Investing in high growth Asian frontier economies., Asia Frontier Capital

Scott Osheroff

Investing in high growth Asian frontier economies.

Asia Frontier Capital

Asia Frontier Capital Ltd. is a pioneering fund management company based in Hong Kong that specializes in investing in high growth Asian frontier economies by managing the AFC Asia Frontier Fund , AFC Iraq Fund and the AFC Vietnam Fund.

The AFC Asia Frontier Fund invests in public equities of Asian frontier countries that are seeing increasing consumption due to favorable demographic trends, rising incomes and high GDP growth. The fund invests in listed equities of companies that have their principal business activities in Bangladesh, Bhutan, Cambodia, Iraq, Laos, Maldives, Mongolia, Myanmar (Burma), Nepal, Pakistan, Papua New Guinea, Sri Lanka and Vietnam. The AFC Asia Frontier Fund is positioned to take advantage of the continuing economic shifts in these countries and offers high returns combined with significant diversification opportunities. This fund is directed by the founder and CEO of Asia Frontier Capital, Thomas Hugger, who has been investing in frontier markets across Asia and Africa for more than 20 years.

The AFC Iraq Fund was launched on the 26th June 2015 and aims to achieve long-term capital appreciation for investors by capturing value and growth potential in the post conflict high-growth & resource rich Iraq market. The fund emphasises long term investment horizon to truly capture the opportunity in Iraq. The fund's investable universe consists of locally listed companies that have their principal business activities in Iraq as well as foreign listed companies that have the majority of the business in Iraq as a whole including the prosperous Kurdish Region of Iraq (KRI). The AFC Iraq Fund offers access to investments in post conflict recovery potential of Iraq, including the KRI, and/or stability in its territory. The AFC Iraq Fund is managed by Asia Frontier Capital (Iraq) Limited, Cayman Islands under the executive leadership team of Thomas Hugger (CEO & Fund Manager) and Ahmed Tabaqchali (CIO) who have more than 47 years of investment experience as well as an extensive background covering global, emerging, frontier and MENA markets.

The AFC Vietnam Fund invests exclusively in listed Vietnamese equities to capture value in growth companies with a focus on the small to medium size companies. This market segment offers a unique investment opportunity as the valuation gap between large- and small-cap stocks in Vietnam is presently much wider than in comparable neighboring markets and the valuations are significantly depressed versus their regional peers. The fund adopts a fundamental-quantitative approach and employs an in-house earnings model to identify attractive companies where we see high growth opportunities. In conjunction with targeting the maximum upside potential the portfolio has been structured to mitigate corporate government and liquidity risks. The fund invests in a diversified portfolio of 70-90 attractively valued companies to carefully control concentration risk.  This approach allows the fund to sell, or buy, positions without having a significant market impact. The fund is directed under the executive leadership of Thomas Hugger and Andreas Vogelsanger who have more than 50 years combined experience managing investments in frontier markets, Asia and around the world.

For more information about the fund, management team and investment strategy please contact us at info@asiafrontiercapital.com.

Thematic (Sector/Industry)

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos to visit portfolio companies and other companies on our shortlist. The photos in this article are all by AFC.

Asia Frontier Capital Travel Report: Laos

Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

Download the Morningstar Fact Sheet : http://corporate.morningstar.com/US/documents/MarketingFactSheets/AboutMorningstarFactsheet.pdf

The positive 2016 profit alerts from China’s coal companies are within expectations, with profit rebounds driven by higher coal prices. The benchmark Bohai-Rim Steam-Coal Price Index, or BSPI, closed at CNY 593 per tonne on Dec. 28, up 60% year over year. While the peak heating season should keep prices elevated over the next few months, we think coal prices will start to decline by the end of the first quarter of 2017 to be around 15%-20% below where they are now. We think the coal price gains are largely reflected in the current share prices, and anticipate limited upside boosts following a more subdued long-term view.We maintain fair value estimates for narrow-moat <a href="https://www.smartkarma.com/entities/382" target="_blank" data-smartkarma-citation="entities:382:1">China Shenhua Energy Co H (1088 HK)</a> of HKD 16.40, and no-moat <a href="https://www.smartkarma.com/entities/383" target="_blank" data-smartkarma-citation="entities:383:1">China Coal Energy Co H (1898 HK)</a> and <a href="https://www.smartkarma.com/entities/384" target="_blank" data-smartkarma-citation="entities:384:1">Yanzhou Coal Mining Co H (1171 HK)</a> of HKD 3.30 and HKD 4.30, respectively, ahead of the full-year earnings results due out in March, pending more details.Analysts: Jennifer Song and Lorraine Tan, CFA

