LIVE on Thursday 3pm ET: Isaac Schwartz on Value Investing in Asia

April 9, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Isaac Schwartz of Robotti & Company will share his perspective on value investing in Asia at Asian Investing Summit 2020.

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About the instructor:

Isaac Schwartz is the Portfolio Manager of Robotti Global Fund, which he started in 2007. Robotti Global Fund seeks to achieve long-term gains by investing in undervalued securities (primarily stocks) of companies throughout the world. The Global Fund’s largest investments are now in the United Kingdom, the United States, Kazakhstan, Indonesia, and Hong Kong. Isaac serves as a director of Menu Group (U.K.) Ltd., the leading online food delivery platform in several former Soviet Republics, and of Complete Start Inc., a plant-based health food company in the U.S.. Prior to joining Robotti & Company in 2002, Isaac worked for Schiff’s Insurance Observer, an investigative journal, where he did research on the property-casualty and annuity insurance industries. Isaac graduated from Wharton with a B.S. in Economics.

ITC: India-Based Tobacco Company and Consumer Brand Factory

April 9, 2020 in Asia, Asian Investing Summit 2020, Audio, Equities, Ideas

Roshan Padamadan of Luminance Capital presented his in-depth investment thesis on ITC Limited (India: ITC) at Asian Investing Summit 2020.

Thesis summary:

ITC Limited is a company that is both defensive and aligned to growth/recovery. The business has a high intrinsic return on equity. Nearly half the business is tobacco, while the second-largest segment is consumer products, reaching over one-half of Indian households. The company has shown an ability to create and nurture consumer brands — a “brand factory”.

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About the instructor:

Roshan Padamadan is Fund Manager at Luminance Capital. Previously, he served as COO, Risk and Compliance officer at Sixteenth Street Capital, based in Singapore. Luminance Global Fund has a global unconstrained investment strategy, looking at special situations and deep value. Prior to launching Luminance in 2013, Roshan also spent more than seven years with the HSBC Group, including more than three years with HSBC Asset Management, as a Product Specialist. He worked for the highly commended Offshore Indian Equity team which ran US$5+ billion from Singapore, including a US$100+ million award-winning India hedge fund. Roshan has earned an MBA in Management from Indian Institute of Management, Ahmedabad. He holds the CFA, FRM and CAIA charters and speaks over five languages.

Prudential: Well-Run Pan-Asia Insurer at Discount to Liquidation Value

April 9, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Andrew Macken of Montaka Global Investments presented his in-depth investment thesis on Prudential (UK: PRU) at Asian Investing Summit 2020.

Thesis summary:

Prudential is a 170 year-old life insurance company in Asia. Prudential has a market-leading position in nine Asian markets and is well-positioned to take advantage of the multi-decade structural tailwinds associated with (i) an emerging Asian middle class; (ii) growth in financial wealth in Asia; (iii) growing insurance penetration across the region; (iv) growing demand for retirement income; and (v) growing demand for asset management, particularly in equities and bonds.

The company has consistently generated high economic returns and double-digit growth in earnings and embedded value. Yet, the shares recently traded at just 60% of estimated liquidation value, likely due to the following reasons: (i) Brexit-related uncertainty in recent years, as the business is listed in London; (ii) recent Hong Kong protests, as HK is a key market for prudential; and (iii) the COVID-19 crisis. As the perceived risks subside, Andrew expects Prudential shares to more than double over time.

