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Dheeraj Dadhich Shares a Perspective on Indian Culture

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio

Dheeraj Dadhich of Dadhich Family Office provided a perspective on Indian culture at Asian Investing Summit 2018. Dheeraj talked about the effect of Indian history, philosophy, and traditions in conduct on business values and consumption patterns via migration, choice of jobs, and family formations in India.

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About the instructor:

Dheeraj discovered the world of value investing before graduating from high school and relishes in it even now. He manages his family’s money, along with his brother. His focus have not just been application of multidisciplinary approach in stock picking but also how to conduct daily affairs, think about society at large and creating multi-generational wealth for people around him.

PNB Housing Finance: Carlyle-Backed, Recently Public Company

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio, Equities, Financials, Small Cap

Vishal Mittal of Altais Advisors presented his in-depth investment thesis on PNB Housing Finance (NSE: PNBHOUSING) at Asian Investing Summit 2018.

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About the instructor:

Vishal Mittal has over 13 years of experience across strategic planning and financial analysis. He is the co-founder of Altais Advisors. Prior to this, he has worked with Bharti Airtel in strategic planning and financial analysis for over four years. He also has worked with AT Kearney as an analyst in the management research and consulting space. He earned his MBA from Indian Institute of Foreign Trade (IIFT) and has also completed an Advanced Programme in Management Consultancy from the Indian Institute of Management, Ahmedabad (IIM-A).

Daihan Pharmaceutical: Infusion Manufacturer with Improving ROE

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio

Hoosik Min of Pine Investment Advisory presented his in-depth investment thesis on Daihan Pharmaceutical (KOSDAQ: 023910) at Asian Investing Summit 2018. Daihan is a manufacturer of infusions.

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About the instructor:

Hoosik (Michael) Min holds a B.A from Hankuk University of Foreign Studies and an M.B.A. in Finance from the University of Denver. Michael began his career in 1989 as an IT sector analyst at Coryo Securities, Tongyang Securities, Dongwon Securities, and Korea Investment & Securities. After 2007, he served as CIO in the Asset Management Department of Tempis Capital Management for three years and founded Pine Investment Advisory in 2010. He serves as chief investment officer.

Bharti Infratel: Second-Largest Wireless Tower Company in India

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio, Communication Services, Equities, GARP, Mid Cap, Special Situations, Wide Moat

George Kurian of RARE Infrastructure presented his in-depth investment thesis on Bharti Infratel (India: BHIN) at Asian Investing Summit 2018.

Thesis summary:

Bharti Infratel is the second-largest wireless tower company in India. The investment case is a classic example of time horizon arbitrage. While the market seems focused on the ongoing carrier consolidation, it ignores the normalized earnings power of the company.

Over the next couple of years, Infratel could become the second-fastest growing tower company in the world on an EBITDA basis, yet the it was recently priced at the lowest EV/EBITDA tower multiple in the peer group.

Moreover, with many companies safely levered in the mid-single digit net debt-to-EBITDA multiple range, Infratel has a net cash balance sheet. It also owns 42% of the largest tower company in India, Indus, and has a right of first refusal to buy the remainder of Indus. The board of Infratel has asked management to evaluate the Indus acquisition, which, if done at reasonable terms, could improve the growth prospects of Infratel, provide synergies, and lower the weighted-average cost of capital.

Infratel could be the classic “double play” for long-term investors due to a potential uplift in earnings and valuation multiples.

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About the instructor:

George Kurian, CFA, is a Portfolio Manager at RARE Infrastructure in Sydney, Australia, and has over 18 years of Investment and Finance experience. The fund he works for, RARE Emerging Markets Fund, has been ranked by the London based Citywire as the second best performing Global Emerging Markets fund in the world over a four year period between London and Rio Olympics. George has published several articles including ‘Darwin’s Power and Porter’s missing Force’, where he showed how a multi-disciplinary framework could extend the traditional Value investing philosophy. Prior to joining RARE in 2010, George was an Investment Analyst with Tradition Capital Management in NJ, US. He has also worked with Citigroup Investment Research in New York City, Aviva plc in the UK, and has also worked in several states in India. He is also fluent in three languages. George holds an MBA in Finance and Investment management from Duke University’s Fuqua school of Business, NC, US. While at Duke, one of his investment ideas was voted by an NYC hedge fund as top five from all Universities in United States. He is also a CFA charterholder.