The positive 2016 profit alerts from China’s coal companies are within expectations, with profit rebounds driven by higher coal prices. The benchmark Bohai-Rim Steam-Coal Price Index, or BSPI, closed at CNY 593 per tonne on Dec. 28, up 60% year over year. While the peak heating season should keep prices elevated over the next few months, we think coal prices will start to decline by the end of the first quarter of 2017 to be around 15%-20% below where they are now. We think the coal price gains are largely reflected in the current share prices, and anticipate limited upside boosts following a more subdued long-term view.We maintain fair value estimates for narrow-moat China Shenhua Energy Co H (1088 HK) of HKD 16.40, and no-moat China Coal Energy Co H (1898 HK) and Yanzhou Coal Mining Co H (1171 HK) of HKD 3.30 and HKD 4.30, respectively, ahead of the full-year earnings results due out in March, pending more details.Analysts: Jennifer Song and Lorraine Tan, CFA

Surging Coal Prices Drove Positive 2016 Profit Alerts for Coal Companies

Energy Expert

Thierry Bros, PhD

Thierrybros.com

In Saudi Arabia, the Saud family wants to launch an Initial Public Offering (IPO) for 5% of Saudi Aramco, the biggest worldwide oil company (10,1mb/d of oil produced in 2015) for more than $100bn while implementing the 0,5mb/d production cut agreed at the 30 November 2016 OPEC meeting. Could this opaque company be valued trillions of dollars as Saudi Arabia tells the Press? Maybe not!Or could after 39 years, <a href="https://www.smartkarma.com/entities/811" target="_blank" data-smartkarma-citation="entities:811:1">Exxon Mobil Corp (XOM US)</a>, via the IPO process, re-enter Saudi Aramco capital? Saudi…

In Saudi Arabia, the Saud family wants to launch an Initial Public Offering (IPO) for 5% of Saudi Aramco, the biggest worldwide oil company (10,1mb/d of oil produced in 2015) for more than $100bn while implementing the 0,5mb/d production cut agreed at the 30 November 2016 OPEC meeting. Could this opaque company be valued trillions of dollars as Saudi Arabia tells the Press? Maybe not!Or could after 39 years, Exxon Mobil Corp (XOM US), via the IPO process, re-enter Saudi Aramco capital? Saudi…

EM PM, Ecstrat

Emad Mostaque

EM PM

Ecstrat

Ecstrat is a consultancy advising on asset allocation between global equity markets, with a focus on the intersection of governments, geopolitics, governance and markets.
 
Over the past few years and more especially since the Great Financial Crisis (GFC), investors have become more focused on short-term market movements and real-time returns and have consequently neglected the analysis of the underlying structural themes that underpin longer term performance.
​
More specifically we believe that the evolution of governance-based relationships between investors, controlling shareholders, labour and the state is one of the primary determinants of both relative and absolute performance between individual equity markets.
 
We will endeavour to provide investors with some of the context surrounding governance-related issues which encompass many different disciplines including history, economics and political science, as well as the financial metrics which are the most obvious manifestation of the structural characteristics of each market.
 
We will pay particular attention to the shifts and potential inflection points for governance in individual markets as these are often the best lead indicators for both economic and market performance.