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About the instructor:

Andrew Macken is the Co-Founder and CIO of Montaka Global Investments. Montaka Global Investments manages the Montaka global equity long/short strategies as well as the Montgomery Global long-only strategies, in partnership with Australian boutique fund manager, Montgomery Investment Management. After spending nearly four years as a senior member of Jim Chanos’ research team at Kynikos Associates, a global equity long/short fund based in New York, Andrew has developed particular expertise in short portfolio management. Kynikos is one of the largest short-focused hedge funds in the world and manages capital on behalf of high net worth families and institutional investors. Prior to this, Andrew worked as a management consultant at Port Jackson Partners (PJP), a leading advisor to corporates based in Australia and abroad. At PJP, Andrew focused on corporate strategy for major clients both in Australia and overseas. Andrew holds a Master of Business Administration (Dean’s List) from the Columbia Business School in New York. Previous to this, Andrew also graduated with High Distinction with a Master of Commerce, focusing on Finance; and First Class Honours with a Bachelor of Engineering under a Co-Op Scholarship from the University of New South Wales in Sydney.

Redington: Indian IT Products Distributor at Depressed Valuation

April 9, 2020 in Asia, Asian Investing Summit 2020, Audio, Equities, Ideas

Sidd Thomas and Kimi Venkataraman presented their in-depth investment thesis on Redington (India: REDINGTON) at Asian Investing Summit 2020.

Thesis summary:

Redington is a leading distributor of IT products in India and the MENA region (including Turkey). It has 225+ clients, ranging from large IT product companies such as HP, Dell, and Apple to smaller, niche operators such as JABRA. Redington’s value proposition lies in its ability to bring products to market through a network of 40,000+ last-mile partners.

Redington shares recently traded at a P/E of 4x, due to a 50% drop in the share price in recent weeks. While the coronavirus-caused disruption will hurt earnings, the business should bounce back given its long-term track record of earnings and revenue growth (ten-year CAGR of ~15%). Sidd and Kimi value the business based on a five-year average P/E multiple of 10x and 2019 EPS, suggesting upside of roughly 100% from recent levels.

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About the instructors:

Siddharth Thomas founded Beaconsfield Investment Management in 2010. Prior to that he worked as an analyst covering Asian equities at Fairfax Financial Holdings and as an associate analyst at Credit Suisse equity research. Born and raised in Chennai, India, Siddharth completed his bachelor’s of science degree from Purdue University. He is also a level 3 candidate in the CFA program.

Krishnaraj (Kimi) Venkataraman is the Managing Partner of Kimi & Partners, an investment firm he founded in 2008. Kimi’s previous work experience includes Tata Steel and P&G India, as well as several business startups in India, including Marketics which was successfully sold to WNS. Kimi has been an investor for more than 20 years and, after reading Warren Buffett, has been investing in undervalued Indian stocks. Kimi lives in Bangalore, India, with his wife and two daughters.

Indian Energy Exchange: Defensible Moat, Superior Business Economics

April 9, 2020 in Asia, Asian Investing Summit 2020, Audio, Equities, Ideas

Vinod Moras of Kiara Advisors presented his in-depth investment thesis on Indian Energy Exchange (India: IEX) at Asian Investing Summit 2020.

Thesis summary:

Indian Energy Exchange is India’s largest energy exchange with 97% market share but still a small fish in a large pond as it trades ~4% of India’s energy consumed. Power consumption is a structural growth theme in India due to the low per-capita consumption. On top of this, the industry dynamics are driving both the power supply and demand from the long-term to the short-term market, benefiting the energy exchanges.

IEX has been taking market share from other products in the short-term market as the company is providing real solutions to industry problems. Since launching eleven years ago, IEX has established itself as a dominant exchange and built a wide moat due to a high-quality management team, wide network of buyers and sellers, technological edge, and product innovation. Business economics are attractive, with low operating cost, fixed cost, and maintenance capex resulting in strong FCF and ROICs of 40+%.

The market quotation is attractive, with the shares trading at ~20x trailing earnings, despite long-term double-digit growth visibility. The company also has new products in the pipeline, where the potential opportunity is large, which offers option value.