Ashok Kinha on Capital Market vs. Business Investments in Asia

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio

Ashok Kinha of Athamus Venture Management discussed capital market vs. business investments in Asia at Asian Investing Summit 2018.

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About the instructor:

Ashok Kinha serves as Chairman of Athamus Venture Management, a private equity and venture capital firm. Ashok has been instrumental in the management of funds, fund managers, and real estate developers for the last sixteen years. Ashok chaired the risk functions in his last assignment with Azure Capital, in addition to heading legal and compliance functions. Previously, Ashok worked with fund managers like ICICI Venture and IREO, a U.S.-based real estate fund. He has also represented or worked at companies like Knight & Marshall of Singapore, Ascendas, and Unitech Limited.

Hosokawa Micron: Global Leader in Powder and Particle Processing Equipment

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio, Equities, GARP, Information Technology, Mid Cap, Small Cap

KB Kee of presented his in-depth investment theses on Hosokawa Micron (Taiwan: 6277) and Tocalo (Tokyo: 8035) at Asian Investing Summit 2018.

Thesis summary:

Hosokawa Micron is the global leader in powder and particle processing equipment and high-performance plastics thin-film blowing manufacturing equipment, with clients in the pharma, cosmetics, food and beverage, auto, and other industries. Hosokawa has a strong reputation for world-class technology and advanced technical capabilities. Hosokawa has five R&D centers and eight test centers, enabling it to launch new products that meet customer needs quickly.

Since current CEO Yoshio Hosokawa took over in 2014 to rationalize the business, financial performance has improved significantly. Yoshio has made difficult decisions, such as divesting the loss-making confectionery equipment segment in 2015. CFROA (operating cash flow divided by assets) of 13% is one of the best in the industry (Alfa Laval 8%, GEA 5%, John Bean 8%, IDEX 13%, Marel 14%).

Yet, the market quotation of EV/CFO of 6x, EV/EBIT of 8x, and EV/EBITDA of 7x represents a discount to comparable companies. Hosokawa implemented shareholder-friendly actions in 2017, including a share buyback. Hosokawa has the potential to grow operating profits by 50-80% in the next 3-5 years to $70-83m, and spur an upward valuation re-rating based on EV/EBIT 15x towards a 95-134% rise in market cap from its present $534m to cross $1.04-1.25bn in the next 3-5 years, or a share price of JPY 13,800 to 16,600 from its present JPY 7,090.

No thesis summary is available for Tocalo.

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About the instructor:

Koon Boon (KB) is the Chief Investment Officer of Hidden Champions Fund where he was responsible for the sustainable growth and outperformance of listed Asian equity investments in the Hidden Champions Fund. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. KB was also the Managing Editor of the Moat Report Asia, a research service focused exclusively on highlighting undervalued wide-moat businesses in Asia. Paid subscribers to the Moat Report Asia from North America, Europe, the Oceania and Asia include professional value investors with over $20 billion in asset under management in equities, some of the world’s biggest secretive global hedge fund giants, hidden billionaires and savvy private individual investors who are lifelong learners in the art of value investing. interval. KB was also a faculty (accounting) at SMU teaching accounting courses and had pioneered the course on Accounting Fraud in Asia, an official module in the undergraduate curriculum. KB is also honored and grateful to be able to have the opportunity to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community.

