came in the face of strong a strong earnings result in 2022 when revenues rose +13% year-on-year and earnings per share +22%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e4731832-372a-41b5-bfb5-3417492787df_1346x464.png) The primary reason for this rebound is that Thailand’s COVID-19 lockdowns ended on 1 June 2022\. After this date, Thailand’s entertainment venues and bars opened again, leading to greater on-premise sales, especially beer. The gradual recovery in tourist arrivals from late 2021 onwards also helped support ThaiBev’s beer volumes. _This post is for paying subscribers only._ ### Hidden Champions among India's ADRs/GDRs URL: https://www.asiancenturystocks.com/hidden-champions-among-indias-adrsgdrs/ Last updated: 2025-10-06T12:55:50.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ec08293d-c337-41c9-9bf8-eab8c58dc6ac_1485x990.jpg) Mumbai cityscape. Source: Getty Images # Summary - So far, I’ve avoided discussing Indian equities for one simple reason: few international investors can invest in stocks listed on the Bombay Stock Exchange. - But there are more than a dozen Indian companies listed overseas. - I spent two days researching these companies, determining which has sustainable competitive advantages or not. - Out of 16 companies, I highlight five: [**HDFC Bank**](https://finance.yahoo.com/quote/HDB/?p=HDB&ref=asiancenturystocks.com), [**Larsen & Toubro**](https://finance.yahoo.com/quote/LTOD.IL?p=LTOD.IL&ref=asiancenturystocks.com), [**Dr Reddy’s Laboratories**](https://finance.yahoo.com/quote/RDY/?p=RDY&ref=asiancenturystocks.com), [**Infosys**](https://finance.yahoo.com/quote/INFY?p=INFY&.tsrc=fin-srch&ref=asiancenturystocks.com) and [**MakeMyTrip**](https://finance.yahoo.com/quote/MMYT/?p=MMYT&ref=asiancenturystocks.com). - In my view, they all have competitive products and are likely to grow for the foreseeable future. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) The post will follow the same format as my previous write-ups on “hidden champions” in [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/), [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/), [Taiwan](https://www.asiancenturystocks.com/hidden-champions-of-taiwan/) and [China’s ADR market](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/): to find companies that dominate their niches and compound capital at a high return on equity. The topic of discussion will be Indian companies listed overseas, specifically in the United States (ADRs) or London (GDRs). This discussion should not be taken as investment advice - simply a discussion of what companies are doing well among this sample of overseas Indian businesses. ``` Table of contents: 1. A top-down view of Indian stocks 2. Screening for candidates 3. Hidden champions among India's ADRs/GDRs 4. Concluding remarks ``` --- # 1\. A top-down view of Indian stocks ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/217f5ba8-5576-406f-bdbb-12408ed350b3_1246x900.png) I first came to India in the mid-2000s and spent half a year there as an exchange student. But in my subsequent career, I never had the opportunity to invest in Indian equities, and my knowledge remains woefully inadequate. I want to remedy that situation by first digging into Indian depositary receipts listed in the United States and London. The interest in these stocks is high, given that they’re easily accessible through most trading platforms. Most of you are aware of the Indian growth story, so that I won’t rehash those old narratives. But I want to share two charts that I think illustrate key realities of the Indian economy. One chart is about India’s failed manufacturing sector. Rather than manufactured goods, the greatest success stories in the past two decades have been in service industries such as IT outsourcing, pharmaceuticals R&D, hospital tourism and so on. Meanwhile, India’s manufacturing sector has gone nowhere, as this chart from Emerging Advisors illustrates: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/546a43b9-e633-4668-992f-19a32ec5e3e2_856x806.png) India’s share of US/EU imports by sector. Source: Emerging Advisors The second chart I want to draw attention to is this one on the [explosion in investment in roads and railways over the past ten years](https://www.economist.com/asia/2023/03/13/india-is-getting-an-eye-wateringly-big-transport-upgrade?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b0d26ed2-c8b7-4c3b-b97e-ac7d0486005c_608x662.png) This massive increase in infrastructure spending might be a game-changer for the export of manufactured goods, which remains the missing piece in India’s development puzzle. And there are now early signs of improvement, with Apple now making 5-7% of its products in India and [targeting 25%](https://edition.cnn.com/2023/02/10/tech/india-apple-iphone-manufacturing-china-rival-intl-hnk/index.html?ref=asiancenturystocks.com#:~:text=Apple%20devices%20are%20manufactured%20in,after%20they%20went%20on%20sale.) soon. I would like to find companies that are benefitting from this trend. Regarding the stock market, there are over 5,000 stocks listed in India, though most of them with tiny market capitalisation. The domestic market ranks between Hong Kong and Taiwan. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/00264469-56c9-47a6-9f29-d192d185b76c_3100x1048.png) In the past, it’s been illegal for Indian companies to list directly overseas. While that [may change in the future](https://www.thehindubusinessline.com/markets/indian-cos-will-soon-be-allowed-to-directly-list-their-shares-overseas-says-fm-sitharaman/article67131157.ece?ref=asiancenturystocks.com), Indian companies continue to use depositary receipts to raise capital overseas, and the aggregate market cap of Indian American Depositary Receipts (ADRs) and Global Depositary Receipts (GDRs; typically listed in London) is now about US$660 billion. A Dow Jones index with 15 Indian ADRs and GDRs has performed nicely over the past two decades, rising +11.6% per year in US Dollar terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f11f3540-bab6-4b3a-8523-f77badd36157_2032x986.png) Part of this increase is undoubtedly due to higher valuation multiples. The domestic stock index SENSEX now trades at a P/E ratio of 23.6x, making it one of the world’s most expensive markets other than the United States. India’s [CAPE ratio is now 32x](https://indices.cib.barclays/IM/21/en/indices/static/historic-cape.app?ref=asiancenturystocks.com), much higher than the 20x level in the early 2010s. I found 16 depositary receipts of Indian companies traded actively in London and New York. Weighted by market cap, roughly half are financials such as HDFC Bank and ICICI Bank. Another 28% are in energy, specifically Reliance Industries. The rest include several tech businesses and industrials. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5fa32574-1b40-4516-a652-a187801226f3_3082x1048.png) Some more details of what companies belong in each GICS sub-sector: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/97a966de-51d7-4e96-acec-bb30b299daa8_3156x882.png) --- # 2\. Screening for candidates In any case, let’s now dig deeper into individual companies that exhibit “hidden champion” like characteristics, including: - High historical average return on equity - High growth in earnings per share - Strong share price performance The following ten companies score the highest in terms of historical return on equity: _This post is for paying subscribers only._ ### CK Hutchison update (1 HK) URL: https://www.asiancenturystocks.com/ck-hutchison-update-1-hk/ Last updated: 2023-09-07T04:25:27.000Z Blue-chip conglomerate facing inflation pressures. Estimated reading time: 18 minutes _This post is for paying subscribers only._ ### Your feedback URL: https://www.asiancenturystocks.com/your-feedback/ Last updated: 2023-09-03T04:51:13.000Z _This post is for paying subscribers only._ ### Portfolio review August 2023 URL: https://www.asiancenturystocks.com/portfolio-review-august-2023/ Last updated: 2026-06-04T11:43:15.000Z [Click to view in your browser](https://www.asiancenturystocks.com/portfolio-review-august-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update The portfolio experienced a pullback in August. Almost all stocks in the portfolio lost value, especially those listed in Hong Kong. The portfolio's value fell by -3.8% month-on-month and is now +29.0% since inception in October 2021, equivalent to an IRR of +14.5%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/310739b1-c298-476f-84a2-faaee0441282_2898x956.png) I’m seeing a disparity between falling commodity prices and increasingly expensive Indonesian equities. There’s anecdotal evidence of an overall weakening Indonesian economy, but it’s not showing up in the numbers yet. Pessimism around Chinese equities has reached a crescendo. Technical analyst [Jason Goepfert](https://twitter.com/jasongoepfert/status/1696190802072887633?s=20&ref=asiancenturystocks.com) at Sentimentrader recently published a chart showing that the number of negative headlines regarding China has become the greatest since 2015. The prevailing narrative seems to be that China is experiencing a 2008-style housing crash. I disagree with that view. The slowdown is due to lower construction activity after government banks cut off private developers from credit. Growth will be weak for the foreseeable future. But I do not expect a housing-led financial crisis. Here is the portfolio as of 31 August 2023: _This post is for paying subscribers only._ ### What I read in August 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-august-2023/ Last updated: 2023-08-30T04:00:10.000Z Estimated reading time: 17 minutes _This post is for paying subscribers only._ ### The Philippine Stock Exchange (PSE PM) URL: https://www.asiancenturystocks.com/the-philippine-stock-exchange-pse/ Last updated: 2026-07-31T01:42:46.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do hold a position in the Philippine Stock Exchange at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- I came across a write-up on Value Investors Club discussing [**The Philippine Stock Exchange**](https://www.marketwatch.com/investing/stock/pse?countrycode=ph&ref=asiancenturystocks.com)*(PSE PM - US$231 million)*. You can find it [here](https://valueinvestorsclub.com/idea/Philippine%5FStock%5FExchange%5FInc/7232631815?ref=asiancenturystocks.com#description) (members only). After spending several days on the stock, I think the VIC author was spot on. The story is this: the Philippine Stock Exchange (“PSE”) is the monopoly stock exchange operator for the Philippines, a developing country with a young population of 114 million. The industry is attractive because it’s capital-light with few fixed expenses, barriers to entry and significant network effects. For example, market participants are attracted to the largest trading venues with the greatest liquidity. PSE’s business can almost be seen as a toll bridge, collecting “royalties” on the growth of the listed equity universe of the Philippines. The company makes money by taking a cut of capital raises, annual fees to maintain stock listings, membership fees for brokerage firms, transaction fees, data fees and so on. The company has had a tough ten years as foreign investors have shunned Philippine equities. But what could help the PSE monetise its monopoly in the future is a greater number of companies listed, higher valuations and greater trading volumes: - The number of companies listed has stayed flat for most of the past ten years. But in 2020, the government finally repealed the country’s 1-4% IPO tax, paid by each issuer. The Philippines had been the only country in the ASEAN region to impose such a tax, and companies may have understandably avoided going public. And since 2020, we’ve seen more companies go public. - Valuation multiples for Philippine stocks have now come down to record low levels, with a forward P/E for the Philippine Composite of 12.5x compared to a ten-year average of 18.6x. - In mid-August 2023, financial super app GCash launched a service for single-stock trading called “GStocks PH”. Users can now buy any stock listed on the Philippine Stock Exchange through the app. There are currently 1.7 million brokerage accounts in the Philippines, with a penetration rate of just 1.5%. Given that GCash has 80 million users, it could move the needle. And expect users to sign up for trading once GCash itself goes ahead with its IPO, planned for year-end 2023. The PSE currently has a market cap of US$231 million. But note that the company has US$85 million in net cash, excess securities and treasury shares on its balance sheet. Adjusted for these assets, the enterprise value is only US$146 million. That’s a tiny number when you consider Malaysia’s monopoly stock exchange trades at a US$1.2 billion market cap despite having only a +60% larger stock market. While the trailing P/E of 17.6x may not look low, if you adjust for the cash and assume continued mid-teens growth in listing and service fee revenues, as well as 25% yearly growth in trading fees, you’ll end up with a P/E ratio of 8.4x and EV/EBIT of 4.7x by 2026. The risks are mostly about the cycle. Interest rates have recently increased from 2% to 6.25% to combat the high inflation rate experienced in 2022\. The longer monetary policy remains this tight, the greater the likelihood of a recession. But in my personal view, interest rates will eventually come down, causing investors to experience a loss of income and look for alternatives to bonds and bank deposits by instead investing in stocks. Catalysts to look out for include any impact on trading volumes from the launch of GCash’s trading feature, greater IPO activity after the 2020 removal of the IPO tax, a potential acquisition of the remaining 79% not currently owned in fixed income exchange and securities depository PDS and finally, any approval to raise listing fees and clearing fees. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Alibaba: SOTP with Chinese characteristics URL: https://www.asiancenturystocks.com/alibaba-sotp-with-chinese-characteristics/ Last updated: 2023-08-20T04:34:29.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be7ca882-6928-4b9e-81ca-15c11c17f063_1024x683.jpg) Source: Getty Images I haven’t paid much attention to e-commerce giant [**Alibaba**](https://finance.yahoo.com/quote/BABA/?p=BABA&ref=asiancenturystocks.com) *(BABA US - US$233 billion)* in the past. But recently, the company has announced a restructuring that could potentially add value to minority shareholders. And I’m not the only one who thinks so. Recent 13F’s show that both [Dan Loeb’s](https://whalewisdom.com/filer/third-point-llc?ref=asiancenturystocks.com#tabholdings%5Ftab%5Flink) and [David Tepper’s](https://whalewisdom.com/filer/appaloosa-management-lp?ref=asiancenturystocks.com#tabholdings%5Ftab%5Flink) hedge funds have both upped their bets on the company. In this post, I’ll describe what I’m seeing in Alibaba. And what a sum-of-the-parts valuation can tell us about a business that’s becoming a lot different than what it’s been in the past. ``` Table of contents: 1. Alibaba 1.0 2. Widespread scepticism 4. The state strikes back 5. Alibaba 2.0 6. Sum-of-the-parts 7. Conclusion ``` # Alibaba 1.0 ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/253e69c4-29b8-49c9-b55b-a5cae05c6cfe_1280x718.png) Source: Getty Images Chinese e-commerce operator Alibaba was founded in 1999 by Hangzhou entrepreneur Jack Ma. He had worked as an English teacher for several years before pivoting to software development. After a short stint at a state-owned enterprise, Jack Ma and several other individuals set up Alibaba.com － a website connecting Chinese factories with buyers worldwide. It then moved into e-commerce by incubating the widely successful platforms Taobao and TMall. Alibaba wasn’t the only e-commerce operator in China. eBay bet big on the market, as did Amazon. It also had well-funded local competitors such as JD.com. But thanks to the brilliance of Jack Ma, it came up with innovations such as an instant messaging platform that enabled shoppers to interact with merchants. It also came with an online payment solution called AliPay, which held purchase funds in escrow until the buyer received the product. And Alibaba was also clever in that it offered the platform for free to merchants, making money on advertising instead. That caused merchants to flock to the platform and Alibaba to gain enormous scale. And 20 years later, Alibaba still dominates China’s e-commerce industry. In the past decade, however, Alibaba has used the cash flows from the main e-commerce business to finance new initiatives. Today, e-commerce represents roughly 75% of total revenues, with the remainder from cloud computing, logistics and other businesses. That said, few of those projects are profitable. It’s still the case that the main e-commerce business is subsidising the rest of Alibaba’s activities, as you can see in the following chart: It’s difficult to overstate the importance of Alibaba. Whether you’re discussing online shopping, payments, investments, data storage, logistics, entertainment, or education － Alibaba impacts people’s lives across so many dimensions. The organisation is also unique. Some have likened Aliababa to a cult, with employees known as Ali People (“阿里人”). For them, working for Alibaba is not just a job － it’s a way of life. But the company also expects a lot from its employees. It was one of the first organisations to be associated with the “996” lifestyle: employees working so hard they stay at the office from 9 am to 9 pm, six days per week. It’s a notoriously tough organisation, but employees are often well rewarded. Transactions on Alibaba’s platforms have grown over time. The gross merchandise value (“GMV”) has now reached CNY 8.3 trillion, equivalent to almost 6% of China’s GDP － a number that’s hard to understand. Some of that GMV belongs to Alibaba’s overseas business, but only a small portion. Growth is going to slow down eventually. China’s e-commerce penetration is already [over 30%](https://www.schroders.com/en-us/us/intermediary/insights/china-e-commerce-is-it-time-to-look-beyond-regulatory-pressures/?ref=asiancenturystocks.com) － more than anywhere else globally. How high could the number possibly get? Probably not more than 50% since retail sales include items such as cars and restaurant orders, which tend to be sold offline. Alibaba is also losing market share. Competitor JD.com has grown fast over the past few years by replicating the business model of Amazon of selling directly to consumers through a proprietary logistics network. Bytedance’s short-form video app Douyin has also moved into e-commerce. Meanwhile, in lower-tier cities, Alibaba has faced competition from group buying website Pinduoduo. This decline in market share doesn’t necessarily mean that Alibaba is facing a decline. Taobao and Tmall still have the greatest number of SKUs of any platform and excel in discovery, with a large feature set built into their platforms. And it might enjoy a certain scale advantage in its R&D and logistics expenditures, enabling it to offer the lowest prices of any platform. Outside of China e-commerce, Alibaba also owns several other important businesses: - Alibaba’s **international e-commerce** websites are small but growing rapidly. Those include Southeast East Asian e-commerce business “Lazada” and global discount e-tailer “AliExpress”, which has made a name for itself selling inexpensive Chinese products to global consumers. - Alibaba’s **cloud** business can best be likened to a Chinese version of AWS, dominating the Chinese market with a 36% market share, ahead of Huawei Cloud and Tencent Cloud. Today, it has over 4 million paying customers. - **Cainiao** is Alibaba’s logistics network. It doesn’t own many trucks or warehouses, but is mostly a co-ordinator of e-commerce parcels through third-party suppliers. Cainiao is also building a network of neighbourhood storage lockers to which parcels can be delivered. - Alibaba’s **local consumer services** segment primarily includes the delivery platform Ele.me - a Chinese version of Uber Eat that competes directly with Meituan. - A **Digital Media & Entertainment** business, which owns the long-form video platform Youku and movie studio Alibaba Pictures, which finances Hollywood movies and Chinese movies targeted at the domestic audience. - Finally, Alibaba has exposure to the mobile payment network AliPay through associate **Ant Financial**. But Alibaba doesn’t own the equity in Ant Financial, just the rights to 37.5% of its profits. In any case, Ant Financial has become a financial powerhouse, offering payment services, money market funds, consumer loans, insurance policies and more. Taken together, these businesses have created a conglomerate that is almost unmatched in its reach and importance to the Chinese tech ecosystem, as the following chart illustrates nicely. --- # Widespread scepticism ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/830dd018-e930-4f2d-8b08-6d87a86669da_1156x866.png) Source: IMDb But since the IPO in 2014, many intelligent investors have questioned the accuracy of Alibaba’s reported numbers. For example, in the 2017 documentary [The China Hustle](https://www.imdb.com/title/tt7215388/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F2%5Fnm%5F0%5Fq%5Fthe%2520china%2520hustle&ref=asiancenturystocks.com), short-sellers and journalists such as Roddy Boyd, Dan David and Herb Greenberg said that Alibaba was a lottery ticket and that the numbers could not be verified. In 2015, [John Hempton](http://brontecapital.blogspot.com/2015/10/alibaba-yeah-right-jack.html?ref=asiancenturystocks.com) at Bronte Capital questioned how Alibaba’s 367 million users could be **spending US$1,056 each annually**. With a household consumption per capita at the time of US$2,650, that would mean that 40% of the consumption is spent on Alibaba services. He felt that this number was unreasonably high. But most likely, there are natural explanations for Alibaba’s high GMV number. Many of Alibaba’s merchants have been faking transactions to boost their ratings and rankings. And there have also been non-traditional items sold on the platforms, including aircraft, real estate and non-performing loans. Those must have brought up the reported numbers. _This post is for paying subscribers only._ ### Sierra Rutile (SRX AU) URL: https://www.asiancenturystocks.com/sierra-rutile-srx-au/ Last updated: 2026-07-31T01:42:26.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Sierra Rutile at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- Now, here’s an oddball stock: [**Sierra Rutile**](https://finance.yahoo.com/quote/SRX.AX?p=SRX.AX&.tsrc=fin-srch&ref=asiancenturystocks.com)*(SRX AU - US$58 million)* is a micro-cap that owns the largest rutile mine globally, located in the African country of Sierra Leone. Rutile is a type of mineral sand with a high concentration of titanium dioxide (\~95%), primarily used as an ingredient in white pigment in paints, plastics, paper and cosmetics. Sierra Rutile’s mining operation began in the 1960s. After an interruption during Sierra Leone’s civil war in the 1990s, it re-listed on AIM in the 2000s and was acquired by Australian mineral sands exploration company Iluka Resources in 2016 for AU$455 million in total consideration (equivalent to US$400 million). Eventually, in 2022, Iluka decided to spin off Sierra Rutile as a separately listed entity on the ASX. Because of its much lower market cap, and the fact that it’s not part of any index, Sierra Rutile has traded down significantly in price. Today, Sierra Rutile’s market cap is US$58 million. If you deduct net cash of US$36 million, you get to an enterprise value of US$22 million. That’s a low number compared to the company’s historical enterprise value range of US$50 million to US$600 million when listed on AIM. There are a few complicating factors, though: - One is that the remaining mine life of Sierra Rutile’s key production base, “Area 1”, is supposedly only four years. In 2022, the reserve replacement ratio was over 100%. And Sierra Rutile will undertake an expansion project in adding the Pejebu and Ndendemoia deposits, adding several years to Area 1’s reserves. And I also find it remarkable that Iluka Resources’ acquisition documents claimed Sierra Rutile had a 20-year projected mine life. - Sierra Rutile plans to undertake a US$337 million project in an adjacent area called Sembehun. While mineral sands are easy to mine and the existing Area 1 infrastructure can be used, there could be other technical difficulties. - It’s unclear whether Sierra Rutile will be able to finance the capex of Sembehun via capital markets. If equity is issued, that would be dilutive to minority shareholders. - The government has recently announced that it wants to renegotiate the fiscal arrangement for the company, which means it may need to pay higher taxes in the future. - White pigment is partly used in construction, and construction activity is weighed down by high interest rates. That said, the supply & demand for natural rutile continues to be constructive thanks to a scarcity of supply. The mine has operated for almost 60 years with no major issues replacing lost reserves. The government has been mostly supportive, including under President Julius Maada Bio. Perhaps most importantly, Sierra Rutile is run by an able management team. Its Chairman resigned from much larger Iluka Resources to run Sierra Rutile. Its CEO has over 25 years of experience, including at BHP. And the finance director is the former head of corporate finance at Macquarie’s Perth office, which focuses on metals & mining transactions. These are serious individuals with great reputations at stake. I’m fascinated by the incentive structure for the management team. The quantum of initial equity grants and long-term performance rights have depended on the trading price of Sierra Rutile shares. And also dependent on the total return achieved from 1 January 2023 to 31 December 2025\. In other words, management has been incentivised to push the share price down and achieve a high total return in the subsequent three years. I don’t know whether management will find a solution to finance Sembehun’s capex. All I know is that it’s a brownfield project with already-proven reserves. One way to think about the company's valuation is by adding up the four years of remaining free cash flows at Area 1 of about US$120 million, adding the NPV of the Sembehun project to US$65 million and adding the net cash of US$36 million. Then you’ll get to a combined value of US$221 million, much higher than today’s market cap of US$58 million. The presence of well-regarded value investors Samuel Terry Asset Management in the shareholder register could unlock value in the business, for example, by aborting the Sembehun project. The definitive feasibility study for Sembehun is due at the end of 2023, and the final investment decision will be taken in early 2024\. It remains to be seen whether these events will help unlock the value that’s obvious to more observers. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Top 20 book recommendations URL: https://www.asiancenturystocks.com/top-20-book-recommendations/ Last updated: 2025-10-24T15:06:01.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e8266759-b948-4a26-96ca-f7d7e98cee29_980x735.jpg) Source: Getty Images An Asian Century Stocks subscriber asked me for book recommendations. And after two years of writing, I’ve never once mentioned what books I enjoy. So let me try to remedy that. Here is a list of my top 20 investing-related books. And forgive me for only choosing a few books from this part of the world － that reflects my European background, more than anything else. ``` Table of contents: 1. Money Masters of Our Time 2. One Up on Wall Street 3. The Warren Buffett Way 4. You Can Be a Stock Market Genius 5. Capital Returns 6. Influence 7. Quality of Earnings 8. The Art of Short Selling 9. Diary of a Very Bad Year 10. My Own Story (Bernard Baruch) 11. The Last Kings of Shanghai 12. Wealth, War & Wisdom 13. Devil Take the Hindmost 14. The Great Beanie Baby Bubble 15. The Great Taiwan Bubble 16. Tomorrow’s Gold 17. The Volatility Machine 18. The Model 19. How Asia Works 20. Asian Godfathers ``` In no particular order: # 1\. Money Masters of Our Time [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ed113717-d2dd-404a-bd77-91dbe24f7d1b_328x499.jpg)](https://www.amazon.sg/Money-Masters-Time-John-Train/dp/0887309704/ref=sr%5F1%5F1?crid=1PHOXV7N9SZMY&keywords=money+masters+of+our+time&qid=1690960311&sprefix=money+masters+of+our+t%2Caps%2C252&sr=8-1&ref=asiancenturystocks.com) I consider John Train’s book [Money Masters of Our Time](https://www.amazon.com/Money-Masters-Time-John-Train/dp/0887309704/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691300723&sr=8-1&ref=asiancenturystocks.com) the best book ever written on investing. The book contains interviews with 14 individuals who were at the time considered to be the best investors in the world: Warren Buffett, George Soros, Julian Robertson, Michael Steinhardt, Peter Lynch, John Templeton and so on. What I love about the book is the fact that it’s so dense. There’s so much to learn. And if you read the book back-to-back, you’ll start to get a sense of the common denominators among this diverse group of investors. For example, most of them focus on value, most of them have a contrarian mindset, most ignore the crowd, etc. Trust me — there’s no better book out there. --- # 2\. One Up on Wall Street [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d90c7e05-987a-4d07-9928-d685d21f9807_446x690.png)](https://www.amazon.sg/One-Up-Wall-Street-Already/dp/0743200403/ref=sr%5F1%5F1?crid=2BIYZANSAA36C&keywords=One+Up+on+Wall+Street&qid=1690960244&sprefix=warren+buffett+way%2Caps%2C241&sr=8-1&ref=asiancenturystocks.com) Peter Lynch’s books are fantastic. And in my view, [One Up on Wall Street](https://www.amazon.com/One-Up-Wall-Street-Already/dp/0743200403/ref=sr%5F1%5F1?keywords=One+Up+on+Wall+Street&qid=1691302214&sr=8-1&ref=asiancenturystocks.com) is the best that he’s written. It provides a commonsensical, practical approach to picking stocks. There’s not much theory in here. Instead, he gives you advice that you can actually implement tomorrow. Some of my personal gems from the book: > *“The person that *turns over the most rocks* wins the game.”* > *“Look for small companies that are already profitable and have *proven that their concept can be replicated*”* > *"The real key to making money in stocks is *not to get scared out of them*."* > *“If you can follow only one bit of data, *follow the earnings*.”* The book was helpful when I first started working on the buy-side. And I would read it from time to time to remind myself of the lessons that he learnt over his career. I’d advise you to do the same. --- # 3\. The Warren Buffett Way [![The Warren Buffett Way](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/da9386e8-666f-44e9-bcd2-f4c7337b22a5_216x320.jpg)](https://www.amazon.sg/Warren-Buffett-Way-Robert-Hagstrom/dp/1118503252/ref=sr%5F1%5F1?crid=213HWWGWSGELW&keywords=the+warren+buffett+way&qid=1690960304&sprefix=the+warren+buffett+way%2Caps%2C254&sr=8-1&ref=asiancenturystocks.com) If you only read one Warren Buffett book, I’d suggest choosing Hagstrom’s book [The Warren Buffett Way](https://www.amazon.sg/Warren-Buffett-Way-Robert-Hagstrom/dp/1118503252/ref=sr%5F1%5F1?crid=213HWWGWSGELW&keywords=the+warren+buffett+way&qid=1690960304&sprefix=the+warren+buffett+way%2Caps%2C254&sr=8-1&ref=asiancenturystocks.com). It gives you a sense of how Buffett assesses the quality of a business. For example, he likes to buy companies with recurring revenue, consistent operating history, strong management teams, etc. He also likes to stick with companies with high returns on equity and profit margins. That approach has certainly worked for him. --- # 4\. You Can Be a Stock Market Genius [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a74e054b-5a4f-4c4b-8109-bf754eeba0bc_328x499.jpg)](https://www.amazon.sg/You-Can-Stock-Market-Genius/dp/0684840073/ref=sr%5F1%5F2?crid=X6SRYYXGW87N&keywords=you+can+be+a+stock+market+genius&qid=1690960148&sprefix=you+can+be+a+stock+market+geni%2Caps%2C254&sr=8-2&ref=asiancenturystocks.com) The average stock probably isn’t mispriced. Joel Greenblatt’s argument is that you need to look for special situations, where price has diverged from value. In his book [You Can Be a Stock Market Genius](https://www.amazon.com/You-Can-Stock-Market-Genius-ebook/dp/B0043RSJB8/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691317112&sr=8-1&ref=asiancenturystocks.com), he describes how to invest in special situations: spin-offs, companies after they exit Chapter 11 restructurings, merger securities, recaps, and more. In my experience, they’re fantastic hunting grounds. --- # 5\. Capital Returns [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0016c372-244d-493b-838f-bfaef4c5856b_333x499.jpg)](https://www.amazon.sg/Capital-Returns-Investing-Through-Managers/dp/1137571640/ref=sr%5F1%5F1?crid=2MQF0Y8RSA5D2&keywords=capital+returns&qid=1690960189&sprefix=capital+retur%2Caps%2C250&sr=8-1&ref=asiancenturystocks.com) Ed Chancellor helped Marathon Asset Management put together the two books: [Capital Account](https://www.amazon.com/Capital-Account-Manager-Turbulent-1993-2002/dp/1587991802/ref=sr%5F1%5F1?keywords=Capital+Account&qid=1691304567&sr=8-1&ref=asiancenturystocks.com) and [Capital Returns](https://www.amazon.sg/Capital-Returns-Investing-Through-Managers/dp/1137571640/ref=sr%5F1%5F1?crid=2MQF0Y8RSA5D2&keywords=capital+returns&qid=1690960189&sprefix=capital+retur%2Caps%2C250&sr=8-1&ref=asiancenturystocks.com). They’re a collection of letters sent to investors when the firm was still operating. Capital Returns is the more accessible of of the two. The reason I think it’s important is that it explains Marathon’s approach to analysing capital cycles. In commodity industries, the supply & demand for a product will vary across cycles, with recurring under- and oversupply. The length of the cycle will depend on the lead time of adding new capacity. Analysing commodity businesses is a different ball game than analysing companies with strong moats. So to truly understand stocks, you’ll need this book in your toolbox. --- # 6\. Influence ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c68c66dc-25b0-49e6-8e16-c639e68231fa_452x688.png) While not investment-related, Robert Cialdini’s book [Influence](https://www.amazon.com/Influence-New-Expanded-Psychology-Persuasion/dp/0062937650/ref=tmm%5Fhrd%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691326057&sr=8-1&ref=asiancenturystocks.com) is such an important book that I think every investor should read it at least once in their lives. It describes the ways that salesmen trick others into buying their products, including making use of reciprocation, liking, social proof, authority, scarcity, consistency bias and a feeling of unity. Once you understand these principles, you’ll be less at risk of influence campaigns from individuals, governments or other organisations. And you’ll also understand whether a company is likely to be successful in selling a particular product. It’ll help you understand basic psychology. --- # 7\. Quality of Earnings [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e129caa3-4109-43e5-b547-6720b316c8b5_456x684.png)](https://www.amazon.com/Quality-Earnings-Thornton-L-Oglove/dp/0684863758/ref=sr%5F1%5F1?crid=2G7RRBUXRUGC3&keywords=thornton+o%27glove&qid=1691321125&sprefix=thornton+o%27gl%2Caps%2C299&sr=8-1&ref=asiancenturystocks.com) [Quality of Earnings](https://www.amazon.com/Quality-Earnings-Thornton-L-Oglove/dp/0684863758/ref=sr%5F1%5F1?crid=2G7RRBUXRUGC3&keywords=thornton+o%27glove&qid=1691321125&sprefix=thornton+o%27gl%2Caps%2C299&sr=8-1&ref=asiancenturystocks.com) is a short, straightforward book telling you how to dissect the quality of a company’s earnings. Each chapter covers a different part of the checklist that O’Glove recommends investors use to calculate a company’s sustainable earnings power. These include deleting non-recurring gains and losses, being mindful of rising receivables or inventories, looking at interest coverage ratios, auditor sign-offs, etc. Even though it’s becoming somewhat dated, I think the framework is still helpful in figuring out how to interpret quarterly earnings numbers. --- # 8\. The Art of Short Selling [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/51b2431d-32d3-4f47-a402-7c1f8cafe758_328x499.jpg)](https://www.amazon.sg/Art-Short-Selling-4/dp/0471146323/ref=sr%5F1%5F2?crid=25LDPSZE881F2&keywords=the+art+of+short+selling&qid=1690960350&sprefix=the+art+of+short+sel%2Caps%2C259&sr=8-2&ref=asiancenturystocks.com) Kathryn Staley’s book [The Art of Short Selling](https://www.amazon.com/Art-Short-Selling-Kathryn-Staley/dp/0471146323/ref=sr%5F1%5F1?crid=296RGH5PZHUAN&keywords=the+art+of+short+selling&qid=1691318018&sprefix=the+art+of+short+sel%2Caps%2C366&sr=8-1&ref=asiancenturystocks.com) is the best ever written on short-selling. The book is a series of case studies where Staley describes past stocks she had been involved with. She describes the red flags she saw in specific companies, how she traded the stocks and the outcome of her campaigns. You’ll learn about receivables and inventory divergences, depreciation schedule tricks, cost-to-completion accounting, kitchen sinks, etc. If you’re interested in short-selling, this is the book for you. --- # 9\. Diary of a Very Bad Year [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/64fa71de-b018-421b-ae94-6535ec35c4b5_328x499.jpg)](https://www.amazon.sg/Diary-Very-Bad-Year-Confessions/dp/0061965308/ref=sr%5F1%5F1?crid=3KLM4E8PPOSW2&keywords=diary+of+a+very+bad+year&qid=1690960025&sprefix=diary+of+a+very+bad+ye%2Caps%2C416&sr=8-1&ref=asiancenturystocks.com#customerReviews) I read [Diary of a Very Bad Year](https://www.amazon.com/Diary-Very-Bad-Year-Interviews-ebook/dp/B003P2VMZC/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691326862&sr=8-1&ref=asiancenturystocks.com) after a recommendation from journalist Matt Levine, who writes a column on Bloomberg’s website. The book is a discussion with an anonymous hedge fund manager, describing his thoughts about the US financial system as the world headed into a recession. The wisdom of this anonymous fund manager blows me away. After reading the book, you’ll see banking, the financial sector, currencies, risk management and speculation in a different light than before. --- # 10\. My Own Story (Bernard Baruch) [![Baruch My Own Story](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66589b4d-935d-481c-9f47-f49d39b4a398_213x320.jpg)](https://www.amazon.com/Baruch-My-Own-Story-Bernard/dp/1607969130/ref=sr%5F1%5F1?keywords=Baruch+My+Own+Story+Paperback+%E2%80%93+19+November+2015&qid=1691304962&sr=8-1&ref=asiancenturystocks.com) Bernard Baruch’s [My Own Story](https://www.amazon.com/Baruch-My-Own-Story-Bernard/dp/1607969130/ref=sr%5F1%5F1?keywords=Baruch+My+Own+Story+Paperback+%E2%80%93+19+November+2015&qid=1691304962&sr=8-1&ref=asiancenturystocks.com) is the best biography of an investor I’ve ever read. He described his journey from a penniless broker turned speculator and eventually government official. I admire Bernard Baruch’s genius when it comes to speculation. He believed in putting all your eggs in one basket and watching them. It’s also an incredibly well-written book that’s enjoyable to read. Finally, I appreciate the historical perspective － it gives you an insight into what it was like investing during the gold standard and during times of war. --- # 11\. The Last Kings of Shanghai [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a7f3ad29-866d-4c1d-b6f7-e672ed5382fe_326x499.jpg)](https://www.amazon.sg/Last-Kings-Shanghai-Jewish-Dynasties/dp/0735224439/ref=sr%5F1%5F1?crid=YE6AI5DIATZD&keywords=The+Last+Kings+of+Shanghai&qid=1690960556&sprefix=asian+godfathers%2Caps%2C305&sr=8-1&ref=asiancenturystocks.com) [The Last Kings of Shanghai](https://www.amazon.com/Last-Kings-Shanghai-Jewish-Dynasties/dp/0735224439/ref=sr%5F1%5F1?crid=GFB8BE73WHLB&keywords=last+kings+of+shanghai&qid=1691324735&sprefix=last+kings+of+shang%2Caps%2C459&sr=8-1&ref=asiancenturystocks.com) discusses the trials and tribulations of foreign businessmen in Shanghai before the communist victory in 1949\. The book is about two families of traders, the Sassoons and the Kadoories. Victor Sassoon moved most of his wealth to Shanghai in the early 20th century. He and Lawrence Kadoorie built a large part of the art deco-style buildings that line The Bund even to this day. I believe there is much to learn from the book. For one, much of the wealth accumulated during the 1930s resulted from money-printing and building inflation. Second, once the doors shut － they really shut. The Nationalist government stopped convertibility to silver and prevented the outflow of capital. And when the Communists came to power, they expropriated all private sector wealth. I hope this scenario does not reoccur in modern-day China. --- # 12\. Wealth, War & Wisdom [![Wealth, War and Wisdom](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9b03b235-eed1-4f0d-97ee-7bff3ce9f438_213x320.jpg)](https://www.amazon.sg/Wealth-War-Wisdom-Barton-Biggs/dp/0470474793/ref=sr%5F1%5F1?crid=N7ZBDCCJY5Z4&keywords=Wealth%2C+War+%26+Wisdom&qid=1690960382&sprefix=%2Caps%2C265&sr=8-1&ref=asiancenturystocks.com) I read Barton Bigg’s book [Wealth, War & Wisdom](https://www.amazon.com/Wealth-War-Wisdom-Barton-Biggs/dp/0470474793/ref=sr%5F1%5F1?crid=17GGW84B0AAC8&keywords=wealth%2C+war+%26+wisdom&qid=1691319206&sprefix=wealth%2C+war+%26+wisd%2Caps%2C348&sr=8-1&ref=asiancenturystocks.com) just a few years ago. You can find my full review of it [here](https://www.asiancenturystocks.com/protecting-your-capital-during-a/). This book delves deep into what it was like investing during the Second World War. In the book, Biggs argues that to protect your capital, you’ll need to own diversified portfolios of stocks and properties in safe regions of the world. We’re so far removed from the Second World War that most investors don’t even consider the risk of war. But it could happen again. Make sure you’re prepared. --- # 13\. Devil Take the Hindmost [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cc2b5729-541b-4f30-bd6a-2bdee1249dc2_333x499.jpg)](https://www.amazon.sg/Devil-Take-Hindmost-Financial-Speculation/dp/0452281806/ref=sr%5F1%5F2?crid=3QVDKJCGKYIJN&keywords=devil+take+the+hindmost&qid=1690960405&sprefix=devil+take+the+hind%2Caps%2C255&sr=8-2&ref=asiancenturystocks.com) I’m a big fan of author and journalist Edward Chancellor. His book [Devil Take the Hindmost](https://www.amazon.com/Devil-Take-Hindmost-Financial-Speculation/dp/0452281806/ref=sr%5F1%5F1?crid=2E7L4CQJNDC81&keywords=Devil+Take+the+Hindmost&qid=1691320862&sprefix=devil+take+the+hindmost%2Caps%2C547&sr=8-1&ref=asiancenturystocks.com) is the best introduction to financial history I’ve ever read. In a captivating story-telling format, he goes through the major financial bubbles throughout history, including the Tulip Bubble, the South Sea scheme, the Railway Mania of 1845, the crash of 1929 and the Japanese Bubble in the 1980s. Reading history puts current reality in a different light. You’ll be less likely to get involved in the get-rich-quick schemes that always tend to occur towards the end of any cycle. --- # 14\. The Great Beanie Baby Bubble ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16940f21-81f6-405f-affe-cd55cd45a674_456x678.png) [The Great Beanie Baby Bubble](https://www.amazon.com/Great-Beanie-Baby-Bubble-Delusion-ebook/dp/B00INIXVPW/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691326837&sr=8-2&ref=asiancenturystocks.com) is an absolute blast. Beanie Babies were a toy that became popular in the late 1990s and was sold by the Ty Corporation. They convinced buyers that limited editions and recurring changes to the toys meant the products were scarce. By managing supply tightly, the Ty Corporation built up hype with prices for sought-after Beanie Babies rising to the moon. The book perfectly demonstrates the psychological factors that underlie any speculative episode: buyers extrapolating recent trends and, perhaps most importantly, wanting to show off to their friends what rare specimens they owned and how much money they had made. It’s an absurd story, but I see parallels with the current craze for cryptocurrencies. --- # 15\. The Great Taiwan Bubble [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/40efc777-6b5b-4ee3-b7ea-75d6a894368b_310x474.jpg)](https://www.amazon.sg/Great-Taiwan-Bubble-Emerging-Market/dp/1881896188/ref=sr%5F1%5F1?crid=2O4CCTFT75II5&keywords=the+great+taiwan+bubble&qid=1690960717&sprefix=the+great+taiwan+bubb%2Caps%2C266&sr=8-1&ref=asiancenturystocks.com) [The Great Taiwan Bubble](https://www.amazon.com/Great-Taiwan-Bubble-Emerging-Market-ebook/dp/B008FZYPJY/ref=sr%5F1%5F1?crid=2QTPAC2KCYC11&keywords=The+Great+Taiwan+Bubble&qid=1691325816&sprefix=last+kings+of+shanghai%2Caps%2C867&sr=8-1&ref=asiancenturystocks.com) is another book that betrays my fascination with financial bubbles. This book is among the most entertaining I’ve ever read. In the late 1980s, the Taiwanese stock market went up 12x in less than four years. And at the peak of the bubble, one-third of all adult Taiwanese were playing the stock market. From what I can tell, the bubble left a mark on Taiwanese society for decades. I learnt from the book that liberalisation of the capital account can cause interest rates to drop, pushing money into the stock market. Closing the illegal lottery Dajia Le in 1985 may have also pushed people into the market. And easy credit also enabled speculators to pile on in ever greater numbers. I wrote about the story [here](https://www.asiancenturystocks.com/boombusttaiwan/). --- # 16\. Tomorrow’s Gold [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/657debbd-e5e5-45b8-a9d1-84ddb651ab12_321x474.jpg)](https://www.amazon.sg/Tomorrows-Gold-Asias-Age-Discovery/dp/9628606727/ref=sr%5F1%5F1?crid=XTLTHBSKIRLQ&keywords=Tomorrow%E2%80%99s+Gold&qid=1690960432&sprefix=%2Caps%2C241&sr=8-1&ref=asiancenturystocks.com) Marc Faber’s [Tomorrow’s Gold](https://www.amazon.com/Tomorrows-Gold-Asias-Age-Discovery/dp/9628606727/ref=sr%5F1%5F1?keywords=Tomorrow%E2%80%99s+Gold&qid=1691321955&sr=8-1&ref=asiancenturystocks.com) is an incredible book that I think should be more widely read. Written in 2002, it’s a story about cycles. Not just investment cycles but also the rise and fall of empires, cycles of flows into emerging markets and cycles of inflation and deflation. Faber believes in making large bets on out-of-favour asset classes and sticking with them through the next upturn. His characterisation of the six phases of an emerging market bubble provides guidelines on what to look out for. Because, in my experience, cycles happen with surprising regularity. And if you ever find yourself becoming a true believer, the joke will be on you. --- # 17\. The Volatility Machine [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/87c6389b-08ee-406b-8a6d-cf2ee827acaf_315x499.jpg)](https://www.amazon.sg/Volatility-Machine-Emerging-Economies-Financial/dp/0195143302/ref=sr%5F1%5F1?crid=2HP4ME935NC8S&keywords=The+Volatility+Machine&qid=1690960487&sprefix=the+volatility+machine%2Caps%2C241&sr=8-1&ref=asiancenturystocks.com) In my view, [The Volatility Machine](https://www.amazon.com/Volatility-Machine-Emerging-Economics-Financial/dp/0195143302/ref=sr%5F1%5F1?keywords=The+Volatility+Machine&qid=1691326636&sr=8-1&ref=asiancenturystocks.com) is professor Michael Pettis’s best book. It describes how capital flows can affect emerging markets across cycles. He speaks of vulnerabilities in sovereign balance sheets, including high external debt, that can cause currencies to drop precipitously during times of crisis. He also describes what a typical emerging market cycle can look like from rising liquidity, capital inflows, boom and eventually bust. And the conditions can cause the volatility across the cycle to become extreme. A must-read for any frontier- or emerging market investor. --- # 18\. The Model [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f71725d8-ab2f-402c-9842-9fee00d7a873_331x499.jpg)](https://www.amazon.sg/Model-Years-Investing-Asian-Equities/dp/0857199595/ref=sr%5F1%5F2?crid=1BXXGM45AKB39&keywords=The+Model&qid=1690960454&sprefix=%2Caps%2C233&sr=8-2&ref=asiancenturystocks.com) Richard Lawrence’s book [The Model](https://www.amazon.com/Model-Years-Investing-Asian-Equities-ebook/dp/B09Q3KFV6H/ref=sr%5F1%5F2?crid=2EJOCORVL6BU0&keywords=The+Model&qid=1691323017&sprefix=the+model%2Caps%2C602&sr=8-2&ref=asiancenturystocks.com) is a recent addition to my bookshelf. It’s the most comprehensive book I’ve ever read on stock picking in Asia. And Lawrence has an incredible track record － 14% per year for over three decades through his Overlook Partners Fund. In the early days, he went after deep-value stocks but eventually graduated to higher-quality stocks at reasonable valuations. I like his approach to ranking companies on not just the EPS growth － as in a PEG ratio － but also the return on equity. I also like how Overlook manages capital raises, capping subscriptions in good times to ensure money doesn’t leave during crises. Reading about Lawrence’s investments throughout the years is fascinating, with many stocks remaining listed in Hong Kong or elsewhere. I also wrote about the book [here](https://www.asiancenturystocks.com/richardlawrence/). --- # 19\. How Asia Works [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6c0d17cd-65b4-409e-96e5-6ce11704882b_326x499.jpg)](https://www.amazon.sg/How-Asia-Works-Success-Failure/dp/1846682436/ref=sr%5F1%5F1?crid=1TD5U51SRWFXH&keywords=how+asia+works&qid=1690960512&sprefix=how+asia+wo%2Caps%2C253&sr=8-1&ref=asiancenturystocks.com) [How Asia Works](https://www.amazon.com/How-Asia-Works-Success-Failure-ebook/dp/B00B3M47VC/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1691323744&sr=8-1&ref=asiancenturystocks.com) is another case of “great book, poor title”. I think Studwell is one of the few individuals that has explained the East Asian growth story in simple-to-understand language. He argues that Japan, Taiwan and Korea benefitted from land reform that distributed wealth, improved farm productivity and enabled talented individuals to start businesses. He also argued that their governments encouraged exports and foreign direct investment. And finally, that lending was set by industrial policy rather than nepotism. Southeast Asia has mostly failed in their attempt to industrialise, and Studwell makes a strong argument for why that’s the case. Vested interests keep reforms from taking place. --- # 20\. Asian Godfathers [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/55bfabe5-c74a-4afc-a563-e9e8cbe26b3e_317x499.jpg)](https://www.amazon.sg/Asian-Godfathers-Money-Power-Southeast/dp/0802143911/ref=sr%5F1%5F1?crid=342YNJB62340C&keywords=asian+godfathers&qid=1690960766&sprefix=asian+godfathe%2Caps%2C257&sr=8-1&ref=asiancenturystocks.com) [Asian Godfathers](https://www.amazon.com/Asian-Godfathers-Money-Power-Southeast-ebook/dp/B008V4621S/ref=sr%5F1%5F1?crid=293VBQ4TWBOUN&keywords=asian+godfathers&qid=1691324415&sprefix=asian+godfat%2Caps%2C380&sr=8-1&ref=asiancenturystocks.com) is another one of Studwell’s books. It tells the story of how Southeast Asia’s economies are controlled by tycoons, often working together with government leaders, controlling scarce licenses and enjoying access to bank funding that normal entrepreneurs do not. It’s a tragedy that vested interests keep the region from developing. But I suppose from the point of view of investors, some of the businesses in the region truly enjoy barriers to entry because these economies are far from enjoying free competition. I also wrote about the book [here](https://www.asiancenturystocks.com/table-of-contents/). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) What did I miss? Any books that you recommend? Leave your comment below. 👇 [Leave a comment](#ghost-comments-root) ### L'Occitane (973 HK) URL: https://www.asiancenturystocks.com/loccitane-973-hk/ Last updated: 2026-07-31T01:42:06.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in L’Occitane at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**L’Occitane**](https://finance.yahoo.com/quote/0973.HK?p=0973.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(973 HK - US$4.6 billion)* is a Hong Kong-listed French cosmetics brand focusing on skincare products. The company was founded in the 1970s by Olivier Baussan. He wanted to use natural, organic ingredients from his home province of Provence to produce personal care products. The word “Occitan” refers to the culture of Provence, suggesting deep ties to the region. In the early 1990s, Austrian businessman Reinold Geiger took control of L’Occitane and helped the brand become an international phenomenon. Today, L’Occitane has almost 1,400 stores worldwide. The biggest target markets are the United States, Japan and China. The products sold in the store span body care, face care, hair care, and fragrances. What are the most popular products? *“Shea Butter Hand Cream”* for dry hands and *“Immortelle Precious Cream”*, used to smooth out wrinkles. The main brand, *“L’Occitane en Provence”*, is mature. The business is growing in the mid-single digit range and － in my view － limited pricing power. While some capex has been reinvested in the main business, free cash flow has also been used for acquisitions. Unfortunately, many have been made at high prices, causing goodwill to accumulate on the sheet. And the return on equity has gradually come down to about 10%. But since 2018, there have been signs of improvement. The company introduced a new corporate strategy called “Pulse”, which emphasised employee incentives and a decentralised organisation. While some employees complain that the company has become greedy and money-focused, that may not be a bad sign for shareholders. Since 2022, L’Occitane also has a new CFO called Christian-Matthias Klever, with an incredible resume, including being CFO of Breitling when well-regarded private equity firm CVC owned it. The previous CFO, Thomas Levilion, had been with the company since 2008. L’Occitane’s recent acquisitions have performed much better. - The 2019 purchase of British cosmetics brand Elemis has proved successful. It’s growing in its core markets. And now the brand is being introduced to Asia. - Since the 2021 purchase of *“Sol de Janeiro”* from LVMH, it’s become one of the fastest-growing major cosmetics brands globally. Sol de Janeiro’s *“Bum Bum Cream”* and *“Brazilian Crush Fragrance Mist”* sell like hotcakes. The brand’s recent revenue growth has been well more than 100% per year － even before the end of Sephora store exclusivity in the United States. Google search queries for the brand have gone vertical. L’Occitane’s FY2023 earnings fell year-on-year. The reasons were impairment charges of pre-2019 acquisitions, a shutdown of L’Occitane’s Russian operations, and China’s zero-COVID policy. But these problems are all in the rearview mirror at this point. Management's long-term guidance of a 16% operating margin (pre-operating lease expenses) seems reasonable, given the high incremental margins at Sol de Janeiro. Assuming US$900 million in Sol de Janeiro Revenues and a 15% operating margin, I reach a forward FY2026e P/E of 11.8x. Most of L’Occitane’s global peers trade at approximately twice that multiple. One risk includes related party transactions with the parent company *“L’Occitane Groupe SA”*. I don’t understand why Grown Alchemist was first acquired by the parent company and then injected into the ListCo. I also don’t understand why the parent company lent the US retail operation US$31 million when the ListCo could have easily done so itself. Other risks, such as a stronger Euro and intensifying competition, are probably minor issues that won’t detract from the story. Currency movements tend to even out over time. And while there is competition from The Body Shop, Kiehl’s and others, customers tend to be loyal to their favourite skincare brands. The key events to look forward to include the end of Sephora’s store exclusivity in the United States in early 2024, the launch of Elemis and Sol de Janeiro in Asia and China’s post-COVID consumer. And potentially, we might even see better capital allocation under new CFO Christian-Matthias Klever. **Click the “Download” button below to access the full PowerPoint presentation:** [L'occitaneL'occitane.pdf5 MBdownload-circle](https://www.asiancenturystocks.com/content/files/2025/10/L-occitane.pdf "Download") ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Travel notes: Manila URL: https://www.asiancenturystocks.com/travel-notes-manila/ Last updated: 2025-10-24T15:06:13.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7fd86a61-7846-49aa-8cd5-64c904a1a323_1500x1000.png) A street corner in the Manila neighbourhood Bonifacio Global City (“BGC”). Source: personal photo. I spent the past few days in Manila, the capital of the Philippines. Since Southeast Asia’s borders opened up in 2022, it’s become easier to travel across the region. Not only am I now able to better understand the companies in my coverage universe. I’m also able to pass on any insights to you. So here is what I learnt from my short stay in Manila: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e227f2b9-abe0-454b-b9ba-432ff2e298c8_1456x1048.png) Manila’s spot in the Asia-Pacific. Source: Google Maps I travelled from my home base of Singapore to Manila’s Ninoy Aquino International Airport (NAIA). My first impression was that the airport had seen better days. In the context of modern Asian airports, NAIA offers no more than the bare minimum. On the positive side, I learnt that the government is now trying to upgrade NAIA, with plans to [double its capacity](https://asia.nikkei.com/Business/Transportation/Rival-Philippine-firms-set-aside-differences-to-fix-up-Manila-airport?ref=asiancenturystocks.com) to 61 million passengers annually by 2028\. Under the new government, infrastructure is being taken seriously again. The only question is whether airport services provider [**MacroAsia**](https://www.asiancenturystocks.com/macroasia-mac-pm/) *(MAC PM - US$147 million)* － which I’ve written about in the past － will benefit from this upgrade. Manila is a massive city. It’s home to 13 million people in an urban sprawl that takes hours to traverse. In fact, the city has grown so much that the original Manila is only one of 17 cities that make up the larger area known as “Metro Manila”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/65d476b4-4499-42f1-b07b-dcfb22d13661_1160x948.png) Source: Google Maps After exiting the airport, we drove to the Makati central business district (“CBD”). Once there, we visited the Ayala Museum, which provided the history of the Philippines from early settlement through colonialism and independence. The Spanish influence is obvious. The Philippines was a Spanish colony from 1565 to 1898, leaving the country with a population of 80% catholic and a language peppered with words such as *“pero”* and *“puede”*. But American influence is also evident. During American rule, the literacy rate rose from just 2% to about 50%. While the Philippines adopted its religion from Spain, its education system was influenced by America. Walking around in the Makati CBD, I learnt that much of the land we were walking on is owned by the [**Ayala Corporation**](https://www.marketwatch.com/investing/stock/ac?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(AC PM - US$7.0 billion)* through its subsidiary [**Ayala Land**](https://www.marketwatch.com/investing/stock/ali?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com)*(ALI PM - US$7.6 billion)*. The Ayala group has also developed a newer business district called Bonifacio Global City (“BGC”). While similar townships can be found in many Southeast Asian cities, these are extraordinary assets. It’s almost as if Manhattan was controlled by a single corporation. We visited several of Ayala’s shopping malls. They were surprisingly pleasant. And packed with shoppers. The economy is clearly on fire after several years of pandemic restraint. While service staff still wear face masks to protect the guests from COVID-19, ordinary Filipinos have already ditched them. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7e817f28-0f81-4669-8ce8-d3c32d5280f4_1232x1534.png) Inside Ayala’s Greenbelt shopping mall. Source: personal photo. In one of Ayala’s malls, we saw a machine with the words “GCash”, offering consumers the ability to deposit cash into a mobile wallet. Once the money reaches the wallet, it can be used to pay bills or for payment in most shops. You can think of it as a Filipino version of WeChat Pay. With 70 million users, GCash has become a phenomenon. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/526688ce-86ce-455c-ad93-2f4d2359e1db_888x1196.png) A GCash top-up machine. Source: personal photo So who owns GCash? The Ayala Corporation, through its subsidiary [**Globe Telecom**](https://www.marketwatch.com/investing/stock/glo?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(GLO PM - US$5.1 billion)*. What’s powerful about the GCash app is that half of the population remains unbanked. But with the app, it becomes easier to bring those individuals into the formal banking system. And lend out that capital to productive endeavours. In Makati, we visited a modern Filipino restaurant. We tried a variety of dishes, from *“kare-kare”* (peanut stew) and *“bangus”* (fried milkfish). We later also tried *“sisig”* (chopped-up pig’s face) and *“adobo“* (pork stew). All delicious, with a deep garlicky taste. If Chinese cuisine is characterised by soy sauce and Thai cuisine by chilli, then Filipino food best characterised by the word “garlic”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e070b3f8-fd21-464e-9ba8-d5d74d5b4a35_1116x830.png) Several Filipino dishes. Source: personal photo We walked by several fast-food restaurants. The most famous might be the Philippine version of McDonald’s － [**Jollibee**](https://www.marketwatch.com/investing/stock/jfc?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(JFC PM - US$5.2 billion)*. Serving a fare of fried chicken, rice and spaghetti, it’s popular among families. Former chef Anthony Bourdain was famously a fan of Jollibee. And owner Tony Tan Caktiong has a decent reputation in the industry. In Bonifacio Global City, we visited the local pizza restaurant chain [**Shakey’s**](https://www.marketwatch.com/investing/stock/pizza?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(PIZZA PM - US$291 million)*, which research provider Smartkarma has [discussed in the past](https://www.smartkarma.com/entities/shakey-s-pizza-asia-ventures/research?ref=asiancenturystocks.com). The story is inspiring － a local pizza chain beating Pizza Hut at its own game. The restaurant environment was pleasant and inviting. Perfect for a family outing when parents want to treat their children to something special. A few blocks away, we stopped by the hypermarket chain “S&R”, owned by grocery retailer [**Puregold**](https://www.marketwatch.com/investing/stock/pgold?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(PGOLD PM - US$1.5 billion)*. Like America’s Costco, S&R is a membership club where you pay PHP 700 (US$13) per year for shopping there. The items were cheap by Western standards but only sold in bulk sizes. The way shoppers are rewarded with pizza and hot dogs after the checkout counters reminded me of IKEA, which employs a similar strategy. While owner Lucio Co is controversial, his Puregold grocery retail operation has been successful. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0f3eaeb4-a777-4181-b62f-ab3f2d410857_1198x722.png) Puregold’s Costco-style retailer S&R. Source: personal photo A short trip west of Makati, you’ll find the new “Entertainment City” - a stretch of casinos meant to rival China’s Macau. Sitting on flat reclaimed land, it’s a sprawling development that’s far from walkable. Manila’s Entertainment City felt like a big construction site to me. I was impressed with the Solaire casino, owned by Enrique Razon’s [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/)’ *(BLOOM PM - US$2.3 billion)*. The finishing of the building, the interior design, the artwork － everything was top-notch. In contrast, [**Universal Entertainment**](https://www.marketwatch.com/investing/stock/6425?mod=mw%5Fquote%5Fswitch&countrycode=jp&ref=asiancenturystocks.com)’s *(6425 JP - US$1.5 billion)* casino Okada Manila looked more run-down, at least from the outside. *(Full disclosure: I own shares in Bloomberry Resorts.)* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6bb16ee2-4f4f-4de4-9cd6-3ea0ec8ab40a_1386x946.png) Bloomberry Resorts’ casino “Solaire” at Manila’s Entertainment City. Source: personal photo. We also visited Manila’s old town and the city's northern parts. The poverty we saw was a stark contrast from the comfort of the Makati CBD. The reality is that the Philippines remains a poor country. The bottom half of the population earned no more than US$250 per month. And a dozen families control large parts of the economy. While East Asian countries like Japan, Korea and Taiwan managed to upgrade their economies by exporting manufactured goods, the Philippines never made such a transition. Instead, the Philippines’ largest exports remain its workers: domestic helpers, cover band artists, ship captains, etc. It’s not hard to understand why. Filipinos are famously service-minded, friendly and hospitable. The Philippines may have one of the most service-oriented cultures in the world. Unfortunately, services are difficult to export to other countries. While there’s been success in the BPO sector, manufacturing will be needed for a broad-based rise in family incomes. Or greater tourism once the infrastructure improves to at least Thai levels. Several people I spoke to expressed disappointment about the election of new president Bongbong Marcos (“BBM”) in 2022\. He is the son of Ferdinand Marcos, who allegedly stole billions of dollars from state coffers, while his wife Imelda amassed a luxury shoe collection of over 800 pairs. Which I’m sure was only the tip of the iceberg. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b041c4cc-2dbf-45c0-a641-34a75f44e9b0_1386x770.png) Former dictator Ferdinand Marcos, his wife Imelda and son, current president, Bongbong Marcos (“BBM”). Source: Financial Times The big question on investors’ minds is whether the Philippines is returning to the old Marcos days of authoritarian rule, corruption and human rights abuses. Worrying signs are starting to emerge. [Nikkei](https://asia.nikkei.com/Business/Companies/Philippine-company-linked-with-Marcos-ally-strikes-business-deals?ref=asiancenturystocks.com) reported that Bongbong Marcos’s cousin’s company RYM Business Management has started buying stakes in several important companies. And RYM has also injected capital into the Philippine Veterans Bank, which will enjoy financial firepower to acquire further assets. And there are also plans to set up a sovereign wealth fund, despite the nation’s persistent current account deficit. And then there’s the risk of rising censorship. RYM Business Management has entered into a new joint venture with ailing broadcaster [**ABS-CBN**](https://www.marketwatch.com/investing/stock/abs?mod=mw%5Fquote%5Fswitch&countrycode=ph&ref=asiancenturystocks.com) *(ABS PM - US$62 million)* to provide *"accurate and balanced news and information to the country"*. When the president's cousin sets up a major new TV channel, that’s not exactly a recipe for free and independent media. In Southeast Asia, investors have become conditioned to ignore local politics. Savvy businessmen tend to cultivate relationships with whoever is in charge and do well across political transitions. But if martial law is imposed again － as under Ferdinand Marcos － all bets will be off. But for now, the rule of law is still intact. And there are many other reasons to be positive. Bongbong Marcos’s government just approved [123 new infrastructure projects](https://www.scmp.com/news/asia/southeast-asia/article/3212980/philippines-greenlights-more-100-infrastructure-projects-using-us163-billion-its-own-money?ref=asiancenturystocks.com). And it’s now allowing [full foreign ownership](https://www.aseanbriefing.com/news/philippines-issues-implementing-rules-for-the-public-service-act/?ref=asiancenturystocks.com#:~:text=100%20percent%20foreign%20ownership%20of%20select%20public%20services,to%2040%20percent%20foreign%20ownership.) of infrastructure companies. To me, this suggests greater capital formation in the coming years and perhaps the start of a new credit cycle. I also find it encouraging that the inflation rate is coming down. From 2022 onwards, the Bangko Sentral ng Pilipinas (BSP) has raised interest rates from 2% to 6.25% in just over a year to combat inflation. But now that the inflation problem is in the rearview mirror, I believe that the BSP will soon be able to lower rates and thereby stimulate the economy. It’s also a fact that investors remain cautious about Philippine equities. The Price/Book ratio of the Philippine Stock Exchange Index (PSEi) is now close to its 2008 lows. And the total market cap of Philippine stocks as a percentage of the world market cap is also close to a 10-year low: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/691050f7-bc6a-4a5f-8bb8-7424bf4db972_2428x1140.png) Philippines market cap as % of world market cap. Source: Bloomberg --- # Conclusion I went to Manila on a personal trip with no company meetings scheduled. But I came away more positive than before, given the rock-bottom valuations and a macroeconomic backdrop that’s likely to become more positive once interest rates come down to reasonable levels. I’m becoming more careful of who I invest with. While the Ayalas, Razons and Gokongweis have decent reputations, other businessmen may not be as trustworthy. And then there’s a question of politics. For now, Bongbong Marcos seems relatively hands-off. But whether he’ll eventually go down his father’s path － that remains to be seen. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos. [Get 30 day free trial](#/portal/signup) ### Portfolio review July 2023 URL: https://www.asiancenturystocks.com/portfolio-review-july-2023/ Last updated: 2026-06-04T11:43:47.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/portfolio-review-july-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update A great month for the portfolio. The value rose +7.8% month-on-month and is now +34.1% since inception in October 2021, equivalent to an IRR of +18.0%. US Dollar weakness explains part of the gain, as the portfolio value is measured in USD. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1080c89f-acb6-47c5-904c-ba9970657a62_1706x576.png) I recently joined Meta’s new social networking app, Threads. On there, I’ve noticed enthusiasm for Indonesian equities. And while my Indonesian stocks like [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/), [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) and [**Ultrajaya**](https://www.asiancenturystocks.com/deep-dive-2021-19-ultrajaya-milk/) have done well - they are not the exception. Almost every Indonesian consumer stock is rising. We are in a full-on bull market, and many stocks are getting closer to what I think they’re worth. I see similar bull market tendencies in the Taiwanese market after Interactive Brokers opened up access to that market. Japanese stocks have become hot, too. And at the other end of the spectrum, Chinese stocks remain hated. Every spike in the HSI seems to get sold. The contrarian in me is tempted to add exposure to Hong Kong equities. I’ve done so over the past seven months and I’ll probably continue. Here is the portfolio as of 25 July 2023: _This post is for paying subscribers only._ ### What I read in July 2023 URL: https://www.asiancenturystocks.com/what-i-read-in-july-2023/ Last updated: 2023-07-25T02:28:07.000Z Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Hidden champions of Taiwan URL: https://www.asiancenturystocks.com/hidden-champions-of-taiwan/ Last updated: 2025-10-06T12:55:24.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cd0b0e05-0fd4-4ffb-8635-cca67772e36e_2019x1091.jpg) Source: Thomas Tucker, via Unsplash # Summary - Taiwan is an independently governed island just off the coast of mainland China. - Its economy is dynamic, with a large number of SMEs that compete successfully on a global scale. - The stock market has enjoyed strong performance over the past few decades and enjoys the highest return on equity of any market in Asia at 16%. - There are currently 2,500 stocks listed in Taiwan. I’ve dug into this list and tried to identify so-called “hidden champions” of companies doing well. - My list of 28 hidden champions includes semiconductor companies, display makers, Internet platforms, food & beverage companies, bicycle manufacturers and more. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Interactive Brokers has just enabled [access to Taiwanese stocks](https://financefeeds.com/taiwanese-broker-sinopac-taps-interactive-brokers-for-us-stocks-etfs-and-algorithmic-trading/?ref=asiancenturystocks.com) for all its clients. So if you own an Interactive Brokers account, you can now trade Taiwanese stocks through Interactive Brokers’ partner firm, SinoPac Securities. It’s as easy as buying shares in the United States or Europe. Since Interactive Brokers announced the news, I’ve seen a high interest among investors in Taiwanese equities. So I felt I should do my part and write a post about companies listed on the Taiwan Stock Exchange. This post will follow the same format as my previous write-ups on “hidden champions” in [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/), [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/) and [China’s ADR market](https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/). The objective is to find companies that dominate their niches and compound capital at a high return on equity. More or less the type of companies that German management guru Hermann Simon called [hidden champions](https://www.amazon.com/Hidden-Champions-Twenty-First-Century-Strategies-ebook/dp/B008BBJDB2/ref=sr%5F1%5F1?crid=DUHTMF6ZIR5U&keywords=hidden+champions+of+the+21st+century&qid=1682094032&sprefix=hidden+champions+of+the+21st+centu%2Caps%2C326&sr=8-1&ref=asiancenturystocks.com). I pay zero attention to price, so do not take the following discussion as investment advice. I’m simply trying to identify the most successful companies operating on the island of Taiwan. ``` Table of contents: 1. A top-down view of Taiwanese stocks 2. Screening for candidates 3. Hidden champions of Taiwan 4. Concluding remarks ``` --- # 1\. A top-down view of Taiwanese stocks ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/383c12b2-9f1e-46ee-8cef-939bf6001baf_1190x962.png) Taiwan is an island off the coast of mainland China with a population of 24 million people. The island was originally inhabited by Austronesian tribes. During the Ming and Qing dynasties, the island came under Chinese control. It was then ceded to Japan after China’s defeat in the first Sino-Japanese War in 1895 and remained a Japanese colony until it was returned to the Republic of China (ROC) in 1945. After a defeat by the Communists in 1949, the Republic of China’s leader Chiang Kai-Shek fled to Taiwan. It then became the only formerly Chinese province no longer controlled by the Chinese Communist Party. Under Chiang Kai-Shek’s authoritarian rule, the island enjoyed significant economic growth. And in the 1990s, it became a multi-party democracy and continues to thrive under the current system. Whenever I mention Taiwanese equities, the first question I get is about the unresolved civil war between the Nationalists (Kuomintang or “KMT”) and the Communists (the CCP). Will Taiwan eventually come under the control of the CCP? I personally think that’s likely. The CCP’s military arm is becoming more powerful each year, and it’s hell-bent on taking control of Taiwan. But I’m sceptical that we’ll see an amphibious invasion with hundreds of thousands of casualties and destruction of property. There’s no need for a war. Much better to work the system from the inside by co-opting locals first. Perhaps a KMT win in the January 2024 election will help the CCP achieve its goal. Let’s put that aside for now and dig deeper into the Taiwanese stock market. The market has existed since 1897 when Taiwan was a Japanese colony. In the 1980s, Taiwan enjoyed an incredible stock market bubble - a series of events I wrote about in [this previous Substack post](https://www.asiancenturystocks.com/boombusttaiwan/). In the 1990s, the Taipei Stock Exchange merged with the OTC Securities Exchange and was renamed the Taiwan Stock Exchange, with the new symbol TWSE. Taiwan has a vibrant economy. The number of companies per capita is among the highest in the Asia-Pacific. Economic growth has been steady at around 3-4% per year. And Taiwanese businesses are doing very well, with Taiex earnings rising almost 15% per year in the past decade. Much of that increase is thanks to the rise of semiconductor juggernaut TSMC and its suppliers － but still. But Taiwan is also the home of many smaller successful companies. For example, Taiwan hosts the largest wet suit manufacturer in the world, the largest snowboard maker in the world, and the largest producer of golf clubs. The list goes on. I think there’s also a case to be made that Taiwan’s currency is undervalued. Its real effective exchange rate remains far below its early 1990s highs. And Taiwan’s current account surplus keeps rising, putting upwards pressure on the exchange rate. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/738e1c2e-5780-456b-b3a9-bd71f7bd9427_1200x568.jpg) It’s also worth mentioning that former central bank governor Perng Fai-nan explicitly aimed to keep the currency cheap to promote exports. When he was replaced in 2018, the Taiwanese Dollar was finally allowed to appreciate. The Taiwanese stock market is highly liquid. The following chart from 2022 shows that stock market capitalisation was the fifth highest in Asia after markets in China, India and Japan. There are many stocks to choose from － even for funds with high requirements on daily trading volumes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f0d82d1d-0e95-4086-9a31-551f4c828bc6_1326x448.png) Source: Bloomberg The most popular index is the Taiwan Taiex Index *(TWSE Index)*. It’s a tech-heavy index weighted by market cap, with the largest constituents being TSMC (28%), Hon Hai, Mediatek, Delta Electronics And Chungwha Telecom. The Taiex has performed well and is above its 1980s bubble highs. And it’s been driven by strong fundamentals (= higher earnings) rather than a multiple expansion. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/88959fb4-4dc6-46df-b26d-953a812109a0_2434x1104.png) Source: Bloomberg Many of Taiwan’s hardware-centric tech companies benefitted from the COVID-19 tech boom, also known as the work-from-home bubble. Fundamentals have deteriorated more recently, with TSMC reporting negative revenue growth, DRAM prices slumping, and inventories building up in the PC supply chain. So I’m frankly surprised by the recent strength in the index. Taiex now trades at a forward-looking P/E multiple of 14.6x, in line with the historical average of 14.7x. While that might seem high, remember that Taiex has the highest return on equity of any index in Asia. The market is the closest you can get to the S&P 500 in this part of the world － at least when it comes to return on equity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a704449f-e3a8-4e9d-a9cd-6968b8b433c5_2038x684.png) Taiwanese equities also offer surprisingly generous dividend yields. Historically, the dividend yield for Taiex has been around 4%. The primary reason for Taiwan’s high dividend payout ratio (\~60%) is that retained earnings are subject to a 5% additional profit retention tax over and above the normal 20% corporate income tax rate. That means retained earnings are subject to an aggregate tax rate of 25% compared to just 20% for dividends. Individuals also enjoy dividend tax credits. Companies are incentivised to pay out high dividends. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ff5ddb4c-9225-4779-9cc9-72b2e2df338c_1932x834.png) Here is the sector split of all the 2,500 companies listed in Taiwan, weighted by market cap. As you can tell, it’s a tech-heavy market, with industrials, materials companies and consumer companies representing far smaller parts of the market capitalisation. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/751e34a2-af22-4ed8-95cd-f0a5395ba5db_1284x462.png) The largest companies in each of the above sector groups are the following: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/79036309-1167-477d-aeb5-a005c1bc0a9b_1326x450.png) That said, it is a difficult market for foreigners to understand. Most of the documentation is in traditional Chinese; analyst coverage is sparse outside the top names. But for those with access to management teams, English is usually sufficient. Companies are generally open to meeting investors, at least if you can get a local brokerage house to open the doors for you. If you want to dig into individual companies, I recommend the following two reference books, best described as the Taiwanese version of America’s Moody’s manuals. They’re unfortunately only available in traditional Chinese. You can buy them on Shopee [here](https://shopee.tw/%EF%BC%88%E5%85%A8%E6%96%B0%EF%BC%89%E8%82%A1%E5%B8%82%E7%B8%BD%E8%A6%BD-%E4%B8%8A%E5%B8%82-%E4%B8%8A%E6%AB%832022-%E5%86%AC%E5%AD%A3%E8%99%9F-%E8%90%AC%E7%94%A8%E6%89%8B%E5%86%8A-%E6%B1%BD%E8%BB%8A%E8%BB%8A%E9%9B%BB%E7%B8%BD%E8%A6%BD-%E8%88%88%E6%AB%83%E7%B8%BD%E8%A6%BD-%E7%94%9F%E6%8A%80%E7%B8%BD%E8%A6%BD-i.68011793.1682226556?sp%5Fatk=9839fd12-ccec-4efb-915e-4811f7c1aad6&xptdk=9839fd12-ccec-4efb-915e-4811f7c1aad6&ref=asiancenturystocks.com). --- # 2\. Screening for candidates Let’s now dig deeper into individual companies that exhibit “hidden champion” like characteristics, including: - High historical average return on equity - High growth in earnings per share - Strong share price performance The following ten companies score the highest in terms of historical return on equity: _This post is for paying subscribers only._ ### What if the yen strengthens? URL: https://www.asiancenturystocks.com/what-if-the-yen-strengthens/ Last updated: 2023-07-19T02:07:03.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/what-if-the-yen-strengthens/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4065f802-578b-4481-91c2-d6e32cf5d470_1691x1127.jpg) Source: Jase Bloor via Unsplash I am not a macro prognosticator, so take the following discussion with a grain of salt. But lately, I’ve been asking myself what might happen to the Japanese market if the currency ever strengthens. The Japanese yen has gone through many such cycles of weakening and strengthening against the US Dollar. And it’s now hitting the upper limits of its historical trading band, having depreciated more than 30% against the dollar since 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7576e8e9-4979-43bb-b8c3-b0fbdd1fea3e_2424x1100.png) USDJPY. Source: Bloomberg This weakness has been driven by widening interest rate differentials in the US and Japan, where short-term US deposits offer more than 5% compared to not much more than zero in Japan. Capital has flowed out of Japan to take advantage of this opportunity. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3b56101e-04e7-4136-8335-9817c03913a9_2428x1142.png) Yellow line: the US effective Fed Funds rate. White: BoJ policy rate Source: Bloomberg What caught my eye the other day was this chart, showing a tight correlation between the US 10-year government bond and the USDJPY exchange rate. The higher US yields go, the weaker the yen tends to become. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8d2e267c-5776-44e0-8466-641130fcc96d_1280x580.jpg) Yellow: USDJPY. White: 10-yr UST yield. Source: Bloomberg The trillion-dollar question now is whether the interest rate differential will narrow at some point, causing the yen to strengthen － either through lower interest rates in the United States or higher in Japan. ``` Table of contents 1. Why the USD-JPY interest rate differential might narrow 2. Prior episodes of yen strengthening 2.1. The Great Financial Crisis precedent 2.2. The Asian Financial Crisis precedent 3. Potential strong yen beneficiaries 4. Conclusion ``` # 1\. Why the USD-JPY interest rate differential might narrow Economist Scott Grannis at the [Calafia Beach Pundit](http://scottgrannis.blogspot.com/?ref=asiancenturystocks.com) blog likes to show the following chart about how the US M2 money supply growth has been a leading indicator of the year-on-year change in CPI since the pandemic began in 2020. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/323a2714-2143-4ca5-ab0b-ebdd9291f709_400x229.jpg) Source: Scott Grannis While the fiscal deficit on a federal level is edging towards 8% yet again, the private sector is deleveraging, causing the above contraction in the aggregate money supply. Logic tells us that if interest rates are higher than the income growth of the average borrower, debt will accumulate. And borrowers will be less keen on taking on new debt. That’s why I think it’s meaningful that with BBB spreads of 1.6%, total borrowing costs for an average corporate US borrower will be above 6%. And for individual borrowers, 30-year mortgages now cost 7%. These are very high levels compared to the pre-COVID nominal GDP growth of around 4% per year. US interest rates are very high, indeed. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3f0e51e4-8147-443b-b3e8-f8b039e6816b_2434x1146.png) US nominal GDP growth year-on-year. Source: Bloomberg It’s also meaningful that household balance sheets in the US have already spent their stock of excess savings, meaning that they’re spending above their means. Surely, aggregate spending and hence GDP growth will have to come down. ![Figure 2. Evolution of savings rates during the COVID-19 pandemic. See accessible link for data.](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/72b6a8ba-1002-48c0-ae60-3ad75718a7e6_1150x543.png) Source: The Federal Reserve Meanwhile, the Bank of Japan (BoJ) has an explicit policy of targeting 2% inflation. It’s not only controlling the short-term policy rate but also longer-term rates through the use of so-called yield curve control. When US rates started rising in 2022, the BOJ engaged in large-scale quantitative easing to maintain Japanese interest rates where they were. The scale of these government bond purchases has been immense, as you can tell from the following chart: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/19c2f2f2-cd62-4495-91e2-906fedb03e3d_1512x656.png) Source: Jefferies But we’ve now come to a point where it’s absurd to maintain the BoJ’s zero-interest rate policy. Japan’s wage growth is now the fastest since the mid-1990s. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2d5f98ab-027c-4908-b513-f89cacaaff27_2270x978.png) Source: Jefferies Headline inflation hit 4% in late 2022 and remains above 3%. The BoJ Tankan Enterprises inflation expectations survey suggests about 2% longer-term inflation expectations － in line with BoJ’s target. And new BoJ governor Ueda has confirmed that the 2% inflation target will not change. A shift in BoJ policy has become apparent in how 10-year bond yields were allowed to rise from 25bps to 50bps in late 2022\. These are small steps, but the trend is clear. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/baad6956-fa3e-4dd6-8849-e211db73e497_2420x1102.png) The 10-year JGB yield. Source: Bloomberg So to summarise, while I’m certainly a macro tourist, it’s not inconceivable that the US-Japan interest rate differential will narrow at some point in the next 1-2 years. And it looks like the yen might appreciate against the dollar in such a scenario as carry trades are unwound. --- # 2\. Prior episodes of yen strengthening Whenever we’ve had a global recession, the yen has strengthened. Japanese capital seeking safety after encountering losses overseas. There’s been five instances of global recessions in the half-century: 1975, 1982, 1991, 2009 and the year 2020: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/033ea262-b7a6-4c8d-b1f3-877e08e803cc_775x422.png) Source: [The Conference Board](https://www.conference-board.org/topics/recession/what-is-a-global-recession-and-what-can-trigger-it?ref=asiancenturystocks.com#:~:text=Since%20the%20Second%20World%20War,1998%2C%202001%2C%20and%202012.) In the 1982 recession, the yen strengthened by around 20%, in 1991 by around 17%, towards 2009 by around 30% and in 2020 by just around 6%. Rough numbers, but I think you get the point. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8c360256-c147-4e77-9688-9585e8daf6e0_2428x1098.png) USDJPY. Source: Bloomberg I think this pattern will continue. The yen has traditionally been a funding currency for carry trades overseas, i.e. borrowing in yen to invest in higher-yielding assets overseas. Eventually, such carry trades reverse, and the yen returns to its prior level. In his book The Art of Currency Trading, author Brent Donnelly recounts how such an episode of yen depreciation and appreciation can play out: > *“The combination of low volatility and *high carry in 2006 attracted huge pools of money to the long AUDJPY and NZDJPY carry trade* and the strategy performed very well. Very well, that is, *until the first tremors of the global crisis* were felt and speculators decided all at once to unwind their carry trades as volatility roofed from abnormally low levels. This resulted in a *colossal unwind of all carry trades and saw AUDJPY fall from 107 to 86 in about a month* in the summer of 2007.”* Let’s now dig deeper to see what companies benefit from yen appreciation. ## 2.1\. The Great Financial Crisis precedent The Great Financial Crisis started with a credit crunch in 2007 and developed into a global recession by 2008. The yen hit bottom on 22 June 2007 at **124** to the US Dollar and peaked on 17 December 2008 at **87**, equivalent to a strengthening of around \~30%. Here is a chart of the USDJPY movements during this period: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3351d06f-61e0-40ea-9574-9ff75a0d333e_2428x1100.png) USDJPY. Source: Bloomberg Only 62 companies in Japan above a US$200 million market cap exhibited positive total returns during this period (price change plus dividends). Here is the list of the top names in this list: _This post is for paying subscribers only._ ### International Housewares Retail (1373 HK) URL: https://www.asiancenturystocks.com/international-housewares-retail-1373/ Last updated: 2026-07-31T01:40:34.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in IH Retail at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**International Housewares Retail**](https://finance.yahoo.com/quote/1373.HK?p=1373.