Portfolio update September 2025
A weak month for the portfolio, but with three deep dives published, plenty to think about.
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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)
In early January, Krish Mehta from Enam Holdings pitched HDFC Bank at the Manual of Ideas Best Ideas 2024 conference (HDB US - US$133 billion). I wrote briefly about HDFC last year here.
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 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:
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.
wrote about Japanese testing equipment maker Sysmex (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.
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