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About the instructor:

Vinod Moras is a value investor focused on Asian equity markets scouting for undervalued companies with high quality business models, strong moats and top quality management teams. He is currently a senior investment analyst at KIARA Advisors, an Asia focused long/short equity fund, covering India and Southeast Asia markets. In his prior role, Vinod served as a senior investment analyst at APS Asset Management, a $3bn Asian hedge fund investing in long/short equities focused on the Chinese internet sector and India. Vinod is a member of the Value Investors Club (VIC) since 2010. Vinod holds a Master’s degree in Finance from New York University, Polytechnic Institute.

Indian Energy Exchange: Dominant Power Trading Platform

April 9, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Amey Kulkarni of Candor Investing presented his in-depth investment thesis on Indian Energy Exchange (India: IEX) at Asian Investing Summit 2020.

Thesis summary:

Indian Energy Exchange is a competitively advantaged platform business on the cusp of breakout growth. The Indian Energy Exchange (IEX), in operation since 2008, is an electronic system-based power trading exchange regulated by the Central Electricity Regulatory Commission. In light of the underlying structural and regulatory changes in the industry, Amey estimates that the company can grow revenue at a CAGR of 20+% over the next decade.

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About the instructor:

Amey Kulkarni operates a boutique investment advisory that partners with select individuals and family offices in their journey of wealth creation through investments in the Indian equity markets

Amey worked in the corporate sector for a decade with experience spanning across India, Europe and African markets. Amey has also worked closely with the top management of L&T (Chairman’s office) and the MD&CEO office at Jindal Steel & Power handling responsibilities of corporate strategy and business planning.

Having gained unique insights into the internal workings of large diversified businesses from close quarters, Amey now applies the learnings to run an investment fund at Candor Investing.

At Candor Investing, Amey invests in companies that don’t require external capital, have the ability to grow for a long time and are run by honest and hungry management.

Being passionate about sharing the learnings and insights gained out of his investment experience, Amey occasionally takes up visiting faculty assignments at various Indian business schools. He is also a contributing author to the Moneylife Magazine which is renowned for pointing out corporate governance issues and championing investor awareness campaigns.

Emeco: Lowly Valued Australian Leader in Mining Equipment Rental

April 9, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Peter Kennan of Black Crane Capital presented his in-depth investment thesis on Emeco (Australia: EHL) at Asian Investing Summit 2020.

Thesis summary:

Emeco is the largest mining equipment rental company in Australia, with dominant market share. The company provides fully maintained equipment and has in-house capability to overhaul and rebuild equipment, providing Emeco with a competitive advantage.

The shares recently traded at 2.8x EV/EBITDA and 2.5x free cash flow. At 2x net debt to EBITDA, leverage is relatively low and declining. Peter had originally presented Emeco in 2015.

For historical context, replay Peter’s presentation on Emeco from 2015.

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About the instructor:

Peter Kennan is CIO of Black Crane Capital. Prior to founding Black Crane in 2009, Peter was a leading corporate financier with UBS Asia Pacific. He has 25 years of investment and corporate finance experience across a diverse range of sectors and transactions. With UBS, Peter was Head of Asian Industrials Group for UBS Asia, a corporate finance sector team covering energy, infrastructure, resources, consumer/retail and general industrial companies. He achieved number 1 team rating in Asia in 2006 and 2007. Peter was also the Head of Telecoms and Media sector team for UBS Australia specializing in M&A, advising on many large, complex transactions. Prior to UBS, Peter spent 7 years with BP in a variety of engineering and commercial roles.

Jiangsu Yanghe Brewery: Third-Largest Baijiu (Spirits) Company in China

April 9, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Ning Jia of Shanghai Pumeng Asset Management presented his in-depth investment thesis on Jiangsu Yanghe Brewery (China: 002304) at Asian Investing Summit 2020.

Thesis summary:

Jiangsu Yanghe Brewery is the third-largest baijiu (spirits) company in China. The baijiu industry, especially the premium and super premium segment of the industry, has one of the best business models in the world due to the unique nature of the product and unique characteristics of China’s spirits market.