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(1373 HK - US$268 million)* (“IH Retail”) is a Hong Kong-based discount retailer of housewares goods. It was started in the 1990s by two talented Hong Kong entrepreneurs and has now grown to a network of 380 stores across Hong Kong, Macau, Singapore and several other countries. The stores mostly operate under the “Japan Home Centre” brand name. The products are exceedingly cheap, closer to dollar store pricing than anything else. IH Retail can achieve these low prices by cutting out the middlemen. Today, over 40% of the products are private label goods, and the rest are branded products meant to entice customers to come to the stores. Their low prices explain why the company has achieved a 5% same-store sales growth － year in, year out. Growth in the store count has been tepid at around 2% per year. The Hong Kong government’s housing plans will be the biggest growth driver. Suppose the government follows through on its plan to build affordable housing for millions of people in the New Territories. In that case, IH Retail can capitalise on this construction by expanding its store network. IH Retail’s profits will likely drop now that Hong Kong is healing from the COVID-19 pandemic. It has earned excess profits in the past three years by selling face masks and rapid antigen test kits. Its high-margin e-commerce sales boomed. And it also benefitted from government subsidies in Hong Kong and Singapore. Those will not recur. So profit margins will have to come down a bit. Still, IH Retail appears to be a well-run company. Even before COVID-19, it earned a return on equity of nearly 20%. And capital returns have been generous, with an 85% dividend payout ratio and recurring share buybacks. At a forward-looking 7% operating margin, you’re looking at a P/E ratio of 11.1x on 2025 numbers. For reference, the global peer group trades around twice that P/E multiple. And the dividend yield is likely to be around 8% per year, adding to the total return. This low valuation multiple could explain why IH Retail’s two co-founders keep buying shares in the open market close to the current share price. There are not many obvious red flags — just some minor related party transactions concerning office space rentals. The real risk is the short-term drop in profits that will likely play out in the next year or so as Hong Kong recovers from COVID-19\. But beyond that, IH Retail is likely to continue growing steadily. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### The global plane shortage URL: https://www.asiancenturystocks.com/the-global-plane-shortage/ Last updated: 2023-07-12T02:12:51.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![aerial photography of airliner](https://images.unsplash.com/photo-1436491865332-7a61a109cc05?ixlib=rb-4.0.3&ixid=M3wxMjA3fDB8MHxwaG90by1wYWdlfHx8fGVufDB8fHx8fA%3D%3D&auto=format&fit=crop&w=1000&q=80) Source: Unsplash Last weekend, I came across this chart showing that global flight activity is already above pre-COVID levels: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1253913f-8f90-40c7-8510-2066520a5642_740x582.png) Source: AMP I’ve also found myself travelling more in the past few months. I’m probably not the only one. Meanwhile, the well-regarded Fidelity Asian Values Fund has taken a stake in BOC Aviation － an aircraft leasing company. What are they seeing that the market doesn’t? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/611d0e94-3b85-48a8-bffc-8b9789b16bc7_2438x722.png) Source: Fidelity Asian Values Fund [May 2023 monthly factsheet](https://www.asiancenturystocks.com/content/files/FILPS/Documents/en/current/ret-en-gb-gb0003322319.pdf) I’ll try to figure out the answer in this post. Is travel demand now pushing lease rates and aircraft values higher? And who will be the main beneficiaries of this trend? ``` Table of contents 1. Travel demand is stronger than ever 2. Production remains capacity constrained 3. Supply & demand is getting tighter 4. CO2 ambitions increases demand 5. Investable universe of stocks 5.1. Aircraft manufacturers 5.2. Aircraft lessors 6. Conclusion ``` # 1\. Travel demand is stronger than ever The number of Google search queries for “flight tickets” globally has gone ballistic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/91e9c6f5-7208-47fb-81ed-979daefc5391_1320x444.png) Source: Google Trends Whether this is due to temporary revenge spending or a permanent shift in demand for travel is unclear. But people are certainly keen on travelling. _This post is for paying subscribers only._ ### Multi Bintang update (MLBI IJ) URL: https://www.asiancenturystocks.com/multi-bintang-update-mlbi-ij/ Last updated: 2023-07-09T04:00:10.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Multi Bintang when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1d3d8c0b-2fb0-4de2-b49d-1bae59ed90da_728x524.png) # Summary - Multi Bintang (MLBI IJ) is Indonesia’s largest beer producer with a 60% market share. The “Bintang” brand name is incredibly strong and the preferred choice for most of Indonesia’s beer drinkers. The company is also protected by significant barriers to entry, including license restrictions and 150% import tariffs. These factors explain why Multi Bintang has been able to achieve a 100%+ return on equity in the past. - The company was hurt by the large-scale social restrictions that took place during COVID-19\. These caused nightlife venues to be shut down and the borders to be closed. But the restrictions have now been taken away. Recent tourism data from Bali is encouraging. The number of arrivals is already back to 80% of pre-COVID levels and is now trending in the right direction. - I think there are plenty of reasons why Multi Bintang could become a growth stock yet again. Indonesia’s beer consumption per capita remains low. While muslims are never going to embrace alcohol, the rest of the population will. Save for extraordinary events in 2015 and 2020, that Indonesian beer market has been growing nicely. - I foresee a 2024e P/E ratio of 14 and an EV/EBIT of 10x for Multi Bintang. Those numbers are far below the peer group and historical averages. It’s also worth noting that Multi Bintang has historically paid out 100% of earnings as dividends. In other words, next year’s dividend yield is likely to be around 7%, which compares to a historical level of about 3%. - The main risks are a potential alcohol ban, competition from craft brewers and higher input costs. But neither of these factors are likely to derail the EPS recovery story, at least not in the short term. --- # 1\. Introduction to Multi Bintang I first wrote about Indonesian beer brewery Multi Bintang in late 2021 ($): [Deep-dive 2021-21: Multi BintangMulti Bintang (MLBI IJ) is Indonesia’s leading beer producer. The company started in 1929 as “Nederlandsch-Indische Bierbrouwerijen” back when Indonesia was a Dutch colony. Today, Multi Bintang has a market share of almost 60%. Its flagship beer “Bintang Bir” is by far the most popular brand in the sector.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/image/fetch/h_600-c_limit-f_auto-q_auto:good-fl_progressive:steep/https_3a_2f_2fbucketeer-e05bbc84-baa3-437e-9518-adb32be77984-s3-amazonaws-com_2fpublic_2fimages_2ffa06cb54-7aba-4759-ac3a-b3152886ece6_1330x748.jpg)](https://www.asiancenturystocks.com/deep-dive-2021-21-indonesian-sin/) My arguments in that report were as follows: _This post is for paying subscribers only._ ### Erin Meyer: The Culture Map URL: https://www.asiancenturystocks.com/culture-decoded/ Last updated: 2025-12-23T09:12:52.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e4627099-e7f0-4c6f-bb06-dbf008bca584_983x707.png) # Summary - Erin Meyer’s book [The Culture Map](https://www.amazon.com/Culture-Map-Breaking-Invisible-Boundaries-ebook/dp/B00IHGVQ9I/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1688190008&sr=8-1&ref=asiancenturystocks.com) tries to deconstruct cultures into eight component parts across how we communicate, make decisions and think. - According to her research, Asian cultures tend to be more hierarchical, more subtle in their communication and more flexible with regard to schedules. Meanwhile, Northern European cultures are at the opposite extreme, being more egalitarian, explicit in their communication and even confrontational. - Potential implications for investors include how we interpret messages from individuals from each culture, predicting how well an individual will do in a particular cultural environment and the comparative advantages of organisations from different cultures. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Our friends at [China Charts](https://www.realchinacharts.com/?ref=asiancenturystocks.com) recently recommended the book [The Culture Map](https://www.amazon.com/Culture-Map-Breaking-Invisible-Boundaries-ebook/dp/B00IHGVQ9I/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1688190008&sr=8-1&ref=asiancenturystocks.com) by Erin Meyer. I spent part of my vacation reading through it and found it chock-full with insights. It helps us understand how people from different cultures think and behave. And while the material is targeted towards the MBA students Erin Meyer teaches at INSEAD, investors should also find the material useful. Interpreting messages in light of our cultural biases helps us decode messages. It can help us predict people’s behaviours. And perhaps even help us identify companies' competitive advantages if they’re rooted in culture. Erin Meyer looked at her survey data and concluded that cultural differences were rooted in eight key dimensions: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4570cdb7-4cb1-407e-a45b-0cb63f170a33_1648x240.png) In her view, these eight dimensions largely explain the differences in how people behave. For example, the **communicating**, **evaluating**, and **disagreeing** dimensions have to do with how direct we are in our communication. The **leading**, **deciding** and **trust** dimensions have to do with company hierarchies. **Persuading** and **scheduling** have to do with people’s mindsets. There might be overlaps between the categories, but let’s leave that aside for now. And also, be aware that these are generalisations and that individual differences can be far greater than those predicted by culture. ``` Table of contents 1. Communicating: explicit or not 2. Evaluating: negative feedback 3. Persuading: fact- or principle-based 4. Leading: flat or hierarchical 5. Deciding: who decides 6. Trusting: the need for relationships 7. Disagreeing: embracing confrontation 8. Scheduling: following the timeline 9. Conclusion ``` # **1\. Communicating: explicit or not** The first dimension Meyer emphasise is how **explicit** the communication is between two individuals. For example, Americans are famously explicit. A rule for public speakers in America is apparently to “tell the audience what you’re going to tell them., then tell them, and finally tell them what you’ve told them”. Textbooks are designed similarly, not to economise on words but rather to make messages as clear as possible. Meyer calls such cultures **low-context** since not much context is needed to understand what the other person is trying to say. People from such cultures will generally tell you explicitly what they want to get across. At the other end of the spectrum, you’ll find countries in East Asia such as China, Japan, Korea and Indonesia. Here the communication style tends to be more subtle. A long shared history has created assumptions of what different behaviours mean. Subtle cues will help the listener understand the messages. That listener must try hard to “read the air” to understand. Because there’s a long shared history of what words and behaviours might mean, Meyer calls these cultures **high-context cultures**. Here is a chart showing where countries belong in this dimension. Europe belongs to the low-context, explicit part of the spectrum. And East Asia - China, Japan, Korea, Indonesia - belong to cultures where communication is more subtle. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/89393a99-1bbf-4d63-ba22-de10fbc5cb9b_1240x450.png) Why does this matter? Because the same message can be interpreted differently by people from each of these extremes. - For example, the direct Dutch tend to think that you are not trustworthy if you don’t say it straight. - But a person from Indonesia will think that if you’re too direct, or too explicit in your communication, you’re treating them like children. That spelling out a task in great detail is a sign that you don’t trust the recipient to figure out the solution on his or her own. The takeaway is obvious. If you’re meeting with people from East Asian cultures, you’ll generally need to exert effort to understand the subtle cues provided to you. You’ll need to listen more and speak less. And ask the speaker to clarify if you’re not sure you’ve fully understood. So if you’re meeting with people from East Asian cultures, you’ll need to exert effort to understand the subtle cues provided to you. Listen more and speak less. And ask them to clarify if you’re unsure if you’ve fully understood. --- # **2\. Evaluating: negative feedback** Another key differentiator between cultures is the willingness to provide negative feedback. Just because a person is explicit in his or her communication doesn’t mean that the person is willing to provide criticism. Americans, for example, are often direct and explicit in their communication but still **cautious in providing criticism**. Instead, Americans often provide positive feedback before touching on the negatives. They will also generally try to downplay negative criticisms with qualifiers such as *“kind of”*, *“sort of”*, *“a little”*, *“a bit”*, *“maybe”,* or *“slightly”*. An American will probably find the **negative feedback** from individuals from the Netherlands, Germany and Russia overly harsh. Meyer argues that people from these countries learn from an early age, to be honest and give messages straight. From their perspective, Americans are not being truthful enough. Their feedback might be seen as somewhat fake: > *“*With Americans, the grid is different*. Excellent is used all the time. Okay seems to mean not okay.”* Qualifiers used by people from the Netherlands, Germany, and Russia are more often words such as *“absolutely”*, *“totally”*, *“strongly”*, etc. They generally don’t beat around the bush. Here is a chart from Meyer’s book showing how each culture can be mapped along the explicit/negative feedback dimensions. You can tell that the Anglo-Saxon countries tend to be more cautious in providing direct negative feedback, while Northern Europeans tend to be more frank. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb3a8ed2-001e-4713-ad17-170afdc1e1ee_1238x974.png) East Asia stands out on the bottom-right-hand side of the chart. It seems like they generally use subtle cues to communicate, including when it comes to indirect negative feedback. But Meyer makes a distinction here. She argues that within the family, they may be frank with criticism, especially with their children. But when it comes to colleagues and those in higher ranks, they learn never to criticise openly. Be extra careful providing negative feedback to a person in front of his or her group. That would be a cardinal sin. --- # **3\. Persuading: fact- or principle-based** Erin Meyer makes the point that the way to get persuaded by somebody differs greatly from country to country. In America, people will be persuaded by evidence. They want to see the **practical application first** before drawing any conclusions. Anglo-Saxon school systems are apparently centred around this idea. And you also see it in the common law legal system, in which a judgment sets a precedent for future cases. In Germany and Latin countries, on the other hand, people will be more persuaded by theoretical frameworks that are then applied to practical situation. Meyer calls this **principles-first reasoning**. In countries with principles-first reasoning, the structure of an argument often follows the following outline: 1. Thesis: Lay out the argument 2. Anti-thesis: a counter-argument 3. Synthesis: Contrast the two arguments and finally reach a conclusion Countries belonging to the principles-first part of the line will find an argument this way. Only when a counter-argument has been provided do they feel confident that the thinking is robust? In applications-first countries like America, you’ll want to get to the point quickly. Provide a real-life story of success and then induce general lessons from it — exactly how Harvard’s case studies are structured. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea06d0c3-c0f9-45a2-ab69-e668e33ce48d_1216x262.png) Meyer makes a final distinction. She argues that Asians tend to have a more **holistic mindset**, giving more attention to the background and context of a particular issue. So when it comes to persuading someone from the Eastern part of the globe, she argues you’ll want to start from a macro point of view. Explain how everything fits together, and only then deal with the issue more granularly. --- # **4\. Leading: flat or hierarchical** We now come to the question of hierarchy. Some societies are more hierarchical than others, which matters in how we communicate and behave. The definition of **egalitarian cultures** is that leaders at the top are treated the same way as those lower down in the organisation. Leaders push power down and then try to step out of the way. They work by setting objectives and then rallying the team around those objectives. In **hierarchical cultures**, however, all problems are pushed up, and it’s up to one leader to decide. Organisation charts will be important in such cultures, with a clear sense of who belongs where in the hierarchy. A lot of miscommunication can happen to people who work in teams from across cultures. Someone from a hierarchical culture will see an egalitarian leader as weak and ineffective. Someone from an egalitarian culture will find a forceful leader overbearing and disrespectful. The working styles of teams from the two extremes will be dramatically different. Meyer speculates that cultures have been formed by political systems in the past. That Latin cultures might have been influenced by the famously hierarchical Roman empire. That Northern European societies have been known to be egalitarian all the way back to the Viking era. And that East Asian cultures have been influenced by Confucian philosophy, where you’re told to respect the elderly and others higher up in the hierarchy. Most Asian countries belong to the hierarchical part of the timeline, while Northern Europe tends to be more egalitarian. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/772667e8-50d6-4eb2-8044-cea7b5b0166a_1208x268.png) On a practical level, Meyer argues that in the hierarchical societies in East Asia, you’ll want to pay respect to people higher up in the hierarchy. Address emails to people at the right level; in meetings, you should greet the seniors first, etc. But leaders in the more Confucian countries are also expected to protect and care for those under them. So even in highly hierarchical societies, there is still a give-and-take that creates a balance. --- # **5\. Deciding: who decides** Dimension number five is about decision-making. Who within the organisation actually makes the final call? Meyer argues that the hierarchy doesn’t always explain who makes the decision. In some countries, such as Germany, organisations tend to be hierarchical, with great respect paid to those higher up. But decisions are still made in consensus. But usually, there is a correlation between how hierarchical an organisation is and whether the **person at the top** makes the final decisions. America is famously top-down, with leaders deciding on strategy alone. Meyer thinks that such a setup helps organisations make decisions fast. But she also thinks that it puts pressure on the leader to have the relevant skills necessary to deal with all the problems that land on his or her desk. The other option is **consensus decisions**, which sounds great in practice but also introduces inertia. It might be hard to convince an entire group to go off the beaten path. Though on the positive side, once a decision has been made, implementation might be easier since each team member will most likely already have bought into the strategy. They’ll be more enthusiastic, knowing that their voice has been heard. Japan is unique in the way that decisions are made. In the so-called “ringi system” of decision-making, consensus is formed at each level of the hierarchy. And once that consensus decision has been made, the question is pushed up to the next level. Meyer believes that this system is time-consuming and introduces accountability issues, with little incentive to stand out and challenge the consensus. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c323fa95-858c-4401-9d18-a6c6fa0d91e4_1214x428.png) --- # **6\. Trusting: the need for relationships** As anyone who has worked in emerging markets can attest, relationships matter greatly in business. In many developing countries such as Brazil, trust is built up through **relationships**. Once the relationship is built, loyalty and openness come with it. And only then can deals start to take place. Business in East Asia is often conducted the same way. Much attention is paid to relationships or “guanxi” in China, with no clear demarcation line between personal and business relationships. You’ll need a relationship for any favour to take place. On the other side of the spectrum, you find countries such as the US, UK and Australia whose cultures can be said to be **task-based**. There’s a long tradition of separating the practical and emotional. You do the task assigned to you — no questions asked. It might even be seen as unprofessional to mix relationships with business. Meyer argues that this dichotomy comes from the strength of countries’ legal systems. In countries with a strong rule of law, there is less need for trust in business relationships. You’ll know that the legal system will uphold your rights. Not so in most emerging markets, where your relationship is basically your contract. Ultimately, your network is all you can count on. She also argues that Japan is a special case. There, people tend to follow tasks assigned to them during the day. But after work, people will go out drinking together to build a connection. They’ll think that by letting your guard down, you show that you’re an authentic individual with nothing to hide. Friendliness doesn’t necessarily mean relationship based. Americans often smile at strangers and engage in chit-chat. But that doesn’t mean relationships have been formed. Conversely, a stony expression doesn’t necessarily mean arrogance or hostility. The “trusting” dimension has more to do with whether a person is willing to work with you with or without an existing relationship. In the relationship-based cultures of East Asia, the answer is emphatically “yes”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1776d1e4-d81b-454b-b81c-3dcb9e467c64_1222x270.png) --- # **7\. Disagreeing: embracing confrontation** The “disagreeing” dimension has to do with disagreement. To what extent will open disagreement between two individuals harm their relationship? The most **confrontational societies** in the world are said to be France, Germany, Holland and Denmark. Everyone is expected to have different ideas. I’ve often heard people in Asia being put off by this combativeness, and I can understand why. But the purpose of confrontation isn’t to attack the other individual. There’s this German concept called “sachlichkeit”, which translates into objectivity. This means that each person separates the idea from the person, being able to attack an idea without necessarily hurting the person’s feelings. People from confrontational cultures feel it’s important to challenge a proposal to determine its robustness. Americans, on the other hand, often perceive dissent as a threat to their unity: *“United we stand, divided we fall”*. If you disagree with somebody openly, you’re almost disrupting the status quo. In East Asia, Meyer argues that people try to preserve **group harmony** at all costs. Protecting someone’s “face” is more important than what you believe is correct. Even asking for someone’s opinion can be seen as confrontational. But again, even in Confucian societies, there’s a difference between the behaviour of out-of-group individuals with those within the group. People may not treat outsiders the same way as those within the group, as we’ve seen repeatedly in history. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ebfb3e84-88cb-43c6-baf1-9a9916f7cb83_1232x290.png) --- # **8\. Scheduling: following the timeline** The final dimension that Meyer speaks about is how flexible we are with schedules. Meyer argues that Northern Europe and the United States pay a great deal of attention to being on time. But the rigidness has to do with more than just time. They’ll also want things to go according to the plan in a **linear fashion**. As described by someone quoted in the book > *“They expect us to work by carefully closing one box before opening the next”* In some European countries, individuals are **basically on time**. France and Northern Italy belong to these categories. You can come late to a meeting, but perhaps not more than ten minutes. And then we have cultures working at a completely different time scale, those that tend to be **flexible** about time. India, Kenya, Nigeria, etc., belong to this part of the spectrum. Europeans might consider people from such cultures lazy and unstructured. But the reality is that in societies characterised by constant change, planning ahead is impossible. That’s as true for traffic as it is for the weather, the effectiveness of government bureaucracies, etc. Nothing can be predicted with certainty. And people in these countries have simply learned to adapt by not paying too much attention to schedules. Within East Asia, the Japanese are known to be highly organised planners. They are definitely closer to Germany in this respect than most of emerging Asia. In China, however, everything seems to happen without preplanning. As a businessman in China quoted in the book said: > *“The Chinese are *kings of flexibility*”* In other words, in mainland China, individuals don’t care as much about planning for tomorrow or next week but instead focus on the task at hand. But somehow, it all ends up working out anyway. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d249b949-7bf4-4eb0-8015-2a12fdab576a_1226x290.png) --- # **9\. Conclusions** Erin Meyer has made her database public on her website [erinmeyer.com](https://erinmeyer.com/?ref=asiancenturystocks.com), where you can also download nice visuals on how cultures differ. This is what the chart looks like for the Asian countries included in the data set, together with the US, the UK and Germany for comparison. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6fbfa8b5-2e59-4488-9ea7-af67de0df57b_1248x758.png) As you can tell, the Asian countries belong firmly to the right-hand side of the chart. In these countries, communication can be subtle, feedback is provided indirectly, group harmony is maintained at all costs, society tends to be hierarchical where decisions are taken at the top, and most countries are also more flexible about their schedules. So why am I discussing a book on culture in a newsletter otherwise focused on investing? Because I think there are important lessons to take away from it. One lesson has to do with interpreting messages. We need to see any communication through the appropriate lens. Read between the lines and pay as much attention to what is not being said as the actual words. Don’t expect people in Asia to be as direct as you might see in the Netherlands or Germany. Another lesson has to do with predicting behaviour. Darwin believed that natural selection caused some animals to be better adapted to the local environment. Culture works similarly. An individual might be well-suited to his or her cultural environment but fail in another type. If a company hires a new CEO from a different culture, consider cultural compatibility to see whether he’ll succeed in his new role. A third lesson has to do with comparative advantages. Living across continents, I’ve always wondered why certain companies from certain cultures do well in the global marketplace. Might their success be partly attributed to culture? - **Hierarchical** organisations where decisions are made at the top might be better suited for industries with constant change and requiring the brilliance of a single individual to make leaps forward. Apple under Steve Jobs comes to mind. - I hypothesise that corruption is less likely in cultures where communication is made **explicit** across the board. I also hypothesise that minority protection might be better in more **task-based** cultures, where relationships matter less for someone’s willingness to do business with others. - I also wonder whether the **persuading** and **scheduling** factors influence whether a country's individuals are likely to succeed in engineering. Germans and Japanese are known for their engineering prowess, and they also happen to be principles-focused and rigid about schedules. It’s hard to generalise across an entire population and perhaps quixotic to even try. But in any case, I found the book illuminating, and it will certainly help me view communication and behaviour in a different — cultural — light. If you want to learn more about Erin Meyer’s work, you can find her book on Amazon [here](https://www.amazon.com/Culture-Map-INTL-ED-Decoding/dp/1610392760/ref=sr%5F1%5F2?crid=1DRNJ22KOLFX7&keywords=erin+meyer&qid=1688281988&sprefix=erin+meye%2Caps%2C163&sr=8-2&ref=asiancenturystocks.com) and her website [here](https://erinmeyer.com/?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) ### Portfolio review June 2023 URL: https://www.asiancenturystocks.com/portfolio-review-june-2023/ Last updated: 2026-06-04T11:44:13.000Z **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* --- # Portfolio update June was a weak month for the portfolio, down -1.5% month-on-month and now +24.5% since inception in October 2021, equivalent to an IRR of +13.8%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8ecca9a6-611f-4644-b567-73abd8051ed4_1500x522.png) The primary issue was pullbacks in the share prices of Chinese oil & gas company [**CNOOC**](https://www.asiancenturystocks.com/cnooc/) and Indonesian chocolate producer [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/). I suspect rising OECD crude oil inventories are to blame for the recent drop in energy equities. Higher cocoa prices might have caused some to sell Delfi. It’s unclear why [**Multi Bintang**](https://www.asiancenturystocks.com/deep-dive-2021-21-indonesian-sin/) dropped, as I believe the outlook continues to improve. On the positive side, the Indonesian dairy company [**Ultrajaya**](https://www.asiancenturystocks.com/deep-dive-2021-19-ultrajaya-milk/) had a big rally. And the new holding [**Fuji Corp Miyagi**](https://www.asiancenturystocks.com/fuji-corp-miyagi-7605-jp/) rose after a surprise announcement that it would buy back another 1 million shares. Here is the portfolio as of 25 June 2023: _This post is for paying subscribers only._ ### A View From Asia URL: https://www.asiancenturystocks.com/a-view-from-asia/ Last updated: 2023-06-26T14:39:03.000Z _This post is for paying subscribers only._ ### Book review: Asian Godfathers URL: https://www.asiancenturystocks.com/how-to-become-an-asian-tycoon/ Last updated: 2023-06-25T04:40:15.000Z A book by Joe Studwell on how to become an Asian tycoon. Estimated reading time: 22 minutes _This post is for paying subscribers only._ ### Invite your friends to read Asian Century Stocks URL: https://www.asiancenturystocks.com/invite-your-friends-to-read-asian-68da92f55ed5434b0b8ff849/ Last updated: 2023-06-21T03:53:40.000Z _This post is for paying subscribers only._ ### Hidden champions among China's ADRs URL: https://www.asiancenturystocks.com/hidden-champions-among-chinas-adrs/ Last updated: 2025-10-06T12:56:23.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea4aebef-7c26-4ad7-b111-de99a59bca3f_1024x683.jpg) # Summary - China has two domestic stock exchanges: Shanghai and Shenzhen. But getting approval to list domestically can be difficult. - There’s also the option to list overseas. Besides Hong Kong, the largest market by far for Chinese companies to list overseas is the United States. - Companies listed in the US tend to use depositary receipts to gain access to capital, often through complex Variable Interest Entities (VIEs) structures. - There’s been a crackdown on companies in several sectors, including technology, education and property development. It’s unclear whether this crackdown is over and what role private enterprises will play in tomorrow’s China. - I’ve identified 12 companies among China’s ADRs that qualify as “hidden champions” - companies that dominate their niches and enjoy strong competitive advantages. While frauds are common, I’ve tried to exclude them from the list. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) My previous posts on hidden champions in [Singapore](https://www.asiancenturystocks.com/hidden-champions-of-singapore/) and [Hong Kong](https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/) were well received. The concept of “hidden champions” was introduced in Hermann Simon’s book [Hidden Champions of the 21st Century](https://www.amazon.com/Hidden-Champions-Twenty-First-Century-Strategies-ebook/dp/B008BBJDB2/ref=sr%5F1%5F1?crid=DUHTMF6ZIR5U&keywords=hidden+champions+of+the+21st+century&qid=1682094032&sprefix=hidden+champions+of+the+21st+centu%2Caps%2C326&sr=8-1&ref=asiancenturystocks.com). It refers to companies dominating their respective niches. Common denominators among such companies include high earnings growth and high returns on capital. In today’s post, I’m shifting my attention to Chinese companies listed in the United States. Most of these companies are not directly listed but trade through so-called American Depositary Receipts (ADRs). Let’s see whether it’s possible to find hidden champions among them. ``` Table of contents: 1. China’s overseas listings 2. The Chinese ADR market in 2023 3. A shift in the political landscape 4. Screening for candidates 5. Hidden champions among China’s ADRs 6. Conclusion ``` --- # 1\. China’s overseas listings ![Where Does China's Securities Market Go From Now ? -- Beijing Review](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c557ab6d-c3d0-4100-bf0e-9b0da9764724_500x345.jpg) Zhu Rongji opening the Shanghai Stock Exchange in 1990\. Source: CFP When Chinese companies have wanted to raise capital, historically, they’ve chosen to do so at China’s two domestic exchanges: Shanghai and Shenzhen. But due to difficulties in gaining approval for a domestic listing, some companies instead choose to raise capital overseas. There are many hurdles in doing so. For example, China’s capital controls make it difficult to repatriate capital raised overseas back into China. If a company wants to list its shares overseas directly, it will need regulatory approval. And finally, there are foreign ownership limits for companies operating in sensitive areas such as technology, media and education. Chinese companies have become increasingly adept and navigating this environment. One solution has been to raise capital through so-called depositary receipts. These are certificates issued by banks that represent ownership of the underlying shares. Dividends get passed on to the holders of the depositary receipts at the ratio at which they represent the underlying. Those listed in America are known as **American Depositary Receipts** (ADRs), and those elsewhere as **Global Depositary Receipts** (GDRs). It’s worth making a distinction between **sponsored ADRs** and unsponsored ones. With sponsored ADRs, the company has a formal agreement with the bank that creates them. Unsponsored ones are where banks choose to issue depositary receipts on their own. These tend to be illiquid. And since they’re not considered securities under US law, they do not need to file reports with the SEC. The first Chinese company to list in America in **1992** used this structure: the automaker Brilliance Automotive, which would later form a joint venture with BMW in China. Brilliance issued depositary receipts against underlying shares of a Brilliance subsidiary in Bermuda, which only owned part of the entire group. The next part of the development of China’s ADR market was in the year **2000**. That was the year when China Telecom was listed on the NYSE as part of a push to impose market discipline on its state-owned enterprises. That same year, the Chinese tech company Sina Corporation devised a way to get around China’s foreign ownership restrictions: Variable Interest Entities (VIEs). Since China’s law prohibits foreign ownership in sensitive sectors like technology, Sina set up an offshore company in the Cayman Islands that had an agreement with Sina’s main business in China to transfer profits. Following Sina’s innovation, many Chinese tech companies were listed in the United States, including Baidu in **2006** and Alibaba and JD in **2014**. VIEs are controversial. Many Chinese ADRs using such VIE structures pay out capital previously raised overseas, and their dividend yields tend to be low. Many Chinese investors call ADRs “concept stocks” (概念股). In the early **2010s**, a series of accounting scandals among Chinese overseas listed companies shook the market, including Sino-Forest in Toronto and Longtop Financial. The SEC started paying attention and has been trying to improve the quality of accounting in overseas listed Chinese companies. After President Donald Trump’s [Executive Order 13959](https://en.wikipedia.org/wiki/Executive%5FOrder%5F13959?ref=asiancenturystocks.com) in **2020**, it became illegal for American citizens to own shares in Chinese military-linked companies. This included Chinese telecom companies such as China Telecom, and they were therefore forced to be delisted from the NYSE. That same year, we also saw the introduction of the [Holding Foreign Companies Accountable Act](https://en.wikipedia.org/wiki/Holding%5FForeign%5FCompanies%5FAccountable%5FAct?ref=asiancenturystocks.com). This law states that companies that prevent the Public Company Accounting Oversight Board (PCAOB) from conducting inspections will be delisted from US exchanges. But so far, they’ve [been given access](https://pcaobus.org/news-events/news-releases/news-release-detail/pcaob-releases-2022-inspection-reports-for-mainland-china-hong-kong-audit-firms?ref=asiancenturystocks.com) to all audit records requested. That means the delisting risk is off the table, at least for now. [Chinese ADRs are safe from delisting, for nowDisclaimer: Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century StocksMichael Fritzell![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea30cd42-3f3d-4864-a139-c5633fe0c941_728x524.png)](https://www.asiancenturystocks.com/chinese-adrs-are-safe-from-delisting/) --- # 2\. The Chinese ADR market in 2023 Hong Kong remains the biggest market for Chinese companies to raise capital overseas; many companies are listed directly. The United States is the second-biggest market for Chinese overseas listing by far. Meanwhile, while Chinese companies are listed in London, Singapore, Zurich, Toronto and Sydney, these are much smaller markets. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1796a371-0ffd-409f-8fd7-24893aafa476_1712x826.png) Summing up the market caps of all Chinese companies listed in the United States, you get to US$860 billion, making the market bigger than Indonesia but smaller than South Korea. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f3f629d-eab2-41be-b1f3-88c3b81e0b75_1482x502.png) The performance of the ADR market has been horrendous in the past two years. And even over 15 years, the index has been largely flat. And with few dividends paid, for that matter. Here is a chart of the S&P China ADR index from late-2001 until today: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d4d02300-8756-468d-b430-ed5703ecc6bf_2444x1108.png) Source: Bloomberg This index now trades at a forward P/E of 15.0x, price/book of 2.0x and a dividend yield of 0.3%. That may not sound low, but tech companies tend to be faster-growing and difficult to value using traditional valuation multiples. In total, there are 376 Chinese companies listed in the United States, but most of these are small. Applying a US$50 million market cap minimum will leave you with only 148 ADRs. Here is a sector split for these stocks: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f0bd2b98-ba4f-4f0c-8f68-9216b76ad0b7_1876x624.png) But within the sectors called “consumer discretionary” and “communication services” you’ll find many tech companies such as Alibaba and JD.com. Here are the largest companies in each of the above sectors. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/26e760c8-2c17-458e-831e-49b2647c364e_1668x618.png) --- # 3\. A shift in the political landscape ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c918fc94-0de3-4674-ad5c-1069755bd08b_1940x1091.jpg) I think it’s worth pointing out the shifts we’ve seen in the political landscape over the past few years. The poor performance of China’s ADRs might reflect US sanctions, a weaker Chinese economy and poor investor sentiment. But it’s also related to a set of crackdowns that began in 2020. Since Deng Xiaoping’s reforms in the late 1970s, the government has become increasingly committed to private-sector entrepreneurship. A key turning point was the 1988 regulation on private enterprises, which allowed anybody to start a company. But since Xi Jinping became General Secretary in 2012, China has turned more socialist. An early sign of this shift was in bank lending from 70% to private enterprises in 2012 to just [30% in 2016](https://www.amazon.com/State-Strikes-Back-Economic-Reform/dp/0881327379/ref=sr%5F1%5F2?crid=2MIM4IUXOZRU1&keywords=nicholas+lardy+china&qid=1686984592&sprefix=nicholas+lardy+chi%2Caps%2C293&sr=8-2&ref=asiancenturystocks.com), according to Nicholas Lardy. More recently, the Communist Party has been pushing for all private companies to institute Communist Party committees, including subsidiaries of foreign companies. The delineation of responsibilities between the company board and these party committees is unclear. The idea is that the party committee in each company will *“executive the will of the party”*. And from my understanding, they will also have a veto on hiring decisions. That’s why I was concerned when the crackdown on Chinese tech companies began in late 2020\. Since then, many CEOs have resigned, although we don’t know exactly why. In some cases, these resignations occurred right after the government received “golden shares” in the company, most notably at Bytedance before Zhang Yiming resigned a month after. But the resignations have been industry-wide: other than Zhang Yiming, we’ve also seen Jack Ma at Alibaba, Richard Liu at JD, Dowson Tong at Tencent Music Entertainment, Colin Huang at Pinduoduo and Su Hua at Kuaishou resign. The Communist Party has also cracked down on other sectors. For example, tuition centres were declared illegal overnight, causing companies engaged in that sector to become practically worthless. And from late 2020, private property developers have been cut off from credit, justified through the so-called [Three Red Lines](https://en.wikipedia.org/wiki/Three%5Fred%5Flines?ref=asiancenturystocks.com) document. Whatever the intended purpose, the result has been that private developers are going bankrupt en masse, with their remaining assets slowly gobbled up by state-owned enterprises. This has made me question private enterprises' role in tomorrow’s China. It’s possible that the crackdowns that occurred from 2020 to 2022 were part of a gamble to consolidate power in the run-up to the October 2022 Party Congress. A more cynical view would be that state-owned enterprises will be favoured from now onwards, while private companies pushing forward the Party’s Made in China 2025 vision will be tolerated. But it’s also possible that much of this negative news has already been priced-in. A glimmer of hope was provided by central banker Guo Shuqing in January 2023 when he said that the crackdown on Chinese tech companies was [basically over](https://edition.cnn.com/2023/01/09/economy/china-economy-guo-shuqing-ant-group-intl-hnk/index.html?ref=asiancenturystocks.com). Is he right? Only time will tell. --- # 4\. Screening for candidates Just like previously, I like to screen for my hidden champions using three main metrics: - The historical average return on equity - Growth in earnings per share - Share price performance But given the complex realities of running a business in a communist country, I’m looking for businesses aligned with the Communist Party. Specifically, companies that are not at odds with party supremacy or the plans set out in [Made in China 2025](https://en.wikipedia.org/wiki/Made%5Fin%5FChina%5F2025?ref=asiancenturystocks.com). I’m also looking for companies with sustainable competitive advantages - companies whose products or services are unique and add value to customers. The following ten companies score the highest in terms of historical return on equity: _This post is for paying subscribers only._ ### Fuji Corp Miyagi (7605 JP) URL: https://www.asiancenturystocks.com/fuji-corp-miyagi-7605-jp/ Last updated: 2026-07-31T01:40:01.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I hold a position in Fuji Corp Miyagi at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- When the brilliant Twitter account [Ocular Investor](https://twitter.com/oculariast/status/1665129992420818946?s=20&ref=asiancenturystocks.com) mentioned Japanese tire retailer [**Fuji Corp Miyagi**](https://finance.yahoo.com/quote/7605.T?p=7605.T&.tsrc=fin-srch&ref=asiancenturystocks.com)*(7605 JP - US$187 million)* last weekend, I was intrigued. Here is a company that has grown its earnings per share at a 14% annual rate for two decades yet trades at only 6x P/E. What’s the catch? Fuji Corp Miyagi － not to be confused with machine tool maker [Fuji Corp Aichi](https://finance.yahoo.com/quote/6134.T/?p=6134.T&ref=asiancenturystocks.com) － is a Japanese automobile tire retailer run by a hungry entrepreneur, Fumiki Endo. He founded the company in 1971 and continues to push the company forward. Today, the company has 48 outlets selling tires, wheels, and car accessories. In contrast with the competition, Fuji focuses almost entirely on tires & wheels and sells them at discount prices. The entire company is built around efficiency and low cost. The store buildings are often bought second-hand and renovated to lower prices. Store layouts are simple and functional but certainly not fancy. And Fuji Corp has built several automated warehouses offering many SKUs yet with decent inventory turnover. Customers comment that Fuji’s prices are the lowest in the industry, and the selection of products is great. But there are also complaints about simple store furnishing and long waiting times. Fumiki Endo has purposefully sacrificed some aspects of the customer experience to maintain low prices. The low price point is what’s enabled Fuji Corporation to take market share. The runway of growth remains long. Consider this: competitors Autobacs Seven and Yellow Hat have 588 and 735 domestic outlets compared to Fuji’s 48\. There is immense potential for growth. And Fuji has also been successful in its e-commerce operation. While the company’s segment breakdown is confusing, most sales now come from online sales, whether delivered to stores or customers’ homes. The industry is slow-growing, with the total auto parc stagnant over the past few decades. But a potential shift to heavier electric vehicles could wear out tires faster than before, requiring more frequent purchases. And Fuji is taking market share thanks to its low-price focus and e-commerce operation. With greater online sales, I expect revenues to grow in the high single-digits and margins to expand. With this in mind, the P/E ratio will likely drop from 7x to about 5x by 2026\. Meanwhile, the net cash position represents roughly 24% of the market cap. While the dividend payout ratio of 14% is disappointing, I find it encouraging that Fuji’s return on equity has consistently been around 15-20%, suggesting that capital has been reinvested wisely. The company repurchased roughly 10% of shares outstanding in 2022, most of which were cancelled. Is there a catch? I don’t think so. Fuji Corporation appears to be a well-managed discount retailer taking market share year in and year out. The weather will have an impact on the results and fluctuations in raw materials prices. But across the cycle, customers are likely to be attracted by Fuji’s low prices. It’s just a question of when investors will start paying attention. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Catalyst: Mutant Mayhem URL: https://www.asiancenturystocks.com/catalyst-mutant-mayhem/ Last updated: 2023-06-07T04:09:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![Teenage Mutant Ninja Turtles: Mutant Mayhem Trailer Shows Superfly - Variety](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cee2575d-1bd3-4cd6-ba6f-9ee76887f545_1000x563.png) I’ve spoken positively about the 2023 box office, about how movie-goers are finally returning to the cinemas. The outlook for the cinema industry is finally positive again. In this post, I’ll dig deeper into one franchise: Teenage Mutant Ninja Turtles (“TMNT”). This franchise might have a renaissance with Seth Rogen’s new movie [Mutant Mayhem](https://www.imdb.com/title/tt8589698/?ref%5F=vp%5Fclose&ref=asiancenturystocks.com), due to be released on 2 August 2023. This release will have important implications for two stocks listed in Hong Kong. Two stocks that I’m paying close attention to. # The TMNT franchise ![Teenage Mutant Ninja Turtles #5 (1984 Comic) - YouTube](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f8caf065-462f-49e9-8124-6a8e71762528_1280x720.jpg) Teenage Mutant Ninja Turtles was originally a comic book published in **1984** and written by Kevin Eastman and Peter Laird. The story is about four teenage turtles - Donatello, Leonardo, Raphael and Michaelangelo - exposed to radioactive waste, which gave them supernatural powers. The teenagers were then trained in the art of ninjutsu by their rat master, “Splinter”. They use their abilities to fight crime in a dark, rainy New York City infested with crime and dangerous villains, including the evil character “Shredder”. The original books were meant as a parody of the popular superhero comics of the time, such as Daredevil and X-Men. The series' lighthearted tone has carried on, with Teenage Mutant Ninja Turtles being more humorous than the average Marvel or DC superhero franchise. The first animated [Teenage Mutant Ninja Turtles](https://www.imdb.com/title/tt0131613/?ref%5F=nv%5Fsr%5Fsrsg%5F8%5Ftt%5F8%5Fnm%5F0%5Fq%5Fteenage%2520mutant%2520ninja%2520turtles&ref=asiancenturystocks.com) show aired on Fox Kids in **1987**. But it wasn’t until **1990** that the Teenage Mutant Ninja Turtles craze really took off, with the first live-action [Teenage Mutant Ninja Turtles](https://www.imdb.com/title/tt0100758/?ref%5F=nv%5Fsr%5Fsrsg%5F3%5Ftt%5F8%5Fnm%5F0%5Fq%5FTeenage%2520Mutant%2520Ninja%2520Turtles&ref=asiancenturystocks.com) movie released in cinemas. It had a budget of just US$13.5 million yet brought in over US$200 million at the box office. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ee015d46-b5b5-447a-b8df-aca1998638ff_3058x1356.png) The movie’s sequels were not nearly as successful, but several games on Nintendo’s video game consoles kept interest in the franchise. In **2007**, a 3D-animated movie with called [TMNT](https://www.imdb.com/title/tt0453556/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fq%5FTMNT&ref=asiancenturystocks.com) was released in cinemas. The movie did okay at the box office, but reviewers complained of a lack of substance. The franchise's revival came in **2012** when new owner Nickelodeon launched its 3D-animated [Teenage Mutant Ninja Turtles](https://www.imdb.com/title/tt1877889/?ref%5F=nv%5Fsr%5Fsrsg%5F7%5Ftt%5F8%5Fnm%5F0%5Fq%5FTeenage%2520Mutant%2520Ninja%2520Turtles%2520TV&ref=asiancenturystocks.com) TV series. It became the #1 TV show for boys during its premiere and got a high 7.9/10 score on IMDb. Soon after, the 2014 Teenage Mutant Ninja Turtles real-action movie was a massive success and brought in nearly US$500 million at the box office. This movie and its **2016** sequel led to spikes in sales of related toys. Finally, since **2018**, we’ve seen a TV series and movie released on Netflix under the name of [The Rise of the Teenage Mutant Ninja Turtles](https://www.imdb.com/title/tt9784708/?ref%5F=fn%5Fal%5Ftt%5F2&ref=asiancenturystocks.com). --- # Mutant Mayhem The reason I’m paying attention to the Teenage Mutant Ninja Turtles franchise is because significant change is coming. On 2 August, Hollywood actor and producer Seth Rogen will release a new Teenage Mutant Ninja Turtles movie called [Mutant Mayhem](https://www.imdb.com/title/tt8589698/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F4%5Fnm%5F0%5Fq%5FMutant%2520Mayhem&ref=asiancenturystocks.com). This is what we know about the movie so far: - The screenplay is written by Seth Rogen and Evan Goldberg, a duo that’s previously come up with hits such as Superbad, Pineapple Express, Sausage Party and The Interview. - The movie's plot is about the four teenage ninja turtles trying to be accepted as normal teenagers by taking on a mysterious New York City crime syndicate with an army of mutants. - The movie’s voice actors include John Cena, Seth Rogen, Ice Cube, Post Malone, Paul Rudd, Jackie Chan and several other major Hollywood stars. - The animation style resembles Japanese anime, with a low frame rate and exaggerated human features, including large eyes. - The movie is produced by Seth Rogen’s Point Grey Pictures with a budget of US$200 million, making it the most expensive Teenage Mutant Ninja Movie ever made. Paramount will distribute it. - The release window will be 2 August in the United States all the way to 22 September in Japan. The reception has been positive overall. A few comments on the trailer: > *“It's crazy how we are living in somehow like a *golden era for animation industry*. The quality of animated movies these days are more unique and animators are trying different things to give new flavors to it. I love it!”* > > *“This actually looks awesome.. I love how the brothers are younger teens.. they’re always depicted as so much older and more serious.. looks like *a great kids movie*”* > > *“The Turtles having younger-sounding voices is such a nice change of pace. It makes them more *relatable for younger kids*.”* > > *“Won't lie. I actually want to see this movie. I was there when TMNT was brought into the world. Ah, *the nostalgia*.”* > > *“I love this version already. It's a cool mix of previous takes on the Turtles, it's colorful and exciting, GORGEOUS, it has an actual *teenage vibe and actors*, they do feel young, naive, more childish like just into middle school- bro I'm definitely watching this.”* Seth Rogen said in an interview that the movie is meant to resonate with young boys and girls who are looking to be part of something greater and who want to feel like they belong: > *“We found a way to make it deeply personal. It’s a teenage movie, we’re putting a lot of our own feelings - of awkwardness and insecurity and a *desire to belong and be accepted* and all that - into the movie”* Will it be successful? I think so. One Seth Rogen movie that reminds me of Mutant Mayhem is [Sausage Party](https://www.imdb.com/title/tt1700841/?ref%5F=nv%5Fsr%5Fsrsg%5F0%5Ftt%5F8%5Fnm%5F0%5Fq%5FSausage%2520Party&ref=asiancenturystocks.com), which brought in US$141 million at the box office. But with far greater brand recognition for the Teenage Mutant Ninja Turtles franchise and also targeting the younger demographic, I’m confident the movie will reach well above US$200 million in sales. And there’s more coming. [Cinelinx](https://www.cinelinx.com/movie-news/tv/next-tmnt-animated-series-is-set-in-the-same-universe-as-mutant-mayhem-exclusive/?ref=asiancenturystocks.com) reported that Seth Rogen is also working on a related TV series for Paramount+. The new Seth Rogen Teenage Mutant Ninja Turtles TV series is rumoured to launch in 2024 or 2025. --- # Playmates Toys (869 HK) ![Cowabunga! Here's your exclusive sneak peek at the 'Teenage Mutant Ninja Turtles: Mutant Mayhem' toys](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4584997d-979c-472b-8724-0c0d78b6d386_639x373.jpg) _This post is for paying subscribers only._ ### Hong Kong's tourism boom URL: https://www.asiancenturystocks.com/hong-kongs-tourism-boom/ Last updated: 2023-06-01T03:12:13.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/hong-kongs-tourism-boom/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/48288ca4-8373-4285-868c-4a97fcbe70ee_1061x707.jpg) Source: Getty Images Hong Kong’s tourism industry is recovering. Ever since its borders opened in early January 2023, we’ve seen more and greater numbers of tourists going from mainland China across the border to Hong Kong. These tourists are spending money left and right: on hotels, restaurants, souvenirs, and so on. In this post, I will discuss companies benefitting from the boom. And to what extent the boom has been priced in by the market. ``` Table of contents 1. Evidence of a tourism boom 2. Companies benefitting from the boom 2.1. Retailers 2.2. Commercial property owners 2.3. Restaurants 2.4. Hotels 2.5. Healthcare facilities 2.6. Transport operators 2.7. Telecom operators 2.8. Insurance companies 3. Conclusion ``` # 1\. Evidence of a tourism boom Hong Kong’s borders were more or less closed during COVID-19\. Travellers from certain countries were banned from entering or subject to quotas. There were quarantine requirements. And people were forced to present negative COVID-19 pre-departure tests before entering the city. And after three years of COVID, the borders finally opened on 8 January 2023\. The daily arrivals quota was initially set at 60,000 people per day. Then on 5 February 2023, the quota was eliminated altogether. By 8 March 2023, all border checkpoints were reopened, and there are no longer any restrictions on travel between Hong Kong and mainland China. To jumpstart tourism, the Hong Kong government also launched a HK$255 million “Hello Hong Kong” tourism campaign, which involved giving away half a million air tickets to international visitors. [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/daa6a33f-94f2-486a-8abd-950a2f952821_938x522.png)](https://www.brandhk.gov.hk/en/campaign/hello-hong-kong?ref=asiancenturystocks.com) Since the border reopening, mainland Chinese tourism has gone bananas. In April 2023, the number of mainland Chinese visitors reached 2.3 million. The total number of visitors to Hong Kong has now reached 2.9 million people: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f0ef909-ed4d-4d74-8e08-38cbc46fc42a_1996x872.png) Source: Bloomberg Separate numbers from [Hong Kong International Airport](https://www.hongkongairport.com/en/media-centre/press-release/2023/pr%5F1654?ref=asiancenturystocks.com) confirm these numbers. It handled 3.1 million passengers in April 2023, compared to a 2.3 million average in the first three months of the year. April’s passenger arrival number represents roughly 50% of the pre-2019 level. We’re also seeing a positive effect of tourism on Hong Kong’s retail industry. Hong Kong’s March retail sales rose +41% year-on-year, compared to a +31% year-on-year rise in February. While some of that recovery was surely due to the easing of COVID-19 restrictions late last year, tourism must have helped too. And according to industry publication Skift, sales of jewellery, watches, clocks and valuable gifts [jumped +165%](https://skift.com/2023/05/04/hong-kong-tourism-benefited-from-return-of-mainland-china-visitors-in-march/?ref=asiancenturystocks.com) year-on-year. Jewellery retailer Chow Tai Fook said its same-store sales for Hong Kong and Macau jumped +97% year-on-year in the first quarter of 2023\. Incredible numbers. There’s also plenty of anecdotal evidence of a boom in mainland Chinese tourism to Hong Kong. For example, the Asia Travel Reset newsletter reported that the presence of mainland Chinese visitors to Hong Kong could be felt in mid-May: > *“Day-trippers are easy to spot. In the banks of Admiralty, *mainlanders of all ages dominate the teller lines*. *Supermarket as well as brand shoppers are busy in Causeway Bay*. Garment traders are over from Dongguan and tech guys from Shenzhen. Plenty of people are meeting relatives and friends who live, work or study here. I chatted at the airport bar with a VC guy from Chengdu working on a deal that will bring him back “6 or 7 times this year”.”* Pictures are starting to appear across social and traditional media of mainland tourists visiting Hong Kong. Here are a few examples: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ec358325-969a-4b0e-b9d9-b203a117ced7_3084x2334.jpg) Source: [Xinhua](https://twitter.com/XHNews/status/1653246886030233607?ref=asiancenturystocks.com) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bc9b51ef-8dad-4227-850e-7696d49d8bc4_728x524.png) Source: [Dickson Lee](https://www.scmp.com/news/hong-kong/hong-kong-economy/article/3220253/hong-kong-budget-travel-industry-experts-top-picks-low-cost-mainland-tours-city?ref=asiancenturystocks.com) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e96124eb-b232-43eb-8792-937fe0acd492_720x480.jpg) Source: [Yicai Global](https://twitter.com/yicaichina/status/1622841039605182464?ref=asiancenturystocks.com) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5e9e400c-42ed-43b4-adc5-0c75314c638d_1200x799.jpg) Source: [Global Times](https://twitter.com/globaltimesnews/status/1652301689343582209?ref=asiancenturystocks.com) ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0144771a-5ae3-43c8-af2f-7d6cda48c87e_900x600.jpg) Source: [Xinhua](https://twitter.com/XHNews/status/1636183492462608384?ref=asiancenturystocks.com) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/71a6e90f-11c7-443a-bad6-b61a50a7d35d_1080x712.png) Source: [Bloomberg](https://www.bloomberg.com/news/articles/2023-05-08/china-opening-revives-wealth-pipeline-to-hong-kong-finance-hub?utm%5Fmedium=social&utm%5Fsource=twitter&cmpid%3D=socialflow-twitter-billionaires&utm%5Fcontent=billionaires&utm%5Fcampaign=socialflow-organic&leadSource=uverify%20wall) ![HK](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bb397221-c8f5-4d86-9048-244b5fc61df6_770x578.jpg) Source: [Edmond Ng](https://www.aljazeera.com/economy/2023/3/20/hong-kong-struggles-to-win-back-tourists-world-city-crown?ref=asiancenturystocks.com) ![Tourists walk along Canton Road in Tsim Sha Tsui on the first day of a full reopening of the border between Hong Kong and mainland China on Monday. Photo: Jelly Tse](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f39dac87-b539-4d39-96e9-0eec25d72745_1098x732.jpg) Source: [Jelly Tse](https://www.scmp.com/business/article/3209541/hong-kong-retail-rental-growth-expected-top-asia-pacific-markets-return-mainland-chinese-tourists?utm%5Fsource=Twitter&utm%5Fmedium=share%5Fwidget&utm%5Fcampaign=3209541) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d8eaabb3-3865-414f-aab0-d93022d571a6_1524x1002.png) Source: [Anthony Kwan](https://www.nytimes.com/2023/05/09/world/asia/hong-kong-china-tourists.html?utm%5Fsource=twitter&utm%5Fmedium=website&utm%5Fcampaign=BxBakery%5Frevive) Going through recent earnings calls, I’m also seeing a lot of positive commentary surrounding mainland Chinese tourism to Hong Kong. For example: > *“The improvement was, of course, driven by Mainland China, our houses benefiting gradually from the reopening of the market. *Hong Kong and Macao rebounded sharply*.”* \- Jean-Marc Duplaix, CFO of Kering > > *“We saw also a *big acceleration of tourism back into Hong Kong*, Macau and even Thailand. So this is positive”* \- Nicolas Hieronimus, L’Oreal CEO > > *“A strong rebound in internal tourism, then *the opening of Hong Kong and Macau and sometimes reporting a 3-digit growth in those 2 cities*.”* \- Andrea Guerra, Prada CEO > > *“Revenue at DFS rebounded reopening of the China borders, although it still remains below 2019 levels. *There was a progressive return of tourists to Hong Kong* and Macau.”* \- Chris Hollis, LVMH Director of Financial Communications > > *“We are starting to see the impact of *strong economic rebounds in Hong Kong* and Mainland China.”* \- Georges Elhedery, HSBC Group CFO > > *“We see early signs of a *strong rebound in business activity in Hong Kong* and throughout Asia as travel fully resumed.”* \- Anna Manning, Reinsurance Group of America CEO > > *“*The momentum started in terms of the visitors coming into Hong Kong*. We saw a distinct momentum pick up in February. And *that’s continued as we kind of progress through February into March*.”* \- Anil Wadhwani, Prudential CEO > > *“We’re starting to see Mainland China volume increase in Hong Kong. And then international has just started to come back… so *Hong Kong \[is\] doing very well*.”* \- Josh D’Amaro, Chairman of Disney Park > > *“The key for Hong Kong is, obviously, the profits and revenues are up significantly because we were closed with COVID. There’s no restrictions. We’re now back to doing member intakes… So *we’re feeling pretty good about Hong Kong*”* \- Andrew Carnie, Soho House CEO --- # 2\. Companies benefitting from the boom ## 2.1\. Retailers Hong Kong’s listed retailers are likely to be some of the main beneficiaries of more Chinese tourists to Hong Kong. These tourists will spend money on clothing, cosmetics, electronics, jewellery, wristwatches, snacks, alcohol, cigarettes and even over-the-counter-medicines. But one factor is likely to hold back a full recovery to pre-2019 levels: Beijing’s crackdown on the “daigou” industry from 2019 to 2021\. Since then, bringing products across the border to mainland China without paying tax has become a lot more difficult. So the daigou business is probably not coming back. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fae0abb2-50f3-4f7f-b832-bf515005b50c_1342x1002.png) _This post is for paying subscribers only._ ### Portfolio review May 2023 URL: https://www.asiancenturystocks.com/portfolio-review-may-2023/ Last updated: 2026-06-04T11:44:46.000Z [Click here to view the post in browser](https://www.asiancenturystocks.com/portfolio-review-may-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* # Summary - May’s portfolio performance was strong, with the portfolio value rising another +4.2% month-on-month. The portfolio is now up +26.4% since inception in October 2021, equivalent to an IRR of +15.7%. - The biggest outperformers were [**Delfi**](https://www.asiancenturystocks.com/deep-dive-2012-7-delfi-ltd/) and [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/), perhaps partly related to the strength of the Indonesian consumer in early 2023. - I’ve started selling shares in two Japanese names, using them as funding sources for Chinese consumer and Asia travel recovery bets. These are the themes I am most excited about. - Meanwhile, with the weakening US and European economies, I’m considering hedging the portfolio by buying government bonds. I’m also considering reducing my exposure to commodities. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) # Portfolio update The portfolio performance has been decent, rising another +4.2% month-on-month in May and is now +26.4% since inception in October 2021, equivalent to an IRR of +15.7%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b8d99f03-fb11-4281-ab1c-441b958f82bd_1908x628.png) _This post is for paying subscribers only._ ### Major Cineplex update (MAJOR TB) URL: https://www.asiancenturystocks.com/major-cineplex-update-major-tb/ Last updated: 2023-05-24T03:19:36.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers and to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Major Cineplex when publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ba5a923f-7300-402a-a933-0e8a31d23493_728x524.png) Source: Major Cineplex # Summary - Major Cineplex is the market leader in Thailand’s cinema industry, with 815 screens under management and a market share close to 70%. The company is run by a hungry entrepreneur called Vicha Poolvaraluck, who built it from scratch. Historically, the company has earned a return on equity of close to 20%. - After many decades of success, the business hit a rough patch during COVID-19\. Cinemas were forced to operate below capacity. Moviegoers had to wear masks and were unable to eat popcorn. And Hollywood movies were delayed for several years out of fear that COVID-19 would hurt their box office revenues. - Major Cineplex’s share price was mostly steady throughout 2021 and 2022\. In the past few weeks, the share price has slumped. Investors are scratching their heads to figure out why. - Part of the reason could be related to the 1Q2023 numbers released on 10 May 2023\. They were lacklustre, with revenues and profits falling sequentially. - But I think the share price slump is more likely related to Thailand’s lower house election, which took place on 14 May 2023\. The election result surprised everyone, with the Move Forward Party - led by Harvard-educated Pita Limjaroenrat - gathering the most votes of any party. One of their campaign promises is to break up monopolies, and some fear that Major Cineplex might be one of the companies targeted by a new government. - On the other hand, the Move Forward Party coalition only has 313 seats out of the 376 necessary to gain government control. Campaign promises will have to be diluted. Compromises will need to be made. And it’s not even clear to me that Major Cineplex represents a monopoly in the eyes of the coalition. - The COVID-19 recovery story remains in place, however, with a strong pipeline of movies for the remainder of 2023. - In a full recovery scenario, I foresee a 2025e P/E of 12.9x and a dividend yield of 7.0% — low numbers in the context of an expensive overall Thai stock market. --- # 1\. Introduction to Major Cineplex It’s been a while since I first wrote about the Thai cinema chain [Major Cineplex](https://www.asiancenturystocks.com/major-cineplex-group-public-co-ltd-major-tb/) ($): [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/afbd788f-a933-46de-b0bb-989e41fd1504_1968x1108.png)](https://www.asiancenturystocks.com/major-cineplex-group-public-co-ltd-major-tb/) In my original report, I argued that: _This post is for paying subscribers only._ ### Ryohin Keikaku (7453 JP) URL: https://www.asiancenturystocks.com/ryohin-keikaku-7453-jp/ Last updated: 2026-07-31T01:39:35.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Ryohin Keikaku at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Ryohin Keikaku**](https://finance.yahoo.com/quote/7453.T?p=7453.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(7453 - US$3.0 billion)* is a Japanese retailer selling household goods and apparel under the brand name “Muji”. It’s a highly liquid stock with an ADV of US$26 million. Muji started in 1979 as a private-label brand of the supermarket Seiya. A decade later, it was spun off into its own entity, allowing it to thrive. The word “Muji” means “no brand”, a reference to its private label origins. The philosophy remains the same as in those early days: minimalist, high-quality products at lower prices than what you’d pay for branded goods. To ensure decent profit margins even at those lower prices, Muji doesn’t spend much money on advertising. Muji enjoys a cult following, especially in Japan and other East Asian markets. Consumers like their functional, minimalist designs. Specific “hero” products include pens, umbrellas, suitcases, toiletry bags, storage boxes, and many other cleverly designed products. However, Muji’s success has attracted several copycat brands, especially in China. Examples include the now much more successful Miniso. This competition is one factor behind Muji’s weakening China same-store sales from late 2018 onwards. Other issues that have plagued the company include government-mandated store closures during COVID-19, for example, in Japan in 2020 and in China in 2022\. The weakening of the Japanese yen has also put pressure on margins. Ryohin Keikaku’s new President, Nobuo Domae, took over Ryohin Keikaku in 2021 with a novel strategy of opening stores next to supermarkets in suburban areas. Domae has an excellent reputation, being a former top executive at competitor Fast Retailing and responsible for much of its success overseas. It’s still unclear whether Domae’s aggressive store expansion plan will succeed. Muji’s Japan sales/sqm is now falling. But it’s still plausible that lower rents could make up for the weaker store productivity once they’ve fully ramped up. Otherwise, the outlook for Muji seems excellent. China’s zero-COVID policy is now over, and the same-store sales numbers for China suggest a recovery. Management is guiding for price increases to help make up for the higher procurement costs now that the yen has weakened. So expect a partial recovery in the operating margin, at a minimum. I’m assuming a conservative 8% operating margin, in which case the P/E should end up at around 11x in 2025, compared to 19x historically and 22x for the peer group. The risks are that Nobuo Domae’s store expansion fails. The last time Muji expanded its store sizes in the 1990s, it ended up in tears. Then again, Domae’s reputation is excellent, so you might want to give him the benefit of the doubt. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-b2b/ Last updated: 2023-05-15T04:01:36.000Z MacroAsia, Sunnexta Group _This post is for paying subscribers only._ ### MacroAsia (MAC PM) URL: https://www.asiancenturystocks.com/macroasia-mac-pm/ Last updated: 2026-07-31T01:39:17.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in MacroAsia at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**MacroAsia**](https://www.marketwatch.com/investing/stock/mac?countrycode=ph&ref=asiancenturystocks.com) *(MAC PM - US$161 million)* is the leading aviation services company in the Philippines, with three major businesses: - **Maintenance, repair & overhaul** (”MRO”) through its 49% owned JV ”Lufthansa Technik Philippines”, which provides airframe overhaul across its eight base hangars in the Philippines. It has a \~50% market share across international airlines and particular expertise in repairs of Airbus A380. - **Ground handling and aviation services** (80% owned): Ground handling of aircraft in Manila, Cebu and elsewhere, including moving aircraft to the gate, baggage handling, check-in, aircraft cleaning, fuelling, etc. - **In-flight catering**: Provides food & beverages to 15 foreign airlines (67% market share) and national carrier Philippines Airlines. It also has plans to expand into institutional catering through its new plant in the southern part of Manila. It also has smaller businesses in water supply, sub-leasing a special economic zone at Ninoy Aquino International Airport in Manila and nickel mining services. But overall, most earnings come from the MRO JV with Lufthansa. This JV has a unique competitive advantage in that it enjoys the technological skills of Lufthansa engineers and low-cost English-speaking staff in the Philippines. MacroAsia grew nicely in the two decades up to 2019 by taking over contracts from competitors shut down by the government and provided to it by key customer Philippines Airlines (which now represents \~50% of revenues but a lower share of profits). Air travel to the Philippines had also been growing at roughly 10% per year, making MacroAsia somewhat of a long-term compounder. The company was founded by Philippine tycoon Lucio Tan, who became rich through his near-monopoly in tobacco during the Ferdinand Marcos years. He then bought a controlling stake in the Philippines Airlines. While he has been accused of tax evasion in the past, those issues seem to have been settled. Lucio Tan also seems to be on cordial terms with current President Bongbong Marcos. MacroAsia should benefit from borders reopening and the relaxation of COVID-19 restrictions in the Philippines and elsewhere. Since most profits come from the Lufthansa MRO JV, it’s essentially a bet on long-haul flight traffic. I foresee a P/E multiple of 6.9x by 2025, which compares to its pre-COVID level of about 20x. Peers like Singapore’s SIA Engineering and SATS already trade above 20x P/E on their 2024e estimates. The close relationship with customer Philippines Airlines - also controlled by Lucio Tan - could be problematic if he decides to shift profits to the airline at some point. But the reality is that most profits come from the Lufthansa MRO JV anyway. _This post is for paying subscribers only._ ### Value Investing 101 URL: https://www.asiancenturystocks.com/long-term-front-running/ Last updated: 2026-08-26T13:02:51.000Z I’ve received comments that Asian Century Stocks is difficult to grasp for those outside the finance industry. So let me try to address that issue once and for all. In this post, I’ll provide an introduction to value investing. For example, why do people bother doing fundamental analysis? How do investors choose to invest in a particular stock? I’ll try to explain those issues and many others in simple terms. Here’s an outline of today’s discussion: ``` Table of contents 1. Stories spread like ripples in calm water 2. Momentum investing 3. Value investing 4. Catalysts 5. Implementation 6. Fertile grounds for ideas 6.1. Variant view with a catalyst 6.2. Baby out with the bathwater 6.3. Scepticism about a great growth stock 6.4. Special situations 6.5. Booms and busts 7. Conclusion ``` ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) # 1\. Narratives spread like ripples in calm water ![droplet impact - ripples water stock pictures, royalty-free photos & images](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/88ad5b37-0288-4510-8e70-3f38402aac17_612x387.jpg) Ripples in calm water. Source: Getty Images > *“In the short run, the market is a *voting machine* but in the long run, it is a weighing machine.”* \- Benjamin Graham Viral stories spread exponentially. This is true not only of memes but also of exciting stories about stocks. We get bombarded with narratives daily. Open up CNBC.com, and you’ll see the stories I’m talking about. About elections, interest rate cuts, new products, etc. How do you respond to these stories? You’ll typically form a view of whether you agree with it or not. We tend to “adopt” narratives that already correspond to our existing set of beliefs. Especially those that spark greed or fear, a feeling of community or a sense of community. For example, when COVID-19 hit in early 2020, stories began spreading on social media about sickness and death. Some discarded the event, as perhaps they were of the opinion that epidemics tend not to be a big deal. However, others interpreted the data differently and masked up for years as a consequence. When faced with convincing narratives and emotions that bubble up, we’ll be tempted to act, perhaps by buying shares in a company benefiting from the supposed trend. During COVID-19, for example, many were compelled to buy shares in vaccine maker Moderna. Compelling stories tend to spread in an exponential fashion, from one journalist or one investor to the next. Social media “retweet” buttons have only amplified this virality. I like to think of this virality as the movement of ripples in calm water as narratives spread from one person to another in ever-greater numbers. What does exponential spread mean for investors? Well, if one individual spreads the story to two people each, you end up with the following pattern across Stage 1, Stage 2 and Stage 3: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/af7efa13-1069-47fa-ae18-7141c24a741a_1368x442.png) If that story is an exciting stock tip, and each person is acting on that tip, then the share price will increase exponentially from Stage 1 to Stage 3. My point is this: *most individuals will hear about the stock tip in Stage 3* (60% likelihood), not Stage 1 (only 14% likelihood). That’s the nature of how compelling stories can spread, in an almost exponential fashion. So, if you hear a convincing story and buy a stock based on that story, you’ll be among the last to invest — perhaps close to the peak. That’s why trying to assess narratives in mainstream media is a stupid idea. You’ll be among the last to read and act on those stories, chasing narratives that have already been priced in. --- # 2\. Momentum investing ![Q&A With CNBC's Mad Money Host Jim Cramer-www.njmonthly.com](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6ed8cbad-15fd-4283-9fee-9c6012d56817_600x400.jpg) Jim Cramer. Source: CNBC > *“Successful investing is about having people agree with you ... *later*.”* \- Jim Grant So how do you make money, then? In theory, you’ll want to invest in Stage 1 before others catch on to the story and bid up the price. You might call this strategy *“long-term front-running”*. Not front-running in the illegal sense, but rather buying before others do — sometimes years in advance. Here’s an example of a typical “hype cycle”. As a positive narrative about a stock spreads from one person to another, the share price will exhibit the following pattern: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8e4dd323-d519-43c9-8da0-90af7535de22_1206x790.png) - In **Stage 1**, the stock tends to be illiquid and does not receive much attention from either journalists or sell-side analysts. If you hear the stock mentioned, you’re unlikely to have much of an emotional reaction to it. In fact, you probably don’t even know about the company’s existence. Then, suddenly, a new trend emerges: some government regulation, a new product, or enthusiasm about a specific category of products. - In **Stage 2**, the new trend starts showing up in the company’s financials. The media comes up with a narrative that explains what’s showing up in the data. Investors start putting on exposure. Sell-side analysts pick up coverage and raise their estimates. New buzzwords such as *“BRICs”*, *“The Internet of Things”*, or *“AI”* become known by the general public. And finally, institutional investors buy into the stock as the liquidity becomes high enough for them to accumulate shares. Throughout Stage 2, skepticism remains. - In **Stage 3**, momentum leads to the stock overshooting to the upside. The valuation multiple becomes hard to justify. And suddenly, only trend-followers remain. Then, a flaw is exposed: for example, perhaps growth is slowing down, or accounting irregularities are exposed. This is typically where volumes peak as the shareholder register churns. The initial drop is typically bought and explained away. But over time, investors stop checking their brokerage accounts. It takes a while for them to change their minds. After six months to 2 years, investors start to come to terms with the fact that the stock might not recover. They’ll adopt new narratives about the stock, that *“the growth story is finally over”* or that *“the stock has lost momentum”.* The decision to get rid of the stock is finally related to fatigue, growing tired of getting disappointed repeatedly. Companies that have experienced hype cycles include [Nvidia](https://finance.yahoo.com/quote/NVDA/?p=NVDA&ref=asiancenturystocks.com) (ChatGPT), [Tesla](https://finance.yahoo.com/quote/TSLA/?p=TSLA&ref=asiancenturystocks.com) (electric vehicles), [Meituan](https://finance.yahoo.com/quote/3690.HK/?p=3690.HK&ref=asiancenturystocks.com) (delivery services) and [DraftKings](https://finance.yahoo.com/quote/DKNG/?p=DKNG&ref=asiancenturystocks.com) (US online gaming). Somehow, these types of stocks have been able to capture the public’s imagination. The “hype cycle” described above illustrates a set of realities. One is that investors tend to extrapolate the recent past far into the future. When growth accelerates, the P/E ratio tends to rise commensurately on top of the actual earnings growth. And when growth decelerates, we’ll instead see the P/E compress. Another fact of life is that almost every company hits a speed bump sooner or later. Never assume that the future will be smooth sailing. It never is. And finally, the more popular a stock has been, the faster trend-following speculators must sell to avoid disastrous drawdowns. Escalator up, elevator down. That’s how stock prices tend to move. --- # 3\. Value investing ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/437a09ab-a84b-4dbb-aa98-ca0d6a741f7f_750x489.png) Warren Buffett. Source: Getty Images > *“Rule No.1: *Never lose money*. Rule No.2: Never forget rule No.1.”* \- Warren Buffett One way to deal with the speculative nature of financial markets is to avoid hype cycles altogether. That’s precisely what value investors try to achieve. They buy stocks cheaply, hoping the market will eventually recognize the intrinsic value of their portfolio holdings. Most also try to minimize downside risks by sticking to high-quality companies that sell products that are either needed or desired. For example, if a company sells a product that customers need and can’t get anywhere else, that company is probably not going out of business. It should be able to raise prices, at least in line with inflation. And if the management team is strong, it might even be able to expand the business over time. Warren Buffett popularized the concept of “economic moats”. These are company characteristics that protect the company’s profits from competition. And the lack of competition helps them maintain high margins and a high return on capital. Examples of such business characteristics include: - **Brand recognition**: Customers are willing to pay up for great brands. These brands can help customers minimize the risk of purchase. They can also serve as a status symbol － a costly signal that you have the resources to buy them. - **Network effects**: Services with network effects are those whose value to each user goes up as more users join the platform. Companies with network effects are typically hard to dislodge. Instagram is a perfect example. - **Cost advantages**: Some companies have major fixed costs, such as R&D spread across large unit volumes, enabling them to charge lower prices. Samsung Electronics memory chip unit comes to mind. - **Switching costs**: When it’s expensive or inconvenient for customers to switch to a competitor’s product or service. SAP’s enterprise resource planning system is famously hard to switch away from. - **Barriers to entry**: Regulatory hurdles or high capital requirements. These are quantitative factors that are difficult to assess. But if a company truly enjoys a competitive advantage, you should also see it in the numbers, for example, in the return on equity (net profit/equity). If a company can achieve a 20% return on equity across the cycle with clean accounting and treating its stakeholders fairly, it’s probably doing something right. When judging management teams, ensure the CEO is well-equipped to deal with the particular environment he or she is operating in. For some innovative companies, it might be important to have a CEO with a background in product development. In commodity industries, a company might be better served with a CEO with a relentless focus on costs and capital allocation. In any case, you’ll want the CEO to focus on the business rather than golf or anything else. And you’ll want somebody who skates to where the puck is going rather than focusing on the past. Problems need to be dealt with head-on. That said, high-quality companies rarely trade at low prices. The only time such stocks trade down is when a company experiences short-term challenges. The market is frequently too myopic to see beyond the current downturn. Having a longer-term time horizon than the market is known as *“time arbitrage”* － making money by being more patient than others. Over a hundred years ago, John Maynard Keynes made the point that few investors are patient enough to buy value and wait for years until that value is realized for the benefit of shareholders: > *“The game of professional investment is *intolerably boring* and *over-exacting* to anyone who is entirely exempt from the gambling instinct; whilst he who has it must pay to this propensity the appropriate toll.”* So, while value investing works, it can certainly be boring, and it can take years to recognize the underlying value of an asset. Patience is needed. --- # 4\. Catalysts > *”What are the *catalysts* for the company's proper valuation to be realized?”* \- Julian Robertson We know that stock prices tend to exhibit short-term momentum. We also know they tend to overshoot to the upside as investors pile on and bid up the price. And finally, we know that paying attention to value can minimize losses over the long run. So what should we make of these facts, then? My suggestion is to combine both strategies. Buy stocks that are undervalued compared to their long-term earnings power. Also, ensure the stocks have catalysts that could cause investors to bid up their prices. Such “catalysts” can include anything that causes investors to buy them soon. Typically, they’ll be events that cause shifts in investor expectations. I like it when sell-side analysts upgrade their earnings estimates and call their clients, suggesting they buy the stock. If institutional investors like a story, they’ll often be willing to pay up for it. So, you’ll want to identify future events that markets may have overlooked. Focus on significant change. And ignore events that only affect earnings for a quarter or two. Events that will happen in the next six months are usually priced in. Events further out in the future might be in the process of being priced-in, but haven’t been incorporated into sell-side estimates yet. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a40fc54d-e784-4310-a94e-bc2132a511ab_1352x414.png) I think the sweet spot is events 6-24 months from today, as those will start to be priced in by market in the upcoming year. By looking further ahead, you’ll be able to front-run the buying of other investors as they, too, catch on to the story. How do you know what earnings expectations are? You can start by looking at sell-side analyst estimates. You can also look at P/E multiples. But don’t assume that just because the P/E ratio is low, investor expectations are likely to shift higher. It requires earnings growth to surprise on the upside, too. I prefer to make my own earnings forecast. Then, compare that forecast with sell-side estimates. It’s challenging to make predictions, but try to look at the granularity of an estimate across volumes, selling prices, margins, etc. If you have access to company management, they might be able to help you. Identifying catalysts is about understanding people’s psychology. Your job is not just to predict earnings but also to predict how other investors are likely to react to those earnings. So you’ll need to put yourself in their shoes and observe how they behave. Only then can you understand whether a particular catalyst is likely to move the needle or not. --- # 5\. Implementation ![Battling a bear market - by Michael Fritzell](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/48cece47-85bf-4b1f-bf1a-35d0cac469d8_1450x1128.png) Steinhardt & Partners. Source: New Breed on Wall Street > *“What will *change*?”