After a few months of thinking, I’ve been getting steadily more bearish on just about everything as the biggest political change in years happens next Friday when Donald Trump becomes President of the USA. I honestly don’t think anyone can believe it, including his own supporters and the potential impact is certainly not priced into US markets, with a little bit being priced into Emerging Markets such as Mexico at this point. The simple fact is that nobody knows where we will end up given the range of potential Trumpian outcomes. With regards to oil, if he pursues the trade policies that have been about the only consistent part of his platform, this will clearly be terrible for oil demand. The below looks at two potential shocks on the supply side, an acceleration of the 190 million barrels of strategic petroleum reserve rebalancing, which could unravel a tenuous OPEC deal and the shock impact of the border adjustment tax proposal, which I would assign a 50% probability of passing but would be unlikely to pass until later this year (who knows though). I would now be bearish on oil over the next few months in the face of record financial net length and too many possible pot holes, although I still see supply shocks later this year.

After a few months of thinking, I’ve been getting steadily more bearish on just about everything as the biggest political change in years happens next Friday when Donald Trump becomes President of the USA. I honestly don’t think anyone can believe it, including his own supporters and the potential impact is certainly not priced into US markets, with a little bit being priced into Emerging Markets such as Mexico at this point. The simple fact is that nobody knows where we will end up given the range of potential Trumpian outcomes. With regards to oil, if he pursues the trade policies that have been about the only consistent part of his platform, this will clearly be terrible for oil demand. The below looks at two potential shocks on the supply side, an acceleration of the 190 million barrels of strategic petroleum reserve rebalancing, which could unravel a tenuous OPEC deal and the shock impact of the border adjustment tax proposal, which I would assign a 50% probability of passing but would be unlikely to pass until later this year (who knows though). I would now be bearish on oil over the next few months in the face of record financial net length and too many possible pot holes, although I still see supply shocks later this year.

LNG, Oil & Gas, M&A Market Intelligence Specialist

Massimo Bellino

M&amp;A deal volume in the oil and gas sector (1) increased markedly in 2016 both in the US by 67% (YoY) and globally by 50% if using normalised data for 2015 without the one-off $82bn Shell/BG deal (2). The growth was driven, particularly at the global level, by a surge of multi-billion dollar transactions announced in 4Q16 with total volume reaching over $30bn in December alone which represented 23% of the yearly total.The key factor supporting M&amp;A activity was the steady rise in oil prices, up by over 100% since the historical minimum for twenty years in January last year. Uplifting oil prices also sustained the exceptional rally in 2016 of global oil and gas equity prices which outperformed the market by 20% as tracked by S&amp;P global indexes.The emergence on the buy-side of large acquisitions of oil majors that up to very recently had been mainly focused on disposal plans could signal a shift in the expectations for the sector outlook. Among the deals announced in 4Q16, there were three acquisitions by <a href="https://www.smartkarma.com/entities/21847" target="_blank" data-smartkarma-citation="entities:21847">BP PLC (BP/ LN EQUITY)</a> totalling $3.8bn, <a href="https://www.smartkarma.com/entities/812" target="_blank" data-smartkarma-citation="entities:812">Total Sa (FP FP) </a>purchasing $2.5bn assets in Brazil and Siccar Point buying OMV’s UK assets for up to $1bn which was the largest private equity-backed acquisition in oil and gas outside North America of the last three years.The recent rush of M&amp;A deals involving major industry players and private equities could indicate a growing consensus that the oil cycle has bottomed out and that the industry is successfully adapting to the lower oil prices. As the number of global announced or rumoured assets for sale continues to grow, totalling an estimated value close to $190bn (3), the opportune time might have come to expand portfolios before asset prices rise again.Together with oil majors also an increasing number of cash-rich buyers, especially private equities, are expected to step up global investments in oil and gas in the coming months. As a result, M&amp;A activity should grow further this year and provided oil prices confirm the expectations implied by the improved business sentiment, the oil and gas sector will continue its recovery in 2017.<a href="#_ftnref1" target="_blank"></a>(1) For the purpose of this insight the oil and gas sector includes only activities of exploration, extraction and production of oil and gas i.e. upstream and excludes midstream, downstream and oil services.<a href="#_ftnref2" target="_blank"></a>(2) Including Shell/BG deal the M&amp;A growth in 2016 (YoY) would be 1% based on Bloomberg data.<a href="#_ftnref3" target="_blank"></a>(3) As estimated by Energy Market Square a new online platform providing market intelligence for oil and gas M&amp;A professionals.