GMR Infrastructure: Complexity Keeps Market Quotation Unjustifiably Low

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Asian Investing Summit 2018 Featured, Audio, Deep Value, Distressed, Energy, Equities, Industrial Conglomerates, Real Estate, Small Cap, Special Situations, Transcripts, Transportation

Deepak Kapur of Tapaks Capital Management presented his in-depth investment thesis on GMR Infrastructure (India BSE/NSE: GMRINFRA) at Asian Investing Summit 2018.

Thesis summary:

GMR Infrastructure is a play on India’s fast-growing airport sector. It is one of the largest infrastructure companies in India, owning and operating assets in the following segments: energy (power plants and coal mines), transportation (airports and highways), and property development (commercial property and special investment regions for industrial development).

The thesis is based primarily on the growing value of GMR’s cash-generating airport and allied businesses, growing at 15+% (aero revenues are based on assured return on equity, and non-aero business has reasonable operating leverage). GMR is the largest private sector airport operator in India. It owns and operates the Delhi International Airport as well as the Hyderabad International Airport under the public-private partnership model. It recently also won the mandate to build and operate a greenfield airport at Goa. Apart from India, GMR has airport development and operating interests in the Philippines and Greece.

In the last few years, the energy and highway businesses have been a drag, as their leveraged balance sheets and suboptimal operations led to large losses and increasing debt. The suboptimal performance was due to issues such as inadequate fuel supply for power plants, lack of long-term power purchase agreements from buyers, lack of environmental clearances leading to stuck projects, excess capacity in the industry, poor realizations, and inadequate toll collections.

The stock has languished in a narrow band for the last six years and is down 85% from its 2007-2009 peak during the infrastructure craze in India. However, asset monetization (sold a stake in its energy business), fund raising (QIP and rights issues), refinancing as well as debt restructuring and asset disposal initiatives of recent years, supported by a pick-up in the economy, have lent some stability to the balance sheet. The worst times seem to be behind the company. Looking ahead, GMR aims to sell the highway projects, restructure its energy operations, and shift the growth focus to airport, property, and EPC businesses.

The complexity of the operations and holding structure, the negativity surrounding the debt on balance sheet, certain regulatory issues, and various ongoing litigations have kept the valuation depressed. The recent market cap of INR 106 billion represents at least a 40-50% discount to underlying value and provides reasonable downside protection for the long-term investor, even after considering dilution risk. An unpleasant regulatory surprise for the airport business remains the biggest risk to the investment thesis.

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About the instructor:

Deepak Kapur is an investor and educator based in Chennai, India. He has over 15 years of experience in the secondary equity markets of India. In the past, he managed equity portfolios for individuals but currently manages only proprietary funds. He focuses on the mid and small-cap space in the secondary equity markets of India. He is value conscious and his preferred style is to hunt for opportunities in businesses that are currently out of favor in the market. He is a visiting lecturer at the Indian Institute of Management, Indore, where he has been teaching a course on Business Valuation since the last eleven years. He earned his Bachelors in Chemical Engineering and Master’s in Biological Sciences from the Birla Institute of Technology and Science, Pilani, and completed his MBA from Indian Institute of Management, Indore. He is an avid surfer, yoga practitioner and loves reading. His subjects of interest include; history, brain sciences, empirical psychology, financial markets, entrepreneurship, health and nutrition.

Karur Vysya Bank: Regional Bank in India with Positive Management Change

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio, Deep Value, Equities, Financials, Micro Cap, Special Situations

Anish Jobalia presented his in-depth investment thesis on KARUR VYSYA BANK (NSE: KARURVYSYA) at Asian Investing Summit 2018.

Thesis summary:

Karur Vysya Bank, based in South India, is a regional bank that started its journey in 1916 in Karur, a textile town in Tamil Nadu. KVB primarily started as a small and medium enterprise (SME) bank. It continues to position itself as a comprehensive player that caters to the needs of SME customers. KVB’s core philosophy of nurturing customers through times “thick and thin” has earned it respect over its hundred-year existence, resulting into a sticky customer base.