* \- Michael Steinhardt I believe every investment decision should be based on your opportunity cost. If you can invest in 10% risk-free government bonds, you better find stocks that offer a total return much higher than that. The same is true for comparisons between individual stocks. You’ll want to weigh the potential upside vs the potential risks for each stock. Put together a portfolio where each stock will likely provide a return based on its calculated upside higher than the other, risk-adjusted alternatives. ## 5.1\. Assessing the potential upside Start by opening the company’s annual report and looking at the segment breakdown of revenues and expenses. Then look at the management discussion and analysis to determine the key drivers of revenues and margins. A good starting point is to extrapolate long-term trends and then ask yourself: what might change? Here is the checklist that I use when trying to think about what might change when it comes to an individual company: - **Business model viability**: is the business model fundamentally profitable? - **Secular demand trends**: affects the long-term likely steady-state growth rate - **Product competitiveness**: strong engagement suggests market share gains - **New products**: creating entirely new revenue streams - **Runway of growth**: how much longer the company can continue growing - **Barriers to entry**: whether the market share or margins are sustainable - **Industry supply**: greater supply can put pressure on industry selling prices - **New regulation**: affects the viability and competitiveness of products - **Management**: influences the development of new products and strategic bets - **Restructuring**: can help unlock value by, e.g. shutting down unprofitable segment - **Capital allocation**: shifts in how money is allocated can benefit shareholders - **Macro variables**: interest rates, currency exchange rates, business cycles, etc. - **Accounting quality**: earnings manipulation games cannot last forever - **Insider transactions**: suggests management knows something you might not - **Reflexive processes**: e.g. use of high-priced stock to buy cheap assets Of course, some of these factors matter more in the short run and others more in the long run. So it will truly be an art to think about how each of the fundamental factors of the company might shift in the years ahead and then model earnings properly. I pay great attention to long-term secular trends affecting the company, such as the rise of e-commerce, Western dietary habits or the containerisation of trade. I also pay attention to customer delight compared to what competitors can offer. Because if customers are happy, then the company will be able to raise prices, expand －or even both. You can judge customer delight by speaking to them or looking at engagement metrics or product reviews. For commodity industries, I pay the greatest attention to shifts in industry supply. A large increase in the industry supply of any commodity will cause its price to drop. I like to look at total industry capital expenditure from the annual reports of each company in the industry, their expansion plans, industry inventory, and commodity prices. In your estimate of future earnings, don’t forget to consider where margins might end up, given competitive pressures, industry supply & demand, etc. And think about the impact of interest expense and corporate income taxes. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/10b57978-cb10-4e3d-bdeb-4f7937446594_1648x634.png) My earnings estimate for NagaCorp, which many criticised for being too cautious. Source: [Asian Century Stocks](https://www.asiancenturystocks.com/deep-dive-2023-8-nagacorp-3918-hk/) After forecasting earnings, apply a P/E (price/earnings) multiple you think is reasonable. You might base it on the company’s trading history, the peer group or the perceived quality of the business. ``` Intrinsic value = future EPS x P/E multiple ``` I’d be willing to use a 20x P/E multiple on a high-quality slow-growing business. But perhaps not more than 10x P/E for a low-quality business selling a commodity product. Finally, look at the quality of upcoming catalysts and how soon they are likely to occur. The closer they are to the future, the greater your annualised return on investment. --- ## 5.2\. Assessing risks I think you’re best off thinking about downside risks qualitatively. And then come up with a subjective feeling of risk based on those qualitative factors. Many things could happen that we can’t even imagine. For example, practically nobody had predicted COVID-19? Yet it happened. So instead of trying to predict future negative events, think of the attributes that cause companies to become more fragile. For example: - Whether it has **economic moats** or not - Whether revenues are **recurring** or reliant on discretionary spending - Excessive **leverage** - A track record of **fraud and misrepresentation** - A product at risk of **technological obsolescence** - A variety of **legal or regulatory risks** - Excessive **customer or supplier concentration** Going through this list for each company will give you a feeling of the risk of the assets. With experience, you’ll understand what factors matter the most in what situations. Your familiarity with the company and industry in question should also affect your perception of the potential downside risks. As you become more comfortable with a particular situation, you should be willing to allocate more to that investment. --- ## 5.3\. The risk-reward skew To reiterate, I suggest calculating the upside in percentage terms and then weighing that upside against a subjective feeling of the risk of a particular stock. You might call this the risk-reward skew － whether the reward justifies the risk. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb0fcc84-0f52-49ea-9ffa-c929cf0a17c6_1444x900.png) For a risky stock with high leverage, customer concentration and a commodity product, I’d want more than 100% upside － especially if the story will take years to play out. Conversely, for a moaty company selling an industry-leading or differentiated product, perhaps I’ll be happy with as little as a 50% upside. And also, take into account whether are any near-term catalysts in your timeline of future events. If you have to wait many years for something to play out, then the annualised rate of return on your investment will likely prove poor. If all you get from a risky stock is a sub-10% yearly return, then why bother? Finally, in the event that the company has a near-term problem, wait for it to pass. It’s hard to guess how bad things can get. And how long it will take for the company to recover. Life is short. You’re better off looking forward to positive surprises. --- # 6\. Fertile grounds for ideas ![magnifying glass - magnifying glass stock pictures, royalty-free photos & images](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/523fb7bb-996b-4c24-b5ad-14ed2f3365c3_612x382.jpg) Source: Getty Images So far, I’ve argued that you should find stocks that enjoy significant upside to their intrinsic values, have positive catalysts in the near-term future and don’t carry too many downside risks. But where do you find such stocks? Here are five suggestions on situations that I consider fertile grounds for ideas: ## 6.1\. Variant view with a catalyst > *“Investing is about discounting the obvious and *betting on the unexpected*”* \- George Soros In this category, I’m referring to situations where you know something that the rest of the market doesn’t － some events in the future that will cause earnings expectations to shift in the next 24 months. Perhaps a future product, a future regulation, or a shift in industry supply & demand. There’s no easy way to identify these situations other than interacting with people in the industry. You can also try to use Google Alerts, filtered RSS feeds and more with keywords that signal a coming event. Or dig into the individual companies from A-Z and ask yourself, *“What might change”*? And then invest if you think earnings expectations will shift materially in the next few years. --- ## 6.2\. Baby out with the bathwater > *“Usually, when an *entire industry is in a crisis*, with one or two companies bankrupt or on the verge of it, the whole industry is due for a bounce, as long as there is something in the situation that should change fundamentals”* \- Jim Rogers Investors are quick to put stocks in categories and judge them based on their affiliation with these categories. For example, whenever an asset class or a sector becomes *“uninvestable”*, individual stocks will become unfairly punished just by virtue of being part of that category. The high-quality company (the “baby”) gets thrown out with the bathwater, so to speak. The trigger for such crashes tends to be outflows from a particular category of funds, perhaps country or sector funds. And then trend-followers sell with no regard for price. Illiquid stocks are usually punished the most - especially those that fall below the market cap or trading volume thresholds that institutional investors require to invest. Whenever uninformed peers tell you that a region *“sounds risky”,* there are probably bargains. They might concede that stocks look cheap but will typically tell you that *“there are no signs of a turnaround yet”* and that the *“picture is still dark”*. You’ll need to question these popular narratives and start buying shares of high-quality companies that have been unfairly punished － companies that will survive the crisis no matter what. I like companies with strong balance sheets, differentiated products, high returns on capital, clean corporate structures, and actively buying back shares. Remember, crises are typically the only time when high-quality companies become even remotely cheap. So make sure you pounce once opportunities present themselves. --- ## 6.3\. Scepticism about a great growth stock > *“Unless there is *fear in a stock*, it probably doesn’t have a great capital gains potential”* \- Bob Wilson Great growth companies are rare. As Michael Mauboussin demonstrated in [The Base Rate Book](https://plus.credit-suisse.com/rpc4/ravDocView?docid=gIamqy&ref=asiancenturystocks.com), betting on continued 20%+ growth usually leads to disappointment. But, once in a blue moon, you might come across a product you think is so far above the competition that you think it will grow fast for years or even decades. With a management team well-equipped to take advantage of the opportunity. Monster Beverage comes to mind, as does Tencent. In that case, consider buying shares in the company and hold until the growth opportunity has been exploited. For great growth stocks, I pay attention to customer engagement, whether the products dominate their niche or are differentiated in some way, whether their market share is increasing, whether margins or return on capital are higher than peers and whether operating cash flow per share is rising. You might wonder why such stocks could ever be undervalued. You’d be right to be sceptical. But in some cases, investors in non-speculative markets might be myopic. Despite extraordinary growth prospects, they might be unwilling to pay more than 20x or 30x P/E. Also, be on the lookout for sceptical comments about the company’s growth prospects. Investor scepticism can be seen as fuel for further gain. Scepticism may persist for years but eventually dissipate as the stock goes higher in the hype cycle, at which point it will be time to sell. --- ## 6.4\. Special situations > *“I'm looking for these special situations, *these unique ideas*”* \- Michael Burry What Joel Greenblatt calls “special situations” are those where a stock price has dropped due to factors that have nothing to do with company fundamentals. What makes special situations investing so compelling is that you don’t need to be a great financial- or business analyst. Just buy a stable-enough business at a ridiculously low valuation. And hopefully, the business will be humming along until other investors realise what a bargain the stock really is. Events that might have triggered the forced selling of shares below intrinsic values include: - Spin-offs - Post-reorganisation equities - Broken IPOs or merger arb - Dilutive rights issues - Dividend omissions To identify special situations, run screens through Bloomberg or some other paid service. In some of the above cases, you may need to search manually through filings or news reports. I’d suggest reading [Greenblatt’s 1999 book](https://www.amazon.com/You-Can-Stock-Market-Genius/dp/0684840073/ref=sr%5F1%5F1?crid=JND6Q1J52L5I&keywords=you+can+be+a+stock+market+genius&qid=1683636610&sprefix=you+can+be+a+stock+market+gen%2Caps%2C490&sr=8-1&ref=asiancenturystocks.com) since he covered special situations far better than I ever could. I think it’s a must-read for any event-driven investor. --- ## 6.5\. Booms and busts > *“Just about the time you learn to play the game, *they change the rules*”* \- Alan Abelson As I alluded to above, people invest based on narratives, and price movements can reinforce the perception of the narrative itself. Whenever a particular method of investing becomes popular, fund flows into that strategy start to pick up. The flows can help the strategy perform and attract further inflows. In finance, reflexive processes refer to situations where an increase in the price of a security can lead to further price gains. Perhaps as higher-priced stocks can attract better-quality employees through dilutive stock options. Perhaps through accretive acquisitions financed through high-priced equities. Or just as trend-following investors pile on as a story continues to deliver. But eventually, at Stage 3, the valuation gap becomes too big to ignore, and momentum traders become jittery. Something sparks a shift in investors' minds and they start selling. The stock will fall much faster than it rose, not forming a bottom until true value investors feel compelled to step in. Let’s say you’re impressed by ChatGPT and want to play the “AI” boom by buying Nvidia. What are some of the signals that might tell you where we are in the hype cycle? - If a new buzzword has just been created (such as FANG, BRIC or ETFs) but not yet used by the general public, we might still be in an early inning. - Smart investors step in ahead of the general public. - Fund flows tend to be positive throughout the build-up of the boom and tend to accelerate just before the peak. - The mass media starts paying attention to the theme midway through the cycle. - Long-term log-periodic oscillations in the share price tend to increase in frequency, indicating overcrowding until a breaking point, which can be identified through quantitative models. - In the euphoric stage, margin debt as a proportion of market value shoots ups. - In the end, only trend-followers survive as participants - i.e., it is hard to find any value investors left as shareholders. - Volatility tends to rise at around the peak as retail investors step in and smart money sells. - An element of fear is introduced - doubts start to emerge among shareholders, and their *“continuity of thought”* against higher prices is somehow broken. - The exponential price trend breaks, and the price fails to make a new high despite positive commentary. The stocks most affected by boom and bust patterns are those whose intrinsic values are difficult to determine: growth stocks, gold, collectables and cryptocurrencies. While some investors baulk at paying high multiples for stocks, it’s usually not possible to entirely disprove why a growth stock should not trade at a certain multiple. It just depends on how many years of growth you are willing to discount. --- # 7\. Conclusion Investors who adopt the “value-with-a-catalyst” strategy tend to focus on stocks that are undervalued compared to their future earnings. They then identify catalysts that might cause other investors to reassess their earnings expectations. I suggest weighing the calculated upside of investing in a particular stock with a subjective view of the risks involved. Call it the risk-reward skew. - The upside is best measured by projecting earnings by analysing consumption trends, new products, regional expansion etc., and then applying a multiple against those earnings. - The downside is best measured in qualitative terms by ticking off a checklist of potential risks: leverage, the company’s economic moat, customer concentration, risk of fraud, risk of technological obsolescence, the valuation multiple and whether you have expertise in a particular country or industry. Getting to a well-balanced portfolio requires turning over many stones and discarding ideas that didn’t work out. And when you find ideas that score particularly well, be prepared to bet big. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Enjoyed this post? Consider a free trial, giving you instant access to Asian Century Stocks deep-dive reports, thoughtful commentary and more: [Get 30 day free trial](#/portal/signup) ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-e44/ Last updated: 2023-05-11T02:07:14.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-02e/ Last updated: 2023-05-08T04:01:00.000Z NagaCorp, Seven & I, Activation Group, Medical Net _This post is for paying subscribers only._ ### NagaCorp (3918 HK) URL: https://www.asiancenturystocks.com/deep-dive-2023-8-nagacorp-3918-hk/ Last updated: 2026-07-31T01:38:50.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in NagaCorp at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**NagaCorp**](https://finance.yahoo.com/quote/3918.HK?p=3918.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(3918 HK - US$3.5 billion)* is a Hong Kong-listed casino operator based in Cambodia’s capital city of Phnom Penh. Its two “NagaWorld” casinos with 480 gaming tables and 3,700 slot machines, and hotels with 2,700 rooms and related commercial properties. What makes NagaWorld unique is that it has a monopoly on running casinos in a 200km radius of Phnom Penh, lasting until 2045\. And its casino license lasts until 2065\. The regulatory environment has also been exceptionally favourable, with low gaming taxes of just 4-7% compared to up to 40% in Macau. Cambodia also offers visas on arrival to mainland Chinese visitors. NagaCorp was founded by a Malaysian national called Dr Chen Lip Keong, who used to be the economic adviser to Cambodia’s current Prime Minister Hun Sen. NagaCorp, under his control, compounded earnings per share at a 15% rate for over 15 years until COVID-19 hit in early 2020. The bull case is that tourism to Cambodia growing on a secular basis. Only 7 million people visited Cambodia in 2019 compared to 40 million in Thailand. Cambodia has a close relationship with China, often described as a success case in China’s Belt and Road Initiative. And a new airport will open in Phnom Penh in 2025, enabling greater tourism. Roughly half of Cambodia’s foreign direct investment (FDI) comes from China. And that FDI is likely to grow now that two major trade agreements have gone into effect. Sell-side analysts at CICC found an 83% correlation between China's FDI into Cambodia and NagaCorp’s gross gaming revenue. On the other hand, Cambodia’s casinos have often been used for money laundering and capital flight, including from China. For example, before 2019, hundreds of thousands of Chinese operated online casinos in Sihanoukville, targeting mainland customers. Most of those have now been shut down. While NagaWorld doesn’t operate any online casino, it has worked with so-called junket operators in the past, who lend money to VIP customers to buy chips, and those chips can then be redeemed for foreign currency. The VIP customer in China then settles the debt with the junket operator in Renminbi. NagaCorp’s profits fell precipitously during COVID-19. - One major reason was the border closures, given that only foreign passport holders can gamble at NagaWorld. - Another reason was China’s crackdown on capital flight through the use of junket operators. For example, it shut down Macau junket operator Suncity, which used to operate VIP rooms at NagaWorld. NagaCorp is also building a third casino nicknamed “Naga 3”. This casino will cost US$3.5 billion and have a floor area of half a million square metres - a massive investment. There are also questions about how Naga 3 will be financed. 50% of the capex will be taken the ListCo. The remaining 50% will be financed by the controlling shareholder Dr Chen, who will, upon completion, inject the asset into the ListCo. Many wonder whether a US$3.5 billion project is needed, provided that most of NagaCorp’s revenues are from VIP customers anyway. And when it comes to VIP customers, I’m not sure that the Chinese VIP business will ever return to its 2019 level. Even with conservative assumptions, the P/E ratio will probably end up somewhere around 9.6x, below its historical multiple of 11x and below the peer group’s 18x. On the positive side, China’s borders have now opened up. And group travel to Cambodia has also resumed. So expect far greater foot traffic to Cambodia in the next few quarters. And Dr Chen is buying shares actively in the open market, suggesting optimism for the future. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-4f6/ Last updated: 2023-05-01T04:03:25.000Z Noah Holdings, Hibiscus Petroleum, April 2023 portfolio review _This post is for paying subscribers only._ ### Portfolio review April 2023 URL: https://www.asiancenturystocks.com/portfolio-review-april-2023/ Last updated: 2026-06-04T11:45:25.000Z Adding to three China reopening proxies. Estimated reading time: 28 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-adf/ Last updated: 2023-04-24T04:00:24.000Z Persistent Systems, Praemium, Hong Kong Hidden Champions, Borrowing ideas from funds #6 _This post is for paying subscribers only._ ### Hidden champions of Hong Kong URL: https://www.asiancenturystocks.com/hidden-champions-of-hong-kong/ Last updated: 2025-10-06T12:56:53.000Z An attempt to find the best businesses listed in Hong Kong. Estimated reading time: 33 minutes. _This post is for paying subscribers only._ ### Borrowing ideas from funds, part 6 URL: https://www.asiancenturystocks.com/borrowing-ideas-from-funds-part-6/ Last updated: 2026-04-15T15:31:30.000Z Here’s yet another edition of my reviews of the key holdings of Asia-focused funds. I will release new editions as time progresses. # Summary - I love VARECS Partners’ strategy of focusing on companies dominating their niches. The stock that intrigues me the most is the online auction platform [**Aucnet**](https://finance.yahoo.com/quote/3964.T/?p=3964.T&ref=asiancenturystocks.com). The stock trades at a P/E of 8.5x and EV/EBIT of 2.5x. For reference, Thailand’s Union Auction trades at 20.5x and Copart at 30.0x. - Forager Funds seem to like niche software businesses. In any case, New Zealand’s [**Tourism Holdings**](https://finance.yahoo.com/quote/THL.NZ/?p=THL.NZ&ref=asiancenturystocks.com) fits into my personal positive view of Asian tourism. The stock trades at a consensus 2024e P/E of 11.6x, which does seem low. - Airlie Funds proclaims to have a value-focused strategy. But neither of their top positions trade at particularly low multiples. I suppose [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX/?p=TAH.AX&ref=asiancenturystocks.com) trades at an EV/Sales of 0.8x. I covered the stock in this prior deep dive [here](https://www.asiancenturystocks.com/deep-dive-2022-28-tabcorp/). - VinaCapital’s Vietnam Opportunity Fund is publicly traded and seems to give exposure to companies with high margins and high returns on equity. After listening to the Business Breakdown podcast on India’s Titan, I’m starting to understand the attractiveness of [**Phu Nhuan Jewelry**](https://www.marketwatch.com/investing/stock/pnj?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com). I also think that [**FPT Corporation**](https://www.marketwatch.com/investing/stock/fpt?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) makes sense. And [**PetroVietnam Technical Services**](https://www.marketwatch.com/investing/stock/pvs?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) will probably benefit from any upswing in regional energy sector capex. - Capital Dynamics’ Tan Teng Boo is an old-school value investor. I do think his portfolio company [**Padini**](https://finance.yahoo.com/quote/7052.KL/?p=7052.KL&ref=asiancenturystocks.com) is a high-quality retailer, mostly thanks to the brilliance of founder Yong Pang Chaun. It enjoys a return on equity of 26%. I’ve long been sceptical about their ability to deal with the competition with H&M, Uniqlo and Zara. But I’ve been proven wrong. The valuation multiple of P/E 12.3x remains low. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) # VARECS Partners VPL-I Trust ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/705821a1-2eac-4b4d-bd58-5b9b02217639_290x290.png) Tokyo-based Varecs Partners was founded by Jiro Yasu, previously at First Eagle in New York City, focusing on Asian equities for them. Since 2006, he’s been the portfolio manager for VARECS Partners’ VPL-I Trust. ![Jiro Yasu | Fund Manager Finder | INVESTMENT IN JAPAN ](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a45dfa8d-a9cd-4f43-adfe-027475750750_670x350.jpg) Jiro Yasu There is no performance data for the trust, at least not in the public domain. The strategy is to invest in high-quality businesses at significant discounts to intrinsic value. According to the website, they prefer dominant businesses in niche markets. And since they’re long-term investors, they hope for intrinsic value to “compound”. At least, that’s how they think about the intrinsic value concept. There is no full disclosure of VPL-I Trust’s portfolio. But since VARECS takes large positions, they’ve had to disclose their positions in the seven companies with larger than 5% stakes. These companies are eclectic, to say the least. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5f977102-9e87-46be-abea-990a1a12b0be_2362x562.png) Source: Bloomberg [**Teikoku Electric Manufacturing**](https://finance.yahoo.com/quote/6333.T?p=6333.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(6333 JP - US$334 million)* produces no-leak canned pumps, with a 40% global market share in its segment. Canned pumps are used in the chemicals and petrochemical industries where hazardous materials are being handled, and liquids need to be transferred with zero risk of leakage. The stock has performed well and still trades at just 13.0x P/E. [**Dream Incubator**](https://finance.yahoo.com/quote/4310.T/?p=4310.T&ref=asiancenturystocks.com) *(4310 JP - US$212 million)* is a consulting company established by Koichi Hori, a former BCG consultant. It has a venture capital business, incubating start-ups. It also has a consulting arm which serves large enterprises and the government. And it also does M&A advisory. Its profitability has been inconsistent, but the stock trades at 0.27x revenues. [**Hokuetsu Industries**](https://finance.yahoo.com/quote/6364.T/?p=6364.T&ref=asiancenturystocks.com) *(6364 JP - US$300 million)* is Japan’s largest producer of air compressors used in sectors such as construction, mining, agriculture, and manufacturing. Compressed air is used as a power source for tools and machinery. Compressed air can also be used for drying, blowing and cleaning. Hokuetsu’s earnings have recovered nicely from COVID-19\. It trades at 10.1x P/E. [**Aucnet**](https://finance.yahoo.com/quote/3964.T/?p=3964.T&ref=asiancenturystocks.com) *(3964 JP - US$295 million)* has an online auction platform for used cars and machinery. The company also offers inspection services for the vehicles listed on the platform to guarantee the quality of the items. It also offers payment services with escrow accounts and delivery of the vehicles to the customer. The commission is charged as a percentage of the price of each vehicle. The stock trades at just 9.5x P/E with a 3.2% dividend yield. [**Vertex**](https://finance.yahoo.com/quote/5290.T?p=5290.T&ncid=yahooproperties%5Fpeoplealso%5Fkm0o32z3jzm&ref=asiancenturystocks.com)*(5290 JP - US$313 million)* produces concrete-related products such as beams, columns and panels, bridge girders, and tunnel linings. They’re essentially a supplier to construction companies. The stock has performed beautifully over the past two years yet only trades at 10.1x P/E. [**Mercuria**](https://finance.yahoo.com/quote/7347.T/?p=7347.T&ref=asiancenturystocks.com) *(7347 JP - US$116 million)* is a fund manager founded as a JV between the Development Bank of Japan and Asuka Asset Management. They provide growth capital to small and medium-sized enterprises in Japan that have demonstrated potential for expansion but require additional funding to accelerate. To date, Mercuria has invested in healthcare, education and tech companies. Its main shareholder is Itochu. The stock trades at 9.5x P/E with a 5.6% dividend yield. [**Techno Medica**](https://finance.yahoo.com/quote/6678.T/?p=6678.T&ref=asiancenturystocks.com) *(6678 JP - US$117 million)* manufactures and sells internally-developed test tube preparation systems, automating whole blood and urine tests from check-in to collection. It has a domestic market share of about 90% and is now turning overseas for growth. The stock trades at just 12.9x P/E with a 3.3% dividend yield. --- # Forager Australian Shares Fund ![Forager Funds Management - International and Australian Shares Funds](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c334cf9b-c711-42e8-a551-af663cc13444_458x110.png) Forager Funds was founded by Steve Johnson in 2009\. The fund manager is focused on long-term value in companies that other investors overlook. Today, they manage around AU$350 million in assets under management. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9121d30b-9411-4a0a-b9ac-46af6419d73b_1534x862.png) Johnson started at Macquarie, then shifted into writing a newsletter called *“The Intelligent Investor”* between 2003 and 2009\. Today, he manages several funds, including the Forager Australian Shares Fund and the Forager International Shares Fund. Since its inception, the Forager Australian Shares Fund has performed better than the index, though not significantly. On my numbers, I get to a compound annual growth rate of about 8%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/786f3180-0751-421c-b207-df136f0ab639_1416x376.png) According to the latest March 2023 fact sheet for the Australian Shares Fund, the largest exposures are companies that are relatively obscure to the average investor. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3e73c737-2839-4fc9-9464-7a35631b7835_1014x716.png) [**Tourism Holdings**](https://finance.yahoo.com/quote/THL.NZ/?p=THL.NZ&ref=asiancenturystocks.com) *(THL NZ - US$564 million)* is a New Zealand-based company that sells campervans, motorhome rentals and tourism-related services such as holiday park management, tour agencies, etc. Regarding motorhomes, its fleet is currently over 6,000 vehicles, mostly in New Zealand and Australia. The stock has performed nicely in the past year. On a forward-looking basis, the stock still trades at just 11.6x P/E. [**RPM Global**](https://finance.yahoo.com/quote/RUL.AX/?ref=asiancenturystocks.com) *(RUL AU - US$218 million)* develops software solutions for metals & mining companies. A few of its software programs include mine design, planning, scheduling and optimisation solutions for open-cut and underground mining. RPM also sells an asset management solution that helps companies manage their mining equipment and infrastructure. The company is losing money but its EV/Sales multiple is 3.9x. [**Readytech**](https://finance.yahoo.com/quote/RDY.AX/?p=RDY.AX&ref=asiancenturystocks.com) *(RDY AU - US$228 million)* is another company, but focusing on a different niche: education. Readytech’s software is focused on student management software, measuring enrolment, attendance, assessment and reporting. It can also help manage school employees, including payroll services and compliance. Readytech also has an e-learning platform, but its popularity is unclear. The stock now trades at a P/E of 17.8x, though be aware of the historically low return on capital. [**Integral Diagnostics**](https://finance.yahoo.com/quote/IDX.AX/?p=IDX.AX&ref=asiancenturystocks.com) *(IDX AU - US$492 million)* provides diagnostic imaging services such as X-rays, ultrasounds, mammograms, CT scans, MRI scans, etc. They have a number of diagnostic imaging centres across Australia and have built up a network of doctors referring patients to their clinics. It seems like growth has been driven by acquisitions, leading to a weak return on equity. Trailing twelve-month P/E on a GAAP basis is currently 27.6x, which doesn’t sound all that low. [**Gentrack Group**](https://finance.yahoo.com/quote/GTK.NZ/?p=GTK.NZ&ref=asiancenturystocks.com) *(GTK AU - US$200 million)* is also a software developer in another vertical: solutions for utilities and airports. Its software is used for billing, customer management, operational analytics, etc. Its apparently been used by over 200 utilities and airport operators worldwide, including in Australia. The company is barely profitable but trades at an EV/Sales of 2.3x. --- # Airlie Australian Shares Fund ![Airlie Australian Share Fund - Airlie Funds Management](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6331ea2d-70f2-4b5c-bc65-88d710b89c52_366x142.png) Airlie Funds Management is one of the Australian value investors I respect the most. I came across them during my research of Tabcorp, covered here. But the firm also seems to have a decent reputation among the Australian investment community. The company was founded in 2012 by John Sevior, who came from being head of equities at Perpetual. Today, it runs about AU$9billion in assets under management, with a clear value-focused approach. In 2018, Magellan Financial Group acquired Airlie. And more recently, John Sevior has said he will retire from Airlie in June 2023. ![Coronavirus: Despite the COVID-19 flux, market is 'still a good place to be'](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3f858111-1881-44b3-84c3-59531e3f4bdd_800x450.jpg) The Australian Shares fund is today run by Matt Williams, who was also head of equities for Perpetual, though at a later date. Co-portfolio manager for the fund is Emma Fisher. She can be found on Airlie’s YouTube channel, where she provides [quarterly updates](https://www.youtube.com/watch?v=BQklBKbTsCU&ref=asiancenturystocks.com) to investors. The fund’s strategy is bottoms-up, long-only and concentrated into roughly 25 stocks in Australia. They call their approach “active, high conviction”. Current assets under management are AU$ 347 million. The performance of Airlie’s Australian Shares Fund has been quite impressive at 10.5% per annum compared to an index return of 8.1%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45aa9bc7-8149-405e-81cc-fe8fc5d81ed2_1776x1010.png) While I haven’t been able to retrieve the entire portfolio, the fund’s top ten positions are disclosed in the fund’s monthly fact sheets, for example, [here](https://www.asiancenturystocks.com/content/files/funds/airlie-australian-share-fund/reports/fund-updates/february-2023-fund-update.pdf). Since they are listed in alphabetical order, unfortunately, we do not know which of these stocks are their highest conviction bets. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fb70224c-f560-4b7c-904f-cb2485f341e9_1740x852.png) This portfolio is decidedly mainstream. The portfolio covers major index weights such as [**BHP**](https://finance.yahoo.com/quote/BHP/?p=BHP&ref=asiancenturystocks.com), [**Commonwealth Bank**](https://finance.yahoo.com/quote/CBA.AX/?p=CBA.AX&ref=asiancenturystocks.com), [**CSL**](https://finance.yahoo.com/quote/CSL.AX/?p=CSL.AX&ref=asiancenturystocks.com)**,** [**National Australia Bank**](https://finance.yahoo.com/quote/NAB.AX/?p=NAB.AX&ref=asiancenturystocks.com) and [**Macquarie**](https://finance.yahoo.com/quote/MQG.AX/?p=MQG.AX&ref=asiancenturystocks.com). While the Australian banks enjoy stronger underlying profitability than most of their European peers, I personally question why you’d want to own them in the face of a weakening Australian property market. And 2023 is when many mortgages face interest rate resets, which will undoubtedly be challenging for many homeowners. I also question whether my former employer, Macquarie, will do well in a high-interest-rate environment. Airlie has a larger-than-index weight on [**Aristocrat Leisure**](https://finance.yahoo.com/quote/ALL.AX/?p=ALL.AX&ref=asiancenturystocks.com)*(ALL AU - US$17 billion)*. The company produces slot machines under the brands Buffalo, Queen of the Nile, and More Chilli. It also has an online game developer subsidiary, Product Madness, which produces free-to-play casino games for social media platforms like Facebook. The stock has recovered from COVID-19 and trades at a fairly lofty P/E multiple of 27.7x. [**Mineral Resources**](https://finance.yahoo.com/quote/MIN.AX/?p=MIN.AX&ref=asiancenturystocks.com) *(MIN AU - US$10 billion)* is even more of an off-index bet. It’s a mining services business with excellent returns on capital thanks to its (historically) asset-light business model. The services offered include mine design and construction, mining and crushing, and mine site operation and maintenance. It also has a renewable energy subsidiary focusing on waste-to-energy and gas-fired power generation. The stock has gone on a massive rally since 2020, thanks to its exposure to the lithium mining industry. The stock trades at P/E 21.6x, but be aware that Chinese onshore lithium prices have started falling. [**Medibank**](https://finance.yahoo.com/quote/MPL.AX/?p=MPL.AX&ref=asiancenturystocks.com) *(MPL AU - US$6.6 billion)* provides health insurance domestically and healthcare services such as telehealth, in-home care and support services, etc. Earnings growth has been somewhat weak, but the company pays out most of its earnings as dividends, providing a 3.8% dividend yield. The 2024e P/E ratio is 19.3x. Lastly, Airlie has invested in offline wagering services company [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX/?p=TAH.AX&ref=asiancenturystocks.com)*(TAH AU - US$1.6 billion)*. They invested in the stock before the spin-off of The Lottery Corporation. But according to analyst Will Granger in this video [here](https://www.youtube.com/watch?v=3WDTI6pXdgQ&ref=asiancenturystocks.com), they are now more bullish on the former, given the large valuation disparity that has emerged. Weak foot traffic at Tabcorp’s retail venues during COVID-19 is now in the rearview mirror. States are also equalising the playing fields between the taxes paid by online and offline wagering companies. The stock trades at an EV/Sales of 0.88x. I wrote about Tabcorp in a prior dee-dive available [here](https://www.asiancenturystocks.com/deep-dive-2022-28-tabcorp/). --- # VinaCapital Vietnam Opportunity Fund ![VinaCapital | World Economic Forum](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3afbb560-85cc-4fa2-a3bb-686ab49e9a48_564x89.png) VinaCapital is a Vietnam-focused asset manager founded in 2003 by a group of American and European businessmen and portfolio managers. Today, it’s one of Vietnam’s largest investment managers with US$4 billion in assets under management. [**Vietnam Opportunity Fund**](https://finance.yahoo.com/quote/VOF.L/?p=VOF.L&ref=asiancenturystocks.com) *(VOF LN - US$846 million)* was launched that same year as a closed-end fund listed on the London stock exchange. The fund invests in a diversified portfolio of listed and unlisted equities, real estate and private equity. VOF’s performance has been impressive, rising roughly 11% annually in British Pound terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1f1c7f56-d415-42a9-a622-b3ca319f7998_1526x584.png) The fund is managed by a group of individuals at VinaCapital, including portfolio manager Khanh Vu and VinaCapital’s CIO Andy Ho, whose book I reviewed [here](https://www.asiancenturystocks.com/andyhovietnam/) and can be purchased [here](https://www.amazon.com/Crossing-Street-success-investing-Vietnam-ebook/dp/B094NNYF1T/ref=sr%5F1%5F1?crid=11OCSEULOVTNV&keywords=crossing+the+street&qid=1654650560&sprefix=crossing+the+stre%2Caps%2C371&sr=8-1&ref=asiancenturystocks.com). ![Andy Ho và “hành trình” tới Giám đốc Điều hành VinaCapital - Nhịp sống kinh tế Việt Nam & Thế giới](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e6043c99-b1aa-4f78-8c72-d1b59aef3112_550x364.jpg) VinaCapital’s Andy Ho Andy has been with VinaCapital since 2007 and now leads the firm’s investment strategy and portfolio construction. Before VinaCapital, he worked as an investment banker for Goldman Sachs in New York and Hong Kong. He also worked for US-based private equity firm Pegasus Capital. He has an MBA from Kellogg. The portfolio is 100% focused on Vietnam and seemingly index-agnostic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/95825907-b78d-4ad0-ba14-120b1dec89c3_2538x1278.png) [**Asia Commercial Bank**](https://www.marketwatch.com/investing/stock/acb?countrycode=vn&ref=asiancenturystocks.com) *(ACB VN - US$3.5 billion)*is one of the largest commercial banks in Vietnam, with total assets of roughly US$30 billion. It seems that ACB has been at the forefront regarding its technology, with a slick mobile app and online banking platform. Its financial performance is also impressive. The stock trades at a P/E of 6.1x, despite a return on equity in the mid-20s. [**Hoa Phat Group**](https://www.marketwatch.com/investing/stock/hpg?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(HPG VN - US$5.1 billion)* used to be VOF’s largest position, but it looks like it’s now been sold down in favour of ACB. It’s a large Vietnamese steel manufacturer with two steel plants and over 7 million tonnes of capacity. Hoa Phat also has a real estate development subsidiary called Hoa Phat Land and an agriculture subsidiary producing and exporting rice, coffee and cashew nuts. The stock trades at a P/E of 11.8x. [**Khang Dien House**](https://www.marketwatch.com/investing/stock/kdh?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(KDH VN - US$868 million)* is a Vietnamese real estate developer across residential (luxury villas, apartments, townhouses) and commercial (office towers and shopping centres). It has pioneered mixed communities such as Celadon City in Ho Chi Minh City, which has many facilities, including schools, shops, recreational facilities, etc. They seem to be focused on higher-end developments. The stock trades at trailing 27.0x P/E but note that the Vietnamese real estate sector is in a downturn due to a lack of credit. The P/B is 1.8x, in line with its historical level. [**Airports Corporation of Vietnam**](https://ph.investing.com/equities/airports-corporation-of-viet-nam?utm%5Fsource=google&utm%5Fmedium=cpc&utm%5Fcampaign=18454663361&utm%5Fcontent=624651669806&utm%5Fterm=dsa-1546555491534%5F&GL%5FAd%5FID=624651669806&GL%5FCampaign%5FID=18454663361https://ph.investing.com/equities/airports-corporation-of-viet-nam?utm%5Fsource=google&utm%5Fmedium=cpc&utm%5Fcampaign=18454663361&utm%5Fcontent=624651669806&utm%5Fterm=dsa-1546555491534%5F&GL%5FAd%5FID=624651669806&GL%5FCampaign%5FID=18454663361&ISP=1&gclid=CjwKCAjwov6hBhBsEiwAvrvN6J2eGd%5FmiyYlm5AtUgyqYXjBWSqTUc4c5Y3jA%5FQISuq2AYS559qpNRoCd-oQAvD%5FBwE) *(ACV VN - US$7.1 billion)* is a state-owned enterprise operating 22 airports in Vietnam, including the Noi Bai International Airport and Tan Son Nhat International Airport in Ho Chi Minh City. The state continues to own most of the shares, and the Chairman is a former government official from the Civil Aviation Authority. The retail side of the business only represents 12% of revenue vs 50% at most modern airports. But the airport is highly regulated, and higher profitability will be driven primarily by higher passenger numbers. The stock trades at 26.9x P/E, with earnings having more or less recovered from COVID-19. [**FPT Corporation**](https://www.marketwatch.com/investing/stock/fpt?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(FPT VN - US$3.7 billion)* is a tech conglomerate based in Hanoi, focusing on a number of disparate segments: software outsourcing (primarily to Japanese clients), broadband and wireless telecom services, retail shops, digital content and a tech-oriented university. Despite decent earnings growth in the past few years, the stock trades at no more than 13.9x P/E. [**Orient Commercial Bank**](https://www.marketwatch.com/investing/stock/ocb?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(OCB VN - US$944 million)* is a smaller commercial bank owned partly by Japan’s Aozora Bank and the Trinh Van Tuan family. The returns on capital metrics are impressive, with a return on equity of 25%, putting it in the top 3 banks in Vietnam. The stock now trades at a P/E of 6.3x. [**Phu Nhuan Jewelry**](https://www.marketwatch.com/investing/stock/pnj?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(PNJ VN - US$1.1 billion)* is a gold merchant with its own retail shops. Vietnamese love gold, partly as a method to protect their savings from the ravages of inflation. The penetration rate of gold jewellery is already at very high levels. Still, given the success of Indian jewellery company Titan, I can see Phu Nhuan Jewelry continue compounding capital at a rapid rate. The company’s return on equity is currently 25%, probably among the strongest of any of the largest listed companies in Vietnam. The stock now trades at a P/E of 12.8x. [**Vinhomes**](https://www.marketwatch.com/investing/stock/vhm?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(VHM VN - US$9.3 billion)* is Vietnam’s largest real estate developer. It has a massive land bank supporting its sales for at least the next 30 years. The bull case is that Vietnam’s living area per capita is currently about half that of China. The consensus 2023e P/E ratio of 6.1x looks low, but the gross margin of 57% may or may not be sustainable, depending on how land prices continue to develop. [**Quang Ngai Sugar**](https://www.investing.com/equities/quang-ngai-sugar-jsc?ref=asiancenturystocks.com) *(QNS VN - US$620 million)* is a sugar producer owned by the state. Its Quang Ngai province sugar mill has a capacity of 10,000 tons of sugarcane per day, which is then made into white sugar, raw sugar and liquid sugar and sold to third parties. The company has partnerships with sugarcane plantations to ensure a steady supply to its sugar mill. The stock trades at a P/E of just 9.4x. [**PetroVietnam Technical Services**](https://www.marketwatch.com/investing/stock/pvs?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) *(PVS VN - US$517 million)* is a subsidiary of PetroVietnam, which provides services to the oil & gas industry - both to its parent and third parties. It does offshore engineering and construction services, deals with logistics and manpower supply, and does maintenance and repair. The return on equity has come down since 2015, most likely due to the downturn in global energy capex. The near-term P/E is 20.1x. --- # iCapital.biz ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/56284aa3-51a1-4c37-892d-7eaa9f8221b3_550x130.png) **iCapital** *(ICAP MK - US$65 million)* is a closed-end fund listed on Bursa Malaysia, which provides permanent capital to a number of sub-funds. The manager of these funds is Capital Dynamics Asset Management. This fund manager was set up by value investor Tan Teng Boo in the mid-2000s and he has been the CIO of the fund since inception. He has a degree in economics from UCL in London and was an asset management professional before starting Capital Dynamics. ![Capital Dynamics' Tan warns of overvalued global markets | The Star](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0f987088-79cc-48ee-b3a1-8ec11aa91b28_940x724.jpg) Tan Teng Boo Tan’s approach is focused on value － identifying cheap stocks that have the potential to generate long-term returns. He has won a number of awards, including Best CIO at the Asia Asset Management Awards in 2012\. Tan was recently interviewed by Malaysia’s FIRL Podcast [here](https://youtu.be/mvORFu9yrw0?ref=asiancenturystocks.com). And in November last year, he expressed [optimism about Chinese stocks](https://themalaysianreserve.com/2022/11/07/keep-your-eyes-on-china-says-fund-manager-tan/?ref=asiancenturystocks.com) thinking that the zero-COVID policy might be lifted. He was proven correct in that view. The growth in NAV per share has been around 8.0% per year vs Bursa Malaysia’s 1.8%, implying massive outperformance. But it’s worth noting that iCapital.biz trades at a significant discount to NAV of roughly 48%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2a031ca2-14ad-4729-b327-2f906d212093_1500x1104.png) iCapital.biz currently has exposure to 26 companies, all listed in Malaysia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/14188a2b-1d9a-4f38-ae6c-a564d509467b_2354x882.png) Source: Bloomberg Largest position [**Sam Engineering & Equipment**](https://finance.yahoo.com/quote/9822.KL?p=9822.KL&.tsrc=fin-srch&ref=asiancenturystocks.com)*(SEQB MK - US$544 million)*produces precision-machined components and other related engineering services. For example, aircraft engine parts, aircraft ground support equipment, material handling equipment, etc. It also has a services arm, providing E&C services in the renewables sector. The stock trades at a modest P/E ratio of 9.6x. [**Padini**](https://finance.yahoo.com/quote/7052.KL/?p=7052.KL&ref=asiancenturystocks.com) *(PAD MK - US$600 million)* is a Malaysian clothing retailer, a domestic competitor to H&M, Uniqlo and Zara. Its store brands include Padini, Vincci and Brands Outlet. Except for the COVID-19 period, the company has earned a return on equity of around 20-30%. Padini has been surprisingly nimble in the face of significant competition from multinationals. I attribute much of Padini’s success to the brilliance of its founder Yong Pang Chaun. Today, the stock trades at a P/E of just 11.4x. [**Kelington Group**](https://finance.yahoo.com/quote/0151.KL/?p=0151.KL&ref=asiancenturystocks.com) *(KGRB MK - US$213 million)* is another Malaysian engineering company focusing on high-tech industries such as semiconductors and chemicals. For example, Kelington might build cleanroom facilities and ultra-high purity gas and chemical delivery systems. It’s built plants across Southeast Asia, China, Taiwan and the Philippines. The stock trades at a P/E of 20.4x, but note that the stock has been a ten-bagger since 2016\. Icapital.biz was an early investor. [**Capital A**](https://finance.yahoo.com/quote/5099.KL/?ref=asiancenturystocks.com) *(CAPITALA MK - US$701 million)* is the recently-renamed holding company for low-cost carrier AirAsia. While AirAsia has been seen as a Malaysian success story, the corporate structure and accounting have also [been criticised](https://www.reuters.com/article/malaysia-airasia-accounts-idUSL3N0YY32X20150612?ref=asiancenturystocks.com) by GMT Research in Hong Kong. Capital A suffered during COVID-19 and has had to issue shares and dilute minority shareholders. The company continues to be loss-making. [**Kronologi Asia**](https://finance.yahoo.com/quote/0176.KL/?p=0176.KL&ref=asiancenturystocks.com)*(KAB MK - US$91 million)* is an IT services provider helping organisations store and back up their data. Its customers include financial services, healthcare, telecom operators, and government agencies. Note the weak return on equity, despite being an asset-light services business. The stock trades at a P/E of 16.4x. [**Suria Capital**](https://finance.yahoo.com/quote/6521.KL/?p=6521.KL&ref=asiancenturystocks.com) *(SURIA MK - US$96 million)* is not a financial services company but rather a port operator, managing the ports of Kota Kinabalu, Sandakan and Tawau in the Malaysian province of Sabah on the island of Borneo. Other than cargo handling, it also offers freight forwarding services. The company is also involved in property development, which may explain the weak return on equity in the single digits. The stock looks incredibly cheap at a P/E of 7.7x with a dividend yield of 3.3%. [**Boustead Holdings**](https://finance.yahoo.com/quote/2771.KL/?p=2771.KL&ref=asiancenturystocks.com) *(BOUS MK - US$391 million)* is a Malaysian conglomerate focusing primarily on oil palm plantations, property development, and heavy industries such as shipbuilding, defence, and aerospace engineering. It has a storied background as one of the major trading houses in the 19th century British Malaya. Boustead Holdings has quite a bit of debt, and in its most recent financial year, it made a loss. It’s not an easy company to value. [**Apex Healthcare**](https://finance.yahoo.com/quote/7090.KL/?p=7090.KL&ref=asiancenturystocks.com) *(APEX MK - US$432 million)* is a Malaysian pharmaceutical company producing generics such as antibiotics, painkillers and cardiovascular drugs. It has a medical devices division, which produces diagnostic and monitoring equipment such as blood glucose monitors and blood pressure monitors. The return on equity has been in the mid-teens, with slow but steady earnings growth. The P/E is currently 13.6x, with a dividend yield of 2.0%. [**APM Automotive**](https://finance.yahoo.com/quote/5015.KL/?p=5015.KL&ref=asiancenturystocks.com) *(APM MK - US$88 million)* produces automotive parts and accessories such as seating systems, interior and exterior trims, acoustics and electrical systems. It’s part of the Tan Chong Group, which owns auto dealerships and a number of other distribution businesses. While APM Automotive is based in Malaysia, its clients include most major global automakers. After a tough period during COVID-19, presumably due to weak production output of vehicles globally, earnings are recovering. But the stock remains down 60% since its peak in 2014\. APM Automotive’s near-term P/E is 14.9x. [**Bioalpha Holdings**](https://finance.yahoo.com/quote/0179.KL/?p=0179.KL&ref=asiancenturystocks.com) *(BIOA MK - US$37 million)* sells health supplements, herbal teas and such. The company tagline is “Health Through Biotech”. It sells its products online through distributors and owns a retail chain where it sells its products. I find it difficult to judge the quality of Bioalpha’s health supplement － whether there is a scientific basis for their claims about their anti-ageing properties, for example. The company is loss-making but trades at 3.8x EV/Sales. [**Tong Herr Resources**](https://finance.yahoo.com/quote/5010.KL/?p=5010.KL&ref=asiancenturystocks.com) *(THR MK - US$107 million)* is involved in the production of stainless steel fasteners such as bolts, nuts, screws, etc. They’re used in construction, automotive, electronics and manufacturing. The P/E ratio is 5.8x, but earnings seem surprisingly volatile. [**MKH**](https://finance.yahoo.com/quote/6114.KL/?p=6114.KL&ref=asiancenturystocks.com) *(MKH MK - US$176 million)* is a Malaysian property developer focusing on properties across the spectrum from residential to commercial, industrial and infrastructure projects. It has many townships in Malaysia with related facilities and also builds landed properties and condominiums. The trailing P/E ratio is 3.5x. [**Parkson**](https://finance.yahoo.com/quote/5657.KL/?p=5657.KL&ref=asiancenturystocks.com) *(PKS MK - US$38 million)* is a fallen angel, suffering from its exposure to department stores that have lost out to more modern shopping malls and other modern retail concepts. It had a large exposure to the Chinese department store industry. But without ownership and with falling revenues, it had to break leases and reduce its footprint. Today Parkson is unprofitable and only operates a handful of stores in Malaysia, Vietnam, Indonesia and China. [**United Plantation**](https://finance.yahoo.com/quote/2089.KL/?p=2089.KL&ref=asiancenturystocks.com) *(UPL MK - US$1.6 billion)* is one of Malaysia’s best-managed plantation companies, partly owned by Danish conglomerate UIE. The business is vertically integrated, with plantations, infrastructure and refining all within the group's ownership, making the business an efficient operation. The stock trades at a P/E of 12.1x, below its historical average of around 18x. I wrote about United Plantations [here](https://www.asiancenturystocks.com/deep-dive-2021-10-united-plantations/). [**Luxchem**](https://finance.yahoo.com/quote/5143.KL/?p=5143.KL&ref=asiancenturystocks.com) *(LUXC MK - US$121 million)* distributes chemicals in Malaysia, including solvents, industrial gases, resins and pigments. It also has a property development arm that does commercial and residential projects. The stock trades at a P/E of 3.0x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-d99/ Last updated: 2023-04-17T04:02:30.000Z Deep-dive 2023-7, Activation Group, Red Roulette _This post is for paying subscribers only._ ### Hartalega (HARTA MK) URL: https://www.asiancenturystocks.com/deep-dive-2023-7/ Last updated: 2026-07-31T01:38:32.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Hartalega at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes only － not a recommendation to buy or sell shares.* --- [**Hartalega**](https://finance.yahoo.com/quote/5168.kl/?ref=asiancenturystocks.com) *(HART MK - US$1.7 billion)* is one of the world’s leading producers of disposable gloves for healthcare use. The rubber glove sector enjoyed an incredible boom during COVID-19\. But following the pandemic, demand has weakened, and the industry is now experiencing excess supply and widespread losses. With Hartalega’s share price down 60% from its pre-COVID levels, investors are asking themselves whether the business might be permanently impaired. Hartalega is certainly a leader in the industry. Founder and Executive Chairman Kuan Kam Hon is a legend in the industry. The company enjoyed 20-30% returns on equity throughout most of the 2010s. And it’s been at the forefront of innovation in terms of materials technology and automation. Its latest production lines can produce 48,000 pieces per hour, far above the industry standard. The underlying demand for disposable gloves has risen by about 9% per year pre-COVID. This growth is driven by low penetration rates in emerging markets, whose per capita consumption for gloves remains only \~5% of that in North America and Europe. Hartalega’s growth has been further boosted by nitrile gloves taking market share from their latex equivalents. Nitrile gloves are stronger, less likely to be punctured and can withstand a broader range of hazardous materials. They’re also suitable for those with latex allergies. In the past decade, Hartalega increased its production capacity by a compound annual growth rate of 16%. And before COVID-19, Hartalega’s annual earnings growth was around 17%. This takes us to the impact of COVID-19\. Demand has dropped significantly as inventories piled up at customers. Several glove makers, such as China’s Intco, expanded capacity rapidly. And while glove prices rose from US$23 per 1,000 pieces to US$80 in the second quarter of 2021, they’re back to US$20 today. Every single glove maker is losing money right now. There are a few positive signs, however. Several companies have mentioned that customer inventory is being drawn down. Both Top Glove and Hartalega have raised prices somewhat, though we don’t know exactly what impact this had on their volumes. And there’s a question of whether we’ll see a drop-off in demand now that China’s zero-COVID policy is finally over. The real turn of the cycle may take a few more quarters. Whatever happens, Hartalega will have a better chance of surviving than almost any of its peers. Its operating profit per 1,000 gloves has been much higher than that of either Top Glove, Kossan Rubber or Supermax. While Hartalega made a small loss in the latest quarter, the numbers were small. Hartalega also has a large net cash pile of 24% of its market cap. Once industry supply & demand improves, Hartalega’s capacity expansion will likely continue. The company has plans to build its new so-called “NGC 1.5” complex with another four production lines. These will increase the aggregate production capacity from 44 billion pieces per year to 63 billion. I believe that Hartalega will end up at a P/E ratio of around 10.8x by 2027, with a dividend yield of 5.6%. While that may not sound particularly low, remember that Hartalega is a well-managed growth company. Historically, the stock has traded at a P/E of 22x. And if you adjust for the cash, the P/E ratio will become even lower. The main risk is that Hartelga’s competitors expand without regard for profits. The cash accumulated during COVID-19 may be invested in new capacity, hurting industry economics. But quarterly data suggests that industry capex has gone down to pre-COVID levels. With underlying industry growth of around 9% per year, I think it’s only a matter of time before supply & demand become balanced again. I also don’t think that the Chinese producers hold material competitive advantages. Their margins have traditionally been low. They are subject to 10% import tariffs for gloves exported to the United States. Despite the recent minimum wage hike, labour costs remain higher in China than for imported labour into Malaysia. With the rubber glove boom gone bust, it’s hard to say exactly when glove ASPs will bottom. I would imagine it’s going to be a drawn-out process. Then again, it’s rare for growth companies in Asia to trade close to 1x book. _This post is for paying subscribers only._ ### Desmond Shum: Red Roulette URL: https://www.asiancenturystocks.com/playing-red-roulette/ Last updated: 2025-12-23T09:13:45.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a140c031-47a5-4635-8a84-1918d6299f4d_1604x916.png) Source: Getty Images Desmond Shum’s biography [Red Roulette](https://www.amazon.com/Red-Roulette-Insiders-Corruption-Vengeance-ebook/dp/B08VJP821L/ref=tmm%5Fkin%5Fswatch%5F0?%5Fencoding=UTF8&qid=1681191848&sr=8-1&ref=asiancenturystocks.com) was a real eye-opener for me. It’s a tell-it-all story of a corrupt businessman trying to make it big in Beijing. What makes the book so special is the amount of detail he provides about how business was done in Beijing in the 2000s. For investors, the key takeaway from the book is that the political system is now changing in favour of state-owned enterprises (SOEs). The window of opportunity for private entrepreneurs to make it big in China might have closed. And that will have widespread ramifications for the future of the People’s Republic. --- # How to play “Red Roulette” ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6c23e9b4-de5a-475d-8e50-4506bde36ca6_2294x1414.png) Desmond Shum with his two parents in Hong Kong. Source: Red Roulette “Red Roulette” refers to gambling in red, Communist China. Author Desmond Shum was born in Shanghai during the cultural revolution. He moved to Hong Kong after the country opened in the late 1970s and got a college degree in the United States. Despite being offered a green card, he returned to Hong Kong to build a career there. That’s where he felt at home. After a short stint as a stockbroker, he joined the American private equity firm ChinaVest, which helped foreigners invest in Chinese companies. A few years earlier, in the 1980s, the Chinese government had just started allowing private enterprises to form. Desmond’s employer ChinaVest played it safe, preferring to invest in foreign-owned companies that built manufacturing plants and distribution systems across the mainland. Corruption was widespread. A trading company ChinaVest owned a stake in openly helped distributors smuggle goods across the border to China. Desmond recounts the story of Chinese naval officers offering his warship to help smuggle beers. Hong Kong was in the middle of this burgeoning trade, trying to satisfy the needs of a billion Chinese that were getting wealthier by the day. In the late 1990s, Desmond moved to Beijing to set up a local office for ChinaVest. After some trials and tribulations, he met a young woman called Whitney Duan. He was smitten by her. Whitney and Desmond became a couple and eventually had a son. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/37413387-7bbb-4924-939e-ad78761b1aa3_1032x1540.png) Desmond’s wife Whitney Duan. Source: Red Roulette Whitney was an entrepreneur. And her secret sauce was identifying and cosying up to key decision-makers in the Chinese Communist Party. Her first job was as an assistant to a real estate development company run by the People’s Liberation Army. She formed a personal JV with the company to acquire land from the government, then developed a few properties with great success. After gaining a few million dollars in net worth, she yearned for more. So she moved to Beijing and tried to join the big leagues. That’s where she eventually got to know the wife of then-vice president Wen Jiabao (温家宝), Auntie Zhang (colloquially known as “Zhang ayi” or 张阿姨). Whitney knew Wen was next in line to become China’s premier, so she eventually cultivated a relationship with the family to eventually profit from it. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2a0977fa-998d-4415-8b14-3191e4e53d6f_1050x596.png) Former premier Wen Jiabao with his wife “Auntie Zhang” and his two children. Source: Red Roulette Wen Jiabao wasn’t involved in business himself. He was a serious politician. But behind his back, his family used his connections to make money in various ways. For example, Auntie Zhang was involved in the gemstone business. Wen Jiabao’s son Winston Wen founded the private firm New Horizon Capital. Wen Jiabao’s daughter Lily Wen owned a consulting business that offered access to his father. Eventually, Whitney would form a verbal agreement that Auntie Zhang would get 30% of any profit from joint enterprises, with Whitney and the other partners getting 70%. And Auntie Zhang didn’t even need to invest 30%, as other businessmen were often more than willing to lend her money for any investment. Whitney’s first deal was offering the Wen family to invest in 2% of insurance company Ping An before its IPO. People’s Liberation Army-linked company COSCO had a stake in it. The executive running the company figured it might be worth getting on the good side of the premier’s family. Whitney and Desmond also invested in 1% of Ping An for US$12 million, funded by a bridge loan from a state-owned pharmaceutical company. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/954f876f-8e0a-444a-a6d8-918e152740dd_2080x1024.png) Ping An’s IPO in 2004\. Source: Red Roulette When Ping An listed in Hong Kong in 2004, the share price jumped 8x what they had paid for it. Whitney and Desmond were worth over US$100 million. And now they upped the ante. The next deal was to build a logistics centre at the upcoming Beijing Capital International Airport, to be unveiled in time for the 2008 Beijing Olympics. A district Communist Party leader had learnt that Whitney was close to the Wen family, so he gifted valuable land next to the airport to a joint venture between Auntie Zhang, Whitney and state-owned enterprises. This was a normal set-up, joint ventures between state-owned enterprises and red aristocrats - party officials or second-generation revolutionaries. Part of the reason red aristocrats were needed was to gain approval. Every decision to build an airport required signatures from at least seven ministries. Without the weight of a senior Communist Party official, nothing would get done. Whitney and Desmond’s job was to oversee the project. They would curry favours with officials, buying them nice watches, golf clubs, aged Moutai rice wine and so on. Everyone needed to get in line. The airport logistics centre project started with an initial investment of US$30 million, of which US$16 million came from the Wen group. Most of it is funded by loans from state-owned enterprises. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/02e76afa-fbd7-47c6-b667-20a15e511731_1042x656.png) The logistics centre at the Beijing Capital International Airport. Source: Red Roulette As the 2000s progressed, Whitney and Desmond got involved with more deals, all related to their connection with Auntie Zhang. When the Bank of China needed State Council approval to fast-track its IPO, they contacted Whitney. She helped them make sure Wen made the call to make it happen. And she was then personally given the opportunity to buy 3 million shares just before the IPO. On the first day of trading, the stock went up another 15%, and she made another small fortune. With greater wealth came greater spending. In Hong Kong, Whitney bought a pink diamond for US$15 million. They bought a Rolls-Royce Phantom with a ministry-rank license plate to drive around Beijing. And for Desmond’s 40th birthday, she got him a custom-made FP Journe watch worth half a million Euros. Whitney also got into art, sponsoring the rise of artist Zeng Fanzhi. She went to auctions where she competed to buy his paintings, paying as much as US$5 million apiece. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f3adba0f-86fb-43d8-9949-643c732618a6_1672x1300.png) A wine tasting of Chateau Lafite Rothschild with Evergrande’s CEO Xu Jiayin and his wife Ding Yumei, former CCP official Jia Qinglin’s wife and son as well as Whitney and Desmond. Desmond recalls bringing a group of influential people to a European wine tour, including Xu Jiayin, CEO of Evergrande Group. Xu played a similar game, typically offering people outrageously expensive gifts. With Whitney, he tried to give her a million-dollar diamond ring. As the couple became wealthy, they started bickering more. Whitney started disrespecting him in public, and her competitive nature led to many arguments. This combative relationship eventually led to their split. In 2012, the New York Times published a front-page article about the wealth of Wen Jiabao. Auntie Zhang had transferred ownership of her shares in Ping An to her mother-in-law, creating a paper trail the journalists could follow. She had no choice but to shut down any side businesses she had had with Whitney and Desmond. And after divorcing Whitney, Desmond moved to London in 2015 to seek safety for himself and his son. He got out just in time. After Xi Jinping came to power in 2012, getting capital out of China became a lot more difficult. An anti-corruption campaign was launched to go after Communist Party and government officials that had used their positions to enrich themselves. By 2020, authorities had investigated 2.7 million officials for corruption and punished more than 1.5 million. The whereabouts of Whitney remains unknown. During one trip to Beijing in 2017, Whitney let it slip that Party authorities had banned her from leaving the country. The high-stakes game of Red Roulette was finally over. --- # Takeaway #1: Corruption was widespread ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1fdf69a0-c61d-4d76-b7f7-9009a62d7ce1_1046x674.png) A Rolls Royce Phantom in Beijing. Source: Red Roulette The first lesson from the book is that corruption was widespread in 2000s Beijing. Access to government officials was used to obtain loans from banks and state-owned enterprises. And such access was also used to get cheap land from local governments. The rule of law was not clearly defined. After private enterprises were allowed to flourish from the 1980s onwards, old laws became outdated. But when new laws were created, the government intentionally included grey areas that gave the Party power to target anybody deemed a threat. Those grey areas could be translated into money. For example, the contract to provide mineral water to China’s high-speed rail went to relatives of Deng Xiaoping. The family of China’s President Jiang Zemin secured a license to sell duty-free products at Beijing Capital International Airport. --- # Takeaway #2: The state has reasserted control ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a3bfd51f-e763-4ecf-a584-a53289c8cfa8_1048x732.png) CCTV coverage of the court trial of Sun Zhengcai The rise of Xi Jinping and Communist Party hardliners from 2007 onwards marked a shift away from private enterprises. The type of corruption detailed in Desmond Shum’s book is becoming less prevalent. Government officials have become more cautious. That’s surely positive from a certain perspective. But simultaneously, you could argue that bribes can be used as “grease” in the system - to make deals happen. For example, in Desmond’s airport logistics centre project, meetings had previously been done with only five individuals attending. But after a corruption crackdown in 2008, dozens of representatives were sent by the airport to each meeting. And they all had differing opinions. Nothing got done. Collective decision-making is becoming the norm across the Chinese economy. The new buzzword has become "state-owned enterprises march forward, private enterprises retreat” (国进民退). SOEs now receive the majority of bank loans. And Desmond claims that state-owned firms have started to carry out forced mergers with private enterprises. Other than slow decision-making, incentive structure can also be perverse in other ways. SOEs will typically try to meet targets set through key performance indicators (KPIs). But will state-owned enterprises innovate and exceed expectations beyond what’s required through these KPIs? Desmond was a creation of the old system. And he’s understandably cynical of the changes taking place. He believes the 2004 election of opposition leader Chen Shui-bian in Taiwan shook the Communist Party to its core, seeing Taiwan’s democratisation process as a roadmap to political reform. That the Communist Party felt its monopoly on power could be threatened and therefore decided to crack down on private enterprises. Perhaps China’s honeymoon with private entrepreneurs was a Leninist tactic to “divide the enemy to annihilate it”. In Desmond’s own words: > *“Ever since it had seized power in 1949, the Chinese Communist Party had used elements of society when it needed them and discarded them when it was done.”* China today is very different from what it was in the pre-Xi Jinping era. Practically every private company has now been forced to establish Communist Party Committees, which interfere in management decisions. So while entrepreneurs might appear rich on paper, they remain servants of their masters in the Chinese Communist Party. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) Enjoyed this post? Consider a free trial, giving you instant access to deep-dive reports, thoughtful commentary and access to my Asia-focused portfolio: [Get 30 day free trial](#/portal/signup) ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-6b7/ Last updated: 2023-04-10T04:04:40.000Z Shine Justice, the rubber glove cycle, Planet MicroCap Review _This post is for paying subscribers only._ ### The best recent posts on Asia Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asia-century/ Last updated: 2023-04-09T14:09:26.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### The glove cycle is bottoming URL: https://www.asiancenturystocks.com/the-glove-cycle-is-bottoming/ Last updated: 2023-04-09T04:33:12.000Z Inventories have most likely peaked and glove prices bottomed. Estimated reading time: 15 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-fca/ Last updated: 2023-04-03T04:02:15.000Z Hitachi, Kaspi, Singapore hidden champions, March 2023 portfolio review _This post is for paying subscribers only._ ### Hidden champions of Singapore URL: https://www.asiancenturystocks.com/hidden-champions-of-singapore/ Last updated: 2025-10-06T12:57:17.000Z An attempt to find the best businesses in Singapore. Estimated reading time: 24 minutes _This post is for paying subscribers only._ ### Portfolio review March 2023 URL: https://www.asiancenturystocks.com/portfolio-review-march-2023/ Last updated: 2026-06-04T11:45:59.000Z Positive development in Hong Kong's restaurant industry and Singapore public transport. Disappointment at Ichigo Hotel. Estimated reading time: 23 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-610/ Last updated: 2023-03-27T04:01:18.000Z Deep-dive 2023-6, Pinduoduo, Public Bank _This post is for paying subscribers only._ ### Seria (2782 JP) URL: https://www.asiancenturystocks.com/deep-dive-2023-6/ Last updated: 2026-07-31T01:38:09.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Seria at the time of publishing this article. To reiterate, this post and the below presentation are for informational and educational purposes and not a recommendation to buy or sell shares.* --- [**Seria**](https://finance.yahoo.com/quote/2782.T?p=2782.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(2782 JP - US$1.5 billion)* is a family-owned Japanese discount retailer focusing on so-called 100-yen stores. These stores are the Japanese equivalents of American “Dollar stores”, which sell a variety of items at uniformly low prices of just 100 yen (US$0.76 cents). Such items include simple clothing, kitchenware, beauty products, stationery, food, and so on. 100-yen stores have taken market share from department stores and general merchandise stores over the past thirty years. Customers are attracted by the low prices and their “treasure hunt” experience. And a reassurance knowing that whatever items they might pick up, the total bill won’t break the bank. The market leader in Japan’s 100-yen industry is privately held [Daiso](https://en.wikipedia.org/wiki/Daiso?ref=asiancenturystocks.com), which has roughly 3,800 stores in Japan. Seria has about half as many stores, at about 1,900\. While Daiso is popular among those looking for practical household items, Seria has a greater focus on design products, targeting the 30-50 female demographic. One YouTuber called Seria, *“The classiest 100 yen shop in Japan"*. I think that’s an accurate representation. Customers tend to praise Seria’s clean and bright store environments as well as its cute and well-designed products. Seria has achieved great success, with revenues compounding at 10% per year over the past two decades. Thanks to margin expansion, EPS has grown at an even faster rate of about 15%. Meanwhile, Seria has earned about a 20% return on equity, which is exceptional compared to most other Japanese retailers. Much of Seria’s current success can be attributed to the current Chairman and President, Eiji Kawai. After he joined Seria in 2003, he introduced a POS system that gathered data on orders and inventories. And later on, he also developed an inventory management system that uses advanced algorithms to figure out what products to stock at any given point in time. Eiji Kawai also launched a new store format called “Color the Days” with bright, pleasant shop environments and more organised aisles. These stores have sales per square foot in line with those of market leader Daiso. The roll-out of these stores explains Seria’s increase in its operating margin to about 10% in the fiscal year 2021. Over the past year, Seria has been facing a serious challenge in the depreciation of the Japanese yen. Both Daiso and Seria remain committed to defending their 100-yen price point. But with higher input costs and rising inflation, that’s proving increasingly difficult. Seria’s gross profit margin has already fallen about 2 percentage points from 43.5% to 41.6%. But I don’t think the weakening yen destroys the business model. This near-term challenge of rising input costs can be solved in several ways: Seria can shift its product mix to cheaper items. It can start to procure more items domestically. Or it can simply raise its prices, as American dollar stores have started to do. In fact, Seria’s items already cost more than 100 yen since the 10% consumption tax is added on top of this amount. I personally think that customers are unlikely to care if the products cost a little bit extra. But for now, Seria’s margin pressure will remain as long as the yen remains weak and it doesn’t shift its pricing strategy. Kawai is guiding for about 100-150 new stores every year, which is equivalent to about 5-8% growth in the store count. While the ASP hikes are unlikely at this point, Seria’s same-store sales growth has historically been around 2% per year. So you can probably expect high single-digit organic growth on top of a 2-3% dividend yield. If you believe that Seria’s gross profit margins will come back to the 43% level once the pricing strategy has been adjusted, you’ll be looking at a 2026e P/E ratio of 10.7x, which compares to a historical level of about 18x. The key risks are the near-term cost pressures that we’re seeing from the weak Japanese yen. Import tariffs on Chinese goods are another possibility. Some investors question whether Seria can maintain its 10% margins when Can Do and Watts are barely able to achieve 3%. But a higher sales per square foot explains most of the differential. Seria’s cash flow conversion rate is excellent, it pays plenty of tax, and its balance sheet is clean. So I don’t see any signs of earnings manipulation. From a corporate governance point of view, perhaps the only question mark is Eiji Kawai’s total control of the business. There is no counterweight to him. But at the same time, family-run businesses tend to perform better over the long run. Just be aware that a bet on Seria is a bet on Eiji Kawai himself. _This post is for paying subscribers only._ ### Winners of China's "daigou" crackdown URL: https://www.asiancenturystocks.com/winners-of-chinas-daigou-crackdown/ Last updated: 2023-03-22T06:07:56.000Z Hainan duty-free stores and cross-border e-commerce platforms stand to benefit. Estimated reading time: 13 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-b7f/ Last updated: 2023-03-20T04:00:47.000Z Deep Dive 2023-5, Halyk Bank, Oriental Watch, Nintendo _This post is for paying subscribers only._ ### Hysan Development (14 HK) URL: https://www.asiancenturystocks.com/deep-dive-2023-5/ Last updated: 2026-07-31T01:37:48.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Boustead Singapore at the time of publishing this article. To reiterate, this post and the below presentation is for informational and educational purposes and not a recommendation to buy or sell shares.* --- [**Hysan Development**](https://finance.yahoo.com/quote/0014.HK?p=0014.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(14 HK - US$2.9 billion)* is a commercial property owner and developer in Hong Kong’s Causeway Bay. The company is known for its heritage and its decent corporate governance. Hysan has traditionally been seen as a “pure play” on Chinese tourism. It owns key properties around Times Square, which is popular among Chinese tourists. A few of its buildings include Lee Gardens and Hysan Place. The company’s rental income is split almost 50/50 between office and retail, though the proportion from retail used to be a lot higher. Rents have come down since 2019 for three separate reasons: 1. First, the anti-government protests in mid-2019 cut off mainland tourism to Hong Kong, hurting Hong Kong’s retail industry. Overall retail sales are down about 30% since then, and even more for the higher beta categories. 2. Second, COVID-19 caused many employees to work from home, reducing the need for office space. 3. Third, there’s been new construction of office space, causing some pressure on Hong Kong island office rents. But in early 2023, China’s borders have practically reopened, with no PCR test needed anymore and no restrictions to speak of. COVID-19 restrictions have been taken away, both on the mainland and in Hong Kong. And over the past two months, the number of mainland tourists to Hong Kong has gone up exponentially. In my view, all the conditions necessary for a retail recovery are now there. Then there’s a question of whether the Hong Kong office property market has been permanently impaired by COVID-19\. I personally doubt it. Working from home is inconvenient in Hong Kong, where homes tend to be small, and several generations often live under one roof. In fact, Asia’s larger cities have had far higher return-to-office rates than those in North America. I’m also noting that public transport usage in Singapore is already back to pre-pandemic levels. Might we see a similar recovery in Hong Kong? Hysan Development’s discount to NAV is currently 67% - an all-time high. And the assumptions used in that NAV are fairly conservative, with cap rates of 5-5.5% for office and retail, above market levels. Could cap rates expand further? Sure. But I personally believe that the path of least resistance is for US and Hong Kong interest rates to go down over the next 1-2 years. Then there’s a question of leverage. Hysan borrowed to finance its acquisition of an expensive plot of land on Caroline Hill in the southern part of Causeway Bay. Hysan and its JV partner will build a three-tower property on the plot. Great location, but leverage will remain elevated until the building is completed in 2026\. At 23% net debt/equity, the debt burden is real. However, Hysan remains an investment-grade borrower. And on the positive side, the Caroline Hill project and its other new developments could add to NAV, pushing the discount up even further. The question is, how long will that discount remain? **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### IVF URL: https://www.asiancenturystocks.com/ivf/ Last updated: 2025-10-24T15:08:53.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8fea1870-6343-4a9d-9312-16f75838e802_1616x909.jpg) Source: Getty Images We are becoming infertile. A study by Levine & Swan (2017) showed that the sperm count had decreased at a rate of 1.9% per year until 2011\. Investor Jeremy Grantham believes if the current trends continue, the median couple will have trouble conceiving [by the mid-2030s](https://www.gmo.com/americas/research-library/chemical-toxicity-and-the-baby-bust%5Fviewpoints/?ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3ad39bf3-8043-4820-9e3c-61a33fa0507c_692x364.png) Sperm concentration by year. Source: Grantham, Mayo, van Otterloo & Co # 1\. Solving the infertility problem Part of the problem is that couples are choosing to have babies later in life. The likelihood of a natural conception each month goes from around 20% at age 30 to around 10% by age 40\. The longer we wait, the more difficult it gets. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/974f5465-387d-469e-a5b6-5f14f7fc83b8_2240x1254.png) Source: Virtus Health But it’s also becoming clear that certain substances are reducing our fertility. Over the past 50 years, the use of chemicals in our daily lives has exploded. Grantham believes that the key reasons for reduced fertility are pesticides on fruits and vegetables and active chemicals in plastics, shampoos, soaps, face creams, fragrances and other cosmetics. A low sperm count isn’t the only factor behind infertility. Other common fertility problems include ovulation disorders, blockage in the fallopian tubes that transport eggs from the ovaries or inflammation causing damage to the lining of the uterus. How can we solve the infertility problem? - **Better health**: Eating whole foods rather than processed is said to improve fertility. Drugs such as caffeine, nicotine and alcohol are best avoided. Sleep and exercise can also help. - **Medications**: Certain medications can be used to stimulate ovulation or increase sperm count in men. - **Surgery**: In special cases, surgery can be used to remove and repair damage to the reproductive system. - **Artificial insemination**: In these procedures, sperm is inserted directly into the woman’s reproductive tract during ovulation. - **In vitro fertilisation (IVF)**: Finally, women can get pregnant by fertilising eggs with sperm *outside the body* in a laboratory setting. --- # 2\. IVF: pregnancy in a test tube ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/188830db-5985-408f-9ece-b0aeaffe137c_1467x1001.jpg) An embryo is being selected for an IVF procedure. Source: Getty Images In-vitro fertilisation (“IVF”) refers to a medical procedure where eggs are combined with sperm in a laboratory setting and then inserted into a woman’s uterus. The word “vitro” means glass in Latin, referring to the laboratory dish where fertilisation takes place. IVF is a sub-category of the broader universe of assisted reproductive technologies (“ART”): technologies meant to help couples achieve a successful pregnancy. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/87494660-9d40-4294-9073-7d22898a3ca5_2636x494.png) - **Genetic testing** is done to identify sperm or embryos that are most likely to lead to a healthy baby. - **Artificial insemination** of sperm into a woman’s uterus is a simple procedure that’s suitable for couples with mild fertility issues. - But for those with significant trouble conceiving, **IVF** will have a far higher success rate. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/04ab401f-0346-4651-8eb8-5508660726ec_830x720.png) IVF: eggs from the ovaries are combined with sperm in a test tube, nurtured to form an embryo and then inserted into the uterus. Source: Endometriosis **The first step of the IVF process** is to inject hormones into a woman’s body to stimulate her ovaries to produce eggs. A doctor then uses a thin needle to retrieve those eggs from the ovaries and then places them in a laboratory dish where they’re combined with sperm. Once an embryo has been formed and grown for a few days, the embryo is then implanted into a woman’s uterus in the hope that it’ll lead to pregnancy. Within two weeks, a pregnancy test will hopefully provide a positive result. If the procedure was not successful, then the patient has the option to go through yet another “cycle”, i.e. another attempt at IVF. --- A woman wanting to prepare herself for a *future* IVF procedure has two options: she can either freeze her own eggs or freeze embryos: - **Freezing eggs** enables the woman to decide who the father of the child is going to be at a later stage. It’s also cheaper. - **Freezing embryos** leads to a higher success rate in achieving pregnancy, allows for genetic screening and also provides multiple opportunities for pregnancy within a single IVF cycle. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3ef631af-f38c-42d3-872e-6cfaab93063d_1697x1131.jpg) Freezing of eggs in liquid nitrogen for future use. Source: Getty Images The probability of a successful IVF treatment for a single cycle is about 50% for women below 35\. For women above the age of 42, that probability drops to about 4%. That may sound like a low number, but the probability of a successful pregnancy through IVF is still about 4-5x higher than for conception through natural means. IVF procedures are expensive. The cost of IVF is about US$12,000 for a single cycle, plus another US$3-5,000 for genetic testing of implanted embryos. But one cycle is normally not enough. Typically, three cycles will be necessary to achieve a successful outcome, putting the total cost of pregnancy through IVF above US$50,000\. And that’s not even counting the cost of childbirth. To improve the chances of a successful outcome and save money, many choose to insert multiple embryos. Doing so increases the chances of pregnancy, but it also leads to a greater risk of twins, triplets or more children at the same time. While having one child typically costs around US$20,000, that cost skyrockets to US$100,000 for twins and [more than US$400,000 for triplets](https://www.cbsnews.com/news/cost-of-having-baby-21k-for-single-birth-105k-for-twins/?ref=asiancenturystocks.com) or more. So inserting multiple embryos can be risky both in terms of health and finances. On the positive side, children conceived via IVF - also known as [test tube babies](https://en.wikipedia.org/wiki/Test%5Ftube%5Fbaby%5F%28disambiguation%29?ref=asiancenturystocks.com) \- have been shown to have equal school performance, social skills and behaviour. So while the procedures are costly, they are effective and valuable for those who are unable to conceive naturally. --- # 3\. The birth of a new industry The first baby ever conceived through an IVF procedure was Louisa Brown in 1978\. Dr Robert Edwards - one of the doctors that conducted the procedure - received a Nobel prize in medicine for his achievement. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5d2b03ac-4580-45b9-bc75-b64d2fc92adc_1628x976.png) Dr Robert Edwards and Dr Patrick Steptoe holding Louise Brown, the first child conceived in a test tube. Source: Alamy Until 2018, over 8 million babies had been born through IVF procedures. And today, roughly 2% of babies born in the United States come from IVF. In some European countries like Denmark, that number is as high as 10%. Because of our reduced fertility and the rising age of childbirth, the IVF market is growing quickly at almost 10% per year. And in the Asia Pacific region, growth is even higher, somewhere in the mid-teens. Here is a flowchart of the industry supply chain: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8d4223af-b13f-4b52-a2b2-578a83133bad_2570x1164.png) Patients are served by IVF clinics, which may be standalone or residing in larger hospitals. The freezing of eggs or embryos and the actual IVF procedure can occur in the same clinic, but that’s not always the case. Meanwhile, suppliers to the IVF clinics include drug manufacturers, producers of medical equipment and consumables and genetic testing companies. Who captures the economics of the industry? The industry profit pool is well spread out and distributed across the supply chain. The owners of important patents - including drug manufacturers and genetic testing companies - enjoy strong bargaining power. The IVF clinic industry is highly fragmented and not particularly regulated. Some have reported that IVF clinics exaggerate claims, perform unnecessary procedures and cross certain ethical boundaries. For example, a doctor in California famously [inserted 12 embryos](http://edition.cnn.com/2010/SHOWBIZ/celebrity.news.gossip/10/18/octuplets.doctor.hearing/index.html?ref=asiancenturystocks.com) into a woman’s uterus, leading to the birth of eight babies. --- # 4\. The investable universe of IVF stocks The IVF industry remains niche. Most drug- and equipment makers are based in Europe or the United States. There are also a few listed IVF clinic operators in Australia, Canada, the UK and China. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d05a47d1-a047-464a-92e4-b459df0e302c_2752x966.png) ## 4.1\. IVF clinics In certain Asia Pacific countries such as Japan, South Korea, Singapore, Taiwan and Australia, governments cover a portion of the cost of IVF. In Singapore, for example, the government provides subsidies for up to three cycles. In most Asia EM countries, including China, Indonesia, Thailand, etc., patients are forced to pay entirely out of pocket. That’s led to so-called fertility tourism, whereby Chinese travel to Thailand or the United States for their IVF. The cost of a single IVF cycle in Thailand is less than half the price of that in the United States or Singapore, making the industry cost-competitive. The single-cycle IVF success rate in Thailand of 40-50% is also said to be significantly higher than that in China’s 20%, according to [research analysts at DBS](https://www.asiancenturystocks.com/content/files/ResearchManager/downloadresearch.pdf), though I can’t guarantee the accuracy of those numbers. Some of the Thai hospital operators have large exposure to fertility tourism, including [**Ekachai Medical Care**](https://finance.yahoo.com/quote/EKH.BK/?p=EKH.BK&ref=asiancenturystocks.com)**,** with almost 20% of its revenues from IVF prior to COVID-19\. [**Bangkok Chain Hospital**](https://finance.yahoo.com/quote/BCH.BK/?p=BCH.BK&ref=asiancenturystocks.com) also has exposure to the IVF industry through its subsidiary World Medical Centre. [**Praram 9 Hospital**](https://finance.yahoo.com/quote/PR9.BK/?p=PR9.BK&ref=asiancenturystocks.com)had roughly 7% of its revenues from IVF services prior to COVID-19. China’s National Health Authority vowed in 2022 to make IVF technologies more accessible to its citizens. The Chinese government has now said it wants IVF procedures to be gradually included in the government insurance fund’s reimbursement program. So while the reopening of China’s borders should help certain Southeast Asian hospital operators, greater subsidies could bring part of that IVF business back to China. Within China, the only pure-play IVF clinic out there is [**Jinxin Fertility**](https://sg.finance.yahoo.com/quote/1951.HK/?ref=asiancenturystocks.com) (1951 HK). It’s a Shenzhen-based IVF clinic operator with over 50 clinics across the Sichuan and Guangdong provinces. Jinxin Fertility’s services offered include genetic testing, artificial insemination and IVF. [**Monash IVF**](https://finance.yahoo.com/quote/MVF.AX/?p=MVF.AX&ref=asiancenturystocks.com) (MVF AU) operates a network of 27 fertility clinics across Australia, where it has a 20% market share. It also operates in Malaysia. Monash’s parent company is [**Australian Clinical Labs**](https://finance.yahoo.com/quote/ACL.AX/?p=ACL.AX&ref=asiancenturystocks.com) (ACL AU), and it’s also engaged in other types of medical testing services, including fertility testing. In other parts of the world, [**Medicover**](https://finance.yahoo.com/quote/MCOV-B.ST/?p=MCOV-B.ST&ref=asiancenturystocks.com) (MCOVB SS) operates healthcare clinics across, including IVF centres in Poland and Ukraine. The Fertility US-based [**Progyny**](https://finance.yahoo.com/quote/PGNY/?p=PGNY&ref=asiancenturystocks.com) (PGNY US) is a fertility benefits manager, acting as a patient advocate to ensure the best outcomes for the client. Ekachai Medical Care trades at a low multiple and but its hospitals have most likely benefitted from COVID-19, a trend that is likely to reverse now that Thailand has reverted to a living-with-COVID strategy. Monash IVF and Jinxin Fertility both trade at reasonable multiples. But the acquisitive nature of both of these companies has dragged down their returns on equity to single-digit levels. EPS growth has been practically non-existent. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b9909f54-9056-45c1-89f1-93037075d3e2_1432x484.png) --- ## 4.3\. Suppliers of equipment & consumables There is no pure-play IVF equipment or consumables supplier in the Asia Pacific region. But in Europe, you have [**Vitrolife**](https://finance.yahoo.com/quote/VITR.ST/?p=VITR.ST&ref=asiancenturystocks.com) (VITR SS), a Swedish company providing products and services for IVF procedures. The common denominator between all of its products is that they’re all designed to improve the chances of successful fertility treatments: for example, sperm handling products, embryo transfer catheters, culture media, etc. Analysts at Redeye estimate that the company has a 20% market share in the global market for disposable IVF products. Vitrolife’s well-regarded CEO, Thomas Axelsson, just announced his resignation. Canada’s [**Hamilton Thorne**](https://finance.yahoo.com/quote/HTL.V?p=HTL.V&.tsrc=fin-srch&ref=asiancenturystocks.com) (HTL CN) provides equipment, consumables, software, and services for IVF clinics. It has grown partly through acquisitions, including genetic testing company Embryotech and IVF consumables business Gynemed, which specialises in cell culture media products. There’s a decent [2018 write-up](https://valueinvestorsclub.com/idea/HAMILTON%5FTHORNE%5FLTD/3532239279?ref=asiancenturystocks.com) on the stock at Value Investors Club. Other equipment suppliers such as [**The Cooper Companies**](https://finance.yahoo.com/quote/COO/?p=COO&ref=asiancenturystocks.com) (COO US), [**Fujifilm**](https://finance.yahoo.com/quote/4901.T/?p=4901.T&ref=asiancenturystocks.com) (4901 JP) and [**Fisher & Paykel**](https://finance.yahoo.com/quote/FPH.NZ/?p=FPH.NZ&ref=asiancenturystocks.com)(FPH NZ) have only limited exposure to the IVF industry and should, therefore, not be considered pure-play IVF stocks. Most suppliers trade at relatively high multiples. While the industry tailwinds are obvious, note that expensive acquisitions have driven down the return on equity for all of these companies except New Zealand’s Fisher & Paykel. But it doesn’t have much exposure to the IVF industry, to begin with. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b43662a7-5111-4ef8-ae7d-b2d7d73e4e2a_1428x390.png) --- ## 4.2\. IVF drug makers The largest producer of drugs used in IVF treatments is the drug company [**Merck**](https://finance.yahoo.com/quote/MRK?p=MRK&.tsrc=fin-srch&ref=asiancenturystocks.com)(MRK GR). It produces so-called gonadotropins, which are used to stimulate the ovaries to produce multiple eggs. It also sells drugs used to control the timing of ovulation as well as branded progesterone used to prepare the uterus for embryo implantation. But Merck is a massive pharmaceutical company with only a fraction of its revenues from IVF drugs. In 2021, Merck spun off [**Organon**](https://finance.yahoo.com/quote/OGN/financials?p=OGN&ref=asiancenturystocks.com) (ORG US), which owns medicines such as Ganirelix, Follistim and Pregnyl, which are used in IVF treatments. I estimate that Organon has a high-single-digit revenue contribution from IVF drugs. There was a short write-up on Organon on Value Investors Club [here](https://valueinvestorsclub.com/idea/ORGANON%5Fandamp%3B%5FCO/3748458872?ref=asiancenturystocks.com#description), with limited analysis, though pointing out that post-spin-off selling pressure might have pushed down the share price. Organon does trade at an exceptionally low P/E multiple, though be aware that its drug Nexplanon is facing a loss of exclusivity in 2025. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/43f3c588-a90d-43cf-b5a8-2f8c1cdef607_1424x284.png) --- # Conclusion The IVF industry is booming, driven by couples having children later in life as well as infertility problems. There should be plenty of opportunities for IVF clinic operators, including for Jinxin Fertility which may benefit if the Chinese government introduces subsidies for IVF procedures. But the acquisitive nature of many IVF-related companies has caused their returns on equity and earnings per share growth to be weak. One stock that trades at a low multiple with fat profit margins is Organon, though be aware of its ongoing patent cliffs, which may be the reason it was spun off in the first place. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Enjoying Asian Century Stocks? Consider a free trial, giving you instant access to deep-dive reports, thoughtful commentary and access to my Asia-focused portfolio: [Get 30 day free trial](#/portal/signup) ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-067/ Last updated: 2023-03-13T04:00:41.000Z En-Japan, Geo-Energy Resources, Haw Par Corporation _This post is for paying subscribers only._ ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-916/ Last updated: 2023-03-12T06:51:44.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### En-Japan update (4849 JP) URL: https://www.asiancenturystocks.com/en-japan-update-4849-jp/ Last updated: 2023-03-12T05:22:12.000Z A highly successful HR-tech company suffering from weak near-term earnings due to its new Engage platform. Estimated reading time: 22 minutes _This post is for paying subscribers only._ ### Chinese ADRs are safe from delisting, for now URL: https://www.asiancenturystocks.com/chinese-adrs-are-safe-from-delisting/ Last updated: 2023-03-08T04:08:34.000Z On VIE structures, delisting risks and potential workarounds. Estimated reading time: 15 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-63b/ Last updated: 2023-03-06T04:00:40.000Z KFC, Japanese restaurants, Astutex alt-data _This post is for paying subscribers only._ ### The ultimate guide to Japan's publicly listed restaurant chains URL: https://www.asiancenturystocks.com/japanese-restaurants-2023/ Last updated: 2026-02-12T02:44:12.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/japanese-restaurants-2023/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/17e8149a-708d-4263-9a9a-45d5c33c14a0_1485x990.jpg) High-end sushi. Source: Getty Images --- # Table of contents 1\. A short history of Japanese food 2\. Restaurant industry sector trends 2.1\. Low-priced restaurants taking market share 2.2\. Consolidation 2.3\. Franchising 2.4\. Central food kitchens 2.5\. Automation 2.6\. Overseas growth 2.7\. Delivery services 2.8\. COVID-19 2.9\. Rising prices 3\. Investable universe of stocks 3.1\. Fast-food restaurants 3.2\. Sushi restaurants 3.3\. Family restaurants 3.4\. Japanese BBQ 3.5\. Chinese restaurants 3.6\. Pubs & Izakayas 3.7\. Coffee shops 4\. Hidden champions of Japan F&B retail 4.1\. Arclands Service 4.2\. Gift Holdings 4.3\. Genki Sushi 4.4\. Torikizoki 4.5\. Yossix 4.6\. WDI (World Dining Inspirations) 5\. Conclusion --- # Summary - The Japanese restaurant market is essentially a no-growth industry - The only ways to achieve growth are by having exposure to segments such as fast-food or conveyor-belt sushi, by expanding overseas or by taking market share within a segment - I’ve identified a few companies that I believe are offering something unique. Izakaya pub operator [**Yossix**](https://finance.yahoo.com/quote/3221.T/?p=3221.T&ref=asiancenturystocks.com) is run like a tight ship and is differentiated through its focus on rural areas. [**Arclands**](https://finance.yahoo.com/quote/3085.T/?p=3085.T&ref=asiancenturystocks.com) has developed machinery in-house that enables its popular pork katsu restaurants to be run by non-professionals. [**Gift Holdings**](https://finance.yahoo.com/quote/9279.T/?p=9279.T&ref=asiancenturystocks.com)’ Machida Shoten ramen broth is winning customers’ hearts, and the runway of potential growth seems large. Customers like the uniformly low prices offered by the leading izakaya chain [**Torikizoku**](https://finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com). The Western-style restaurants run by [**WDI Corp**](https://finance.yahoo.com/quote/3068.T/?p=3068.T&ref=asiancenturystocks.com) enjoy exceptionally positive reviews. And finally, [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com)’s Shinkansen food delivery trains are a hit with families with young children. - The restaurant categories that were hurt most by COVID-19 were the pubs and izakayas and the casual- and fine dining segments. These are now on a clear recovery path. - In my view, the izakaya pubs Yossix and Torikizoku both have recovery potential from COVID-19\. Genki Sushi’s overseas restaurants were also hurt by pandemic lockdowns and should perform better going forward. # Introduction The restaurant industry is competitive. The barriers to entry are minimal, and successful concepts can easily be copied. So success in the food & beverage retailing industry is often about execution. Having a laser-focused CEO work towards a specific vision: developing the right recipes, choosing the right locations, hiring the right people, and pleasing a specific customer demographic. Given the lack of “moats” in the sector, I’ll investigate which of the restaurant chains in Japan are truly doing something different and ground-breaking. I’ll investigate which Japanese restaurants might do well beyond COVID-19. # 1\. A short history of Japanese food Japanese people have historically eaten mostly plant-based food, focusing on rice, vegetables and seafood. ![GURUNAVI Japan Restaurant Guide | Let's experience Japan](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ea4e386c-4d70-49a6-9521-7d966dad6d33_848x565.jpg) A traditional Japanese meal of rice, omelette, miso soup, grilled fish and pickled vegetables. Source: Gurunavi A typical meal would be rice served with side dishes such as vegetables, miso soup and grilled fish. Soy products such as tofu and soy sauce have also been staples of the Japanese diet for over a thousand years. During China’s Tang Dynasty, around 618-907 AD, Chinese-style wheat noodles (“ramen”) were introduced to Japan. Ramen noodles are made of wheat flour and eaten in a rich soup broth. And since then, new types of noodles dishes have developed in Japan. Eating buckwheat noodles (“soba”) became popular in mountainous regions and wheat noodles (“udon”) in coastal regions. Chinese-style dumplings (“gyoza”) has also become a staple food at many Japanese restaurants. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6287c72c-acfe-4ba8-ba72-c2af5e2795cd_2454x510.png) The invention of sushi initially came from southern China. Packing raw fish in vinegared rice was originally a way to preserve it. Today, of course, refrigeration solves that problem. And the spread of refrigerators in the past century has made sushi more popular. Technically, the word “sushi” refers to the rice, which is prepared together with vinegar, sugar, salt and other seasonings. The raw fish is either consumed on its own (“sashimi”), on top of a small piece of vinegared rice (“nigiri”), through maki rolls or on top of a bowl of rice (“chirashi”). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0db35e7f-a270-4e36-b23b-f0e71a020531_2422x516.png) After the Meiji restoration in 1868, foreign cuisine started exerting greater influence on Japan’s restaurant industry. In the late 19th century, the curry was served at Japanese hotels catering to foreigners. Curry rice became a popular dish among locals, though milder and sweeter than its Indian counterpart. French cuisine inspired the Japanese to create rice with omelette and ketchup (“omurice”), which has become a staple among Japanese children. Deep-fried dishes such as pork in breadcrumbs (“tonkatsu”) were also invented during this period. Other types of Western-style dishes introduced since the Meiji restoration include steaks, hamburgers, bread, pastries, sandwiches and coffee. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/372bd141-f65a-4798-8ec5-0ecd382eb719_2462x520.png) Following World War 2, Japanese-style pubs (“izakayas”) became popular as Japan urbanised and the nightlife blossomed. Izakayas serve alcohol together with side dishes such as grilled chicken skewers (“yakitori”), fried octopus balls (“takoyaki”), steamed soybeans (“edamame”), etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7e890ff1-771c-4019-86a1-36610f248862_2476x532.png) Japan’s fast-food industry took off through the popularisation of McDonald’s in the 1970s. Soon thereafter, local competitors such as Mos Burger and Korea’s Lotteria started popping up, and hamburgers have become a staple of the Japanese diet. KFC has also become popular, notably during the Christmas season, which many Japanese celebrate by eating buckets of KFC chicken. Local fast-food options such as beef bowls (“gyudon”) and takeaway bento boxes have also become popular. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6e88428b-2ee3-4f91-8016-ebf1348e6fa0_2476x524.png) --- # 2\. Restaurant industry sector trends Japan’s restaurant industry is essentially a no-growth industry, where overall sales barely keep up with inflation. The culprits are weak demographics and competition from convenience- and grocery stores. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1a4c8916-5de0-4980-abc5-d204813a8a68_1104x884.png) But underneath this stability, you’ll find that the sector is at the intersection of a number of trends that are affecting each restaurant differently. I’ll now go through some of these trends one by one. ## 2.1\. Low-priced restaurants taking market share ![Saizeriya Reopens Free-Flow Drink Bars At All S'pore Outlets, Remember Not To Reuse Your Cup](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d7b6e422-7c89-4195-82c1-9133675f3c10_1500x750.jpg) Affordable family restaurant Saizeriya, serving Italian cuisine. Source: Saizeriya Like in most other countries, fast-food restaurants are taking share from mid-priced competitors. In Japan, that sector is dominated by [**McDonald’s**](https://finance.yahoo.com/quote/2702.T/?p=2702.T&ref=asiancenturystocks.com), but also local family restaurants such as [**Saizeriya**](https://finance.yahoo.com/quote/7581.T?p=7581.T&.tsrc=fin-srch&ref=asiancenturystocks.com) and cheaper izakaya pubs such as [**Torikizoku**](https://finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com). Western cuisine is also becoming more popular, a trend that’s probably benefitting the major fast-food restaurant chains such as KFC Japan and McDonald’s Japan. Customers that go to fast-food outlets do so for a quick, affordable meal. In contrast, the appeal of casual dining or fine dining restaurants is often to try something new. But that also means that they are constantly forced to seek new customers, which makes it difficult for such restaurants to remain successful year in, and year out. Fast-food restaurants don’t have that problem. --- ## 2.2\. Consolidation Several of the large Japanese restaurant group are engaging in M&A to roll up the industry, with varying degrees of success. Japan’s restaurant industry continues to be made up of many small and mid-sized operators that generally have low margins and low efficiency. As their founders become older, they often sell their restaurants to larger companies that want to take advantage of the loyal customer bases of each restaurant. Examples are [**Colowide**](https://finance.yahoo.com/quote/7616.T/?p=7616.T&ref=asiancenturystocks.com)’s hostile takeover of Ootoya in 2020, [**Yoshinoya**](https://finance.yahoo.com/quote/9861.T/?p=9861.T&ref=asiancenturystocks.com)’s acquisition of ramen noodle franchise Link Holdings, and [**Create Restaurants**](https://finance.yahoo.com/quote/3387.T/?p=3387.T&ref=asiancenturystocks.com)’ acquisition of noodle restaurant operator Kiya Foods. The most acquisitive restaurant conglomerates include [**Skylark**](https://finance.yahoo.com/quote/3197.T/?p=3197.T&ref=asiancenturystocks.com), [**Zensho**](https://finance.yahoo.com/quote/7550.T/?p=7550.T&ref=asiancenturystocks.com), [**Create Restaurants**](https://finance.yahoo.com/quote/3387.T/?p=3387.T&ref=asiancenturystocks.com) and [**Colowide**](https://finance.yahoo.com/quote/7616.T/?p=7616.T&ref=asiancenturystocks.com). As is typically the case for acquisitive companies, the return on equity for those companies remains relatively low, suggesting that the strategy isn’t working very well. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/63f1dcba-5636-43b4-b919-032bfcb8c46b_2652x758.png) --- ## 2.3\. Franchising An asset-light way to grow is through a franchisor model, whereby franchisees pay for their own capex and operations while the franchisor receives royalties for providing expertise, brand name and the operating model. The franchisee model is especially popular in the fast-food segment. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aa297bef-9318-42e5-b78a-88f21ce26036_1408x410.png) KFC Japan’s franchise agreements with both Yum Brands and its sub-franchisees. Source: Shared Research Many franchisee operations are also forced to buy ingredients from captive suppliers, further taking away from the economics of running a restaurant. Some franchisee restaurants are running at very low margins. The difficulty of investing in a listed franchisor is that we often don’t know the unit economics of the franchisees. That’s especially true when the royalty fees are not directly proportional to sales. In [**Komeda’s Coffee**](https://finance.yahoo.com/quote/3543.T/?p=3543.T&ref=asiancenturystocks.com)’s case, for example, the franchisor receives an up-front payment that boosts short-term revenue but presumably at the expense of future earnings. In my view, the franchisee model works best when the brand name is strong, and the restaurant is a “destination” of sorts. If a company is relying on strong foot traffic for the locations chosen, there’s no point paying extra royalties to a franchisor. --- ## 2.4\. Central food kitchens Food processing plants tend to be automated to a much greater extent than restaurants themselves, enabling a low marginal cost of production and economies of scale for the supply chain as a whole. A centrally located food processing plant can supply many restaurants within, say, a specific city. After food is delivered to a restaurant, it is then heated and served to customers. The restaurant is thus able to save labour costs and doesn’t need to hire chefs and specialist staff. As [Kenkyo Investing](https://www.kenkyoinvesting.com/?ref=asiancenturystocks.com) has argued in the past, an entire restaurant could, in theory, be run by “a high schooler with a microwave”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a224b7f2-46a8-4dab-9c94-d92835cbee28_353x200.jpg) A central food processing plant run by Royal Host. Source: Royal Host Food delivered from a central food kitchen is unlikely to be as flavourful or with as good a texture, but technology is improving. Most customers won’t be able to tell the difference. It’s also worth mentioning that the central food kitchen model doesn’t work as well for restaurants serving fresh food, including sushi restaurants. From what I can tell, the model using central food processing plants is used particularly for fast-food outlets such as [**Yoshinoya**](https://finance.yahoo.com/quote/9861.T/?p=9861.T&ref=asiancenturystocks.com) and family restaurants such as [**Saizeriya**](https://finance.yahoo.com/quote/7581.T/?p=7581.T&ref=asiancenturystocks.com) and Gusto. Companies that benefit from this trend are the incumbents with large, underutilised central food processing plants. As well as refrigerator equipment manufacturers such as [**Nakano Refrigerators**](https://finance.yahoo.com/quote/6411.T/?p=6411.T&ref=asiancenturystocks.com) and freezer storage companies [**Nichirei**](https://finance.yahoo.com/quote/2871.T/?p=2871.T&ref=asiancenturystocks.com) and [**Yokorei**](https://finance.yahoo.com/quote/2874.T/?p=2874.T&ref=asiancenturystocks.com). ## 2.5\. Automation COVID-19 pushed restaurants to introduce automation into their operations earlier than they otherwise would have. So far, robots are mostly used to guide customers to their tables, take orders, deliver the food and, in special cases, also prepare it. Automation through robots is used to greet guests and, in some cases, even take orders. In most cases, robots are used today to take guests to their tables and/or deliver food to them. The major suppliers of such robots include [**SoftBank Robotics**](https://finance.yahoo.com/quote/9984.T/?p=9984.T&ref=asiancenturystocks.com) and [**Omron**](https://finance.yahoo.com/quote/6645.T/?p=6645.T&ref=asiancenturystocks.com). Such robots have been introduced to [**Skylark**](https://finance.yahoo.com/quote/3197.T/?p=3197.T&ref=asiancenturystocks.com)’s Syabuyo shabu-shabu restaurants, [**Monogatari**](https://finance.yahoo.com/quote/3097.T/?p=3097.T&ref=asiancenturystocks.com)’s Japanese barbecue restaurants and [**Watami**](https://finance.yahoo.com/quote/7522.T/?p=7522.T&ref=asiancenturystocks.com)’s izakayas, to name just a few. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/64307e5e-7511-49dd-b7a2-9400ee8c2e0b_1280x800.jpg) A food delivery robot. Source: Nikkei Ordering is increasingly done via tablets with specialised software developed by start-ups such as TouchTo, Huber, Qmenu and Smary. Other restaurants, such as [**McDonald’s Japan**](https://finance.yahoo.com/quote/2702.T/?p=2702.T&ref=asiancenturystocks.com) use self-ordering kiosks and allow customers to pick up their food at a centralised location. Some restaurants, such as [**Zensho**](https://finance.yahoo.com/quote/7550.T/?p=7550.T&ref=asiancenturystocks.com)’s Sukiya, use QR codes on tablets that customers scan with their smartphones. Customers then pay online via their smartphones. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3e6619b4-69d9-47e4-88fe-df1bb2583e76_606x486.png) Source: Genki Sushi Food preparation is also increasingly becoming automated, at least to some extent. For example, sushi robots have become popularised by [**Suzumo Machinery**](https://finance.yahoo.com/quote/6405.T/?p=6405.T&ref=asiancenturystocks.com), which invented them in the 1970s. The company still has an 80% market share in sushi rolling machinery. You can find Shared Research’s excellent initiation report on Suzumo Machinery [here](https://sharedresearch.jp/en/companies/6405?ref=asiancenturystocks.com). In other areas, [**Fuji Seiki**](https://finance.yahoo.com/quote/6400.T/?p=6400.T&ref=asiancenturystocks.com) produces rice ball machines that help produce onigiri. [**Shibuya**](https://finance.yahoo.com/quote/6340.T/?p=6340.T&ref=asiancenturystocks.com) produces bottling systems. [**Kitazawa Sangyo**](https://finance.yahoo.com/quote/9930.T/?p=9930.T&ref=asiancenturystocks.com) sells frying machines to restaurants. And [**Rheon Automatic Machinery**](https://finance.yahoo.com/quote/6272.T/?p=6272.T&ref=asiancenturystocks.com) produces encrusting machines and bread makers. That said, it’s proven hard to completely automate the cooking process. Placing seafood on rice is difficult for machines to do. Robots cannot slice meat or vegetables or place finished the food on plates. So, for now, machines are mostly used for rolling or packaging sushi or for frying or heating up food. --- ## 2.6\. Overseas growth Since Japan’s restaurant industry is stagnant, many brands are pushing for overseas expansion to drive growth. As a spokesperson for the ramen chain Chikaranomoto said: > *"Overseas there is significant demand for ramen restaurants, and *there is room for the market to grow*… We are opening shops faster than in Japan."* ![Kaitensushi (回転寿司), Kura Sushi US - by Conor MacNeil](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d37e082a-d051-4195-989d-8b83c3ecb7f7_906x544.png) Kura Sushi stores in the United States. Source: [Conor MacNeil](https://investmenttalk.substack.com/p/kaitensushi-kura-sushi-us-90d) [**Kura Sushi**](https://finance.yahoo.com/quote/2695.T/?p=2695.T&ref=asiancenturystocks.com), for example, is targeting overseas locations to make up 40% of all shops by the end of this decade. [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com) is also targeting growth in Southeast Asia. Pub operator [**Watami**](https://finance.yahoo.com/quote/7522.T/?p=7522.T&ref=asiancenturystocks.com) has said publicly that it wants to increase its footprint in China. --- ## 2.7\. Delivery services ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/80c586fb-5db7-480a-a805-24abd4eda22a_1178x664.png) A Demae-Can delivery driver. Source: Nikkei Japan’s delivery industry is dominated by Uber Eat and local competitor [**Demae-Can**](https://finance.yahoo.com/quote/2484.T/?p=2484.T&ref=asiancenturystocks.com), which is backed by SoftBank and Naver via its parent Z Holdings. Demae-Can began by offering delivery of restaurant food but has since then expanded to offering grocery delivery as well. Restaurants with in-house delivery capabilities can use Demae-Can’s platforms to collect orders and pay a small commission for the trouble. Restaurants without delivery capabilities can use Demae-Can’s delivery options as well. Most of Demae-Can’s drivers are working for third parties, though some remain in-house. You can read fellow Substacker Will Schoeb’s excellent introduction to Demae-Can [here](https://japanbi.substack.com/p/demae-can-the-line-superapp-backed). Other delivery service competitors include Foodpanda, and NTT Docomo’s Yume Navi, which delivers meals from convenience stores such as 7-Eleven and Lawson. Since delivery is expensive, I would imagine that delivery services can only capture a small part of the market. For a single customer, going to a local ramen shop will still be far cheaper. And delivery services cannot replicate the experience of taking your date to a high-end restaurant, for example. --- ## 2.8\. COVID-19 The overall Japanese restaurant industry saw its sales drop about 15% in 2020, the steepest fall since statistics started to be collected in the early 1990s. The hardest hit sub-segments were the pubs and izakayas, followed by casual dining and fine dining restaurants. Coffee shops around office areas or railway stations were also hurt by the pandemic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bbdbac1d-0aa3-4fd5-b42a-85fe500f05ad_1554x1046.png) Pubs and izakayas were the hardest hit restaurants during COVID-19, while fast-food outlets did relatively better. Source: Japan Spotlight Some of the measures that restaurants had to undertake were to space out tables, reduce seating capacity and install plastic screens to avoid air circulation. In some areas, restaurants were prohibited from serving alcohol for a specific period of time. And certain bars had to stop operating as early as 8 pm, making their opening hours restricted. Contact tracing efforts were introduced. All of these measures impacted the restaurant industry, especially for those restaurants serving alcohol. ![People enjoy drinks and dinner at a Japanese izakaya pub, amid the coronavirus disease (COVID-19) outbreak, in Tokyo](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d1e4200a-ef94-447d-afbb-dfb751a5df7b_6318x4410.jpg) Plastic dividers meant to shield customers of an izakaya joint. Source: Issei Kato Restaurant operators shifted their focus to solo customers and in many cases, had to reject groups of three or more. The average size of a restaurant-booking party fell from 5-6 before the pandemic to 3 in the middle of it, according to [**Gurunavi**](https://finance.yahoo.com/quote/2440.T?p=2440.T&.tsrc=fin-srch&ref=asiancenturystocks.com)’s restaurant guide. At the other end of the spectrum, some pizza joints and fast-food outlets maintained or even increased their sales during the pandemic, partly by relying on demand via delivery services. Restaurants offering drive-through ordering, including [**KFC**](https://finance.yahoo.com/quote/9873.T/?p=9873.T&ref=asiancenturystocks.com)**,** did well. Uber Eats and Demae-can were the primary beneficiaries. Even high-end restaurants were forced to shift their focus to take-away demand, offering boxed lunches for takeaway and home delivery. This newfound popularity of delivery services also led to a short boom in cloud kitchens that only prepare food and do not serve it. One such example is Ghost Restaurant Laboratory in Tokyo, which restaurant chain [**Toridoll**](https://finance.yahoo.com/quote/3397.T/?p=3397.T&ref=asiancenturystocks.com) invested in. Now that COVID restrictions are easing, many restaurants are shifting back their expansion to urban locations such as train stations, offices and tourist attractions. It remains to be seen how fast customer behaviour will revert back to what it used to be before COVID-19. --- ## 2.9\. Rising prices The rapid depreciation of the Japanese yen in 2022 drove up the costs for food service companies. Labour shortages during the pandemic also caused wages to rise. Restaurant profit margins therefore suffered. Many restaurants are now raising prices, though reluctantly. Here is a summary of the price increases we saw in 2022: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3852cfc5-5e7c-4aa5-9d2c-6834cec011f4_1280x1180.jpg) Price increases at a number of Japanese restaurants during 2022\. Source: Mizuho It’s also clear that consumers are becoming more thrifty. That trend may well benefit low-cost operators such as fast-food chains. --- # 3\. Investable universe of stocks I think the best way to make sense of the Japanese industry is to divide them into the following seven categories: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cab86154-d56d-4644-a703-ca14c070b7a9_2620x428.png) Each of these categories of restaurants has different growth and profitability characteristics. I’ll now go through them one by one. ## 3.1\. Fast-food restaurants Japan’s fast-food restaurants offer affordable food in restaurants with simple decorations. Customer turnover is typically fast. The food is mostly produced in central food kitchens and then reheated on the spot. And fast-food outlets typically expand through the use of franchisees, which take on most of the capital expenditure and pay the brand owner royalties. Among Japan’s hamburger restaurants, [**McDonald’s Japan**](https://finance.yahoo.com/quote/2702.T/?p=2702.T&ref=asiancenturystocks.com) reigns supreme. McDonald’s entered the Japanese market in 1971 through the help of entrepreneur Den Fujita. That story was told well by the YouTube channel Allocators Asia [here](https://youtu.be/95peEFAk6-s?ref=asiancenturystocks.com). What Den Fujita did was to adapt McDonald’s menu to Japanese tastes, with the introduction of the Teriyaki burger, Ebi Filet-O shrimp burger and McPork sandwich, to name just a few. It’s a franchisee of McDonald’s Corporation and pays royalty fees for the privilege of using the brand, menu, and so on, as well as the ingredients. Local hamburger chain [**MOS Burger**](https://finance.yahoo.com/quote/8153.T/?p=8153.T&ref=asiancenturystocks.com) is another strong competitor, which came up with innovations such as the rice burger. ![How KFC Became a Christmas Tradition in Japan](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/02ee42b1-c67a-4fe1-b84a-442d7a70ea50_750x562.jpg) The fried meat category is dominated by [**KFC Japan**](https://finance.yahoo.com/quote/9873.T/?p=9873.T&ref=asiancenturystocks.com), which has been around for over 50 years. It’s become a tradition in Japan to eat KFC for Christmas. This is due to its 1974 “Kentucky for Christmas” campaign, which argued that fried chicken was a suitable alternative to then-hard-to-find Christmas turkey. This KFC Christmas meal is sold in the form of party barrels with fried chicken, sides and a cake. Technically, KFC Japan is a franchisee of Yum Brands, but it also has franchisees of its own. Another type of fast food is Japanese rice bowls (“gyudon”). It’s a sub-sector that isn’t growing particularly fast. It’s dominated by three restaurant chains: - [**Yoshinoya**](https://finance.yahoo.com/quote/9861.T/?p=9861.T&ref=asiancenturystocks.com) has been around for 120 years and remains a household brand with over 1,000 restaurants both in Japan and overseas. - [**Zensho**](https://finance.yahoo.com/quote/7550.T/?p=7550.T&ref=asiancenturystocks.com)’s chain of Sukiya rice bowl restaurants. Zensho also owns a large number of other restaurant chains, including the Big Boy hamburger restaurant, family restaurant Coco’s, Seto Udon, shabu-habu restaurant Hanaya Yohei and more. - [**Matsuya**](https://finance.yahoo.com/quote/8237.T/?p=8237.T&ref=asiancenturystocks.com) is the third-largest beef bowl chain, with about 1,000 restaurants. It also runs a pork cutlet chain called Matsunoya and a sushi restaurant chain called Sushimatsu. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3e545d74-4ac8-48ba-b3a4-48c6cd118bb4_1306x976.png) Curry house CoCo Ichibanya. Source: HappyCow I’m also a big fan of curry rice specialist [**CoCo Ichibanya**](https://finance.yahoo.com/quote/7630.T/?p=7630.T&ref=asiancenturystocks.com). Its flavourful curry is served with deep-fried pork cutlet. The price point is a bit higher than typical gyudon or Western fast food restaurants. Another pork tonkatsu restaurant is [**Arcland Service**](https://finance.yahoo.com/quote/3085.T/?p=3085.T&ref=asiancenturystocks.com)’s Katsuya chain. This chain does not serve curry but rather deep-fried pork on top of rice, also known as “katsudon”. Within the self-service udon noodles category, [**Toridoll**](https://finance.yahoo.com/quote/3397.T/?p=3397.T&ref=asiancenturystocks.com) operates the chain Marugame Seimen. The company also runs the yakitori family dining restaurant Toridoll and pork cutlet restaurant Butaya Tonichi. The Japanese udon restaurant market grew fast prior to COVID-19 and probably has some growth potential. Reviewing Google Trends, it looks to me like McDonald’s, KFC and Zensho’s Sukiya are doing well, most likely thanks to their low prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0af34a91-0296-461e-b68b-e92cfec13840_1412x454.png) In terms of operating margins, McDonald’s Japan remains the clear outperformer, save for a period around 2015 when customers avoided McDonald’s after an incident with expired chicken making customers sick. KFC also enjoyed decent margins during the pandemic. And the third outperformer is the curry rice restaurant Ichibanya, as mentioned above. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bebb07ea-bf4a-4f25-a790-3476f7fc405d_1354x460.png) Same-store sales trends during COVID were the strongest at McDonald’s, perhaps thanks to its delivery services. Yoshinoya and Ichibanya performed poorly, while Zensho was somewhere in between. I believe that these same-store sales trends will mostly reverse as consumption patterns normalise now that pandemic restrictions have mostly been eased. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d22e414-da15-47d7-a7e9-ea0919690e92_1158x848.png) Source: Mita Securities Neither of the Japanese fast-food operators looks particularly cheap, except potentially [**KFC Holdings Japan**](https://finance.yahoo.com/quote/9873.T/?p=9873.T&ref=asiancenturystocks.com) at 12.1x EV/EBIT. But I believe that KFC benefitted from COVID-19 thanks to its drive-through options and takeaway menus. [**Arcland Service**](https://finance.yahoo.com/quote/3085.T/?p=3085.T&ref=asiancenturystocks.com), which runs the highly popular katsudon chain Katsuya trades at only 12.1x EV/EBIT - a low multiple compared to the competition. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9a77ba12-7320-4db8-b675-b473f61bec7b_1296x460.png) --- ## 3.2\. Sushi restaurants ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a24a0632-c59c-449e-a1bb-db2150cd77a4_1280x720.jpg) Children taking dishes from a Sushiro restaurant near Tokyo’s Ogikubo station. Source: Ken Kobayashi In the past, sushi restaurants have traditionally been high-end service operations, where customers sit at a counter in front of a chef. That chef would then serve raw fish on vinegared rice, a service that’s labour-intensive and also expensive in terms of ingredients. But since the 1950s, lower-priced conveyor belt sushi chains (“kaiten-zushi”) have become popular. In such restaurants, small sushi dishes are transported through conveyor belts. Customers then choose the dishes they like. More recently, kaiten-zushi restaurants have introduced tablets used for ordering, while the conveyor continues to be used to deliver the items to each table. Many brands also use automated sushi-making machines. Japan’s kaiten-zushi market has been growing on a secular basis, except for a slight decline during the depths of COVID-19\. [Some](https://podcasts.google.com/feed/aHR0cHM6Ly9hdWRpb2Jvb20uY29tL2NoYW5uZWxzLzQ5NzA4MTMucnNz/episode/dGFnOmF1ZGlvYm9vbS5jb20sMjAyMC0wOC0xOTovcG9zdHMvNzY2MTIzMA?sa=X&ved=0CAIQuIEEahcKEwjI4Jnc4MP9AhUAAAAAHQAAAAAQLA&ref=asiancenturystocks.com) argue that the sushi restaurant market has been in a bubble, although from what I can tell, most operators are still showing decent numbers. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e6674440-1136-4d72-aa9e-6a7e93f17816_1280x745.jpg) You can tell from the below same-store sales numbers that Japan’s sushi chains weathered the pandemic relatively well thanks to takeaway and delivery services. Some restaurants even installed lockers for their takeaway food, which customers can easily access through a code delivered to their smartphones. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5089e6b5-2291-4864-9ac1-42209a2123d4_1150x828.png) Source: Mita Securities The sushi restaurant industry is dominated by four separate chains: Sushiro, Kura Sushi, Hama Sushi (owned by restaurant [**Zensho**](https://finance.yahoo.com/quote/7550.T/?p=7550.T&ref=asiancenturystocks.com)) and Kappa Sushi (owned by Kappa Create): - Industry leader [**Food & Life Companies**](https://finance.yahoo.com/quote/3563.T/?p=3563.T&ref=asiancenturystocks.com) runs the now-famous conveyor-belt sushi restaurant Sushiro, which operates mostly in suburban locations. It also owns Japanese sushi pub Sugidama, and the Kyotaru sushi take-out service. - [**Kura Sushi**](https://finance.yahoo.com/quote/KRUS/?p=KRUS&ref=asiancenturystocks.com) has a large footprint of sushi restaurants Japan. It also has an overseas operation, partly through its separately listed Taiwanese subsidiary [**Kura Sushi Asia**](https://finance.yahoo.com/quote/2754.TWO/?p=2754.TWO&ref=asiancenturystocks.com) and through its US subsidiary [**Kura Sushi USA**](https://finance.yahoo.com/quote/KRUS/?p=KRUS&ref=asiancenturystocks.com). - [**Kappa-Create**](https://finance.yahoo.com/quote/7421.T/?p=7421.T&ref=asiancenturystocks.com) owns Kappa Sushi, another conveyor-belt sushi chain. It also owns a company manufacturing bread and sushi for convenience stores. - [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com) is known for its Shinkansen train system of delivery and operates overseas via the help of franchisee Maxim’s Group. Reviewing Google search query data, it looks like consumer interest in Food & Life Companies’ Akindo Sushiro, and Kura Sushi is increasing. Genki Sushi is doing well, too, especially overseas. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c54324d1-1b73-46e4-92fa-f4d27e241c87_1436x454.png) Margins have been the highest for Food & Life Companies. And indeed, Sushiro seems to be an outperformer, perhaps thanks to its low prices and high-quality ingredients. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3a05c5fd-3b22-44b8-bf74-37a60c0b1005_1604x554.png) Looking at the trading multiples, [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com) is priced at a reasonable multiple vs its pre-pandemic operating profits, especially given its success overseas. Few Japanese restaurants have done well overseas, whereas Genki’s brand name and product offering seem distinctive enough to make a mark, at least in Southeast Asia. You could argue that [**Kura Sushi**](https://finance.yahoo.com/quote/2695.T?p=2695.T&.tsrc=fin-srch&ref=asiancenturystocks.com) trades at a low price compared to its US and Taiwanese subsidiaries, but note that the company has a significant amount of debt. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/aa42d5e9-9bfc-4327-a2c0-f33b4b4c897e_1090x346.png) --- ## 3.3\. Family restaurants The family restaurant segment emerged in the 1970s, targeting families looking for affordable, child-friendly food in suburban locations. They typically have diverse menus with a standard, affordable fare. ![File:Gusto Restaurant in Japan 03.jpg - Wikimedia Commons](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7084bab3-2f7c-4d18-826f-906b7dbfb36c_1600x756.jpg) A Skylark Gusto restaurant. Source: Wikipedia Commons Since the food in family restaurants is typically simple, it can be produced at a central food manufacturing plant and then reheated at each location, helping bring down costs and prices. But if you go to a family-style restaurant, don’t expect haute cuisine. Examples of family restaurants include Skylark with its restaurant chain Gusto, ramen restaurant Ringer Hut, Gusto, Royal Host and Italian restaurant Saizeriya. - [**Skylark**](https://sg.finance.yahoo.com/quote/3197.T/?p=3197.T&ref=asiancenturystocks.com) runs the popular family-oriented restaurants Gusto and Jonathan’s, focusing on Japanese and Western-style basic dishes such as hamburg steaks, curry rice and pasta. - [**Saizeriya**](https://sg.finance.yahoo.com/quote/7581.T/?p=7581.T&ref=asiancenturystocks.com) is a restaurant chain focusing on extremely low-priced Italian fare such pasta, pizza, risotto and more. - [**Create Restaurants**](https://sg.finance.yahoo.com/quote/3387.T/?p=3387.T&ref=asiancenturystocks.com) has strength in all-you-can-eat buffet restaurants and food courts, but has grown significantly through M&A. Its most popular restaurant is Japanese-style pub Isomaru Suisan. - [**Colowide**](https://sg.finance.yahoo.com/quote/7616.T/?p=7616.T&ref=asiancenturystocks.com) is the parent of Skylark, and also owns izakaya chain Tsubohachi and popular yakiniku chain Gyu-Kaku. - [**Royal Host**](https://finance.yahoo.com/quote/8179.T?p=8179.T&.tsrc=fin-srch&ref=asiancenturystocks.com) is a family restaurant serving Western food such as hamburgers, pasta, curry and more. The same-store sales trends in the family segments were weak in COVID-19, and I would imagine that some of them will have recovery potential in 2023. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a6491614-2e32-4037-91ad-7bb121d4dfe5_1146x826.png) Source: Mita Securities Judging from Google search queries, consumer interest in Saizeriya is going up, while it’s more stagnant for Skylark restaurants Gusto and Jonathan’s, Royal Host and Create Restaurant’s Isomaru Suisan. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/585b6358-2e65-4560-a466-0741ee56dd99_1432x456.png) Margins have been weak almost across the board, suggesting little benefits from centralised food processing plants. My guess is that these restaurants are now facing tough competition from fast-food outlets and, therefore unable to charge high prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/98d918b2-8d1b-47a8-b92d-e6dd8e708305_1366x470.png) While [**Saizeriya**](https://finance.yahoo.com/quote/7581.T/?p=7581.T&ref=asiancenturystocks.com)’s margins aren’t necessarily market-leading, the stock seems reasonably inexpensive at just 0.7x EV/Sales. That said, Saizeriya’s return on capital has been horrendous at just 6%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bbb7d45c-efab-4495-af42-112c951f0bb4_1354x338.png) --- ## 3.4\. Japanese BBQ ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/14239f9e-7596-4ea9-b018-398fc394e5f3_1760x1168.png) Japanese BBQ restaurants serve grilled skewers of yakiniku (grilled beef) or yakitori (grilled chicken), or where customers cook food on their own tables, sometimes with the help of restaurant staff. Japanese hotpot (“shabu-shabu”) is also part of this segment. Shabu-shabu is a casual dining option whereby customers boil meat and vegetables in water with seasonings. [**Monogatari**](https://sg.finance.yahoo.com/quote/3097.T/?p=3097.T&ref=asiancenturystocks.com)’s Yakiniku King is a suburban Japanese barbecue chain, but the company also runs several other shabu-shabu, sushi and other restaurant concepts. [**Anrakutei**](https://sg.finance.yahoo.com/quote/7562.T/?p=7562.T&ref=asiancenturystocks.com) focuses on the yakiniku-focused family restaurant with the same name, also operating at roadside locations with a low price point. [**Amiyaki Tei**](https://sg.finance.yahoo.com/quote/2753.T/?p=2753.T&ref=asiancenturystocks.com) is another yakiniku and yakitori restaurant operator using domestic and wagyu beef only, though at higher prices. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce90dba8-7e4e-461d-a7a3-0f88697d813c_1148x826.png) Source: Mita Securities Google search query data suggests that Yakiniku King is growing well. Monogatari’s average Google review score of 3.8 is also significantly higher than Anrakutei’s 3.4 and Amiyaki Tei’s 3.6. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ce2c45c3-d21f-4149-968a-285acfb3194a_1324x438.png) Monogatari’s margins have been lower than those of its peers but has earned a high return on capital of almost 20% prior to COVID-19\. Amiyaki Tei’s margins have also been decent. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3d7d44e4-8e35-4737-b279-785a45aa6ee9_1312x464.png) [**Monogatari**](https://sg.finance.yahoo.com/quote/3097.T/?p=3097.T&ref=asiancenturystocks.com) trades at an EV/EBIT of 12x and a forward P/E of 18x, which may qualify it as a GARP-type stock. But I believe it was a COVID-19 beneficiary, so I would not extrapolate the success it’s had during COVID-19. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3bcafb92-1640-4742-a9ef-3fe159832e14_1306x294.png) --- ## 3.5\. Chinese restaurants ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9715b5eb-6a4f-497a-bf51-5e25431753b8_878x634.png) Japan’s Chinese restaurants serve gyoza, ramen, fried rice, spring rolls, etc but with a Japanese twist. They tend to be less spicy, less oily and less salty than their counterparts in China. The main companies in the Chinese restaurant industry in Japan include: - Kansai-based [**Ohsho Food Service**](https://sg.finance.yahoo.com/quote/9936.T/?p=9936.T&ref=asiancenturystocks.com)’s restaurant chain Gyoza Ohsho. The company runs a tight ship with a franchisee operation run primarily by former employees of the company. The organisation is decentralised, with each restaurant having the ability to design its own menus. Extensive take-out options may have helped it during COVID-19. - [**Hiday Hidaka**](https://sg.finance.yahoo.com/quote/7611.T/?p=7611.T&ref=asiancenturystocks.com)’s Hidakaya serves low-priced ramen, gyoza and other Chinese dishes in their 440 restaurants around Tokyo. Most outlets are near train statations, and therefore highly dependent on railway station foot traffic. The company is known to be shareholder-friendly. - [**Ringer Hut**](https://sg.finance.yahoo.com/quote/8200.T/?p=8200.T&ref=asiancenturystocks.com) runs the noodle restaurant Ringer Hut and the tonkatsu restaurant Hamakatsu. - Meanwhile, [**Kourakuen**](https://sg.finance.yahoo.com/quote/7554.T/?p=7554.T&ref=asiancenturystocks.com) is more of a pure-play ramen establishment. Same-store sales have been weak during COVID-19, especially for Hiday Hidaka’s restaurant chain Hidakaya which is reliant on the sales of alcohol. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ef2c8ace-bd04-44cb-a718-477353380282_1150x826.png) Source: Mita Securities You can see that search query growth has been decent for most Chinese restaurants in Japan, but especially for Ohsho’s restaurant Gyoza no Ohsho. It’s a growth market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8a373360-410e-4679-bbcb-afa92c9678ff_1372x472.png) Hidakaya’s prices are low, yet the chain has managed to achieve high margins throughout most of its history thanks to the sale of alcohol in its outlets. An exception is during COVID-19, when sales went down the drain, just like for most izakayas. Ohsho Food Service has also enjoy consistently high operating margins. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c7fb6dfc-3d6e-44ee-864c-60349f1be12c_1364x476.png) Neither of Japan’s Chinese restaurants trades at particularly low multiples, in my view. I’m impressed with Gift Holdings, though, and I will speak more about it later. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/94635f87-b91c-41db-82bc-c58dcef4c0d3_1306x336.png) --- ## 3.6\. Pubs & Izakayas ![japanese izakaya](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/746fd509-29b5-40c2-8dd4-d49cc6c3fa47_770x513.jpg) Source: iStock.com/JohnnyGreig Most Japanese listed pub operators focus on izakaya establishments, which can be seen as Japanese versions of tapas bars. Izakaya literally means a place where you stay and drink, as opposed to taking the alcohol home. Customers typically order drinks, together with a variety of snacks such as grilled skewers, sashimi, and deep-fried dishes. This food is typically served in small portions and is meant to be shared among the group. Competition within the izakaya industry is said to be fierce, and it’s also a category that’s been especially hit by COVID-19 as people have avoided social interactions. One of the more popular izakaya chains is [**Torikizoku**](https://sg.finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com), famous for its chicken and 300 yen-across-the-board prices. Another large family-run chain is [**Watami**](https://sg.finance.yahoo.com/quote/7522.T/?p=7522.T&ref=asiancenturystocks.com)**,** whose different brands serve a variety of dishes, including fusion-inspired options. [**Chimney**](https://sg.finance.yahoo.com/quote/3178.T/?p=3178.T&ref=asiancenturystocks.com) operates in the mid-priced segment under the ownership of a liquor firm that sells its product via the restaurant. [**Kushikatsu Tanaka**](https://sg.finance.yahoo.com/quote/3547.T/?p=3547.T&ref=asiancenturystocks.com) specialises in deep-fried skewers and is popular among young people. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/dbcb5418-5beb-4b39-ae42-ea1240d9633c_1152x832.png) Source: Mita Securities I see momentum in the following two izakaya chains: Torikizoku and Kushikatsu Tanaka. Torikizoku suffered after its price hikes in 2017, but it has adjusted its operating model and is now growing again. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1c965b5c-7b93-49c0-a8a6-dc964004fe0c_1366x520.png) The pre-COVID operating margins were the strongest at rural izakaya chain operator [**Yossix**](https://finance.yahoo.com/quote/3221.T/?p=3221.T&ref=asiancenturystocks.com) and Western-style pub operator [**Hub Co**](https://finance.yahoo.com/quote/3030.T/?p=3030.T&ref=asiancenturystocks.com). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/943c3385-3ffd-4dc5-a35d-14fdeafe8120_1588x542.png) Several of the izakayas and pubs trade well below 1.0x revenues. With pre-pandemic margins of [**Yossix**](https://sg.finance.yahoo.com/quote/3221.T/?p=3221.T&ref=asiancenturystocks.com) and [**Hub Co**](https://sg.finance.yahoo.com/quote/3030.T/?p=3030.T&ref=asiancenturystocks.com) at 10% and 7% respectively, you could well argue that they’ll trade close to or even below 10x normalised EV/EBIT. Both of them have earned a decent return on equity. [**Torikizoku**](https://sg.finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com) also appeals to me as a consumer, given its low price point. I’d imagine that the company will be able to grow for many years. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/18b28881-56fd-456e-8fb9-09f2560bdd6f_1304x348.png) --- ## 3.7\. Coffee shops ![Official site of doutor Japan](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4dfa6bca-68ed-403a-a18e-dd64a4151ae6_768x475.jpg) Doutor Coffee Dutch traders brought coffee to Japan towards the later part of the 18th century. Consumption has increased since “manga shops” started popping up in Japan in the 1970s, serving coffee and free comic books for reading. Then came Internet cafes, Starbucks, vending machine coffee in and finally, fresh coffee served by local convenience stores. Japan’s coffee shops are typically situated in areas with high foot traffic, such as in central areas or next to railway stations. But there are also suburban alternatives, where customers come by car and tend to stay for longer. While coffee consumption has gone up, the number of coffee chains has declined considerably as independent cafes have shut down and the likes of Starbucks have taken market share. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b81a3fa1-02fb-4c21-a168-c94e16c4f9c7_725x430.png) US-based [**Starbucks**](https://finance.yahoo.com/quote/SBUX/?p=SBUX&ref=asiancenturystocks.com) served the higher end of the market, while local coffee chain Doutorserves what you might consider the working-class demographic. Parent [**Doutor Nichires**](https://finance.yahoo.com/quote/3087.T/?p=3087.T&ref=asiancenturystocks.com) also owns Excelsior Caffe, which focuses on sit-down coffee shops with more traditional decor. [**Komeda’s Coffee**](https://finance.yahoo.com/quote/3543.T/?p=3543.T&ref=asiancenturystocks.com) have a greater focus on suburban locations, with much lower customer turnover. Meanwhile, [**Saint Marc**](https://finance.yahoo.com/quote/3395.T/?p=3395.T&ref=asiancenturystocks.com) is a mid-priced coffee chain focusing on bread items such as its “chococro“ pastry. The following chart shows you that Starbucks and Komeda have taken market share in recent years from independent coffee shops and, to a lesser extent, Doutor and Saint Marc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f4ffaac4-b098-4612-b972-fb39de224bdd_1156x848.png) Source: Mita Securities The Japan Customer Satisfaction Index has put Starbucks and private equity-owned Caffe Veloce at the top, followed by Doutor. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0807c02e-5d21-4b8b-8764-ba4ab291b2af_1031x260.png) Google search query data suggest a rapidly growing consumer interest in Komeda’s coffee, with stagnation evident for both Starbucks and Doutor. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2667aa6d-ee87-4bea-81d8-06713a40f1f3_1374x472.png) In terms of operating margins, Komeda’s are far above those of the competition. But note that Komeda is reliant on fees paid by its franchisees, which are predominantly fixed and front-loaded. I wonder whether their franchisees are particularly profitable. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3b26091a-fc50-4d94-8b07-983761178c41_1598x548.png) [**Doutor Nichires**](https://finance.yahoo.com/quote/3087.T/?p=3087.T&ref=asiancenturystocks.com) continues to trade at a low EV/Sales multiple, while its revenues are likely to recover with greater railway commuter volumes. Note that Doutor’s pre-pandemic ROE was weak at just 6%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/884394a8-3563-403e-ab51-45beb1036ccb_1096x244.png) --- # 4\. Hidden champions of Japan F&B retail When it comes to finding the so-called “hidden champions” of Japan’s food & beverage retailing industry, I veer towards low-cost companies. Additionally, since pubs and izakayas performed poorly during COVID-19, I imagine that some of them will see recovery in their earnings in 2023 and 2024. I pay particular attention to the pre-COVID return on equity and also the incremental return on equity as a company grows. For restaurants, you’ll want a return on equity to remain high, flat and consistent as they continue to grow. With that in mind, here are six Japanese restaurant operators that I think are exceptional in one way or another. ## 4.1\. Arclands Service ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cd3a8246-df5f-420c-b653-a13ea84cd29d_794x570.png) A Katsuya outlet. Source: Google Maps [**Arclands Service**](https://sg.finance.yahoo.com/quote/3085.T?p=3085.T&ref=asiancenturystocks.com) *(3085 JP - US$514 million)* operates Katsuya, a restaurant chain focusing on tonkatsu, i.e. deep-fried pork cutlets. The company is a subsidiary of home centre operator Arclands focused on the Niigata prefecture. Katsuya is famous for its low-priced menus compared with most other tonkatsu restaurants, with a bowl costing as little as JPY 490 each. The company ensures high-quality standards through automatic deep fryers, which were developed in-house together with a key supplier. The number of Google search queries has gone up in quite a consistent fashion over time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/81976444-cb72-4efd-a7e3-013661f37fa7_1324x452.png) Reviews from Google mention how the food is surprisingly good, with affordable prices and generous portions, despite a 3.5 ranking. Comments include: > *“This place is *incredible for what you pay*. A fast food restaurant like this is proof that Japan does not play around when it comes to food quality”* > > *“Such a *cheap place with amazing fresh testing katsu*, the soup is also insaaannneee”* > > *“I am not sure as to why this shop has 3.5 review when I saw it. *They deserve more*. Perfect service and food... very easy to order.”* > > *“Pretty solid tonkatsu and katsudon for *cheap and fast*! Perfect for when you’re on the go or for a quick bite. Like it better then your traditional beef bowl spots!”* Today, the stock trades at 19.9x 2024e consensus P/E, with a clean balance sheet. While the margins are impressive at 14%, the return on equity has only been in the mid-teens, perhaps due to large investments in machinery. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/364aebce-7564-4194-baf7-9116d1751565_1774x1150.png) --- ## 4.2\. Gift Holdings ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3aa24a87-6b1f-4047-a4cf-0b60e2cf4cad_790x566.png) [**Gift Holdings**](https://finance.yahoo.com/quote/9279.T/?p=9279.T&ref=asiancenturystocks.com) *(9279 JP - US$289 million)* runs a ramen chain called Machida Shoten (町田商店). It’s based in Yokohama and runs directly-owned stores in the Western part of Greater Tokyo. Revenue growth has been solid and consistent at over 20% per year, and the Google Trends chart supports that Machida Shoten is increasing its footprint over time. Growth is funded by internally generated capital with a return on equity of about 30%, while margins are high at around 11%. Since Machida Shoten is only present in western Tokyo, I believe that the potential runway of growth remains large. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/51adb353-5a4a-4c78-88f1-4b16c40c348b_1310x448.png) Machida Shoten serves up Yokohama-lekei ramen noodles, which uses a pork-bone-based soup with soy sauce and medium-thick noodles. The noodles are manufactured in-house, while the soup comes from third parties. The key selling point of the Machida Shoten seems to be the soup broth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7dc91cd2-07c9-4b85-9480-4556998ef1d7_1204x1394.png) The Google Review score is average at around 3.6\. A few notable comments: > *“The ramen itself was really great. The place is *a little cramped and crowded* but that's normal fare for a ramen shop in Machida.”* > > *“One of the *best ramen* i ever ate but *the place is a bit smelly*”* > > *“*Delicious ramen, lively staff, cheap prices* \- get over there! Dine alone or with friends.”* > > *“Visited for the third time. This is the perfect restaurant for those who like *rich miso ramen*.”* The company is run by a 41-year-old man called Sho Tagawa, who opened Machida Shoten in 2008\. You can find an interview with him [here](http://in-shoku.info/foodfighters/vol523.html?ref=asiancenturystocks.com) (Japanese language), where he clearly displays a love for ramen and the industry. Today, Gift Holdings trades at a consensus 2024e P/E of 23.8x, which is fairly low for a company with a large runway of growth and an ROE of almost 30%. That said, the stock price has almost doubled in a year, which may scare off some investors. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3005681c-11ab-46e9-9d9e-db0120bc5422_1774x1150.png) --- ## 4.3\. Genki Sushi ![Genki Kousoku](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f42a7900-d279-40a7-a138-0eb1579ec8bc_1000x666.jpg) I first wrote about [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com) *(9828 JP - US$200 million)* back in early 2021: [Deep-dive 2021-8: Genki SushiGenki Sushi (9828 JP) is a conveyor belt (“kaiten”) sushi restaurant operator based in Utsunomiya, Japan. Genki Sushi started in 1968 by 24-year old Japanese chef Fumio Saito who came up with the concept of sushi on revolving conveyor belts. The company was listed in 1991 and now has a domestic market share of 5.6% across three major brand names: Genki Sushi (small-sized neighbourhood sushi restaurants), Uobei (large-sized sushi restaurants in Japan and Senryo (high-end sushi).![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century Stocks](https://www.asiancenturystocks.com/deep-dive-2021-8-genki-sushi/) At that time, I made the point that Genki Sushi’s overseas franchisee stores in Singapore and Hong Kong were performing exceptionally well and that the concept could probably be replicated across Southeast Asia and the rest of the globe. I also made the case that Genki’s restaurants would eventually recover from COVID-19. What makes Genki Sushi unique is its playful assortment of sushi, as well as its “Shinkansen” delivery trains that serve the food to customers. I think Genki Sushi’s offering is differentiated and especially suitable for families with young children. In Japan, most outlets carry the Uobei brand name, while Genki Sushi-branded sushi restaurants are predominantly small-sized neighbourhood restaurants. Global Google search queries for Genki Sushi have been flat since COVID-19, but those for Uobei are showing a nice upward trend. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bb341b74-3b96-4d04-93d2-95e2fcd24c98_1322x440.png) The median Genki Sushi Google review score is 3.8, a fairly high number. A few comments, just to illustrate the customer experience: > *“*Affordable and delicious* foods!”* > > *“What was *strange about Uobei's menu*. What is tanuki udon (without fried egg)?”* > > *“There were *a lot of unusual sushi*, and it was very delicious and I'm glad ☺️”* > > *“Easy to find along the national highway, *cheap and delicious*.”* > > *“Cheap and yummy! *Food is served very fast (using Shinkansen trains)*! Strongly recommended! Just that crowded during weekend dinner time”* > > *“Instead of sushi flowing in the lane, if you order on your tablet, a large plate in the shape of a bullet train or vehicle will be brought to you in the lane. *Your child will enjoy it*.”* Today, Genki Sushi trades at 12.8x pre-pandemic P/E. The company’s profitability has been uneven, with a median return on equity of 14%, though masking significant volatility. A question mark is Genki’s relationship with parent Shinmei, a producer of rice, which also acts as a related party supplier to Genki Sushi itself. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ae04cf48-f1ce-43db-8dbc-f1e32af26422_1772x1150.png) --- ## 4.4\. Torikizoki ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/249d7fb4-ef8a-4be7-8d90-174878900105_1392x954.png) [**Torikizoku**](https://finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com) *(3193 JP - US$172 million)* is a low-price Izakaya chain that’s become wildly popular among young working-age professionals. It’s known for its 320 yen prices across its entire menu. People come here after work to socialise, drink beer and have drink chicken skewers. Here is an introduction to the chain. Ordering takes place through tablets but gets delivered by staff. The menus are limited, ensuring low inventory and higher efficiency. Google reviews are above average with a median score of 3.7\. A few comments include: > *“If you want *fast and affordable food* this is the place to go. You can order via a tablet at the table which also has English options. Once ordered, everything arrives quickly and is pretty tasty for what it is.”* > > *“Value for money and the yakitori is good! *Everything is priced at 298 yen* (b4 tax) so it means the alcohol here is nicely priced!”* > > *“If you are looking for a cheap but good place to dink it's the right place for you. But be aware that *it is full most of the time* so you should make an reservation in advance.”* The chain expanded fast in the early 2010s and then raised prices in 2017\. Customers responded by going elsewhere, and to deal with the problem, Torikizoku closed unprofitable stores with greater margin control through a new decentralised “amoeba management” system. It now operates its own food processing plant manufacturing its proprietary yakitori sauce. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ae7d5ca4-d4a3-4a44-8f11-32ab3fc0bef6_1326x444.png) The company is run by Tadashi Ohkura. Not much is known about him, but he used to write a blog on the Ameba platform where he pronounced that he wants Torikizoku to become the best yakitori restaurant in the world. He is 62, and his son is not involved in the business. Torikizoku has recovered nicely from the COVID-19 pandemic, earning JPY 1.2 billion in net profit in FY2022\. That puts the stock on a P/E ratio of about 20x. The most recent return on equity print was about 20%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9ebdda02-f0b5-4a25-9208-42a80cbb6785_1780x1150.png) --- ## 4.5\. Yossix [**Yossix**](https://finance.yahoo.com/quote/3221.T/?p=3221.T&ref=asiancenturystocks.com) *(3221 JP - US$161 million)* runs Japanese-style pub chains, with all outlets directly owned. While each concept is different, with an okonomiyaki and grill concept called Yataiya, sushi pubs Yatai-zushi and Nipachi, a common denominator is that they all offer uniformly priced dishes with alcohol. The company’s strategy is also unique in the way that it focuses on rural areas, where the workforce can be easily secured and where its small- and midsized pubs of 99-132 square metres can be opened at low costs. A review of a Yatai-zushi outlet can be found [here](https://soranews24.com/2022/02/14/this-sushi-restaurants-take-home-temakizushi-set-is-insanely-satisfying-for-a-great-price/?ref=asiancenturystocks.com). The largest concept Yatai-zushi has a Google review score of 3.9, which is high in a Japanese context. A few comments include: > *“*Really cheap food* and very tasty, we were so surprised the bill was so cheap for 3 people when we saw it.”* > > *“It was *cheap, delicious and good*!”* > > *“*All-you-can-eat* and all-you-can-drink for 3,000 yen for 2 hours is highly satisfying.”* > > *“I thought that 8000 yen was a *good deal* for a family of 4 with a 100 yen drink campaign.”* The company is run by Masanari Yoshioka who remains Chairman and President and exerts significant control over the operations (the name Yossix is inspired by his surname). He started out in the construction business and then opened a franchisee store for a bento box chain before finally striking out on his own. Every single store is directly owned under the control of Yoshioka, which in my eyes, minimises risk for minority investors who typically don’t have full insight into the profitability of franchisees. Like most other izakayas and pubs, Yossix has been hurt badly by the pandemic, but with an improvement in the most recent quarter. The stock trades at 2024e P/E of 17.1x but only 13.8x pre-pandemic, full-recovery earnings. A normalised return on equity is expected to reach around 20%, in my view. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/43086d6b-c0a2-46b8-91ee-95586981f791_1778x1150.png) --- ## 4.6\. WDI (World Dining Inspirations) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3010e8f5-6556-423b-b43e-fea7bd4116b6_792x570.png) WDI’s restaurant Capricciosa. Source: Google Maps [**WDI Corp**](https://finance.yahoo.com/quote/3068.T?p=3068.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(3068 JP - US$105 million)* \- also known as “World Dining Inspirations” - operates Western-style restaurants with both proprietary brands and as a franchisee for overseas brands. The proprietary brands include Italian restaurant Capricciosa, New York-style breakfast restaurant Sarabeth’s, Hawaiian cafe Eggs ’n Things. The overseas brands include Wolfgang’s Steakhouse, Hard Rock Cafe and Tony Roma’s. It also has the franchise rights to operate Michelin-star restaurant Tim Ho Wan in the US and Europe. WDI seems to partly target inbound tourists to Japan, which makes me think it will do well now that the borders are opening up. WDI has also started to expand to US territories such as Hawaii and Guam. WDI’s restaurants have Google review scores across the board: 4.2 for Hard Rock Cafe, 4.0 for Tony Roma’s, and 3.8 for proprietary brand Capricciosa - all above the median level of 3.6\. To take Capricciosa as an example, Pizzas cost about 2,000 yen and pasta is closer to 1,200 yen, making it a mid-priced option. Tony Roma’s and Hard Rock Cafe are significantly more expensive. Examples of a few reviews I found on Google: > *“The Garlic Tomato Spaghetti here is the best on the entire planet. This is *one of the best affordable Italian restaurants* in the world IMO.”* > > *“Very nice food, the tomato spaghetti was great as usual. Had a bit of trouble actually finding the place because it kinda blends into the background, but *the food was worth it*!”* > > *“Had an absolutely fantastic dinner here tonight! *Service and food were both exceptional*.”* > > *“Always a lot of fun, with lots of unique memorabilia to see. The food is amazingly consistent, regardless of where in the world you are. *The service is excellent and prices are reasonable*.”* The company is run by the Shimizu family. Chairman Yoji Shimizu started the original Playboy Club in Tokyo’s Roppongi district and has strong connections with Wolfgang Puck and others. He is now 82 years old. His son Ken Shimizu runs the day-to-day business and seems energetic. Ken has a law degree from Keio University and previously worked for a bank and 25 years at WDI in sales and business development. He has been the company’s president since 2003. Apart from a weak period in the early 2010s, WDI Corp has earned a return on equity of about 20%. That may be attributable to the fact that WDI serves Western food, which might offer something unique compared to what the average Japanese eats at home, perhaps providing the company with some pricing power. Given that WDI is a franchisee operator, it only earned about 5% operating margins prior to COVID. Assuming full recovery from COVID-19, I could imagine an operating income of JPY 1.5 billion, which would put the stock on an EV/EBIT of 11x. That’s low for a company with such a high return on equity and seemingly decent execution. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/94f3e14e-167e-4815-b9c3-0f4b6175f70b_1774x1148.png) --- # 5\. Conclusion While the Japanese restaurant market is a no-growth industry, I personally think there are companies with growth potential. Examples include [**Arclands**](https://finance.yahoo.com/quote/3085.T/?p=3085.T&ref=asiancenturystocks.com)’ Katsuya chain of katsudon restaurants, [**Gift Holding**](https://finance.yahoo.com/quote/9279.T/?p=9279.T&ref=asiancenturystocks.com)’s ramen restaurants and [**Genki Sushi**](https://finance.yahoo.com/quote/9828.T/?p=9828.T&ref=asiancenturystocks.com)’s sushi restaurants with their Shinkansen train ordering and delivery system. I also believe certain restaurant operators will see a strong recovery from COVID-19, particularly the izakayas. [**Torikizoku**](https://finance.yahoo.com/quote/3193.T/?p=3193.T&ref=asiancenturystocks.com) is the market leader, but I also believe that [**Yossix**](https://finance.yahoo.com/quote/3221.T/?p=3221.T&ref=asiancenturystocks.com) will do well after the pandemic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) *If you would like to support me and get 20x high-quality deep-dives per year and other thematic reports like this, try out the Asian Century Stocks subscription service － all for the price of a few weekly cappuccinos.* [Get 30 day free trial](#/portal/signup) ### 10 Questions with Dmitry Baulin URL: https://www.asiancenturystocks.com/10-questions-with-dmitry-baulin/ Last updated: 2025-10-24T15:09:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4555894c-83ac-4df1-a7b9-58cc02b439dc_1344x756.png) Long-time readers know I am obsessed with using Google search query data to understand consumer behaviour. For that reason, I’ve reached out to one of the foremost proponents of using search query analytics for investment decisions: Dmitry Baulin, the man behind alt-data analytics service Astutex. He’s also the CIO of HQAM, a boutique asset manager in Switzerland with over US$1 billion in assets under management. # 1\. Hi Dmitry! Can you tell us about yourself? What is your background, and what are you focusing on right now? **Dmitry**: I am 40 years old, and I have been in this business for 20 years, working for the same company since its founding in 2003, first as an analyst and now as a partner and CIO. My focus has always been the same – becoming better as an investment manager of institutional and also personal money, which is a totally different thing, of course. --- # 2\. How is managing on a personal level and in an institutional setting different? As a CIO, I have a strict set of rules and a clear strategy for how to pick companies for client portfolios - we invest in quality companies with understandable competitive advantages, pricing power, low capital intensity etc. I also have a team of 10 analysts researching companies and an investment committee that approves all the decisions. Managing personal money is a totally different thing – because emotions are involved. You have to be very disciplined, and risk management is very important – I would say 85% of success is through risk management. In order to recover a 50% loss, you have to double your account. The worst thing that can happen after an unsuccessful investment is you start gambling instead of investing to recover your drawdown. We saw this a lot in 2021 with all these meme stocks and the YOLO culture. Many people underestimate how damaging it could be to your psychology. Easy money can ruin your state of mind. --- # 3\. Can you tell us about your own track record managing money? Of course, I have been there with gambling, too, like most people managing their own money. I guess it is a part of the learning curve. 2020 was a very good year for my personal portfolio – I was up 500% on investments I published on Astutex’s Twitter account, including [**Turtle Beach**](https://finance.yahoo.com/quote/HEAR?p=HEAR&.tsrc=fin-srch&ref=asiancenturystocks.com) *(HEAR US - US$129 million)*, [**iRobot**](https://finance.yahoo.com/quote/IRBT/?p=IRBT&ref=asiancenturystocks.com)*(IRBT US - US$1.2 billion)*, [**Signet**](https://finance.yahoo.com/quote/SIG/?p=SIG&ref=asiancenturystocks.com)*(SIG US - US$3.3 billion)*, [**Amerco**](https://finance.yahoo.com/quote/AUK.SG/?p=AUK.SG&ref=asiancenturystocks.com)*(UHAL US - US$11 billion)*, [**Guillemot**](https://finance.yahoo.com/quote/GUI.PA/?p=GUI.PA&ref=asiancenturystocks.com) *(GUI LN - US$147 million)* and [**Align Tech**](https://finance.yahoo.com/quote/ALGN/?p=ALGN&ref=asiancenturystocks.com)*(ALGN AV - US$24 billion)*. But in 2021, I was down significantly, like most other investors. I had come to think investing was easy and made some stupid mistakes outside of my strategy and investing framework. By the end of 2021, I closed all my positions and took a personal break. So I was very little invested in the first part of 2022 and could finish green for the year. I also held 12,500 shares of Gamestop before the craze started but sold after I realized it was very popular on Reddit. I think this large private ownership makes the stock performance totally unpredictable. --- # 4\. How did the Astutex product develop, and what does it offer investors? It started in 2016 with a discovery of Google Trends - I remember comparing Nike, Adidas and Under Armour, trying to find correlations with respective stock prices. But getting this data manually is certainly not optimal, so we started using a pseudo-API. Then I started researching what else is available and found Alexa website traffic data (then part of AWS and now discontinued), AppAnnie/SensorTower app downloads, Glassdoor/Indeed company reviews, Wikipedia, Instagram, Amazon/BestBuy best sellers etc. We learned how to use scrapers and proxies to collect all sorts of data on a weekly basis and then made an MVP (minimum viable product) with a user interface. Pretty quickly, it became evident that we don’t have enough resources to compete with other big players doing the same and that this data is more of a commodity. Remember, we are just a small asset manager, and this was a side project to improve our research and investment decisions in the consumer space. So we concentrated on these weekly reports that we publish on Substack (a link to Astutex’s Substack [here](https://astutexai.substack.com/)), trying to catch interesting trends and inform our subscribers. There are also three accounts managed specifically with Astutex ideas. --- # 5\. You were early on in spotting the increased popularity of Crocs and Hello Kitty. How did you come up with these ideas? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a4f47a31-6cc7-4ddf-b5a7-a204e2857713_1794x1004.png) Crocs collaboration with Minecraft. Source: Crocs I first tweeted about [**Crocs**](https://finance.yahoo.com/quote/CROX/?p=CROX&ref=asiancenturystocks.com) *(CROX US - US$7.7 billion)* in March 2019: > [Our new best idea - long $CROX short $DECK, strong weather correlation for both, $CROX should benefit from now on as spring finally comes to the US, business transformation full-speed, all charts here: ](https://twitter.com/AstutexAi/status/1112075682895548416%29?ref=asiancenturystocks.com)[drive.google.com/open?id=1bPZn3…](https://drive.google.com/open?id=1bPZn37iienRG%5FLZfiq8T3OjAffCs1LqW&ref=asiancenturystocks.com) > #AlternativeData > > — astutex.ai (@AstutexAi) [ 7:34 PM ∙ Mar 30, 2019 ](https://twitter.com/AstutexAi/status/1112075682895548416%29?ref=asiancenturystocks.com)[](https://twitter.com/AstutexAi/status/1112075682895548416%29?ref=asiancenturystocks.com) Initially, it was a weather play – I experimented with the data on how US nationwide temperatures influence retailer revenue, so I noticed quite an increase in the popularity of Crocs shoes. But then I also saw Chris Camillo's posts on the company and got really fascinated by how they transitioned to a more or less fashion business with all those collaborations and jibbitz customization options. The company also had a very nice tailwind during covid with a lot of people staying at home and management saying they should remain open as they are essential business as medical workers wear them. That was fun to see. [**Sanrio**](https://finance.yahoo.com/quote/8136.T/?p=8136.T&ref=asiancenturystocks.com) *(8136 JP - US$2.4 billion)* was a similar story - a worldwide known IP with a re-opening potential (editor’s note: ACS 2021 write-up available [here](https://www.asiancenturystocks.com/2021-5-sanrio-company-ltd/)). Many hedge funds chose Disney, but Sanrio was a better turnaround play, with a young CEO taking over the company and willing to bring Hello Kitty to the next level after years of stagnation. But again, Covid was in play – the interest in ‘kawaii’ products increased after the coronavirus pandemic as people wanted to experience something nice and sweet, so this obviously helped. --- # 6\. When should Google search query analytics be used, in your view? And what are the pitfalls of interpreting Google search query data? I think [Google search data](http://trends.google.com/?ref=asiancenturystocks.com) is an excellent lead generation tool – you see that interest in something is rising and then check other data sources to see whether it will lead to a meaningful business acceleration. What is important to bear in mind is that Google search query data works better with low-ticket items. For example, accelerating Ferrari search volumes would not necessarily lead to a revenue increase. Search query data is also better for discretionary B2C products. What you should also remember is that search volumes are migrating to Amazon, as consumers do 50% of product searches there. And website traffic is also migrating to apps as all brands are interested in becoming direct-to-consumer businesses. --- # 7\. How do you use and interpret Amazon data? And in what situations have you used such data in the past? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c0526451-05bf-4009-9261-1fa0610a5562_1612x906.png) Celsius Energy drinks. Source: Celsius Holdings We use [Amazon best-sellers data](https://camelcamelcamel.com/?ref=asiancenturystocks.com) to understand how consumer preferences and product pricing change for each category and each brand specifically. It also can provide interesting information, specifically on newcomer performance. This is how we first found out about [**Celsius**](https://finance.yahoo.com/quote/CELH?p=CELH&.tsrc=fin-srch&ref=asiancenturystocks.com) *(CELH US - US$6.8 billion)* in 2019 before it was so widely followed on Finance Twitter: > Energy Drinks market - Celsius is winning market share from VPX Bang and going after $MNST (based on Amazon Best Sellers in the US) #AlternativeData > > — astutex.ai (@AstutexAi) [ 2:59 PM ∙ Jun 13, 2019 ](https://twitter.com/AstutexAi/status/1139185452890632192%29?ref=asiancenturystocks.com)[](https://twitter.com/AstutexAi/status/1139185452890632192%29?ref=asiancenturystocks.com) It is also useful to check data points on discounting during the holiday season and overall product reviews. --- # 8\. In what situations would you use app-download data from, say, SensorTower? Would you interpret data from iOS differently than those from Android? [App download data](https://sensortower.com/?ref=asiancenturystocks.com) is an important data source, but there are a few things you have to remember: - iOS users spend 3x more money on apps than Android owners - Companies spend money to promote their apps to be more DTC (direct-to-consumer) and acquire more data from their customers, and this influences rankings - If an app moved from rank 10 to 5, it is way more valuable than if it moved from 200 to 100, so these rankings are not linear And again, use this data only together with other sources – just like you are putting together a jigsaw puzzle. --- # 9\. What’s your take on Wikipedia page view analytics? In what situations do you think it’s appropriate to focus on them? Any examples where they proved helpful? [Wikipedia](https://pageviews.wmcloud.org/?project=en.wikipedia.org&platform=all-access&agent=user&redirects=0&range=latest-20&pages=Cat|Dog&ref=asiancenturystocks.com) is a good addition to Google search data - it’s always good to have another data source as a backup. But Wikipedia is more relevant for relatively new brands/companies/products. Not for already mass-adopted products such as Warhammer 40k, if I may refer to one of our recent posts: > [Interest in Warhammer 40k is rising while Games Workshop $GAW is trading at PE of 16, multiple options for IP monetization - Eisenhorn TV show in production, Darktide release is due on 30th of Nov, good thesis on GAW here ](https://twitter.com/AstutexAi/status/1582384032561893377%29.?ref=asiancenturystocks.com)[turtlecapital.substack.com/p/tesis-games-…](http://turtlecapital.substack.com/p/tesis-games-workshop-gaw) > > — astutex.ai (@AstutexAi) [ 2:52 PM ∙ Oct 18, 2022 ](https://twitter.com/AstutexAi/status/1582384032561893377%29.?ref=asiancenturystocks.com)[](https://twitter.com/AstutexAi/status/1582384032561893377%29.?ref=asiancenturystocks.com) Similarly, people don’t read Wikipedia pages devoted to Nike or Crocs. They are already aware of what the product is. --- # 10\. Are there any companies you think will surprise investors, either on the upside or the downside? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f58bff5c-9841-4820-906f-22308cac7173_1592x804.png) Spin Master’s PAW Patrol TV series. Source: Spin Master Somehow, we like companies with a strong IP portfolio, such as [**Sanrio**](https://finance.yahoo.com/quote/8136.T/?p=8136.T&ref=asiancenturystocks.com) (this play is probably over), [**Games Workshop**](https://finance.yahoo.com/quote/GAW.L/?p=GAW.L&ref=asiancenturystocks.com) *(GAW LN - US$3.6 billion)*, and [**Spin Master**](https://finance.yahoo.com/quote/TOY.TO/?p=TOY.TO&ref=asiancenturystocks.com) *(TOY CN - US$2.8 billion)*. We live in a world with unlimited opportunities to monetise your franchises, especially in the digital space. Look at all those funds buying artist song catalogues and distribution deals that can bring your content to hundreds of millions of consumers. Look at the performance of Warner Bros Discovery and Lionsgate year-to-date. It’s a fascinating world out there. --- # Thanks for participating, Dmitry! Where can people go to learn more about Astutex and what you offer investors? Astutex is still a work in process, but you can expect that we will become better at identifying trends and bringing this info to our Substack subscribers and Twitter followers. For example, finding similar trends, such as the booming interest in semaglutide, which we highlighted in 2021: > If you were wondering why we put $NOVOb as #1 trending in this report - the answer is 'semaglutide', Novo-Nordisk is up 27% since June 29th > > — astutex.ai (@AstutexAi) [ 8:48 AM ∙ Aug 18, 2021 ](https://twitter.com/AstutexAi/status/1427915235285999618?ref=asiancenturystocks.com)[](https://twitter.com/AstutexAi/status/1427915235285999618?ref=asiancenturystocks.com) --- You can find Astutex’s Twitter account [here](https://twitter.com/AstutexAi?ref=asiancenturystocks.com) and a link to their Substack below: [astutex.ai #AlternativeData insightsLatest Astutex Trendspotting report](https://astutexai.substack.com/?utm%5Fsource=substack&utm%5Fcampaign=publication%5Fembed&utm%5Fmedium=web) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Asian Century Stocks is a reader-supported publication. If you find my writing valuable, consider supporting my writing by becoming a full subscriber. Thanks! [Subscribe now](#/portal/signup) ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-fbe/ Last updated: 2023-02-27T04:02:31.000Z Deep-dive 2023-4, Techtronic Industries, Shimano, Business Brain Showa-Ota, Keck Seng Investments _This post is for paying subscribers only._ ### Portfolio update February 2023 URL: https://www.asiancenturystocks.com/portfolio-update-february-2023/ Last updated: 2026-06-04T11:46:31.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/portfolio-update-january-2023/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* # Portfolio update The portfolio rose +0.4% month-on-month and is now +17.0% since its inception in October 2021\. But this steady increase masks volatility in the portfolio, with [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) up massively. Several stocks disappointed, including [**VTech**](https://www.asiancenturystocks.com/deep-dive-2022-26-vtech/) and [**Niu Technologies**](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/). The rising US Dollar has also been a headwind. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cae3844c-5f26-46b9-aa77-ace7fd20443b_1384x456.png) Let me summarise the major movements in share prices since the last reporting date: - [**Delfi**](https://sg.finance.yahoo.com/quote/P34.SI/?p=P34.SI&ref=asiancenturystocks.com)’s share price rose somewhat after UOB Kay Hian initiated coverage - [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) rose, most likely due to inclusion into MSCI’s global small-cap index - [**SBS Transit**](https://www.asiancenturystocks.com/2021-2-sbs-transit-ltd/) rose after better-than-expected 4Q2022 numbers - [**Pico Far East**](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/) rose after the board said it would seek a mandate to buy back up to 20% of shares outstanding, vs just 10% last year - On the negative side, [**Niu Technologies**](https://www.asiancenturystocks.com/deep-dive-2022-21-niu-technologies/) had a downgrade due to its weak 4Q2022 numbers, which suffered from China’s zero-COVID policy - [**VTech**](https://www.asiancenturystocks.com/deep-dive-2022-26-vtech/) also fell due to weak numbers, which may be related to the depreciation in the Euro vs the Renminbi, where most of the production takes place Here is the portfolio it stands as of 26 February 2023: _This post is for paying subscribers only._ ### UMP Healthcare (722 HK) URL: https://www.asiancenturystocks.com/deep-dive-2023-4/ Last updated: 2026-07-31T01:34:50.