Jiangsu Yanghe Brewery has relentlessly and carefully built one of the most recognizable premium and super premium baijiu brands since 2003, as well as a best-in-class distribution network. As a result, the company has compounded sales and profits at an annual rate of 19+% since the IPO more than a decade ago. While Yanghe is facing significant short-term challenges due to a variety of factors, management has taken targeted actions to get back to sustainable growth, with promising early signs of improvement.

Based on Ning’s analysis, the recent market quotation of Yanghe offers a sufficient margin of safety and potentially substantial upside for long-term investors.

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About the instructor:

Ning Jia is the Chief Investment Officer of Pumeng Asset Management.

Previously Ning worked for four years as an analyst covering U.S and China consumer, healthcare, financial and TMT sectors at Century Management based in Austin, Texas. Century was founded by Arnold Van Den Berg in 1974 and has more than 40 years of track record as an investment manager.

Ning received his Master of Accountancy and B.B.A in Accounting from the University of Georgia. He is a CFA charterholder and a CPA.

KRBL: Owner-Operated Basmati Rice Leader with Strong Economics

April 9, 2020 in Asia, Asian Investing Summit 2020, Audio, Equities, Ideas

Rajeev Agrawal of DoorDarshi Advisors presented his in-depth investment thesis on KRBL (India: KRBL) at Asian Investing Summit 2020.

Thesis summary:

KRBL is the world’s largest rice miller and the biggest player in the branded basmati rice market. KRBL’s brand, India Gate, has 35% market share in the Indian basmati market. KRBL is also the largest player in the Middle East, the largest export market for basmati rice. The company has continued to increase market share in India and most export markets.

KRBL has reported ROE of 20+% and ROCE of 20+% over many years. The company has grown revenue three-fold over the last decade and has grown EBITDA seven-fold in the same period. This growth has been achieved without any equity dilution.

Insiders own 59% of the company. Management has increased its stake from 53% in 2008 to 59% in 2020, driven by open market purchases. The company does not grant employee stock options. Management compensation is under 1% of earnings. Over the past three months, management has bought 38 crores of stock at an average price of INR 252 per share.

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About the instructor:

Rajeev Agrawal is the Founder and Adviser at DoorDarshi Advisors. Rajeev has been investing in the US and Indian equity markets for 15+ years. Rajeev follows Value Investing principles and finds that Indian equity market provides wonderful opportunities for his style of investing. Prior to starting DoorDarshi, Rajeev was a Technology executive focusing on the Financial Industry. He retired from IHS Markit as MD and CTO. Prior to that he has worked in US in various senior positions at Goldman Sachs, Bank of America, JP Morgan and Dresdner Bank. Rajeev completed his B.Tech from IIT Bombay and MBA from IIM Calcutta. He is also a CFA charterholder.

Mercuria and Dream Incubator: Investment Firms at Discount

April 8, 2020 in Asia, Asian Investing Summit 2020, Asian Investing Summit 2020 Featured, Audio, Equities, Ideas

Jiro Yasu and Patrick Rial of Varecs Partners presented their investment theses on Mercuria Investment (Japan: 7190) and Dream Incubator (Japan: 4310) at Asian Investing Summit 2020.

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About the instructors:

Jiro Yasu has more than 15 years of investment experience in the Japanese equity markets including at Varecs Partners, First Eagle Investment Management and Daiwa Securities America. As the Representative Director of Varecs Partners, Jiro spearheads the investment firm’s efforts to identify mid-sized listed Japanese companies where corporate value can be realized for all stakeholders by working together with management. Jiro holds a BA in economics with a specialty in econometrics from Keio University.

Patrick Rial joined VARECS Partners in 2015 as Senior Analyst. He joined from J.P. Morgan Securities Japan where he worked in equity strategy and small cap research. Prior to J.P. Morgan, he was a product manager at Morgan Stanley MUFG Securities. Mr. Rial began his career as a financial journalist covering Japanese equity markets. He has been a CFA charterholder since 2011. He holds a BA in economics and history from Georgetown University.