30 Asian value stocks - each with their own stories. Estimated reading time: 23 mins
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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.
2022 began with a write-up on Philippine cement producer Holcim Philippines (HLCM PM - US$463 million). I had gone deep into the ASEAN cement sector 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 on Vietnamese-imported cement until 2027.
2: CK Hutchison
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.