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Boustead Singapore at the time of publishing this article. To reiterate, this post and the below presentation is for informational and educational purposes and not a recommendation to buy or sell shares.* --- [**UMP Healthcare**](https://finance.yahoo.com/quote/0722.HK?p=0722.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(722 HK - US$83 million)* is a Hong Kong-based provider of healthcare services, offering both general and specialist care across 56 clinics. They also provide corporate healthcare plans that offer access to both their own clinics as well as those in a much larger affiliate network. I got inspiration for this report from [Smartkarma](https://www.smartkarma.com/entities/ump-healthcare-holdings-ltd/analysis?ref=asiancenturystocks.com), who has coverage of the company and has met the management team. From a top-down point of view, Hong Kong’s healthcare sector looks incredibly attractive. The population is aging, with 60-64 year olds being the single largest age group in Hong Kong. As these individuals enter the age at which they start consuming healthcare services to a greater extent, growth will be boosted. UMP Healthcare was started by a medical doctor called Sun Yiu Kwong. Today, his doctor son is also involved in the business as a co-CEO. And banker son-in-law Patrick Tsang deals with M&A, helping the group structure deals in China and elsewhere. Since the IPO in 2015, the stock has languished, despite greater profitability. Part of the reason is a failed foray into mainland China. It could be that the mainland market is just too difficult, given that Chinese citizen enjoy subsided care at state hospitals. Another potential explanation is UMP mismanagement. A number of the transactions were with related parties with clear conflicts of interest. COVID-19 probably helped the business, overall. While the number of patient visitors decreased, that also helped lower payouts to clinics for capitation plan members. Then there were an increased number of highly profitable health screenings, as well as vaccinations against COVID-19. What speaks for greater profitability post-COVID is the fact that UMP has acquired a large number of imaging & laboratory centres, which enjoy \~50% gross margins. Today, UMP trades at around 8x earnings with a great balance sheet. I believe that earnings will come down a bit now that COVID-19 restrictions are being eased. The big question mark is the cash drain from the mainland operation. Despite its failures in mainland China, which brought down the return on equity from 30% to 10%, they are still guiding for yet another HK$200 million earmarked for mainland Chinese investments. Why? On the other hand, insiders are buying shares in bulk. Management has also said that they believe the shares are undervalued. _This post is for paying subscribers only._ ### 10 Questions with ChatGPT URL: https://www.asiancenturystocks.com/10-questions-with-chatgpt/ Last updated: 2025-10-24T15:09:22.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a1b9c34d-db72-48bc-99d5-77d5b8c259ec_1440x810.png) Can you actually get useful information out of [ChatGPT](https://en.wikipedia.org/wiki/ChatGPT?ref=asiancenturystocks.com), the chat bot that has taken the world by storm? I wanted to put that to the test by asking ChatGPT tough questions about Asian equity markets. Here is a summary of that discussion: --- # Hi ChatGPT, I hear that you’re somewhat of an expert on Asian equities? Hello! As an AI language model, I have access to a vast amount of information and can provide general information on various topics, including stock markets in Asia. However, please note that I am not a human expert and my responses are based on the information available to me. It's always a good idea to consult with a financial advisor or do your own research before making any investment decisions. # 1\. Great! So let’s see if we can learn something today. Can you please provide a top down view of the largest economies in the Asia Pacific region? ![Tyler Durden Blog | Asia-Pacific Countries Sign World's Largest Free Trade Deal In "Coup For China" | Talkmarkets](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9c7b45bb-1581-4455-a0f3-30dde9c73d9e_800x800.jpg) The largest countries in the Asia Pacific region have diverse economies, each with their own strengths, challenges, and unique characteristics. Here are some of the key differences between the largest economies in the region: 1. **China**: China is the largest economy in the region and is a major manufacturing and exporting hub, with a focus on industries such as electronics, machinery, and textiles. It is also investing heavily in new technologies and infrastructure projects, such as 5G networks and high-speed rail. However, China is facing challenges such as high levels of debt, an aging population, and tensions with other countries. 2. **Japan**: Japan has a highly developed economy and is a major player in industries such as automotive manufacturing, electronics, and pharmaceuticals. It has a highly skilled workforce and is known for its innovation and technological advancements. However, Japan is facing challenges such as an aging population, a declining birth rate, and a highly competitive global market. 3. **India**: India has a large and rapidly growing economy, with a focus on industries such as IT services, pharmaceuticals, and textiles. It has a young and highly skilled workforce and is attracting increasing amounts of foreign investment. However, India is facing challenges such as high levels of poverty, inequality, and bureaucratic inefficiencies. 4. **Indonesia**: Indonesia has a diverse economy with a focus on industries such as agriculture, mining, and manufacturing. It has a large and growing middle class and is attracting increasing amounts of foreign investment. However, Indonesia is facing challenges such as corruption, infrastructure gaps, and environmental concerns. 5. **South Korea**: South Korea has a highly developed economy with a focus on industries such as electronics, automotive manufacturing, and shipbuilding. It has a highly skilled workforce and is known for its technological advancements. However, South Korea is facing challenges such as an aging population, high levels of household debt, and tensions with neighboring countries. --- # 2\. Thanks. And which stock market is the cheapest currently? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/64598c35-4906-471b-9964-a09f809a833e_1268x848.png) Karachi, Pakistan. Source: Getty Images According to data from Bloomberg as of February 21, 2023, the stock market with the lowest P/E ratio in Asia is the Karachi Stock Exchange (KSE) in Pakistan, with a P/E ratio of around 6.7x. It's worth noting that investing in the KSE may come with certain risks, as the country faces various economic, political, and security challenges. Other relatively low P/E ratio markets in Asia as of February 21, 2023, include the Stock Exchange of Thailand with a P/E ratio of around 10.4x, the Jakarta Composite Index in Indonesia with a P/E ratio of around 12.1x, and the Bombay Stock Exchange in India with a P/E ratio of around 14.3x. --- # 3\. What has worked historically? In which sectors have hundred-baggers been the most common? Identifying the sectors and countries in the Asia Pacific region that have historically provided the most hundred-baggers (stocks that increase in value by 100 times or more) can be challenging, as this information is not readily available and can vary depending on the time period and market conditions. However, here are some potential examples of sectors and countries that have produced hundred-baggers in the past: 1. **Technology Sector in China and Taiwan**: In recent years, the technology sector in China and Taiwan has been a significant source of hundred-baggers, with companies such as Tencent, Alibaba, and TSMC experiencing massive growth in value over the past decade. 2. **Consumer Sector in India**: The consumer sector in India has also produced some notable hundred-baggers, with companies such as Hindustan Unilever and Eicher Motors experiencing significant growth in value over the past few decades. 3. **Resource Sector in Australia**: The resource sector in Australia has historically produced some hundred-baggers, with companies such as BHP Billiton and Rio Tinto experiencing significant growth in value over several decades. 4. **Financial Sector in Japan**: The financial sector in Japan has also produced some notable hundred-baggers, with companies such as Nomura and Tokio Marine experiencing significant growth in value over several decades. --- # 4\. Japan has an aging population, served by a growing healthcare sector. Can you give us an introduction to the sector and the companies operating within it? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6a817341-595e-4522-8092-a233c05e7650_2034x738.png) Syringes used in Japan’s Terumo Corporation’s infusion pumps. Source: Apvine Japan has a universal healthcare system that provides its citizens with access to medical services. The healthcare sector is a major part of the Japanese economy, accounting for around 10% of the country's GDP. The sector is divided into several sub-sectors, including pharmaceuticals, medical devices, and healthcare services. There are several listed companies operating in Japan's healthcare sector, including: 1. [**Takeda Pharmaceutical**](https://finance.yahoo.com/quote/4502.T?p=4502.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(4502 JP - US$50 billion)*: Takeda is one of the largest pharmaceutical companies in Japan, with a focus on developing innovative drugs in areas such as oncology, gastroenterology, and neuroscience. 2. [**Astellas Pharma**](https://finance.yahoo.com/quote/4503.T/?p=4503.T&ref=asiancenturystocks.com) *(4503 JP - US$26 billion)*: Astellas is another major pharmaceutical company in Japan, with a focus on developing drugs in areas such as urology, immunology, and oncology. 3. [**Terumo**](https://finance.yahoo.com/quote/4543.T/?p=4543.T&ref=asiancenturystocks.com) *(4543 JP - US$20 billion)*: Terumo is a medical device company that produces a wide range of products, including cardiovascular devices, blood transfusion systems, and infusion pumps. 4. [**Sysmex**](https://finance.yahoo.com/quote/6869.T/?p=6869.T&ref=asiancenturystocks.com) *(6869 JP - US$13 billion)*: Sysmex is a medical equipment company that specializes in diagnostic testing systems, including blood and urine analysis systems. 5. [**Olympus**](https://finance.yahoo.com/quote/7733.T/?p=7733.T&ref=asiancenturystocks.com) *(7733 JP - US$21 billion)*: Olympus is a medical equipment company that produces a wide range of products, including endoscopes, microscopes, and surgical instruments. In addition to these companies, there are also several smaller companies operating in Japan's healthcare sector, including biotech startups and specialized medical equipment manufacturers. Overall, the healthcare sector in Japan is expected to continue to grow as the country's population ages and demand for medical services increases. --- # 5\. One major trend in the region is the shift towards renewable energy. What sectors and companies might benefit from this shift? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/db593c8b-4e40-43ab-98ef-d8cf2430966c_1564x844.png) Battery cells produced by South Korea’s LG Chem. Source: Carscoops.com A shift towards renewable energy in the Asia Pacific region would benefit several sectors and companies. Here are a few examples: 1. Solar energy: Solar energy is particularly well-suited to many countries in the Asia Pacific region, which have abundant sunshine and large areas of land suitable for solar farms. Companies that are involved in the production of solar panels and related technology, such as [**Trina Solar**](https://finance.yahoo.com/quote/688599.SS/?p=688599.SS&ref=asiancenturystocks.com) *(688599 CH - US$20 billion)* and [**Canadian Solar**](https://finance.yahoo.com/quote/CSIQ/?p=CSIQ&ref=asiancenturystocks.com)*(CSIQ US - US$2.4 billion)*, would likely benefit from an increased shift towards solar energy in the region. 2. Wind energy: Wind energy is another important source of renewable energy in the Asia Pacific region, particularly in countries with strong wind resources such as China and India. Companies that are involved in the production of wind turbines and related technology, such as [**Vestas**](https://finance.yahoo.com/quote/VWS.CO/?p=VWS.CO&ref=asiancenturystocks.com) *(VWS DC - US$29 billion)* and **Siemens Gamesa**, would likely benefit from an increased shift towards wind energy. 3. Energy storage: As renewable energy becomes a larger part of the energy mix in the Asia Pacific region, the need for energy storage solutions such as batteries is likely to increase. Companies that are involved in the production of batteries and related technology, such as [**Tesla**](https://finance.yahoo.com/quote/TSLA/?p=TSLA&ref=asiancenturystocks.com) *(TSLA US - US$624 billion)* and [**LG Chem**](https://finance.yahoo.com/quote/051910.KS/?p=051910.KS&ref=asiancenturystocks.com) *(051910 KS - US$39 billion)*, would likely benefit from an increased shift towards renewable energy in the region. 4. Electric vehicles: The shift towards renewable energy in the Asia Pacific region is also likely to drive increased demand for electric vehicles, which require less fossil fuel than traditional gasoline-powered cars. Companies that are involved in the production of electric vehicles and related technology, such as [**Tesla**](https://finance.yahoo.com/quote/TSLA/?p=TSLA&ref=asiancenturystocks.com) *(TSLA US - US$624 billion)* and [**BYD**](https://finance.yahoo.com/quote/1211.HK/?p=1211.HK&ref=asiancenturystocks.com) *(1211 HK - US$104 billion)*, would likely benefit from an increased shift towards renewable energy in the region. Overall, a shift towards renewable energy in the Asia Pacific region is likely to benefit companies that are involved in the production of renewable energy technology, energy storage solutions, and electric vehicles. --- # 6\. What are some of the hidden champion companies in Singapore that dominate their respective industry niches? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/71fd9b22-5eac-4751-ab53-010ed0aa6c8e_1850x1038.png) The Singapore flyer, operated by Straco Corporation There are several "hidden champion" companies in Singapore that are known for dominating their respective industry niches: 1. [**Aztech Group**](https://finance.yahoo.com/quote/8AZ.SI/?p=8AZ.SI&ref=asiancenturystocks.com) *(AZTECH SP - US$487 million)* \- This company is a leader in the design and manufacture of networking and wireless products, such as routers and modems. 2. [**Boustead Singapore**](https://finance.yahoo.com/quote/F9D.SI/?p=F9D.SI&ref=asiancenturystocks.com) *(BOCS SP - US$307 million)* \- Boustead Singapore is a diversified engineering company that provides a wide range of services, including real estate solutions, engineering services, and energy-related engineering. 3. [**ComfortDelGro**](https://finance.yahoo.com/quote/C52.SI/?p=C52.SI&ref=asiancenturystocks.com) *(CD SP - US$1.9 billion)* \- This company is a leading public transport company in Singapore, with a dominant market share in taxi and bus services. 4. [**Dairy Farm International Holdings**](https://finance.yahoo.com/quote/DFA1.SG/?p=DFA1.SG&ref=asiancenturystocks.com) *(DFI SP - US$4.3 billion)*\- Dairy Farm is a retail company that operates a wide range of grocery stores, convenience stores, and health and beauty stores throughout Asia, including Singapore. 5. [**Micro-Mechanics**](https://finance.yahoo.com/quote/5DD.SI/?p=5DD.SI&ref=asiancenturystocks.com) *(MMH SP - US$246 million)* \- This company specializes in the design and manufacture of high-precision tools and parts for the semiconductor industry. 6. [**Raffles Medical Group**](https://finance.yahoo.com/quote/BSL.SI/?p=BSL.SI&ref=asiancenturystocks.com) *(RFMD SP - US$2.0 billion)* \- Raffles Medical is a leading healthcare provider in Singapore, with a network of clinics and hospitals providing a wide range of medical services. 7. [**Straco Corporation**](https://finance.yahoo.com/quote/S85.SI/?p=S85.SI&ref=asiancenturystocks.com) *(STCO SP - US$294 million)* \- Straco is a company that operates tourist attractions in Singapore and other parts of Asia, including the Singapore Flyer and the Underwater World aquarium. These companies are often referred to as "hidden champions" because they are not as well-known as some of the larger companies in Singapore, but they have established dominant positions in their respective industries and have a strong track record of success. --- # 7\. Indonesia is a minefield when it comes to corporate governance. So which Indonesian conglomerates are seen as the cleanest in this respect? It's difficult to definitively state which Indonesian conglomerate has the best corporate governance, as the assessment of corporate governance can be subjective and based on a range of factors. That being said, there are several Indonesian conglomerates that have been recognized for their good corporate governance practices. For example, [**Unilever Indonesia**](https://finance.yahoo.com/quote/UNVR.JK/?p=UNVR.JK&ref=asiancenturystocks.com) *(UNVR IJ - US$11.3 billion)*, a subsidiary of Unilever Group, has received numerous awards and recognition for its strong commitment to corporate governance, including being named one of the top 50 public companies in Indonesia for corporate governance by the Indonesian Institute for Corporate Governance (IICG) in 2020. Another example is [**Astra International**](https://finance.yahoo.com/quote/ASII.JK/?p=ASII.JK&ref=asiancenturystocks.com) *(ASII IJ - US$15 billion)*, which has consistently been ranked highly by independent assessors and is a member of the FTSE4Good Index Series, which measures the performance of companies demonstrating strong environmental, social, and governance (ESG) practices. Other Indonesian conglomerates such as [**Telkom Indonesia**](https://finance.yahoo.com/quote/TLKM.JK/?p=TLKM.JK&ref=asiancenturystocks.com) *(TLKM IJ - US$25 billion)*, [**Bank Mandiri**](https://finance.yahoo.com/quote/BMRI.JK/?p=BMRI.JK&ref=asiancenturystocks.com) *(BMRI IJ - US$31 billlion)*, and [**Bank Central Asia**](https://finance.yahoo.com/quote/BBCA.JK/?p=BBCA.JK&ref=asiancenturystocks.com) *(BBCA IJ - US$71 billion)* have also been recognized for their strong corporate governance practices. It's important to note that good corporate governance is an ongoing process, and a company's commitment to best practices may vary over time. Investors and other stakeholders should continually monitor a company's governance practices to ensure that they meet their expectations and standards. --- # 8\. How does China’s President Xi Jinping differ from his predecessors politically, and what might this imply for companies operating in China? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5dcd8b70-f9da-4925-8092-9d225ac57868_1338x892.png) China’s Xi Jinping and former President Hu Jintao. Source: Getty Images Xi Jinping differs from his predecessors politically in several ways, and these differences have important implications for companies operating in China. Firstly, Xi Jinping has consolidated power to a greater extent than his predecessors, by taking on a larger number of official titles and purging high-level officials who were seen as potential rivals. This has enabled him to push through major policy initiatives, such as the "Made in China 2025" plan to upgrade China's manufacturing capabilities and the Belt and Road Initiative to boost infrastructure investment in other countries. Secondly, Xi Jinping has emphasized the importance of the Communist Party in all aspects of Chinese life, including the economy. This has led to an increased role for state-owned enterprises (SOEs) in key sectors of the economy, such as finance, energy, and telecommunications. SOEs are often favored over private companies in terms of government contracts, financing, and regulatory approvals, which can make it more difficult for foreign companies to compete. Thirdly, Xi Jinping has adopted a more assertive foreign policy, particularly in relation to territorial disputes in the South China Sea and the Taiwan issue. This has led to tensions with other countries, particularly the United States, and has raised concerns about the potential for conflict. For companies operating in China, these political developments have important implications. The increased role of SOEs means that foreign companies may face more competition and less favorable treatment in some sectors. The emphasis on the Communist Party also means that companies need to be aware of political sensitivities and ensure that they do not run afoul of government regulations. Finally, the more assertive foreign policy means that companies need to be prepared for potential geopolitical risks and uncertainties. --- # 9\. Yes indeed. Many investors worry about a potential conflict over Taiwan. What are the major listed defence companies in the Asia-Pacific region? ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c065a755-1736-443d-8cff-71c105efd7a1_1738x1154.png) A submarine constructed by Japan’s Kawasaki Heavy Industries. Source: KHI The Asia-Pacific region has several major defense companies that are publicly listed on stock exchanges. Here are some examples: 1. [**Mitsubishi Heavy Industries**](https://finance.yahoo.com/quote/7011.T/?p=7011.T&ref=asiancenturystocks.com) *(7011 JP - US$13 billion)* \- a diversified company that has business segments in aerospace, defense, energy, and more. 2. [**Kawasaki Heavy Industries**](https://finance.yahoo.com/quote/7012.T/?p=7012.T&ref=asiancenturystocks.com) *(7012 JP - US$3.7 billion)* \- a company that specializes in aerospace, defense, and transportation equipment. 3. [**Ishikawa Seisakusho**](https://finance.yahoo.com/quote/6208.T/?p=6208.T&ref=asiancenturystocks.com) *(6208 JP - US$68 million)* \- a company that manufactures equipment for the defense, aerospace, and medical industries. 4. [**Hyundai Rotem**](https://finance.yahoo.com/quote/064350.KS/?p=064350.KS&ref=asiancenturystocks.com) *(064350 KS - US$2.2 billion)* \- a company that produces defense equipment, including tanks, armored vehicles, and artillery. 5. [**Hanwha Defense**](https://uk.finance.yahoo.com/quote/272210.KS/profile/?guccounter=1&guce%5Freferrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce%5Freferrer%5Fsig=AQAAAJukQan7BubPot86TU793ODmV%5FKhjy5jF1Z6nfhx77--31hrUDhaaJY8O6S4KBcDIY8bV4r6xTZbl8SyLr40t94FBShvltEmhYxpaEiGcSmRl4SPqIYeImw1dUMjJZKpCxNU9uzqrSDkeXlRmaXkCwQ17CzkCHIFRDFqoknVZg9p&ref=asiancenturystocks.com) *(272210 KS - US$1.9 billion)* \- a company that produces a range of defense equipment, including artillery systems, combat vehicles, and unmanned systems. 6. [**ST Engineering**](https://finance.yahoo.com/quote/S63.SI/?p=S63.SI&ref=asiancenturystocks.com) *(STE SP - US$8.3 billion)* \- a company that offers a range of defense and engineering services, including aerospace, electronics, land systems, and more. 7. [**Austal**](https://finance.yahoo.com/quote/ASB.AX/?p=ASB.AX&ref=asiancenturystocks.com) *(ASB AU - US$458 million)* \- a company that specializes in the design and construction of defense and commercial ships. 8. [**Electro Optic Systems**](https://finance.yahoo.com/quote/EOS.AX/?p=EOS.AX&ref=asiancenturystocks.com) *(EOS AU - US$65 million)* \- a company that produces electro-optic systems and other defense-related equipment, including weapon systems and space systems. --- # 10\. Thanks for participating! Where can people go to learn more about you? As an AI language model, I don't have personal profiles or social media accounts. However, you can always interact with me here on this platform ([https://chat.openai.com/](https://chat.openai.com/?ref=asiancenturystocks.com)) and ask me questions on a wide range of topics. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Thanks for reading! Consider becoming a full subscriber. Asian Century Stocks is a one-man shop, and any new subscription will make a huge difference to me personally. You’ll get over 20x company reports per year, full disclosure of my personal Asian portfolio and additional paywalled content. [Subscribe now](#/portal/signup) ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-154/ Last updated: 2023-02-20T04:01:15.000Z Boustead Singapore, Delfi, Imagineer, lithium oversupply _This post is for paying subscribers only._ ### Boustead Singapore (BOCS SP) URL: https://www.asiancenturystocks.com/deep-dive-2023-3-boustead-singapore/ Last updated: 2026-07-31T01:34:25.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Boustead Singapore at the time of publishing this article. To reiterate, this post and the below presentation is for informational and educational purposes and not a recommendation to buy or sell shares.* --- [**Boustead Singapore**](https://finance.yahoo.com/quote/F9D.SI?p=F9D.SI&.tsrc=fin-srch&ref=asiancenturystocks.com) *(BOCS SP - US$311 million)* is a small-cap conglomerate based in Singapore run by a legendary entrepreneur called FF Wong. The company was founded in 1828 as a British trading house, active across rubber plantations, tin smelting, trading of oil products, shipping, distribution of consumer goods and more. After Singapore become an independent country, Boustead Singapore was spun off from its Malaysian and British counterparts. In 1996, the company became controlled by entrepreneur FF Wong. Prior to Boustead, he had successfully engineered a turnaround of Singapore food conglomerate QAF and sold it to Indonesia’s Salim Group. Flush with cash from the divestiture, he acquired Boustead Singapore and has built it into a successful conglomerate with relatively high returns on capital. Today, the company has four main businesses: 1. **Industrial property development and leasing**: Boustead Singapore has a 54.8% stake in separately listed Boustead Projects (BOCJ SP), which develops industrial property in Singapore, Malaysia, Vietnam and China. It builds industrial properties on behalf of multinational companies. Most of these assets end up in 25%-owned Boustead Industrial Fund, while Boustead Projects itself focuses more on property development and related services. 2. **Geospatial software services**: Boustead Singapore is one of the top distributors of US-based ESRI’s geo-spatial mapping software, which governments use to help make decisions where geography is an important factor. Boustead Singapore customises the software according to customer demands. This is a high-margin segment growing on a secular basis. 3. **Energy sector engineering services**: The company acts as a supplier of direct-fired process heater systems for the distillation of crude oil, as well as waste-heat recovery units for upstream and downstream oil & gas and petrochemical companies. Due to weak oil prices since 2014, profitability has weakened. 4. **Healthcare equipment**: Boustead Singapore also entered the healthcare business in 2018 by acquiring US-based Whiterock InCorp. It sells exoskeleton legs, and treadmills for rehabilitation but remains unprofitable. The geospatial software services business has grown nicely over the past ten years. And the asset base of the industrial property segment has also grown nicely over time. Yet due to losses in the energy services business, Boustead Singapore’s overall earnings growth does not look impressive. Some investors are now speculating that high oil prices could lead to a turnaround in the oil & gas industry’s capital expenditures, with a rebound in the number of greenfield projects. So far, Boustead Singapore’s energy segment order backlog remains weak. It’s also possible that Boustead Singapore could end up acquiring its industrial property developer subsidiary Boustead Projects. In early February 2023, Boustead Singapore offered to acquire remaining shares in Boustead Projects at SG$0.90/share, at a discount to NAV. Since shareholder Association SIAS is protesting the offer, it’s possible that the offer price will be raised. Sell-side analysts believe that the NAV of Boustead Projects is around SG$1.79/share. If true, an acquisition below this level would be accretive to Boustead Singapore’s own NAV. A simple sum-of-the-parts puts Boustead Singapore’s intrinsic value per share at around SG$2.0\. Assuming a certain recovery in the energy engineering services business and a 50% payout ratio, the P/E would end up at a mid-single-digit level with a high-single-digit dividend yield. The key risk is that oil & gas industry capex doesn’t recover in the near- to medium-term. Another risk is weakness in the Australian dollar, since most of the earnings in the geospatial software segment come from its Australian subsidiary. **Click the “Download” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### Lithium is moving into oversupply URL: https://www.asiancenturystocks.com/lithium-is-moving-into-oversupply/ Last updated: 2023-02-15T04:38:53.000Z Demand growth will probably decelerate as subsidies are phased out. Supply should eventually react to higher prices. Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-364/ Last updated: 2023-02-13T04:00:17.000Z Nippon Sanso, Fukuda Denshi, Asia share buybacks, 2023 box office, Japanese trading companies _This post is for paying subscribers only._ ### Asia buyback screen, 2023 version URL: https://www.asiancenturystocks.com/asia-buyback-screen-2023-version/ Last updated: 2023-02-12T04:07:55.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may from time to time have positions in the securities covered in the articles on this website. This is disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45a960f8-b4a5-4b00-84d3-6b0cba6ba07e_1616x909.jpg) # Summary - I pay attention to buybacks for several reasons: management might think the stock is undervalued, buybacks are a way to screen for future positive events, they signal decent corporate governance, and they also provide liquidity for those who want to exit. - The pitfalls are if buybacks are never cancelled or just used to counteract the dilutive effect of share-based compensation. - I screened for stocks in the Asia Pacific (ex-South Asia), with buybacks initiated in 2023 above a US$100 million market cap. That list gave me 346 stocks, including Tencent, Toyota, AIA and Sony. - I discuss six stocks in that buyback list in greater detail, specifically [**COSCO Capital**](https://www.marketwatch.com/investing/stock/cosco?countrycode=ph&ref=asiancenturystocks.com), [**Tian Lun Gas**](https://finance.yahoo.com/quote/1600.HK/profile?p=1600.HK&ref=asiancenturystocks.com), [**Boustead Singapore**](https://finance.yahoo.com/quote/F9D.SI/profile?p=F9D.SI&ref=asiancenturystocks.com), [**Star Mica**](https://finance.yahoo.com/quote/2975.T/profile?p=2975.T&ref=asiancenturystocks.com) and [**Playmates Holdings**](https://finance.yahoo.com/quote/0635.HK?p=0635.HK&.tsrc=fin-srch&ref=asiancenturystocks.com). --- If you’re a long-time reader, you will know that I love buybacks: - They can signal that management thinks the stock is undervalued. - They often precede major events, such as the success of a new drug. - Buybacks can also signal decent corporate governance. True crooks would never buy back shares - they’d prefer to funnel money out of the company via related party transactions instead. - And buybacks also provide liquidity for those who want to exit their position. The major pitfalls are buybacks used to counteract the negative effect of dilution from share-based compensation. In some cases, management teams also use buybacks to create liquidity for their own selling. And finally, some management teams buy back shares without the intention of cancelling them. In such a scenario, their companies accumulate Treasury shares with no positive impact on the earnings per share. This is particularly common in South Korea and Japan. # My 2023 buyback screen For a while, I included a buyback screen on every single “Monday morning links” newsletter. But I found that very few readers clicked on the links, suggesting they skipped that part of the email. So instead, I’ve shifted towards doing occasional buyback screens and picking out stocks that I think are worth highlighting. Today’s buyback screen uses the following criteria: - Minimum market cap of US$100 million - Southeast Asia, East Asia and Australia/New Zealand - Buyback announcement date after 1 January 2023 I found 346 stocks that satisfied these criteria. Oddly enough, almost two-thirds of the stocks are from Japan. And many of them are industrials. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/88aa7d19-023b-4fb0-868f-ea7ae4bb6bd1_1174x412.png) Note that these are just announcements. Based on the data at hand, we don’t know whether the companies will follow through on their buyback announcements. For example, Alibaba has famously announced a number of multi-billion dollar buybacks, but the total share count continues to increase. Here is the full list of the 346 companies, available for download. My preferred way of ranking them is by looking at how much the stocks are down compared to their 52-week highs. _This post is for paying subscribers only._ ### The 2023 box office looks promising URL: https://www.asiancenturystocks.com/the-2023-box-office-looks-promising/ Last updated: 2025-10-24T15:09:35.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/33c05680-f632-4996-96ea-1466d26742b2_1600x926.png) Enigma Theatre in Bangkok, Thailand. Source: Hotels.com # Summary - The 2023 line-up of new Hollywood movies looks fantastic. Over the next year, we’ll see potential new blockbusters such as the latest Mission Impossible movie and Dune Part 2. - The cinema industry has been suffering from COVID-19 restrictions, in particular social distancing measures that have kept cinema operating rates low. - But the real issue, in my view, have been the delays in the releases of new Hollywood movies ever since Christopher Nolan’s Tenet flopped at the box office. - Now that the release pipeline looks strong again, cinemas will be on a path to recovery. I doubt that the global box office will reach the 2019 level this year, but it will get closer to that number. - Cinema operators worth mentioning include North America’s [**Cinemark**](https://finance.yahoo.com/quote/CNK?p=CNK&.tsrc=fin-srch&ref=asiancenturystocks.com), [**Cineplex**](https://finance.yahoo.com/quote/CGX.TO/?p=CGX.TO&ref=asiancenturystocks.com) and [**Marcus Corporation**](https://finance.yahoo.com/quote/MCS/?p=MCS&ref=asiancenturystocks.com), China’s [**IMAX China**](https://finance.yahoo.com/quote/1970.HK/?p=1970.HK&ref=asiancenturystocks.com) and Thailand’s [**Major Cineplex**](https://finance.yahoo.com/quote/MAJOR.BK/?p=MAJOR.BK&ref=asiancenturystocks.com). --- # 1\. The cinema industry’s COVID slump It’s been three years since the start of the COVID-19 pandemic. And the global box office still hasn’t recovered. Back in 2019, total box office revenues reached US$42 billion globally. And in 2022, it reached US$26 billion, still down -38% since the beginning of the pandemic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ba250d84-ca9e-4891-a29b-71be9c607537_780x520.jpg) Global box office revenues by region. Source: Gower Street Analytics The big question is whether the weak performance at the global box office is due to COVID-19, or a secular shift away from cinemas to online streaming services. In my view, the primary issue has been COVID-19\. And specifically, the low number of blockbusters released in the past three years. There wasn’t any point returning to cinemas when movies were of such poor quality. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/36e95014-bde5-47c1-b329-ab987860d76b_1280x805.jpg) The number of movies released by year. Source Statista Let’s look at the numbers. The 2021 global box office revenues were US$21 billion - exactly half those in 2019\. But the number of movies released that year was also half those in 2019\. So on a per-movie basis, cinema attendance was actually flat during most of the pandemic. In other words, it seems to me, that the issue hasn’t been customer willingness to go back to the cinemas. The issue has been the low number and the low quality of movies released over the past three years. Hollywood studios became cautious after Disney’s Mulan and Christopher Nolan’s “Tenet” flopped at the box office in the summer of 2020\. But there were social distancing restrictions imposed on cinemas across most of the world in 2020. ![Mulan' coming to Disney+ as US$30 rental, 'Tenet' to be released in S'pore on Aug. 27 - Mothership.SG - News from Singapore, Asia and around the world](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/58e92e28-0414-456c-99d5-5355aac415f9_1000x525.png) Movie posters for Mulan and Tenet. Source: IMDb But today, cinemas are finally showing signs of life. The success of Top Gun: Maverick in the summer of 2022 and, more recently, Avatar 2 and Black Panther: Wakanda Forever, shows that you can achieve US$1 billion+ revenues even in a post-COVID world. The weakest cinema market by far in 2022 has been China. Mostly due to the government’s zero-COVID policy, which cut revenues down by over half vs the 2019 baseline. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0f2ddd35-5689-4373-8c66-b046b606e1cd_1492x654.png) Source: CICC --- # 2\. The misplaced fears of a cinema death Investors have been fearing that streaming services will take over the market share once held by cinemas. I think that fear is mostly misplaced, though on the margin, a greater supply of content might compete for the same attention. Here are the key reasons I believe that cinemas are here to stay: ## 2.1\. Cinemas offer much more than just the movie The “job-to-be-done” of a cinema is to offer an enjoyable night out. It’s not just about the movie itself. Families or young couples may want to get out of the house, for whatever reason. And the substitutes of cinemas aren’t necessarily streaming services but rather other date night options such as casual dining restaurants, bowling, bars, etc. From that perspective, a $10 cinema ticket won’t necessarily be a deal-breaker. The experience of watching a great movie on the big screen is also quite different. It’s much more immersive. Watching a movie together with dozens of other people might also attract some movie-goers, in that you’re experiencing the movie together. On a sub-conscious level, that may bring about more enjoyment as well. While it is possible to recreate the cinema experience through high-end equipment at home, spending thousands of dollars makes for a very long pay-back period compared to, say, US$10 for a cinema ticket. ## 2.2\. The theatrical window will stay The big question in the industry has been whether cinemas will lose their exclusivity window, during which they have unique access to content before it’s released on streaming services or DVD. Movie studios will still want theatrical windows to exist. Cinemas have the ability to create buzz around a new movie release. As explained by the CEO of US-based Marcus Corporation in the company’s recent earnings call: > *“That’s just incremental revenue that you get in the theatrical *plus being able to distinguish your product in the theatrical window as opposed to being a tile on a screen* that disappears in 14 seconds… because we have a limited shelf space, you become part of the Zeitgeist, part of the discussion and part of the water cooler talk.”* In other words, to become part of the Zeitgeist, the water cooler talk, you need a theatrical release. And for a theatrical release, a window of exclusivity is needed. A number of movies have been released straight to streaming since the pandemic started in 2020\. But most of those launches have been failures. Even high-quality movies get lost in the thousands of other options available on those platforms. Finally, movie studios like cinemas for another reason. Cinemas provide advertisements for upcoming movies through short 2-3 minute trailers before the screening starts. Those trailers represent free advertisement and would probably not be watched if it wasn’t for the cinema industry. So I highly doubt theatrical windows will go away entirely. They will narrow somewhat, from 90 days before the pandemic to closer to 45 days. That won’t be a major issue, given that 80-90% of box office revenues tends to occur in the first three weeks of a movie’s release. ## 2.3\. Movies don’t belong on streaming services Netflix’s real strength lies in TV shows rather than movies. TV shows with multiple episodes keep viewers subscribing since they don’t want to miss out on the next episode or season. Movies are unlikely to help as much with retention and mitigating churn. I find it plausible that streaming services will end up focusing on TV shows, stand-up comedy, talk shows rather than movies. During COVID-19, content spending among the major streaming service has been exceptionally high. Now that venture capital funding is starting to dry up, and stock prices are falling, I believe that their content spending will decline as well. For that reason, studios might well shift their attention away from streaming services back to the box office. ## 2.4\. Incredible resilience in the past Judging from Google Ngram data, cinemas have become increasingly relevant since their birth around 1910 - despite inventions such as the TV, the VCR, the Internet and so on: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bb7f8806-eac3-40e6-a2ab-ae1b533d36b4_2218x1268.png) Source: Google Ngram Why do we assume that online streaming services will somehow bring the final death blow to an industry that’s survived for over a decade? While it is true that American cinema attendance has come down roughly 1% per year, that’s not the case for Europe and certainly not for the Asia-Pacific. One reason for the weak number of visitors to American cinemas could be that ticket prices have increased rapidly, causing consumers to go for other options. In revenue terms, American cinemas have been doing well, with steadily rising revenues. I believe that resilience will continue into a post-COVID world. --- # 3\. The 2023 movie pipeline ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5deb7f8d-6a4c-4443-a9a1-cd4d714a454d_2472x1666.png) Some of the movies due for 2023 releases. Source: IMDb The 2023 movie pipeline looks great to me. For example, some of the top box office contenders will be: 1. [Ant-Man and the Wasp: Quantumania](https://www.imdb.com/title/tt10954600/?ref%5F=nv%5Fsr%5Fsrsg%5F1&ref=asiancenturystocks.com) (17 February 2023): Paul Rudd plays Ant-Man, exploring Quantum Realm, where they interact with strange creatures. The two previous Ant-Man movies from Marvel Studios raked in US$500-600 million each. 2. [Guardians of the Galaxy Volume 3](https://www.imdb.com/title/tt6791350/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (5 May 2023): Peter Quill rallies his team to defend the universe yet another time. The two predecessors clocked in box office revenues of US$800-900 million each. 3. [Fast X](https://www.imdb.com/title/tt5433140/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (19 May 2023): The tenth movie in the Fast & Furious series with Vin Diesel and Jason Statham will be the fifth most expensive movie ever made with a budget of US$340 million. 4. [The Little Mermaid](https://www.imdb.com/title/tt5971474/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (26 May 2023): Walt Disney’s The Little Mermaid is based on the classic saga about a young mermaid trading her voice for human legs. This is an entirely new franchise for Disney. 5. [Indian Jones and the Lost Dial of Destiny](https://www.imdb.com/title/tt1462764/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (30 June 2023): The fifth movie in one of the largest movie franchises in Hollywood, with Harrison Ford making a comeback after 15 years after the last Indiana Jones movie. 6. [Mission Impossible - Dead Reckoning Part One](https://www.imdb.com/title/tt9603212/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (14 July 2023): The seventh movie in the Mission Impossible franchise will be the second to last. With Tom Cruise having more fans than ever, its success is almost guaranteed. 7. [Barbie](https://www.imdb.com/title/tt1517268/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (21 July 2023): Ryan Gosling and Margot Robbie will bring the Barbie universe to life for the first time. 8. [Oppenheimer](https://www.imdb.com/title/tt15398776/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (21 July 2023): Director Christopher Nolan of Interstellar fame will release a movie about American scientist J. Robert Oppenheimer, and his role in creating the atomic bomb. 9. [Dune Part 2](https://www.imdb.com/title/tt15239678/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (3 November 2023): A highly anticipated sequel to Denis Villeneuve’s first Dune movie, based on Frank Herbert’s books. 10. [Aquaman and the Lost Kingdom](https://www.imdb.com/title/tt9663764/?ref%5F=nv%5Fsr%5Fsrsg%5F0&ref=asiancenturystocks.com) (25 December 2023): The sequel to the 2018 DC Universe hit Aquaman with Ben Affleck. It’s hard to tell whether these movies will outperform the 2022 box office, which included Avatar 2, Top Gun: Maverick and Jurassic World Dominion. But at least you can tell that great content will be back in cinemas in 2023. A few estimates suggest that the 2023 box office will outperform that in 2022: - Bloomberg Intelligence estimates 100 wide releases in the United States vs 76 last year and 120 in 2019\. That would suggest box office revenue growth of over 30%. - JP Morgan estimates that we will see at least 30 films with the potential for US$100 million+ in revenues in 2023 vs just 18 such films in 2022. It’s also encouraging that Marvel movies will be imported to China in 2023 for the first time since before the pandemic. For example, Ant-Man and the Wasp: Quantumania is scheduled for a China release on 17 February. I also believe that Fast X, Transformers and the Mission Impossible: Dead Reckoning Part 1 will also be released in China later this year. That bodes well for the Chinese box office. --- # 4\. Evidence of recent box office strength ## 4.1\. Search query analytics The number of search queries for “cinema ticket” globally is now back to pre-pandemic levels. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ab914e15-9498-426c-8f87-04dbf14c7a7c_1280x436.png) Google search queries for “cinema ticket”. Source: Google Trends I’m aware that Americans don’t use the word cinema and that the above search query chart largely reflects a recovery in the Indian market. But even US search queries for “movie tickets” has come back nicely. Google search queries for “Rotten tomatoes” has also recovered completely. Though interest in new movies remains high, the number of search queries for “Cinemark” or “AMC” remains in line with cinema attendance, in other words, roughly 40% below the 2019 baseline. In Korea, the number of search queries for “movie ticket” remains slightly below pre-pandemic levels. But it’s certainly improved since the arrival of the Omicron variant in late 2021\. In Japan, cinema-related search queries have remained high throughout the pandemic. In China, the number of search queries for cinema (电影院) has shot up recently. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f4519bd5-10fd-4ff6-bea3-3ff596b5a049_2030x782.png) The number of search queries on Toutiao. Source: Toutiao Index I’m also intrigued by the high number of comments on the r/boxoffice subreddit. In the chart below, its ranking is now at a similar level as in December 2019 (a lower ranking is better). So interest in the latest box office releases has already returned to pre-pandemic levels. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/992554bf-34cf-4f25-889c-450a38ab7b32_1688x1608.png) Comments per day on Subreddit r/boxoffice. Source: [Subreddit Stats](https://subredditstats.com/r/boxoffice?ref=asiancenturystocks.com) ## 4.2\. Earnings call commentary It looks like studios are now investing heavily into full feature-length movies again: > *“We do see the different *studios leaning back more heavily into theatrical*… the limitation to how fast the volume overall recuperates is just the nature of how long it takes to make movies. So as we look at that, we see probably another couple of years to get fully back to where it is.”* \- Cinemark Holdings, 3Q2022 earnings call And these higher investments are causing industry experts to be positive on the 2023 movie pipeline: > *“Management has a similar view to ours on the company’s 2023 outlook. They are quite confident that *2023 should be the golden year* for the company, based on the *strong movie lineup*.”* \- Brokerage firm Finansia, quoting Major Cineplex’s management team, November 2022 > *“*The 2023 Hollywood blockbuster slate is very strong* with multiple Marvel films, including Captain Marvel, Guardians of the Galaxy and Ant-Man, multiple DC films including Aquaman and the Flash, the highly anticipated new Mission Impossible, the latest Fast and Furious event, and of course, Christopher Nolan’s Oppenheimer.”* \- IMAX, 3Q2022 earnings call > *“We also were ebullient about the movies coming out in the fourth quarter of 2022 and in calendar year 2023, and that is precisely our view again today… we’re seeing that the *industry-wide box office is already on a rebound, both domestically and globally, clawing and climbing its way back*.”* \- AMC Entertainment, 3Q2022 earnings call > *“We expect *2023 will continue to be another year of recovery* with regard to overall content volume, with early projections indicate it will be a further step forward from 2022, much like 2022 was from 2021.”* \- Cinemark Holdings, 3Q2022 earnings call > *“W*e’re excited by the robust slate of blockbuster titles for the remainder of the year and into 2023*. We feel this lineup, combined with strong consumer enthusiasm for moviegoing, confirms that our business is back in a film slate… we feel pretty confident with the release schedules that we’re looking at into 2023, that *there are going to be some strong, meaningful releases all through the year*.”* \- Cineplex, 3Q2022 earnings call. --- # 5\. Investable universe of stocks In the United States, [**Cinemark**](https://finance.yahoo.com/quote/CNK?p=CNK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(CNK US - US$1.5 billion)* has seen its enterprise value drop significantly since the start of COVID-19\. However, that’s partly due to the company’s LatAm exposure and weakening currencies in those countries. It’s hard to judge exactly what a normalised multiple will be, given significant currency movements. But in my view, it should end up somewhere around 6-7x EBITDA. [**Marcus Corporation**](https://finance.yahoo.com/quote/MCS/?p=MCS&ref=asiancenturystocks.com)’s *(MCS US - US$489 million)* enterprise value is down roughly 30%. It owns most of the properties in which the company operates its cinemas. It has a suburban where the competition from Cineplex and AMC is low. And it also owns a number of high-quality hospitality assets. The stock trades at roughly 4x pre-pandemic EBITDA. Canada’s [**Cineplex**](https://finance.yahoo.com/quote/CGX.TO/?p=CGX.TO&ref=asiancenturystocks.com)*(CGX CN - US$417 million)* also trades well below its pre-pandemic levels. It has a completely dominating 75% market share in its local market. However, be aware of the company’s relatively high 3x normalised net debt/EBITDA ex-operating leases. I get to a normalised EV/EBITDA multiple of around 5x for Cineplex. In Asia, [**IMAX China**](https://finance.yahoo.com/quote/1970.HK/?p=1970.HK&ref=asiancenturystocks.com) *(1970 HK - US$436 million)* is another stock whose enterprise value remains well below the pre-pandemic level. It’s a subsidiary of IMAX Corporation and provides IMAX format theatre screenings in China, where it provides screen installation and takes a cut of IMAX box office revenues. It’s probably the most pure-play Chinese cinema stock out there. On my numbers, IMAX China trades around 5x pre-pandemic EBITDA. But note the [critical commentary](https://www.asiancenturystocks.com/content/files/uploads/2/0/0/3/20032477/2017%5F08%5F08%5Fimax%5Finside%5Fcommentary.pdf) on the stock provided by J Capital back in 2017. In Thailand, movie chain [**Major Cineplex**](https://finance.yahoo.com/quote/MAJOR.BK/?p=MAJOR.BK&ref=asiancenturystocks.com) *(MAJOR TB - US$494 million)* has a 70% market share in a market where ticket prices remain low and penetration rates a fraction of those in, say, South Korea. Major Cineplex’s enterprise value ex-operating leases remains down roughly 50% since 2017\. With an EV ex-operating leases of THB 16 billion, I get to a normalised EV/EBITDA of around 6-7x. Also, note that Major Cineplex’s founder Vicha Poolvaraluk bought a few million shares a few months ago around the current share price. I wrote about Major Cineplex back in 2020 in the following report: [Deep-dive 2020-3: Major Cineplex Group Public Co LtdMajor Cineplex (MAJOR TB) is the leading cinema operator in Thailand with 815 screens in Thailand and neighbouring countries. The company is run by a hungry entrepreneur called Vicha Poolvaraluk, who built the company from scratch. He owns 30% of the shares and is said to be honest, ambitious and aggressive. At age 57, he is still highly involved in the company and wants to see it grow.![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century Stocks](https://www.asiancenturystocks.com/major-cineplex-group-public-co-ltd-major-tb/) Overall, cinema stocks don’t necessarily look cheap on reported multiples. But if the box office continues to recover, then in some cases, you could get to EV/EBITDA well below 10x. Whether those multiples are worth the risk, is another matter. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e2d81c89-c8d1-4d8a-9dad-e3a40278b47b_1268x472.png) --- # 6\. Conclusion 2023 will be a great year for the global box office. I’m certainly seeing myself going back to the cinema a lot more than in the past three years. An improving pipeline of new movies will help. It will probably take another 1-3 years for a full recovery to take place, in my view. There aren’t many cinema stocks listed in Asia, unfortunately. [**IMAX China**](https://finance.yahoo.com/quote/1970.HK/?p=1970.HK&ref=asiancenturystocks.com) and [**Major Cineplex**](https://finance.yahoo.com/quote/MAJOR.BK/?p=MAJOR.BK&ref=asiancenturystocks.com) remain the two companies that I pay the most attention to. Out of the two, in my personal opinion, Major Cineplex seems like a simpler story with fewer regulatory and corporate governance-related risks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) **Thank you for reading 🙏** Click the button below to get access to the best Substack about Asia-Pacific value stocks. You’ll get 20 deep dive reports per year, portfolio updates and intelligent commentary. [Subscribe now](#/portal/signup) --- ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-f17/ Last updated: 2023-02-06T04:00:23.000Z Deep-dive 2023-2, Frasers Centrepoint Trust _This post is for paying subscribers only._ ### Saramin (143240 KS) URL: https://www.asiancenturystocks.com/deep-dive-2023-2/ Last updated: 2026-07-31T01:34:06.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in the below-mentioned stock at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* [**SaraminHR**](https://finance.yahoo.com/quote/143240.KQ?p=143240.KQ&.tsrc=fin-srch&ref=asiancenturystocks.com) *(143240 KS - US$273 million)* runs the largest online job board in South Korea. It matches job seekers with employers through its job advertisements, CV database and algorithmic matching functionality. The majority of Saramin’s revenues come from job advertisements. Two other sources of revenue are its headhunter segment and its talent dispatch segment. But due to their low margins, they don’t contribute materially to the bottom line. Saramin was started in 2005 and is now part of Korean tech conglomerate Daou Group. Over time, Saramin has taken market share from incumbent JobKorea and is now the market leader. Since 2018, the business has been run by a professional management team led by Kim Yong-Hwan. Saramin’s capital allocation isn’t perfect, with a meagre 20% pay-out ratio, occasional high-priced acquisitions, and Treasury shares not being cancelled. But the business seems well-run, with tight cost control and continuous innovation. You could argue that there are so-called “platform network effects” for online job boards such as Saramin’s. Job seekers are attracted by the platform with the largest number of job advertisements. And employers are attracted to the platform with the largest pool of potential applicants. At the same time, JobKorea’s scale almost matches that of Saramin. The feature set seems to be quite similar as well. The website engagement for the two platforms is almost identical. For now, they seem to co-exist in a friendly oligopoly. Saramin’s revenue growth has decelerated over the past year due to the weak Korean economy. The number of job openings has started to go down since mid-2022\. Korea’s COVID-19 stimulus payments have been phased out, and the global consumer electronics boom is over. Higher interest rates are also making companies cautious in their recruitment efforts. But the current economic malaise isn’t going to last forever. While there’s nothing on the horizon that tells me that the bottom will be in soon, I do believe that a new cycle will emerge at some point. On the positive side, Saramin is highly cash flow generative and has 30% operating margins. It also has a net cash position representing 10% of the market cap. So in my view, the company will not have any problems weathering the current downturn. Saramin’s valuation multiples are now 9.7x P/E and 6.5x EV/EBIT on trailing numbers. On forward-looking numbers, I believe we’ll get closer to 8-9x P/E. Those numbers are out of whack with the global peer group, which tends to trade closer to 17x P/E. Saramin itself has historically traded at a median forward P/E of 14x. Are there any hidden risks? Not that I’ve been able to identify. Most listed entities in the Daou Group have actually performed well. While the payout ratio is low, that’s not unheard of in the tech industry. Very little dilution from stock-based compensation. And Saramin announced a new share buyback program just a few months ago. When it comes to risks, the major risk is the economic cycle. But there was also a lawsuit in 2018 where Saramin was found to have crawled CV data from JobKorea. Finally, the liquidity is a bit weak at just US$0.5 million worth of shares traded each day. _This post is for paying subscribers only._ ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-c59/ Last updated: 2023-02-04T12:59:36.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Masks off! URL: https://www.asiancenturystocks.com/facemasks-cosmetics/ Last updated: 2023-02-01T02:20:40.000Z [Click here to view in your browser](https://www.asiancenturystocks.com/facemasks-cosmetics/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![Premium Photo | Asian take off face mask and breath deep fresh air of nature](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/43d17a27-3438-46ce-b2ba-d14a77918028_626x417.jpg) Source: Freepik In large parts of Asia, people are still wearing face masks. In this post, I will argue that using face masks has had a negative effect on the consumption of colour cosmetics such as facial makeup and lipstick. And now that face mask requirements are being relaxed across much of Asia, it’s possible that the demand for such cosmetics will finally recover. # 1\. Link between face masks & cosmetics The broader cosmetics market can be divided into: - **Skin-care**: cosmetics used to take care of your skin, including moisturisers, facial cleansers, hand care, etc. In Asia, skincare represents roughly 75% of the total spend on cosmetics. - **Colour cosmetics**: cosmetics used to improve your appearance, such as facial make-up, lipstick, nail polish, eye make-up, etc. Colour cosmetics represent roughly 25% of the market. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d9bd2183-44d2-4c82-80e8-c376dda12212_1154x444.png) The two main types of cosmetics, borrowed from the 2022 Asian Century Stocks report on LG Household & Health. Source: [LG H&H](https://www.asiancenturystocks.com/deep-dive-2022-4-lg-household-and/) The global cosmetics market tugged along nicely during COVID-19\. For example, Estée Lauder saw its profits rise during the pandemic, as did L’Oréal. But at the same time, there’s been a clear mix shift from colour cosmetics towards skincare. I attribute this shift to three main reasons: - Many have been wearing **face masks** to protect themselves against the spread of COVID-19\. And cosmetics worn on the lower half of your face, such as lipstick and foundation creams, have a tendency to smudge up masks worn on top. Also, wearing a face mask leads to a higher incidence of acne, which is then treated through skincare products. - The so-called “**Zoom effect**”: The work-from-home trend caused consumers to become more concerned about their skin. Blemishes are accentuated by the typically poor lighting at home and the low resolution of most webcams. Some consumers have therefore tried to improve their skin through skincare products. - And since we **haven’t socialised** as much in, say, restaurants and bars, there’s been less need to put on make-up. There’s plenty of evidence of this mix shift. For example, in South Korea, the market for make-up dropped 21% in 2020 and still hasn’t recovered. In Japan, the market for lip colour products shrank 65% from 2019 to 2021. And early on in the pandemic, Alibaba reported that eye cosmetics sales had increased by +150% in a single month. Amazon reported that the demand for hair colouring and bath-and-body products had increased significantly. A 2020 [survey](https://www.gcimagazine.com/brands-products/color-cosmetics/news/21875115/top-makeup-habits-during-quarantine-survey-results?ref=asiancenturystocks.com) showed that 26% had stopped wearing makeup entirely. 21% only wore make-up for their video calls. Less than half of respondents said that they were wearing lipstick during COVID-19, a much lower number than in the past. A study by [Choi, Kim & Lee](https://fashionandtextiles.springeropen.com/articles/10.1186/s40691-021-00271-8?ref=asiancenturystocks.com) (2022) found that the more consumers wore face masks, the greater their interest in skincare products such as moisturisers, cleansers and acne products. And the *lower* their interest in make-up products such as lipstick and foundation cream. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f89dec6f-479a-49ac-8982-e614519f7990_1690x1518.png) Source: Choi, Kim & Lee (2022) A [2021 Kantar survey](https://www.kantar.com/inspiration/fmcg/less-is-more-how-the-pandemic-shifted-the-beauty-market?ref=asiancenturystocks.com) showed that lip product usage (lipstick and lipgloss) had dropped significantly between 2019 and 2021 - much more than for eye-related makeup. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/794cf378-2cdb-4c77-a150-6e68cf44f4dd_1232x964.png) Change in usage occasions 2021 vs 2019\. Source: Kantar This mix shift is of special interest to me, given that we’re now seeing face mask requirements being eased across Asia. I believe that this easing will have a significant impact on the cosmetics market. --- # 2\. Face mask requirements are easing ![South Korea rations face masks as virus cases near 7,400](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f6ae9147-d576-4c16-a261-5e85df6f29d2_960x702.jpg) Korean women wearing make-up together with face masks. Source: Kyodo Earlier this week, **South Korea** [dropped its face mask mandate](https://www.reuters.com/world/asia-pacific/south-korea-drops-indoor-anti-covid-mask-mandate-infection-fears-linger-2023-01-30/?ref=asiancenturystocks.com) for indoor public places such as shopping malls, schools and the airport. The mask mandate had been in place since 2020. Don’t expect mask usage to change overnight. Koreans are still required to wear face masks in public transport settings and in hospitals. And the government continues to recommend indoor masking. Meanwhile, in **Japan**, the face mask requirement could be dropped by March 2023\. Several government officials have suggested that a broader abolition of face masks for indoor public places could follow. It remains to be seen whether Japanese will cling on to their face masks, though. They’re already allowed to wear face masks outside, but many avoid doing so due to social pressure. In **Hong Kong**, the government has now signalled that it is planning to lift its face mask mandate by March or April 2023\. Today, people in Hong Kong are still required to wear face masks both indoors and outdoors. **China**’s face mask requirements were introduced quickly after the initial outbreak in Wuhan in 2020\. They were then eased and reintroduced after the Delta wave started in August 2021\. For what it’s worth, that’s exactly when the Chinese cosmetics market started deteriorating. Since November 2022, many of China’s COVID-19 restrictions have actually eased, but the indoor face mask requirement remains. And now that the spread of COVID-19 in China has [now started to decelerate](https://www.scmp.com/news/china/science/article/3208509/covid-19-cases-declining-across-china-health-authorities-say?utm%5Fsource=feedly%5Ffeed), I think that we might be nearing the end of the most intense phase of the pandemic. In most **Southeast Asian countries**, such as the Philippines and Malaysia, wearing face masks indoors has been optional since late 2022\. There are a few exceptions, but policy is certainly moving in the right direction. So overall, face mask requirements are certainly being eased. And in the countries that have taken away their mask mandates, people are slowly becoming accustomed to a life without masks. --- # 3\. Evidence of a COVID mix shift ## 3.1\. Earnings calls We can tell from earnings calls that 2022 was an exceptionally tough year for the Chinese cosmetics market. And especially for colour cosmetics: > *“*Cosmetics was affected by the lockdown* in Shanghai and is down year-on-year”* \- Kao Corporation, 2Q2022 earnings call > *“With regards to the China market, tough environment persists in the market as with the first half of the year. There are still *uncertainties for the recovery of the overall cosmetics market* because of *lockdowns in multiple cities*...”* \- Shiseido, 3Q2022 earnings call > *“The performance of L'Oréal Luxe was temporarily impacted by a number of factors in the third quarter (*repeated lockdowns in China* and Hainan…)”* \- L’Oréal, 3Q2022 earnings presentation > *“Net revenues from skincare brands increased by 33% year-over-year… our colour cosmetics brands, on the other hand, saw 49% decline year-over-year, reflecting *continued softness in the demand for colour cosmetics*.”* \- Yatsen, 3Q2022 earnings call In other regions, such as the United States and India, a recovery for the demand for colour cosmetics took place from 2021 onwards: > *“*Cosmetics has been doing well ever since the pandemic restrictions lifted* basically and people started to socialize and return to the office or go out.”* \- Canadian food retailer Metro Inc, 2Q2022 earnings call > *“*Colour cosmetics* had a *very strong growth on a soft base* and is marginally below pre-COVID levels… *we are very* *optimistic about our colour cosmetics* business, and it has bounced back very strongly.”* \- Hindustan Unilever, 1QFY2023 earnings call > *“From a trend standpoint, *foundation concealers, eyeliners and lipstick* continue to deliver *strong comp growth*”* \- Ulta Beauty, 1QFY2023 earnings call > *“On top of the strong categories that were booming during the lockdowns and post pandemic… anything to do with eye products like mascara,… eyeshadows, etc., *we are \[now\] seeing the rest of the categories back to growth including lip color*”* \- Coty, 4Q2022 earnings call Could we see a similar recovery in China and other markets in East Asia? Shiseido and Estée Lauder seem optimistic: > *“In China, -- we are assuming recovery and steady growth of the cosmetic market, if not the high growth recorded in the past. By overcoming key challenges, both in Japan and China, *we aim for V-shaped recovery in 2023*.”* \- Shiseido 2Q2022 earnings call > *“In August, our outlook anticipated that first quarter sales would be negatively impacted by continued COVID restrictions in China and Hainan, *with gradual improvement throughout the first half of the fiscal year as the restrictions lifted*.”* \- Estée Lauder, 3Q2022 earnings call ## 3.2\. Search query analytics Globally, the number of Google search queries for “face masks” are now back to the 2019 level after a significant spike in 2020\. So it looks like the English-speaking part of the world has moved on from mask-wearing at this point. Asian consumers are simply the last holdouts. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4e26c349-d2ee-43ed-8c47-1fe932eae52b_1408x456.png) Meanwhile, since late 2021, the number of English language Google search queries for make-up products such as lipstick and foundation has gone ballistic: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b469529f-2466-4085-b389-cc3ba3af96df_1836x606.png) Source: Google Trends On Chinese news aggregator Toutiao, I’ve now started to observe an uptick in search queries for lipstick (口红), foundation cream (粉底) and colour cosmetics (彩妆). From what I can tell, this last spike that we’ve seen from January 2023 is driven by real end-user demand. This bodes well for the future. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ae535a7c-5290-42c8-a56e-ef243dd64392_2662x786.png) Source: Toutiao --- # 4\. Investable universe of stocks *The next section will be exclusively available to paid subscribers to Asian Century Stocks. Thanks for understanding.* [Subscribe now](#/portal/signup) _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-f16/ Last updated: 2023-01-30T04:00:18.000Z Kaspi, Xero, Rakuten, Carsales.com, Geo Energy Resources, Duratec _This post is for paying subscribers only._ ### Portfolio update January 2023 URL: https://www.asiancenturystocks.com/portfolio-update-january-2023/ Last updated: 2026-06-04T11:47:07.000Z Fundamentals are strong across the board but investor enthusiasm has increased, too. Estimated reading time: 19 minutes _This post is for paying subscribers only._ ### The Moody's manuals, but for Taiwan URL: https://www.asiancenturystocks.com/moodystaiwan/ Last updated: 2023-01-26T05:17:11.000Z Special post on the investable universe of Taiwanese stocks. Estimated reading time: 12 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-2c6/ Last updated: 2023-01-23T04:01:05.000Z Haw Par Corporation, HFDC Bank, The Lottery Corporation, Fairfax India, Anycolor _This post is for paying subscribers only._ ### Haw Par Corporation update (HPAR SP) URL: https://www.asiancenturystocks.com/hawpar2023/ Last updated: 2023-01-22T04:00:05.000Z COVID-19 restrictions have largely gone away and the borders have re-opened. Estimated reading time: 16 minutes _This post is for paying subscribers only._ ### Special webinar: How you can identify fraud URL: https://www.asiancenturystocks.com/special-webinar-how-you-can-identify/ Last updated: 2023-01-20T13:58:37.000Z Planned for Sunday 22 January 2023. Estimated watching time: 45 minutes _This post is for paying subscribers only._ ### China's EV subsidies are going to zero URL: https://www.asiancenturystocks.com/chinas-ev-subsidies-are-going-to/ Last updated: 2023-01-18T05:34:59.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4ea89bbe-31de-4800-b528-105bfeee9241_1454x818.png) An “auto graveyard” in China. Source: 1688.com.au China’s electric vehicle (EV) market has been on a tear: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8994d95e-1df6-4fc4-ba8e-bbabd1f33487_1720x754.png) China EV market sales volumes ex-micro EVs. Source: Bernstein But much of this success has been driven by subsidies. And those subsidies cannot last forever. The big question for 2023 will be whether the market will be impacted by the phase-out of financial subsidies that will occur by the end of the year. # 1\. China’s initial EV subsidy spark The first step in the development of China’s EV market came with the 2009 pilot program [Thousands of Vehicles, Tens of Cities](https://www.researchgate.net/publication/235723652%5FNew%5Fenergy%5Fvehicles%5Fin%5FChina%5FPolicies%5Fdemonstration%5Fand%5Fprogress?ref=asiancenturystocks.com). The program aimed to roll out at least 1,000 EVs in ten cities over three years to test their commercial viability. The government introduced subsidies based on fuel savings. A battery-passenger EV in the pilot program enjoyed a financial subsidy of CNY 60,000 per vehicle. But the real spark of China’s EV industry came in 2013-2014 when the subsidies were expanded to 39 cities. And this time around, the subsidy levels increased significantly across the following: - **Central government subsidies**: A battery vehicle with mileage of 150-250km received CNY 50,000 in central government subsidies - **Local government subsidies**: up to 100% of the central government subsidy could added on top - **Purchase tax exemption**: China’s 10% vehicle registration tax was waived for all electric vehicles Adding up these financial subsidies, a buyer in those 39 cities could get more than half of the price of his or her EV subsidised by the government. Nothing to sneer at. Then came the license plate benefits. In cities like Beijing, Shanghai, Guangzhou, Shenzhen and Chengdu, you started getting traffic control and license plate benefits by purchasing an EV. In some cities, owning an EV enabled you to drive any day of the week. In other cities, buying an EV enabled you to get a scarce license plate for free. Here’s one example of how the above subsidies could add up. In the case of a Shanghai-based purchaser of a Beijing Auto EV160 vehicle, by applying relevant subsidies, an EV with a theoretical price of US$35,029 ended up costing just US$11,159 - a discount of almost 70%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3ad90e9f-7a9e-4228-a602-8892f8385e2d_620x1018.png) Source: The Wall Street Journal, BAIC There were also subsidies given to the car makers. The central government contributed significantly to EV-related R&D projects. They reduced the import duties for EV-related parts and equipment. And they also subsidised the installation of EV charging facilities. As you can guess, the impact on the Chinese EV market was legendary. The EV penetration rate rose from almost nothing in 2013 to over a million vehicles by 2018. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e565482a-2013-4280-8b2d-1c5d03aa5d65_1456x748.png) Source: IEA Global EV Outlook 2019 --- # 2\. The gradual phase-out of subsidies But we’re now starting to see the subsidies being phased out. From 2017, the local government EV subsidies were reduced to no more than 50% of what the central government offered. And from 2018, the central government itself reduced its financial subsidy to 80%, 60%, 40% and, by the end of 2022, to 0% of the original amount. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b2586e48-a696-4ead-a794-a888e26db2ad_670x630.png) China’s phase-out of EV subsidies. Source: S&P Global The 10% purchase tax exemption will remain until the end of 2023\. But after that, Chinese EV buyers will be left without any financial subsidies whatsoever. That doesn’t necessarily mean that the EV market will crash. Traffic control and license plate provisions still remain. In 2019, China’s National Development and Reform Commission (NDRC) ordered local governments to remove EV license plate restrictions, allowing anyone who wants to purchase an EV to do so. Such traffic control and license plate benefits include being able to drive your EV all days of the week, being able to bypass license plate lotteries or obtaining a license plate for free. License plate benefits can be significant. In Beijing, for example, there have been 3 million people on the waiting list, and only 100,000 license plates were handed out each year. The Chinese government also pushed for ride-hailing fleets to become electric. For example, from 2020 onwards, Shenzhen required that 100% of its ride-hailing vehicles be electric. In 2021, Guangzhou, Zhengzhou, Wuhan and Xi’an also introduced similar laws. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9175eba3-82de-49a3-9db7-909bcd44f9bb_1454x818.png) Ride hailing vehicles in Shenzhen. Source: Vincent Yu/The Associated Press **The final chapter** in China’s EV subsidy story is about so-called “NEV credits”. Such credits are modelled after California’s zero-emission vehicles program, which tries to use market-based pricing to incentivise EV production. In detail: - If an automaker produces a traditional gasoline engine vehicle, he will need to offset that vehicle through an “NEV credit”. - The automaker can either obtain NEV credits by producing electric vehicles or by buying NEV credits from another automaker. - Those NEV credits cannot be carried forward to the next year. That means that the industry’s aggregate NEV production has to hit the target each year, or else certain automakers will have to pay financial penalties. In my view, while the 2013 financial subsidies helped pushed the demand for electric vehicles, these NEV credits will instead push new supply of them. So to summarise, we’re now at an important crossroad, with the central government and local government EV subsidies reduced to zero on 31 December 2022\. And the 10% purchase tax waiver for EVs will be removed by the end of this year as well. The big question now is whether China’s EV market has reached “escape velocity”. Or is it simply a mirage built on unsustainable government subsidies? --- # 3\. Implications of China’s new EV policies > *“It’s the state’s support which is really driving the attention and demand for EVs… I just have *a slight skepticism* that in the future, *if these subsidies are gone*, *whether the consumers would still want to buy EVs* at the market price.”* > > \- Hiroji Onishi, Senior Manager at Toyota China For the Chinese EV market to become self-sustaining, consumers will need to find electric vehicles a better value proposition than their ICE equivalents. EVs need to offer a combination of better convenience and lower prices. - **Convenience**: Whether EVs are convenient is debatable. While charging your EV at home saves you a trip to the gas station, few Chinese have access to EV charging points. The driving range remains far lower than you’d get with an ICE. If you need to drive longer distances, expect to queue up for a charging station and wait a long time for the car to become fully charged. The safety aspect is also worth mentioning, as batteries can and occasionally do self-combust. - **Low price**: The price of a battery needs to come down significantly below the price of an internal combustion engine. EV batteries are often replaced after 8-10 years, whereas a gasoline engine easily lasts twice as long. Electricity is cheaper than gasoline, but it’s still hard to make the numbers work. Today, a typical EV battery costs about US$10,000, while an engine costs no more than US$3,000\. It will take many years of 5% per year energy density improvements, or a breakthrough in solid-state battery technology, for the calculus to change significantly. In my view, the above calculus does not favour electric vehicles. The reality is this: the main draw of buying an electric vehicle in China has been the massive financial subsidies and the license plates benefits. We’re unlikely to see a typical S-curve mass adoption curves as we’ve had with smartphones, microwaves and colour televisions, for example, in the past. Hedge fund manager Jim Chanos seems to agree that EVs does not the fit the profile of a typical S-curve: > @garyblack00 EV’s, out for ten years now, are the slowest adopted “disruptive” consumer technology in modern memory. Less than 3% in a decade. Despite massive subsidies. > > — Diogenes (@WallStCynic) [ 7:24 PM ∙ Jul 10, 2020 ](https://twitter.com/WallStCynic/status/1281670621433335814?s=20&t=vQ8eYuAdNFAlJz4maXGTCw&ref=asiancenturystocks.com)[](https://twitter.com/WallStCynic/status/1281670621433335814?ref=asiancenturystocks.com) In the near term, expect a drop in EV sales as the financial subsidies are phased out. As I’ve written in the past, when EV subsidies were removed in Hong Kong, Denmark and the state of Georgia, [EV sales dropped 80-90%](https://www.asiancenturystocks.com/ev-market-predictions/). Traffic control and vehicle ownership control exemptions will remain in many cities. That will ensure certain demand. The only question is, how long will such restrictions remain? Another question is how China’s new NEV credit system will affect the economics of building an electric vehicle. Here is how I foresee the market developing: - Pure-play EV makers will benefit from the NEV credits they obtain from producing vehicles at the expense of traditional automakers. - As long as the value of an NEV credit is positive, car companies will be willing to sell EVs at a loss since they’ll make up for that loss through sales of NEV credits. - The value of the NEV credits will incentivise automakers to build their EVs as cheaply as possible to maximise the NEV credit value/cost ratio. In my view, at the end of the day, the auto industry is competitive. Without a moat such as a Tesla-style charging network, it will be difficult to achieve superior returns on capital. It doesn’t matter much whether regulation pushes the consumer in one direction or another. --- # 4\. Evidence of an unbalanced market Several on-the-ground facts make it clear that EVs are not going to become mainstream anytime soon: - In China, over half of auto sales are for vehicles below CNY 150,000\. But the high battery costs of building an EV make it almost impossible to sell them below that level. Battery prices either have to fall, or the government has to intervene somehow. - Almost all of China’s urban population live in apartments, and only a portion of those individuals have access to underground parking garages suitable for EV charging stations. Even fewer have the wiring set up for an EV charger, and even fewer would install such chargers if the state grid did not subsidise installations. Another concerning trend is the [auto graveyards](https://www.indiatimes.com/auto/electric/china-electric-car-graveyard-how-thousands-of-evs-are-left-deserted-by-car-sharing-rental-firms-364315.html?ref=asiancenturystocks.com) that have popped up across China over the past few years. A source at an automaker suggested that roughly [70% of EV buyers were not individuals but corporations](https://auto.163.com/20/0224/08/F64U37T2000884MM.html?ref=asiancenturystocks.com). So the main driver of China’s EV market is companies, such as the major ride-hailing companies. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/24f4c418-db3a-4f16-9dc4-1047e88a6779_1450x812.png) Many cities require their ride-hailing fleets to be electric. And the ride-hailing companies tend to have automakers behind them. One trend we’ve seen in the past few years is automakers buying minority stakes in ride-hailing companies, which have then purchased the vehicles produced by the automaker itself. That’s problematic because ride-hailing companies are now experiencing significant losses. But the charade has continued in many places, with car manufacturers enjoying subsidies and being able to reach their financial targets through such schemes. Since lower-end EVs are not particularly convenient, some ride-hailing companies have left their vehicles abandoned in auto graveyards until the subsidies have been received. And there are reports of [vicious depreciation](https://nev.ofweek.com/2022-04/ART-71011-8500-30557400.html?ref=asiancenturystocks.com) of the lower-end EVs typically used by ride-hailing companies. Since they’re not worth much, they’re often sold for scrap after a few years. It’s hard to say how common such auto graveyards are. But if the 70% number is accurate, then at least we know that EV sales are probably driven by regulation rather than real, underlying demand. Another piece of evidence that speaks against EVs is that most of the most popular EVs are ultra-cheap, including so-called “Mini EVs”. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eec0d0ca-3b3b-4815-b820-9bbc2e8c20cd_1452x1250.png) Source: CleanTechnica For example, the ultra-popular Wuling Hongguang Mini EV costs no more than CNY 40,000\. It’s unclear how automaker SAIC can make money on such vehicles if it wasn’t for the NEV credits they obtain from them. While NEV credits were worth around CNY 2,000 each in 2020 and 2021, income from selling NEV credits has declined. Many automakers seem to think that it’s better to produce the required number of EVs rather than buy credits from somebody else or pay the penalties. Again, it looks like much of what we see in China’s auto market today is driven by regulation rather than real, underlying demand. The remaining part of this post will be exclusively available to paid subscribers. Click below to subscribe and gain access to the full post: [Subscribe now](#/portal/signup) --- # 4\. Implications for stocks in the sector ## 4.1\. Pure-play EV companies _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-eb5/ Last updated: 2023-01-16T04:01:00.000Z Deep-dive 2023-1, Nippon Ichi Software, anime stocks _This post is for paying subscribers only._ ### Hello Group (MOMO US) URL: https://www.asiancenturystocks.com/deep-dive-2023-1/ Last updated: 2026-07-31T01:33:47.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in the below-mentioned stock at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* [**Hello Group**](https://finance.yahoo.com/quote/MOMO?p=MOMO&.tsrc=fin-srch&ref=asiancenturystocks.com)(MOMO US) is a Chinese software developer focusing on dating apps. The company owns two major apps: - **Momo** (陌陌): Originally a Tinder clone, known as a “hookup app”. Today, Momo has expanded its offering to include live streaming and social media features. - **Tantan** (探探): A pure-play dating app focused on a younger demographic and that dominates online dating in China today. The common denominator between these two apps is that they allow users to connect to potential partners in their immediate vicinity. The fact that they’re location-based services means that it’s easy for users to meet up in real life. Momo has 109 million monthly active users, is more used in lower-tier cities, and has a tilt towards live-streaming services. Tantan is popular in tier 1 cities among the young demographic and women looking for a relationship. China’s online dating market is still in its infancy, with only a small portion of singles using dating apps. China has roughly 300 million singles, and Momo and Tantan only have 9 and 3 million paying subscribers, respectively. The period since 2019 has been tough for the company: - First, revenues dropped after a government crackdown on live-streaming activities, specifically the introduction of real-name verification and caps on spending. - Second, COVID-19 hurt the market for casual dating. Users were afraid of catching the virus, and there was no point in looking for new potential partners in your vicinity when staying at home, in the same spot, for three years. - Third, China’s macro environment has been weak, and top spenders within the live-streaming segment have been cautious. All of these factors are now changing for the better. The regulatory crackdown on live-streaming companies seems to be over. China’s zero-COVID policy has ended, and herd immunity is building. And the macro environment should improve as well, with an expected catch-up in consumer spending. Management is guiding for the online dating market to improve sometime after the Chinese New Year in late January 2023\. I also see encouraging signs in Douyin search query data, which suggest a pick-up in interest for online dating apps like Tantan. Today, the stock trades in line with other Chinese live-streaming companies at around 0.5x revenues. But I wonder whether the market appreciates that Hello Group dominates the market for online dating in China and that the assets can be monetised in other ways than live-streaming. For example, Match Group has a 30% operating margin without using any live-streaming tipping services that regulators and investors seem to despise so much. Sex sells and online dating apps have significant pricing power. For what it’s worth, Match Group has an enterprise value roughly 15x that of Hello Group. There are obviously many risks involved as well. The Chinese small-cap space is a hotbed for frauds, and I can’t rule out the potential recycling of cash through related parties, as seems to have taken place at competitor JOYY. Competition from short video platforms such as Douyin (TikTok) and Shanghai dating app start-up Soul could also pose a problem in the medium-to-long term. And while it looks like the NASDAQ delisting risks are off the table for now, it’s not something I can rule out entirely either. _This post is for paying subscribers only._ ### Anime is hot again URL: https://www.asiancenturystocks.com/anime-is-hot-again/ Last updated: 2023-01-11T04:24:14.000Z Online streaming services are creating new demand for anime. Estimated reading time: 15 minutes _This post is for paying subscribers only._ ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-765/ Last updated: 2023-01-10T04:00:58.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-be1/ Last updated: 2023-01-09T04:00:24.000Z Magellan Financial Group, December 2022 portfolio review, China's border reopening _This post is for paying subscribers only._ ### Portfolio update December 2022 URL: https://www.asiancenturystocks.com/portfolio-update-december-2022/ Last updated: 2026-06-04T11:48:01.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/portfolio-update-december-2022/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* # Portfolio update Hi everyone - I’m so sorry for being late with my December portfolio update. Travels and personal commitments got in the way. Share prices of most stocks in the portfolio didn’t move much in December. The only major driver of returns was China’s reopening. Several currencies, such as the Japanese Yen and the Singapore Dollar, also strengthened against the US Dollar. That caused the portfolio returns to rise another +3.4% month-on-month and +10.1% since its inception in October 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/392fd7c9-588a-41f3-82a9-f61c353d239e_2458x838.png) On the topic of China’s reopening, the end of China’s zero-COVID policy and rumours about a border reopening caused tourism-related stocks such as [**Bloomberry Resorts**](https://www.asiancenturystocks.com/bloomberry/) *(BLOOM PM - US$1.7 billion)* to go up in price. Those rumours were proven correct, and from today, 8 January 2023, China’s borders [have finally opened up](https://www.asiancenturystocks.com/chinas-borders-are-reopening/). Here is the portfolio it was on 31 December 2022: _This post is for paying subscribers only._ ### China's borders are reopening URL: https://www.asiancenturystocks.com/chinas-borders-are-reopening/ Last updated: 2023-01-04T06:29:36.