The bank has traditionally enjoyed a high average ROA profile of ~1.7%, as observed from 1999 to 2013. ROA has recently shrunk to 0.6% due to high credit costs resulting from exposure to chunky corporate loans.

There has been a management change with the hiring of P. Seshadri, a highly competent CEO. IIM Bangalore alumnus Seshadri is a senior banker with 25+ years of experience at Citibank. In a recent clean-up drive, Seshadri increased the watchlist of stressed assets from INR 650 crores to INR 1200 crores. According to management, this is the tail end of reserving for stressed assets. The bank’s strategy going forward is to granulize the portfolio by shunning large-ticket corporate lending and focusing on low-ticket SME, retail loans, and corporate loans. The incremental slippage ratio and provisions are expected to come down. Credit costs should revert to their long-term average of ~1% across all cycles.

KVB has historically traded at 1-2x price to adjusted book value on a forward basis. It recently traded at INR 100, a multiple of ~1.3x.

Read Anish’s recent article on Karur Vysya Bank.

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About the instructor:

Anish Jobalia was previously associated as a Research Analyst with Jeetay Investments Pvt Ltd, a Mumbai based portfolio management firm with assets under management exceeding US$ 100 mn. Anish worked at Jeetay for nearly 6 years and was principally responsible for identifying, analysing, and executing investments in line with the fund’s value-focused investment strategy. He played an instrumental role in driving the institutionalization of the research process at Jeetay. Anish regularly interacts with CXO level management of listed companies to assess investment opportunities and to understand industry health. He presently manages his own portfolio and is looking to raise funds from investors. Anish completed his Bachelors in Engineering (Electronics and Telecommunication) from Mumbai University in 2007, following which, his passion for equity research led him to pursue an MBA in Accounting and Finance from University of Technology, Sydney.

Ravi Dharamshi on Small Finance Banks in India

April 6, 2018 in Asia, Asian Investing Summit, Asian Investing Summit 2018, Audio, Equities, Financials, Macro

Ravi Dharamshi of ValueQuest Investment Advisors discussed the opportunity in small finance banks in India at Asian Investing Summit 2018. Ravi presented an industry analysis rather than specific investment ideas.

Thesis summary:

Small finance banks in India (SFBs): The largest financial inclusion program in the world has brought 300+ million people under the formal banking system in a short period of time. The business models of SFBs are broad-based, with entry into verticals such as micro, small and medium enterprises. Housing finance lends sustainability. Growth prospects in microfinance have improved after the crisis caused by de-monetization. SFBs also benefit from value migrating away from PSU banks as they struggle with bad loans. SFB models combine the profitability of the NBFC model (ROA of 2+%) and the regulatory protection of the banking model. SFBs’ access to low-cost funds has increased, and borrowing rates have come down from 11-12% to ~8%. Over the next 2-3 years, Ravi expects SFBs to grow at a CAGR of 25+%, with ROA of 1.5+% and ROE of 15%. SFBs are evolving to combine stable business models with long profit runways. Industry participants include AU Small Finance Bank (NSE: AUBANK), Ujjivan Financial Services (NSE: UJJIVAN), and Equitas Holdings (NSE: EQUITAS). Unlisted players that may go public over the next 18-24 months include Suryoday Small Finance Bank, Janalakshmi, and ESAF Small Finance Bank.

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About the instructor:

Ravi Dharamshi has an MBA in Finance from McCallum Business School, US. He returned from the US after a brief internship stint at Salomon Smith Barney. He has been associated with the Indian stock markets for over 13 years. After graduating, he worked his way up through the stock market business, spending four years at RARE Enterprises, where he was involved with research, private equity deals and value creation activities before moving to ValueQuest and taking charge of research. With an enviable track record in stock picking and his ability to take bold calls, he has been instrumental in generating outsized investment returns. Ravi currently heads Investment Strategy and Research at ValueQuest and has proven to be an able leader. He is constantly focused on generating research ideas to maximize investment returns.

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