M&amp;A deal volume in the oil and gas sector (1) increased markedly in 2016 both in the US by 67% (YoY) and globally by 50% if using normalised data for 2015 without the one-off $82bn Shell/BG deal (2). The growth was driven, particularly at the global level, by a surge of multi-billion dollar transactions announced in 4Q16 with total volume reaching over $30bn in December alone which represented 23% of the yearly total.The key factor supporting M&amp;A activity was the steady rise in oil prices, up by over 100% since the historical minimum for twenty years in January last year. Uplifting oil prices also sustained the exceptional rally in 2016 of global oil and gas equity prices which outperformed the market by 20% as tracked by S&amp;P global indexes.The emergence on the buy-side of large acquisitions of oil majors that up to very recently had been mainly focused on disposal plans could signal a shift in the expectations for the sector outlook. Among the deals announced in 4Q16, there were three acquisitions by BP PLC (BP/ LN EQUITY) totalling $3.8bn, Total Sa (FP FP) purchasing $2.5bn assets in Brazil and Siccar Point buying OMV’s UK assets for up to $1bn which was the largest private equity-backed acquisition in oil and gas outside North America of the last three years.The recent rush of M&amp;A deals involving major industry players and private equities could indicate a growing consensus that the oil cycle has bottomed out and that the industry is successfully adapting to the lower oil prices. As the number of global announced or rumoured assets for sale continues to grow, totalling an estimated value close to $190bn (3), the opportune time might have come to expand portfolios before asset prices rise again.Together with oil majors also an increasing number of cash-rich buyers, especially private equities, are expected to step up global investments in oil and gas in the coming months. As a result, M&amp;A activity should grow further this year and provided oil prices confirm the expectations implied by the improved business sentiment, the oil and gas sector will continue its recovery in 2017.(1) For the purpose of this insight the oil and gas sector includes only activities of exploration, extraction and production of oil and gas i.e. upstream and excludes midstream, downstream and oil services.(2) Including Shell/BG deal the M&amp;A growth in 2016 (YoY) would be 1% based on Bloomberg data.(3) As estimated by Energy Market Square a new online platform providing market intelligence for oil and gas M&amp;A professionals.

Growth of M&A Activity Signals Positive Outlook for Oil and Gas in 2017

China

Guanghui Energy Co., Ltd. is principally engaged in energy development, automotive services and real estate property leasing. The Company is in the business of coal mining and related coal chemical manufacturing. The Company is also engaged in the processing and distributing of granite materials and trading of general merchandise such as plastic doors and windows.

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Guanghui Energy Co Ltd A (600256 CH)

Asia Frontier Capital Travel Report: Laos

In line with our process of being on the ground in the countries we invest in, Scott Osheroff, Analyst at Asia Frontier Capital, traveled to Laos...

Asia Frontier Capital

Surging Coal Prices Drove Positive 2016 Profit Alerts for Coal Companies

The positive 2016 profit alerts from China’s coal companies are within expectations, with profit rebounds driven by higher coal prices. The...

Morningstar, Inc.

Saudi Aramco Value: $tn? Maybe Not!

In Saudi Arabia, the Saud family wants to launch an Initial Public Offering (IPO) for 5% of Saudi Aramco, the biggest worldwide oil company...

Thierry Bros, PhD

How Trump Could Change the Oil Game

After a few months of thinking, I’ve been getting steadily more bearish on just about everything as the biggest political change in years happens...

Emad Mostaque

Growth of M&A Activity Signals Positive Outlook for Oil and Gas in 2017

M&A deal volume in the oil and gas sector (1) increased markedly in 2016 both in the US by 67% (YoY) and globally by 50% if using normalised...

Massimo Bellino

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