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![gray airplane on parking](https://images.unsplash.com/photo-1542296332-2e4473faf563?ixlib=rb-4.0.3&ixid=MnwxMjA3fDB8MHxwaG90by1wYWdlfHx8fGVufDB8fHx8&auto=format&fit=crop&w=1000&q=80) Source: Unsplash China will open up its borders on 8 January 2023\. This comes after almost three years of total isolation from the world and will have major ramifications in Asia and beyond. --- # Summary - As I wrote in [early December](https://www.asiancenturystocks.com/zerocovid/), China’s policy of “dynamic zero-COVID” has turned into “dynamic let it rip”. In other words, the Chinese government is letting COVID-19 spread without much control. - The peak in the current COVID-19 wave in China will probably occur sometime in the next few weeks. - I expect a large increase in cross-provincial travel during late January’s Spring Festival and outbound tourism from China’s border reopening on 8 January 2023. - Companies benefitting from outbound Chinese tourism include Asian hotels, airports, casinos, online travel agents, duty-free stores, and tour operators. --- # 1\. A timeline of easing restrictions Since early 2020, Chinese outbound tourism has been almost non-existent: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/76c1b1d9-b522-4454-9f70-04ad1609c141_2748x1308.png) The number of outbound tourists from China (000’s). Source: Bloomberg The primary hurdles for travel have been government regulation when it comes to quarantine and passport issuance. But in the past three months, we’ve seen gradual signs of loosening in China’s zero-COVID policy. Here’s the timeline from September 2022 onwards: - **26 September 2022**: In September, the Hong Kong government removed its hotel quarantine requirements. Instead, inbound travellers just had to do 3 days of health monitoring and COVID-19 tests until day 7 after arrival. Many investors speculated that this presaged a similar opening in mainland China. - **11 November 2022**: China’s National Health Commission announced a document now known as [The 20 Measures](https://www.bloomberg.com/news/articles/2022-11-11/these-are-the-20-measures-guiding-china-s-covid-easing-efforts?ref=asiancenturystocks.com). The government stopped tracing close contacts and started to discourage lockdowns at the local level. The required hotel quarantine was reduced from 7 days to 5 days, plus a home quarantine of 3 days. Airlines no longer faced a penalty if the number of COVID positive patients exceeded a certain number. - **7 December 2022**: [PCR mass testing was stopped outside of high-risk areas](http://www.nhc.gov.cn/xcs/gzzcwj/202212/8278e7a7aee34e5bb378f0e0fc94e0f0.shtml?ref=asiancenturystocks.com), including for cross-provincial travel. Home quarantine was allowed for asymptomatic and mild COVID cases. The health pass app was no longer needed for entry to public spaces. The flight suspension mechanism was also removed. - **25 December 2022**: In late December, the Chinese government [stopped releasing statistics on asymptomatic COVID cases](https://www.reuters.com/world/china/china-stops-publishing-asymptomatic-covid-cases-reports-no-deaths-2022-12-14/?ref=asiancenturystocks.com), presumably to assuage fears about COVID-19 among the population. - **8 January 2023**: Finally, on 8 January, the Chinese government will remove all quarantine requirements for inbound travellers. The only requirement is that travellers need a PCR test 48 hours before departure. The government also confirmed that passport issuance would resume on 8 January. The National Health Commission said in an announcement that Chinese citizens’ ability to travel overseas would be *“resumed in an orderly manner”*. And at the same time, Hong Kong will also introduce quarantine-free travel for mainland Chinese visitors [on 8 January](https://www.channelnewsasia.com/asia/covid-19-hong-kong-eyeing-jan-8-resume-cross-border-travel-china-mainland-3177606?ref=asiancenturystocks.com), and post-arrival tests [will no longer be needed](https://www.scmp.com/news/hong-kong/health-environment/article/3204846/welcome-hong-kong-citys-latest-drastic-easing-covid-curbs-heres-what-you-need-know-if-youre-finally?ref=asiancenturystocks.com). The main takeaway is that from 8 January, both cross-provincial and international travel will have resumed, with the only requirement being a PCR test before departure. --- # 2\. Willingness to travel In my view, mainland Chinese are dying to travel again after three years of isolation. The [revenge travel phenomenon](https://mashable.com/article/what-is-revenge-travel-explainer?ref=asiancenturystocks.com#:~:text=Revenge%20travel%20is%20a%20term,plans%20and%20disrupting%20their%20lives.) is real. According to a recent survey conducted by marketing agency Dragon Trail International, [more than 1/3 of respondents](https://www.asiancenturystocks.com/content/files/wp-content/uploads/sites/6/2022/12/chinese-traveler-sentiment-report-december-2022%5Fdragon-trail-international.pdf) said they would travel outside of mainland China within six months of travel restrictions being lifted: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1420bc57-44f0-43e5-a241-a961ebf99879_1290x1124.png) Source: Dragon Trail International Where will they go? The most popular Chinese travel destinations have historically been Japan, South Korea, Thailand and Singapore, according to this 2019 Weixin report: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f2a28841-03ae-4ed1-8296-99e040227ecf_798x259.png) Top travel destinations for Chinese tourists. Source: CLSA But in late 2022, according to the above Dragon Trail’s survey, Hong Kong is now at the top of the list, followed by Japan. --- # 3\. Early signs of a tourism recovery When it comes to the spread of COVID-19, China’s reported infection numbers reached a peak on 2 December: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8d3725cc-c87b-44cc-9349-7293a7bd23b8_1444x1050.png) Source: Our World in Data But since mass testing has been removed and asymptomatic cases are no longer reported, these numbers no longer tell us much about the pandemic. According to Baidu search query data, the city of Beijing had already passed the infection peak in mid-December, with 30% of the population infected. A doctor in Shanghai said in early January that [70% of the city’s population](https://www.scmp.com/news/china/science/article/3205455/covid-19-china-70-cent-shanghais-population-has-now-been-infected-says-leading-city-doctor?ref=asiancenturystocks.com) had already been infected. And according to a [Chinese research team](https://www.globaltimes.cn/page/202301/1283024.shtml?ref=asiancenturystocks.com) quoted by Global Times, small- and medium-sized cities will see a peak in their outbreaks sometime between 1 January and the Spring Festival on 22 January. So it looks like we’re now very close to peak COVID-19 in China. Transport data are showing early signs of recovery. For example, [Beijing and Guangzhou’s subway traffic](https://www.bloomberg.com/news/articles/2023-01-03/more-people-ride-the-subway-in-china-s-biggest-cities-as-covid-starts-to-peak?cmpid%253D=socialflow-twitter-markets&sref=6ZE6q2XR&ref=asiancenturystocks.com) improved materially in the last week of December. [Shanghai and Nanjing](https://www.bloomberg.com/news/articles/2023-01-03/more-people-ride-the-subway-in-china-s-biggest-cities-as-covid-starts-to-peak?cmpid%253D=socialflow-twitter-markets&sref=6ZE6q2XR&ref=asiancenturystocks.com) are getting closer to that point as well. I believe the ridership in most tier 1/2 city metro systems will recover in the next week or two. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7ed5c23f-386c-445f-af08-c07bfca2212e_1200x900.jpg) Source: Bianco Research Regarding cross-provincial travel, there are signs that air travel search query volumes were up significantly in late December 2022. When China’s cross-provincial travel restrictions were removed on 7 December, Ctrip’s search query volumes shot up, almost immediately reaching 76% of the 2019 baseline vs about 50% previously. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/78355b67-031a-4525-a4c0-1c12c0de22a0_1922x776.png) Source: Bernstein Sanya hotel prices have recovered to pre-pandemic levels, and that’s another sign that cross-provincial travel is recovering well: > @Josh\_Young\_1 Also re. air travel, can't find reporting in English, but local news reporting Sanya hotels running full prices (was 50% off just a wk ago), air travel search volume up 160%, bookings up 30\~75%, flights scheduled now above last week. Air travel is in full BURST recovery mode. > > — Namniko (@xxxx\_chen) [ 4:42 AM ∙ Dec 26, 2022 ](https://twitter.com/xxxx%5Fchen/status/1607235295430455297?s=20&t=xbJkV1mjNCJmtZanAso-oA&ref=asiancenturystocks.com)[](https://twitter.com/xxxx%5Fchen/status/1607235295430455297?ref=asiancenturystocks.com) Cross-provincial travel will be massive during the Spring Festival in late January. Many haven’t visited their hometowns in three years. The Hong Kong experience since it eased its quarantine requirements back in September may serve as a precedent for what will happen in mainland China. By mid-December, Hong Kong airport arrivals had recovered to 20% of the pre-pandemic / pre-protest level. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7ec670ce-1a04-4675-af9d-46d3ce31fb7e_1618x1466.png) Source: Bernstein Hong Kong’s inbound tourism - the green and turquoise lines in the chart above - remained weak until December. But I believe that removing Hong Kong’s post-arrival testing requirements will finally lure foreign tourists to come back to Hong Kong. Another positive sign is that Chinese airlines are gearing up for greater international travel. The number of scheduled international flights is now back to about 7% of the pre-COVID level and going up steadily. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/996ff313-82bb-431e-9355-54825159d623_1118x1060.png) Source: Bernstein A headwind for outbound travel is the rising number of restrictions from destination countries. By late December 2022, we’ve seen five separate countries restricting visitors from mainland China: Japan, India, Taiwan, Italy and the United States. Another hurdle is that mask-wearing is still required in public places in both mainland China and Hong Kong. But I would imagine those restrictions will ease in the next few months as well. Finally, a major worry has been whether new, more severe variants might have popped up in China. There’s anecdotal evidence of patients in China suffering from breathing issues, with their CT scans showing lung inflammation. 1. One explanation for such “white lungs” is that these individuals caught the original Wuhan strain - which caused lung inflammation - but didn’t do proper CT scans until now. 2. Another explanation is that China’s Sinovac shots haven’t protected as well against Omicron as mRNA vaccines did in other countries. 3. Lastly, some foreign governments worry that the white lungs are related to a new variant that could eventually spread to the rest of the world. The speed at which COVID-19 is spreading in China does suggest a variant with a higher reproduction rate than prior Omicron variants. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6e2f038c-71f8-498f-9f36-fa2e519085ce_658x290.jpg) A CT scan of a white lung (left) vs a normal lung (right). Source: [Yahoo Taiwan](https://tw.news.yahoo.com/%E9%82%A3%E8%B7%9F%E4%BB%80%E9%BA%BC%E6%9C%89%E9%97%9C-%E5%A4%A7%E7%99%BD%E8%82%BA%E7%8F%BE%E8%B1%A1-%E7%98%8B%E5%82%B3-%E5%8C%97%E4%BA%AC-%E9%97%A2%E8%AC%A0-031713870.html?ref=asiancenturystocks.com) In any case, WHO met with Chinese officials in [late December](https://www.who.int/news/item/30-12-2022-who-meets-with-chinese-officials-on-current-covid-19-situation?ref=asiancenturystocks.com) and has asked the National Health Commission to share sequencing data to ensure that it is indeed Omicron that spreading in China and not some newer, more problematic variant. The sequencing data retrieved so far suggests that [there is no new variant](https://www.ft.com/content/e9d2c4ee-5f41-458f-9980-77a27f3bd093?ref=asiancenturystocks.com). I personally believe that the white lungs are from individuals previously infected with the original Wuhan strain. Nothing to be too worried about. --- [Subscribe now](#/portal/signup) # 4\. The investable universe of stocks _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-e09/ Last updated: 2023-01-02T04:00:59.000Z Futu, 2022 reviews & 2023 predictions _This post is for paying subscribers only._ ### 2023 predictions URL: https://www.asiancenturystocks.com/2023-predictions/ Last updated: 2022-12-31T08:30:21.000Z Bonds, the US Dollar and Chinese consumer stocks. Estimated reading time: 3 minutes _This post is for paying subscribers only._ ### 2022 recap URL: https://www.asiancenturystocks.com/2022recap/ Last updated: 2022-12-27T09:14:10.000Z [Click to view in your browser](https://www.asiancenturystocks.com/2022recap/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ae88bd7b-2d31-4550-b20d-e78549520801_1616x909.png) I discussed a total of 30 stocks here on Asian Century Stocks in 2022. To refresh our memories, I’ve decided to go through the stories of each of these stocks and see how they stack up today. Enjoy! # 1: [Holcim Philippines](https://www.asiancenturystocks.com/deep-dive-2022-1-holcim-philippines/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/61f59e98-9a24-48e0-8b3d-514b088ac885_1700x956.png)](https://www.asiancenturystocks.com/deep-dive-2022-1-holcim-philippines/) 2022 began with a write-up on Philippine cement producer [**Holcim Philippines**](https://www.asiancenturystocks.com/deep-dive-2022-1-holcim-philippines/) *(HLCM PM - US$463 million).* I had gone deep into [the ASEAN cement sector](https://www.asiancenturystocks.com/cement/) and Holcim Philippines stood out. The company had the sector's lowest EV/ton multiple despite a competent management team. The cement sector is attractive: companies enjoy local monopolies and throw off plenty of cash, even in a downturn. What happened during COVID-19 was that property construction had stopped. Partly due to restrictions but also due to the weaker economy. I thought that the property market would eventually recover and that you’d get a nice dividend yield while you waited. Instead, higher energy prices caused production costs to skyrocket. And the election of Ferdinand “Bongbong” Marcos scared off some foreign investors. Holcim Philippines’ problems are probably temporary, in my view. And on the positive side, the government introduced [new tariffs](https://www.globalcement.com/news/item/14772-philippine-tariff-commission-orders-new-duties-on-imports-of-vietnamese-cement?ref=asiancenturystocks.com) on Vietnamese-imported cement until 2027. --- # 2: [CK Hutchison](https://www.asiancenturystocks.com/deep-dive-2022-2-ck-hutchison/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/569b3a07-7dac-4a63-9c60-94e4c716054d_1544x870.png)](https://www.asiancenturystocks.com/deep-dive-2022-2-ck-hutchison/) [**CK Hutchison**](https://www.asiancenturystocks.com/deep-dive-2022-2-ck-hutchison/) *(1 HK - US$23 billion)* might have the best stock ticker of any company in Asia. But in all seriousness, it’s a well-run company with great assets. Li Ka-Shing’s investment acumen is legendary, and his son Victor Li is a safe pair of hands. The stock price has continued lower throughout the year. A P/E of 7x earlier this year has turned into a P/E of 5x. CK Hutchison’s does have a fair bit of debt. But many of its businesses are infrastructure assets such as utilities and sea ports. Some debt is appropriate, in my view. In any case, CK Hutchison’s short-term problems are the following: - Higher interest rates leading to higher interest expenses - Weaker European currencies - The impact of China’s zero-COVID policy on the retail pharmacy operation - A perception that Beijing might go after Hong Kong tycoons such as Li Ka-Shing But most of these problems are temporary, in my view. Beijing can’t touch the 87% of assets that are overseas. My sum-of-the-parts valuation of CK Hutchison with a 25% conglomerate discount yielded an intrinsic value of HK$85/share. Today, the stock trades at HK$46/share. --- [Subscribe now](#/portal/signup) # 3: [MAP Aktif](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7037a6f7-907e-43c3-865a-6f42b3c0ae48_3274x1838.png)](https://www.asiancenturystocks.com/map-aktif-adiperkasa/) _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-5c6/ Last updated: 2022-12-26T04:00:49.000Z LG Household & Health, Naver, Nitto Kohki and more _This post is for paying subscribers only._ ### Season's Greetings URL: https://www.asiancenturystocks.com/seasons-greetings/ Last updated: 2022-12-24T08:28:45.000Z _This post is for paying subscribers only._ ### LG Household & Health late-2022 update (051905 KS) URL: https://www.asiancenturystocks.com/lghh2022update/ Last updated: 2022-12-22T12:49:43.000Z Health & beauty benefitting from a HK-China border reopening but weaker post-COVID grocery profits. Estimated reading time: 15 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-ac2/ Last updated: 2022-12-19T04:00:49.000Z TSMC, China Jushi, Far East Consortium, 111 Inc, Asian spin-offs, Indonesia's new criminal code _This post is for paying subscribers only._ ### Eight spin-offs URL: https://www.asiancenturystocks.com/eight-spin-offs/ Last updated: 2025-10-29T13:16:38.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![Investing - You Can Be A Stock Market Genius, Computers & Tech, Office & Business Technology on Carousell](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1db83e76-3b98-402b-93f5-0336cc0ad816_768x768.jpg) # Summary - Spin-offs can lead to value dislocations, especially if the spun-off entity is smaller than its parent, the parent is an index constituent in unrelated industries, or the spin-off is “icky” in some respect. - Spin-offs are rare in the Asia-Pacific, but there are a few dozen per year in Australia and Asian developed markets such as South Korea, Hong Kong and Singapore. Since early 2021, there have been 40 spin-offs leading to two separately listed entities. - I’ve chosen to highlight a number of companies with low valuation multiples, including [**SK Square**](https://finance.yahoo.com/quote/402340.KS/?p=402340.KS&ref=asiancenturystocks.com), [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX/?p=TAH.AX&ref=asiancenturystocks.com), [**LX holdings**](https://sg.finance.yahoo.com/quote/383800.KS/?p=383800.KS&ref=asiancenturystocks.com), [**China Conch Environment Protection**](https://finance.yahoo.com/quote/0587.HK?p=0587.HK&.tsrc=fin-srch&ref=asiancenturystocks.com), [**Jinmao Property Services**](https://finance.yahoo.com/quote/0816.HK/?ref=asiancenturystocks.com), [**Central China Management**](https://finance.yahoo.com/quote/9982.HK/?p=9982.HK&ref=asiancenturystocks.com), [**Sierra Rutile**](https://finance.yahoo.com/quote/SRX.AX/?p=SRX.AX&ref=asiancenturystocks.com) and [**Juno Minerals**](https://finance.yahoo.com/quote/JNO.AX/?p=JNO.AX&ref=asiancenturystocks.com). --- # Spin-off theory In Joel Greenblatt’s 1997 book [You Can Be a Stock Market Genius](https://www.amazon.com/You-Can-Stock-Market-Genius/dp/0684840073/ref=tmm%5Fpap%5Fswatch%5F0?%5Fencoding=UTF8&qid=1670997856&sr=8-1&ref=asiancenturystocks.com), he discusses special situation investing. Such special situations include spin-offs, tradable rights issues, merger securities, stocks of companies coming out of bankruptcy, leveraged recapitalisations and corporate restructurings. A common denominated between all of these special situations is that something causes value dislocation, with stock trading below their fair values temporarily. It’s a lucrative part of the market to focus on. In this post, I’ll focus on **spin-offs** in the Asia-Pacific, also known as demergers. A spin-off occurs when a company splits itself into two separate entities. Shareholders of the old company receive shares in the spun-off entity in direct proportion to their original stakes. You then typically end up with two separately listed entities, each with its own stock ticker. Spin-offs can create value for shareholders in the following situations: - **Saving on taxes**: While selling a subsidiary can lead to significant tax consequences, a spin-off often allows for separating two businesses without paying any tax. - **Highlighting value**: If investors value the spun-off entity differently than the parent, then the aggregate market cap of the two new entities might go up. For example, if the spun-off entity is a fast-growing but loss-making technology company, it might be valued much higher than it would be as part of, say, a slow-growing parent. - **Improving management incentives**: Spin-offs can create value by incentivising the new management team through stock options. They’ll be more accountable for their actions. No longer will the spun-off entities be used to support other parts of the larger group. And the spun-off entity may become more agile - less constrained by policies set by the former parent. - **Getting rid of liabilities**: If the parent wants to rid itself of certain liabilities such as debt or, say, asbestos claims, it can transfer those liabilities to the spun-off entity and shield itself from such risks. - **Paving the way for a takeover**: If potential acquirers are not interested in any particular part of the business, a spin-off might be the best solution to facilitate a takeover. But even if a spin-off doesn’t create value, it’s still worth paying attention to. That’s because shares of the spun-off entity often end up trading below fair value after the original shareholders often sell the shares they receive without paying attention to value. In Joel Greenblatt’s own words: > *“The spinoff process itself is a fundamentally inefficient method of distributing stock to the wrong people… once the spinoff’s shares are distributed to the parent company’s shareholders, *they are typically sold immediately without regard to price or fundamental value*”* Such selling pressure tends to be particularly acute when: - **The parent is an index constituent**: In that case, index funds will automatically sell their shares in the spun-off entity to comply with their mandates, and the spin-off’s share price will go down. - **The spun-off entity is too small**: Some fund managers are unable to or unwilling to own shares in companies with low market caps due to risk management or liquidity and time constraints. - **Unrelated business area**: If the spun-off entity is in an entirely different sector than its former parent, investors are more likely to sell it without paying attention to its value. A [2012 study](https://research-doc.credit-suisse.com/docView?language=ENG&source=emfromsendlink&format=PDF&document%5Fid=999089271&extdocid=999089271%5F1%5Feng%5Fpdf&serialid=pvH393UArco6JvZIguX4cJ5jXWIkrqD%2Bb1l3MzX4YTI%3D) by Credit Suisse showed that spin-offs typically trade down about -4% vs the index in the first five days but proceed to recover over the next 30 days. And in the next 12 months, the parent / the spun-off entity outperformed the index by +10 percentage points / +13% percentage points. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b4764cc2-77dc-4b8e-bc8d-a1c96fc8e202_1258x802.png) Source: Credit Suisse A [2014 study](https://www.asiancenturystocks.com/content/files/wp-content/uploads/2019/04/exec%5Fsummary%5F-%5Fthe%5Fedge%5Fdeloitte%5Fglobal%5Fspinoff%5Fstudy%5F-%5Fdec%5F2014.pdf) by Deloitte and the Edge Consulting Group found that spin-offs generated a 22% return in their first 12 months of trading, outperforming MSCI World by 21% in the time period they studied. A [2015 study](https://www.asiancenturystocks.com/content/files/content/dam/jpm/cib/complex/content/investment-banking/archive-56.pdf) from JP Morgan found that during the first two years after a spin-off announcement, the combined market value of the two entities rose 16% on average, exceeding market returns by 8 percentage points. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d2dac236-30bb-4614-bec0-bfad0770c2a2_1190x796.png) Source: JP Morgan So clearly, investing in spin-offs can be profitable, especially when forced selling has the price of the shares fall way below fair value. --- # Asia-Pacific spin-offs Spin-offs are rare in this part of the world. Whenever I run an Asia-Pacific spin-off screen, many of the spin-offs I identify seem to be Australian nano-cap miners. But there are exceptions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6415af31-627e-41bc-9386-b63c752adf0d_1366x464.png) In the 1990s, almost all spin-offs occurred in Hong Kong or Singapore, two of the more developed capital markets at the time, and both allowed for the favourable tax treatment of spin-offs. Since the early 2000s, we’ve also seen more spin-offs from India, South Korea and Australia. The Japanese tax code didn't allow for spin-offs until 2017, with the first Japanese spin-off being karaoke bar operator [**Koshidaka**](https://finance.yahoo.com/quote/2157.T?p=2157.T&.tsrc=fin-srch&ref=asiancenturystocks.com) *(2157 JP - US$634 million)*, which I wrote about in a previous deep-dive [here](https://www.asiancenturystocks.com/2020-7-koshidaka-holdings-co-ltd/) and has performed very well. Most spin-offs in South Korea occur with the intent to consolidate family control. By splitting a business into a Holdco and an Opco, the largest shareholder can retain control of the board in the Opco with a much smaller investment. And since inheritance taxes are high in South Korea, such Holdco/Opco restructurings via spin-offs can help the family sell part of their shares to pay for inheritance taxes without losing control. Such restructurings are not in the best interests of minority shareholders, in my view. --- I downloaded a sample from Bloomberg of all the spin-offs that have taken place in the Asia-Pacific since early 2021\. I used a parent market cap hurdle of US$50 million. That sample contains a total of 40 Asia-Pacific spin-offs. Out of these 40 spin-offs, most of them occurred in developed markets such as Australia, South Korea, Hong Kong and Singapore, along with a few cases in India, the Philippines and Malaysia: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/33951a2f-8ece-4f5a-828d-6495e7e0af5a_1360x498.png) Here is a full table of those 40 spin-offs that have occurred since the beginning of 2021: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6b398432-75ca-455d-8e5a-d0b3c9f698d1_1806x1318.png) You can download the full list of the 40 spin-offs here: [Completed Spin Offs Asia PacificCompleted Spin Offs Asia Pacific19 KBdownload-circle](https://www.asiancenturystocks.com/api/v1/file/b0487255-3aec-4832-9cf8-785913ca57ca.xlsx "Download") --- # Eight situations worth highlighting Let’s now dig deeper into eight spin-offs that I think are worth highlighting, ranked by the highest market cap to the lowest. ## 1\. SK Square (402340 KS) ![SK hynix Gold P31 M.2 NVMe SSD Review: High-Performance, Unprecedented Efficiency (Updated) | Tom's Hardware](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/80e2b16d-733c-4b81-9b27-d8dd52542a26_2000x1125.jpg) The spin-off of [**SK Telecom**](https://finance.yahoo.com/quote/017670.KS/?p=017670.KS&ref=asiancenturystocks.com)’s *(017670 KS - US$8.2 billion)* ICT and semiconductor business [**SK Square**](https://finance.yahoo.com/quote/402340.KS/?p=402340.KS&ref=asiancenturystocks.com) *(402340 KS - US$3.8 billion)* took place in November 2021\. It’s a rare case of a Korean spin-off that’s not done for the purpose of consolidating family control. The spin-off structure is detailed in the 2021 AGM document available [here](https://www.asiancenturystocks.com/content/files/img/eng/ir/2021%5Fegm%5Fagenda%5Fenglish.pdf). SK Square’s main asset is a 20% stake in memory semiconductor company [**SK Hynix**](https://finance.yahoo.com/quote/000660.KS?p=000660.KS&.tsrc=fin-srch&ref=asiancenturystocks.com)*(000660 KS - US$42 billion)*. Hynix’s technology has been inferior to Samsung Electronics but has been catching up in recent years. It now has a larger market than Micron. Other businesses now part of SK Square include security service company ADT Caps, e-commerce operator 11th Street and Korean Netflix competitor Wavve. Former parent SK Telecom is engaged in wireless and fixed broadband telecom services and has a market cap almost twice as big as SK Square's own market cap. Since SK Square is the more attractive business of the two, I don’t believe the forced selling was particularly severe in SK Square’s case. SK Telecom’s stated purpose of the spin-off was to highlight the value of the company’s technology investments and semiconductor business. In their own words: > *“The Company seeks to receive appropriate market valuation and *ultimately intends to enhance its corporate and shareholder values*”* That makes sense to me - semiconductor businesses tend to be valued differently than telecom operators. What I find fascinating is that SK Telecom’s CEO, Park Jung-Ho, joined the smaller, spun-off entity as its CEO. He must see greater potential in SK Square than in SK Telecom. And the spin-off suggests that he’s not a pure empire-builder. SK Square is a hard stock to value. Where its mid-cycle ROE will end up is anyone’s guess. The DRAM cycle is volatile and still in a downtrend. And the valuation multiples of e-commerce companies have also come down. For what it’s worth, SK Square trades at just 4.3x trailing twelve-month earnings and 0.3x book. SK Telecom originally acquired its 20% stake in SK Hynix for US$2.6 billion back in 2012\. Today, SK Square’s stake in SK Hynix is worth US$8.4 billion, more than double SK Square’s entire enterprise value. If management were rational, it would sell its stake in SK Hynix and buy back shares in SK Square as long as the current valuation disparity exists. But you rarely see such forward-thinking capital allocation in South Korea. I’ve met SK Square’s management team, and I doubt they’ll be proactive in closing the valuation gap. But the stock is indeed very cheap at 0.3x book. There has been insider buying in SK Square, including by Park Jung-Ho himself. But his buying has been small at just around US$60,000 in total. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e6717184-c5de-4939-95b0-6567695902aa_2748x1150.png) --- ## 2\. Tabcorp (TAH AU) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/11811e5d-2368-4577-a2d9-0875f5d5deb1_1792x1014.png) I wrote about [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX/?p=TAH.AX&ref=asiancenturystocks.com) *(TAH AU - US$1.7 billion)* in a deep-dive on 20 November 2022, available [here](https://www.asiancenturystocks.com/deep-dive-2022-28-tabcorp/). If you want to read the demerger presentation, it’s available [here](https://www.asiancenturystocks.com/content/files/asx/tah/b304706d-b070-11ec-9922-32a0664dadc9.pdf). Tabcorp demerged from [**The Lottery Corporation**](https://finance.yahoo.com/quote/TLC.AX/?p=TLC.AX&ref=asiancenturystocks.com) *(TLC AU - US$7.0 billion)* in May 2022 and shifted practically all its debt to the lottery business. The Lottery Corporation is a great business but also trades at a very high multiple of 30x P/E. The remaining Tabcorp entity - while hit by COVID-19 and online competition - has now become more attractive for potential suitors. It’s cheap on an EV/Sales basis at around 0.9x sales. While Tabcorp never said so explicitly, it’s clear that the purpose of the demerger was to unlock the value hidden in the lotteries business. Such businesses tend to trade at much higher valuations than Tabcorp was trading at previously. And we indeed got a valuation uplift through the demerger. Smart, value-focused funds like Airlie Funds Management have now shifted their attention to Tabcorp itself, which, thanks to the transfer of debt, has ended up trading at a low EV/Sales. It’s hard to say where New Tabcorp’s margins will end up after COVID. While Australia’s COVID restrictions have eased, that’s not the only issue plaguing Tabcorp. But regulation is slowly moving in Tabcorp’s favour as well. Pre-COVID margins of 8-9% may not be impossible. It’s also worth mentioning that Tabcorp had already received a bid of AU$4.0 billion from Apollo, way above the current market cap of AU$2.5 billion. There are regulatory hurdles, but they’re not insurmountable. There’s been tons of insider buying in Tabcorp since the spin-off, including over a million shares by CEO Adam Rytenskild and almost a million shares by Chairman Bruce Akhurst. Those are positive signs, in my view. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5a80d7e3-206e-402e-81c9-91ddaed96850_2710x1154.png) --- ## 3\. China Conch Environment Protection (587 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7013fa57-a7e8-4187-93fd-43a88e4495f7_856x574.png) [**China Conch Environment Protection**](https://finance.yahoo.com/quote/0587.HK?p=0587.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(587 HK - US$752 million)* was spun off from state-owned enterprise [**China Conch Ventures**](https://sg.finance.yahoo.com/quote/0586.HK/?ref=asiancenturystocks.com) *(586 HK - US$4.0 billion)* in March 2022\. Its Chinese-language website is available [here](http://www.conchenviro.com/?ref=asiancenturystocks.com). The ultimate parent of the group is cement company [**Anhui Conch**](https://finance.yahoo.com/quote/0914.HK?p=0914.HK&.tsrc=fin-srch&ref=asiancenturystocks.com)*(914 HK - US$22 billion)*. The company is engaged in industrial solids and hazardous waste treatment, with a large portion of revenues coming from other companies within the group. China Conch Environment Protection’s March 2022 [prospectus](https://www.asiancenturystocks.com/content/files/listedco/listconews/sehk/2022/0322/2022032200037.pdf) shows that the purpose of the spin-off is to use the listing to secure funding to support faster growth and expansion, improve corporate governance and enhance the brand value of the company. I wonder if the entity will be used to roll-up China’s waste management industry, perhaps by taking over private businesses. SOEs taking over private enterprises is a trend that has accelerated in China over the past few years. The spin-off’s market cap of US$754 million remains much smaller than its former parent’s US$4 billion. So it’s plausible that some original shareholders sold their shares without regard for value post-distribution. Today, China Conch Environment Protection stock trades at a forward-looking P/E of 5.1x. The company has a high debt load of about US$550 million or 5x EBIT, causing the EV/EBIT to be higher than the P/E at 7.7x. While global waste management peers trade at much higher levels say 27x for America’s Waste Management or 36x for Australia’s Cleanaway, I’m not sure they are direct peers. China Conch Environment Protection has a return on equity of just 3.1%. And the delineation between China Conch Environment Protection and the group’s other listed entities is not obvious. But perhaps third-party revenue will grow over time. In June, Anhui Conch proposed to acquire 16% of China Conch Environment Protection, presumably from Conch Ventures. Nothing has come out of it. Looking at the insider transactions, Conch Ventures keeps buying shares, as is Conch International Hong Kong. China Conch Environment also announced a 10% share buyback. In other words, insiders appear to see value in the stock. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/32e1c6e4-ca5c-4ebc-ae08-0dae95f2b187_2740x1154.png) --- ## 4\. LX Holdings (383800 KS) ![Koo Hyung-mo, executive vice president of LX Group, purchased a stake in LX Holdings - 인포스탁데일리](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/41032480-778d-40db-9306-cc585b3c9fe5_550x354.jpg) [**LX Holdings**](https://sg.finance.yahoo.com/quote/383800.KS/?p=383800.KS&ref=asiancenturystocks.com) *(383800 KS - US$529 million)* was formed by taking four non-electronics affiliates of [**LG Corp**](https://sg.finance.yahoo.com/quote/003550.KS/?p=003550.KS&ref=asiancenturystocks.com) *(003550 KS - US$9.6 billion)* and listing them as a separate entity by distributing shares of them to LG shareholders. Today, that entity operates the following subsidiaries: - [**LX International**](https://finance.yahoo.com/quote/001120.KS?p=001120.KS&.tsrc=fin-srch&ref=asiancenturystocks.com) *(001120 KS - US$1.2 billion)* (24.7%): A coal mining and oil palm plantation company with operations across Indonesia, China, Australia and other countries. - [**LX Hausys**](https://finance.yahoo.com/quote/108675.KS/?p=108675.KS&ref=asiancenturystocks.com) *(108670 KS - US$234 million)* (33.5%): Building and interior design products - [**LX Semicon**](https://finance.yahoo.com/quote/108320.KS/?p=108320.KS&ref=asiancenturystocks.com) *(108320 KS - US$1.0 billion)* (33.1%): OLED and LCD semiconductor products for displays - **LX MMA** *(Private)* (50%): Chemicals producer focusing on methyl methacrylate LX Holdings’ Chairman Koo Bon-Joon has sold most of his shares in LG Group, which has been left to his nephew Koo Kwang-Mo. The purpose of the spin-off was alleged to divide the family fortune among the descendants of the LG Group’s founder while avoiding serious tax consequences. Koo Kwang-Mo’s LG Group retains consumer electronics company LG Electronics, cosmetics company LG Household & Health, LG Life Sciences and telecom operator LG Uplus. LX Holdings’ market cap of US$540 million is tiny compared to LG Group’s US$10 billion. So I imagine that there must have been significant forced selling, especially given that the price is down \~50% since the first day of trading. LX Holding now trades at a P/B of 0.4x. The trailing twelve-month P/E ratio is 3.0x. If you take LX Holding’s cash and add the value of their stakes in listed companies plus the unlisted ones (LX MMA), I’m getting to a number close to the book value. For reference, LG Corp also trades at a low P/B of just 0.5x. In September and October, there was a large insider buying by Koo Bon-Joon’s son Gu Hyung-Mo, who now acts as the new Vice President of LX Holding and owns 12% of the company. He must have seen value in the stock at around the KRW 8,000/share mark. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4094fd81-c24e-4090-b437-4d25a6b8f146_2738x1152.png) --- ## 5\. Jinmao Property Services (816 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ffbb65cc-5982-4115-b497-2512510626b6_1418x924.png) [**Jinmao Property Services**](https://finance.yahoo.com/quote/0816.HK/?ref=asiancenturystocks.com) *(816 HK - US$488 million)* is a spin-off from state-owned Chinese property developer [**China Jinmao Holdings**](https://finance.yahoo.com/quote/0817.HK/?p=0817.HK&ref=asiancenturystocks.com)*(817 HK - US$3.2 billion)*. The ultimate parent of Jinmao is the Chinese state chemicals company Sinochem. That makes Jinmao Property Services an SOE. The spin-off took place in February 2022, together with an issue of new shares, with the prospectus available [here](https://www.asiancenturystocks.com/content/files/listedco/listconews/sehk/2022/0225/2022022500025.pdf). The purpose of the spin-off and offering seems to have been to raise funding for acquisitions as well as for reinvesting in the business. Property management companies provide basic services to already-built apartment complexes, including security, cleaning, repairs, receiving e-commerce packages, etc. They look like commodity services to me. But what’s great about them is that it’s challenging for residents to switch away from an apartment complex’s existing property manager. They’re usually stuck with whoever managed the property when they moved in. That means that property management companies’ cash flows tend to be sticky. The major risk involved with these property management companies is usually that they funnel cash to related parties. We’ve seen that happen a few times, at least in privately-owned property management companies. There’s a risk that property developers use their property management companies to finance their property development arms. Former parent and property developer China Jinmao Holdings is a much larger company than Jinmao Property Services, with a market cap 6x greater. On the other hand, many investors consider the asset-light business models of property management companies to be more attractive than those of property developers. So I’m not sure if the average investor chose to sell the shares they received in Jinmao Property Services. Today, the stock’s forward-looking P/E is 6.7x, with a dividend yield of 4.0%. Yearly free cash flows are roughly US$60 million per year, compared to an enterprise value of US$313 million. That’s remarkable, given that the Chinese state controls the company and that cash flows therefore should be safe from expropriation. Jinmao has been spared from the crackdown that’s occurred among private property developers in China, and that gives me some comfort. On the other hand, there’s been no insider buying in Jinmao Property Services since the spin-off. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d8dd5688-f4fa-4955-a85d-9b8b95e33185_2744x1156.png) --- ## 6\. Central China Management (9982 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cd21b3db-96eb-488c-b9c1-134dd7d27d4d_1196x796.png) [**Central China Management**](https://finance.yahoo.com/quote/9982.HK/?p=9982.HK&ref=asiancenturystocks.com) *(9982 HK - US$321 million)* is the property management spin-off from Henan property developer [**Central China Real Estate**](https://finance.yahoo.com/quote/0832.HK/?p=0832.HK&ref=asiancenturystocks.com)(also known as “CCRE”)*(832 HK - US$190 million).* The company was spun off back in May 2021 and also raised capital in conjunction with the spin-off. Central China Real Estate (CCRE) used to be a private developer, but the Chairman’s stake was taken over by the Henan Provincial Government in mid-2022\. He still owns part of the convertible bond. But now that CCRE has become an SOE, you’d think that they’d honour their contracts and are at less at risk of bankruptcy. The property management subsidiary’s market cap of US$317 million was small in relation to CCRE’s previous market cap (before the latest slump) of around US$2 billion. So forced selling might have been part of the picture, in my view. Today, Central China Management’s stock trades at a P/E of 3.7x, with net cash approximately equal to the market cap, which means that the enterprise value is approximately zero. There’s been massive insider buying since the spin-off by Chairman Wu Po Sum (also known as Hua Jianming) and board member Wu Wallis (also known as Li Hua). They must be seeing value in the shares. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4d2d28f4-32f2-4111-86b8-0dec412552c5_2736x1156.png) --- ## 7\. Sierra Rutile (SRX AU) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d1ecf700-1d83-4092-99bb-96970f77416e_1280x714.png) [**Sierra Rutile**](https://finance.yahoo.com/quote/SRX.AX/?p=SRX.AX&ref=asiancenturystocks.com) *(SRX AU - US$56 million)* is an Australian mining company focused on mining for rutile in Sierra Leone, Africa. It’s the world’s largest natural rutile producer, with 541kt of rutile ore reserve and yearly rutile production of 144kt. The company was spun off from [**Iluka Resources**](https://finance.yahoo.com/quote/ILU.AX/?p=ILU.AX&ref=asiancenturystocks.com) *(ILU AU - US$2.8 billion)* in July 2022\. You can find the demerger presentation [here](http://Demerger Overview). Former parent Iluka focuses on the mining of zircon and ilmenite in Australia. What is rutile? So, [rutile](https://en.wikipedia.org/wiki/Rutile?ref=asiancenturystocks.com) is a mineral composed of titanium dioxide (TiO2), a pigment used in paints, plastics, paper, foods and other applications that require bright white colours. The titanium dioxide pigment is the single greatest use of titanium worldwide. Other applications for titanium dioxide include metals for aircraft frames and welding for steel fabrication of shipbuilding. Some of Sierra Rutile’s key customers include Chemours, Kronos, Tronox and Venator. The purpose of the spin-off was to allow parent Iluka Resources to focus on its Australian operations and allow it to diversify into rare earths. Sierra Rutile, on the other hand, focuses on the Sembehun Project in Sierra Leone. CEO of Sierra Rutile Theuns de Bruyn joined the company in 2019 as COO and CEO since January 2021\. In other words, the management team was in place even before the demerger. He’s based in Sierra Leone. Sierra Rutile is a US$55 million market cap company, much lower than Iluka Resources’ US$3.0 billion market cap. So, in this case, it’s highly likely that the spin-off was subject to forced selling pressure. The company experienced weak operational performance during COVID-19 in 2020 and 2021\. But production has since recovered. In early 2022, the company enjoyed sales proceeds of US$1,459/tonne of rutile against a cost per tonne of US$893, for a profit per tonne of US$566\. With yearly rutile production of 144kt, the company earns gross profits of around US$82 million. EBITDA pre-COVID was about US$43 million. Sierra Rutile has a net cash position of US$36 million with no debt in addition to an AU$63 million balance in the Sierra Rutile Rehabilitation Trust. Excluding the rehabilitation trust, that gives you an enterprise value of around US$20 million, about 0.5x EBITDA. The problem is that the company is planning to spend US$284 million in capex for the phase 1 development of the Sembehun - the largest and highest-grade natural rutile deposits in the world. Phase 1 commissioning will take place in 2025\. Such a greenfield project carries risk and requires mining expertise to assess. I don’t have such expertise. But I still sense there is an opportunity here. Sierra Rutile has over 2,000 employees. With an enterprise value of just US$20 million, that gives you an EV/employee ratio of US$10k per head. I’ve never seen such a low ratio in my entire career. And while I’m not familiar with the rutile industry - or Sierra Leone, for that matter - owning the highest-quality ore body in the world has to increase the chances of success. Blackrock has been selling its shares in Sierra Rutile, while finance director Martin Alciaturi bought 100,000 shares recently. Sydney-based wealth management firm Tribeca Investment Partners bought 5 million shares a few months ago, possibly on behalf of somebody else. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/668cfc82-7700-4fac-8fa5-ab7e9f348951_2734x1162.png) --- ## 8\. Juno Minerals (JNO AU) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e69b36c3-61f8-4435-8234-f99611a18afa_1582x746.png) And lastly, we have a nano-cap with a near-term catalyst. [**Juno Minerals**](https://finance.yahoo.com/quote/JNO.AX/?p=JNO.AX&ref=asiancenturystocks.com) *(JNO AU - US$8.3 million)* is an Australian iron ore miner spun off from manganese miner [**Jupiter Mines**](https://finance.yahoo.com/quote/JMS.AX/?p=JMS.AX&ref=asiancenturystocks.com) *(JMS AU - US$283 million)* back in May 2021\. Juno raised new capital as well in conjunction with the spin-off at a price of AU$0.25/share. A June 2022 investor presentation is available [here](https://www.asiancenturystocks.com/content/files/cproot/1083/3/2390940.pdf), and the prospectus [here](https://www.asiancenturystocks.com/content/files/cproot/1009/3/juno-minerals-limited---prospectus-final.pdf). Former parent Jupiter Mines is a much larger operation with a market cap of US$283 million vs Juno Mineral’s current US$8 million. It’s therefore likely that we’ve seen significant selling pressure in the company’s initial year of trading. CEO Greg Durack was previously CEO of much-larger Jupiter Mines and was responsible for two feasibility studies on its key Mount Mason resource. He is originally a chemist but spent 38 years in the mining industry. When the company was listed, 400,000 shares were issued to Greg Durack, and he’s also entitled to 2.4 million stock options. Note that Juno Mineral has 136 million shares outstanding. His salary is AU$250,000 per year - probably fair, in my view. Juno Mineral owns an iron ore hematite deposit at Mount Mason, which it plans to bring into operation by mid-2023\. [All statutory approvals have been granted](https://stockhead.com.au/resources/juno-locks-in-final-development-approval-for-mt-mason-dso-iron-ore-project/?ref=asiancenturystocks.com). It also owns a magnetite project called Mount Ida in the same region close to Kalgoorlie, which will be progressed once Mount Mason has started production. The purpose of the spin-off was to raise funding for the Mount Mason iron ore project. That raises the question of whether they’ll raise more capital to fund the Mount Ida project later on. There are no indications that such a capital raise will take place yet. Juno Mineral’s book value is currently AU$32 million, almost 3x the current market cap of AU$12 million. They have already spent AU$50 million on the Mount Mason project. In the investor presentation, management claims that the stock is valued significantly below its Australian magnetite peers, although I’m not sure how they measure this. London-based hedge fund Tiger Hill Global run by Yilun Chen has been scooping up shares in Juno Minerals ever since the listing last year. He’s not an ACS subscriber, but I can pass along his contact details. The stock is extremely illiquid, with only tens of thousands of shares bought and sold daily. So you’ll probably need to approach a broker to be able to buy a sizeable stake. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6465fa2f-3113-4b15-ae4b-a69a9d977a97_2744x1160.png) --- # Conclusion I think that spin-offs can lead to value dislocations. They’re rare in the Asia-Pacific region, but I’ll continue to monitor the area. I will revisit [**SK Square**](https://finance.yahoo.com/quote/402340.KS/?p=402340.KS&ref=asiancenturystocks.com) once I get more comfortable with the DRAM cycle. Buying a DRAM proxy at 0.3x book seems like a way to get more juice out of a coming DRAM up-cycle if such an up-cycle ever materialises. There’s a good chance that [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX/?p=TAH.AX&ref=asiancenturystocks.com) will ultimately get acquired or at least trade closer to its global gaming peers. I don’t love the business though, given the threat from online/mobile app gambling. [**LX Holdings**](https://sg.finance.yahoo.com/quote/383800.KS/?p=383800.KS&ref=asiancenturystocks.com) seems even cheaper than LG Corp, which I know some ACS subscribers are involved with. Both trade at low P/B. I’d like to find out which of the two companies has a better management team before committing any money myself. [**China Conch Environment Protection**](https://finance.yahoo.com/quote/0587.HK?p=0587.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) seems like a story stock with weak corporate governance. The return on equity is low. Insider buying is encouraging, and the multiple isn’t particularly high. The two Chinese property management companies [**Jinmao Property Services**](https://finance.yahoo.com/quote/0816.HK/?ref=asiancenturystocks.com) and [**Central China Management**](https://finance.yahoo.com/quote/9982.HK/?p=9982.HK&ref=asiancenturystocks.com) seem cheap. It wasn’t long ago that investors were in love with property management companies. Out of the two, Jinmao seems safer, given its connection to the state-owned enterprise Sinochem. [**Sierra Rutile**](https://finance.yahoo.com/quote/SRX.AX/?p=SRX.AX&ref=asiancenturystocks.com) seems like a high-risk situation at a low valuation multiple. Upcoming capex seems high, even considering the company’s strong cash flows. I will try to get a second opinion from someone more experienced in the African mining sector. [**Juno Minerals**](https://finance.yahoo.com/quote/JNO.AX/?p=JNO.AX&ref=asiancenturystocks.com) trades at a low P/B with a production catalyst just six months away. Liquidity is a key constraint here. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d5cfebaf-29a9-4239-b98c-d9b102703684_1100x51.png) ### Indonesia's new criminal code threatens liberty URL: https://www.asiancenturystocks.com/indonesias-new-criminal-code-threatens/ Last updated: 2025-10-24T15:09:51.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![Indonesia's sex 'morality' laws are just one part of a broader, chilling crackdown on dissent | Indonesia | The Guardian](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2706cf06-aafd-40f7-988e-111e6fc790d2_1200x900.jpg) Source: Slamet Riyadi/AP Earlier this month, the Indonesian parliament approved a new criminal code. This new criminal code will ban sex outside marriage and punish those who engage in extramarital or premarital sex with prison. But what’s even worse is that lawmakers snuck in provisions in the law that bans any criticism of the government. Demonstrations will be banned. Anyone deemed to spread “misinformation” on social media could be jailed for up to four years. Indonesia is entering a darker new era, where incumbent leaders can use the new criminal code to go after enemies and consolidate their power. While the direct impact on Indonesian companies is still unclear, it doesn’t make me positive about the long-term prospects of the Indonesian economy. --- # 1\. Bans on sex outside the marriage ![Indonesia seeks to allay fears over premarital sex ban – DW – 12/12/2022](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/20469c96-788b-4db2-abbe-44a2295e4bab_1199x674.jpg) Source: Deutsche Welle Indonesia’s new criminal code will ban sex with anyone who is not your husband or wife. So if you’re not married - think twice before you have sex. You could face up to one year in prison. Premarital sex will also be banned. If parents suspect that their child is having premarital sex, they can then report the couple to the authorities. The couple will then face up to one year in prison. These provisions are, understandably, unpopular among the average Indonesian. An October 2021 study suggests that 42% of Indonesia’s population had practised pre-marital sex. So the law essentially criminalises normal behaviour. It’s not just Indonesians that will be subject to the law. Foreigners and ex-pats will also be banned from having premarital sex. Although in practice, since only parents or children can report someone for premarital sex, foreigners are unlikely to end up in jail for having sex with another foreigner. There’s a new ban on cohabitation before marriage. If you live with a partner before marriage, you’ll be subject to a jail term of up to six months. This provision is strange since living together before marriage is common in Indonesia. Will millions of people get arrested? > *“It is impossible to enforce this law broadly. *There are millions of Indonesian couples who live together without legal marriage certificates*. The authorities and police cannot arrest (all of them)”* \- Andreas Hartono, Human Rights Watch And what about gay couples? Since it’s illegal to marry someone of the same sex in Indonesia, gay couples will be unable to live together. As many others [have pointed out](https://darimulut.substack.com/p/heartache-and-defiance-in-jakarta), parents who disapprove of their children’s sexual orientation will be able to punish them by threatening jail if they move in with their partners. Just imagine what kind of pressure they’ll be living under: > *“This is dangerous not only because of the threat of punishment, but *it can \[give\] legitimacy to the vigilante community*”* \- Muhamad Isnur, Indonesia Legal Aid Foundation. --- # 2\. The end of free speech ![Indonesia parliament ratifies law banning extramarital sex - Nikkei Asia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2404a399-cb45-48cc-acb9-ed880e058dc5_3205x1803.jpg) Source: Nikkei Also included in the new criminal code are provisions about free speech. It will become illegal to criticise the government, including the President, the Vice President, or any other government official. If you insult the president, you’ll run the risk of a jail term of up to three years. It will also become illegal to hold protests that criticise the government. Unless the government has already approved those protests (unlikely). Anyone deemed to spread “misinformation” that could incite a riot will face a prison term of up to four years. Nobody knows how courts will determine what’s misinformation and not. So journalists will probably play it safe by self-censoring themselves and avoiding government criticism. There’s also a vague provision about adhering to “living laws”. You’ll get caught for violating the “rules of society”, but the criminal code doesn’t specify what those rules are. In practice, local courts could potentially punish any behaviour that’s not in line with Sharia law. And on the positive side, for government officials, the maximum punishment for corruption will be greatly reduced to just two years in prison. Great for those who want to consolidate their own power through bribery. --- # 3\. Constitutional challenges ![The 2020 Constitutional Court Law amendments: a 'gift' to judges? - Indonesia at Melbourne](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bd2c80f8-bbca-4509-95a5-04d0ed3a2b95_1100x825.jpg) Source: Charles Wiriawan The parliament has already passed the criminal code. The next step will be for President Jokowi to sign it within 30 days. But even if he doesn’t sign it, the bill will automatically be passed into law anyway. Going forward, the only way that the bill can be withdrawn or watered down is through the constitutional court. In theory, the constitution should support and protect religion, in line with the government ideology of [Pancasila](https://en.wikipedia.org/wiki/Pancasila%5F%28politics%29?ref=asiancenturystocks.com). But it’s unclear whether a perceived Muslim right to practice Sharia law will be weighed against, say, the Hindu faith, which doesn’t ban premarital sex. And the previous dictator Suharto strongly supported the philosophy of Pancasila, even while running a thoroughly corrupt dictatorship. The law will be implemented by 2025\. It remains to be seen whether it gets watered down before its implementation. --- # 4\. Implications for investors I see three potential problems for investors with the new criminal code: 1. Drop in tourism to regions such as Bali 2. Lack of minority shareholder protections 3. A slow descent into authoritarianism # 4.1\. Drop in tourism to Bali ![Tourists enjoy a drink in a beach bar along Seminyak beach, just north of Kuta, in Bali.](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/54f62167-3974-48f4-ab61-9cf3d6684e0e_620x349.jpg) Source: Shutterstock The most immediate question is whether tourism will be affected. Early indications are that [some foreign tourists are starting to desert Bali](https://www.betootaadvocate.com/uncategorized/thousands-of-perth-to-bali-flights-cancelled-after-indonesia-implements-ban-on-pre-marital-sex/?ref=asiancenturystocks.com) in favour of other tourist destinations such as Thailand and Vietnam. Bali’s governor has made the case that foreign tourists [will not need to worry](https://www.theguardian.com/world/2022/dec/12/balis-governor-says-indonesias-ban-on-sex-outside-marriage-poses-no-risk-to-tourists?ref=asiancenturystocks.com) about the premarital sex ban. First, it will take three years before the law comes into effect. Second, any transgression of the law can only be reported by parents or children of an unmarried couple. Third, the Bali government has assured foreigners that marriage certificates will not be needed for unmarried couples to check into a hotel. But what if a foreigner ends up in bed with a local resident? The foreigner could then be blackmailed and threatened with jail unless he or she hands over cash. While both partners would end up in jail - who is to say that a big-enough sum of money isn’t worth a few months in prison? I can picture tourism getting decimated if a foreigner ever goes to jail for premarital sex. Such stories tend to spread fast in overseas media. There’s a reason why tourists shun regions that practice Sharia law, including Indonesia’s own Aceh province. So far, the number of Google search queries for Bali tourist-related keywords has continued to be strong since Bali opened up its borders earlier this year: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9853ff84-3608-4272-967c-502bcad47a69_1416x486.png) Bali tourist arrival has so far shown a gradual recovery. If there’s any immediate impact on tourism to Bali from the new criminal code, we won’t know until the December tourist arrival data comes out in late February 2023. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8d98d492-6e89-4edf-b0c0-042690b87f8a_2766x1232.png) If tourism to Bali does get hit, beer producers such as [**Multi Bintang**](https://finance.yahoo.com/quote/MLBI.JK?p=MLBI.JK&.tsrc=fin-srch&ref=asiancenturystocks.com) *(MLBI IJ - US$1.2 billion)* and [**Delta Djakarta**](https://finance.yahoo.com/quote/DLTA.JK/?p=DLTA.JK&ref=asiancenturystocks.com) *(DLTA IJ - US$195 million)* will probably see lower sales volumes. Before COVID-19, Bali used to represent almost 25% of Indonesia’s beer consumption, and much of that revenue came from tourists visiting from overseas. Hotel owners and developers such as [**MNC Land**](https://finance.yahoo.com/quote/KPIG.JK/?p=KPIG.JK&ref=asiancenturystocks.com)*(KPIG IJ - US$426 million)*, [**Indonesian Paradise Property**](https://finance.yahoo.com/quote/INPP.JK/?p=INPP.JK&ref=asiancenturystocks.com)*(INPP IJ - US$275 million)* and [**Surya Permata Andalan**](https://finance.yahoo.com/quote/NATO.JK/?p=NATO.JK&ref=asiancenturystocks.com) *(NATO IJ - US$274 million)* are also at risk. Airlines such as [**Garuda Indonesia**](https://finance.yahoo.com/quote/giaa.jk/?ref=asiancenturystocks.com) *(GIAA IJ - suspended; just filed for bankruptcy)* and [**AirAsia Indonesia**](https://finance.yahoo.com/quote/CMPP.JK/?p=CMPP.JK&ref=asiancenturystocks.com)*(CMPP IJ - US$115 million)* would suffer marginally. As well as airport service company [**Cardig Aero Services**](https://finance.yahoo.com/quote/CASS.JK/?p=CASS.JK&ref=asiancenturystocks.com) *(CASS IJ - US$54 million)*. In my view, there will be a minor impact in the first few months of the new law. But its longer-term impact on tourism will depend on whether tourists actually end up in jail for premarital sex. I somehow doubt it will happen. --- # 4.2\. Weakening shareholder rights The new criminal code will expand the provisions related to corporate crime, expanding the scope of who can be held responsible for company violations. Shareholders can now become liable for corporate wrongdoings as well. This will blur the line between partnerships and limited liability companies. As Adinova Fauri of the US-based Center for Strategic and International Studies said: > *"*This has the potential to become an elastic law*, and it is necessary to specify how far the shareholder's role \[extends\] in making decisions regarding \[a\] company's violations. Do not let all shareholders be the subject of punishment or over-criminalization… This has the *potential to reduce investment intentions from investors*."* While minority investors in publicly listed companies are unlikely to be affected, foreign direct investment could certainly take a hit. --- # 4.3\. Descent into authoritarianism And finally, I think that the main issue with the new criminal code is that it will enable future presidents to consolidate power: - Banning free speech and reducing the penalties for corruption tilts the power away from the people to the political elite. - Reduced penalties for corruption will encourage bribery. - The extramarital sex provisions will be used to blackmail political enemies. Overall, it’s not implausible that Indonesia could one day regress to a Suharto-style dictatorship, where rent-seeking businessmen collude with the leader to monopolise part of the economy. The new criminal code will take us back closer to the political system of that era, in my view. Let’s hope it gets watered down before its final implementation in 2025. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) If you’re interested in reading more about the Indonesian beer and tourist industry, check out my previous posts on beer producers [**Multi Bintang**](https://www.asiancenturystocks.com/deep-dive-2021-21-indonesian-sin/) and [**Delta Djakarta**](https://www.asiancenturystocks.com/deep-dive-2022-23-delta-djakarta/): [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/fa06cb54-7aba-4759-ac3a-b3152886ece6_1330x748.png)](https://www.asiancenturystocks.com/deep-dive-2021-21-indonesian-sin/) [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8539b136-0fad-4cea-a5ab-77a60e34811d_1710x960.png)](https://www.asiancenturystocks.com/deep-dive-2022-23-delta-djakarta/) ### 🔗 Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-7cb/ Last updated: 2022-12-12T04:00:59.000Z Cafe de Coral, glucose monitors, Turtles Substack, Felix Zulauf, Jeff Gundlach _This post is for paying subscribers only._ ### Café de Coral (341 HK) URL: https://www.asiancenturystocks.com/deep-dive-2022-30-cafe-de-coral-341/ Last updated: 2026-07-31T01:32:42.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Café de Coral at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* [**Café de Coral**](https://finance.yahoo.com/quote/0341.HK/?p=0341.HK&ref=asiancenturystocks.com)(341 HK) is Hong Kong’s largest local fast-food chain, serving affordable Chinese and Western cuisine to 300,000 customers daily. The company was started by individuals in the Lo family, which also founded Vitasoy and restaurant competitor Fairwood. The Lo family continues to control Café de Coral, with the CEO now the son of one of the original founders. Today, Café de Coral has around 500 outlets in Hong Kong and across the border in mainland China. The average ticket price is about HK$40-50 per customer. And many of the customers in Hong Kong are office workers looking for quick and affordable meals. The growth potential for the business lies in its mainland business. The company plans to double its number of mainland Chinese outlets within the next three years, implying an almost 10% yearly store count growth for Café de Coral, on top of low-single-digit same-store-sales growth. From what I can tell, unit-level margins are quite high for Café de Coral’s mainland stores. But the company has spread itself thin across many cities and with its food processing plants severely underutilised. Margins should improve as those utilisation rates come up. Like most restaurants in Asia, the company has suffered during COVID-19\. The Hong Kong government introduced customer distancing rules, restricted dining-in hours and the number of restaurant customers at any given time was capped at certain percentages. Many smaller Hong Kong restaurants went out of business. From October 2022, Hong Kong lifted the restrictions on restaurant opening hours. Some restrictions still remain, including the number of restaurant guests. But given Beijing’s shift towards living with endemic COVID, I believe that we’re now seeing the light at the end of the COVID tunnel. It’s also more likely that the HK-mainland China border will open up now that COVID-19 is spreading across both Hong Kong and mainland China. Opening the border seems high on the government’s priority list. At a 9% operating margin once COVID-19 restrictions are eased, and centralised food kitchens see greater utilisation rates, I expect EPS to come back to around the HK$1.0 level, which would imply a P/E of 12x. Historically, the stock has traded closer to 22x due to a perception of strong corporate governance and growth potential in mainland China. The main risks that I’ve been able to identify include net migration from Hong Kong, high food prices, recurring increases in Hong Kong minimum wages and the risk of food safety scandals. But neither of these risks would threaten the competitive advantage of the business. Given that I’ve previously covered competitor [**Fairwood**](https://finance.yahoo.com/quote/0052.HK?p=0052.HK&.tsrc=fin-srch&ref=asiancenturystocks.com) \- presentation available [here](https://www.asiancenturystocks.com/deep-dive-2021-24-fairwood/) \- a key question is which businesses have stronger competitive advantages and greater growth potential. In my subjective view, I believe that Café de Coral has a better brand name. And Café de Coral’s management team seems more seasoned. There’s no doubt, though, that by copying some of Café de Coral’s methods of operation, Fairwood has created immense value for shareholders with a high return on equity. Fairwood’s stock also trades at surprisingly low multiples. It’s possible that both businesses will do well coming out of COVID-19. _This post is for paying subscribers only._ ### Glucose monitors will become mainstream URL: https://www.asiancenturystocks.com/glucose-monitors-will-become-mainstream/ Last updated: 2025-10-24T15:10:05.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![What is CGM? | FreeStyle Libre](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3f1cd12f-c6c5-4a95-89d5-32c803c05328_1200x1004.jpg) Source: Abbott Earlier this week, I strapped a continuous glucose monitor (“CGM”) onto my arm. A CGM is a small sensor that tracks your blood sugar in real-time. It then sends that data to your smartphone, where it can be analysed. I jumped on the CGM bandwagon to understand how my body responds to food. I wanted to find out how to keep my blood sugar levels within an appropriate range. Through my multi-day experiment with a CGM, I’ve become bullish on the product and the industry. As Peter Lynch once said, consider investing in companies whose products you encounter in your daily life and love. The day has come when CGMs are going mainstream - used not only by diabetics but also by health-conscious individuals such as myself. --- # Introduction to CGMs ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/317f9ff0-6a49-4189-8b4c-438190884347_908x856.png) Continuous glucose monitors (“CGMs”) are sensors inserted through the skin to measure blood sugars in real-time. The sensors stay on your skin for 10-14 days before they’re discarded. These devices are typically used by diabetics whose blood sugars are out of control. Glucose is a type of sugar that’s found in your blood. There are two types of diabetes: - **Type 1 diabetes** is an autoimmune disorder that leads to an inability to produce insulin - the hormone used to regulate blood sugar. Type 1 diabetics need frequent insulin injections to make up for the insulin that’s missing in the body. - **Type 2 diabetes** is when a poor diet causes your body to become insensitive to insulin. To make sure the blood sugar levels remain within an appropriate range, these individuals will eventually need to inject insulin as well. Almost all diabetes patients belong to the Type 2 category. If your blood sugar drops *below* a certain level, you might lose your consciousness or even die. Conversely, if your blood sugar *exceeds* a certain level, you might get damage your blood vessels. So you’ll want to keep your blood sugars within a specific range, say around 80-120 mg/dl or 4-7 mmol/l. To clarify, “mg/dl” is the metric used in the United States in several other countries, and “mmol/l” is the metric used in the rest of the world. In a healthy person, blood sugars increase after a meal and drop within an hour or two. But in diabetics, insufficient insulin or insulin resistance is causing blood sugars to remain high for an extended period of time. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/beae1390-da29-4874-be7e-a88a8497f6c8_1180x946.png) In the old days, diabetics would puncture their fingers, put a drop of blood on a glucose test paper and then insert the test paper into a card reader to determine their blood sugar levels. These devices are known as blood glucose monitors or “BGMs”). ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/45781d54-a3d3-4fa7-ad78-5ff59852dc24_1570x432.png) Old-tech blood glucose monitors - also knowns as **BGMs** \- are inconvenient. The patient is required to carry around alcohol cotton balls, test strips and the testing device. It’s a tedious process, and the patient might also experience discomfort. What’s worse is that the BGM only provides a snapshot of your blood glucose at one specific time. Continuous glucose monitors - also known as **CGMs** \- are much more convenient, given that the needle is so small that you wouldn’t even notice it. The sensor can stay on your skin for weeks. And since it provides continuous updates, you can get feedback on how your body behaves throughout the day and how it responds to different foods. If you’re a diabetes patient, you must then inject insulin. One option is to inject insulin via single-use needles. The other option is to use an insulin pump that pushes insulin into your body continuously through an “infusion set”. The most advanced insulin pumps communicate with the glucose monitor to ensure that blood sugar levels stay within the normal range at all times. ![Insulin Pumps & Continuous Glucose Monitors](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cb674d95-cea5-4d56-926c-315b62e62099_691x460.png) The next technology frontier will be **minimally invasive devices** that can measure glucose levels without piercing the skin. It’s been the holy grail of the diabetes care industry, but somehow, neither solution has reached the market yet. For example: - Novartis had a product that measured glucose levels in the fluid around your eyes, but it wasn’t that accurate. - Another solution is to send an electrical signal to pull glucose through the skin. But that causes irritation, and the readings are not that accurate either. - Glucose monitor implants are available from companies like Senseonics, but they tend to cause inflammation in the body. - Finally, there’s also new technology that uses a laser to measure glucose behind the skin. It remains to be seen whether such technology will ever see the light of day. --- # Benefits of continuous glucose monitors Today, most diabetics still use traditional blood glucose monitors. In the next 10-20 years, many of them will switch to continuous glucose monitors. The benefit of CGMs is that they help modify your behaviour. They provide instant feedback on whether you’re burdening your body with, say, too much-refined sugar or flour. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eae20201-e1e3-4f28-8ae4-f90f2b3d5c44_2148x1136.png) Such instant feedback can provide warning signals, telling you to adjust your behaviour in real-time. Users can then regulate their blood sugars by eating something, taking insulin, exercising and so on. And even after the fact, your doctor can also look at your data and advise on how to deal with your diabetes. According to one study, 90% of diabetics said that they had modified their own behaviour after starting to use a CGM. They become more careful of what they eat, drink more water, start exercising, and so on. Another study showed that using a CGM dropped “A1c” - an approximation of long-term average blood glucose levels - by 1.5 percentage points. That’s a massive drop, suggesting that CGMs help modify your behaviour. --- # The nascent CGM industry Diabetes is a massive industry. In the US, for example, the cost per diabetes patient is around US$17,000 per year, including hospital visits and the cost of drugs to control blood sugar levels. A single hospital visit for low blood sugar can cost around US$2,500\. Insulin is also expensive, and once you’re on insulin, you typically stay on it for the rest of your life. So if your diabetes can instead be controlled through CGMs, then it’s a win for both you and your insurance company. A 10-14 day sensor costs around $40-50, and a CGM subscription can cost around US$1,400-2,000 per year. These are small numbers compared to the future cost of drug treatments or hospitalisations. However, US$1,400-2,000 per year is still out of reach for many emerging market consumers. In such countries, those much-cheaper traditional blood glucose monitors still reign supreme. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/14a09741-9c03-4994-adee-c69d2c69786c_1202x780.png) Cost is a major barrier to CGM adoption. Source: JP Morgan CGMs are a great business. A sensor doesn’t cost more than US$10 to produce, meaning that gross profit margins tend to stay above 60%. And since many patients are on subscriptions, CGM manufacturers will enjoy steady, recurring revenues. And there are significant barriers to entry into the industry: - **Software algorithms**: Modern CGMs do not measure blood glucose directly. Instead, they take a sample from the area just below the skin and use complex algorithms to approximate what the real blood sugar levels might be. The accuracy of those algorithms varies from company to company. - **Clinical trials**: CGMs also need to go through clinical trials before they can be sold. And to get reimbursement from a country’s medical system, they face additional hurdles. - **Closed-loop systems**: Finally, some CGMs work together with insulin pumps in closed-loop systems. So if you want to use a CGM together with a pump, you’ll need to buy the whole set, increasing the barriers to entry further. Today, the market for CGMs is growing close to 30% per year, with a projected market size of about US$19 billion globally by 2024. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cae49e86-99c1-4acc-878a-8386259ded68_902x630.png) The total addressable market for the continuous glucose monitoring market. Source: Huatai Research The potential is even greater outside of the United States and Europe, where penetration rates for Type 2 diabetes patients remain below 2%. For example, there are 6x as many diabetics and pre-diabetics in China than the US. Not to mention the Indian market. The market potential for CGMs is massive. --- # The competitive landscape Today, the CGM industry is dominated by America’s [**Dexcom**](https://finance.yahoo.com/quote/DXCM?p=DXCM&.tsrc=fin-srch&ref=asiancenturystocks.com) *(DXCM US－ US$45 billion)*, [**Abbott**](https://finance.yahoo.com/quote/ABT/?p=ABT&ref=asiancenturystocks.com) (*ABT US－ US$184 billion*) and [**Medtronic**](https://finance.yahoo.com/quote/MDT/?p=MDT&ref=asiancenturystocks.com) *(MDT US－ US$105 billion).* Then, there are several US-based start-ups, such as a16z-backed **Levels** *(Private company).* Dexcom is often called “the Apple of CGMs” as their product are feature-rich but expensive. Abbott’s Freestyle Libre CGM is cheaper but doesn’t have all the bells and whistles. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/cdd70f4f-8c84-4b82-8e7a-2c1828681ec8_1756x608.png) Competitors are starting to show up in China, Korea and Japan. Asian-developed CGMs are not comparable in quality to their American peers. In China, Abbott’s Freestyle Libre CGM dominates the market with an 80% market share. Medtronic’s Guardian CGM controls another single-digit percentage of the market. But several listed Chinese competitors are trying to catch up: - Switzerland’s Ascensia Diabetes Care recently partnered with China’s POCTech - 50% owned by [**Yuyue Medical**](https://finance.yahoo.com/quote/002223.SZ/?p=002223.SZ&ref=asiancenturystocks.com) *(002223 CH－ US$5.1 billion)* \- to develop a CGM. - [**Sinocare**](https://finance.yahoo.com/quote/300298.SZ/?p=300298.SZ&ref=asiancenturystocks.com)*(300298 CH－ US$2.6 billion)* is the leader in traditional glucose monitor tests in China. Its 2016 acquisition of US-based Trividia helped cement its lead. Sinocare also has a CGM that it’s hoping to get approval for in 2023. - [**MicroTech Medical**](https://finance.yahoo.com/quote/2235.HK/?p=2235.HK&ref=asiancenturystocks.com)’s *(2235 HK－ US$504 million)* AiDEX G7 CGM has the benefit of not needing to be calibrated through finger-pricking before use. Its accuracy is decent. MicroTech also has an insulin-infusion pump, which will form a part of a closed-system CGM-insulin pump device to be launched in late 2023. In Japan, start-up **Quantum Operation** (Private) just presented the world’s first non-invasive glucose monitor capable of continuous testing. It’s unclear whether it will ever reach the market. Meanwhile, incumbent blood glucose monitor producer [**PHC Holdings**](https://finance.yahoo.com/quote/6523.T/?p=6523.T&ref=asiancenturystocks.com) *(6523 JP－ US$1.4 billion)* doesn’t have a CGM. But PHC is the exclusive distributor of US-based Senseonic’s implantable CGM for the Japanese market. [**Terumo**](https://finance.yahoo.com/quote/4543.T/?p=4543.T&ref=asiancenturystocks.com) *(4543 JP－ US$22 billion)* has exclusive rights to sell Dexcom’s CGMs in Japan. In Korea, [**i-Sens**](https://finance.yahoo.com/quote/099190.KQ/?p=099190.KQ&ref=asiancenturystocks.com) *(099190 KS－ US$352 million)* has developed a CGM for the domestic Korean market and Germany, to be launched in 2023\. i-Sens’s current product portfolio is mostly focused on traditional glucose monitors. In Taiwan, [**TaiDoc**](https://finance.yahoo.com/quote/4736.TWO/?p=4736.TWO&ref=asiancenturystocks.com) *(4736 TT－ US$786 million)* produces traditional blood glucose monitors, mostly on an OEM basis. It’s unclear whether TaiDoc has a CGM in the pipeline. [**Google**](https://finance.yahoo.com/quote/GOOG/?p=GOOG&ref=asiancenturystocks.com) *(GOOG US - US$1.3 trillion)’s* subsidiary Verily is also working with Dexcom to improve its CGM algorithm. [**Apple**](https://finance.yahoo.com/quote/AAPL/?p=AAPL&ref=asiancenturystocks.com) *(AAPL US－ US$2.3 trillion)* has been rumoured to work on minimally invasive glucose monitors for at least five years together with Dexcom. But if you wear a Dexcom sensor today, you can already read your blood glucose level straight from your Apple Watch. --- # Closing thoughts My own experiment with Abbott’s Freestyle Libre CGM has been overwhelmingly positive. I believe in preventative medicine rather than waiting until it’s too late and disrupting your hormonal balance by injecting insulin. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d2f18639-e7bc-4cda-80d0-aa79376627ac_705x1280.jpg) Last 24 hours of blood sugar levels on my Abbott FreeStyle Libre CGM What have I learnt from my experiment? That I need to be careful with refined sugars, especially in large quantities. With regular exercise, my blood sugars tend to be more stable. And I learnt that it’s okay to fast for prolonged periods of time. My blood sugars will remain stable. While those insights are common sense, it’s powerful to see how your food choices affect your body in real-time. It makes me more determined to clean up my diet. If Dexcom or any of the other market leaders can one day figure out a way to track your blood sugar without piercing the skin, then I think blood glucose monitoring will eventually become mainstream. Sold not just to diabetics but also to normal people like me who just happen to care about their health. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) This is just the beginning. I intend to focus more on the CGM industry in the future. To make sure you don’t miss future reports, consider becoming a full subscriber: [Subscribe now](#/portal/signup) ### Monday morning links 🔗 URL: https://www.asiancenturystocks.com/monday-morning-links-bb6/ Last updated: 2022-12-05T04:00:13.000Z CEL Corporation, China's zero-COVID policy, November 2022 portfolio review _This post is for paying subscribers only._ ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-13a/ Last updated: 2022-12-04T11:16:26.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Variant view: China's zero-COVID policy is dead URL: https://www.asiancenturystocks.com/zerocovid/ Last updated: 2025-10-24T15:10:18.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/zerocovid/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/96428547-03fd-4153-9e46-6a69c999535f_2121x1414.png) --- # 1\. Backdrop Shortly after the big COVID-19 outbreak in Wuhan in late 2019, the government undertook strict lockdown measures to mitigate the spread. It has had a zero-tolerance against infections, aiming to reduce the number of cases to essentially zero. China’s zero-COVID measures were initially successful. But with the Omicron variant in late 2021, it’s become increasingly difficult for the government to eradicate the spread completely. ![How long will Shanghai's lockdown last? - BBC News](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/231edb6c-314b-40eb-9d78-ee0025c2264c_976x549.jpg) In 2022, Shanghai became the epicentre of a large Omicron outbreak. What soon followed was a 2-month harsh lockdown causing the economy to grind to a halt. But Shanghai was not the only city imposing harsh lockdown measures. In fact, by April 2022, close to 200 million people in China were under some form of lockdown, affecting 22% of the country’s GDP. The impact on consumer confidence with regard to employment and income was dramatic: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/932e8733-1a0b-4769-9fec-e315d633a37f_575x322.jpg) Source: Fitch And with weaker job prospects, consumer spending took a severe hit: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/af4700ee-73a9-4518-984d-6018c4b4c549_384x360.png) Source: IIF The extent to which movement restrictions were imposed can also be seen in subway traffic and flight data. For example, the number of flights per day in China decreased to around 3,000 in April and around 4,000 in October, compared to 10,000 in early 2021. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ba9d19b5-3b50-4964-b661-5739f1b727ca_1128x660.jpg) Source: Mizuho --- # 2\. Consensus view In late October, Hong Kong’s Hang Seng index reached a multi-decade low in terms of price/book. And in absolute terms - Hang Seng hit its lowest level since 2008. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/46634dce-ac11-4615-9c6a-76eb71ac7e4e_2598x1214.png) But since late October, we’ve had a strong rebound. Many investors and analysts think that this rebound has gone too far. For example: > *“*Some investors see spreading protests against Covid-19 restrictions as an excuse to take profits* after the Hang Seng gained more than 17% so far in November.”* \- Hao Hong, chief economist at Grow Investment Group This rebound has really been driven by increased optimism about China’s zero-COVID policy. It looks like the government is moving away from its previous stance. Yet investors and analysts continue to be sceptical: > *“Most economists doubt China will move especially swiftly, with authorities instead opting for a step-by-step approach to relaxing their Covid strategy. Mr. Lu and others say *that process is unlikely to even begin until the second quarter of next year.*”* \- Nomura > *“We think that between now and April is a likely transition for the general public to adapt to the new norm. While China’s international flights have risen since May albeit off low base, domestic flights have stalled, *highlighting general caution still in the current transition*.”* \- JP Morgan > *“Many public-health experts said *Beijing has missed the window to put in place a gradual exit plan out of zero-Covid*. For the past three years, the government has spent significant resources on building quarantine facilities and expanding mass-testing capabilities, while China’s progress on developing more-effective vaccines has been slow.”* \- Lingling Wei, The Wall Street Journal > *“*Changes to China’s COVID-19 policy do not appear to be about transitioning to the with-COVID era* but rather changing the emphasis of the dynamic zero-COVID policy from zero to dynamic. Minimizing the number of cases, as with the zero-COVID policy, will remain the goal while stressing flexibility to contain outbreaks sooner, to shorten their duration, and reduce their scale.”* \- Mizuho > *“Even if China were to end zero-covid immediately, *the positive economic effects would probably not be felt until 2024*… The interim period would be one of turbulence and instability. Growth would be low—and, depending on how local authorities carry out covid restrictions, protests may very well continue.”* \- Capital Economics Other analysts and journalists agree that while China’s zero-COVID policy might be easing, any mass spread of COVID-19 will probably lead to chaos for an extended period of time: > *“The Chinese government on November 11 released a circular on further optimizing the COVID-19 response measures. We think the impact of COVID-19 on the economy is likely to diminish in 2023, but how fast it will diminish is uncertain, so scenario analysis is required… looking forward, *while we believe the worst is probably behind us, the path could still be volatile* given the uncertainties in COVID-19 conditions. A more sustainable rally relies on more catalysts, especially on domestic growth.”* \- CICC > *“*Sudden reopening could lead to millions of intensive care admissions in a country with fewer than four ICU beds per 100,000 people*, and where many elderly still haven’t been fully vaccinated, according to public-health experts and official data.” -* Lingling Wei, The Wall Street Journal > *“There is also *potential for an even more disorderly 2023*, in which cases run wild and authorities are forced to abandon zero-covid.” -* The Economist And finally, some argue that the zero-COVID policy simply cannot be deserted, given how central it’s become to building up the legitimacy of Xi Jinping’s rule. And that making any kind of compromise on the zero-COVID policy would be seen as a weakness. > *“*Such a compromise would send a signal* to the general public *that mass protests are an effective means to win change*.”* I think that such scepticism about the end of zero-COVID is unwarranted. While stock prices have risen quite a bit since October, the bull market grow on scepticism, and it’s quite clear that the government policy is moving in the right direction. --- # 3\. Variant view ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/138a1213-014a-4bfc-8863-a837bc7cf727_1224x814.png) Source: Getty Images The more COVID-19 spreads in China, the closer we will be to recovery. This is how I envisage the process playing out: 1. First, the political landscape will allow China’s leaders to move to a normalisation while saving face 2. State media will shift its propaganda to downplaying the threat of these newer COVID-19 variants, such as Omicron 3. COVID-19 restrictions easing nationwide 4. The number of COVID-19 infections will then rise rapidly before peaking sometime in early 2023 5. Finally, we’ll see consumption patterns coming back to normal by around mid-2023 ## 3.1\. The political landscape shifting A key turning point for China’s COVID-19 policy seems to have been the Party Congress in mid-October 2022\. The number of COVID-19 infections shot up right after the Party Congress. It cannot have been a coincidence. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/759f4c2a-0e62-4b02-8d79-b65235600cdc_1428x1006.png) Source: Our World in Data The reason why the 20th Party Congress in October is significant is the fact that Xi Jinping secured a third term as General Secretary of the Communist Party and Chairman of the PRC (a role typically referred to as “President”). By amending the Party Constitution to say that Communist Party members must uphold Xi Jinping’s leadership, he’s practically become a supreme leader, potentially for life. He’s finally secure in his position. It’s also worth mentioning that he has installed loyalists in every single position on the Politburo Standing Committee, ensuring that whatever wishes he might have, they will be implemented. So Xi Jinping’s own goals and ambitions are crucial in understanding how the zero-COVID policy might be adjusted, if at all. One of the earliest signs of a shift in China’s zero-COVID policy was Xi’s trip to Kazakhstan and Uzbekistan in September 2022\. These were his first overseas trips in three years - a significant departure from his prior behaviour. Then, in November 2022, Xi Jinping visited the G20 meeting in Bali. Not only did he visit Bali himself, but he also did not wear a mask - suggesting that he really doesn’t worry much about getting infected himself. ![Biden and China's Xi met in Bali. This is what they talked about : NPR](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/44fae68c-a984-48d4-a00e-d0b99e687262_1100x825.jpg) I think it’s also significant that politics have shifted domestically. An increasing number of protests have broken out, testing the government’s willingness to maintain its restrictive COVID-19 policies. A breaking point for the protest movements seems to have been a fire in Urumqi, Xinjiang, which led to the deaths of residents in an apartment block that were locked inside due to efforts to contain the spread of COVID-19. > Social media vids from Urumqi in Xinjiang say a fire killed ten people but fire trucks were blocked from entering the compound because of Covid zero lockdown controls. #China > > — Bill Birtles (@billbirtles) [ 5:16 AM ∙ Nov 25, 2022 ](https://twitter.com/billbirtles/status/1596009916128370688?s=20&t=BIxIgN5lUc-yaV9X%5F2pWtQ&ref=asiancenturystocks.com)[](https://twitter.com/billbirtles/status/1596009916128370688?ref=asiancenturystocks.com) Videos of the incident were not censored, at least not initially, leading to widespread opposition against such harsh measures. Another lockdown in Foxconn’s iPhone factory in Zhengzhou caused virtual mayhem for its 200,000 employees. Food became scarce, rubbish piled up. Employees became impatient In early November, factory employees decided they had had enough, tried to flee and had clashes with local police forces. > [As the world watched China erupt in protest today, YouTube once again censored our coverage. Our episode on the enormous protests at Foxconn was age-restricted, essentially killing the viewership. No reason was given. This is a travesty @TeamYouTube #China ](https://twitter.com/ChinaUncensored/status/1597025601248169984?s=20&t=whbCZNzqXI7UOYxyKrQ9Tw&ref=asiancenturystocks.com)[youtu.be/ZGRCtFJu-6A](https://youtu.be/ZGRCtFJu-6A?ref=asiancenturystocks.com) > > — China Uncensored (@ChinaUncensored) [ 12:32 AM ∙ Nov 28, 2022 ](https://twitter.com/ChinaUncensored/status/1597025601248169984?s=20&t=whbCZNzqXI7UOYxyKrQ9Tw&ref=asiancenturystocks.com)[](https://twitter.com/ChinaUncensored/status/1597025601248169984?ref=asiancenturystocks.com) By late November, similar protests had erupted across the country: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/44b8e6a2-58d4-4baf-a1ce-24b9f4d8de54_4096x2912.jpg) China Protest Tracker. Source: ASPI In Beijing, students came out on the streets protesting not just against the dynamic zero-COVID but also against the Communist Party and the current leadership. Such videos were censored on the mainland. > This was such a brilliant video I subtitled it so more people can watch it. Beijing students' response last night to accusations that there are 'foreign forces' at play in this weekend's protests > > 'The foreign forces you are talking about – are they Marx and Engels?' > > — Cindy Yu (@CindyXiaodanYu) [ 3:13 PM ∙ Nov 28, 2022 ](https://twitter.com/CindyXiaodanYu/status/1597247427781984257?s=20&t=whbCZNzqXI7UOYxyKrQ9Tw&ref=asiancenturystocks.com)[](https://twitter.com/CindyXiaodanYu/status/1597247427781984257?ref=asiancenturystocks.com) Professor Minxin Pei [wrote in Nikkei](https://asia.nikkei.com/Opinion/Xi-Jinping-has-a-tough-decision-to-make-on-China-s-COVID-protests?ref=asiancenturystocks.com) a few weeks ago that China’s restrictive zero-COVID policies are now leading to mass discontent that could even threaten the Communist Party’s hold on power: > *“What zero COVID has done politically is to victimize people from all social backgrounds at the same time -- and make them relate to each other in terms of their shared frustration with a seemingly tone-deaf, arbitrary and incompetent government. In other words, *the party's zero-COVID policy has inadvertently forged a common identity* \-- as victims of a senseless policy -- for people across various social divides…. Leaders have to make tough choices. *Ending zero COVID would be by far the lesser of two evils, however unattractive it may seem to Xi and the party*.* The current situation is untenable. Chinese citizens are increasingly opposed to strict zero-COVID measures. And Xi Jinping himself is probably secure enough in his own position to be able to make a compromise and let Omicron spread. --- ## 3.2\. State media shifting its messaging ![US tightens rules on Chinese state media over 'propaganda' concerns | US news | The Guardian](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e4e02228-6493-46f5-96b3-8d7351a2770f_1200x900.jpg) Source: Getty Images Over the past two years, the prevailing narrative around COVID-19 in China has been that the vaccination uptake hasn’t been good enough. And that if you let COVID-19 spread, it would pose a massive risk to the elderly population. State media has also repeatedly said that [the country’s medical system would be unable to deal with the deaths](https://www.axios.com/2022/11/26/china-covid-outbreak-lockdown-economy?ref=asiancenturystocks.com) resulting from any large-scale COVID-19 outbreak. Such claims are, in my view, dubious. Roughly 90% of China’s population has been vaccinated with the homegrown Sinovac vaccine. It offers some protection against Omicron. And Omicron does not lead to particularly high case fatality rates, at least not in other countries. Hong Kong’s inability to deal with its early 2022 Omicron outbreak was self-inflicted, as [it required all patients even with mild symptoms to stay in hospitals](https://www.nbcnews.com/news/world/hong-kong-hospitals-hit-90-capacity-virus-cases-surge-rcna16772?ref=asiancenturystocks.com). I think that we’re finally starting to see the narrative about COVID-19 shifting in China. For example, on 4 November, the pro-Beijing newspaper Ta Kung Pao [wrote](http://www.takungpao.com/news/232108/2022/1104/783219.html?ref=asiancenturystocks.com) reported that Omicron infections are actually mild in general: > *"Compared to the Delta variant and the original strains of COVID-19, *the proportion of patients who suffer serious severe cases has been greatly reduced with Omicron*. The risk of asymptomatic infections leading to long-COVID is extremely low, and the risk of mild infections leading to long-COVID is far lower than those of those had severe infections."* (Translation of “相较于德尔塔变异株和原始毒株，奥密克戎大流行阶段的新冠后遗症比例已大大降低。无症状感染者出现新冠后遗症的机会微乎其微，轻症者出现新冠后遗症的比例也远远低于重症者”) And since then, we’ve seen several other state media publications suggest the same thing. For example, on 29 November, Global Times commentator Hu Xijin downplayed the severity of Omicron, saying that **the proportion of severe cases is only 0.025%** (data source unknown). And that **most Chinese people are no longer afraid of being infected**: > The new Omicron variant is spreading fast,pushing adjustment in COVID response in many parts of China.China's current rate of severe cases is about 0\. 025%.Most Chinese people are no longer afraid of being infected.China may walk out of the shadow of COVID-19 sooner than expected > > — Hu Xijin 胡锡进 (@HuXijin\_GT) [ 4:58 PM ∙ Nov 28, 2022 ](https://twitter.com/HuXijin%5FGT/status/1597273701774655488?s=20&t=d78K6-Vv5b1eBJpYQgpGRA&ref=asiancenturystocks.com)[](https://twitter.com/HuXijin%5FGT/status/1597273701774655488?ref=asiancenturystocks.com) Also, on 29 November, the local state newspaper “The Beijing News” published a 5,500-word interview with people who had been infected with COVID and recovered. The main message was that infections were generally mild: > Important signal from official media. The Beijing News, a paper affiliated to the municipality, today published a 5,500-word interview with various people who had Covid and recovered to speak their experiences. Main message: everything is fine. Trending in China's Weibo! > > — Chen Long (@chen\_long) [ 5:51 AM ∙ Nov 29, 2022 ](https://twitter.com/chen%5Flong/status/1597468289525223425?s=20&t=nzkVcKl51nm5cgtip8CLQw&ref=asiancenturystocks.com)[](https://twitter.com/chen%5Flong/status/1597468289525223425?ref=asiancenturystocks.com) Then, on 1 December, Vice Premier Sun Chunlan commented that **Omicron’s pathogenicity is weakening**, suggesting that the virus is no big deal anymore: > *“*With the weakening of the pathogenicity of Omicron virus*, the popularization of vaccination and the accumulation of prevention and control experience, *China is facing a new situation and new tasks in epidemic prevention and control*.”* State media outlet Global Times quoted an expert from Wuhan University who suggested that COVID-19 is [no longer as dangerous as it used to be](https://twitter.com/Sino%5FMarket/status/1598147329047298050?s=19&ref=asiancenturystocks.com): > *"*COVID-19 is no longer as dangerous to humans as it used to be*, so we do not need to panic about Omicron variants."* In mid-November, the state-run newspaper People’s Daily started reporting on serious COVID-19 cases - or rather the lack of serious cases - in China’s key cities. In those stories, it suggested that the lack of serious cases is thanks to the government’s early detection and control. You get the impression that People’s Daily is now trying to downplay the threat of Omicron - that if you get infected, you have nothing to worry about. Several articles about COVID-19 in the past month have also failed to mention the concept of “dynamic zero-COVID”. Instead, they’re now using words such as **“active control”**. In the past, state media would typically argue that China should *“unswervingly stick to its zero-COVID policy”*. I believe that we’re witnessing a change from the past. Finally, the government has started to listen to citizen complaints about the zero-COVID policy and signalled its intent to adjust it: > *“The most important development from the past few days is that there is a public debate on the zero-Covid policy in China… The government did not react by shutting those voices down. Instead *there are signals that the government is listening to the public and taking actions to address their concerns*.” -* Zhiwei Zhang, PinPoint Asset Management --- ## 3.3\. COVID-19 restrictions easing nationwide ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/64164e0c-79c2-4ad7-86fd-3e2c6fa83a48_1080x604.png) Source: Reuters The population has increasingly become fed up with excessive COVID-19 restrictions. And people increasingly realising that Omicron, in most cases, does not lead to serious disease. With this backdrop, the government is probably feeling empowered to deal with COVID-19 in a more scientific fashion. Officially though, there has been no shift away from the zero-COVID policy. But small steps have led to an incremental - de facto - loosening of restrictions. On 11 November, for example, the government released a circular announcing [20 new prevention and control measures](https://www.globaltimes.cn/page/202211/1279666.shtml?ref=asiancenturystocks.com). These new measures confirm the general policy of “dynamic zero-COVID” but emphasise “optimising” and “adjusting” the COVID-19 response. Specifically, the central government wants local authorities to consider virus mutations to **make the response *“more targeted and science-based”***. The new policy also emphasised ***“minimising the impact of the epidemic on economic and social development”***. I interpret this to mean that COVID-19 can spread as long as people’s health and livelihoods are protected. We’ve seen a number of new measures being introduced. For example, cutting the quarantine period for inbound travellers, a lack of contact tracing for secondary infections and a seven-day home quarantine for those who have visited high-risk areas instead of dedicated quarantine facilities. There are now rumours that supplementary COVID-19 policies will allow even positive cases to quarantine at home. That would mark a shift towards living with endemic COVID-19, similar to the policies that many other Asian countries have adopted since Omicron came into the picture in late 2021. > #China to release supplementary COVID-19 measures in the coming days, which will allow positive cases and close contacts to quarantine at home with conditions. > China to step up antigen testing for covid-19, reduce the frequency of mass testing and regular PCR tests. -Reuters > > — CN Wire (@Sino\_Market) [ 7:01 AM ∙ Dec 1, 2022 ](https://twitter.com/Sino%5FMarket/status/1598210757014933504?s=20&t=9gDvNHtO2EEdNCBOyzZuUg&ref=asiancenturystocks.com)[](https://twitter.com/Sino%5FMarket/status/1598210757014933504?ref=asiancenturystocks.com) Cities are now being classified as either high-risk or low-risk zones. Cities with a low amount of infections will then enjoy lax restrictions. For example, Guangzhou just opened after becoming classified as “low risk”: > 广州解封：解除所有疫情防控临时管控区，按低风险区管理。广州躺平了。 > > Guangzhou reopens, re-classified as “low-risk” zone. > > — Hao HONG 洪灝, CFA (@HAOHONG\_CFA) [ 7:30 AM ∙ Nov 30, 2022 ](https://twitter.com/HAOHONG%5FCFA/status/1597855665271484416?ref=asiancenturystocks.com)[](https://twitter.com/HAOHONG%5FCFA/status/1597855665271484416?ref=asiancenturystocks.com) And the central government is now criticising local governments of excessively their excessively strict implementation of China’s zero-COVID policy. It seems to be shifting the blame: > *“The NHC named seven cities where their pandemic prevention and control policies need be corrected during a Saturday press conference held by the Joint Prevention and Control Mechanism of the State Council. *Some of the problems cited were local governments applying excessive quarantine and lockdown measures and extending movement restrictions to unaffected areas*.”* No longer are local governments judged favourably if they implement strict lockdowns as Shanghai did in March 2022\. Today, local government officials will be penalised if they take things too far. In practice, this means a sequential loosening of the COVID-19 control policy. So the result of all of these above reforms is that China’s COVID-19 stringency index - which measures the severity of movement restrictions - has dropped steadily since October: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/70594b7f-38d2-4cae-9f4d-5e64ee59f72f_1860x1292.png) Chris Wood at Jefferies speculates that further easing in China’s zero-COVID policy could take place if the World Health Organisation’s shifts its view of the pandemic at their next meeting in January 2023\. He believes that such a shift could give China a face-saving out for a policy change. For the record, WHO still considers COVID-19 a *“public health emergency of international concern”*. COVID-19 is now spreading across China. But what’s remarkable is that the death rates remain low, at least on the government’s reported numbers. Some analysts believe that deaths are underreported. But even if that’s the case, it still signals the government’s intent to downplay the threat of Omicron. ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d128919e-2af2-4bb9-898a-31f88d36b5ef_1346x927.jpg) Given the large-scale construction of makeshift hospital beds, it looks like the government is preparing for mass outbreaks. It wants to be prepared if and when Omicron starts spreading. > One of the largest quarantine camp in China's Guangzhou city is being built, per AP. > > It has 246,407 beds, including 132,015 in hospital isolation wards and 114,392 for people who are infected but have no symptoms of Covid. > > — unusual\_whales (@unusual\_whales) [ 12:51 PM ∙ Nov 29, 2022 ](https://twitter.com/unusual%5Fwhales/status/1597573842842529792?s=20&t=tygRrjyDI06mr32CB70FPQ&ref=asiancenturystocks.com)[](https://twitter.com/unusual%5Fwhales/status/1597573842842529792?ref=asiancenturystocks.com) I believe we’re now witnessing the early stages of a controlled spread of COVID-19, which will last for a few quarters. China’s zero-COVID policy has essentially shifted from containment to mitigation. --- # 4\. Implications for investors The sectors that have suffered the most from China’s zero-COVID policy are consumer related. Consumer spending has been weak, especially regarding offline retail, restaurants and so on. These businesses are likely to recover at some point. The transportation sector has also been weak. Toll road volumes, airport passenger numbers and railway ridership are still much lower than they were before the pandemic. I expect mean reversion as restrictions lift in the next few months or quarters. I believe that oil demand will also shift upwards as air travel resumes and cars get back on the road. This will have implications for oil & gas producers as well retailers of gasoline. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6f96653e-67cf-48ea-8fa2-6721ec448e28_1100x51.png) Next week, I’ll write about one of the companies that should benefit from China’s re-opening. To make sure you don’t miss it, subscribe by clicking the “Subscribe now” button below: [Subscribe now](#/portal/signup) ### Portfolio update November 2022 URL: https://www.asiancenturystocks.com/portfolio-update-november-2022/ Last updated: 2026-06-04T11:48:31.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/portfolio-update-november-2022/) **Disclaimer:** *This article constitutes the author’s personal views and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks when publishing this article. This is a disclosure - not a recommendation to buy or sell stocks.* # Portfolio update Finally, some sail in the wind. The portfolio rebounded sharply in November, up +7.8% month-on-month and up +6.5% since inception in October 2021 in US Dollar terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d7d7e979-95a4-4c51-b23c-5fbdee0b5d74_3240x1088.png) A primary contributor to last month’s performance was [**MAP Aktif**](https://www.asiancenturystocks.com/map-aktif-adiperkasa/)*(MAPA IJ - US$768 million)*, which reported solid 3Q2022 numbers and with analyst estimates trying to catch up with reality. Small position [**VTech**](https://www.asiancenturystocks.com/deep-dive-2022-26-vtech/) *(303 HK - US$1.6 billion)* also rebounded after its late October 2022 crash. [**Sony**](https://www.asiancenturystocks.com/sony/)’s *(6758 JP - US$102 billion)* stock price went up after reports of the PlayStation 5 finally becoming available to consumers. The US Dollar has also come off with DXY topping out, causing currency gains for the portfolio. The market is pricing in an earlier end to Fed’s rate hike cycle than previously expected. That’s also the reason why bond yields have come down and why many Asian bond proxies rebounded in November. Here is my Asian portfolio as of 30 November 2022: _This post is for paying subscribers only._ ### Monday morning links 🔗 URL: https://www.asiancenturystocks.com/monday-morning-links-522/ Last updated: 2022-11-28T04:00:37.000Z Codan, Geely, Dairy Farm International, Casio Computer _This post is for paying subscribers only._ ### Codan (CDA AU) URL: https://www.asiancenturystocks.com/deep-dive-2022-29-codan-cda-au/ Last updated: 2026-07-31T01:32:20.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Codan at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* --- [**Codan**](https://finance.yahoo.com/quote/CDA.AX?p=CDA.AX&.tsrc=fin-srch&ref=asiancenturystocks.com)(CDA AU) is an Australian small-cap dominating the niche for high-end metal detectors. It also produces communication equipment for use in remote locations. It bears the hallmarks of a “hidden champion”: global leadership within a niche, a strong brand name, operating margins of 25% and a return on equity of about 30%. Codan’s strong market position has enabled the company to compound capital at a rapid rate. The company was started by three friends from the University of Adelaide in 1959, initially focusing on radio devices used in the Australian outback. In 2008, Codan acquired fellow Adelaide company Minelab, known for its high-end metal detectors. Today, Codan’s revenues are split 50/50 between the metal detector and the communications business. But thanks to much higher margins in the metal detector segment, Codan’s operating profit is still driven by the metal detector segment. The metal detectors are sold under the “Minelab” brand name. They cost anything from US$500 to US$10,000 apiece. So why would you pay US$10,000 for a metal detector? Because they’ll be able to find smaller gold nuggets deeper into the ground, with added functionality such as GPS connectivity. Competitors like Garrett and Nokta have difficulty competing in the higher-end segment. In Codan’s communication segment, it serves militaries and government agencies needing encrypted communication, often in remote locations where there’s no existing infrastructure. Products include transceivers, handheld radios, radio coverage repeaters, encryptors, power solutions, etc. Codan enjoyed strong growth during the initial stage of COVID-19\. Hobbyists bought metal detectors with their stimulus money during a period when outside exercise and social distancing were encouraged. Also, artisanal miners bought equipment as larger gold mines shut down due to supply chain issues. And many individuals who lost their jobs in the pandemic also turned to gold prospecting. Since then, demand for Codan’s metal detectors has slowed considerably, causing Codan’s inventories to rise. The company’s 1HFY2023 guidance for the metal detector segment was weak, causing estimates to drop. A few positives are starting to emerge. Insiders are buying shares in the open market. Back in August, new CEO Alf Ianniello said that inventories had probably peaked. Four new coin & treasure detectors will be released by the end of the calendar year 2022 and early 2023\. And management guidance for FY2023 and FY2024 is optimistic. And it’s also worth mentioning that Codan would be a beneficiary of a higher gold price. Gold prices are a function of real interest rates. And some argue that if we’re nearing the end of the Fed’s rate hike cycle, then that headwind for gold is finally going away. Assuming full recovery by FY2025, I foresee a P/E of 8.0x, EV/EBIT of 5.9x and a dividend yield of 6.3%. Historically, Codan’s P/E multiple has been in the 10-20x range with a median level of 13x. Key risks are new product introductions from Garrett and Nokta. And whether Alf Ianniello can live up to the high expectations set by previous, legendary CEO Donald McGurk. _This post is for paying subscribers only._ ### Dairy Farm late-2022 update (DFI SP) URL: https://www.asiancenturystocks.com/dairyfarm2022update/ Last updated: 2022-11-23T03:39:03.000Z Health & beauty benefitting from a HK-China border reopening but weaker post-COVID grocery profits. Estimated reading time: 14 minutes _This post is for paying subscribers only._ ### Monday morning links 🔗 URL: https://www.asiancenturystocks.com/monday-morning-links-e92/ Last updated: 2022-11-21T04:00:52.000Z Tabcorp, Bukalapak, Bursa Malaysia _This post is for paying subscribers only._ ### Asian Century Stocks annual 2022 survey URL: https://www.asiancenturystocks.com/asian-century-stocks-annual-2022/ Last updated: 2022-11-20T08:46:15.000Z Thanks for your continued support _This post is for paying subscribers only._ ### Tabcorp (TAH AU) URL: https://www.asiancenturystocks.com/deep-dive-2022-28-tabcorp/ Last updated: 2026-07-31T01:32:00.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment suits your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Tabcorp at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* [**Tabcorp**](https://finance.yahoo.com/quote/TAH.AX?p=TAH.AX&.tsrc=fin-srch&ref=asiancenturystocks.com)(TAH AU) is Australia’s second-largest company in the wagering industry, offering punters the ability to bet on horse races and other sports events. The government of Victoria set up the company in 1961 under the name of the Victorian “Totalisator Agency Board” (TAB). Since then, the company has quietly consolidated the industry into a single entity. Today, Tabcorp holds exclusive retail and totalisator licenses across all Australian states and territories except Western Australia. Totalisator (“tote”) betting differs from fixed-odds betting in that the company doesn’t offer odds to the gambler. Instead, the operator puts all bets into a pool, and the house take is removed. The remaining money is then shared among the winning individuals. In tote betting, the operator itself doesn’t take much risk. In May 2022, Tabcorp spun off its lotteries and keno division: The Lottery Corporation, with its ticker TLC AU. The remaining “New Tabcorp” has three divisions: 1. **The wagering business**: Enabling customers to put on wagers on horse races and other sports events across 4,300 venues in Australia 2. **The media business**: Several TV channels stream racing-related content to Australian viewers, both at home and in-store. 3. **The game services business**: Servicing electronic gaming machines in pubs, hotels, etc., across New South Wales, New Territory, Queensland and elsewhere. Many local investors seem to consider The Lottery Corporation to be the superior long-term investment alternative. And indeed, Tabcorp looks like the more troubled business of the two. For example, Government-mandated store closures caused Tabcorp’s wagering turnover to drop. And the rise of online gambling has enabled Northern Territory bookmakers and overseas competitors to take market share from Tabcorp. Since they have been operating with lower taxation pressure than Tabcorp, they’ve been able to offer punters better odds. But there are also several positives with Tabcorp’s recent demerger: - Most of the debt was shifted onto The Lottery Corporation's balance sheet. New Tabcorp, on the other hand, is virtually debt-free. - Australia is finally moving on from COVID-19-related lockdowns, with the country learning to live with endemic COVID. - Tabcorp is now lobbying hard for regulators to equalise the playing field between offline operators and online competitors. - Tabcorp’s management team has been replaced with younger faces. In particular, controversial CEO David Attenborough has left the organisation. Tabcorp is also becoming more of a customer-centric organisation, as evidenced by a new Chief Customer Officer and customer-related KPIs used to calculate the remuneration of the senior management team. - The new wagering app released in September 2022 could help Tabcorp become more competitive, although the initial reviews were lukewarm. Tabcorp’s online business already represents 62% of wagering turnover, but it still lags behind the market leader Sportsbet with its two million+ active accounts. Tabcorp’s current enterprise value is around AU$2.3 billion, equivalent to a forward-looking EV/Sales multiple of 0.9x. The peer group trades closer to 2.5x. Tabcorp’s pro forma income statement shows a pre-COVID operating margin of 11%, broadly in line with the peer group. If so, we might be looking at a sub-10x EV/EBIT once the business recovers from COVID-19. Apollo recently announced a bid of AU$4.0 billion for Tabcorp’s wagering and game services business. The regulatory hurdles are admittedly high, but at least the bid tells you how the private market values the business. Similar transactions have taken place at 10x EV/EBITDA, which - if applied to Tabcorp’s forward-looking EBITDA - would imply an enterprise value of almost AU$5.0 billion. Significant insider buying from CEO Adam Rytenskild and Chairman Bruce Akhurst suggests that they are seeing value in the company. The key risks are from online competitors, an upcoming 2024 license renewal in its home state of Victoria, and any delays in the recovery from COVID-19. _This post is for paying subscribers only._ ### Monday morning links 🔗 URL: https://www.asiancenturystocks.com/monday-morning-links-a3b/ Last updated: 2022-11-14T04:01:04.000Z Kaveri Seed, Chinese property developers, Mark Mobius's new book _This post is for paying subscribers only._ ### Inflation-protection provisions are inadequate URL: https://www.asiancenturystocks.com/inflation-protection-provisions-are/ Last updated: 2025-10-24T15:10:31.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be6a0688-555a-4aab-a4dd-62ae5c73a66e_576x324.png) Mark Mobius is not a fan of inflation. In his new book [The Inflation Myth](https://www.amazon.com/Inflation-Myth-Wonderful-World-Deflation/dp/1119741424/ref=tmm%5Fhrd%5Fswatch%5F0?%5Fencoding=UTF8&qid=1668053746&sr=8-1&ref=asiancenturystocks.com), emerging market fund manager Mark Mobius tells you all you need to know about inflation. How central banks were created to enable governments to spend money they didn’t have. How excess spending explains much of the inflation pressures we’re seeing today. And how government inflation statistics almost always understate the true nature of inflation. If true inflation is higher than we think, it will have widespread ramifications for asset prices. Regulated assets whose revenues are adjusted in line with CPI may not offer as much inflation protection as you think. # 1\. A brief history of inflation Inflation can be defined as a loss of purchasing power - your $100 being able to buy fewer and fewer goods and services over time. The first known example of widespread inflation was in the fourth century BC when the ruler of Syracuse “Dionysius” had the brilliant idea of dealing with rising debts by changing the face of all coins. Each coin became worth two, thus halving the debt burden at a stroke. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5440072-dcd1-4e65-a07e-fa3d976d0277_1398x668.png) “Drachma” coins during Dionysius’ reign. Source: [NumisBids](https://www.numisbids.com/n.php?p=lot&sid=1369&lot=31005&ref=asiancenturystocks.com) Similar debasement took place in the Roman Empire, with the silver content falling from 100% to less than 10% in the span of 200 years: ![Currency debasement - Silver content of roman empire coins. : r/Wallstreetsilver](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/75a05a06-d4d1-48d0-951a-105f4ba18079_610x458.jpg) Source: Société Générale The invention of paper money in seventh-century China accelerated the process towards inflation. But throughout most of subsequent history, such paper money was usually backed by gold or silver as coins had been in the past. In the 17th to 19th century United States, when the US Dollar was mostly backed by hard currency, periods of inflation and deflation mostly balanced each other out. So net-net, inflation pressures remained modest. ![The Great Deflation - Wikipedia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e2624928-b553-478c-8012-614d0526280d_1200x588.png) Source: Wikipedia The US economy was strong during this period. For example, between 1870 and 1900, the US experienced a multi-year period of deflation. The mechanisation of labour, improved transport infrastructure, oil lamps and so on caused productivity improvements that led to lower prices. Such deflation was not harmful at all - quite the opposite: > *“Thanks to the spread of electricity and other such wonders in the final quarter of the 19th century, prices dwindled year by year at a rate of 1.5% to 2% per year. *People didn't call it deflation – they called it progress*.”* \- Jim Grant As you can tell from the chart above, the US inflation rate has picked up significantly since the early parts of the 20th century. Mobius argues that central were created by governments to spend money they didn’t have. For example, both world wars were financed through large budget deficits in the United States and Europe. And the US inflation rate only picked up after President Nixon severed the link between gold and the US Dollar back in 1971. Since then, we’ve been in a pure fiat world. The US Dollar is not backed by anything except the fact that domestic contracts need to be denominated in US Dollars (“legal tender laws”) and that you need US Dollars to pay your taxes. So it’s difficult to speak of any “intrinsic value” of our fiat currencies, per se. The supply and the demand for them are usually stable until savers become concerned about government spending. But until this point, the path of least resistance for most individuals is to keep their savings in the national currency. Meanwhile, governments have their own constraints. If they’re not careful, a big loss of purchasing power can cause voter discontent. Understanding this risk, governments generally try to keep inflation in the low single digits - high enough to favour itself and vested interests but not high enough to cause voters to revolt. Today, most democracies have ended up with inflation targets of around 2%, including the European Central Bank and the Federal Reserve, though the latter has a dual mandate of low inflation and maximum employment. --- # 2\. Inflation comes from excess money creation According to Mobius, there are four theories of where inflation comes from: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7b73c947-bb57-44e4-a491-d6dbccb980b8_2782x894.png) 1. Economist John Maynard Keynes argued that inflation comes from *too much demand chasing a limited number of goods* and services. This is also known as [**demand-pull inflation**](https://en.wikipedia.org/wiki/Demand-pull%5Finflation?ref=asiancenturystocks.com). 2. Another economist, Milton Friedman, argued that it’s usually *excess money* that causes demand to increase in the first place, causing inflation to shoot up. This explanation is known as the [**quantity theory**](https://en.wikipedia.org/wiki/Quantity%5Ftheory%5Fof%5Fmoney?ref=asiancenturystocks.com) of money. 3. The third theory of inflation is [**cost-push inflation**](https://en.wikipedia.org/wiki/Cost-push%5Finflation?ref=asiancenturystocks.com#:~:text=Cost%2Dpush%20inflation%20is%20a,increase%20prices%20of%20their%20outputs.), when *supply constraints* lead to higher prices. However, those tend to be temporary. 4. Finally, when *everybody expects inflation to be x%* every year, they will demand their wages to keep up with inflation. Companies will also be pushed to raise prices by an equal percentage to keep their profit margins intact. This is what’s known as [**built-in inflation**](https://en.wikipedia.org/wiki/Built-in%5Finflation?ref=asiancenturystocks.com). In my view, demand-pull inflation seems to be the explanation for long-term inflation pressures. But the primary cause of this higher demand growth is clearly excess money creation. People need higher salaries to spend more, and salaries don’t shoot up for no reason. The process by which money is created in today’s fractional reserve banking system is complex. Households, companies and the government put their money in normal commercial banks. Commercial banks then set aside a percentage of those deposits in the central bank to ensure they have enough liquidity for potential withdrawals. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/718f65b7-b88f-4adb-b3a6-e8d9cc0e1b73_2870x1640.png) When most people think of money creation, they often picture central banks printing new money, either physical bills or adding reserves that commercial banks hold with the central, in a process called [quantitative easing](https://en.wikipedia.org/wiki/Quantitative%5Feasing?ref=asiancenturystocks.com). But the type of money we call central bank reserves are “stuck” in the banking system and cannot be spent on goods and services. And so they don’t really affect consumer price inflation. Today, when the link between commercial bank lending and the quantity of central bank reserves has been severed through the introduction of interest on excess reserves, they’re only used to settle liabilities between banks. The quantity of reserves doesn’t matter much for inflation anymore. Central bank money is also known as “narrow money” and is only 5% of the total money in circulation. The remaining 95% of the money comes in the form of normal commercial bank deposits. And those bank deposits don’t grow by “money printing”. Instead, commercial bank deposits grow whenever someone takes on a new loan: either private sector borrowers such as households or corporates or the public sector through central and local governments: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e5475aa5-a28c-4108-87ce-be5bbfdf1f17_1194x494.png) It almost seems like magic. But in a fractional reserve banking system, bank loans can be created out of thin air, increasing the money supply. For example, if you take on a mortgage to buy a property, you receive money from the bank, and the seller of the property receives money in a bank deposit. The total amount of bank deposits in the economy suddenly increased. **Private sector money creation typically moves in long-term cycles**. When there is not much debt in the economy, any new loans will have a large impact on the money supply and therefore push inflation higher. Eventually, the private sector becomes so indebted that it cannot take on any more debt - despite zero interest rates. The economy reaches the end of the debt accumulation phase. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f6b68c18-9c4f-48da-b890-329aa8755f59_1024x557.png) The long-term debt cycle. Source: Bridgewater At this point, governments can step in and ramp up their budget deficits. If they do it well, they’ll help deleverage the economy. If they don’t do it well, governments end up over-indebted. So at the end of the long-term debt cycle, they need to be careful in how they act: - **In a Great Depression scenario, government budget deficits are too-low** or completely absent while the private sector reduces its debt. This causes a large contraction in the money supply. Widespread bankruptcies ensue. - **In the Japan scenario, new government borrowing just-about balance private sector deleveraging** and nominal growth remains almost the same as the interest rate. You end up with a functioning economy but no money supply growth. Debt/GDP remains the same. Low-interest rates also enable zombie companies to survive, causing productivity to suffer. - **In a “beautiful deleveraging” scenario**, the government budget deficit is large enough for growth to reach “escape velocity” - with nominal income growth greatly exceeding the interest rate. This happened during the Second World War when “yield curve control” kept interest rates low while high budget deficits allowed the economy to deleverage. And eventually, a new long-term debt cycle began twenty years later. So borrowing creates new money, which then chases a limited amount of goods and services, driving up prices in the process. This debt accumulation continues until the private sector has so much debt that it’s reluctant to take on any more debt. It’s then up to the government to step in if it wants inflation to continue. --- # 3\. Interest rates determine the cycle It’s not inevitable that the private sector gears up to unsustainable levels as I described above. The driver of higher leverage is typically that interest rates are so low that you’d be a fool not to borrow. And when interest rates are too low, those who have the ability to borrow benefit at the expense of all others in the economy. ![Economist Irving Fisher - Biography, Theories and Books](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1da98295-9784-4c0b-ae3b-66d721f87bb0_580x326.jpg) Irving Fisher In 1932, American economist Irving Fisher came up with the concept of the [real interest rate](https://en.wikipedia.org/wiki/Real%5Finterest%5Frate?ref=asiancenturystocks.com). It can be described formally as: ``` Real interest rate = nominal interest rate - expected inflation rate ``` Fisher argued that the nominal interest rate matters less than the interest rate adjusted for inflation. For example: - A 4% interest rate in a 6% inflation environment, with a real interest rate of -2%, should be seen as attractive - Whereas a 2% interest rate in a zero-inflation environment, a real interest rate of 2% should not **The problem with Fisher’s view** is that it doesn’t predict actual borrower behaviour. Few borrowers take on debt hoping that consumer prices will fall so that they can buy consumer goods later for a cheaper price. That’s just not how borrowers think. A better model of borrower behaviour is that offered by the so-called [Wicksellian spread](https://en.wikipedia.org/wiki/Wicksellian%5FDifferential?ref=asiancenturystocks.com). It’s named after Swedish economist Knut Wicksell who argued that there is an invisible “natural rate of interest” that causes the supply and demand for capital to clear: ``` Wicksellian spread = Natural rate of interest - interest rate ``` And so, how do you calculate this invisible “natural rate of interest”? French economist [Charles Gave](https://web.gavekal.com/books/stagnation-or-bust/?ref=asiancenturystocks.com) argues that the natural interest rate can be approximated by the returns on capital for the average BBB-rated company. It can also be approximated by nominal wage growth or nominal GDP. Charles Gave’s reasoning is that if average companies can make a positive return from borrowing and investing - they will do so. Or if households can make a positive return from borrowing and investing in wage proxies like rental houses, they will also do so. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/be551e11-7211-4652-8240-14d5843c49b8_950x656.png) When the Wicksellian spread is positive, the private sector will borrow and the velocity of money goes up. Source: [Too Different For Comfort](https://www.asiancenturystocks.com/content/files/media/ebook%5Ffiles/lvgavetoodifferentforcomfort.pdf) The conclusion is that if the interest rate is way below returns on capital for companies or way below wage growth for households, then the private sector will probably borrow. And with higher borrowing, you’ll get excess money sloshing around in the economy, causing the inflation rate to rise. --- # 4\. Inflation statistics are inaccurate > *“One of the things I'm pretty convinced of based on our analysis is that *inflation is under‐reported in China by as much as 4 to 5% a year* … if the inflation figures were wrong, then this would also apply to the levels of economic growth the country was enjoying”* \- Jim Chanos Governments justify persistent inflation with the argument that as long as citizens maintain their purchasing power, then they won’t be hurt by the inflation. But one problem with that argument is that inflation is almost impossible to measure. And even if it were possible to measure it, governments are incentivised to conceal the true inflation to avoid voter backlash. Another problem with the argument is that asset price inflation is typically neglected by central banks. So even if consumer price inflation is low, a loose monetary policy can cause some people to get rich while the rest are unable to compete when it comes to buying a house or affording, say, college tuition. The inflation rate is usually approximated by the change in a consumer price index (“CPI”). A government agency identifies a broad basket of goods that consumers typically buy. It then uses surveys to measure how the prices of the goods in the basket change over time. But as Mobius points out, CPI has several key flaws that make it an inaccurate metric: 1. The first problem is that **CPI excludes certain goods and services,** such as mortgage costs and out-of-pocket costs for medical care. Other related metrics, such as “Core CPI” and “Core PCE”, ignore food, energy and other important categories. Further, many of the fastest-rising expenses for households tend to be underweighted in CPI measurements: ![Image](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/04d43fda-863a-40f2-b00a-110101839485_540x502.png) Deflationary pressures in goods prices, whereas the cost of housing, education and medical care is rising rapidly. Source: howmuch.net 1. Second, **the basket of goods changes rapidly**. It’s impossible to update the basket in real time. For example, a study showed that 44% of online sales in a given year were goods that didn’t exist the year before. How can the basket be adjusted properly to account for such rapid shifts in consumption? 2. Third, most CPI calculations perform so-called [**hedonic adjustments**](https://en.wikipedia.org/wiki/Hedonic%5Findex?ref=asiancenturystocks.com). For example, if the price of a steak rises, the government assumes that consumers will simply purchase a cheaper substitute, like hamburgers. Or if the price of a memory chip goes down, CPI is adjusted downwards, even though most consumers will just buy the latest computer instead and not notice any difference. 3. Fourth, inflation statistics are **backwards-looking**. They don’t tell you what the current inflation pressures are like - only what inflationary pressures were in the past. 4. Finally, CPI calculations are based on **what people say they buy** \- not what they actually buy. Who knows whether consumers are truthful or not? So even if governments want to target the inflation rate to ensure constant purchasing power, it’s easier said than done. And governments may not even want to tell you the truth in the first place. This inaccurate representation of inflation helps governments deceive their citizens about the true nature of the economy, as economic growth is measured in real terms after subtracting a somewhat arbitrary inflation measurement like the [GDP deflator](https://en.wikipedia.org/wiki/GDP%5Fdeflator?ref=asiancenturystocks.com). --- # 5\. Governments love inflation > *“By a continuing process of inflation, government can *confiscate*, secretly and unobserved, *an important part of the wealth of their citizens*”* \- John Maynard Keynes Governments are comfortable with a moderate level of inflation. The shift to fiat currencies and the central bank setting of interest rates has enabled them to spend money above what has already been raised through normal taxation. With fiat currencies, they can now promise their voters spending programs they care about without facing the challenge of raising taxes. This is particularly useful in developing countries where tax systems tend to be unsophisticated. Another reason for governments to push for higher inflation is that voters will be tricked into thinking they are progressing when their compensation rises. They may not realise that their costs are probably rising even faster. Let’s also not deny the fact that big businesses often lobby their government to keep spending on specific areas. And as inflation surprises to the upside, businesses will also benefit from a lower labour cost. We saw that in Weimar Germany in 1919-23 when the real labour cost fell 40-60% vs the pre-inflation era. You can find my post on that topic here: [Post-war Germany's lessons on inflationCostantino Bresciani-Turroni was an Italian economist that lived between 1882 and 1963\. He’s famous for being an anti-fascist intellectual and a proponent of free-market economics. But more importantly, he wrote a book called The Economics of Inflation![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century Stocks](https://www.asiancenturystocks.com/post-war-germanys-lessons-on-inflation/) If the inflation rate gets too high, voters will eventually revolt. For example, Germany’s hyperinflation of the early 1920s left a scar in the national psyche causing Germans to remain prudent borrowers. And the generation that lived through China’s hyperinflation of the early 1940s became suspicious of paper money for decades to come. Today, governments seem to think low single-digit inflation is the sweet spot. They will argue that a little bit of inflation is good for the economy, even though - as Mobius points out - there is no proof that this is actually the case. Inflation is simply a compromise that enables politicians to get re-elected, help them favour vested interests and boosts real economic growth calculated by subtracting inflation rates that are probably underestimated in the first place. --- # 6\. Inflation causes redistribution of wealth > *“*\[Inflation\] discourages all prudence and thrift*. It encourages squandering, gambling, reckless waste of all kind. *It often makes it more profitable to speculate than to produce.* It tears apart the whole fabric of stable economic relationships. Its inexcusable injustices drive men toward desperate remedies. It plants the seeds of fascism and communism.”* \- Henry Hazlitt Inflation leads to winners and losers. That’s especially the case if inflation surprises to the upside or surprises to the downside. In such scenarios, long-term contracts that are fixed in nominal terms will benefit one party and do a disservice to the other party. For example, if your wireless operator gives you 30-day payment terms, then if inflation surprises to the upside, you will gain by being able to pay after 30 days in depreciated currency. Meanwhile, the wireless operator giving those payment terms will lose. Such redistribution of wealth has widespread implications and is largely neglected by the public. So who benefits from high inflation? Generally, the rich asset owners and speculators benefit while the hard-working middle class are on the losing end: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0caf2c59-8363-43c9-963c-b21a0c8b4c19_1704x622.png) Specifically, these are the groups that benefit from higher-than-expected inflation: - **Fixed-rate borrowers** such as corporates or the government benefit as they will receive money today and be able to pay it back through depreciated currency. - **Speculators** can borrow at low-interest rates and invest in assets that grow in line with nominal incomes, for example, precious metals, real estate or stocks. - **Business owners selling products that are unregulated**: Companies whose revenues are non-regulated and enjoy pricing power tend to adjust to inflation almost instantaneously. They also benefit from lower real wages, which tend to lag behind the true inflation rate. - **Governments**: Inflation helps governments reduce their liabilities. And persistent government deficits help them spend beyond their means. Also, as income tax brackets and personal exemptions tend to be fixed in the short-term, inflation causes overall taxation pressures to rise, a phenomenon called [bracket creep](https://en.wikipedia.org/wiki/Bracket%5Fcreep?ref=asiancenturystocks.com). Who loses from higher-than-expected inflation? - First and foremost, **savers**: Most individuals and businesses keep their money in demand deposits at commercial banks. The interest they receive tends to be far lower than the CPI and way below nominal income growth. So inflation can be seen as a tax on savers. - **Individuals on fixed salary**: Individuals who have to bargain hard for any wage increase will be in a tough spot. Trying to keep up with inflation may require them to switch jobs frequently to battle the inertia inherent in the setting of middle-class wages. - **Lenders**: Owners of fixed-income securities or lenders tend to lose from inflation. They pay out money today, but the money they receive in the future will have depreciated. - **Pensioners**: Other groups that live off fixed incomes are pensioners and those that receive disability benefits. While there may be CPI adjustments in the payouts, CPI often doesn’t capture the true extent of underlying inflation. In my view, this redistribution is hard to justify from any moral standpoint. It creates a perverse incentive structure that no doubt weighs on productivity. If economic actors spend more time trying to benefit from this ongoing redistribution of wealth rather than being productive, society-wide prosperity will decrease. --- # 7\. Inflation protection might not be enough This discussion takes us to my final point: **If inflation statistics understate the true nature of inflation, then any asset whose value is linked to consumer price inflation will be at risk**. Early on in my career, I worked in corporate finance, advising companies and funds on their acquisitions of infrastructure-related assets, including utilities, railroads, toll roads, airports and so on. Such regulated assets typically have CPI adjustments in their revenue line that protect investors from currency devaluation. If Mark Mobius is right that CPI understates true inflation pressures, investors in such assets will eventually lose out. Meanwhile, any company with **true pricing power,** such as consumer goods companies and owners of real estate, will be able to raise their prices much faster - not only in line with CPI but with overall wage growth. Which - as Mark Mobius points out - has almost always been higher than CPI. The philosophical argument behind CPI-linked “inflation protection” doesn’t make sense either. Who cares if your CPI adjustment allows you to buy a similar number of television sets or sweaters in the future? What matters for investors is the [opportunity cost](https://en.wikipedia.org/wiki/Opportunity%5Fcost?ref=asiancenturystocks.com#:~:text=In%20microeconomic%20theory%2C%20the%20opportunity,to%20do%20a%20different%20option.) they face in choosing to invest in one asset over the other. If goods producers or owners of real estate can raise prices faster than regulated assets, then those stocks should trade at much higher multiples today. So be sceptical whenever someone claims that CPI adjustments will adequately protect against currency devaluation. --- # 8\. Conclusion Since central banks were introduced in the 19th and 20th centuries and currencies ceased to be backed by gold and silver, inflation has become a recurring theme in our lives. While we might be close to the end of the long-term debt cycle, COVID-19 has shown us that governments are totally capable of raising their budget deficits to excessive-, World War 2-type levels. High inflation rates may well continue. Don’t buy into the idea that CPI-linked assets protect your purchasing power. It’s usually better to own wage proxies like real estate. Or companies whose revenues are unregulated and have enough pricing power to raise prices in line with wages. And across the cycle, we should probably avoid fixed-income assets such as bank deposits and maybe even bonds, too. --- Asian Century Stocks is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber. ### Monday morning links 🔗 URL: https://www.asiancenturystocks.com/monday-morning-links-36f/ Last updated: 2022-11-07T04:01:10.000Z PAX Global, October portfolio update, Asian shipbuilding _This post is for paying subscribers only._ ### Shipbuilding 101 ⚓️ URL: https://www.asiancenturystocks.com/shipyards/ Last updated: 2025-11-13T01:45:47.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/shipyards/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/06776f7e-e07c-4012-901d-9d3ef907136c_636x424.jpg) # Summary - Shipbuilding is a pretty dismal industry, with low margins and vulnerability to movements in labour costs, exchange rates and commodity prices. - The supply of shipyard capacity has dropped since the last peak in 2008 and has only now started to peak. - Meanwhile, demand for shipyard capacity has improved thanks to record orders for containerships and LNG carriers. - Environmental regulation will also increase the demand for shipyard capacity, as existing vessels need to be replaced or upgraded to meet the 2050 green goals set out by the industry body IMO. - While shipyards have been burdened by rising wages and prices for steel, those headwinds are now disappearing. New-build prices have also gone up, suggesting that yard profitability is about to improve. - The Korean shipyards are well-placed to meet the demand for more environmentally-friendly and complex-to-build ships. But those stocks are trading at high multiples. - [**Yangzijiang**](https://finance.yahoo.com/quote/BS6.SI/?p=BS6.SI&ref=asiancenturystocks.com) and [**Namura Shipbuilding**](https://finance.yahoo.com/quote/7014.T/?p=7014.T&ref=asiancenturystocks.com) in Japan trade at lower multiples. The former has almost unbelievable 20%-type operating margins. Namura Shipbuilding benefits from the weaker yen and is well-placed to benefit from an uptick in tanker orders. - Meanwhile, [**Kawasaki Heavy Industries**](https://sg.finance.yahoo.com/quote/7012.T/?p=7012.T&ref=asiancenturystocks.com) and [**Austal**](https://finance.yahoo.com/quote/ASB.AX/?p=ASB.AX&ref=asiancenturystocks.com) are well-placed to benefit from the secular trend of higher defence spending. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8a8c6fae-bb3b-4d56-ad50-4191a264a233_1100x50.png) # Table of contents 1\. The basics of shipbuilding 2\. How shipyards make money 3\. Regulatory environment 4\. Supply & demand for shipyard capacity 5\. Shipbuilding industry map 5.1\. South Korea 5.2\. China 5.3\. Japan 5.4\. India 5.5\. Other countries 6\. Conclusion --- # 1\. The basics of shipbuilding ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ecfabeda-4000-4c75-9472-c86e97a9d177_1061x707.jpg) Source: Getty Images Shipbuilding is a simple business. Buy a piece of land next to the sea or the banks of a river. Then set up workshops, equipment and manpower to construct vessels. Here is an illustration of how a typical shipyard might look like, using Hyundai’s Mipo shipyard in Ulsan, South Korea, as an example: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/de3a8a43-3661-4473-8b1f-64f53b3007ec_605x451.png) A typical shipyard in South Korea, with dry docks in the middle. Source: Daewoo Production of parts takes place in workshops, and final assembly is then done in either dry docks (on land) or floating docks (in water). Large cranes move parts between each section. Here are the key steps of the process of building a vessel, most of which are mentioned in the picture above: - **Cutting factory**: A cutting factory is used to create steel parts, of which you typically need 50,000-100,000 for a single ship. - **Assembly line**: Small and middle-sized blocks are connected into large blocks, each weighing more than 400 tonnes. - **Blasting and painting**: These large blocks are blasted with iron powder to clean the surfaces and then painted. - **Outfitting factory**: Pipes and electric cables are installed to blocks such as the engine room. - **Grand assembly site**: This is the place where the grand assembly blocks are built by connecting large blocks from the assembly lines. - **Dry dock**: This is where the hulls of the ship are constructed from the grand assembly blocks. Dry = on land. - **Float-out**: Finally, the vessel is put into the sea by raising the water level in the dry dock - a so-called “float-out”. The ship is then delivered to its new owner. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6176a71a-687c-4849-838b-7e91da7b8772_1061x707.jpg) A newly built ship is being put into water. Source: Getty Images The amount of work needed to build a ship is usually measured as [**compensated gross tonnage**](https://en.wikipedia.org/wiki/Compensated%5Fgross%5Ftonnage?ref=asiancenturystocks.com) (“CGT”). You calculate the CGT by taking the cubic feet of the ship’s internal value and then adjusting that number with a coefficient based on the additional workload required to build a particular ship. For example, the internal spaces of a passenger ship are far more complex than those of a dry bulk carrier, and their coefficients will therefore differ. Any unit of CGT will be roughly the same in terms of the workload needed to be done by the shipyard. [**Deadweight tonnage**](https://en.wikipedia.org/wiki/Deadweight%5Ftonnage?ref=asiancenturystocks.com) (“DWT”) is a completely different metric. It instead measures what weight in tonnes a vessel can carry. Here are the main types of ships that are typically built by shipyards: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/509cc81c-b8c7-4f8c-b16f-de130e191a4b_2808x1546.png) Cruise ships, ferries, yachts and motor- or sailboats are included in the passenger boat- or passenger ship category. The general cargo category includes containerships and so-called break bulk ships such as roll-on-roll-off (for passenger vehicles), reefer vessels (refrigerated for transport of fruits, etc.), livestock vessels, etc. In the bulk cargo category, you’ll find dry bulk ships used for commodities such as coal, iron ore etc., and tankers used for the transport of crude oil, LNG, etc. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/77d8b09a-1f2c-4aa3-92b5-5df4f8bc3436_2896x1204.png) The complexity of construction between these ships differs greatly: - For example, dry bulk carriers or tankers are among the least complex of larger ships. The competition among shipyards for these types of orders is, therefore, significant. - At the other end of the spectrum, military vessels, LNG carriers or cruise ships are more complex to build and therefore produced at specific first-tier shipyards. Since shipyards need to be close to water, they will be located along the shorelines in locations with greater water depth. Today, most commercial shipyards are assembled in the Eastern part of the world. The major shipbuilders today are China, Korea & Japan, as rising labour costs have made shipyards elsewhere uncompetitive. European companies still dominate the cruise ship and yacht industries, as those tend to be complex to build. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2c77b0af-eac6-4659-a3ab-0f6b9d5dc3f8_1000x700.png) Global shipbuilding order book by country. Source: [Eurobiz online](https://www.eurobiz.com.cn/china-ship-equipment-and-component-market/?ref=asiancenturystocks.com) State-owned shipyards tend to get a greater share of defence contracts. But they’re generally also worse run and often stupid about returns on capital. Private shipyards dominate the construction of higher-end, more technologically advanced vessels. And then there’s a question of new builds vs repairs. Some shipyards focus only on new builds. Others are also engaged in the repair or upgrading of existing vessels. Finally, there’s the ship-breaking industry, which involves disassembling vessels by individuals who have experience working with hazardous materials. In this post, I’ll focus almost exclusively on the commercial new-build market. --- # 2\. How shipyards make money ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/985115be-74a7-4f34-9759-3a22bb146ca0_1161x646.jpg) Source: Getty Images Shipyards take orders from customers such as shipping lines that want to expand capacity. If a shipyard has the capacity, it then proceeds to build the ships according to specifications. Ships are typically priced on a cost+ basis, with EBITDA margins of 5-10%. Here are the average EBITDA margins for shipbuilding companies between 2001 and 2015\. They’ve trended lower over time due to competition from China. The below chart also shows the cyclicality of the industry, with cycles lasting up to a decade or more. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7de84c2f-feac-4905-9601-1dd3eed7d666_840x588.png) Shipbuilder EBITDA margins. Source: [OECD](https://www.oecd.org/industry/ind/Imbalances%5FShipbuilding%5FIndustry.pdf?ref=asiancenturystocks.com) Ships are usually priced in US Dollars. The major expenses for a shipyard are raw materials and labour, in that order. In East Asia, the cost of labour is typically around 20-30% of the total manufacturing costs of a ship. This means that: - A drop in a country’s **currency** \- and resulting lower US Dollar wages - can have a major impact on a shipyard’s profitability - Equally, sudden increases in **wages** can cause existing projects to become unprofitable, especially if the contracts don’t allow for wage adjustments. - If prices for **raw materials** \- especially steel - go up more than expected, margins will be squeezed as well. A typical vessel might take 18-24 months to build. Smaller boats will take a shorter time, and very large crude oil carriers (VLCC), at the other end of the spectrum, might take up to 5 years. If the shipyard’s contract is fixed, as it often is, then the shipyard takes on the risk that the currency will appreciate, that wages will increase suddenly, or that raw material costs will go up. In the short term, the availability of machinery and equipment, such as marine engines, can also constrain shipyards’ ability to finish orders on time. Any delays will inevitably reduce their profitability. Another major factor for profitability is vessel prices. For example, after crude oil prices fell in 2014-15, new-build prices for tankers dropped precipitously, causing shipyards focusing on tankers to become less profitable. ![Increasing demand and rising costs drive newbuilding price hikes - Splash247](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5512b576-d4eb-4a14-847b-7adf35b732d5_782x524.jpg) Source: Maritime Strategies International Finally, there’s the question of utilisation. When a shipyard is operating near full capacity, profits will be decent. At the last cyclical peak for the shipyard market in 2008, utilisation rates hit 90%, and many shipyards earned a return on equity well above 20%. What are the determining factors for new-build prices and utilisation? The demand for ships, on the one hand, and the supply of shipyard capacity. The interplay between these factors causes long-term cycles, which can last a decade, if not longer. Sometimes, shipyards use their own balance sheets to build ships and then sell the vessels into the spot market upon completion to make sure they don’t stay idle for too long. But that’s obviously a risky strategy. --- # 3\. Regulation ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/2756f99e-3a27-49a5-97db-d7d95b5cbc79_1061x707.jpg) Source: Getty Images The regulation for shipyards is centred around local content requirements, state-financing support and the environment, especially with regard to CO2 emissions. Some countries have local content requirements. For example, in the United States, the Jones Act requires that Jones Act ships use a minimum amount of local components. In Asia, such requirements are rare. In Korea and China, we’ve seen the government step in to support local shipyards to help them win orders. For example, the Korean government bailed out Daewoo Shipping & Marine a few years ago, seemingly for non-commercial reasons. And the Chinese state is known to offer shipyards attractive customer financing packages and bank loans with low-interest rates. In terms of environmental regulation, the International Maritime Organization (IMO) will introduce the **Energy Efficiency eXisting ship Index** (EEXI) and the **Carbon Intensity Indicator** (CII) by the end of 2023 in an effort to reduce greenhouse gas emissions. Vessels will need to cut their CO2 emissions by over 20% initially. The CII will be assessed annually with stricter emission limits imposed each year by about 2% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e3066f33-cd3c-4209-8a29-89caa563a418_1986x1124.png) Source: Clarkson, Shinhan How can shipping companies meet these new requirements? By slowing down their ships, initially by 9% and then by another 0.7% each year. They can also adopt new types of fuels that lead to lower CO2 emissions, including: - **LNG-fuelled vessels**: Vessels powered by LNG emit 30% less CO2 than ships fuelled by bunker oil. Today, the combined order book in DWT of global shipbuilders has 22% LNG-fuelled vessels. - **Methanol**: Reduces CO2 emissions by 11%, SOx by 95% and NOx by 13%. Methanol stays liquid at ambient temperatures, so existing infrastructure for liquid fuels can be used. - **E-LNG**: A further transition to e-LNG, that is, LNG produced using electricity from renewable sources, could, in theory, lead to zero net emissions - **Ammonia**: Emits 90% less CO2, but the technology is immature. Ammonia stays as a gas at ambient temperatures and only becomes liquid below -33 degrees Celsius, and it is also highly toxic. The first ammonia-fuelled ships are targeting completion by 2024-25. Here are two scenarios presented by Norwegian rule-setter DNV GL: one where ammonia takes off and one bio-methanol ends up providing the majority of fuels for oceangoing vessels: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3874ecb4-1496-4114-89c9-1a13b324d932_1976x1078.png) Source: DNV GL, Shinhan In any case, existing ships need to be either replaced or upgraded. So how will shipyards be able to assist with this shift to lower CO2 emissions? - UK consultancy Shipping Strategy suggests that in order to be on track with the 2050 green goals laid down by the IMO, shipbuilding capacity will need to grow by 50% in the next five years. - Since there are 28 years left to meet the target, over 3,500 ships a year need to be built or refit every year. That’s an incredible number, given the current shipyard capacity. It’s hard to make the numbers work. - Also, it will take until the late 2020s before buyers will be confident enough to start ordering ships run on hydrogen and ammonia technology for commercial purposes. By that time, we’ll have closer to 20 years left to meet IMO’s targets. So, in conclusion, current environmental targets will be an uphill battle for the global shipping industry to meet. And they may help ensure high shipyard utilisation for many years to come. --- # 4\. Supply & demand for shipyard capacity ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4eb9eb3a-68e2-4a32-b180-a561a1d8408d_1060x708.jpg) Source: Getty Images Shipyard capacity has been dropping for almost 15 years at this point. And the number of active yards continues to drop. The reason has been an incredibly tough climate for shipyards, especially 2nd tier shipyards that lack the capacity to build larger, more complex ships. It looks like we’ve gone full circle from the heydays of the 2000s when the number of active shipyards doubled. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e604e8e8-44b8-4c8d-b053-ba50ca8a4b14_1237x676.jpg) Source: Clarksons Shipyard output has dropped as well. It’s down about 40% from the peak in 2010\. Meanwhile, the number of vessels built is down over 50%, as you can see here: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9f5055d9-c0c8-4ba5-b7c1-0321c437575f_1420x478.png) Source: Clarksons Yard utilisation rates reached 90% in the peak years of 2007-2010, as I’ve mentioned before. Today, they’re down to about 60% despite the drop in the number of active shipyards. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3d985481-c6eb-4792-b73c-ab1e8900a505_1730x1080.png) Source: Douglas-Westwood There’s also been a slight increase in tonnage per vessel, a trend that has benefitted the larger, tier-1 shipyards in Korea and elsewhere. The top 10 shipbuilding groups have increased their market share from just 41% in 2010 to 71% in 2021\. This trend towards greater complexity and consolidation is showing no sign of stopping, given the ever-increasing requirements for more fuel-efficient vessels. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/72e7e90f-6e86-48e9-bf8d-816119d6befa_724x482.png) Source: Getty Images Today, there are currently around 100,000 vessels operating today across the world, with a combined capacity of around 900 million CGT. Global shipyard capacity is around 57 million CGT, so about 6.3% of the CGT of vessels in use worldwide. Given that a ship lasts for 25 years (1/25 = 4%), the capacity seems to be about right to counteract yearly scrapping of 4% plus ton mile growth of about 2% per year (4% + 2% = 6%). Construction of new ships was initially curtailed by COVID-19 in early 2020, as lockdowns caused shipyards to shut down temporarily. Then, as cash hand-outs were provided to developed market consumers staying at home, they went on a shopping spree, increasing the demand for goods transported in container ships. Container rates reached a multi-decade high by the autumn of 2021. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9ee57740-c733-4c3b-93d5-3b51691d3bf1_2386x1356.png) A key container shipping rate. Source: Bloomberg Although the container shipping bubble has now burst, the order book for containerships remains high at almost [30% of the on-water capacity](https://www.freightwaves.com/news/container-ship-building-spree-is-not-over-yet-new-orders-still-rising?utm%5Fcontent=212972205&utm%5Fmedium=social&utm%5Fsource=twitter&hss%5Fchannel=tw-31128798), vs just 8% in 2020\. Most of those orders went to Korean and Chinese shipyards. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a3a00b5f-67d6-49c5-b981-2ffe41a9e7ee_1218x982.jpg) Orderbook by segment & country. Source: Drewry Given the weaker profitability in the container shipping market, you’d expect some orders to be cancelled. And indeed, containership new-build orders have come down over the past six months. The demand for dry bulk ships remains muted. The Baltic Dry Index remains at average levels. And weakness in China’s property market has caused the demand for industrial commodities to drop. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/25e8640c-3197-4a12-85ba-190b0b4180cf_2384x1358.png) Source: Bloomberg Finally, the demand for crude oil tankers has started to rise due to the war in Ukraine and a recovery in the demand for crude oil since COVID-19\. LNG carriers are also in high demand thanks to Asian LNG prices at record highs. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e08fbff9-13c2-4e13-a711-eb619366c8ff_2378x1354.png) Source: Bloomberg The contracting activity seems elevated for LNG carriers and containerships. Meanwhile, the equivalent of just 2% of the current fleet of tankers is contracted, suggesting a potential upside in tanker new-build orders going forward. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bbbb11d7-1922-43c4-aadc-9330c22b5782_1004x602.png) Source: Drewry --- Another major event in 2021 was a record increase in prices for raw materials such as steel. Prices soared by 50% from December 2020 until early 2022\. Steel prices are now finally coming down to earth. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/69f8286a-d72c-4f55-8bd0-645127c98c1d_2386x1420.png) Source: Bloomberg Those higher costs caused shipbuilding contracts signed in 2020 and early 2021 to become unprofitable. Much of the contracting until early 2021 was done without commodity price hedges. With shipyards squeezed by higher costs and becoming loss-making, they’ve started to [raise their prices](https://www.tradewindsnews.com/shipyards/japanese-yards-seek-higher-bulker-prices-amid-cost-concerns/2-1-1191934?ref=asiancenturystocks.com) to account to make sure they make a decent profit. Thanks to this increase in new-build prices, shipyards are in a very good position to earn decent margins in 2023. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/d2d799a5-b82b-4b54-be57-d56cf2a8e8ae_822x690.jpg) Source: Clarkson Research Another major trend has been the strength of the US Dollar, especially against the Japanese Yen. The weaker yen has improved the competitiveness of Japanese yards. As Mark Williams of UK Consultancy Shipping Strategy said: > *“The incentive to talk to Japanese yards is clear”* On the other hand, Japanese shipyards tend to sell their ships to domestic buyers, priced in Japanese yen. That limits how much they can benefit in the short term. This year, Chinese shipyards experienced production constraints due to recurring lockdowns to deal with COVID-19\. Total shipyard output was up 11% last year to 33m CGT but is projected to fall to around 27m CGT in 2022 due to weakness in Chinese shipyard output. Yard capacity has stayed flat since 2019\. And now, most tier 1 shipyards are operating at a high 70% utilisation rate. The utilisation of tier 2 shipyards is closer to 40%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eda4b819-8c61-4ed6-bc13-9eab0b7525c2_1280x848.jpg) Source: Drewry It’s possible that shipyards will expand to meet the higher demand. But given that it takes over 2 years from ground breaking to first production, we won’t see a supply response to this uptick in demand until 2024/25. In summary, COVID-19 led to a boom in orders for containerships and LNG carriers, keeping tier 1 shipyards busy for the next few years. We’re now seeing a slowdown in containership orders, though, and it’s unclear whether tanker orders will pick up the slack. In any case, shipyard profitability is likely to improve in 2023 as steel prices have come back to earth and 2021 vintage orders disappear from the backlog. --- # 5\. Shipbuilding industry map ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/565130b4-0e06-4698-bebf-9e43132d4d95_2430x1470.png) The world’s shipyards are typically divided into first-tier shipyards vs second-tier shipyards. The first-tier shipyards are able to produce ships longer than 122 metres and typically have the capabilities to build more advanced ships such as LNG carriers. Korea and Japan are a the forefront of technological developments. As of the end of 2021, China had 44% of the global shipbuilding order book, followed by Korea and Japan. Chinese shipyards are able to offer their customers attractive payment terms and financial packages supported by state-owned Chinese banks. The Singaporean yards are more focused on the construction of oil & gas rigs, which are not captured by the below data. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1de94297-c0cd-460e-b19a-6448babaefc8_786x562.png) Global shipbuilding order book by country. Source: IHS Markit The below chart shows which companies have received the majority of the orders. The Koreans are at the top, followed by private company Imabari Shipbuilding in Japan and private Chinese shipyard Yangzijiang and SOE-owned Jiangnan Shipyard. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/205c1cf6-6559-40d3-93ab-33fb1dfaec8c_1992x1146.png) Source: Shinhan A word on valuations: shipbuilders receive cash in advance, and liability is added, called unearned revenue or deferred revenue. Instead of deducting all cash, I usually use the net number (cash - unearned revenue) when calculating the cash portion of a shipyard’s enterprise value. Bloomberg doesn’t adjust the numbers this way, so be wary of headline enterprise value multiples. It’s also worth mentioning that shipyard stocks are incredibly volatile. P/E ratios should therefore be measured at mid-cycle revenues and margins or implied from P/B with their mid-cycle return on equity. --- ## 5.1\. South Korea ![Liner companies swamp Hyundai Mipo for feeder boxships | TradeWinds](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c0ef576a-ac73-494c-8e11-c1bdd9be2dd5_1600x796.jpg) Hyundai Mipo Dockyard Korean shipbuilders are doing well, representing a large part of the global order book. The industry is dominated by three companies: [**Hyundai Heavy Industries**](https://finance.yahoo.com/quote/329180.KS?p=329180.KS&.tsrc=fin-srch&ref=asiancenturystocks.com), [**Daewoo Shipbuilding & Marine**](https://finance.yahoo.com/quote/042660.KS/?p=042660.KS&ref=asiancenturystocks.com) and [**Samsung Heavy Industries**](https://finance.yahoo.com/quote/010140.KS/?p=010140.KS&ref=asiancenturystocks.com). The three Korean shipyards’ exposure to containerships / LNG carriers / tankers is more or less the same. Separately listed [**Korea Shipbuilding & Offshore Engineering**](https://finance.yahoo.com/quote/009540.KS/?p=009540.KS&ref=asiancenturystocks.com) (KSOE) owns 80% of Hyundai Heavy Industries and represents the majority of its NAV. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5b02cc2d-9c8c-4a9e-a319-1be182afcbde_1456x790.png) EV/Sales for the Korean shipyards. Source: Bloomberg There is optimism among investors about the Korean shipyards, as they are further ahead than the Chinese shipyards in their ability to create the gas-fuelled vessels that will be needed to reduce CO2 emissions in line with IMO’s requirements. The Korean shipyards also represent a large portion of the global order book for new vessels. The Korean shipyards also have the ability to build complex ships such as LNG carriers. That helped them bag a massive order from Qatar Petroleum recently. Hyundai Heavy and Daewoo together build around 60% of the world’s LNG carriers. ![Qatargas buys 10 LNG carriers as long-term charter contracts to Japanese owners end | TradeWinds](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e01aaf3b-c8c7-4634-8f49-4da1c4765484_1600x797.jpg) An LNG ship owned by Qatargas, owned by Qatar Petroleum. Source: Tradewinds Out of Korea’s three major shipyards, [**Hyundai Heavy Industries**](https://finance.yahoo.com/quote/329180.KS/?p=329180.KS&ref=asiancenturystocks.com) (HHI) is the largest. It has a 10% market share in the global shipbuilding industry. Its shipyard stretches over four kilometres at the Mipo Bay in Ulsan in Eastern Korea, where it has ten dry docks. Hyundai Heavy Industries re-listed on the KRX through an IPO last September. The retail tranche of the IPO was heavily oversubscribed, which might explain why the stock trades at a premium to its peers in terms of EV/Sales. HHI is also the global leader in marine engines (\~30% market share), as well as LNG and methanol dual-fuel engines. This vertical integration gives it an edge over its peers. [**Samsung Heavy Industries**](https://finance.yahoo.com/quote/010140.KS/?p=010140.KS&ref=asiancenturystocks.com) has strength in LNG carriers, shuttle tankers, drill ships and FPSOs. That may explain the weakness the company has experienced since the oil price drop in 2014\. Today, the order book also includes containerships, even though historically, they were not Samsung Heavy’s strength. The company also produces machinery and equipment used on ships, including control devices and gantry cranes. Samsung Heavy’s Geoje shipyard, close to Busan, has three dry docks and five floating docks. [**Daewoo Shipbuilding**](https://finance.yahoo.com/quote/042660.KS/?p=042660.KS&ref=asiancenturystocks.com) operates another major shipyard on Geoje Island next to Busan in South Korea. It has somewhat larger exposure to tankers than Samsung Heavy and Hyundai Heavy, but the differences are not material. Daewoo’s debt levels are the highest among the three, and the company nearly went bankrupt in 2016 after the South Korean Board of Audit and Inspection found a KRW 1.5 trillion accounting fraud in the company’s books. A government bailout helped the company stay afloat. In 2019, Hyundai Heavy Industries struck an agreement to acquire Daewoo Shipbuilding, but the deal was rejected by the European Union due to antitrust concerns. So Daewoo Shipbuilding remains a separate company. Out of the three, Hyundai Heavy has enjoyed more stable margins, though they have been volatile throughout the cycle. Samsung Heavy has been loss-making for most of the past 10 years due to the downturn in tanker orders from 2014 onwards. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/09bdf85c-3d93-4194-8087-f5dc052806d3_1972x1080.png) Source: Shinhan Investment Corporation With EV/Sales of 0.9-1.3x and P/B of 1.1-1.8x, neither of the Korean shipyards trade at low multiples. It’s anyone's guess where margins will end up. But using typical cost+ assumptions of around 8% operating margin, it will be hard to see these shipyards trade much below 10x EV/EBIT. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5c14ab57-4d0f-48b1-bbb1-01c3420daad5_920x218.png) --- ## 5.2\. China ![Yangzijiang 2020 order haul tops $1bn with 3,500-teu boxship series | TradeWinds](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/285e2cfb-fd9b-49bf-bab2-f264e6261101_2400x1192.jpg) China’s shipbuilding industry is dominated by state-owned enterprises and the government’s support of them through state-owned banks. In 2019, the China State Shipbuilding Corporation (CSSC) and China Shipbuilding Industry Company (CSIC) merged to create the largest shipbuilder in the world with a \~20% market share. The two companies had originally split in 1999 as part of Zhu Rongji’s SOE reform to increase competition in the shipbuilding industry. At that time, CSIC oversaw shipyards in the north and west (e.g. in Chongqing), and CSSC oversaw those in the south and the east. The two A-share listed entities [**China CSSC Holdings**](https://finance.yahoo.com/quote/600150.SS/?p=600150.SS&ref=asiancenturystocks.com) and [**China Shipbuilding Industry Company Limited**](https://finance.yahoo.com/quote/601989.SS/?p=601989.SS&ref=asiancenturystocks.com) **(CSIC)** are subsidiaries of the combined, merged parent company. The two listed companies continue their (primarily commercial) businesses under a single parent. Some of their shipyards include Jiangnan Shipyard, Yantai Raffles Shipyard, Guangzhou Wenchong Shipyard and many more. The companies are not particularly profitable. There is also a private shipyard in China called [**Yangzijiang Shipbuilding**](https://finance.yahoo.com/quote/BS6.SI/?p=BS6.SI&ref=asiancenturystocks.com), listed in Singapore. It’s one of the most profitable shipbuilders in China, with a return on equity well above 10% across the cycle. I don’t fully understand how Yangzijiang is able to achieve this profitability. It has the capability to produce ultra-large containerships, large bulk carriers and LNG vessels. Yangzijiang’s yards are full through 2024 with an order book of over US$8 billion, mostly from containerships. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/770a31c7-c031-4e3c-aaa7-b29b0baf7339_2384x1294.png) The state-owned shipyards trade at relatively high EV/sales, despite weak profitability. That may reflect the currently-high valuations in China’s A-share market. Yangzijiang - assuming that their reported numbers are correct - looks downright cheap given the strong order book and operating margins of almost 20%. But I’m sceptical about the numbers. How can a shipyard earn 20%+ margins in a commodity industry such as shipbuilding? It defies belief. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/56b03df7-9027-42bb-a010-818018393b2c_1404x228.png) --- ## 5.3\. Japan ![Dramatic turnaround for Namura Shipbuilding | TradeWinds](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/661af79b-2eaa-4da7-ad53-fba9e3b3407a_2400x1195.jpg) A shipyard run by Namura Shipbuilding Japan’s shipbuilders have lost market share over the past few decades. Before 1999, Japan produced most of the world’s ships. But today, Japan’s global market share is in the low teens. The primary driver has been rising labour costs in Japan and the increased sophistication of Korean and Chinese shipbuilding. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/e8d9d337-7764-48c6-b497-5cb949793525_574x382.png) Source: OECD There have been efforts to consolidate the industry, with Mitsui E&S now becoming absorbed into Mitsubishi Heavy Industries (defence) and Tsuneishi (commercial). The order book of the Japanese shipbuilders comes primarily from Japanese shipping lines, such as NYK Line, Mitsubishi OSK, and the "K" Line. The largest shipbuilder in Japan, [**Kawasaki Heavy Industries**](https://finance.yahoo.com/quote/7012.T/?p=7012.T&ref=asiancenturystocks.com), is a diversified conglomerate active in the production of motorcycles, hydraulics for excavators, jet engines, aircraft and finally shipbuilding. The company started as a shipyard in 1878, but today, the shipyard business is only a small portion of the total. Kawasaki’s shipyard focuses on high-performance LNG carriers, container ships, bulk carriers, VLCCs and submarines for the Japanese Maritime Self-Defence Force. Its shipyards are at Kobe and Kagawa, and it also has a few joint ventures with COSCO in China. [**Namura Shipbuilding**](https://finance.yahoo.com/quote/7014.T/?p=7014.T&ref=asiancenturystocks.com) is a large pure-play shipyard company. It produces bulk carriers, tankers and LNG/LPG carriers, mostly for domestic customers but priced in US Dollar terms. Namura’s shipyards are spread out across Sasebo and Hakodate shipyards. The near-term order book seems strong as LNG prices have spiked and the demand for tankers is on the rise as well. Finally, [**Mitsui Engineering and Shipbuilding**](https://finance.yahoo.com/quote/MU1.SG/?p=MU1.SG&ref=asiancenturystocks.com) (Mitsui E&S) is a subsidiary of the trading company Mitsui. Its shipyard at Tamano is one of Japan’s largest, but it also has shipyards at Chiba, Oita, Yura and Niigata. Other than shipbuilding, Mitsui E&S also has an engineering business, constructing power plants for third parties. The company is currently being restructured, with a 49% stake sold to Tsuneishi. Meanwhile, Mitsubishi Heavy Industries will acquire Mitsui E&S’s defence business. So the ListCo “Mitsui E&S” will see its exposure to shipbuilding drop significantly. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/b38dcd74-b470-4d0a-83ef-f927bd2a45fe_2380x1286.png) Kawasaki Heavy Industries trades at a low multiple, but note that its return on equity has been in the single digits for many years. Namura made mid-single-digit operating margins in the 2000s and double-digits during the oil bull market of 2012-14\. Today’s Price/Sales of 0.38x (excluding restricted cash) still seems low given the potential for a return to full utilisation and high-single-digit margins. Before 2019, Namura traded at a Price/Sales of around 0.60x. The weakness in the Japanese yen should help. While Mitsui E&S continues to trade at a low multiple, the reorganisation will lead to a cash inflow from my understanding, and it’s not clear where this cash will end up. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/3c208778-8e35-487d-9361-43d9cce218a4_922x146.png) --- ## 5.4\. India ![Welcome to Cochin Shipyard : ISO 9001 Certified - The biggest greenfield Shipyard of the Millenium](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16000aba-2f2e-4f08-a41a-a5af5f74c375_1920x800.jpg) Cochin Shipyard India’s listed shipbuilders are all controlled by the state and focus on defence work. [**Cochin Shipyard**](https://finance.yahoo.com/quote/COCHINSHIP.NS/?p=COCHINSHIP.NS&ref=asiancenturystocks.com)in Kerala, for example, is building India’s first indigenous air defence ship for the Indian Navy and is managed by the Ministry of Shipping. Cochin Shipyard also has a commercial business, which it developed together with Mitsubishi Heavy Industries. [**Mazagon Dock**](https://finance.yahoo.com/quote/MAZDOCK.NS/?p=MAZDOCK.NS&ref=asiancenturystocks.com) in Mumbai and [**Garden Reach Shipbuilders**](https://finance.yahoo.com/quote/GRSE.NS/?p=GRSE.NS&ref=asiancenturystocks.com) in Kolkata are managed by the Ministry of Defence and also have significant exposure to defence orders. Neither Cochin Shipyard nor Garden Reach Shipbuilders are particularly cheap on their near-term valuation multiples. Mazagon Dock’s P/Sales multiple (excluding restricted cash) is 2.23x, also a very high multiple, as Indian investors are getting excited about defence stocks in a world of greater geopolitical tensions. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/929b3421-b8c9-447a-93b0-4cdafba7e988_920x166.png) --- ## 5.5\. Other countries ![AUSTAL PHILIPPINES LAUNCHES THE LARGEST FERRY CONSTRUCTED BY AN AUSTAL SHIPYARD | Austal: Corporate](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/167c3691-b5ec-4941-a4f2-365894747e45_1200x675.jpg) A shipyard owned by Austal Philippines Singapore has four shipyards: Keppel shipyard: owned by [**Keppel Corporation**](https://finance.yahoo.com/quote/BN4.SI/?p=BN4.SI&ref=asiancenturystocks.com), Jurong Shipyard: owned by [**Sembcorp Marine**](https://finance.yahoo.com/quote/S51.SI/?p=S51.SI&ref=asiancenturystocks.com), ST Engineering Marine: owned by [**ST Engineering**](https://finance.yahoo.com/quote/S63.SI/?p=S63.SI&ref=asiancenturystocks.com), and Penguin Shipyard: owned by [**Penguin International**](https://finance.yahoo.com/quote/BTM.SI/?p=BTM.SI&ref=asiancenturystocks.com). Both Keppel and Sembcorp Marine are owned by the Singapore government through the holding company Temasek (21% and 49% stakes, respectively). There have been discussions in the past of merging Keppel and Sembcorp Marine, but nothing has materialised. The shipyards are seen as cost-efficient, despite Singapore’s higher wages, as many of its workers are from overseas, including Bangladesh. Keppel’s and Sembcorp Marines’ exposures are tilted towards the construction of oil rigs, including drillships. ST Engineering is a Singaporean defence company with limited exposure to its shipyard business. The shipyard focuses on defence orders but also produces commercial vessels such as passenger ferries and offshore support vessels for the oil & gas industry. Penguin International is a homegrown Singaporean shipbuilder focusing on patrol boats, fire fighting, search and rescue vessels, passenger ferries and windfarm support vessels. The company is profitable and seems to be well-run. Taiwan’s shipyard sector is dominated by the state-owned enterprise [**CSBC Corporation**](https://finance.yahoo.com/quote/2208.TW/?p=2208.TW&ref=asiancenturystocks.com), which has shipyards in both Kaohsiung and Keelung. The company was built around a Mitsubishi Heavy Industries shipyard that was taken over by the ROC government after the second world war. Today, it produces warships, submarines and commercial ships such as containerships, mostly for Taiwanese shipping lines such as Yang Ming and Evergreen. CSBC’s civilian-defence split is about 40/60%. In Kaohsiung, you’ll also find a major private shipyard owned by [**Jong Shyn**](https://finance.yahoo.com/quote/2644.TWO/?p=2644.TWO&ref=asiancenturystocks.com). Meanwhile, [**Lungteh**](https://finance.yahoo.com/quote/6753.TWO/?p=6753.TWO&ref=asiancenturystocks.com)’s shipyard is in Yilan and produces corvettes and other warships for the ROC Navy. Finally, Australian shipyard operator and defence contractor [**Austal**](https://finance.yahoo.com/quote/ASB.AX/?p=ASB.AX&ref=asiancenturystocks.com) has shipyards across the world. Defence vessels are produced in Henderson, Australia and in Alabama. Its commercial vessels are in the Philippines. Examples of ships it has built include littoral combat ships, catamarans, patrol boats and passenger ferries. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/85ac173c-d262-4e4b-b6b7-5a4a567aa0bc_2386x1290.png) Neither Keppel Corporation nor Sembcorp Marine looks particularly cheap on their multiples. Penguin, while fully utilised, trades at the upper range of its historical trading range. The Taiwanese shipyards do not trade at low multiples either. Australia’s Austal, on the other hand, trades at only 11.5x P/E, despite an environment of ever-increasing defence spending across the globe. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/10e2e0f9-63ec-4a44-8bdc-a0a1469eb7d2_922x286.png) --- # 6\. Conclusion The shipyard industry is competitive, and margins have been dropping, perhaps because of competition from Chinese yards that receive significant state support. There’s been a significant increase in orders for containerships and LNG carriers, and those will keep tier 1 yards busy for the next few years. Meanwhile, the weak profitability of 2021 vintage orders will slowly disappear from backlogs, causing shipyard profitability to improve. That said, a Price/Sales of 1.0x for the Korean shipyards seems excessive in my mind unless they can dramatically increase revenues further. The state-owned Chinese shipyards are not profitable, and [**Yangzijiang**](https://sg.finance.yahoo.com/quote/bs6.si/?ref=asiancenturystocks.com) looks attractive on the numbers, although the numbers seem almost too good to be true. [**Namura Shipbuilding**](https://sg.finance.yahoo.com/quote/7014.T/?p=7014.T&ref=asiancenturystocks.com) in Japan, on the other hand, trades at a Price/Sales of just 0.38x, below its historical trading range. It should benefit from the weaker yen and an uptick in orders for tankers and LNG carriers. I’m personally interested in defence contractors, as I see secular growth in defence spending across the globe. Shipyards serving the defence industry include [**Austal**](https://sg.finance.yahoo.com/quote/ASB.XA/?p=ASB.XA&ref=asiancenturystocks.com) and Japan’s [**Kawasaki Heavy Industries**](https://sg.finance.yahoo.com/quote/7012.T/?p=7012.T&ref=asiancenturystocks.com). ### The best posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-posts-on-asian-century-stocks/ Last updated: 2022-11-04T11:22:38.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Expense report template URL: https://www.asiancenturystocks.com/expense-report-template/ Last updated: 2025-10-24T23:57:51.000Z Here is a template for a request for your employer to expense a subscription to Asian Century Stocks. You can find the template on Google Docs [here](https://docs.google.com/document/d/1MnPYtl9MP1K8CyIHIx3LjHOB0ZDjLMD%5FQC5UHsxZx2o/edit?usp=sharing&ref=asiancenturystocks.com). --- # Template Dear \[name of manager\], I’d like to expense a subscription to [Asian Century Stocks](https://www.asiancenturystocks.com/). It’s a newsletter focusing on equities in the Asia-Pacific, helping with idea generation and background research on those ideas. As a subscriber, I get over 20 deep-dive reports each year on stocks in Japan, China, Singapore, Australia and New Zealand above a US$50 million market cap limit. These reports are on stocks you normally wouldn’t come across in sell-side research. I also get access to thematic reports that help me expand my knowledge across a variety of industries. The newsletter costs $350/year ($45/month). If it helps us identify even a single investment each year, then the newsletter will pay for itself many times over. It’s an incredible deal. Let me know if you’re fine with this. Thanks, \[Your name\] ### Recommendations of other Substacks URL: https://www.asiancenturystocks.com/recommendations-of-other-substacks/ Last updated: 2022-11-01T13:39:27.000Z The top finance related Substacks out there _This post is for paying subscribers only._ ### Portfolio update October 2022 URL: https://www.asiancenturystocks.com/portfolio-update-october-2022/ Last updated: 2026-06-04T11:49:03.000Z **Disclaimer:** *This article constitutes the author’s personal views only and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks at the time of publishing this article. This is a disclosure - not recommendations to buy or sell stocks.* # Portfolio update The past month has been frustrating as well. Down another -0.8% month-on-month and now down -1.2% since inception in October 2021, all in US Dollar terms. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9e79477f-d8a6-466b-8618-9eb292d7c857_1318x450.png) The US Dollar is showing signs of topping. But who knows? I’ll just continue doing what I think makes sense - to buy undervalued stocks with near-term catalysts. The ideal stock is one that’s cheap and with no near-term challenges whatsoever. *“Investing by looking forward to positive surprises”*, as I like to say. I believe that most of the positive surprises in the coming quarters will come from any of the following four themes: - The semiconductor **chip shortage ending** - A **cross-border travel recovery** in Asia ex-China - Japanese exporters benefitting from the **weak yen** - **Tightness in commodities** because of the war in Ukraine Then, there are a few *potential* areas of opportunity. Where the evidence is not as clear-cut as I’d like it to be: - China's **zero-COVID policy ending** \- though little evidence of a recovery so far - **Falling inflation bets** \- because if the world is truly entering a recession, then government bonds and bond proxies should do better than, say, cyclicals --- Here is my Asian portfolio as of 30 October 2022: _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-aff/ Last updated: 2022-10-31T04:00:19.000Z Casio Computer, Sea Limited, Hong Kong insider buying screen _This post is for paying subscribers only._ ### Casio Computer (6952 JP) URL: https://www.asiancenturystocks.com/deep-dive-2022-27-casio-computer/ Last updated: 2026-07-31T01:31:39.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Casio Computer at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/16d24a31-b9d0-4319-ae5d-07d2b6a45f5a_1920x816.jpg) [**Casio Computer**](https://sg.finance.yahoo.com/quote/6952.T?p=6952.T&.tsrc=fin-srch&ref=asiancenturystocks.com)(6952 JP) is a Japanese consumer electronics company that’s most famous for its G-Shock branded durable wristwatches. The company was formed in 1957 as four brothers of the “Kashio” family got together to produce and market an electronic calculator. Over time, Casio added other consumer electronics products, such as cash registers, digital cameras and wristwatches. Casio engineer Kikuo Ibe created the first G-Shock watch in 1983\. Legend has it that he accidentally dropped and broke a pocket watch given to him by his father. After designing 200 prototypes, he finally devised the G-Shock design - a wristwatch with ten layers of protection and a floating quartz timekeeping module inside. What makes G-Shock watches unique is the fact that they are virtually indestructible. And the battery life lasts for many years. That makes them low-maintenance watches you do not need to worry about. As co-inventor Yuichi Masuda described G-Shock’s niche: > *"We believe that the ideal final form for a timepiece is to be something that continues to display the time properly in any environment and without the need for user interaction and that can be used forever. Put another way, this means having no need for recharging, battery replacement, or any maintenance”* Undoubtedly, the rise of the Apple Watch and other fitness trackers poses a challenge to the traditional watch industry. But G-Shock sales volumes have kept rising throughout the past decade, more than doubling since the early 2010s, showing that they can hold their own. The other parts of Casio’s business are not doing as well. The scientific calculator business is steady but may not be as relevant in the age of iPads and smartphones. The cash register business may not be as relevant in a cashless future. The electronic music instrument business is doing well but faces competition from Yamaha. What brings hope is Casio’s new management team since 2018\. Current Chairman and CEO “Kazuhiro Kashio” is the son of one of the founders. His impact on Casio should not be underestimated. Some of the reforms undertaken include: - An early retirement program to bring in new blood into the senior executive rank - Most senior executives have been replaced with younger faces - The organisation structure has become flat, forming “business units” where planning and development work together with marketing personnel to understand customer needs. - Casio now has an explicit focus on maximising return on capital employed We are seeing early signs of success from this reorganisation. The digital camera business was shut down. Casio is rolling out high-margin subscription services for its cash register business. And the company’s digital marketing is improving with a focus on direct relationships with customers that are targeted individually. And the G-Shock division is showing signs of life. Since 2019, G-Shock has started releasing metal and carbon versions of its wristwatches, and those watches have become highly sought after. For the first time in four decades, G-Shocks are not only durable but also starting to become - dare I say it - cool? The weakness of the Japanese yen also helps. Casio has 75% of its revenues from overseas, and much of its production is in Japan. The depreciation has caused Casio’s enterprise value to reach an all-time low, despite the improvements that have taken place since 2018. There have been a few other challenges during COVID-19, including lockdowns in China, high freight and raw materials costs, semiconductor chip shortages and offline store and school closures. But those problems are most likely temporary. Exactly how much Casio will benefit from the weak yen is unclear. Operating profit increased materially when the yen depreciated from 2012 to 2015\. This time around, I expect around a JPY 10 billion to JPY 20 billion boost to operating profit, leading to a P/E ratio of 10-12x coming out of COVID-19, despite a current net cash position of 26% of the market cap. While there is no real competition within Casio’s niche of cheap, durable watches, technology improvements may one day make Apple Watches cheaper and with longer-lasting battery life. For now, I believe that both can co-exist within their respective niches. **Click the “Read now” button below to access the full PowerPoint presentation:** _This post is for paying subscribers only._ ### 10 Hong Kong stocks with unusual insider buying URL: https://www.asiancenturystocks.com/hkinsider2022/ Last updated: 2025-10-24T15:10:45.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/hkinsider2022/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is not a recommendation to buy or sell stocks.* ![Hong Kong's Stock Exchange Proposes Waiving Revenue Requirement for Some Tech IPOs - WSJ](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/8cbcd80d-b68a-4ed0-b180-217712d8079c_860x574.jpg) # Summary - The Hang Seng index is now getting closer to its 2008 lows. - But the key constituents of the Hang Seng index are not particularly cheap. The P/E multiples of Hong Kong small-caps, on the other hand, seem far lower the key constituents of the index. - A screen of Hong Kong-listed companies with market caps above US$100 million and management insider buying over the past three months gives an output of 89 stocks. - A few of the stocks worth highlighting include [**Zhongsheng**](https://sg.finance.yahoo.com/quote/0881.HK/?ref=asiancenturystocks.com), [**Yuexiu Property**](https://finance.yahoo.com/quote/0123.HK/?ref=asiancenturystocks.com), [**Yihai**](https://finance.yahoo.com/quote/1579.HK/?p=1579.HK&ref=asiancenturystocks.com), [**Luk Fook**](https://sg.finance.yahoo.com/quote/0590.HK/?p=0590.HK&ref=asiancenturystocks.com), [**China XLX**](https://finance.yahoo.com/quote/1866.HK/?p=1866.HK&ref=asiancenturystocks.com), [**Perfect Medical**](https://sg.finance.yahoo.com/quote/1830.HK/?p=1830.HK&ref=asiancenturystocks.com), [**Pacific Textiles**](https://sg.finance.yahoo.com/quote/1382.HK/?p=1382.HK&ref=asiancenturystocks.com), [**Tai Cheung**](https://sg.finance.yahoo.com/quote/0088.HK/?p=0088.HK&ref=asiancenturystocks.com), [**IH Retail**](https://sg.finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com) and [**Pico Far East**](https://sg.finance.yahoo.com/quote/0752.HK/?p=0752.HK&ref=asiancenturystocks.com). # A Hong Kong insider screen Monday’s drawdown in the Hang Seng index was brutal, down 7%: ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/79a0aba8-9aaf-47ce-8b88-a48f66bf74db_3532x1356.png) It’s anyone’s guess where the index will bottom. What’s surprising is that neither of the top holdings of the Hang Seng index looks particularly cheap. Except for [**China Mobile**](https://finance.yahoo.com/quote/0941.HK/?ref=asiancenturystocks.com), which trades at a P/E multiple of 7x. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/844a52d1-b680-4f2d-80bd-b117971a1b4d_1134x508.png) Source: BlackRock The good news is that certain Hong Kong-listed equities now trade at far lower multiples than what we saw at the post-COVID peak in early 2021. To get a sense of the opportunities in Hong Kong-listed equities, I’ve run a screen on the Hong Kong-listed equities with the greatest management insider buying over the past 3 months. Here are the top 20 stocks, ranked by the value in US$ of management buying, over the past few months: 1. [**Xinyi Glass**](https://finance.yahoo.com/quote/0868.HK/?p=0868.HK&ref=asiancenturystocks.com): Producer of float glass for autos 2. [**Smoore International**](https://finance.yahoo.com/quote/6969.HK/?p=6969.HK&ref=asiancenturystocks.com): Provision of vaping products in China 3. [**Beijing Enterprises Urban Resources**](https://finance.yahoo.com/quote/3718.HK/?p=3718.HK&ref=asiancenturystocks.com): Subsidiary of Beijing Enterprises 4. [**SJM Holdings**](https://finance.yahoo.com/quote/0880.HK/?p=0880.HK&ref=asiancenturystocks.com): Macau’s former casino monopoly operator 5. [**Hang Lung Group**](https://finance.yahoo.com/quote/0010.HK/?p=0010.HK&ref=asiancenturystocks.com): Privately owned property developer in HK & China 6. [**China Renaissance Holdings**](https://finance.yahoo.com/quote/1911.HK/?p=1911.HK&ref=asiancenturystocks.com): Chinese brokerage company 7. [**Symphony Holdings**](https://finance.yahoo.com/quote/1223.HK/?p=1223.HK&ref=asiancenturystocks.com): Producer of footwear and shopping mall developer 8. [**Greentown Service Group**](https://finance.yahoo.com/quote/2869.HK/?p=2869.HK&ref=asiancenturystocks.com): Private Chinese developer 9. [**Productive Technologies**](https://finance.yahoo.com/quote/0650.HK/?p=0650.HK&ref=asiancenturystocks.com): Semiconductor equipment for solar panels 10. [**Luk Fook**](https://finance.yahoo.com/quote/0590.HK/?p=0590.HK&ref=asiancenturystocks.com): Hong Kong-based jewellery company 11. [**Digital China Holdings**](https://finance.yahoo.com/quote/0861.HK/?p=0861.HK&ref=asiancenturystocks.com): A Lenovo-affiliated IT service provider 12. [**C-Mer Eye Care**](https://finance.yahoo.com/quote/3309.HK/?p=3309.HK&ref=asiancenturystocks.com): Eye and surgery centres in China 13. [**Kerry Properties**](https://finance.yahoo.com/quote/0683.HK/?p=0683.HK&ref=asiancenturystocks.com): Robert Kuok-affiliated developer & manager 14. [**Dah Sing Banking**](https://finance.yahoo.com/quote/2356.HK/?p=2356.HK&ref=asiancenturystocks.com): Hong Kong commercial bank 15. [**Cathay Media And Education**](https://finance.yahoo.com/quote/1981.HK/?p=1981.HK&ref=asiancenturystocks.com): Film & TV studio for PRC content 16. [**China LNG Group**](https://finance.yahoo.com/quote/0931.HK/?p=0931.HK&ref=asiancenturystocks.com): Privately owned LNG distributor in China 17. [**Hong Kong & China Gas**](https://finance.yahoo.com/quote/0003.HK/?p=0003.HK&ref=asiancenturystocks.com): Distributes town gas in Hong Kong & China 18. [**Eagle Nice (Intl)**](https://finance.yahoo.com/quote/2368.HK/?p=2368.HK&ref=asiancenturystocks.com): Sportswear & garment body shop 19. [**International Housewares Retail**](https://finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com): Owner of Japan Home retail stores 20. [**Longfor**](https://finance.yahoo.com/quote/0960.HK/?p=0960.HK&ref=asiancenturystocks.com): Private Chinese developer of shopping malls You can find the entire spreadsheet available for download here: [Hk Insider BuysHk Insider Buys19 KBdownload-circle](https://www.asiancenturystocks.com/api/v1/file/90d9a512-3697-4406-8fa5-c92a765453cf.xlsx "Download") Here are a few stocks that I would like to highlight from the above list: # 1\. Zhongsheng (881 HK) ![Jardine Matheson Completes Transfer of Zung Fu China to Zhongsheng Group, Strengthening Strategic Partnership | Jardine Matheson](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ddbb833f-222b-4de1-80fe-1b60eb2f73e0_600x404.jpg) [**Zhongsheng**](https://sg.finance.yahoo.com/quote/0881.HK/?ref=asiancenturystocks.com) (*881 HK* *－ US$10.5 billion*) is a Jardine Matheson-backed auto retailer in China with 417 outlets. Its brand portfolio includes Mercedes Benz, Lexus, Porsche, Toyota, Honda, Audi, Volvo, Xpeng and Infiniti. In short: half-half exposure to German as well as Japanese brands. Like other auto dealerships, it makes much of its money through high-margin after-market services, which tend to be stable throughout the cycle. After excess capacity in the auto dealership industry in the early 2010s, the company has increased its earnings significantly since 2016. The company has been suffering from COVID-19-related lockdowns and supply chain disruptions. Some also question the value of auto dealership after-market services in an era of electric vehicles, which tend to break down less often. Today, the stock trades at a forward P/E of 6.9x and an EV/EBIT of 5.8x. The company’s historical P/E has been closer to 15x. Major shareholder Huang Yi through his holding company “Blue Natural Development” has been buying shares aggressively in September 2022, in aggregate close to 3 million shares. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/bb1837b6-be90-4955-bd40-12291ba0204b_3520x1354.png) --- # 2\. Yuexiu Property (123 HK) ![Yuexiu Hotel, Guangzhou | 2022 Updated Prices, Deals](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9cd2bb82-16c7-4dee-90ab-413c58e2047b_1024x768.jpg) State-owned property developer [**Yuexiu Property**](https://finance.yahoo.com/quote/0123.HK/?ref=asiancenturystocks.com) (*123 HK* *－ US$3.4 billion*) owns an incredible portfolio of assets in its home city of Guangzhou. The company’s land reserves are mostly in the Guangdong-Hong Kong-Macau area, also known as the Greater Bay Area. The exposure is primarily to tier 1 cities, which are enjoying net migration flows. Its leverage is somewhat higher than COLI’s and CR Land’s, but still far below the worst offenders in the sector. Ownership by the Guangzhou Metro makes it a state-owned enterprise and thereby protected from the current crackdown on private developers. Thanks to its status as an SEO developer, Yuexiu has been able to buy land at competitive prices, only 33% of ASP, enabling it to earn mid-cycle gross profit margins of around 25%. It’s worth noting that Yuexiu’s contract sales in 2022 are actually up year-on-year, which is remarkable considering the sector’s broader slump. Despite this decent performance, the 2023e consensus P/E is only 5.3x with a dividend yield of 7.6%. Director Lee Ka Lun has purchased 232,000 shares over the past month, though he is admittedly an active trader. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9e92a918-5c25-4da6-9dfe-730cdd28484b_3532x1350.png) --- # 3\. Yihai (1579 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/a59b462b-61a3-427c-9c2e-96a1db59c76e_2008x868.png) [**Yihai**](https://finance.yahoo.com/quote/1579.HK/?p=1579.HK&ref=asiancenturystocks.com) (*1579 HK* *－ US$2.0 billion*) is a sister company of the hot pot restaurant chain Haidilao that produces hot pot-related food products sold to supermarkets around China. The products include soup bases and dipping sauces. Yihai sells both to related party Haidilao and third parties, and such related party transactions open up questions about transfer pricing. Given that Haidilao has suffered during the pandemic due to COVID-19-related lockdowns, Yihai’s sales have also weakened, with growth decelerating from 50% to almost zero. Today, the 2023e P/E is 16.3x and EV/EBIT 10.2x. CEO Guo Qiang bought about 100,000 shares in late August / early September 2022 for the first time ever. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/30cd6022-e529-496e-85e2-e1fe95eb4fb9_3534x1362.png) --- # 4\. Luk Fook (590 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/88890d76-6437-465b-8f18-ee8eda9f9663_1400x933.jpg) [**Luk Fook**](https://sg.finance.yahoo.com/quote/0590.HK/?p=0590.HK&ref=asiancenturystocks.com) (*590 HK* *－ US$1.3 billion*) is one of Hong Kong’s largest jewellery retailers. The company sells gold-, platinum-, diamond- and other types of jewellery. Many of Luk Fook’s stores are run through franchisees, with 1,355 franchisee stores and 152 self-operated stores as of 2017\. Luk Fook makes money by selling its jewellery to franchisees at wholesale prices. But the self-operated stores are far more profitable. Only 50 or so of those stores are in Hong Kong, and the rest are mostly in mainland China. Profitability suffered in FY2020, partly because of reduced tourism to Hong Kong but also due to the pandemic. Earnings have now almost fully recovered. But the enterprise value remains 40% below its 2019 level. Luk Fook’s 2023e P/E is 6.6x and has a dividend yield of 7.9%. Chairman & CEO Wai Sheung Wong has acquired over 700,000 shares over the past few months. Board member Li Hon Hung acquired 100,000 shares in August and September 2022. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4299a2ff-93fb-4ac2-9e84-04bb4b74185d_3512x1358.png) --- # 5\. China XLX Fertiliser (1866 HK) ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/80668fbc-9949-4e67-a13b-f1d5fcebc842_1230x692.png) [**China XLX**](https://finance.yahoo.com/quote/1866.HK/?p=1866.HK&ref=asiancenturystocks.com) (*1866 HK* *－ US$526 million*) is a Henan-based fertiliser company listed in Hong Kong since 2006\. It also has operations in Xinjiang and Jiangxi, where its Jiujiang base opened in 2021\. It focuses on the production of urea, methanol and a variety of other chemicals. The stock trades at a 2023e consensus P/E multiple of 2.3x and a dividend yield of 6.0%. The P/B has almost come down to its 2020 lows. Deputy General Manager Yan Yunhua purchased 650,000 shares in September. Chairman Liu Xingxu’s holding company Pioneer Top Holding also purchased almost 2 million shares in September. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/86b3f01b-2f78-4483-8c8f-69c0f81fa3aa_3534x1358.png) --- # 6\. Perfect Medical (1830 HK) ![Perfect Medical – Image Creative](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/ca64854a-a3eb-4147-bf23-ebfb93987fcb_2560x1707.jpg) [**Perfect Medical**](https://sg.finance.yahoo.com/quote/1830.HK/?p=1830.HK&ref=asiancenturystocks.com) (*1830 HK* *－ US$476 million*) is a Hong Kong-based company that offers slimming and beauty treatments, such as freckle removal, lymphatic drainage therapy and anti-ageing treatments. There are currently 57 branches in Hong Kong and mainland China. Reading the material, I can’t help wondering to what extent Perfect Medical treatments are effective vs just selling hope. But the business is profitable, with a 50% return on equity for the last fiscal year. The stock currently trades at a 2023e consensus P/E ratio of 7.1x and a dividend yield of 8.6%. Chairman and CEO Au-Yeung Kong bought 300,000 shares in October 2022. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/532a3011-e98e-4800-8731-af6b9aeb38f7_3520x1354.png) --- # 7\. Pacific Textiles (1382 HK) ![针织巨头：互太纺织将在越南建第二家工厂，运动内衣面料需求猛增_公司_产能_销售](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c866cd35-a932-4ae0-b24e-daf71808cbb8_806x556.png) [**Pacific Textiles**](https://sg.finance.yahoo.com/quote/1382.HK/?p=1382.HK&ref=asiancenturystocks.com) (*1382 HK* *－ US$449 million*) supplies knitted fabric to Uniqlo (50% of revenues), Target, Walmart, Victoria’s Secret, etc. Its main products include innerwear and outerwear, which represent 50/50 of revenues. Most of its factories are in mainland China. But Pacific Textiles is now actively expanding into Vietnam, as cotton prices and labour costs are higher in China. The return on equity has consistently been around 20-30%. The product seems to be more or less a commodity, so it’s surprising to see such high ROE. The company was formed by Choi Kin Chung (蔡建中) in 1997\. Then in 2017, Japan’s Toray Industries became a substantial shareholder by purchasing shares from Mr Choi. Toray is now bringing in Japanese customers to the company, but the new management also begs the question of whether Choi’s absence will cause organisational issues. Pacific Textiles trades at a 2023e consensus P/E of 6.2x and a dividend yield of 13.5%. The company’s capital allocation seems strong. The balance sheet is strong, with a net cash position. It pays out a dividend of about 85% of net profit each year. And since October 2022, it’s been actively buying back shares. CFO Tou Kit Vai bought 200,000 shares in September for the first time since March 2020. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/6ea54c29-1187-4b40-80d3-842ae850997c_3528x1360.png) --- # 8\. Tai Cheung (88 HK) ![Pulsa Repulse Bay Luxury Residential Tower - e-architect](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4ea56d21-b398-4a24-9a5c-7be5068abf5a_1000x690.jpg) [**Tai Cheung**](https://sg.finance.yahoo.com/quote/0088.HK/?p=0088.HK&ref=asiancenturystocks.com)(*88 HK* *－ US$315 million*) is a small-cap property developer and manager that’s owned by Hong Kong’s Chan family. It was initially set up as a construction company in the 1950s and then a developer through the 1960s and 1970s. Today, the company is run by the founder’s son David Pun Chan, who Marc Faber has spoken fondly of, and who I believe is a man of integrity. Tai Cheung owns a great set of assets, including a 35% interest in the Sheraton Hotel in Tsim Sha Tsui and the next-door shopping mall. It owns the office building Metropole Square in Sha Tin, residential developments at 3 Plunkett’s Road on The Peak and Pulsa in Repulse Bay. It also owns a logistics building in California and land on Ap Lei Chau island in Hong Kong. Price/book is today 0.37x, i.e. a fraction of the company’s liquidation value. Historically, it’s traded at 0.6x. The current dividend yield is 6.0%. While the stock is thinly traded, and David is, therefore, reluctant to buy back shares, it announced a buyback program of 10% of shares outstanding in July 2022. Chairman and CEO David Pun has been buying consistently throughout 2022 but more aggressively in September with about 200,000 shares. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f58a1146-27d7-4ad9-b2f3-eed12389757f_3518x1358.png) --- # 9\. International Housewares Retail (1373 HK) ![What's New – Japan Home](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/5faafddf-c191-4180-bb91-da8542206dd7_2560x1920.jpg) [**International Housewares Retail**](https://sg.finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com) (*1373 HK* *－ US$244 million*) is most known for its key brand name Japan Home in Hong Kong and Singapore. But it also runs a number of other retail concepts, including 123 by Ella and DayDayStore. Japan Home provides houseware items at very competitive prices. Think IKEA but with lower-priced and more everyday types of items. The company was established in 1991 and was listed in 2013 after a brief period of private equity ownership under a fund run by Sweden’s EQT. IH Retail currently runs 380 stores, most of them in Hong Kong, Singapore and a few other geographies. David Webb is a major shareholder with about 7% of the shares outstanding. The stock currently trades at a P/E of 8.7x, an EV/EBIT of 7.3x and a dividend yield of 8.4%. There’s a risk that IH Retail was a COVID beneficiary, given the company's strong growth during the pandemic. Chairman and CEO Lisa Ngai bought 4.8 million shares in May 2022, and board member Lau Pak Fai bought over half a million shares in October and over 1 million shares in August. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/47f397dc-80f2-4f5e-8e3c-d269dbc94a2b_3528x1364.png) --- # 10\. Pico Far East (752 HK) ![Pico Far East books HK$58m earnings | The Standard](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/53969965-52b9-4cf0-9572-edfb1c0a8389_1000x563.jpg) [**Pico Far East**](https://sg.finance.yahoo.com/quote/0752.HK/?p=0752.HK&ref=asiancenturystocks.com) (*752 HK* *－ US$169 million*) is a service provider for the global exhibitions and events industry. Organisers hire Pico to decorate and set up exhibition booths, with a one-stop service. It’s also involved in the interior designs of museums, theme parks, physical signage and event management. The company is run by the Chia family, who came from Singapore. But the business is now run out of Hong Kong due to the fact that half of the revenues come from Greater China. Pico has suffered during the pandemic through border closures and related quarantine restrictions. But there are early signs that border restrictions to Hong Kong and China are easing, at least for business travellers. The company has been profitable throughout the pandemic, and the balance sheet remains strong with a large net cash position. In a full-recovery scenario, you might expect Pico to return to its 2019, which would yield a P/E of 5.6x and a dividend yield of 12.6%. A key question mark is Pico’s attempt to enter high-tech businesses through expensive acquisitions. Many view those initiatives as an endless money pit. Chairman and CEO Lawrence Chia bought 2 million shares in September 2022. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/05d2d6ed-dad1-4df8-90b6-2795e3f073d0_3522x1358.png) I wrote about Pico Far East in this prior write-up: [Deep-dive 2021-18: Pico Far EastPico Far East (752 HK) is one of the largest service providers for the global exhibitions and events industry. Organisers hire Pico to decorate and set up exhibition booths for major events taking place in Asia and beyond. The majority of revenues, at around 77%, comes from the exhibition and event business. The remainder comes from building interior de…![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/c5744157-4e40-4bef-a99a-01486dfd4e77_291x291.png)Asian Century Stocks](https://www.asiancenturystocks.com/deep-dive-2021-18-hk-small-cap-covid/) --- # Conclusion The Hang Seng index doesn’t necessarily look all that cheap. But among Hong Kong’s small-caps, you can easily find stocks trading at single-digit P/E multiples and high-single-digit dividend yields, despite underlying growth. [**Zhongsheng**](https://sg.finance.yahoo.com/quote/0881.HK/?ref=asiancenturystocks.com), [**Yuexiu Property**](https://finance.yahoo.com/quote/0123.HK/?ref=asiancenturystocks.com), [**Yihai**](https://finance.yahoo.com/quote/1579.HK/?p=1579.HK&ref=asiancenturystocks.com), [**Luk Fook**](https://sg.finance.yahoo.com/quote/0590.HK/?p=0590.HK&ref=asiancenturystocks.com), [**China XLX**](https://finance.yahoo.com/quote/1866.HK/?p=1866.HK&ref=asiancenturystocks.com), [**Perfect Medical**](https://sg.finance.yahoo.com/quote/1830.HK/?p=1830.HK&ref=asiancenturystocks.com), [**Pacific Textiles**](https://sg.finance.yahoo.com/quote/1382.HK/?p=1382.HK&ref=asiancenturystocks.com), [**Tai Cheung**](https://sg.finance.yahoo.com/quote/0088.HK/?p=0088.HK&ref=asiancenturystocks.com), [**IH Retail**](https://sg.finance.yahoo.com/quote/1373.HK/?p=1373.HK&ref=asiancenturystocks.com) and [**Pico Far East**](https://sg.finance.yahoo.com/quote/0752.HK/?p=0752.HK&ref=asiancenturystocks.com) are just a few of them. ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-60c/ Last updated: 2022-10-24T04:00:49.000Z Nippon Sanso, Metals X, Japan Reliance Service Corporation _This post is for paying subscribers only._ ### Who benefits from the weak yen? URL: https://www.asiancenturystocks.com/weakyen/ Last updated: 2022-10-23T02:09:48.000Z An attempt to identify the stocks that will benefit from the weak yen. Estimated reading time: 16 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-762/ Last updated: 2022-10-17T04:00:58.000Z VTech, Chang'an Automobile, Value Partners, Nihon Falcom _This post is for paying subscribers only._ ### VTech (303 HK) URL: https://www.asiancenturystocks.com/deep-dive-2022-26-vtech/ Last updated: 2026-07-31T01:31:17.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do hold a position in VTech at the time of publishing this article. Note that this is a disclosure and not a recommendation to buy or sell.* [**VTech**](https://finance.yahoo.com/quote/0303.HK/?ref=asiancenturystocks.com)(303 HK) is a Hong Kong toy and electronics manufacturer run by an energetic entrepreneur called Allan Wong. The company was founded in 1976 as a manufacturer of video games, mostly for third parties such as Radioshack. Later on, Vtech branched out into toys, computers, cordless phones and a variety of other electronic products. Today, three segments remain: 1. **Toys** (“Electronic learning products”) (43% of revenues) for the North American and European markets. These products are sold under the VTech and LeapFrog brand names. This business is more or less stable. 2. **Contract manufacturing** (40% of revenues) for third parties across audio equipment, earbuds, IoT products and the medical health industry. This segment has grown significantly over the past decade, more than tripling in revenue. 3. **Telecom products** (17% of revenues), under their own VTech / Snom brand names and for third parties. These products include cordless phones for residential and business use, conference phones and baby cameras. The residential sub-segment is in decline, whereas the commercial & other telecom sub-segment is holding up well. Electronics manufacturing is a competitive industry. But VTech is unique among its Hong Kong and Chinese peers in that it owns several valuable brand names such as LeapFrog, VTech and Snom. It’s also an exceptionally well-run business. Allan Wong has made a conscious decision to enter businesses that require little PP&E and working capital, resulting in a high return on capital. He’s also been laser-focused on costs. For example, he’s been laying off employees quickly in the troubled residential telecom segment. The capital allocation is among the best I’ve seen in Asia. VTech typically pays out 100% of its earnings as dividends. It also engages in M&A opportunistically when prices are low. The major acquisitions of the past few years have taken place at EV/Sales multiples of just 0.2-0.4x, and the acquisition targets have often had underutilised assets. More recently, VTech announced a share buyback of up to 10% of shares outstanding. There are several reasons why VTech’s share price has fallen. The company was hit by US tariffs on Chinese goods in 2018 and 2019\. It’s also seen margin pressure from higher resin prices, freight costs and semiconductor shortages. These problems are going to be resolved. And the weaker RMB should be a tailwind. VTech’s guidance is cautious, but gross margins will most likely recover in the next year or two. Consensus for 2023e has VTech trading at 7.4x P/E and 13.2% dividend yield, despite a \~30% return on equity. While the business is not a fast grower, growth in the contract manufacturing is likely to counteract weakness in the telecom segment. And free cash flows of US$200 million per year are high compared to a market cap ex-cash of US$1.2 billion. The key risks are customer concentration (top 5 customers are 44% of revenues), minimum wage pressure in China and the potential impact of e-commerce on VTech’s toy segment. Also, check out Macklowe’s excellent write-up on VTech on Value Investors Club, available [here](https://valueinvestorsclub.com/idea/VTech%5FHoldings/5462055503?ref=asiancenturystocks.com) if you have access to the website. _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-29d/ Last updated: 2022-10-10T04:00:55.000Z Alibaba, Softbank, CITIC, Malaysian Smelting Corporation _This post is for paying subscribers only._ ### Introduction to Asia's fertiliser industry URL: https://www.asiancenturystocks.com/fertilisers/ Last updated: 2022-10-09T05:24:18.000Z Halfway through a fertiliser bull market. Valuations multiples differ from country to country. Estimated reading time: 22 minutes _This post is for paying subscribers only._ ### The best recent posts on Asian Century Stocks URL: https://www.asiancenturystocks.com/the-best-recent-posts-on-asian-century-156/ Last updated: 2022-10-05T08:55:14.000Z A monthly reminder of the best recent posts sent to paid subscribers _This post is for subscribers only._ ### Borrowing ideas from funds, part 5 URL: https://www.asiancenturystocks.com/fundideaspart5/ Last updated: 2026-04-15T15:31:19.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/fundideaspart5/) **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers. Consult your financial adviser to understand whether any investment is suitable for your specific needs. I may, from time to time, have positions in the securities covered in the articles on this website. This is disclosure and not a recommendation to buy or sell.* --- Here’s yet another edition of my reviews of the key holdings of Asia-focused funds. I will release new editions as I find more high-quality funds to track. # Summary - The CIM Dividend Income Fund is a veritable gold mine for stocks with high dividend payments. Such stocks include fertiliser company [**China BlueChemical**](https://finance.yahoo.com/quote/3983.HK/?p=3983.HK&ref=asiancenturystocks.com) with its 13.1% dividend yield, [**PTC India**](https://finance.yahoo.com/quote/PTC.NS/?p=PTC.NS&ref=asiancenturystocks.com)’s 11.0% and [**China Suntien Green Energy**](https://finance.yahoo.com/quote/0956.HK/?p=0956.HK&ref=asiancenturystocks.com)’s 8.0%. - Hong Kong’s [**VTech**](https://finance.yahoo.com/quote/0303.HK/?p=0303.HK&ref=asiancenturystocks.com) has returned to its March 2020 lows due to temporary headwinds related to high raw materials and shipping costs. It trades at a P/E of 7.8x with a dividend yield of 12.6%. - There’s significant value in [**Quality Houses**](https://finance.yahoo.com/quote/QH.BK/?p=QH.BK&ref=asiancenturystocks.com)’ 19.8% stake in HomePro, given that the stake is worth more than the entire enterprise value of the company. - Thanks to rising oil prices, Japanese oil company [**Inpex**](https://finance.yahoo.com/quote/1605.T/?p=1605.T&ref=asiancenturystocks.com) now trades at a forward P/E ratio of 5.1x and should benefit from the weakening of the Japanese yen. - [**Saigon Cargo Services**](https://www.marketwatch.com/investing/stock/scs?countrycode=vn&ref=asiancenturystocks.com) is likely to become a long-term compounder, given secular growth in Vietnamese cargo traffic, despite competition from the new airport in Ho Chi Minh City. The stock trades at a P/E ratio of 11.8x. --- # Santa Lucia Asset Management’s CIM Dividend Income Fund ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eac70334-e5df-4fe3-94ad-2c349c9a5f04_1420x138.png) Singapore-based Santa Lucia Asset Management is an old-timer in the Asian investment scene. Several of the funds managed by Santa Lucia have been managed continuously by founder **James Morton** since 1994, though only since 2010 under the name of Santa Lucia. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/455d378d-998f-4a01-b1a4-af58bb8ec86f_1350x1800.jpg) James’s career spans Bain & Co, Arthur Young, Citicorp. His management of the Mackenzie Cundill Recovery Fund won him several awards from Morningstar and Lipper. He has an MBA from Stanford. He’s also written several books, including the 1996 book [Investing with the Grand Masters: Investment Strategies of Britain’s Most Successful investors](https://www.amazon.com/Investing-Grand-Masters-Investment-Stratetgies/dp/0273625365/ref=sr%5F1%5F2?crid=ZJ0RKUZO84D3&keywords=James+Morton+investing&qid=1664865066&qu=eyJxc2MiOiIxLjQxIiwicXNhIjoiMC4wMCIsInFzcCI6IjAuMDAifQ%3D%3D&sprefix=james+morton+in%2Caps%2C295&sr=8-2&ref=asiancenturystocks.com). [![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9319553a-f303-473f-ab98-c9e12e918f02_317x474.jpg)](https://www.amazon.com/Investing-Grand-Masters-Investment-Stratetgies/dp/0273625365/ref=sr%5F1%5F2?crid=ZJ0RKUZO84D3&keywords=James+Morton+investing&qid=1664865066&qu=eyJxc2MiOiIxLjQxIiwicXNhIjoiMC4wMCIsInFzcCI6IjAuMDAifQ%3D%3D&sprefix=james+morton+in%2Caps%2C295&sr=8-2&ref=asiancenturystocks.com) Santa Lucia now has roughly US$900 million in assets under management. Its CIM Dividend Income Fund focuses on dividend stocks with a targeted yield of 6%. The CIM Dividend Income Fund has now made a total return of 1,268% since inception in 2001 in USD terms, with dividends reinvested or 12.9% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/18eaaa9b-333c-4ad6-aa1a-4f4af73721a0_1640x328.png) The latest portfolio has an unusual mix of stocks compared to most other Asia-focused fund managers. You can tell that the fund is index-agnostic. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f80ed0fd-550e-47b2-b984-f59c24bc22ef_3408x1126.png) The fund’s largest position is [**Yuexiu Property**](https://finance.yahoo.com/quote/0123.HK/?ref=asiancenturystocks.com), the Guangdong-based state-owned property developer and manager. Yuexiu owns a significant portfolio of investment property in Guangzhou. Its debt levels are low, and its SOE status protects it from the current crackdown on indebted developers. The price/book ratio is now 0.54x, and the dividend yield is 6.8%, broadly in line with its historic averages. [**China Everbright Environment Group**](https://finance.yahoo.com/quote/0257.hk?ltr=1&ref=asiancenturystocks.com) operates waste treatment plants in China. While the company has a significant amount of debt, it’s a state-owned enterprise. The stock trades at a 2023e P/E of 3.1x and a dividend yield of 10.1%. India-listed [**IRB InvIT Fund**](https://finance.yahoo.com/quote/IRBINVIT.BO/?p=IRBINVIT.BO&ref=asiancenturystocks.com)is an infrastructure investment trust that owns a portfolio of 24 toll roads across ten states in India. The company is backed by GIC, an arm of Singapore’s sovereign wealth fund. An introductory presentation of the trust is available [here](https://docs.publicnow.com/viewDoc?filename=84310%5CEXT%5C17D00F1F1D1F2AEF90AF6ECDF4D953820AC15891%5F55980D8BB3E51DC4ECC0171B8B2913AB95897366.PDF&ref=asiancenturystocks.com). The dividend yield appears to be 13.5% but with a forward P/E of 14.5x (earnings yield of 6.9%), I’m not sure whether the dividend is fully funded. [**China Hongqiao Group**](https://finance.yahoo.com/quote/1378.HK/?p=1378.HK&ref=asiancenturystocks.com) is the world’s largest aluminium producer. It’s based in China’s Shandong province and has a yearly aluminium output of 5.6 million tonnes. The management team is highly regarded. The P/E ratio is currently 3.4x, with a dividend yield of 13.5%. Hongqiao has been accused of under-reporting its production costs through related party transactions, most notably by Emerson Analytics [here](https://www.asiancenturystocks.com/content/files/public-ckfinder/Short-sellers/Emerson-Analytics/chinahongqiao-hk%5F1378-strongsell.pdf). [**West China Cement**](https://finance.yahoo.com/quote/2233.HK/?p=2233.HK&ref=asiancenturystocks.com) is a Shaanxi-based cement producer with a leading market position in the province. It also has a presence in Xinjiang and Guizhou. The total production capacity is 29 million tonnes across 17 production lines, most of which are in Shaanxi. It also produces aggregates and commercial concrete. The stock is down significantly over the past year and now offers a reported 2.5x P/E ratio and a 14.2% dividend yield. You can find an introduction to the company [here](https://www.asiancenturystocks.com/content/files/eng/ir/presentation/pre2208.pdf). [**REC Ltd**](https://finance.yahoo.com/quote/RECLTD.NS/?p=RECLTD.NS&ref=asiancenturystocks.com) (Rural Electrification Corporation) provides financing for Indian power generation, transmission and distribution projects. The borrowers are state-owned utilities. Despite its stated purpose of raising finance for the electricity sector, the share count has remained flat for over a decade. The stock trades at a P/E ratio of 2.5x with a dividend yield of 12.3%. [**Media Nusantara Citra**](https://finance.yahoo.com/quote/MNCN.JK/?p=MNCN.JK&ref=asiancenturystocks.com) (“MNC”) is an Indonesian media company that owns several free-to-air television channels, including RCTI, MNCTV, GTV and iNews. It also owns 19 pay-TV channels. Other businesses include radio, print media, talent management and TV-related content production. The stock’s P/E ratio is currently 4.6x but with a dividend payout ratio of just 5% since a few years back. Investors are worried about the impact of streaming services such as Netflix on MNC’s TV channels. [**China BlueChemical**](https://finance.yahoo.com/quote/3983.HK/?p=3983.HK&ref=asiancenturystocks.com) is a Chinese fertiliser producer owned by CNOOC. It used to be called CNOOC Chemical but changed its name to BlueChemical in 2006\. It sells urea, phosphorus, methanol and compound fertilisers. Its cost structure is more or less fixed, and compared to its peers; it has less exposure to coal prices as a raw materials input. The stock has been more or less flat for the past five years and now offers a P/E ratio of 3.7x and a dividend yield of 13.1%. [**PTC India**](https://finance.yahoo.com/quote/PTC.NS/?p=PTC.NS&ref=asiancenturystocks.com) (“Power Trading Corporation of India”) is also involved in the Indian power sector, trading electricity and financing power projects. It has a renewable energy portfolio of 290 MW, primarily consisting of wind power projects. The stock trades at a run-rate P/E ratio of 5.4x and a dividend yield of 11.0%. [**Sinotrans**](https://finance.yahoo.com/quote/0598.HK/?p=0598.HK&ref=asiancenturystocks.com) is a Chinese logistics service provider that’s owned by China Merchants Group. It offers transport services across air, road, rail and shipping. It’s a significant freight forwarder across Chinese ports. The P/E ratio is currently 3.5x despite modest debt levels and offers a 9.8% dividend yield. [**JB Financial**](https://finance.yahoo.com/quote/175330.KS/?p=175330.KS&ref=asiancenturystocks.com) (“Jeonbuk Bank“) is a Korean financial institution that owns two commercial banks, asset managers and a few overseas subsidiaries. The bank is based in Jeonju, a smaller city in South Korea’s southwest. The stock should benefit from higher interest rates in Korea, but on the other hand, the Korean housing market is starting to wobble. The P/E ratio is 2.3x, and the dividend yield is 10.6%. [**China Suntien Green Energy**](https://finance.yahoo.com/quote/0956.HK/?p=0956.HK&ref=asiancenturystocks.com) sells natural gas and constructs natural gas pipeline-related infrastructure, owning seven long-distance pipelines in China. It also develops wind farms and solar power plants. Total wind power installed capacity of 5.7GW. It’s also involved in property leasing. The P/E ratio is 4.1x, and the dividend yield is 8.0%. [**Chongqing Rural Commercial Bank**](https://finance.yahoo.com/quote/3618.HK/?p=3618.HK&ref=asiancenturystocks.com) is a small commercial bank serving the Chongqing municipality in China. It owns 1,760 branches across Chongqing, mostly focusing on retail banking services. The P/E ratio is 2.3x, and the dividend yield is 11.9%. --- # PineBridge Asia ex-Japan Small Cap Equity ![PineBridge Asia ex Japan Small Cap Equity Fund](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7afbfaa1-97fa-4e0a-ba11-8e99336019f4_499x101.png) PineBridge Investments is a subsidiary of Pacific Century Group, an Asia-based investment group connected with Richard Li and PCCW. The Asia ex-Japan small cap equity fund is run by Hong Kong-based **Elizabeth Soon**. She has been running the small-cap fund since 2008\. Before PineBridge, she worked for Schroders in Hong Kong for a decade and Allianz Global Investors. She has degrees from the National University of Singapore and Manchester Business School. ![Elizabeth Soon, CFA](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/0b1c62d4-8538-4783-a59a-c3c4f25287a2_400x400.jpg) The fund seeks capital appreciation by investing in companies throughout Asia ex-Japan. Soon seems to have an eye for compounder-type stocks that may seem expensive in terms of their P/E ratios but end up doing wonderfully over the long run. At least half of the fund is in companies with market caps less than US$1.5 billion at the time of purchase. Since its inception in 1999, the fund is up 1,044% in USD terms with dividends reinvested, or 10.8% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/66855545-f4d7-42c8-b45b-b8021a2341b7_1648x308.png) The fund is quite large at US$1.5 billion. It has therefore been forced to diversify across 86 names. The stocks are not the typical stocks pushed by investment banks. Many of them don’t have any analyst coverage at all. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/7657eb87-86b7-48ec-9bc9-337cef0cef4c_3400x1122.png) The largest position is Taiwan’s [**Sinbon Electronics**](https://finance.yahoo.com/quote/3023.TW/?ref=asiancenturystocks.com). The company is a producer of cable assemblies and connectors. Customers range from automotive companies, network equipment, medical devices, etc. Those customers typically approach Sinbon asking for customised solutions with low volumes. For what seems like a commodity business, the return on equity is surprisingly high and steady at around 20-25%. The P/E ratio is 19.9x, but the company has practically no debt. [**Divi’s Laboratories**](https://finance.yahoo.com/quote/DIVISLAB.BO/?p=DIVISLAB.BO&ref=asiancenturystocks.com) is a Hyderabad-based pharma company, producing both generics and active pharmaceutical ingredients across six manufacturing facilities in India. The company has 60-85% market shares in generic naproxen, dextromethorphan and gabapentin APIs, and 20-30% market shares in pregabalin and methylamine APIs. The return on equity is impressive, and the earnings have grown immensely over the past 20 years. P/E ratio of 39.5x. [**Voltronic Power**](https://finance.yahoo.com/quote/6409.TW/?p=6409.TW&ref=asiancenturystocks.com) produces uninterruptable power supplies (UPS), inverters for solar panels and other power-related products. Uninterruptible power supplies are electrical devices that provide emergency power when the main power fails. The products are used in home electronics, servers, and industrial-, medical- and network equipment. Customers include Schneider, Emerson, Socomec and Riello. It’s a true compounder with a return on equity consistently around 30-40%. EPS has gone up tenfold in the past 12 years. The high P/E ratio of 32.7x reflects this growth profile. [**Nantong Jianghai Capacitor**](https://finance.yahoo.com/quote/002484.SZ/?ref=asiancenturystocks.com) is one of China’s largest producers of capacitors, which are used for temporary electric energy storage. Combing (super-)capacitors with lithium-ion batteries help prolong the life span of batteries, improve performance and efficiency and speed up charging time. The stock is seen as a “play” on the electric vehicle theme. The forward P/E is currently 24.6x but note that earnings have gone up five-fold over the past decade. [**Chow Tai Fook Jewellery**](https://finance.yahoo.com/quote/1929.HK/?p=1929.HK&ref=asiancenturystocks.com) is a Hong Kong-based jewellery retailer with a long history. Today, the business has expanded from Hong Kong to mainland China where it has a large retail network and is one of the largest jewellery retailers with an estimated 13% market share. The brand name is excellent and is seen as one of the most trusted in the industry in Hong Kong. The company is owned by the Cheng family, which is also involved in the property sector through New World Development. The stock trades at 20.3x P/E against earnings that were potentially elevated during COVID-19. [**Techtronic**](https://finance.yahoo.com/quote/0669.HK/?p=0669.HK&ref=asiancenturystocks.com) is widely regarded as one of Hong Kong’s highest-quality businesses. It’s a global leader in power tools for the DIY market, used for home improvement, construction and infrastructure industries. Its brands include Milwaukee, Homelite, Ryobi, etc. America’s Home Depot is its largest customer. Its major competitors include Stanley Black & Decker and Bosch. The company benefitted from COVID-19 as the US home improvement industry experienced a temporary boost in demand. The stock is trading at 13.8x P/E but be careful with the E in that equation. [**SITC International**](https://finance.yahoo.com/quote/1308.HK/?p=1308.HK&ref=asiancenturystocks.com) is a Hong Kong-based shipping company, owning 74 container ships and leasing two dozen more. The company also has freight forwarding, warehousing and similar services. SITC has done well during COVID but suffered more recently as container shipping costs have come down. The company’s run-rate P/B of 2.3x is now back to pre-pandemic levels. [**Shree Cement**](https://finance.yahoo.com/quote/SHREECEM.NS/?p=SHREECEM.NS&ref=asiancenturystocks.com) is a major cement in the North Indian market with an annual capacity of 43 million tonnes. It sells cement under the Shree Jungrodhak, Bangur Cement and Rockstrong brand names. Shree’s margins are market-leading thanks to the company’s low-cost structure. And growth has consistently been around 15% per year in volume terms, helping the company take market share over time. The stock trades at an elevated EV/tonne of US$184 and a P/E ratio of 39.7x. [**Alchip Technologies**](https://finance.yahoo.com/quote/3661.TW/?p=3661.TW&ref=asiancenturystocks.com) is a Taipei-based fabless semiconductor company designing CMOS ASICs. Its first major order was for the graphics ASIC for the PlayStation 2\. Since then, it has diversified its customer base to Cisco, Investar, AcerVC, etc. Most of its chips are produced TSMC, which also owns 20% of Alchip. A major negative event was Alchip’s loss of China’s Phytium after US sanctions on the company. Phytium represented almost 40% of Alchip’s revenues at the time. But the company has done well despite this headwind. The stock trades at a 2023e P/E ratio of 19.1x. [**YTO Express**](https://finance.yahoo.com/quote/600233.SS/?p=600233.SS&ref=asiancenturystocks.com) is one of China’s largest delivery companies, now ranked #3 with a 15% market share. It’s a competitive sector, and YTO’s reliance on key partner Alibaba makes it vulnerable. Parcel delivery prices have dropped significantly over the past decade. And since YTO doesn’t control the entire network as SF Express does, there aren’t many network effects. But it does benefit from secular growth in e-commerce parcel deliveries. The stock trades at 17.2x P/E. [**Airtac**](https://finance.yahoo.com/quote/1590.TW/?p=1590.TW&ref=asiancenturystocks.com) is a Taiwanese manufacturer of pneumatic components such as valves, cylinders, and linear motion guides. Its products are used for process automation in industries ranging from oil & gas, chemicals, etc. AirTac has been taking market share from Japan’s SMC, especially in the Chinese market. It looks like a secular compounder with a return on equity of 22%. The P/E ratio is 20.6x. [**VTech**](https://finance.yahoo.com/quote/0303.HK/?p=0303.HK&ref=asiancenturystocks.com) is a Hong Kong-based toy manufacturer selling electronic learning products under the VTech and LeapFrog brand names. It also sells cordless phones for office use (a declining industry) and contract manufacturing for professional audio equipment, hearing aids, etc. (a growing segment for VTech). The business has a high return on equity and pays out 90-100% of earnings as dividends. The 2023e P/E ratio is currently 7.8x, with a dividend yield of 12.6%. [**Hansol Chemical**](https://finance.yahoo.com/quote/014680.KS/?p=014680.KS&ref=asiancenturystocks.com) is a Korean producer of hydrogen peroxide for the semiconductor, paper and fabric industries. The company also sells materials needed for the quantum-dot resin used in Samsung Quantum Dot TVs and the paint for Samsung’s smartphones. The business is surprisingly profitable, with a return on equity above 20%. The forward P/E ratio is currently 9.7x, but in a typical Korean fashion, the company hardly pays any dividend. --- ## Niwes Hemvachiravarakorn According to Magnus Angelfelt’s [The World’s 99 Greatest Investors](https://www.amazon.com/World%C2%B4s-99-Greatest-Investors-Success-ebook/dp/B00LI5FGNW/ref=sr%5F1%5F1?crid=34QRF0N55Y4SN&keywords=magnus+angenfelt&qid=1664943274&qu=eyJxc2MiOiIwLjc4IiwicXNhIjoiMC4wMCIsInFzcCI6IjAuMDAifQ%3D%3D&sprefix=magnus+angenf%2Caps%2C422&sr=8-1&ref=asiancenturystocks.com), Thailand’s **Niwes Hemvachiravarakorn** earned a yearly CAGR of 38% for 15 years. While Nives used leverage and Thailand enjoyed a stock market boom from the early 2000s, it’s clear that he has talent. He’s written a [large number of books](https://shopee.co.th/search?keyword=%E0%B8%99%E0%B8%B4%E0%B9%80%E0%B8%A7%E0%B8%A8%E0%B8%99%E0%B9%8C%20%E0%B9%80%E0%B8%AB%E0%B8%A1%E0%B8%A7%E0%B8%8A%E0%B8%B4%E0%B8%A3%E0%B8%A7%E0%B8%A3%E0%B8%B2%E0%B8%81%E0%B8%A3&ref=asiancenturystocks.com), but unfortunately, they’re only available in Thai. Channel News Asia interviewed Hemvachiravarakorn a few years ago. The video is available [here](https://www.channelnewsasia.com/watch/close-dr-niwes-hemvachiravarakorn-1637966?ref=asiancenturystocks.com). ![Club VI - Nives Hemvachiravarakorn Phd. or "Dr.Nives" is known by many as THAILAND'S WARREN BUFFETT. He is unarguably the most successful value investor this country has ever had. Keep up with](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/efc4a05d-7fed-4a41-99ad-c8f347a96a87_244x200.jpg) His strategy is to find companies that are experiencing problems that are either short-term in nature or solvable. His portfolio is concentrated among 5-7 stocks, and he’s not reluctant to make big bets. Today, Niwes is listed as the shareholder of only four companies. But his wife Paopilas Hemvachiravarakorn also shows up on the shareholder register of convenience store operator CP All, with a stake worth US$65 million. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/180db35e-3c77-42ca-9935-409638676b9c_3406x508.png) [**Quality Houses**](https://finance.yahoo.com/quote/QH.BK/?p=QH.BK&ref=asiancenturystocks.com) is a Thai property developer specialising in residential properties. Low-rises represent the majority of revenues, with condominium sales having dropped to only 6% of revenues. The company owns a 19.9% stake in building materials retailer HomePro, worth US$942 million, compared to Quality Houses’ own enterprise value of just US$929 million. The condo business has been weak, potentially due to lower investment demand for properties during COVID-19, especially from Chinese buyers. The 2023e consensus P/E is 9.5x, despite the large hidden value in Quality Houses’ stake in HomePro. [**Bangkok Aviation Fuel**](https://finance.yahoo.com/quote/BAFS.BK/?p=BAFS.BK&ref=asiancenturystocks.com) provides aviation fuel services at several airports in Thailand, including Suvarnabhumi (Bangkok), Don Mueang and Koh Samui airports. It also has pipelines that connect Suvarnabhumi Airport with an oil refinery in Bangkok’s Chong Nongsi district. Competition is limited since a single airport will not have more than two or three jet fuel providers at most. The company has a significant amount of debt, causing its EV/EBITDA to remain high despite a falling share price. The current market cap is currently around 22.9x pre-pandemic earnings vs a historical level of 20-25x. It’s historically been a growth stock with a return on equity of around 30%. [**Eastern Water Resources**](https://finance.yahoo.com/quote/EASTW.BK/?p=EASTW.BK&ref=asiancenturystocks.com) supplies water to seven provinces in the Eastern part of Thailand. There’s a dispute between Eastern Water and the Central Administrative Court about the government’s takeover of key pipelines in the Eastern region. The stock trades at a P/E of 11.6x and a forward dividend yield of 5.5%, but note that the dividend yield dropped during COVID-19\. Over the past 10 years, the stock has traded at a P/E ratio of 16.0x. [**Muramoto Electron Thailand**](https://finance.yahoo.com/quote/METCO-R.BK/?p=METCO-R.BK&ref=asiancenturystocks.com) (“METCO”) is a subsidiary of Japan’s Muramoto Group. It produces electronics parts for office automation and the automotive industry. Its products include big tank printers, car audio panels, PCBs for car cameras, car sensors and car keys. The stock trades at 9.5x run-rate earnings, despite having 38% of its market cap in net cash. Growth appears to be tepid. Convenience store operator [**CP All**](https://finance.yahoo.com/quote/CPALL.BK/?p=CPALL.BK&ref=asiancenturystocks.com) runs 12,000 7-Eleven outlets across Thailand. CP All has exclusive rights to run 7-Eleven shops across the country with an 80% market share. The majority of those outlets are in the Greater Bangkok area. Some outlets are fully owned, and some are franchised out. Since 2013, CP All also owns cash-and-carry operator Siam Makro, which is gradually taking share from wet markets, serving restaurants across the country. Thailand’s convenience store sector suffered during COVID-19 due to weak foot traffic and a lack of tourism, but it’s now recovering. The stock is not cheap though, at a 2023e P/E of 23.8x. --- # PYN Elite Fund ![PYN Elite Fund - PYN](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/1bdeab56-d8fa-4ad7-ba34-3289619447c8_306x164.png) Finland’s PYN Elite Fund is a fund with a 23-year track record across Southeast Asian and Chinese equities. Today, most of the investments are in Vietnam since it believes in the macroeconomic fundamentals of the country. PYN’s latest [3Q2022 investor letter](https://www.asiancenturystocks.com/content/files/wp-content/uploads/investor-letter-3%5F2022-final.pdf) describes the company’s strategy well and why it believes in Vietnamese bank stocks. The company is involved in long-term value investing, aiming to outperform funds that are focused on equities globally. And the performance has been more than decent, returning 3,309% since inception in 1999 in USD terms with dividends reinvested, or 16.1% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/94919d88-fa99-4107-a7d0-090ffc41f5f3_1638x314.png) PYN Elite’s portfolio manager is **Petri Deryng**, who has run the fund since its inception in 1999. ![Profile photo of Petri Deryng](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9849b83e-cc0a-4ec3-a767-4288f81bbf2f_291x291.jpg) Prior to starting PYN, he was an entrepreneur in Finland’s radio and TV industry. He’s been based in Vietnam for many years back. The portfolio is concentrated across some 20-odd Vietnamese stocks. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/530e68ae-5b5c-4dcf-8a29-13eb4036ebc9_2650x1068.png) PYN Elite Fund’s largest position is [**Vinhomes**](https://www.marketwatch.com/investing/stock/vhm?countrycode=vn&ref=asiancenturystocks.com), Vietnam’s largest real estate developer. It has a massive land bank supporting its current sales for the next 30 years. Vietnam’s living area per capita is currently about half that of China, suggesting catch-up growth still ahead of it. The consensus 2023e P/E ratio of 6.1x looks low, but the gross margin of 57% may or may not be sustainable, depending on how land prices continue to develop. The second-largest position is [**VietinBank**](https://www.marketwatch.com/investing/stock/ctg?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) is the largest listed bank in Vietnam in terms of its branch network, total assets and profitability. The state has been selling down its stake in the company, and it’s now controlled by IFC and BTMU. Other than its retail banking arm, it’s also involved in brokerage, fund management, insurance, money transfer and leasing. The bank trades at a 2023e P/E ratio of 4.5x. [**VEA**](https://www.marketwatch.com/investing/stock/vea?countrycode=vn&ref=asiancenturystocks.com) (“Vietnam Engine & Agricultural Machinery Corp”) is a producer of agricultural machinery such as ploughs, combustion engines, rice husking, tractors, water pumps, etc. Almost all sales are to the domestic market. Earnings have come down during COVID-19, but even at the current level, it still trades at around 8.2x 2023e earnings. [**Vincom Retail**](https://www.marketwatch.com/investing/stock/vre?countrycode=vn&ref=asiancenturystocks.com) is a Hanoi-based shopping mall operator that’s part of the Vin group. It has a 60% market share in modern retail in Vietnam under the Vincom Center, Vincom Mega Mall, Vincom Plaza and Vincom+ brand names. Vietnam has recently relaxed its COVID-19 restrictions, which should help the company. The stock does not appear cheap at first glance at 25x 2019 (full-recovery) earnings, but property is typically capitalised at low cap rates, especially in a fast-growing market like Vietnam. [**TPBank**](https://www.marketwatch.com/investing/stock/tpb?mod=mw%5Fquote%5Fswitch&countrycode=vn&ref=asiancenturystocks.com) (“Tien Phong”). TPB is a retail-oriented bank with a fat net interest margin and low NPLs. It’s a first-mover in digital banking, backed by key shareholders FPT, DOJI and Vietnam National Reinsurance Corporation (Vinare). It seems like a well-operation. The stock trades at a P/E ratio of 4.6x. [**Airports Corp of Vietnam**](https://finance.vietstock.vn/ACV-airports-corporation-of-vietnam.htm?languageid=2&ref=asiancenturystocks.com) is the operator of 22 out of 23 civil airports in Vietnam. The company is run like a typical Vietnamese SOE, with the Chairman being a former government official from the Civil Aviation Authority. Utilisation in ACV’s airports is high, and the company is now investing heavily to increase capacity. There remains significant potential in the non-aeronautical segment since the contribution is only 12% of revenue vs 50% for most modern airports. The main hurdle remains regulation, which in Vietnam remains restrictive and not conducive to high profitability. The stock trades at 26.6x pre-pandemic revenue with a strong balance sheet. [**Military Bank**](https://www.marketwatch.com/investing/stock/mbb?countrycode=vn&ref=asiancenturystocks.com) is one of Vietnam’s three-largest private sector banks and one of the most profitable ones. It has exposure to retail and SME lending. Its link to military-related enterprises enables it to enjoy a low cost of funding since those tend to have accounts with the bank. The stock trades at a 2023e P/E of 4.2x. [**Saigon Cargo Services**](https://www.marketwatch.com/investing/stock/scs?countrycode=vn&ref=asiancenturystocks.com) is one of the two cargo support operators at Tan Son Nhat Airport - and the only international airport in Vietnam’s Ho Chi Minh City. The main shareholders are the airport company ACV, the Vietnamese army and logistics operator Gemadept. Passenger and cargo volumes grew in the mid-teens before the pandemic. A few years ago, total air freight volumes in Vietnam were only half those of Singapore despite having a 20x greater population. It’s plausible that SCS’s cargo volumes will continue to grow for many years ahead. Sargon Cargo Services recently increased its capacity, but it might face pressure from HCMC’s new airport, which is scheduled for completion in 2025\. The stock trades at a run-rate P/E ratio of 11.8x. The other stocks in the portfolio are primarily in the construction industry, property development or infrastructure investment. One can tell that Petri believes in the Vietnamese growth story and therefore doesn’t mind holding cyclicals, despite fears about a rising interest rate environment. --- # Belgrave Capital Management’s Vitruvius Asian Equity Fund ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/eb863928-0953-4ad4-a8c3-bf2e4519aeb7_1266x284.png) The Vitruvius Asian Equity UCITS Fund is run by **Mattia Nocera**, the founder of London-based Belgrave Capital Management. It’s a small fund of US$55 million, but only one of many managed by Belgrave. Mattia started Belgrave in 1995 and has been running the Vitruvius Asian Equity Fund since its inception in 2010\. Prior to starting Belgrave, he worked for Bankers Trust. He’s an American citizen with degrees from Brown University and NYU. ![Mattia Nocera - FundsPeople Italia](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/f02ee6d3-e9a4-4327-8e47-98a2e36dc718_600x533.png) The Vitruvius Asian Equity Fund is up 118% since its inception in 2010 in US Dollar terms, or 6.3% per year. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9d745e45-8739-4447-a6a5-0f8bb9f14e8e_1646x312.png) What stands out about the fund is the fact that it invests with total disregard for the index. It’s focused on capital gains and investing across Asia Ex-Japan. Here are the current largest positions of the fund. As you can tell from the [August 2022 fact sheet](https://www.asiancenturystocks.com/content/files/%5Fmanage/upload/vitruvius20asian20equity20eng2020222d08.pdf), the fund has outsized exposure to Japan and the technology hardware industries. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/40159b41-8698-4d5c-bad5-d2506bee955b_3404x1124.png) The fund’s biggest position is Taiwan’s [**E Ink Holdings**](https://finance.yahoo.com/quote/8069.TWO?p=8069.TWO&.tsrc=fin-srch&ref=asiancenturystocks.com), the monopoly supplier of e-paper displays for Amazon’s Kindle and other e-readers, as well as supermarket price tag displays. The benefit of e-paper is the long battery life, high contrast, wide viewing angles, lightweight and low glare. The company holds patents that make it difficult for peers to gain entry into the sector. The company is launching colour e-readers, which could drive growth in the future. The stock is listed through a reverse merger. It now trades at 20.8x 2023 earnings. [**Hitachi**](https://finance.yahoo.com/quote/6501.T/?p=6501.T&ref=asiancenturystocks.com) is a producer of machinery across tech, power systems, construction machinery, automotive, etc. The largest “IT” business is about systems integration, consulting and IT solutions for business customers. The second-largest segment, “social infrastructure & industrial” builds industrial machinery systems, elevators, escalators, railway systems, and power generation equipment. It’s also involved in semiconductor manufacturing equipment, MRI machines, etc. The stock is undergoing a restructuring and trades at just 10.0x forward P/E. [**Anhui Gujing Distillery**](https://finance.yahoo.com/quote/000596.SZ/?p=000596.SZ&ref=asiancenturystocks.com) produces Chinese rice wine “baijiu”. Vitrius owns the B-share, which is denominated in Hong Kong Dollars and trades at a 61% discount to its A-share equivalent. The forward-looking P/E ratio is 14.8x. [**Inpex**](https://finance.yahoo.com/quote/1605.T/?p=1605.T&ref=asiancenturystocks.com) is a Japanese oil company formed through the merger of Inpex and Teikoku Oil. It has pure upstream exposure across crude oil and natural gas. The government is the largest shareholder, and it may therefore have certain priorities other than shareholder wealth maximisation. It’s involved in three main projects: the Ichthys LNG project, the Abadi LNG project, and the Kashagan oil field. Inpex should benefit from the weakness of the Japanese yen, given that its revenues are all priced in US Dollars. The 2023e forward P/E ratio is 5.1x. [**Toyota Motor**](https://finance.yahoo.com/quote/7203.T/?p=7203.T&ref=asiancenturystocks.com) is the largest car manufacturer in the world, with exposure to all major markets globally. Its brand names include Toyota and Lexus. Some say that Toyota is lagging behind in the shift to EVs, but on the other hand, it has a strong portfolio of hybrid vehicles and is also advanced in fuel cell technology. [**Hyundai Heavy**](https://finance.yahoo.com/quote/329180.KS/?p=329180.KS&ref=asiancenturystocks.com) is the world’s largest shipbuilding company. It also produces heavy equipment. The types of ships built include oil tankers such as VLCCs, container ships, LNG carriers, barges and naval vessels. It also constructs oil rigs and marine engines. The company is not profitable but trades at 1.85x book and 1.02x revenues. [**DFI Retail Group**](https://finance.yahoo.com/quote/D01.SI/?p=D01.SI&ref=asiancenturystocks.com) (“Dairy Farm International”) is a retailer owned by the Jardines / Keswick family. It has 7,181 outlets across Asia, ranging from supermarkets, health & beauty stores, convenience stores, etc. The cash cow has been the Hong Kong and Chinese businesses, but they’ve been hurt by COVID-19 restrictions and a lack of tourism to Hong Kong. The Southeast Asian business has been loss-making for many years, and the restructurings have not had a material impact yet. E-commerce is a potential threat to DFI’s recovery. The stock has a forward 2023e P/E ratio of 16.0x but note that estimates are low. I wrote about Dairy Farm in early 2021 [here](https://www.asiancenturystocks.com/2021-1-dairy-farm-international-holdings-ltd/). [**ASE Technology**](https://finance.yahoo.com/quote/3711.TW/?p=3711.TW&ref=asiancenturystocks.com) is the global leader in the assembly and testing of semiconductor chips, based out of Kaohsiung but with facilities across China. The company was formed from ASE’s acquisition of Siliconware Precision back in 2018, which was financed through debt. The stock trades at P/E 6.8x with an 8.4% yield on 2023e consensus numbers, but earnings during COVID-19 may have been unsustainable. [**SK Hynix**](https://finance.yahoo.com/quote/000660.KS/?p=000660.KS&ref=asiancenturystocks.com)is one of South Korea’s two large memory chip makers, along with Samsung Electronics. DRAM represents 70% of revenues and NAND around 20%, but DRAM represents the majority of revenues. While Hynix has always lagged behind Samsung, its acquisition of Toshiba enabled it to catch up in R&D. Memory prices are currently weakening, causing Hynix’s earnings to drop. So take the 2023e P/E multiple of 11.5x with a grain of salt. [**Komatsu**](https://finance.yahoo.com/quote/6301.T/?p=6301.T&ref=asiancenturystocks.com) is Japan’s largest construction machinery maker, with sales from every region of the world and second to only Caterpillar. It has particular exposure to mining equipment such as dump trucks. It’s unique in the sector in that most components are produced internally, ensuring quality control. Komatsu’s acquisition of Joy Global also strengthened its product portfolio. Thankfully, Komatsu apparently does not have much exposure to China’s property sector. It should benefit from the weakening of the Japanese yen, given that 86% of revenues are from overseas. The P/E ratio is 9.2x on next year’s earnings. Japan’s [**Nikon**](https://finance.yahoo.com/quote/7731.T/?p=7731.T&ref=asiancenturystocks.com) operates across four business segments: lagging-edge lithography machines for semiconductor manufacturing, cameras, healthcare equipment such as microscopes as well industrial metrology. It’s lagging behind ASML in lithography machines but still has a strong position in DUV machines. Nikon has recently lost market share to Sony in DSLR cameras, and there’s a question mark whether smartphone cameras will eventually outcompete DSLRs. On the positive side, content creators are keen buyers of DSLRs. The P/E ratio is 11.2x. [**Plug Power**](https://finance.yahoo.com/quote/PLUG/?p=PLUG&ref=asiancenturystocks.com) is an American company that manufactures fuel cells for hydrogen fuel cell systems. Such fuel cells are meant to replace gasoline engines. Plug Power has been subject to shareholder class actions due to misleading statements during the IPO. I also think the company seems somewhat promotional, and the shares have been subject to constant dilution from follow-on offerings. The company is not profitable but trades at a forward-looking EV/Sales of 8.0x. Japan’s [**Bridgestone**](https://finance.yahoo.com/quote/5108.T/?p=5108.T&ref=asiancenturystocks.com) is the world’s largest manufacturer of tires globally. The name comes from an English translation of founder Shojiro Ishibashi’s name (Ishi = Stone, Bashi = Bridge). In 1988, Bridgestone acquired America’s Firestone and thereby increasing its presence in the US market, now the biggest for Bridgestone. Rubber prices have recently come off, and the company should benefit from the weak Japanese yen, given that the company sells the majority of its products overseas. The stock trades at 9.8x P/E and 7.4x EV/EBIT on 2023e consensus estimates. --- ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-592/ Last updated: 2022-10-03T04:01:05.000Z Koito Manufacturing, Prosus, Yodogawa Steelworks, Pentamaster International _This post is for paying subscribers only._ ### Koito Manufacturing (7276 JP) URL: https://www.asiancenturystocks.com/deep-dive-2022-25-koito-manufacturing/ Last updated: 2026-07-31T01:31:00.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Koito Manufacturing at the time of publishing this article. Note that this is disclosure and not a recommendation to buy or sell.* [**Koito Manufacturing**](https://finance.yahoo.com/quote/7276.T/?guccounter=1&guce%5Freferrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce%5Freferrer%5Fsig=AQAAAJukQan7BubPot86TU793ODmV%5FKhjy5jF1Z6nfhx77--31hrUDhaaJY8O6S4KBcDIY8bV4r6xTZbl8SyLr40t94FBShvltEmhYxpaEiGcSmRl4SPqIYeImw1dUMjJZKpCxNU9uzqrSDkeXlRmaXkCwQ17CzkCHIFRDFqoknVZg9p&ref=asiancenturystocks.com)(7276 JP) is the world’s largest manufacturer of automotive lighting products. Such products include headlamps, rear-combination lamps, fog lights, etc. The company was founded by a man called “Genrokuro Koito” in Tokyo in 1915\. Initially focused on selling fresnel lenses for railways, the company moved into motorcycle lamps and eventually passenger vehicle lamps in the 1930s. Since then, it has grown with its key customer Toyota, which still represents 40% of Koito’s revenues. Since the early days of COVID-19, a shortage of semiconductor chips has plagued the auto industry. Auto OEMs were forced to halt production, and the vehicles that did get sold were sold at incredible prices. Many auto OEMs did just fine, with higher prices counteracting the negative effect of lower volumes. It was a different story for auto parts suppliers. Since they’ve been unable to raise prices quickly, their gross profits have fallen in line with weakening volumes. And even though most of Koito’s customers are Japanese, they sell their vehicles worldwide. So Koito was and continues to be a bet on global production volumes. There are now early signs that the chip shortage is easing. The most compelling evidence is that the demand for semiconductors from competing consumer electronics is falling. Foundry capacity is finally available for automotive-related chips. And then there’s the benefit of the weakening yen. While Koito’s contracts are long-term in nature, in the medium-term, there is no doubt that Koito reported profits in yen will benefit from the weaker currency. Over 60% of sales are currently overseas. And its Japanese customers will also benefit significantly from the increased competitiveness that the weak yen has enabled. Other than a resolution to the chip shortage and the weakening of the Japanese yen, Koito will also benefit from the ongoing shift that’s taking place from halogen and HID lamps to LED. Koito’s adaptive driving beams also drive growth, thanks to their much higher average selling prices and better margins. In 2023, Koito will also release headlamps with integrated LiDARs to enable level 2/3 advanced driver assistance systems. I think Koito is at the forefront of automotive lighting R&D. It was the first company to mass-produce LED headlamps in 2007\. And it’s far ahead in adaptive driving beams as well. The company is skating to where the puck is going, not where it has been. As far as I can tell, Koito is ahead of its Japanese competitors Stanley Electric and Ichikoh, technologically. But it’s probably behind its German competitor Hella. In light of these factors, I believe that Koito will make close to JPY 90 billion in net profit by 2025, giving the stock a P/E multiple of around 7.0x, despite a solid net cash position of over 40% of the market cap. The key risks are a delayed recovery of global auto production volumes, perhaps from a 2023 recession or China’s zero-COVID policy. There’s also a risk that Koito loses sales from its key client Toyota if it follows through on its stated aim to diversify among its key suppliers. _This post is for paying subscribers only._ ### Changes to the publication URL: https://www.asiancenturystocks.com/changes-to-the-publication/ Last updated: 2022-09-28T07:06:31.000Z Five changes coming to the publication _This post is for subscribers only._ ### Portfolio update September 2022 URL: https://www.asiancenturystocks.com/portfolioseptember2022/ Last updated: 2026-06-04T11:49:32.000Z [Best viewed in your browser](https://www.asiancenturystocks.com/portfolioseptember2022/) **Disclaimer:** *This article constitutes the author’s personal views only and is for entertainment and educational purposes only. It is not to be construed as financial advice in any shape or form. Please do your own research and seek your own advice from a qualified financial advisor. From time to time, the author may hold positions in the below-mentioned stocks consistent with the views and opinions expressed in this article. I have positions in all of the below stocks at the time of publishing this article. This is a disclosure - not recommendations to buy or sell stocks.* # Portfolio update Carnage over the past month. Down -5.7% month-on-month and now down -0.5% over the first twelve months of the portfolio, measured in US Dollars. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/4d98aa2a-2c39-4e78-9cde-bcf7d168521b_1378x468.png) It’s the strength of the US Dollar that’s wrecking markets across Asia. The Yen is now at 144, the Singapore Dollar at 1.44, for example. The only currency that has been spared is the Hong Kong Dollar, thanks to its peg, but unfortunately, I have little exposure to HKD-denominated assets. The DXY shows the relentless rise of the US Dollar, at least against the other major currency pairs. The portfolio was funded back in early October last year, and since then, the DXY is up about +23%. ![](https://storage.ghost.io/c/2c/05/2c053c06-80c0-447b-904b-e324017b1293/content/images/public/images/9303cef2-45f1-4353-bdc8-2320b3a486fd_3120x1540.png) The only real impacts from the current US hiking cycle are higher debt burdens for those with USD borrowing and Asian rate hikes catapulting local economies into recessions. But most of my stocks are defensive consumer stocks with limited leverage. Over the past year, I’ve had significant exposure to oil prices via CNOOC. That one has produced satisfactory returns thanks to massive dividend payments and despite a recent weakening in the oil price. I’ve had significant exposure to Indonesian and Japanese tourism through Multi Bintang, Ichigo Hotel REIT and Kyushu Railway. That bet has also turned out okay, despite the weakening of the Japanese Yen. And lastly, Indonesian auto producer and distributor Jardine C&C performed well, though I sold it far too early. So while the performance is disappointing in terms of the numbers, I realise it could have been worse. What have I learnt over the past year since I started tracking my portfolio? - For one, the need to buy cheap. My biggest mistake was buying Sony after, admittedly, wanting to create content that would bring in subscribers and then getting excited by the stock. It traded at a fair multiple of 15x EBIT, and I still don’t know if the stock is undervalued at its current 12x EBIT. - Another lesson is that you don’t want to buy stocks with near-term challenges, such as Ultrajaya. Up until now, at least. I believe in the value-with-a-catalyst approach: buying cheap and looking forward to positive surprises. In my case, those positive surprises are mostly about tourism, an end to COVID-19, an end to supply chain constraints and strong cash flows from high commodity prices. --- Here is my Asian portfolio as of 27 September 2022: _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-636/ Last updated: 2022-09-26T04:01:31.000Z Anicom, the automotive chip crisis, Jeff Gundlach, Stan Druckenmiller, Chris Redl _This post is for paying subscribers only._ ### Variant view: The automotive chip shortage is over URL: https://www.asiancenturystocks.com/automotivechips/ Last updated: 2022-09-25T04:41:22.000Z The prime beneficiaries will be volume proxies such as Japanese auto parts suppliers. Estimated reading time: 13 minutes _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-6fd/ Last updated: 2022-09-19T04:00:34.000Z Swire Pacific B-share, Uni-Charm Indonesia, Chinese cloud industry and Chris Wood _This post is for paying subscribers only._ ### Swire Pacific B-share URL: https://www.asiancenturystocks.com/deep-dive-2022-24-swire-pacific-b/ Last updated: 2026-07-31T01:30:43.000Z **Disclaimer:* Asian Century Stocks uses information sources believed to be reliable, but their accuracy cannot be guaranteed. The information contained in this publication is not intended to constitute individual investment advice and is not designed to meet your personal financial situation. The opinions expressed in such publications are those of the publisher and are subject to change without notice. You are advised to discuss your investment options with your financial advisers, including whether any investment is suitable for your specific needs. From time to time, I may have positions in the securities covered in the articles on this website. Full disclosure: I do not hold a position in Swire Pacific at the time of publishing this article. Note that this is disclosure and not a recommendation to buy or sell.* --- **Swire Pacific** ([A-share](https://finance.yahoo.com/quote/0019.HK/?p=0019.HK&ref=asiancenturystocks.com): 19 HK, [B-share](https://finance.yahoo.com/quote/0087.HK/?ref=asiancenturystocks.com): 87 HK) is a Hong Kong conglomerate focused on developing and leasing commercial property. It’s also the controlling shareholder of Hong Kong airline Cathay Pacific and a major Coca-Cola bottling business in China. Founder John Swire set up the company in Liverpool in 1816\. Less than fifty years later, it started trading textiles with Chinese companies through a partnership in Hong Kong. Over the years, the company also set up a sugar refinery in Hong Kong’s Quarry Bay, went into the paint industry, bought a Coca-Cola bottling business, entered the offshore support vessel industry and set up a JV with Cathay Pacific. It became a conglomerate rivalling the likes of Jardine Matheson and Cheung Kong. But most importantly, the company set up Swire Properties in 1972\. The first project was to build a 61-tower residential development in Quarry Bay on the same piece of land Swire used to run its sugar refinery. Today, the majority of Swire’s assets are centred around commercial property. It owns Pacific Place and Taikoo Place in Hong Kong and several retail properties in mainland China. The Hong Kong assets are mostly offices, whereas the mainland properties have greater exposure to retail. These assets are of exceptionally high quality, in my view. The corporate structure is complex. At the top, you have the London-based family holding company, John Swire & Sons. Then below is the Hong Kong-listed conglomerate Swire Pacific, which owns stakes in several other listed companies, including Swire Properties (1972 HK) and Cathay Pacific (293 HK). The company has suffered alongside the Hong Kong economy. The problems started with the “Occupy Central” movement in 2014, which caused mainland tourism to drop. The anti-government protests in mid-2019 cut off mainland tourism almost entirely, which hurt the profits of Swire’s airline Cathay Pacific. And then came COVID-19, which caused Hong Kong air travel to grind to a halt. The retail industry suffered, both in Hong Kong and on the mainland. And many individuals worked from home, reducing the demand for office space. That has caused Hong Kong office- and retail rents to drop significantly. Swire Pacific’s rental income has only declined marginally, but future rental reversions will continue to weigh on profits. Higher interest rates have also increased Swire Pacific’s borrowing costs and caused cap rates to expand. The Hong Kong property market has started wobbling. There are some early signs that normalisation can happen at some point. Workplace patronage in other parts of the world has already recovered. Hong Kong recently reduced the quarantine period for travellers to just three days. And many investors hope that October’s Party Congress could be a catalyst for reduced COVID restrictions. Swire Pacific has two share classes: A-shares (19 HK) and B-shares (87 HK). Their voting rights are identical. But B-shares only offer 1/5 of the cash flow rights of the A-shares. But B-shares are also a lot cheaper. They trade below 1/5 of the price of an A-share. So at the current price, for every dollar invested, you get far greater voting rights and cash flow rights in the B-share than in the A-share. In addition, the Swire family has a 71.5% stake in the B-share and only a 48.9% share in the A-share. So if you buy B-shares, you’ll be investing alongside the family. Swire Properties trades at a discount to NAV, Swire Pacific trades at a discount to Swire Properties and its other subsidiaries, and finally, the B-share trades at a discount to the A-share. Swire Pacific’s B-shares essentially trade at a triple discount. Using market cap rates, a sum-of-the-parts valuation with a typical 25% NAV discount leads to an intrinsic value per B-share of HK$26.6, well above the current share price of HK$8.9 for the B-share. In P/E terms, it seems likely that Swire Pacific will trade in the high single digits with a \~7% dividend yield. The risks are that China’s and Hong Kong’s strict COVID policies continue for longer than expected. That would be a massive problem for Cathay Pacific, which relies on open borders to and from Hong Kong. Higher interest rates are also a headwind, but Swire Pacific’s debt levels are modest compared to those of other Hong Kong conglomerates. And then there’s a question of Swire Pacific’s bargaining power against Beijing. Some mainland enterprises have been compelled to contribute directly to Beijing’s new goal of wealth redistribution. Hong Kong tycoons may one day find themselves in the crosshairs of Beijing as well. On the positive side, Swire Pacific has now initiated a share buyback, and it plans to buy back both A- and B-shares. If Swire buys back the maximum amount of shares under its mandate without breaching the free float requirement, it could end up with 140 million B-shares or roughly 4.7% of total B-shares outstanding. _This post is for paying subscribers only._ ### Monday morning links URL: https://www.asiancenturystocks.com/monday-morning-links-b53/ Last updated: 2022-09-12T04:03:49.000Z Delta Djakarta, Ryohin Keikaku, Inabata & Co, Haier D-share, Japan's coming tourism boom _This post is for paying subscribers only._ _Includes the latest 500 public posts. Use `/sitemap.xml` for the complete archive of public content._